The planned budgetary cuts in the public sector of HRK 2 billion are based on cutting HRK 1.1 billion for specific benefits; laying off about 5,000 people, whereby about HRK 400 million would be saved; cutting overtime work, whereby HRK 200 million would be saved; and cutting material costs.

Speaking about the need to downsize and restructure the public sector, Labour Minister Mirando Mrsic said public companies' management boards would make the required arrangements with trade unions, adding that there was room for downsizing.

Mrsic voiced confidence that the downsizing would not impact the quality of service in the public sector.

"I'm asking those in charge in the public sector, if the sector could be equally efficient with 5,000 less workers and without overtime work, why did money have to be set aside for that so far," said union representative Mladen Novosel .

He said the unions felt that the laying off of workers with fixed-term contracts must be done carefully, adding that fixed-term employment should be an exception, not a rule. He warned that as many as 90 per cent of the newly-employed had fixed-term contracts.

Novosel said Croatia's goal must be the employment of at least 2.2 million people, instead of the current 1.4 million, which he said was economically untenable.

Croatia must change its economic model, but this cannot be done through one budget, said Ivan Ergovic, president of the Croatian Employers Association.

In order to seriously increase employment, structural reforms are necessary, the price of labour and the parafiscal levies have to be reduced, and the economy should be more competitive, said Ergovic.

He said HUP had supported the 2012 draft budget, although it felt that more cuts were possible, but added that employers found the retroactive payment of dividend tax unacceptable.

The unions said they supported the draft budget's macro-economic goals, as they did not want Croatia to end up like Greece and other countries facing bankruptcy, but underlined the importance of job creation.