The move by EU Finance Ministers welcoming Croatia to adopt the single currency follows the recommendation by the European Commission a few weeks ago. Ahead of the formal decision on Tuesday, criteria conditions were reviewed, including sound budgetary management, long-term interest rates, price, and exchange rate stability. The Czech Presidency announced that it was sensible for Croatia to join the euro area: “Croatia has successfully completed all the required economic criteria.”
Zdravko Maric, the outgoing Croatian Finance Minister, finally signed the documents to become the 20thmember of the EU’s Monetary Union. Croatia will introduce the European common currency on 1 January 2023 – so it still has almost six months for the technical preparations.
European Central Bank (ECB) President Christine Lagarde spoke of a reason for joy and congratulated Croatia: “Moving from being 19 to being 20 is not just symbolic in number, but it’s also a sign that together we are stronger and that the euro area, and the euro in and of itself, act as a common denominator, as a shield because united we are stronger.” Minister Marić echoed the words of President Lagarde, saying that “the fact that Croatia will become the 20th member of European Monetary Union area is also a clear signal that European integration is ongoing despite all the challenges that we are facing.”
With around four million inhabitants, the country has been a member of the EU since 2013 but has so far kept the “kuna” as its currency. According to the ECB, the conversion rate of the kuna has been fixed at 7.5345 kuna to 1 euro. Croatia marks the first country to join the euro area since Lithuania joined back in 2015. Before that, it was Slovenia that adopted the euro back in 2007. Just like any former Eastern-bloc country, Croatia also seeks to solidify its western orientation after many years of communist rule post World War II.
But there will also be economic benefits. Lower interest rates, better credit, more jobs in the country and a rising standard of living can be expected. In the eyes of the Czech Government, the accession will finally move Croatia into the core of the EU politically, and, financially, result in making payments both cheaper and easier, as well as stabilising the country’s financial system.
Moreover, Croatia’s aim of joining the Schengen area will remove barriers to travel in Europe, specifically when looking at the country’s top tourist attractions, which include Split and Dubrovnik on the Adriatic coast.
Other Eastern European countries want to follow suit, such as Bulgaria and Romania. Nevertheless, there has been growing apprehension due to the benefit of monetary independence during a financial crisis – just like the one in 2008.