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Croatia: U.S. Pressure Delays World Bank Loan

Washington, 2 July 1997 (RFE/RL) - The United States continued its effort to push Croatia into better compliance with the Dayton Peace accord Tuesday by winning an indefinite postponement of a proposed World Bank loan to Zagreb.

The 30 million dollar credit was to help the former Yugoslav republic rebuild its investment climate, but the U.S. pushed to hold the loan up because of Washington's dissatisfaction with Croatia's failure to uphold key provisions of the peace agreement. It is especially upset at Croatia's failure to hand over war criminals and failure to allow Serb refugees to return to their homes peacefully.

U.S. officials acknowledge privately, however, that it took a lengthy discussion among the 24 Executive Directors of the bank before others joined in agreeing to the postponement.

A U.S. Treasury official, speaking on provision of not being identified, says the American position was that in post-conflict situations such as exists in the former Yugoslavia, where international assistance is flowing, political and economic considerations merge into one.

"If you don't have political stability in a place like Croatia, there can be no economic justification for putting money in," says the official.

The World Bank charter and long practice requires that all bank loans be considered and decided upon their economic merits, not the political considerations of any member nation. The U.S., although the bank's largest shareholder, does not have a veto and controls only 17.4 percent of the board's vote.

The U.S. official acknowledges there were a "range of views" in the board on the question, but that after a discussion of over one and one-half hours, most of the board members were "satisfied enough" to agree to the postponement.

Sources say that the only Executive Director to argue vehemently for going ahead with the loan was from the Netherlands, which represents a constituency of 11 nations, including Croatia, on the board.

The U.S. official was quick to admit that if pushed, most of the executive directors would probably vote in favor of the loan. But they agreed with American Executive Director Jan Piercy's argument that when there is to be a major flow of international financial assistance, there must be an underpinning of stability -- and compliance with the peace accord responsible for ending the violence -- to make the aid economically justifiable.

World Bank staff economists also acknowledged that there are some "logical issues of bad governance in Croatia that help provide an economic justification for delaying the loan.

"It's not as if we're pushing our own political view on this," says the U.S. Treasury official. Rather, the official says, the U.S. is trying to ensure that a peace agreement which forms the basis of peace is honored by all the signatories.

Top World Bank officials or any of the Executive Directors can bring the loan back before the board at any time, so the U.S. is anxious to make discernible progress on the compliance issue as quickly as possible. Not only to get the peace process working better, but to get the desperately needed financial assistance flowing again too.