How did the Commission assess Croatia's second payment request?
On 19 September 2022, Croatia submitted to the Commission a request for the disbursement of €700 million under the Recovery and Resilience Facility (RRF). The request was based on the achievement of 21 milestones and four targets for the second instalment, as outlined in the Council Implementing Decision approving the plan. They cover several reforms in the areas of social policy with the new Social Welfare Act and training of social professionals, energy policy with the assessment of the barriers to higher uptake of renewable energy sources and the adoption of the Hydrogen Development Strategy, public administration with a Decision on incentives for the voluntary mergers of local government units. Necessary legal and administrative conditions for the further deployment of electronic communications, including 5G, are also included. The milestones and targets also confirm progress towards the completion of investments in water management, labour market, education, the social and justice system, as well as support for the environmental and digital transitions of public authorities, SMEs and mid-cap companies.
With their request, the Croatian authorities provided detailed and comprehensive evidence demonstrating the fulfilment of 21 milestones and four targets. The Commission has thoroughly assessed this information before endorsing the positive preliminary assessment of the payment request.
What are the next steps?
The Commission has now sent the positive preliminary assessment of Croatia's fulfilment of the milestones and targets required for this payment to the Economic and Financial Committee (EFC), asking for its opinion. The EFC's opinion, to be delivered within maximum four weeks, should be taken into account in the Commission's assessment. The Commission will adopt the decision on the disbursement of the financial contribution, in accordance with the examination procedure, through a comitology committee. Following the adoption of this decision by the Commission, the disbursement to Croatia would take place. The amounts disbursed to the Member States will be published in the Recovery and Resilience Scoreboard. The Commission has also shared its positive preliminary assessment with the European Parliament.
How do the milestones and targets achieved by Croatia under this second payment request effectively support the green transition?
In this payment request, the green transition is supported by reforms and investments in water and sewage systems, energy and energy efficiency, as well as support to businesses. Following the adoption of a detailed investment programme for water and wastewater investments, more than 115 km of public sewerage (drainage) network and over 226 km of public water supply network have been constructed or reconstructed. An assessment document setting out recommendations to reduce administrative bottlenecks for a higher uptake of renewable energy sources was published. In addition, the Parliament adopted a Hydrogen Strategy for Croatia. It provides a framework for hydrogen production and use with a focus on renewable and green hydrogen as a substitute for fossil fuels, as well as for increasing the stability of the renewable energy source-based electricity system for energy self-sufficiency, clean energy transition and sustainable mobility. A set of grant and financial instruments have been put in place to support businesses and industries to adapt their processes to the green transition. Finally, the energy renovation programme for public sector buildings was adopted, which will encourage comprehensive renovation as a combination of energy-efficiency and seismic renovation. This will have a lasting impact on reducing energy consumption in buildings and increasing their safety.
How do the milestones and targets achieved by Croatia under this second payment request effectively contribute to the digital transition?
A set of milestones and targets related to the digital transition in the business, agricultural and justice sectors were delivered.
This includes the launch of a new digital platform for the online payment of business fees, which is expected to alleviate the administrative burden for companies. A new online platform promoting the circular economy in the agri-food sector will help raise awareness and educate about prevention and reduction of food waste and food donation. New electronic tools and administrative capacities were put in place in the State Judicial Council and the State Attorney's Council to reduce backlogs, shorten court proceedings and improve the transparency and efficiency of the justice system. In addition, reforms related to employment in sectors and activities linked to the green and digital transitions were adopted: new active labour market policies will boost (self-) employment and increase employability, while the newly set-up voucher system for adult education, training and upskilling aims to foster green and digital skills. Furthermore, cultural and creative industries will benefit from updated copyright rules which facilitate the online licensing of creative, cultural and media content. Finally, the legal and administrative conditions for the planning, licensing and construction of electronic communication networks were simplified and adapted to accelerate the internet coverage (high-capacity network) and 5G.
How do the milestones and targets achieved by Croatia under this second payment request contribute to improving Croatia's economic and social situation, and its resilience?
The milestones in the second payment request contain measures to improve the business environment and judiciary, both of which are important for the efficient functioning of the economy.
Several measures were also implemented in the areas of employment, education and social services. Two milestones were met that will contribute to a better functioning of the labour market: the introduction of new active labour market policies in the green and digital transitions and the new voucher system for adult education, training and upskilling. The implementation of the structural reform of the education system continued with the comprehensive analysis of secondary education needs, which in turn will support measures to increase the share of students enrolled in general secondary education, to reduce the share of students in surplus programmes and to align vocational programmes with labour market needs. The social policy reform further progressed with the adoption of the Social Welfare Act increasing the adequacy of the main social benefits targeted at the most vulnerable groups and contributing to the reduction of inequalities, while reducing the administrative burden and increasing the transparency of the system. Furthermore, the reform enabled the faster and more efficient provision of benefits by merging existing social benefits into a single benefit. The Act also introduced a new social mentoring service. In addition, 253 new social mentoring professionals have already been trained.
Does the achievement of the milestones and targets under this second payment contribute to an effective implementation of the Plan?
The milestones and targets fulfilled constitute significant steps in the implementation of the Croatian recovery and resilience plan, and of its broader reform agenda.
They include important measures to improve the business environment, access to finance for companies, as well as the efficiency of public administration and of the judiciary. For example, Croatia adopted an action plan containing a set of measures to reduce non-tax and para-fiscal charges as well as fees for professional examinations. It has set up a digital platform for the seven most common business fees and has developed financial instruments to improve access to finance for companies that invest in green and digital technologies as well as for companies in growth and development phase. Amendments were made to the legislative framework to encourage the voluntary merger of local government units in order to make public services more efficient and more transparent for citizens, regardless of their place of residence. To contribute to reducing backlogs and shortening court proceedings, Croatia adopted amendments to the Bankruptcy Act, the Consumer Insolvency Act and to the Code of Criminal Procedure, and invested in digitalising the State Judicial Council and the State Attorney's Council. In an effort to switch to renewable energy sources, Croatia adopted the Hydrogen Strategy, produced an analysis on barriers hindering the uptake of renewable energy sources and adopted the energy renovation programme for public sector buildings. Finally, to strengthen the labour market, Croatia adopted reforms related to the employment in sectors and activities linked to the green and digital transitions.
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