Croatia ready for euro adoption in 2023

The European Commission on Wednesday estimated that Croatia will meet the conditions for adopting the single currency on January 1, 2023, which will make it the 20th member of the euro zone, seven years after Lithuania’s accession.

The formal decision will be taken by EU finance ministers in early July, but the door is now wide open. No resistance is expected while the former Yugoslav republic of 4 million meets all the technical criteria. The European Central Bank (ECB) also issued a positive statement on Wednesday.

“I assume that the process will go well and that Croatia can join the eurozone as early as next year,” said Commission Vice-President Valdis Dombrovskis, who will be in Zagreb on Thursday.

Croatia had expressed its desire to introduce the single currency as soon as it joined the EU in 2013.

It is now “ready to join the euro area on January 1st. This will strengthen Croatia’s economy and benefit its citizens, businesses and society at large,” said Commission President Ursula von der Leyen. That will “also strengthen the euro,” she said.

Croatian Prime Minister Andrej Plenkovic said he was confident his country would join the euro club in early 2023. At the same time, “we also want to enter the Schengen area” of freedom of movement in Europe, he said at a press conference in Berlin.

The Mediterranean country has an important tourism sector. The standard of living there corresponds to that of Poland and the Baltic States, and wealth accumulation (GDP per capita) is just over half the EU average. The unemployment rate reached 6.1% in April.

This green light comes as the euro has just celebrated its 20th anniversary as a trust currency.

On January 1, 2002, millions of Europeans in twelve countries exchanged their lira, francs, deutschmarks and drachmas for euro coins and banknotes.

Since then, seven more countries have joined: Slovenia in 2007, Cyprus and Malta in 2008, Slovakia (2009), Estonia (2011), Latvia (2014) and finally Lithuania in 2015. The euro area already has 345 million inhabitants, pending Croatia.

– symbol of European unity –

The single currency is a symbol of European unity and sovereignty. All EU countries have theoretically committed to joining once they meet the conditions, but there is no timetable. The only exception: Denmark negotiated an exception after a referendum in 2000 in which the Danes rejected the euro.

The introduction of a new currency has sparked fears in Croatia, where just 30% of residents think the country is ready for the euro, according to a survey conducted in March and April. 87% of the population believe that this will lead to price increases.

“We know that many citizens are concerned about the price increases caused by the changeover to the euro, especially in times of high inflation. It is therefore important that the Croatian authorities take measures to reduce the risks related to rounded up prices.” if they are converted, said Economy Commissioner Paolo Gentiloni.

In any case, according to the criteria examined by the Commission and the ECB, the Croatian economy is ready.

The harmonized 12-month inflation rate stood at 4.7% in April, below the set threshold of 4.9%.

The finances are solid. The government deficit reached 2.9% of gross domestic product (GDP) last year, just under the 3% mark. Debt is certainly above the 60% mark at 80% of GDP, but this is the case for most EU countries and it is clearly on the decline.

The country’s long-term interest rates are also within the set limits.

Finally, in July 2020, the country joined the European Exchange Rate Mechanism (ERM II) and has remained there without problems. This mechanism sets a 15% variation limit around the rate of the kuna, the Croatian currency, which is currently set at 7.5345 to one euro. A final exchange rate will be set in July.

In its report published on Wednesday, the Commission considers that Bulgaria, which aims to adopt the euro in 2024, has not yet met the conditions. Five other countries in the antechamber of the common currency (Hungary, Poland, Czech Republic, Romania, Sweden) are also in this case, but have no intention of joining in the short term.

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