Croatia will benefit from joining the euro
Croatia will reap significant economic benefits when it becomes the 20th country to adopt the euro as its currency on January 1, the country’s central bank governor said.
In an interview with the Financial Times, Boris Vujčić said that given that so much trade in the country is already done in euros due to tourism and foreign direct investment, and so many bank deposits in euros, which replace the kuna, the Croatian currency since 1994, it was a logical step.
“Croatia is the country that will gain the most by joining the Eurozone,” he said, emphasizing that this would eliminate the currency risk. “Croatia’s exchange rate risk is the biggest…when your currency depreciates against the euro, it means your debt is worth more.”
To help consumers adjust, shop prices will be displayed in both currencies from September, which will last until the end of next year, and any businesses that try to take advantage of the switch to raise prices will be fined.
“The handover comes at a time when inflation is already high, so the starting position is that Croatian consumers are very price sensitive,” Michał Senczuk, CEO of the leading grocery chain Studenac, told the FT. “This makes it difficult for any retailer to impose an unjustified price increase because otherwise customers will go to your competitors.”
Banks are reducing the number of ATMs that dispense kuna to prepare them for euro notes instead, and there will be a two-week period in which the currencies will flow side-by-side, with only euros in use after January 14.
European Commission President Ursula von der Leyen is expected to be in the Croatian capital Zagreb on New Year’s Day, where she will join Prime Minister Andrej Plenković, who will go out for coffee and pay in euros.
Croatia, which joined the European Union in 2013, will be the second, after Slovenia, among the republics of the former Yugoslavia to adopt this currency.
Croatian Finance Minister Marko Primorac supported the decision to change, saying that the euro “will strengthen our economy, will be an anchor of stability, make us more resistant and protected against external shocks and crises, and will contribute to improving the investment climate.”
Tamara Perko, head of the Croatian Banking Association, told the Reuters news agency that the one-time cost of the change would be around 100 million euros ($106 million), and banks could lose up to 130 million euros in revenue per year. which is allegedly due to the termination of the currency conversion fee.
In addition to the economic importance of connecting Croatia with a united Europe, there is also a political statement about the tightening of ties, while at the same time the war in Ukraine opened some divisions within the bloc.
The president of the European Central Bank, Christine Lagarde, said that Croatia’s accession was a “vote of confidence in the euro area” and that the country would benefit from the “euro shield”.