Preparations for the introduction of the euro may begin

Published: 2/11/2017

The euro will bring global political and economic credibility to Croatia, noted Croatia's Prime Minister Andrej Plenković, opening the conference presenting the "Strategy for the Adoption of the Euro in Croatia". The euro presents an opportunity that Croatia has to use, and it is also a useful instrument for boosting economic growth and higher employment, noted the Prime Minister. The citizens will feel the euro in a very concrete and tangible manner because of its numerous and great economic benefits, said the Prime Minister.

He added that today's conference would launch a broad public, professional and political discussion on the Croatian membership in the euro area, which will help achieve greater public understanding and debunk the myths and unfounded fears rooted in the public sphere. He stressed that the slogans pointing to the conclusion that we would get European prices and keep Croatian wages were not true. The Prime Minister added that this myth had to be dispelled and discussed in depth.

The introduction of the euro, the second most important global currency after the dollar, would put Croatia in the narrowest circle of member states of advanced integration processes in the European Union, noted the Prime Minister. 

Owing to its fiscal and macroeconomic results in the previous two years, also recognised by all three major rating agencies, Croatia is now ready to start the process for the introduction of the euro, noted the Prime Minister and invited the citizens to take part in the public discussion on the "Strategy for the Adoption of the Euro in Croatia".

The benefits of the introduction of the euro for Croatia are permanent and relatively high while its costs are mostly one-off and low, noted the Croatian National Bank Governor, Boris Vujčić. The introduction of the euro will eliminate the currency risk for the citizens, companies and the government, which will in turn reduce the risks to financial and macroeconomic stability.  It will also have a favourable impact on the country risk premium, and on the regulatory costs for banks which will decrease significantly and have a positive effect on the interest rate level, and thus on financing conditions and economic growth acceleration, added Governor Vujčić. The euro is also expected to have a positive effect on investments, while citizens and companies will be able to make savings on reduced costs for exchange transactions and commissions for cross-border euro payments. The reduction of transaction costs and greater price comparability will spur international trade and tourism.

The loss of independent monetary and exchange rate policies will not generate a significant cost for Croatia, Governor Vujčić stressed, adding that high credit and deposit euroisation and the domination of banks in foreign ownership in the domestic banking system narrow the space for active use of monetary and exchange rate policies.  The monetary policy of the European Central Bank will suit the needs of the Croatian economy, given Croatia's strong economic and financial integration with the euro area, underlined Governor Vujčić.

The macroeconomic indicators provide Croatia with a good starting point for the fulfilment of the criteria for the introduction of the euro, noted the Finance Minister Zdravko Marić. The Long-standing price and exchange rate stability and the progress achieved in fiscal adjustment indicate the readiness to meet the convergence criteria soon after joining the ERM II. Of these criteria, up to recently the biggest obstacle was public debt which exceeded the reference value of 60% of GDP, but the criteria of public finance sustainability may be fulfilled also if the debt is decreasing at a satisfactory speed, which is the case in Croatia which exited the excessive deficit procedure in July this year.  If public debt continues to decrease at the required pace and indicators for other criteria remain within the permitted framework, shortly after joining the ERM II Croatia could meet all the formal criteria for the introduction of the euro, said Minister Marić.

Croatia is already today ready to start the process of the introduction of the euro. This view is supported by our achievements in the reduction of macroeconomic imbalances, as evidenced, among others, by Croatia's exit from the excessive deficit procedure and achievements in the fulfilment of the nominal convergence criteria, noted the Deputy Prime Minister and Minister of Economy, Entrepreneurship and Crafts of the Republic of Croatia, Martina Dalić. It is also important that we prepare our economy structurally for the integration in the euro area. Structural reforms are not only important in the context of adjustments for the introduction of the euro but are also key for increasing our economy's competitiveness, irrespective of the introduction of the euro. Staying on course of a responsible economic policy and commitment to structural reforms, the Government shows with the Strategy presented today that it undertakes to pursue this course and make further efforts in external policy which will speed up the achievement of the strategic objective of the introduction of the euro in Croatia, noted Deputy Prime Minister Dalić.

The conference closed with the conclusion that Croatia may begin with the process of the introduction of the euro, while continuing to pursue at the same time and irrespective of that process, a prudent fiscal policy and structural reforms, particularly those aimed at the improvement of the business environment, tax burden reduction and increased public sector efficacy.  This improves competitiveness and reduces macroeconomic imbalances, i.e. fosters economic growth and employment.

"Strategy for the Adoption of the Euro in Croatia" is available at: euro.hnb.hr and on the websites of the Government of the Republic of Croatia, the Croatian National Bank and the Ministry of Economy, Entrepreneurship and Crafts.

For the purposes of consultations on the proposal for the Strategy for the Adoption of the Euro in Croatia as an official currency the Strategy has been published on the portal e-savjetovanja. The consultation is open until 30 November 2017.