CEFTA Quandary

September 2006 | Ratings Update

Negotiation of the terms of the Central European Free Trade Area (CEFTA) expansion, due for finalisation in October, are increasing regional friction. Serbia and Bosnia-Hercegovina are pushing to impose tariffs on Croatian imports, which could significantly worsen the country's trade and current account deficits. Serbia is also pushing for a permanent Secretariat, based in Belgrade. CEFTA Special Coordinator Erhard Busek's opinion carries much weight with the EU: as such, Croatia will want to be seen as conciliatory, but conceding too much could cost the ruling HDZ party important domestic support ahead of 2007's elections.

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