Premiership (2000–2003)
In August 1998, Račan and Budiša signed a coalition agreement and later won the 2000 elections, dislodging HDZ from power after a decade.
Following the election, Račan became Prime Minister of Croatia and formed a six-party centre-left government with ministers from SDP, HSLS, the Croatian Peasant Party (HSS), the Liberal Party (LS), the Croatian People's Party (HNS), and the Istrian Democratic Assembly (IDS).
Račan, like the newly elected president Stjepan Mesić, was initially hailed as a new, reformist leader who would symbolize the break with Croatia's authoritarian and nationalist past. While a democrat, Račan was, however, inefficient in running a government comprising six parties, the first coalition in modern Croatian history. His style of governance, sometimes described by the phrase "Odlučno možda" ("Decisively maybe" in English), plagued his government with factional struggles. Račan had to adopt a compromise-making attitude which limited the government's ability to commit fully to what should be done.
Račan faced problems when his main coalition partner Budiša lost in the 2000 Croatian presidential election. This made Budiša lose any significant role in the government so he became frustrated and started making trouble.
This led to the break-up with Budiša who took a more nationalist approach to dealing with the issues of ICTY indictments against Croatian Army generals. This rift began to affect Račan's government on other issues. IDS was the first to leave the coalition in June 2001.
Račan formally resigned on 5 July 2002, after their coalition partner HSLS obstructed the ratification of a vital agreement with Slovenia on the status of the co-owned Krško Nuclear Power Plant. This led to a party split which saw the main faction of HSLS leave the ruling coalition and a dissenting faction which formed a new party called LIBRA which opted to stay in the government. This enabled Račan to form a slightly modified government that would remain in power until the next elections in 2003.
Račan's best achievements were in foreign policy. He successfully brought Croatia out of the semi-isolation of the Tuđman era and set the country on the road towards membership of the European Union. During his term as prime minister, the Constitution of Croatia was amended, turning Croatia from a semi-presidential system to a parliamentary democracy and granting more power to the parliament and prime minister. Among other things, Račan opened up the government's workings to the public with an "open-doors day" at the government and scheduled regular press conferences, which was in sharp contrast to previous governments who for the most part shunned media attention. Račan visited Bleiburg, Austria, in 2002 and attended the annual commemoration of the Bleiburg repatriations.
During his term in office, Croatia also changed economically. The opening to the West brought fresh inflows of capital which helped jump-start Croatia's GDP growth, amounting to around 5% per year during the years of the Račan government – high compared to previous years. The government also undertook a series of reforms in the public and government sectors and started large building projects, such as an affordable housing program and the construction of the A1 highway connecting the two biggest cities Zagreb and Split, which had been long-desired due to its importance for tourism. During this period, Račan also began to heal the rifts between Croatia and its neighbour Serbia and other former Yugoslav republics.
He also endured much criticism during that time when it came to the ICTY investigations. On the right-wing political spectrum he was attacked as being non-patriotic and a traitor to the national interests while on the liberal-left spectrum he was accused of not doing enough in fighting right-wing extremism and doing little on ensuring de-Tudjmanisation. In February 2001, he faced a massive public uproar when the indictment from ICTY came for Mirko Norac, who at the time was a runaway. The incident came to a peak when 100,000 people came to protest on the Split Riva against the government and a fear of a Coup d'état was at stake. The incident was calmed down when Račan made a deal with Carla Del Ponte which assured that Norac would be prosecuted in Croatia.
In July 2001, came the indictment for Ante Gotovina but Račan delayed accepting it because he felt that some parts of the indictment were wrongly written and negative about the Croatian War of Independence. Since Gotovina was not arrested or even under surveillance during that time, he made his escape to exile which lasted until his arrest in 2005. It was a heavy blow in the Croatian negotiations process with the EU. The last major ICTY scandal happened in September 2002 when the indictment for Janko Bobetko came. Bobetko at the time was in a bad health condition, so he refused to leave his home and surrounded himself with armed people. Račan was afraid that if Bobetko died during the transport to The Hague, it would cause a national riot with the right-wing population. Račan rejected the indictment and Croatia faced a risk of international isolation at that point. Račan persuaded Bobetko to leave his house and go to the hospital. The situation was tense until April 2003 when Bobetko died. After his death, the indictment was dropped and Croatia continued with the negotiations.
Račan was also criticized for his ratification agreement with Slovenia over the Gulf of Piran in 2001. Račan attempted to improve relations with Slovenia which were needed for the EU negotiations so he made an agreement which gave Slovenia 80% of the gulf territory and an exit in international waters but Croatia would still have the border with Italy. The agreement was heavily attacked by the public and the parliament speaker at the time, Zlatko Tomčić, claims that he did not know how much territory was given to Slovenia until the new gulf map came out in the newspaper Slobodna Dalmacija. The agreement was later rejected and not signed by the prime minister so it never came to a realization.
