December 21, 2015 / 8:04 PM / 3 years ago

Croatia faces further delay in forming new government, holding up urgent reforms

ZAGREB (Reuters) - The leader of a small party that emerged as kingmaker after Croatia’s inconclusive Nov. 8 election said it would ask its president on Tuesday for more time for negotiations on a future government to avoid a disruptive new election.

President Kolinda Grabar-Kitarovic of Croatia addresses attendees during the 70th session of the United Nations General Assembly at the U.N. headquarters in New York, September 30, 2015. REUTERS/Mike Segar

Croatia is the newest of the European Union’s 28 members and its economy is among the weakest. Any prolonged delay in forming a new government would hold up reforms needed to spur investment and prevent further, crippling downgrades in its credit rating.

President Kolinda Grabar-Kitarovic is to hold a fourth round of consultations with the three main parliamentary parties on Tuesday and aim to nominate a prime minister-designate with the support of at least 76 deputies, which no one can claim yet.

“Tomorrow we will ask for some additional time from the president,” Bozo Petrov of kingmaker party Most (Croatian for “bridge”) said after talks with Prime Minister Zoran Milanovic, leader of the outgoing Social Democrat-led coalition.

The November election gave the main opposition conservative HDZ party 59 seats in Zagreb’s 151-seat parliament, three more than Milanovic’s centre-left bloc.

Most, without which a government cannot now be formed, won 19 seats but this was later cut to 15 after three deputies bolted to form their own party and one became an independent.

Most has insisted on a reformist government comprising all three parties with a non-party, technocrat prime minister, but said it was also ready to side with one of the major parties if the other rejected its conditions.

The Social Democrats have indicated readiness to discuss these terms, while the HDZ on Monday declined Most’s offer to be part of a broad three-party coalition.

“Such a government would not be efficient. We are only for bilateral talks with Most on a joint reformist government,” HDZ leader Tomislav Karamarko said.

Parliamentary deputies representing national minorities or fringe parties are expected to support a deal by Most and one of the two mainstream parties to reach the 76-seat minimum for a governing majority.

If the top parties prove unable to agree on a premier-designate, the president will have to call a new election, though there is no legal deadline for such a decision.

Most, founded three years ago and made up of municipal politicians and independents, says its aim is to overhaul the bloated public sector and judiciary, reduce tax pressure on businesses and tame Croatia’s rising public debt.

The former Yugoslav republic is under European Commission pressure to enact reforms to encourage investment, reduce unemployment and restrain public debt, which is running close to 90 percent of gross domestic product.

An extended political impasse could prompt more downgrades in Croatia’s credit rating and make it harder and more expensive for it to borrow on international markets in coming years.

Croatia is rated BB by Fitch and Standard & Poor’s and Ba1 by Moody’s, with a negative outlook.

Reporting by Igor Ilic; Editing by Mark Heinrich

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