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A fleeting moment in the sun

Offered a rare chance to jump into the first rank of transition economies, the jewel of the Adriatic must choose between getting ahead and just getting by.

Zagreb, Croatia's picturesque capital, is famous for its cafés. On nearly every block tables spill out onto the sidewalk, or even the street, filled with well-dressed locals sipping coffees and cocktails.

Try to find an actual restaurant, however, and you could walk kilometres.

Many Croatians reflexively use this as a metaphor for their economy. The country's wealth of low-hanging economic fruit - a majestic coastline and large inward flows of remittances - masks a general lack of nourishment, and tempts the public and policymakers to put off or water down much-needed reforms. Although well ahead of the war-ravaged former Yugoslav republics to the east, Croatia trails star EU candidate Slovenia and other advanced transition countries, and runs the danger of complacently muddling through another decade.

Zagreb: a café society, but good
restaurants are hard to find

The prevailing economic and political climate in the small republic of roughly 4.5

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