Tuesday

4th Oct 2022

EU greenlights Croatia to join euro in January

  • The European Union formally approved Croatia joining the eurozone at the start of 2023 (Photo: JasonParis)
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The European Union formally approved Croatia joining the Eurozone at the start of 2023.

In a signing ceremony in Brussels on Tuesday (12 July), finance ministers confirmed Croatia has met all financial requirements, including public debt level and, crucially, inflation which sat at 4.7 percent in April 2022.

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The conversion rate is set at one euro to 7.53450 Croatian kuna, with the Adriatic country now having until December to prepare for the transition.

"A strong and larger euro area reinforces Europe's influence internationally," commissioner Valdis Dombrovskis told reporters after the ceremony.

Moreover, Croatian adoption of the euro "is helping to widen the foundation for Europe's future economic resilience and strength."

Croatia, an ex-Yugoslav republic, has been a member of the European Union since 2013, and the greenlighting was hailed as a triumph by the country's chief central banker.

"This is a historic day for Croatia. Five years of hard work paid off," governor of the Croatian central bank Boris Vujčić said in a press conference in Zagreb on Tuesday.

Dual pricing

According to finance minister Zdravko Marić, starting from 5 September, the dual display of prices in kuna and euro will officially begin.

Croatia signed up to join the core group of eurozone members on the day when the euro hit dollar parity for the first time since 2002.

Fears the Kremlin will cut off gas to Europe has pushed the euro down. This will drive up the relative price of oil which is traded in dollars, further driving up inflation.

"We're all facing very strong challenges these days, but obviously, with coordinated policies and measures, I think we can cope with these challenges," Marić told press upon arrival in Brussels.

But while the country's leadership is sounding optimistic about the move, only one in three Croatians believe their country is ready to join the currency union, according to a poll carried out by Eurobarometer in June, and many fear the introduction of the euro will lead to businesses rounding up prices when they convert from the kuna.

But Dombrovskis on Tuesday said that joining the euro "will bring tangible economic benefits" for Croatia.

Using the euro "will make it easier and more attractive to invest in your country," he added.

Bulgaria is the next country in line to join the currency union, which has stated its willingness to join in 2024.

But in a report published in June, the European Central Bank (ECB) found Bulgaria still "not fully ready" for joining the eurozone.

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