By Igor Ilic

 

ZAGREB (Reuters) - The Croatian government and public sector trade unions failed to sign an agreement on a 2017 pay increase as planned on Monday, and talks are set to continue.

 

Last Friday they tentatively agreed that wages would rise by three percent in April and by an additional three percent from November next year.

 

A 2009 agreement promised to increase public sector wages by 6 percent a year once Croatia's economy grew by 2 percent on average in two consecutive quarters. After years of recession, the economy returned to growth in 2015.

 

Union representatives said on Monday the government wanted them to give up some of the pay rise for this year and the right to seek compensation in court, which was not acceptable.

 

Labour Minister Tomislav Coric said his negotiating team wanted to protect the state from costly lawsuits.

"Our goal is to protect the state (finances) as a considerable sum of money is involved," he said.

"We didn't succeed this time to find a solution, but it doesn't mean it won't be possible next time."

An annual wage increase of six percent would cost the budget up to 1.8 billion kuna ($254 million), or 0.5 percent of gross domestic product.

The government insists its goal is to continue with efforts to reduce public debt and win approval from Brussels next year to exit the excessive deficit procedure, a tool the European Union uses to impose fiscal discipline on member states.

Croatia's current public debt is around 85 percent of GDP

and the government wants to reduce it to 83 percent next year. According to the 2017 budget proposal, the budget deficit is set at 1.6 percent of GDP, slightly lower than the 1.7 percent seen this year.

(Reporting by Igor Ilic; editing by Andrew Roche)