A DECISIVE PRIME MINISTER Jadranka Kosor at the August 5th Victory and Homeland Thanksgiving Day festivities in Knin Jadranka Kosor has begun to show the first signs of her political emancipation and distancing from the right wing of the Croatian Democratic Union (HDZ). The full extent of her growingly evident deviation from the faction led by Vladimir Seks and Andrija Hebrang is not yet known, but a sentence she uttered ten days ago in close company is significant - "If he continues with this blackmail, I shall tender my resignation, and I would really like to see how they will go on if Government falls and early elections are called."

Nacional was told about this surprising statement from among the top officials in the coalition Government, confirmed Monday by a close aid to the Croatian Prime Minister. They both claim that, just a month after having taken the reins from Ivo Sanader, the Head of Government has begun to show an ever-greater independence and distance from both Seks and Hebrang, and some key associates in cabinet such as Damir Polancec and Ivan Suker. What is more, Jadranka Kosor is increasingly, when drafting economic plans and analysis, dependent on three economic experts far from the HDZ - Zeljko Rohatinski, the Croatian National Bank Governor, Zeljko Lovrincevic of the Economic Institute and the CEO of Zagrebacka Bank (ZABA), Franjo Lukovic.

And while Suker and Polancec formally remain powerful ministers, the Prime Minister is slowly pushing them into the background, and consults primarily with Rohatinski, Lukovic and Lovrincevic when making her decisions. As another ever more influential unofficial advisor to Jadranka Kosor, Nacional's source has cited CNB Deputy Governor Boris Vujcic. Vujcic's influence has grown so much in these few weeks that he has even been considered for a cabinet post. The Prime Minister's aids feel that Boris Vujcic would be an excellent replacement for Suker, but the move is for now difficult to implement.

But, however much Jadranka Kosor is trying to solidify her position, she is by no means any more politically independent than she was and continues to depend very much on her powerful party colleagues. That is why she is trying to balance things out, and continues to consult with Seks, Suker and Luka Bebic on all key topics, and is at the same time creating her own circle of associates, who are not members of the ruling party. These include Durda Adlesic and Milorad Pupovac, whose five MPs are a guarantee of the stability of the current Government. Unlike Sanader, who was an autocratic leader that ruled without consulting others much, Jadranka Kosor nurtures a completely different style. From the moment she took on the post of Prime Minister she has consulted daily on the majority of decisions with the presidents of the smaller coalition parties. She has thereby demonstrated a robust political instinct, as it was precisely from the HSLS and the SDSS that signs had come over the past months of a possible exit from the ranks of Government and, in the event of early elections, that they would join a third political bloc that might be led by Stipe Mesic.ZELJKO LOVRINCEVIC of the Economic Institute advised the Prime Minister to increase the VAT rate

Having gained greater importance in creating Government policy, Durda Adlesic and Milorad Pupovac have been held alongside the HDZ, at least for the coming few months. During that period it is expected that Jadranka Kosor will undertake two measures that will provide the HDZ-led government a chance to survive. First, simply put, she has to get rid of some of Sanader's people and bring people she trusts to their posts.

Second, by September she needs to make some radical moves and measures to stabilise the economic situation, because if she dithers it could lead to the collapse of the socioeconomic situation, and it is certain in that kind of situation that Government would fall.

When it comes to personnel policy, it is evident that Jadranka Kosor is giving serious consideration to new people. Besides, one of the most important measures she has adopted was the increase of the VAT rate from 22 to 23 percent, and that was a proposal first put forward abut two months ago by Zeljko Lovrincevic. At the time Suker and Sanader reacted negatively, but the new Prime Minister has acted differently and, in spite of the expected resistance the measure has provoked in the public, has backed Lovrincevic's idea.

The information on her consultations with Rohatinski and Vujcic are further indicators of the fact that she is distancing herself from Ivan Suker and Damir Polancec. Zeljko Rohatinski has for years publicly warned of the fact that the current ruling economic policy is unsustainable, as a result of which the HDZ leadership had on several occasions discussed his ouster from the post of CNB Governor. He was saved by the excellent standing he has among the public, and the support he has been receiving these past years from Stipe Mesic. Even Sanader knew that an attempt to eliminate Rohatinski would lead to strong criticism, and he rather tolerated his criticism.

