In 1918, the Croats, Serbs, and Slovenes formed a kingdom known after 1929 as Yugoslavia. Following World War II, Yugoslavia became an independent communist state under the strong hand of Marshal TITO. Although Croatia declared its independence from Yugoslavia in 1991, it took four years of sporadic, but often bitter, fighting before occupying Serb armies were mostly cleared from Croatian lands. Under UN supervision the last Serb-held enclave in eastern Slavonia was returned to Croatia in 1998.

HISTORY
The Croats are believed to be a purely Slavic people who migrated from Ukraine and settled in present-day Croatia during the 6th century. After a period of self-rule, Croatians agreed to the Pacta Conventa in 1091, submitting themselves to Hungarian authority. By the mid-1400s, concerns over Ottoman expansion led the Croatian Assembly to invite the Habsburgs, under Archduke Ferdinand, to assume control over Croatia. Habsburg rule proved successful in thwarting the Ottomans, and by the 18th century, much of Croatia was free of Turkish control.

ECONOMY
Following World War II, rapid industrialization and diversification occurred within Croatia. Decentralization came in 1965, allowing growth of certain sectors, like the tourist industry. Profits from Croatian industry were used to develop poorer regions in the former Yugoslavia. This, coupled with austerity programs and hyperinflation in the 1980s, contributed to discontent in Croatia.

Fueled in great part by increases in tourism, the Croatian economy began to turn around in 2000, growing 2.9%. This was followed by a 3.8% increase in 2001. The trend continued in 2002, when the economy expanded by 5.2%, stimulated by a credit boom led by the newly privatized and foreign-capitalized banks, some capital investment (most importantly road construction), increases in tourism, and gains by small and medium-sized private enterprises. The increase of unemployment over the last several years appears to have halted and is slowly reversing, although state-financed enterprises, particularly in agriculture and shipbuilding, continue to rely on subsidies and rack-up arrears. Weak investor interest due to poor financial condition of many firms and unresolved property right issues, unrealistic Croatian expectations of market value, and political infighting led to a slow-down of privatization in 2002. However, the expected 2003 sale of 25% (plus one share) of the national petroleum company, and privatization of segments of the national electricity company starting in 2004 should stimulate further foreign investment and increase competitiveness.

FOREIGN RELATIONS
Croatia is in the midst of pursuing a policy of greater Euro-Atlantic integration. In October 2001, Croatia took another step closer to membership in the European Union (EU) after Prime Minister Racan signed a Stabilization and Association Agreement with the EU. On February 25, 2003, Croatia formally presented its EU membership application. Croatia was admitted into the Partnership for Peace Program, which was designed by NATO member states in 1994 to strengthen Euro-Atlantic security on May 25, 2000, and, in May 2002, was welcomed into NATO’s Membership Action Program, a key step toward NATO membership. On May 2, 2003, the United States joined Croatia, Albania, and Macedonia to sign the Adriatic Charter, in which the three NATO aspirants pledged their commitment to NATO values and their cooperative efforts to further their collective NATO aspirations. Croatia has been a member of the United Nations since 1992, and contributed troops to UN operations in Sierra Leone, Ethiopia, and Eritrea and Kashmir. It also sent a Military Police unit to support the International Stabilization Assistance Force in Afghanistan. Croatia is a member of the World Trade Organization and the Central European Free Trade Organization.

U.S.-CROATIAN RELATIONS
U.S. engagement in Croatia is aimed at fostering a democratic, secure, and market-oriented society that will be a strong partner in Euro-Atlantic institutions. The United States opened its embassy in Zagreb in 1992, and has continued to work with Croatia to overcome the legacies of communism, war, ethnic division, and authoritarian government.

In an effort to promote regional stability through refugee returns, the United States has given more than $13.4 million since 1998 in humanitarian demining assistance. Croatia hopes to remove an estimated one million remaining mines by 2010. The United States also has provided additional financial assistance to Croatia through the Southeastern European Economic Development Program (SEED) to facilitate democratization and restructuring of Croatia's financial sector

Full country name: Republic of Croatia
Area: 56,538 sq km (22,049 sq mi)
Population: 4.437 million
Capital city: Zagreb (pop: 777,000)
People: Croats (78%), Serbs (12%), Slavic Muslims, Hungarians, Slovenes
Languages: Croatian, Serbian, Italian, Slovene
Religion: Roman Catholic, Eastern Orthodox
Government: Parliamentary democracy
President: Stipe Mesic
GDP: US$202.6 billion
GDP per head: US$4.566
Annual growth: 3.7%
Inflation: 6.2%
Major industries: Steel, cement, chemicals, fertilisers, textiles
Major trading partners: EU( esp. Germany, Italy), Slovenia
Member of EU: No