My Lords, I congratulate the noble Earl, Lord Dundee, on raising the issue of Croatia and its relations with Europe. I agree with him that Croatia is a European country by most definitions, culturally and geographically. It has made substantial strides towards incorporating the acquis. No doubt, as the process moves along, further such progress will be made.
It is therefore important, as the noble Earl stressed, to see Croatia as a stabilising factor in part of the near-abroad of the European Union. He was also right to see the process of the accession of Croatia as part of the enlargement process as a whole. Although there may be hesitation about the European credentials, size and cultural credentials of certain other countries, there can be no such hesitation in respect of Croatia.
Croatians do not see themselves as a Balkan country, because of the pejorative connotation of "Balkan". They no doubt feel upset when they think of Metternich's suggestion that the Balkans begin at the Landstrasse from Vienna. They view themselves as central European. Having spent one afternoon in the cathedral in Zagreb, looking at the way that the different phases of architecture exactly paralleled those in western Europe, I can well see the reasons for that pride in being part of central Europe. One should therefore, perhaps, not talk so much of the enlargement of the European Union, more of a process of reunification.
After Slovenia, in terms of its prosperity and culture, Croatia is next in line. If there are some who see, somewhere in the Balkans, the collision of the tectonic plates of the Austro-Hungarian and Ottoman empires, and if there is to be a divide there, Croatia is very firmly on the western, Christian, Catholic side. Hence the strong commitment of Austria to Croatia, not only in the early 1990s—some say with a somewhat negative effect—during the period of Alois Mock, but now with Wolfgang Schüssel, with the rather murky events at the beginning of October.
We must recognise, however, that, for that reason, Austria has been consistent. There have been suggestions that the decision to compensate and restitute German expellees from Croatia, which coincided almost exactly with the change in October, was part of a pay-off. My Austrian friends deny that, however, and say that the agreement was the end part of a long period of negotiation. It will be interesting to see how Her Majesty's Government construe it.
The proper self-image of the Croatians is wholly European. There was a delay compared to other countries, similar to that in Slovakia under Meciar, because, under the Tudjman regime from 1992 to 1999, Croatia remained a poor Balkan country. During the last 18 months, however, there has, in my judgment, been a profound transformation, and under the same party as Tudjman, the HDZ. Prime Minister Sanader deserves considerable credit for that. There has been a real effort at internal reconciliation in Krajina and external co-operation with other countries in the region. There has also been recognition of the responsibility for war crimes in the 1990s and even with regard to the crimes against the Jewish population in the Second World War.
I mentioned the volte-face of the ICTY in respect of Mr Gotovina. It happened, according to some commentators, between 1 and
The economy is in good shape. It had substantial growth last year, and tourist receipts are buoyant. However, it needs to move from an opaque to a more open and mature government structure and to open up its banking sector, particularly the financial services sector. The World Bank report in May this year concluded that the overall fiduciary risk was "significant", resulting from deficiencies in public financial management. Therefore, much needs to be done in the interim period. British American Tobacco recently threatened to withdraw because of the effect on investors there. The World Bank and the IFC survey ranked Croatia behind 134 other countries in the protection of investments.
In terms of the simultaneous move towards NATO, Croatia is a member of the membership action plan, but there needs to be a substantial transformation of its armed forces to make it NATO-compatible. The last figure that I saw showed that three-quarters of its defence expenditure was spent on personnel and only 8 per cent on new investment. The personnel of its armed forces are extremely old.
What can we in the United Kingdom do to bring Croatia closer to the European Union? What progress has been made? Some examples were given by the noble Earl. What is the current target date for accession? Clearly, the Croatian target date of 2007–08 is unrealistic, but in our contribution, we should look at the well tried instruments of twinning with local authorities, of more parliamentary exchanges, and of placements in the public service of particular help to the police and the army in exorcising the ghosts of the communists and the period of Tudjman. There are particular problems in justice and home affairs, the functioning of the courts and the quality of the judiciary. I know that Austria has been particularly active here.
What efforts have been made to promote regional co-operation using the committed neighbours—Austria, Hungary and Slovenia—as mentors? Important, too, are regional infrastructure projects promoting regional agreements such as the agreement reached in November on the south-east Europe energy convention. What pressure will there be on Croatia to accelerate the integration of Serbs in the Krajina and also in the regranting of citizenship to Serb former citizens? Obviously, there should be help, too, to eliminate the non-tariff barriers in that region because it is important that the countries of the region work together closely.
What are the benefits to the European Union of the welcome accession of Croatia? Negatively, it will help to reduce the dangers of Croatia and the region being used as a transit route to the European Union for drugs, people and arms smuggling by organised gangs. There is a long history along the Dalmatian coast, but Montenegro and Albania are probably worse offenders, certainly in terms of corruption. Positively, it is an opportunity to show to the region that, if a country does things that are right, it will be rewarded. I hope that Serbia and Montenegro, Albania and Macedonia will be able to co-operate with Croatia and in time follow Croatia along that route. Certainly Croatia's geo-strategic position and its increasing respect for minorities will help to stabilise a key and potentially vulnerable region for the European Union. The progress made thus far should be recognised with approval, and we should encourage Croatia to continue further along that route.