Our latest double edition report marks Croatia’s EU entry on July 1 following more than ten years of membership negotiations. Yet, the local authorities already managed to anger the European Commission after making a last minute change in the domestic legislation, not allowing the application of the European Arrest Warrant (EAW) to crimes committed before 2002.

The change thus leaves the door open for some former top military Croat officials from the Yugoslav wars to avoid justice in other EU countries. As Croatia already missed several deadlines to align to the EAW, the Commission is now threatening to impose sanctions that include blocking some of the EU funding aid.

At the same time in early August both Moody’s and S&P affirmed their credit ratings for Croatia with the former keeping the rating outlook at stable, while the latter downgrading it to negative. The agencies said they see limited growth potential amid the weak foreign demand.

The statistics office confirmed its flash estimate for a 0.7% year on year GDP contraction in April to June, which is however smaller than forecasted by local analysts. Croatia has entered a fifth consecutive year of recession in 2013 with real GDP losing 12% since 2008 due to declines in real consumption and real investment, the S&P said.

Croatia’s annual consumer price inflation again cooled down to 1.9% in August from 2.3% in July and 2% in June. The industrial production decline, however, accelerated to 4.1% year on year in July from 1.5% a month earlier. Retail sales edged up by a real 0.4% on the year in July after rising 2.6% in June.

The jobless rate dropped for a fifth month in a row to 18.5% in July from 18.6% in June and 19.6% in May helped mainly by the summer tourism season. It was still above the 17.5% one registered in July 2012. The average net wage kept on shrinking in real terms – by 2.1% year on year in June after a 0.6% year on year decrease in May.

The country's foreign trade deficit rose an annual 6.3% in January to June after dropping by 1.6% in the first five months alone. It accounted to 8.3% of GDP versus 8.1% of GDP in the first half of 2012.