World Bulletin / News Desk

Croatia's teachers and nurses staged a one-day strike on Thursday, the first major protest against austerity measures in the country that will join the European Union next year, while Fitch affirmed Croatia's rating but downgraded its outlook.

Unions said more than 70,000 out of some 100,000 people working in schools, universities and hospitals joined the strike over reduced bonuses and wage cuts announced for 2013.

The year-old centre-left government cancelled a collective agreement with public sector unions earlier this year in an effort to renegotiate contract terms and said it would cut 2.3 billion kuna ($393 million) from the wage bill next year.

The government is trying to consolidate the public finances and revive the economy that is now in a fourth year of recession.

The budget deficit will be reduced to 3.5 percent of gross domestic product this year from 4.4 percent last year, but for next year the deficit is seen rising to 3.8 percent due to the costs of EU accession, higher loan repayment costs and restructuring of the ailing shipbuilding industry.

Croatia is scheduled to join the EU in July.

Teachers have threatened new strikes towards the end of this school year if the government does not reverse its plans for education cuts.

Croatia's efforts to consolidate public finances have helped it preserve its investment grade, which is just a notch above speculative status.

However, the Fitch rating agency downgraded Croatia's outlook on Thursday to negative from stable, citing a milder fiscal consolidation path than previously announced.

The other two main rating agencies also have a negative outlook for Croatia.

($1 = 5.8475 Croatian kunas)