Croatia to obey fiscal rules even if growth fails -minister

ZAGREB, Oct 4 (Reuters) - Croatia will stick to fiscal discipline even if the economy fails to meet growth expectations in 2013, Finance Minister Slavko Linic said on Thursday, rejecting calls by some trade unions to soften austerity measures.

Under its fiscal responsibility law, Croatia has to cut public spending each year by at least one percentage point of gross domestic product. This year it will reduce the general budget gap to 3.4 percent of GDP from 4.5 percent in 2011.

"We are not thinking about changing the law. If our growth projection fails, we will have to focus on more savings," said Linic, the first Croatian finance minister to effectively cut budget spending since the end of the country's 1991-95 independence war.

The government forecast 2013 gross domestic product growth at 1.8 percent while the International Monetary Fund sees it at 0.8 percent.

The Fund commended this week the government's efforts but warned that further budget tightening may be in jeopardy if growth remains weak .

Croatia, which is scheduled to join the European Union in nine months, is set to suffer a fourth year without growth.

The government's austerity drive has helped the country keep its credit rating, which is just a notch above junk, but rating agencies, along with the IMF, have stressed the importance of achieving growth in the future.

The nine-month-old centre-left government is now trying to kickstart the economy, mostly through investments by public companies in energy and transport infrastructure.

Some public sector unions, mostly in education, have opposed the government's austerity policies and threatened protests and strikes. The first protests in the capital Zagreb are planned for next week.

"Our social partners have to understand that the situation in Croatia does not permit playing games with the budget. We have a high foreign debt and public spending and a low level of production," Linic said.

Croatia's foreign debt is just over 100 percent of GDP, while the overall public debt is slightly above 50 percent, according to EU methodology.

(Reporting by Igor Ilic; editing by Zoran Radosavljevic and Ruth Pitchford)

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