Opposition Making Gains

Opposition party SDP is edging ahead of the incumbent HDZ in opinion polls. The government has recently been tainted by the arrest under suspicion of bribe-taking of three politically-appointed vice-presidents of the State Privatisation Fund. If the SDP does gain the reins in a general election expected in November, which we consider a strong possibility, fiscal loosening will be ahead. While current PM Ivo Sanader is targeting a balanced budget by 2010, the SDP has pledged to increase pension-spending by 10% and is in favour of running larger deficits to boost industry and drive growth.

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