When the European Parliament voted last July on Croatia's acceptance of the eurozone, the head of the Parliamentary Action Group for the Euro, Portuguese Margarida Marques, said, "Croatia's accession to the single currency is the first important process of European integration, after Britain's exit from the European Union."
"The strategic goal has been achieved," said Croatian Prime Minister Andrej Plenkovic. "We have worked hard and spent a long time, because we firmly believe that joining the eurozone serves the national interest of Croatia."
"We are very satisfied, we have achieved our goal faster than some other countries that started before us," he added. "Entering the eurozone offers a simpler lifestyle for Croatian citizens, and enormous economic benefits." .
The European Parliament had approved the accession of Croatia (joined the European Union in 2013) to the eurozone with 539 votes in favor, 45 against, and 48 abstentions, to become the 20th member of the eurozone.
What is the state of the Croatian economy?
The Croatian economy is one of the strongest economies in southeastern Europe, in terms of gross domestic product (58.3 billion euros in 2021). After the collapse of the socialist system, it moved to an open market economy.
The structure of the Croatian economy is similar to the economies of the European Union, where service activities constitute about two-thirds of the gross domestic product, and the most important sectors of the Croatian economy are tourism.
With nearly 20 million foreign tourist arrivals (2019), tourism accounts for about 20% of Croatia's GDP.
Croatia has a developed road network, and during the past 15 years it has added about a thousand kilometers of modern highways, which contributed strongly to linking it with the European Union countries, mainly with Germany, Italy, Slovenia, Austria and Hungary.
The contribution of the rest of the sectors to the GDP (according to 2020 statistics) is as follows:
Wholesale and retail trade and food services (20.1%)
Industry (19.2%)
Public administration, defense, education, human health and social work activities (18.1%)
Trade with European Union countries represents 67% of Croatia's exports (Germany 13%, Italy 12% and Slovenia 10%). Outside the European Union, Bosnia and Herzegovina comes on top of importing countries with a value of 9% of total exports, followed by Serbia with 5%.
In terms of imports, Croatia imports about 77% of its needs from European Union member states (15% from Germany, 12% from Italy, and 11% from Slovenia). As for outside the European Union, Croatia covers about 5% of its needs from China and 3% from China. Bosnia and Herzegovina.
What does Croatia benefit economically from its accession to the eurozone?
In the 27-nation European Union, adoption of the euro provides significant economic benefits that stem from deeper financial relationships with other members of the currency bloc and from the monetary authority of the European Central Bank.
The Eurozone is one of the most economically powerful regions in the world, with a population of more than 340 million people, and its currency, the Euro, is one of the most liquid currencies in the world.
Croatian Finance Minister Marko Primorac stated, "With Croatia's entry into the eurozone, the governor of the Croatian National Bank will become a full member of the board of directors of the European Central Bank, and all this will enable us to play a more active role in the European project. The risks of currency exchange rate changes will be completely eliminated." This will have a positive impact on borrowing costs."
"The credit rating of our country will rise, making it more attractive for investment and Croatia will be stronger and safer in times of crisis," he added.
Are there political benefits?
The benefits of the euro are not limited to the economic aspect only, but entry into the euro also has political rewards, as the euro is considered a basic value of European unity, and the common currency is the most ambitious European project to integrate countries, which gives it a place in the heart of the European Union, and this means obtaining a seat At the top of the decision-making tables in the European Union.
Therefore, Croatia's strong position within the European Union will give it a comparative advantage in one of the most regions in the world in terms of fluctuations and changes in the balance of power based on political and economic alliances, in which the European Union seeks to play very important roles, against the rest of the other regional and international powers, led by Serbia. and Russia.
Will there be mutual benefit between Croatia and the eurozone?
It is not expected that Croatia’s entry into the eurozone will have major international economic effects. Croatia is a small country (56,594 square kilometers), and is relatively poor. Its population does not exceed 4 million, and per capita wealth is 14,989 euros (according to 2021 statistics), which is less than Half of the average in the eurozone. However, Croatia's adoption of the euro instead of its local currency, the Kuna, sends important political signals related to European stability and security, especially in light of the current crises facing Europe. The President of the European Central Bank, Christine Lagarde added, "Croatia's accession is a vote of confidence in favor of the eurozone."
What are the downsides of this joining?
Many interact emotionally with the matter, as they see that Croatia will lose its independence and sovereignty in favor of Europe, while others fear the impact of this step on the poor classes, and they cite this as what happened in other countries such as Slovenia, but it is certain that there are some real negatives, including:
Bank loss
"Changing the currency has some costs for the banks," the head of the Croatian Association of Banks, Tamara Perko, told Reuters. "We have a one-time cost of about 100 million euros for the whole process of moving to the euro, and we also have 130 million euros in lost revenue annually," she added. Referring to bank revenues from transfers to and from the euro.
The spread of counterfeit currencies
According to European Central Bank reports, in 2021 347,000 counterfeit euro banknotes were discovered, most of which were in denominations of 20 and 50 euros, which constituted more than 65% of the total counterfeit money.
And the countries that use the euro recently are a suitable land for the circulation of counterfeit banknotes, as it is difficult for citizens to distinguish fake money from the original, and in the case of Croatia, the greatest danger is the entry of counterfeit currencies through tourism.
The Croatian Central Bank has warned citizens against conducting any financial transactions outside approved financial institutions, as well as ensuring the safety of banknotes upon receipt, especially from foreigners.
What are the procedures for safe entry into the eurozone?
The main problem that the newly acceding countries to the eurozone fear is that traders will increase prices in the first period, taking advantage of consumers not being accustomed to using the euro. Therefore, the Croatian government has taken some measures to ensure safe entry into the eurozone, the most important of which are:
Fixing the exchange rate
The Croatian Central Bank set a fixed and announced exchange rate of the euro against the kuna at 7.5340 kuna per euro.
Transitional phase
In order for the seller and buyer to adjust to pricing in euros, starting from September 5, 2022, all goods were priced in euros plus kuna, and Croatian citizens were allowed to pay for goods and services using euros or kuna, starting from that date until January 14 January 2023.
Code of Ethics
It is one of the mechanisms established at the initiative of the Ministry of Economy and Sustainable Development and the Croatian Chamber of Commerce, with the aim of contributing to the creation of a safe environment for consumers. on prices.
Each member of the Code of Ethics acquires the right to display the visible identification mark of the Code on points of sale and points of service, and may display the mark when carrying out marketing activities, by placing it on all publications, catalogs, on websites, social networks, mobile applications and in other media .
The Code of Ethics initiative is being implemented under the slogan "Every Cent Counts, Every Kuna Counts", and its implementation is monitored by the Ministry's inspectors.
The eurozone was established in 1999 with the participation of 11 countries, led by Germany and France. The euro witnessed 7 previous expansions, starting with Greece in 2001. Lithuania is the last European Union country to join the single European currency area, the euro, in 2015.
Joining the euro requires meeting a set of economic conditions, linked to low inflation, sound public financial resources, exchange rate stability, and lower borrowing costs.