The Croatian government’s plan to use a concession agreement to monetise the debts of Hrvatske Autoceste (HAC), Croatia’s national motorway authority, and Autocesta Rijeka-Zagreb (ARZ), the state-owned company that operates the Rijeka-Zagreb motorway, is in danger of unravelling.

According to the Ministry of Maritime Affairs, Transport and Infrastructure, the combined debts of HAC and ARZ totalled HRK33bn (€4.3bn) in principal alone.

Under the agreement, unveiled in 2013, the government would lease the country’s two main highways and ancillary roads for 30-50 years to a winning consortium in return for a one-off payment of up to HRK2bn to reduce public debt.

The new operator’s revenue streams would include tolls and income from motorway services, while the government retained fuel excise duties.

The bidding groups include Croatia’s four mandatory pension funds (OMFs), for which participation represents a new long-term investment vehicle.

Opponents of the plan, who describe the project as a form of privatisation that would lead to higher motoring costs and job losses, have suggested alternatives such as rescheduling the debts or financing them through government bond sales open to the public, as well as pension funds.

From the government’s perspective, neither solution reduces the country’s general government debt, which had risen to 77% of GDP by the end of June 2014, from 68.5% a year earlier.

Meanwhile, eliminating the associated interest costs, the government argues, would free up revenues for new infrastructure investment.

In October, a group of construction trade unions, trade union associations and civil society organisations initiated a call for a referendum supporting a ban on concession schemes for existing highways.

The group claims it has obtained the necessary number of signatures – 10% of the eligible voting population.

The 400,000-odd signatures now have to be verified by a parliamentary committee.

Prime minister Zoran Milanović, while stating he would respect the outcome of the referendum, is nevertheless referring it to the Constitutional Court.

He wants the Court to examine, among other things, the implications for lost revenues for OMFs’ 1.7m members should the referendum pass.

The timing could not be worse.

The bidding consortia have until the end of this month to submit non-binding proposals, followed by a period of negotiations.

According to the Ministry of Maritime Affairs, Transport and Infrastructure, a shortlist may be published in December or January.

It is also possible that none of the bids are acceptable, although currently the government has not announced an alternative proposal to deal with the motorway debts.