Kosor told the press the non-resident representative would be based at the Croatian Ministry of Foreign Affairs and European Integration.

The Croatian premier's visit is a great honour for us and an opportunity for good talks about our future diplomatic relations, and we expect to this issue to be solved between government institutions, so that they can be formalised as soon as possible, said Fayyad.

We want to intensify our economic cooperation at all levels and I outlined the potential of the Croatian economy to my Palestinian colleague, Kosor said, saying cooperation was possible in the production of potable water, foodstuffs and in education in Croatia.

Our joint position is to establish a Croatian-Palestinian economic council which would develop our future economic relations, which are very important to us, said Fayyad.

Speaking of the situation in the Middle East, Kosor reiterated to Fayyad the Croatian position on the co-existence of two states, Israel and Palestine.

Croatia supports a solution in the shape of two states that would ensure the right of the Palestinians to their own state and the right of the Israelis to live in peace and security, Kosor said, adding that Croatia wished for dialogue to continue to ensure peace and progress in the region.

Fayyad said Kosor expressed Croatia's willingness to help in important issues such as health-care.

Later today Kosor was due to visit a rehabilitation centre for mine victims in Ramallah. She said she would invite a young Palestinian family to come to Croatia for rehabilitation.

We are very grateful for that and we can also cooperate in youth education and other issues in which we hope to cooperate based on sustainable ties between the two states and the two peoples, said Fayyad.

In the afternoon, Kosor was scheduled to meet Palestinian President Mahmoud Abbas.