Croatia's politicians promise tax cuts, woo upstarts before vote

By Igor Ilic

ZAGREB (Reuters) - Croatia's two biggest parties are promising tax cuts and toning down talk of tough reforms as well as building alliances with smaller, mostly upstart parties to try to convince voters they can produce a stable government in September's snap election.

Last November's election produced a fragile government embroiled in disputes over sensitive political appointments, reforms that would have meant massive public sector job cuts and a conflict of interest case. It collapsed after five months.

While opinion polls for the Sept. 11 vote point to a slight advantage for the SDP social democrats over the HDZ conservatives - who led the last government with the reformist Most party - neither is seen winning an outright majority.

"The parties know each other better now, so I expect the post-election coalition talks to be quicker than last year," the Economist Intelligence Unit's Maximilan Lambertson said, noting that Most and other newcomers are running for the second time.

"However, political instability may still persist amid possible disputes within a government on various reforms, like public administration or privatization issues."

Opinion polls forecast that Most, or "Bridge", will come third again in the election, giving HDZ - with new leader, EU lawmaker Andrej Plenkovic - an advantage.

"I feel no responsibility for earlier difficulties in relations between Most and HDZ. I'm entirely open to cooperate, on a rational basis," Plenkovic has told national weekly Globus.

Most says it wants to put an end to two decades of control of Croatia's politics by the two biggest parties, which it accuses of clientelism and corrupt practices.

The SDP, which has formed a pre-election coalition with three other smaller parties, is also eyeing a partnership with the left-leaning regional IDS party from the western Istrian peninsula and national minorities groupings.

"We have a serious program and experienced people ... we offer a safe course," SDP leader and former prime minister Zoran Milanovic told a rally this week.

The recent instability, combined with the major parties' promises to lower the tax burden for consumers and businesses, is raising eyebrows among business leaders and economists.

"I see two problems here. The parties largely offer partial economic ideas without offering a big, consistent picture. Also, the state is still a dominant factor in the economy and there is little talk about how to change it, about privatization issues for example," independent economist Damir Novotny said.

"What basically prevails are talks about welfare transfers toward citizens."

Croatia's unemployment rate is close to 14 percent and growth at about 2 percent is not enough to create jobs, throwing into high relief the fact that SDP and HDZ are short on detail on issues such as how to overhaul the costly health and pension sectors, cut red tape and improve the glacial legal system.

"We want the (future) government to state clearly what it plans to do in the first year... It's about time to start spending just what we earn and do it responsibly," the national employers' association HUP's Davor Majetic has told state TV.

(Editing by Ingrid Melander and Louise Ireland)

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