Croatia looks to oil and gas fields in Adriatic Sea

Croatia welcomes EU membership
Croatia welcomes EU membership


    Croatia welcomes EU membership


Croatia welcomes EU membership 03:11

Story highlights

  • Eurostat: In 2012, Croatia's economy contracted by 2% and is expected to contract by 1% this year
  • Croatia -- a small country of 4.3 million people -- is also battling against chronic unemployment
  • One major obstacle to foreign investment is Croatia's problems with endemic corruption

European Union newcomer Croatia is looking to undiscovered oil and gas fields in the Adriatic Sea to revive its ailing economy, according to the country's president.

Ivo Josipovic told CNN that Croatia -- soon to become the 28th member of the European Union -- is searching for partners in the energy sector to help reveal oil and gas "green fields" in the waters that separate the Balkan nations and Italy.

Read more: Croatia PM: We need Italy to recover

The country, which relies heavily on its sun-kissed Adriatic coast to attract tourists and boost the economy, is seeking new revenue streams to combat a high national debt and a lack of competitiveness.

In 2012, Croatia's economy contracted by 2% and is expected to contract by 1% this year, according to Eurostat -- the European Commission's data service.

"There is one way to change the economy and that is to motivate investors to come to Croatia," Josipovic told CNN in an exclusive interview.

Croatia -- a small country of 4.3 million people -- is also battling against chronic unemployment over 18%, with only Greece and Spain having a higher jobless rate. But Josipovic is adamant that Croatia's European membership, which officially begins on July 1, will attract foreign investment and prevent a so-called "brain drain" in the country's workforce.

"Brain drain is always connected to a bad economic situation, with the EU or without the EU," he said. He added: "But somehow by foreign investment or companies, I expect some brains to come to Croatia as well."

Read more: Patek Philippe boss: Quality is more important than growth

One major obstacle to foreign investment is Croatia's problems with endemic corruption. Since breaking away from Yugoslavia in the early 1990s, Croatia has struggled to choke off profiteering from those in positions of power.

In November last year, the country's former prime minister, Ivo Sanader, was jailed for 10 years after being found guilty of taking pay-offs from foreign companies.

Read more: Luxury sales defy economic gloom

Sanader -- who was premier from 2004 to 2009 -- fled the country but was arrested in Austria. He is now appealing his sentence.

Josipovic said: "Corruption is now considered as something that is not acceptable for our society and anyone who is caught will go to jail. Of course, efficiency of investigation is needed through our judiciary."

Read more: Europe's new threat: Slow decay

Transparency International -- an organization tackling corruption -- ranked Croatia below Rwanda, Jordan and Cuba in its Corruption Perceptions Index for 2012. But the country still came in above Italy - Europe's third largest economy.

Of the former Yugoslav states, Croatia will be only the second country behind Slovenia to join the EU, but the country also has designs to one day join Europe's embattled single currency area, the eurozone.

Josipovic said the euro is already a de facto currency in Croatia but the country needs at least five years to meet the euro area criteria before it can think about joining.

"[There is] no special target year," he told CNN. "But we think we already have the euro because if you ask someone the price, they tell you in euros. Our savings in banks are 80% or more in euros because our citizens believe in the euro because the buy euro and save in euro."

Despite not being in the single currency, many small businesses in Croatia have debts denominated in euros rather than in kuna -- the country's domestic currency - exposing them to exchange rate risk.

      Marketplace Europe

    • spc marketplace europe latvia valdis dombrovskis_00021207.jpg

      Latvia's economic prospects

      CNN's Nina Dos Santos visits Latvia to speak to the country's outgoing Prime Minister and the prospects for the eurozone's 18th member.
    • spc marketplace europe malta immigration africa_00002118.jpg

      Asylum seekers in Malta

      Malta is the gateway to Europe and on the frontline of the immigration flows. Isa Soares reports from a detention center on the Mediterranean island.
    • spc marketplace europe malta immigration vox pops_00001419.jpg

      Maltese concerned over migrants

      CNN's Isa Soares speaks with people on the streets of Valletta who say their country can't cope with more migrants from Africa and the Middle East.
    • spc marketplace europe malta george vella_00032005.jpg

      Malta's migrant struggle

      Malta cannot afford to continue supporting migrants from war-torn countries in its over-crowded detention camps, the country's foreign minister has told CNN.
    • spc marketplace europe 2013 what went wrong_00020426.jpg

      What went wrong in 2013?

      Slow recoveries, bailouts, and youth unemployment. Richard Quest speaks to Europe's top CEOs about the issues of 2013.
    • spc marketplace europe 2013 defining moments bob parker intv_00010826.jpg

      2013: The year of tapering

      CNN's Richard Quest speaks to economist Bob Parker about defining moments of 2013 and about what to expect in 2014.
    • spc marketplace europe estonia energy_00000923.jpg

      Estonia's dirty energy drive

      The Baltic nation of Estonia is developing its oil shale energy reserves in a bid to become energy self-sufficient.
    • spc marketplace europe nani beccalli falco_00041005.jpg

      GE Europe exec's jobs warning

      Europe must stop being nationalistic if it wants to help a lost generation of workers, the regional boss of U.S. conglomerate General Electric says.
    • spc marketplace europe greece petros christodoulou_00002025.jpg

      Is Greece on the mend?

      Greece is on the way to economic recovery as investor faith returns to the recession-ridden eurozone nation, an executive at Greece's largest bank has told CNN.
    • spc marketplace europe euro jim cloos_00012617.jpg

      Don't blame euro, says pioneer

      One of the masterminds behind the euro says Europe would have suffered a far worse fate if the single currency had never been created.
    • spc marketplace europe maastricht eu_00002401.jpg

      The birthplace of the euro

      Nina Dos Santos visits the Dutch city where the European treaty carrying the city's name came into force 20 years ago.
    • spc marketplace europe spain working hours_00010525.jpg

      Spain may turn clocks back

      As Spain continues its drive to slash budgets and cut spending, one of the nation's favorite pastimes is under threat as ministers look for ways to boost productivity.