The European Comission indicated this Wednesday that Croatia will be ready to enter the euro and join the eurozone from January 1, 2023, after having met the criteria of financial stability and compliance with treaties that are required in the process.
“This will make Croatia’s economy strongere, benefit citizens, businesses and society on a large scale. Croatia’s adoption of the euro will also make the euro stronger,” said the President of the European Commission, Ursula von der Leyen, in a statement in which she recalled that less than a decade ago the country joined the the European Union.
The Community Executive has indicated that Croatia meets the necessary criteria to adopt the euro, including price stability, with one of the best EU benchmarks for average inflation levels of 4.9% over the last twelve monthsa budgetary position without an excessive deficit, stability in exchange rates and interest rates of around 2.6%, in line with those of the euro zone.
Also, for assess the sustainability of Croatia’s adoption of the euro, Criteria such as the balance of payments, integration of financial and labor markets, labor costs and additional price indices.
In this sense, the economic vice-president of the European Commission, Valdis Dombrovskis, has valued the Croatia’s “commitment”, “diligence” and “perseverance in efforts” to fulfill the conditions for the adoption of the euro in January 2023.
The European Commission has pointed out among the main risks for Croatia’s integration into the euro zone, the business ecosystem, with a special focus on corruption and regulatory qualityalthough it has shown that the country will not experience economic imbalances.
This has been announced by the Community Executive in its Convergence report in which it evaluates the progress made by the candidate countries to join the euro, including Sweden, Bulgaria, the Czech Republic, Hungary, Poland and Romania, as well as Croatia, the seven Member States legally committed to adopting the single market currency.
Inflation in Croatia
It will be the Council that will make the final decision on integration into the Croatian euro in the first half of Julyafter the corresponding debates in the Eurogroup and in the European Council, and after both the European Parliament and the European Central Bank have given their opinions.
Croatia is the only one of the seven candidate Member States to enter the eurozone that meets the criteria of financial stability, as well as the compatibility of national monetary legislation with the statutes of the European Central Bank.
In addition, the Community Executive has considered that inflation levels in the Balkan country will be in line with those of the euro zone in 2022 and 2023, although he has warned that the correct integration of Croatia into the euro will require monitoring the risks of an increase in the consumer price index, especially if wages increase in line with productivity.
The report prepared by Brussels has indicated that the Croatia’s deficit fell to 2.9% of Gross Domestic Product (GDP) in 2021 and has been forecast to fall to 2.3% of GDP in 20222 and 1.8% in 2023.
The public debt is “relatively” high, close to 80% of GDP in 2021, although it is expected to decline. In addition, the study has pointed to a medium-term risk of debt sustainability.