The Croatian government decided at its meeting on Thursday to cut by 10 per cent privileged pensions exceeding HRK 3,500.

The privileged pensions, which are regulated by a dozen laws, will be reduced under one law, which will take effect on July 1.

The move will not apply to the pensions of 100-percent disabled war veterans, miners who worked in the Tupljak coal mine, and people who were exposed to asbestos in their workplace.

The pensions below HRK 3,500 will not be reduced, and it will be ensured that the reduced privileged pensions are not lower than that.

Some 10,000 budget beneficiaries will receive reduced pensions, and the law will be implemented by the Croatian Pension Insurance Agency.

The new law will save HRK 250 million in this year's budget, HRK 610 million in the 2011 budget and HRK 620 million in the 2012 budget.

Prime Minister Jadranka Kosor said that the measure was part of the government's economic recovery programme, and added that the government would be introducing similar measures every week.

The next measure will be to limit the entitlement of members of Parliament to free travel only to travel relating to parliamentary activities.

The government also decided to merge several hospitals in Zagreb, with Health Minister Darko Milinovic saying that the purpose of the move was not just cost-effectiveness but also the desire to improve health services and reduce the patient waiting lists by 20 per cent.