Croatia adopts Euro as its currency

Despite economists reservations on Euro, the European countries keep switiching to Euro as their currency.

In July 2022, Croatia had decided to adopt Euro on 1 Jan 2023, becoming the 20th member of the European Monetary Union.

The Council of the European Union today adopted the Decision on the adoption by Croatia of the euro on 1 January 2023, amendments to the regulation according to which Croatia becomes the 20th member of the euro area and the regulation determining a fixed conversion rate between the euro and the kuna at: 7.53450 kuna per 1 euro.

The Council adopted the Decision in accordance with the positive assessment by the European Commission, after implementing procedures and conducting discussions in the Eurogroup and in the European Council, and taking into consideration the opinion given by the European Parliament and the European Central Bank.

The Decision was signed by Zbyněk Stanjura, Czech Finance Minister, in his capacity of President of the Economic and Financial Affairs Council (ECOFIN). The European Commission also displayed a banner on the Charlemagne building welcoming Croatia to the euro area with the message: Welcome to the euro, Croatia!

“Croatian citizens and entrepreneurs will have concrete, direct and lasting benefits from Croatia’s joining the euro area. Currency risk will be largely eliminated, Croatia will become more attractive to investors and more secure in times of crisis. The euro is also the key value of the European unity and it will enable us to play an even more active role in the European project. I am truly proud of this great Croatian success,” said Boris Vujčić, CNB Governor.

“We have achieved a strategic goal – Croatia is becoming a member of the euro area on 1 January 2023! The introduction of the euro will make our economy more resilient and raise the standard of living of the population in a long term. The membership of the euro area also provides higher security for Croatia and our citizens in times of crisis. We have worked hard and for a long time on this project because we firmly believe that joining the euro area is the national interest of Croatia,” said Prime Minister Andrej Plenković.

ECB President Christine Lagarde on the transition:

Eight months after you became ECB President, the Croatian kuna and the Bulgarian lev were included in the European Exchange Rate Mechanism II. After the shortest period in the ERM II of all new EU Member States, Croatia is now also about to join the euro area. Was such an outcome a surprise for you?

I will focus on Croatia, which is becoming a new member of our family. I believe it has achieved exceptional success and that is big news. Being able to do all that – covering all the areas within a period of ten years between accession to the European Union and euro area entry – is an incredible success. Croatia has implemented reforms and the necessary restructuring and done everything to continue to have sound public finances. So it fully deserves to be admitted to the euro area on 1 January 2023, and it is wonderful to welcome the 20th member to the family when we are celebrating the 20th anniversary of euro banknotes and coins. This is big news and a reason for all of us to celebrate!

Over the past few years, people in Croatia have had a chance to hear a lot of arguments in favour of introducing the euro, but the most prominent ones – such as lower interest rates and more favourable borrowing terms – have become less convincing due to a change in circumstances. People worry that the euro will only spur inflation. To what extent have these new circumstances changed the narrative in terms of the costs and benefits of introducing the euro?

It is good to have the euro because it can operate as a shield. Once a euro area country, always a euro area country. All for one and one for all. We are together in this, all soon-to-be 20 euro area countries. I am old enough to remember when France became a member of the euro area and we exchanged the franc for the euro. We were also worried that abandoning our currency and adopting the common currency might have grave consequences in terms of higher prices and less independence. However, looking back on 23 years of the euro and 20 years of euro banknotes and coins, we can say that it has paid off – the euro has brought protection and strength.

The initial concern that prices will be a little higher can be allayed. I am certain that the Croatian government has taken the necessary steps, such as ensuring prices are clearly displayed in both kuna and euro. In France, too, we were able to monitor the prices in both francs and euro for about half a year.

It is a really good way of providing information because it is difficult, especially for elderly citizens, to switch to another currency all of a sudden. I believe that pocket calculators (or apps for the younger generation) displaying the price of a desired product in both currencies are useful in that process, as they were to us in France. I also trust that there are arrangements in place to punish those who abuse the system, who take advantage of the conversion to raise prices. There must be a combination of measures in place to facilitate the conversion while, at the same time, not allowing it to result in difficulties for citizens.

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