The process is not quite concluded but the result is now no longer in doubt: Croatia will become the twentieth member country of the euro zone on January 1, 2023. On Wednesday June 1, the European Commission and the European Central Bank ( ECB) have handed over; in parallel, their two reports on the « convergence » of this Balkan country. “The commission has concluded that Croatia is ready to adopt the euro”notes the press release.
It now recommends that the European Council officially approve this accession. This should be done during a meeting of the ministers of the economy of the Twenty-Seven in July. Then, Croatia will adopt the dual display of prices in the fall, then switch to single currency coins and banknotes in the New Year. The kuna, used since 1994, will disappear, with an exchange rate of 7.53450 for one euro.
The approval of Croatia’s accession is not a surprise but marks the culmination of a long process, which began shortly after the country became a member of the European Union in 2013. This requires to respect a series of economic criteria: level of public debt and deficit, inflation, financial health of banks, reliability of statistical data, fight against money laundering… The country gradually had to show its credentials.
Proof that the process is not necessarily simple, Croatia but also Bulgaria entered at the same time, in July 2020, into the European exchange rate mechanism (known as « ERM II » in the lingo). This decisive phase, the antechamber to the accession to the euro, places the local exchange rate in a fixed range of plus or minus 15% against the euro. Today, however, only Croatia has received the green light from the European Commission and the ECB. Bulgaria has postponed its accession until January 1, 2024, due to lack of sufficient economic progress.
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It must be said that the period was difficult. “The pandemic and the war in Ukraine have made it more difficult to achieve convergence”, explains Philip Lane, the chief economist of the ECB. Croatia, a very touristic country, has been particularly affected by the Covid-19. Like everywhere else, the country’s debt has jumped, exceeding the limit of 60% of gross domestic product (GDP), in principle imposed on all member countries (even if half of the countries do not currently respect it). Unlike Bulgaria, Croatia has made significant budgetary efforts, reducing its debt from 87.3% of GDP in 2020 to 79.8% last year. “A strong decline”welcomes the ECB report.
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