Croatian Finance Minister Marko Primorac announced on Tuesday that energy prices, including electricity and gas, are expected to rise by 10 to 15 percent. Contrary to recent media speculation, Primorac assured that the price hike will not reach 20 or 30 percent. The increase is a consequence of the ongoing state of elevated energy prices globally.

The minister emphasized that subsidies on electricity and gas will be reduced gradually. This gradual reduction aims to mitigate any potential negative impacts on consumers while ensuring market stability. Primorac highlighted the importance of understanding that protecting specific groups at the government's expense is essentially a reallocation of budgetary resources.

Subsidies, he explained, have been funded by taxpayers, and retaining them at their current levels would distort price signals. If you try to artificially reduce the price from the budget, citizens and entrepreneurs aren't aware of the ongoing market disruptions and are less motivated to reduce energy consumption or switch to renewable sources, he said. Therefore, subsidy reductions will be undertaken carefully to avoid market turbulence.

Regarding fuel subsidies, Primorac noted that the government has largely discontinued them. Over the past two years, various short-term decrees were issued to lower excise duties on diesel and gasoline. Subsidies were halved last year and were completely abolished this summer. However, the government retained some control over fuel margins to prevent excessive price inflation.

Primorac also addressed the forthcoming tax reforms, including the highly anticipated property tax. He acknowledged that the over-taxation of properties and rental income has essentially turned Croatia into a society of rentiers, an issue the new property tax aims to correct. The new tax would target owners of unused properties, those not occupied or rented out, with the intent of encouraging better utilization of real estate assets.

Anticipation surrounds whether the property tax will once again be presented without implementation, a scenario witnessed several times in the past. Primorac expressed hope that this time the government would follow through with the tax, reassuring that the details and potential impacts of the tax will be clearer after its official presentation.

Explaining the broader economic context, Primorac reiterated that the prolonged high prices of energy necessitate a reduction in subsidies. These subsidies, financed by taxpayer money, have become less justified over time. Long-term high energy prices signal a permanent market shift, he stated, underlining the need for a broader adoption of sustainable and renewable energy sources among citizens and businesses.

Authorities have held regular meetings to address fuel pricing, often implementing temporary measures to control excise taxes on fuel. We've been holding bi-weekly government meetings to discuss fuel prices, and though we reduced subsidies systematically, we retained some control over margins to avoid market chaos, Primorac mentioned.

Government strategy now focuses on introducing policy packages aimed at protecting citizens and mitigating inflationary pressures driven by rising energy costs. Primorac concluded that the Croatian government remains committed to a balanced approach, ensuring that subsidies do not unduly burden the budget while managing inflation and encouraging shifts to renewable energy sources.

In summary, while the Croatian government prepares for a moderate hike in energy prices, it seeks to phase out subsidies gradually to avoid market disruptions. Meanwhile, the proposed property tax aims to stimulate the more effective use of real estate, countering Croatia's drift towards a rentier society. The approaching weeks will shed more light on the specifics and implications of these fiscal measures.