The ministry says that GFR has altered some of the conditions of the purchase since it submitted a binding bid for the shares, which was accepted by the government last July.

In a statement, which was published in full by Romanian news agency ACTMedia, Grampet Group said:

"Throughout the negotiations, Grampet Group has repeatedly indicated to the Croatian side the obstacles that were in the way of a successful conclusion of the deal, as well as possible solutions and our continued openness to consider any alternatives that the government may propose. Among these pending issues were: unclear legal status of assets worth around €20m; incomplete information from HŽ Cargo reflecting the exact situation of the company; rapid deterioration of HŽ Cargo's financial situation, with debt increasing by €4m per month, requiring a new due diligence process; failure to contact the European Commission in a timely manner to secure approval for the transaction; and lack of approval from creditor banks for the change of shareholder structure before the launch of the privatisation.

"We also strongly reject claims made by the government on Friday that Grampet Group shared in any of the responsibility for the failure of the privatisation process. We consider this a unilateral decision by the Croatian side, which may have reflected differences within the government expressed in the media last week on the way forward for HŽ Cargo."

Grampet adds that in a meeting with transport minister Mr Sinisa Hajdaš Dončič in Zagreb on January 23, which was attended by the company's CEO Mr Grucia Stoica, "both parties shook hands and parted with the firm conviction that the privatisation process could be completed with success."

HŽ Cargo issued a statement on January 27 saying that the government is ready to provide Kuna 230m ($US 41m) to restructure the business if the company's management are able to meet four key conditions within the next two weeks. These include: making 1100 of its 3482 staff redundant; reducing salaries by 20%; disposing of non-core business activities; and reducing severance pay for employees leaving the company.

"The cost of bankruptcy is greater than the cost of normalising operations, and the survival of HŽ Cargo is in the interests of the state and the economy," the statement says.

HŽ Cargo currently has long-term debts of around Kuna 800m. Dončič says privatisation of the company is still likely to go ahead, but the government has no intention of restarting the process this year.

The total value of the sale to GFR was expected to be around Kuna 1.1bn. HŽ Cargo carried around 12 million tonnes of freight, or 2.44 billion tonne-km, in 2011.

HŽ Cargo became a limited-liability company in 2007 as part of the restructuring of HŽ into a holding company, and remains a wholly-owned subsidiary of HŽ Holding.