Croatia could join euro zone within next 5-7 years

NEWS 10.05.2018 18:53
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Source: N1 ilustracija

In the Thursday’s session, the government adopted the strategy for the introduction of the euro as Croatia’s official currency, which could happen within five to seven years, said the Deputy Prime Minister and Economy Minister, Martina Dalic.

“Our euro zone membership is one of the commitments we have taken on under the Treaty of Accession to the EU, but the Treaty does not determine the specific date by which Croatia should introduce the euro as its currency. That was left for the member states to decide,” said Dalic.

There are two kinds of criteria for the introduction of the euro: nominal convergence criteria and real convergence criteria.

The first set includes fiscal deficit, trends and the amount of the public debt, price stability, exchange-rate stability, and long-term interest rates, and Croatia has already met those criteria to a large extent, Dalic said.

The real convergence criteria is linked to the dynamic and speed of closing the gap between the average income level in Croatia, and the income level in the EU.

Our level is on par with the average level of other member states when they launched the process of introducing the euro, Dalic said.

“Accelerating the real convergence is our permanent duty which we have to deal with in the coming period, and is linked to the measures we are undertaking in the economic system,” Dalic said.

Entering the Exchange Rate Mechanism (ERM II) for at least two years before adoption of the euro is also one of the conditions. ERM II ensures that exchange rate fluctuations between the euro and other EU currencies do not disrupt economic stability within the single market, and helps non euro-area countries prepare themselves for participation in the euro area.

All the activities will be conducted and coordinated by the Croatian National Bank (HNB) with the European system of central banks.

“Croatia is, in economic terms, a very good candidate for the conversion to the euro, and a suitable candidate to participate in the euro area. One of the benefits of the introduction is the elimination of exchange rate risks in the economy,” she said, adding that the costs of the introduction were one-off.

One consequence of the conversion will be an estimated one-off 0.2-0.4 percent average price increase. Dalic said preparations would be made to make sure the conversion effects on price levels were minimal.