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Octopus hunting in Croatia

bne
January 21, 2010

The Croatian capital Zagreb may be firmly in the grip of a mid-winter
freeze, but the Croatian authorities are preparing to go octopus
hunting. Animal rights activists need not be concerned, however, as
the octopus in question is not some poor cephalopod, but rather a
mafia-like cartel that is accused of wielding enormous political and
economic influence away from the public eye and has been the hidden
force behind a string of scandals that has rocked the country in
recent months.

And the head of the octopus is alleged to be none other than one-time
premier Ivo Sanader. How the mighty are fallen. Six months ago,
Sanader was the untouchable prime minister of Croatia, having won two
general elections for the ruling HDZ party. But his six years at the
top of the Croatian political tree came to an abrupt and totally
unexpected end at the start of July when he announced his resignation,
for reasons that seemingly still remain a mystery to even his closest
friends and political colleagues.

Six months on and the once all-powerful Sanader cuts a completely
different figure from the assured - many would argue arrogant - one
that had led the country since 2003. A disastrously ill-judged and
unsuccessful attempt to lead a party putsch against his successor as
prime minister, Jadranka Kosor, in late December led to him being
thrown out the HDZ and subject to general opprobrium from the Croatian
public. But Sanader's problems may only just beginning. There is
fervent speculation in the Croatian press that Sanader is the head of
the so-called octopus, a secret organization that created a parallel
system of power in the Balkan state and has made Croatia an unwelcome
byword for corruption and criminality and increasingly a no-go for
foreign investors.

Tentacles

Now the Justice Ministry and the anti-corruption agency Uskok has been
charged with cutting the octopus down to size and dismantling the
unofficial levers of power. PM Kosor, who has won widespread praise
for her strong anti-corruption since she came to power in July, has
repeatedly said that "nobody is untouchable," interpreted by many as a
pointed reference to her one-time boss. Sanader is now seen as the key
figure in the background behind financial scandals at power company
HEP, postal savings bank HPB, road company HAC and food company
Podravka that have shaken the Croatian public's confidence in state
institutions and tarnished the country's international image.

Sanader has also been connected with the shenanigans surrounding the
emergency nationalization of Austria's Hypo Alpe Adria, with
allegations that he financially benefited from the bank's entry into
Croatia in the early noughties and actively canvassed for the granting
of a banking licence for Bayerische Landesbank when it acquired Hypo
Alpe Adria in 2007. A series of revelations in the Austrian and German
press about Hypo Alpe Adria's business dealings in Croatia with a host
of dubious figures including arms dealers, jewel thieves, war
criminals and shady politicians has led to the coining of the phrase
"K und K" – Kroatien und Korruption.

Stung by those foreign press allegations and Sanader's attempted
putsch, Kosor has now decided to take decisive action and has
established a special task force to purge Croatia of the influence of
the so-called octopus. At stake is not only Croatia's reputation, but
also its potential membership of the EU and its economic future in
general, and its attractiveness as a destination for foreign direct
investment in particular. Kosor's anti-graft drive will also enjoy the
whole-hearted support of the newly elected president of Croatia, Ivo
Josipovic, whose campaign based on fighting corruption and firmly
establishing the rule of law captured the imagination and votes of the
Croatian public. By slaying the octopus, which has caused enormous
damage to government finances while enriching a privileged few, the
authorities are hoping to restore confidence in Croatia, which has
suffered from an almost complete lack of faith among foreign investors
and entrepreneurs in any possibility of doing fair and effective
business there.

Among the actions likely to taken will be a cabinet reshuffle,
involving the removal of pro-Sanader ministers, a purge of state
secretaries loyal to Sanader, and investigations in to the past
actions of parts of the administrative infrastructure such as the
customs service and the police, at both the national and local level.

Kosor, who has been widely praised by the likes of US foreign
secretary Hillary Clinton for her uncompromising stance on rooting out
institutionalized corruption in Croatia, will no doubt be hoping that
by taking action against former members of her own government and
political party, she will be able to convince the EU to finally agree
to admitting Croatia as the latest member of the EU at the start of
2012.
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