ZAGREB – The liabilities of Croatia’s largest business group are threatening its bankruptcy with the potential loss of tens of thousands of jobs and even the stability of the country’s government.
Struggling Agrokor Group’s core businesses are the production and distribution of food and beverages and a network of retail stores that have accumulated a debt of 5.4 billion euros ($6 billion).
This figure represents some 12 percent of the Croatian Gross National Product (GNP).
“The possible bankruptcy of Agrokor would be as a consequence of the general economic and political situation Croatia has experienced in the last decades,” the dean of the Zagreb’s University of Economics and World Bank expert, Velimir Srica, told EFE.
As it became clear Agrokor would be unable to make upcoming debt repayments, the government has seen itself forced to intervene, given that the group has some 40,000 employees in Croatia and around 20,000 in neighboring Slovenia and Bosnia.
In addition, Agrokor’s suppliers, who provide employment to around 150,000 workers, have also been affected, mainly within Croatia’s agricultural sector.
These figures imply that bankruptcy could lead to a devastating financial and economic tidal wave as conservative Croatian Prime Minister, Andrej Plenkovic, has already warned.
Croatia’s largest company was established in 1976 and started in the flower business.
During the 1990s it experienced a swift, aggressive, debt-financed expansion under the first independent Croatian presidency of Franjo Tudjman (1991-1999).
Its largest acquisition outside Croatia took place in 2014 when it acquired Mercator, Slovenia’s leading retail store chain.
Its annual consolidated total revenue is around 6.59 billion euros, amounting to some 15 percent of the Croatian GNP, one of the poorest EU economies.
Its expansion during the ‘90s was cloaked in obscurity and is considered a textbook example of the post-communist era “Clientele capitalism,” whereby business success depended on close links between entrepreneurs and the country’s political ruling elite.
“It reflects the lack of any state strategy, the insane alliance between politics and economy, corruption, and ignorance,” the Croatian World Bank expert warned.
The symbiosis between Agrokor and the Croatian state was to such a degree that “the Croatian tax office didn’t send anybody to audit the company’s accounts in a decade,” Srica said.
“When in early 2017 it appeared the corporation was close to bankruptcy, the Croatian government reacted in haste to avoid an implosion,” he said.
The government adopted the so-called “Agrokow Law” that foresaw the government’s intervention in large corporations to avoid their bankruptcy.
“The government’s target was to avoid an economic and financial tsunami that would affect us all,” the Croatian prime minister, Andrej Plenkovic, said last week
In accordance with Croatian law, the main Agrokor shareholder, multimillionaire mogul, Ivica Todoric, was forced to hand over his company to a crisis management board in March that opened talks with its main creditors, among them, two Russian banks: Sberbank and VTB.
Agrokor assured it will not be forced to declare bankruptcy and announced a company restructuring within the next 18 months, which would mean selling off assets.
Agrokor’s dire straits are not only a menace to Croatia’s social and economic stability but have provoked a cabinet and coalition crisis between the conservative Croatian Democratic Union (HDZ) and the centrist Most party.
The coalition’s junior partner Most went to the extreme of backing a no-confidence vote against Zdravko Maric, Croatia’s finance minister and former Agrokor administrator, on an alleged conflict of interest.
The HDZ managed to salvage its finance minister by a very narrow parliamentary majority vote but the press and financial analysts both agree the Croatian cabinet is doomed and will collapse in the coming days or weeks, thus leading to the second snap general elections in less than a year.
The Most party accuses HDZ of covering up criminal activities within Agrokor’s management, which would mean that members of the HDZ leadership would be allegedly implicated in such dealings.
According to the opposition led by the Socialdemocrat SDP, the Agrokor group’s restructuring will, sooner or later, end in failure and the Croatian citizens will be left to foot the bill.