INTERNATIONAL POLICY ANALYSIS No More Buying Time: Fiscal Austerity in Croatia VELIMIR ŠONJE September 2012 n In the initial phase of the crisis(2008–2010) the HDZ-led centre-right government allowed a wider fiscal deficit and strong growth in public debt, although they cut public infrastructure programmes and introduced new taxes. The idea was to buy time in order not to cut public sector wages, subsidies and transfers. This fiscal strat­egy proved to be wrong as GDP recorded one of the sharpest contractions in Europe in this period. n The new SDP-led centre-left government that took office in January 2012 faced two real threats: exploding public debt and a deterioration in credit ratings. In order to cope with these threats, the new government initiated stronger fiscal adjustment on the expenditure side. n The»austerity vs. growth« debate does not seem to be a good intellectual frame­work for thinking about policies in the case of Croatia, as postponing austerity re­quires finding someone to finance the deficit at low interest rates. That may be impossible for the time being, so some degree of austerity seems to be a necessity in Croatia.