Croatia's new centre-left government led by Prime Minister Zoran Milanovic was sworn in Friday, facing the difficult tasks of leading the country out of an economic crisis and into the European Union. Shortly after the swearing in, the parliament voted to hold a referendum on Croatia's entry into the EU on January 22, a move enabling Zagreb to eventually join the bloc in mid-2013.

It was the first major decision by the new parliament, dominated by the centre-left coalition, which had overwhelmingly approved the new cabinet.

Milanovic warned in a speech that the country's economy was "in a dangerous situation" and needed austerity measures.

"Croatia is not in chaos ... but in a dangerous situation and at a turning point," Milanovic said, referring to its serious economic malaise.

Presenting his cabinet's programme before the vote, the Social Democrat leader told the deputies that an austerity budget would be the first big challenge for his government.

"Public finances are overstrained... Croatia has to limit public spending (and) consolidate the budget," the 45-year-old Milanovic insisted.

The new parliament was inaugurated on Thursday after a centre-left coalition led by Milanovic's SDP had ousted the scandal-plagued ruling conservatives.

In the December 4 vote, the four-party Kukuriku coalition won 80 seats in the 151-seat parliament while the conservative HDZ had 47 seats.

Croatia's Adriatic tourism-oriented economy gradually recovered after the 1991-1995 war of independence from the former Yugoslavia.

But with the onset of the global financial crisis, the Balkan country has mostly been in recession since 2009.

Slowing export growth, weak credit growth, low investment and persistent unemployment -- now standing at almost 18 percent --- have all contributed to a sluggish recovery.

The central bank sees a modest 0.5 percent growth and a fiscal deficit of 6.2 percent for this year. The World Bank Predicted a 1.0 percent slump of gross domestic product (GDP) in 2012.

Analysts say the new government will have to undertake structural reforms notably of its generous welfare system, inefficient public administration and improve the business climate.

"We pledge to bring into the European family an economically developed and competitively prepared Croatia," the government said in its four-year programme presented to the parliament.

Earlier this month Croatia signed an EU accession treaty, paving the way for Zagreb to formally join the bloc on July 1, 2013.

Apart from the referendum over the issue in Croatia, the treaty has to be ratified by all current 27 EU member states. The latest survey showed that some 60 percent of Croatians would say 'Yes' in the referendum.

In his speech, Milanovic called on Croatians to support EU membership.

Of the six republics that formed the former socialist Yugoslavia -- Bosnia, Croatia, Macedonia, Montenegro, Serbia and Slovenia -- only the latter is an EU member, since 2004. The former federation collapsed in a series of bloody wars in the 1990s.