The European Union has officially approved Croatia’s entry into the Eurozone in early 2023.
At a signing ceremony in Brussels on Tuesday July 12, finance ministers confirmed that Croatia had met all financial requirements, including the level of public debt and, most importantly, inflation which stood at 4, 7% in April 2022.
The conversion rate is set at one euro for 7.53450 Croatian kuna, with the Adriatic country now having until December to prepare for the transition.
“A strong and enlarged euro area strengthens Europe’s influence internationally,” Commissioner Valdis Dombrovskis told reporters after the ceremony.
Moreover, Croatia’s adoption of the euro “contributes to broadening the foundations of Europe’s future economic resilience and strength”.
Croatia, a former Yugoslav republic, has been a member of the European Union since 2013, and the green light was hailed as a triumph by the country’s top central banker.
“This is a historic day for Croatia. Five years of hard work have paid off,” Croatian central bank governor Boris Vujčić told a press conference in Zagreb on Tuesday.
Dual price display
According to Finance Minister Zdravko Marić, from September 5, the dual display of prices in kuna and euro will officially start.
Croatia signed up to join the hard core of euro zone members on the day the euro reached parity with the dollar for the first time since 2002.
Fears that the Kremlin would cut gas to Europe pushed the euro lower. This will drive up the relative price of oil which is traded in dollars, which will further increase inflation.
“We are all facing very significant challenges these days, but obviously with coordinated policies and measures, I think we can deal with these challenges,” Marić told reporters upon his arrival in Brussels.
But while the country’s leaders seem optimistic about the move, only one in three Croatians believe their country is ready to join the monetary union, according to a Eurobarometer poll in June, and many fear that the introduction of the he euro does not lead to companies rounding up prices when converting from the kuna.
But Dombrovskis said on Tuesday that joining the euro “will bring tangible economic benefits” to Croatia.
Using the euro “will make it easier and more attractive to invest in your country”, he added.
Bulgaria is the next country vying to join the monetary union, which has declared its desire to join in 2024.
But in a report released in June, the European Central Bank (ECB) said Bulgaria was still “not fully ready” to join the euro zone.