Croatia became the 28th member of the European Union today (1 July), a milestone capping the Adriatic republic's recovery from war but tinged with anxiety over its economy and the state of the bloc it joins.

EU flags fluttered from a stage in Zagreb's central square ahead of festivities on Sunday, but there have been few signs of the gushing welcome that marked past expansions to ex-communist nations.

Croatia joins the bloc just over two decades after declaring independence from federal Yugoslavia, the trigger for four years of war in which some 20,000 people died.

Facing a fifth year of recession and record unemployment of 21%, few Croatians are in the mood to party.

The EU is also deeply troubled by its own economic woes, which have created internal divisions and undermined public support for the union and its expansion.

"Just look what's happening in Greece and Spain! Is this where we're headed?" said pensioner Pavao Brkanović. "You need illusions to be joyful, but the illusions have long gone," he said at a Zagreb market.

President Ivo Josipović told Croatia's Nova TV on Saturday that journalists from EU countries had repeatedly asked him why Zagreb wanted to join the bloc.

"My counter question was: 'You come from the EU. Is your country preparing to leave the bloc?' They would invariably reply: 'Of course not.' Well, there you go, that's why we are joining, because we also believe the EU has a future," he said.

The country of 4.4 million people, blessed with a coastline that attracts 10 million tourists each year, is one of seven that emerged from the ashes of Yugoslavia during a decade of war in the 1990s.

Merkel no-show

Slovenia was first to join the EU, in 2004, but Serbia, Bosnia, Macedonia, Montenegro and Kosovo are still years away.

To get to this point, Croatia has gone through seven years of tortuous and often unpopular EU-guided reform.

It has handed over more than a dozen Croatian and Bosnian Croat military and political leaders charged with war crimes to the United Nations Tribunal for the former Yugoslavia in The Hague.

It has sold shipyards, steeped in history and tradition but deeply indebted, and launched a high-profile fight against corruption that saw former prime minister Ivo Sanader imprisoned.

The spirit of the occasion took another knock when German Chancellor Angela Merkel, the bloc's most powerful leader, pulled out of the accession ceremony, saying she was too busy.

Croatian media linked the move to a row over a former Croatian secret service operative wanted in Germany, though a spokesman for Merkel denied this.

Instead, Merkel urged Croatia to press on with reforms.

"There are many more steps to take, especially in the area of legal security and fighting corruption," she said in a weekly podcast.

For some Croatians the merits of accession were undeniable, despite the lukewarm mood.

"I know many people in Croatia are very sceptical but I think EU entry is the best thing that could have happened and it's an injustice we should have waited since 1990," said Željko Kaštelan, a businessman whose hotels employ 70 people.

"What we need to do now is work hard to make up for the lost time," he said.