EU finance ministers on Tuesday gave Croatia the final green light to adopt the euro single currency on January 1, 2023.
“I would like to congratulate my counterpart, Zdravko Maric, and the whole of Croatia for becoming the 20th country to join the euro area,” said Zbynek Stanjura, the finance minister of the Czech Republic, which holds the EU’s rotating presidency.
Croatia’s switch from the kuna to the euro in 2023 will come less than a decade after the former Yugoslav republic joined the European Union and will set a new milestone in the bloc’s further integration.
“This is a time for celebration… and an act of conviction,” said Christine Lagarde, the head of the European Central Bank at a signing ceremony in Brussels.
“The whole of Croatia decided and was convinced of the value of joining the euro and the euro area,” she added.
In adopting the legal texts necessary for the historic move, the ministers officially set the euro at 7.53450 Croatian kuna.
The newest member joins the group at a difficult moment with the euro hovering close to parity with the US dollar, a symptom of a looming cost-of-living crisis in the eurozone economy.
“We’re all facing very strong challenges these days, but obviously with coordinated policies and measures I think we can cope with these challenges,” said Maric as he arrived to meet his counterparts in Brussels.
To join the euro, Croatia met the strict conditions, including keeping inflation in the same range as its EU peers, as well as embracing sound public spending.
Croatia expressed willingness to adopt the single currency upon joining the EU in 2013, and the decision to allow Zagreb’s entry comes as the euro has just celebrated its 20th anniversary.
On January 1, 2002, millions of Europeans in 12 countries gave up the lira, franc, deutsche mark and drachma for euro bills and coins.
They have since been joined by seven other countries: Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and finally Lithuania in 2015.
– ‘Tangible benefits’ –
Bulgaria is the next county in line to join the euro, and has stated its willingness to adopt it as of January 1, 2024.
However, eurozone members are worried about the long-term stability of the Bulgarian economy and Sofia has yet to garner the same political support as Croatia.
EU governments are wary of repeating the mistakes of the euro’s early days when countries such as Greece were rushed into the single currency with shaky finances, setting the stage for the eurozone debt crisis.
Like euro-adopting citizens before them, many Croatians fear the introduction of the euro will lead to a hike in prices — in particular that businesses will round up prices when they convert from the kuna.
EU commission executive vice president Valdis Dombrovskis insisted that joining the euro “will bring tangible economic benefits” for Croatia.
Using the euro “will make it easier and more attractive to invest in your country. It will lower barriers for businesses and remove currency exchange costs,” he added.