Jadranka Kosor is leading an entirely different policy than that led by her predecessor and is not only avoiding a confrontation with the CNB Governor, but is in fact numbering him among her most trusted advisors. To secure the support of the powerful banking lobby she is also heeding the advice of Franjo Lukovic. Cooperation with the leading banking groups is necessary because the annual turnover of the corporation that own Zagrebacka Bank and the Privredna Bank of Zagreb (PBZ) is greater than the Croatian GDP.
As a pragmatic politician Jadranka Kosor has grasped that the stability of Government depends largely on cooperation with the financial elite.

Also noticeable is a shift in the way in which decisions related to economic issues are made - while Sanader adopted decisions with a great dose of self-confidence, as if he were an economist, Jadranka Kosor is not shy of seeking advice, it is now evident, even outside the HDZ. That does not mean that the departure of Damir Polancec and Ivan Suker is in fact a certainty, but it does open the possibility. Polancec is in a weaker position since he plays no major role within the HDZ, and the question as to what he has achieved as Deputy Prime Minister could be raised.

DEPARTURE FROM GOVERNMENT Jadranka Kosor and Vladimir Seks The economic crisis has shown the many weaknesses of the Croatian economy, the drop in GDP is significant, and the unsuccessful privatisation of the shipbuilding sector has for years been an obstacle to accession to the European Union. All this falls into Polancec's portfolio and that is why his position is in question. Finance Minister Ivan Suker is for now in a much more stable position. He has succeeded in seeing through the budget rebalance and, what is more important, can count on the support of the HDZ's real leaders: Andrija Hebrang, Luka Bebic and Vladimir Seks. If Jadranka Kosor were to succeed in eliminating Suker it would confirm her political independence, and that is something Seks and Hebrang cannot allow.

This is the reason for their support of the Finance Minister, who is increasingly becoming a bulwark towards the growing ambitions of Jadranka Kosor. The Prime Minister knows that her threat to resign and call early elections would put the HDZ in a very difficult position. A number of bad moves and poor reactions to the crisis has significantly weakened the HDZ's position, and since taking over the post of Prime Minister Jadranka Kosor has also been forced to bear the consequences of the civic dissatisfaction.

Now she is the chief target of criticism and the public sees her as the most responsible for the poor economic and social policies. She must have been aware of this when she agreed to take up the post previously occupied by Ivo Sanader, but she is certainly not overjoyed with the public opinion polls which show that Government is, in the words of Sanader, "up the creek". A poll carried out last week by Nova TV shows that 66.9 percent of those polled do not support the policies led by Jadranka Kosor. Cited as her worst moves so far are the increase in the VAT rate, the scrapping of free school textbooks and the introduction of new taxes. They judged as positive is the slower pace of the construction of the Peljesac bridge and cuts to the wages earned by politicians.

The poll confirmed a drop in the popularity of the HDZ and of the ruling coalition. The leading party is the SDP with the support of 33.7 percent of those polled, while 25.9 percent back the HDZ. The breakdown is similar when comparing the left and right-of-centre - a potential SDP-HNS-IDS coalition would win 47.4 percent of the vote while the HDZ-HSS-HSLS trio would clinch 33.4 percent. That means that in the event of early elections the opposition would score a convincing victory and take power. In these circumstances the ultimatum issued by Jadranka Kosor is a very real one. Her resignation would also draw out the HSLS and the SDSS, and a number of ethnic minority MPs who would likely no longer back this Government. What is more important still is that it would become absurd to maintain a Government that two Prime Ministers and several coalition partners would have left in a short period of time. If that was to happen Andrija Hebrang would lose even the theoretical chance of winning the presidential elections, and a double defeat would put the Croatian Democratic Union back in the situation it had found itself in early 2000.Given the fact that she remains very much dependent on her powerful party colleagues Jadranka Kosor is trying to balance things out, and continues to work with Seks, Suker and Luka Bebic when deciding on all key issues

At the time the death of Tudjman, defeat at the polls and infighting threatened to break up the party, which was saved when Sanader took over the reins as the new HDZ president and by the disappointment of voters with the half-hearted policies pursued by the administration of then Prime Minister Ivica Racan. The HDZ is well aware of this and this autumn Jadranka Kosor will endeavour to achieve two apparently opposite goals - to homogenise the party and in the process rid herself of officials and ministers that are a ballast to the policies she wishes to pursue.

Cited behind the scenes as the most appropriate targets are Bozidar Kalmeta and Marina Matulovic-Dropulic, whom the European Commission has allegedly also singled out as a result of corruption scandals. But for the HDZ to hold on to power and she to the post of Prime Minister, Jadranka Kosor will have to make some much more radical moves.