Surprise Election Win to Keep Croatian Ruling Party in Power

(Bloomberg) -- Croatia's ruling party scored a surprise victory in Sunday's general election, defying predictions for a tight race and putting it within touching distance of a majority in parliament.

With almost all votes counted, Prime Minister Andrej Plenkovic's center-right Croatian Democratic Union, known as HDZ, had 66 of the legislature's 151 seats, compared with 41 for the Social Democrat-led Restart alliance in second place.

The vote, held against a backdrop of rising Covid-19 infections, comes at a key juncture for the European Union's newest member-state and its 4.2 million people. The new government must finalize this year's entry into ERM-2 -- the waiting room for euro adoption -- while lifting an economy that relies on tourism for a fifth of output from its worst slump on record amid the coronavirus pandemic.

With support from the eight seats allocated to minority groups, as well as other small parties and individual lawmakers, HDZ can quickly get the 10 or more seats it needs for a majority, according to Kresimir Macan, who heads the Manjgura political consultancy.

Plenkovic, premier since 2016, “will easily form a government,” Macan said by phone from Zagreb. “He can continue to work quickly on fighting the pandemic and saving the tourist season, and continue with the planned administrative reform. In the current situation, this is a good result for Croatia.”

The country's 2029 Eurobonds rose for a 15th day, bringing the yield down to 1.16%.

‘Compelling Victory'

Plenkovic had at one stage looked a good bet for outright victory after weathering the initial phase of the pandemic and ending lockdowns promptly in a bid to salvage the crucial summer season. But visitors haven't flocked back to historic Dubrovnik or the country's hundreds of Adriatic Sea islands. And Plenkovic was criticized for refusing to self-isolate following an encounter with tennis star Novak Djokovic, who tested positive for the virus but is now free of it.

The premier thanked voters for what he called a “compelling victory.” Croatia needs “solutions for the economy and public-health challenges,” he told supporters in Zagreb. “It needs to strengthen institutions, as well as human and minority rights.”

Without the need to team up with right-wing parties, Plenkovic -- a former EU diplomat -- now has the opportunity to bring HDZ closer to the political center, according to Macan.

The election result will come as a relief to the government after ally Kolinda Grabar Kitarovic lost her bid for re-election as president in January, in part over ties to the scandal-plagued mayor of the capital.

©2020 Bloomberg L.P.