Mr Hamilton, Yours Excellencies, Ladies and Gentlemen,

I am very pleased to have this opportunity to present to you the short overview of the situation on-the-ground in Croatia, the government's achievements in the last two years, as well as our short- and long-term priorities and objectives.

The process of democratic transition in Croatia started at the same time as in other Central and East European countries. However, faced with the aggression waged by the Milosevic's regime, democratization could not proceed at the same pace in Croatia. The human and material losses, as well as a variety of social and economic problems the war brought in its wake, only aggravated the complex process of transition. This double transition - from socialism to democracy and market economy and from war to peace - further burdened the pace of the political, economic and social reforms.

In the elections of January 2000, the Croatian people voted to end the period of international isolation, the mismanagement and abuse of power of the previous government, and its failure to ensure the economic progress. The electoral victory of the coalition of political parties in Croatia in January 2000 was based on a program that advocated inclusion in the Euro- Atlantic institutions, economic progress, as well as strengthening regional cooperation.

Since January 2000, the coalition government has brought the country into the World Trade Organization (WTO), the European Free Trade Association (EFTA), the Partnership for Peace (PfP), and NATO's Membership Action Plan (MAP). Croatia also signed a Stabilization and Association Agreement with the European Union, and participates actively in the Stability Pact. Thus, Croatia significantly redefined its international position and confirmed its role as a real contributor to security and stability in the region.

In the last two and a half years, my government has done its utmost to make the best of the received mandate for change. The semi-presidential system has been changed into a parliamentary one, and the government has been brought closer to the people. The defense and security systems are democratically reformed. The media has been liberalized.

The macroeconomic situation is stable and the GDP growth - between 3 and 4 percent - is continuing, while Croatia's GDP per capita corresponds to that of the advanced transition countries of Central Eastern Europe.

Capital restructuring and privatization have been intensified and made transparent. The relations with the international monetary and banking institutions have been improved. The implementation of the infrastructural projects of major importance for Croatia and this part of Europe - such as regional highways and oil-pipelines - has been intensified. Foreign trade has been liberalized. Currently, about 80 percent of the exchange of goods occurs due to free trade agreements.

The social and health care systems are in the process of reform and the whole welfare sector is being rethought along more realistic means. The return of refugees, reconstruction and revitalization of war-affected areas, including mine clearing, are progressing well, financed mainly from the national budget. The law reform, the minority legislation, the reform of television and many more issues top our agenda.

Sweeping changes have also been made in the area of foreign policy. Croatia ended its isolation and has significantly redefined its international position. The country confirmed its role as a real contributor to security and stability in the region; a fact which has been recognized by the international community. Croatia is deeply committed to promoting a policy of good relations and mutual cooperation in the three regions to which it belongs - Central Europe, Southeast Europe, and the Mediterranean.

The Croatian strategic foreign policy goals are membership in NATO and the European Union. I am glad to say that 75 percent of the population supports this policy. While making every possible effort to prepare the country for EU membership by 2006, we plan to submit our application for candidacy to the EU early next year.

Particularly encouraging is the progress achieved in bringing Croatia closer to NATO. In May 2000, Croatia was invited to join Partnership for Peace. Only two years later, the NATO ministerial in Reykjavik invited Croatia to join the Alliance's Membership Action Plan, allowing the country to become an official NATO candidate. In the last two years a series of actions have been taken: participation in PfP activities, intensified dialogue with NATO institutions, and a number of joint military exercises with Croatian and US forces on Croatian soil.

Croatia has been actively participating in the activities of the Vilnius Group of NATO candidate countries. We sincerely believe that all NATO aspirant countries included in the Vilnius group could contribute significantly to the fulfillment of our shared vision of a democratic, prosperous, and undivided Europe.

Croatia is aware of the fact that it will not be invited to join the Alliance at the Prague NATO summit in November 2002. However, Croatia expects to be recognized as a strong candidate and a front-runner for the next round of enlargement. In that context, Croatia will remain strongly committed to continue working closely with NATO, invited countries, and all NATO candidates, further endorsing the Vilnius process. Croatia firmly believes that the United States will stay committed to a NATO open-door policy and encourages the strengthening of institutional links with all countries that share the common vision of security, cooperation, and solidarity as the principles of the North Atlantic Alliance. Croatia considers its NATO membership as the most efficient investment in the permanent stability and prosperity of Southeast Europe.

The actual situation in the Southeast Europe has greatly improved, thanks to the strong commitments to political and economic reforms. Further progress in efforts at democratization and integration into the Euro-Atlantic institutions will improve regional stability and security in this sensitive region. That is why we hope that the international community, especially the United States and the EU, will remain involved in the region - particularly in Bosnia- Herzegovina, to help it fully achieve integrity, independence and integration into the European mainstream on the basis of the equality of its three constituent peoples, which is key to a lasting peace and progress in the region.

Our relations with Italy, Slovenia, Hungary and Bosnia-Herzegovina are based on mutual respect and understanding. Croatia welcomed the admission of Bosnia-Herzegovina to the Council of Europe, and we support the admission of the Federal Republic of Yugoslavia, provided that Belgrade meets all the requirements set up by the Parliamentary Assembly and the Committee of Ministers of the Council of Europe.

Relations between Croatia and Yugoslavia have achieved important progress. The border on the Danube, the issues of refugees/returnees, missing and imprisoned persons, and the role and position of ethnic minorities, are being settled in a constructive atmosphere.

Croatia is also a security contributor to international peace efforts, participating in the UN missions in Sierra Leone, Eritrea and Ethiopia, as well as in international activities in Kosovo. We have a similarly fruitful cooperation with the United States in confronting global terrorism.

In the aftermath of September 11th, Croatia demonstrated its commitment to act as a de facto ally of the United States, defending the values shared by the democratic world. The global insecurity that emerged after September 11th has taught us clearly that it is necessary to expand the institutional framework of mutual cooperation. All NATO aspirant countries expect to contribute and participate in the process of building a safe, free and democratic Europe. There is no place for new division lines in Europe.

Thank you.

H.E. Ivica Racan spoke at a Wilson Center Director's Forum on June 6, 2002. The above is the transcript of his speech, edited by EES Program Associate Sabina Crisen. Meeting Report #256.