Opinions are divided on the likely longevity of the new government of Croatia headed by prime minister Jadranka Kosor, swept into power after the abrupt resignation of her predecessor.

Kosor faces two crises, one the border dispute with Slovenia which is blocking Croatia’s European Union aspirations, the other the worsening financial and economic crisis.
Within days of taking office, Kosor and her finance minister Ivan Suker took to parliament a proposal to reduce spending in the budget by the equivalent in local currency of about $152 million while reshuffling a separate $419 million.

She did so with a warning of further cuts to keep the country afloat.

Croatia was among countries – one being Bulgaria – named in a media report as being poised to ask the International Monetary Fund for a bailout.

The report in Handelsblatt led to the euro losing value and was vehemently denied by Croatia’s government.
Suker said that Croatia was in regular contact with the IMF but was not in talks "about the standby arrangement or anything else," according to a report on Croatian news website Javno.

Central Croatian National Bank governor Zeljko Rohatinski said that there were two good reasons not to ask for an IMF bailout. One was that doing so would deplete Croatia’s currency reserves while in any case Croatia knew what it should do.

Kosor emphasised the latter point, saying that the budget cuts were intended to keep the country afloat and make it unnecessary to ask for IMF help.
Croatia’s economy appears to be in a troubling state, with foreign direct investment in the first quarter of 2009 coming in at 399 million euro, about 60 per cent less than in Q1 2008.

Then there is the border dispute that Kosor has inherited from her predecessors.
The dispute goes back to 1991, when Croatia and Slovenia declared their independence from Yugoslavia. Should Zagreb meet Ljubljana’s demands, it would have to cede some of its off-shore waters, giving Slovenia direct access to international waters.

The standoff has defied European Commission efforts at mediation and appears to have dashed Croatia’s hopes of moving ahead this year in EU accession negotiations. Previously, Slovenia blocked acceptance of chapters that they said were related to issues linked to the border dispute.

Zagreb and Ljubljana have staved off allowing one incident to sour relations, after agreeing that an alleged plot by a Croatian national to throw hand grenades at Slovenian prime minister Borut Pahor was an isolated incident.

The arrest of the alleged would-be perpetrator, reportedly a Croatian war veteran who intended heading into Slovenian territory to carry out the assasination, generated media comment that the incident was a measure of the emotions being stirred up by the border dispute.

On July 13, Ljubljana-based daily Dnevnik said that the episode was an illustration of the "irrational" aspects of the dispute.
The incident happened as it emerged on July 12 that, in a telephone conversation between Kosor and Pahor, it had been agreed that the two would meet within 10 days from then.

The meeting was expected to take place in Croatia, while Croatia’s foreign ministry and other institutions were to discuss what format the meeting would take.
Pahor said that he hoped that the meeting would produce progress in resolving the border dispute, Javno said.

Kosor has issued an appeal to European institutions to assist in achieving progress, a move presumably intended to get the EU to reverse its decision to, in effect, withdraw from the mediation process. One of the last acts of the Czech Presidency of the EU, which ended at the end of June, was to cancel planned negotiations in what was seen as a signal that major European leaders had lost patience with the imbroglio.

Quoting website Index, the Croatian Times reported Kosor as saying at the opening ceremony of Croatia Summit 2009: "Croatia expects Europe to have the courage and strength to move bilateral issues off the table in order to continue Croatia’s EU accession negotiations. My government will do everything to meet all demands, but we want our European friends to do everything to remove all unnecessary obstacles.

"We cannot tolerate any more blockades in Europe," Kosor said.