TEN months after Croatia achieved its dream of joining the European Union (EU), its economy is still shrinking, sending a troubling reminder to its ex-Yugoslav neighbors that the bloc cannot promise prosperity.

    EU entry requirements and membership rules are meant to ensure new entrants have strengthened their economies and institutions enough to thrive within the trading union.

    For countries such as Croatia and Serbia, EU membership was also meant to help the region move on from the wars of the 1990s to shared economic development in the new millennium.

    But Croatia, the bloc’s 28th member state, is its worst economic performer this year, along with bailed-out Greece and Cyprus, and there is little sign so far of local start-ups or foreign investors generating viable businesses beyond tourism.

    “Only a few in Croatia seem to understand that attracting investors is nothing but a beauty contest all over Europe. Hence all the failed privatizations here,” said a Western business veteran in Zagreb.

    Even Slovenia, the state best-equipped to make its own way economically when Yugoslavia broke up, has struggled to let go of state ownership — notably of its debt-laden banks — despite graduating to eurozone membership in 2007. Elsewhere in the region, apart from a Fiat factory in Serbia few new jobs have emerged to replace those lost as state-owned industry rusted away.

    Croatia’s old-time industry, including shipbuilding, largely collapsed in the 1990s. Diplomats say it was unprepared for the EU and is reaping no benefits from membership.

    “There are a lot of uncompetitive companies, lots of imported goods. EU funds are not flowing. There is no planning, security, the legal system is not up to EU standards,” said an EU diplomat based in Zagreb.

    World Bank data shows Croatia is the only European country, along with Greece, whose economy has been shrinking since 2008. Croatia has shed almost 13 percent of gross domestic product in five years.

    Although industrial output rose for three straight months in the first quarter, for the first time since 2009, analysts expect further decline this year and marginal growth in 2015.

    “Now that Greece has growth again, we are an increasingly obvious underperformer,” said Velimir Sonje of the ArhivAnalitika consultancy in Zagreb.

    “Markets see that our [bond] yields have barely budged in the past year, while those on Slovenian and Hungarian debt have fallen sharply,” he said, referring to Croatia’s stubbornly high borrowing costs.

    The latest European Commission data put Croatia at the bottom of EU fund beneficiaries, having used just 18 percent of the funds available in 2007-13.(SD-Agencies)