The biennial report on the readiness of the seven Member States (Bulgaria, Czech Republic, Croatia, Hungary, Poland, Romania, Sweden) to join the euro area, which the European Commission published on Wednesday 10 June, shows that Croatia is the most advanced country in this respect (see EUROPE 12408/6).
Croatia fulfils all the economic convergence criteria (price stability, sound public finances, long-term interest rates) set out in the TFEU Treaty (Article 140). And its budgetary and financial legislation is fully compatible with European rules. When it adopts the single currency, Croatia will also have to join the euro area banking union, which transfers in particular the supervision of large banking groups to the ECB.
In 2019, the Croatian budget recorded a surplus of 0.4% of GDP and the country's public debt was reduced from 72.9% to 66.3% of GDP in two years.
However, Zagreb does not fulfil the exchange rate criterion. In July 2019, Croatia applied to participate in the exchange-rate mechanism (ERM II) in which it will have to operate for at least two years without severe tensions before it can join the euro area (see EUROPE 12292/9).
See the Commission's Convergence Report: https://bit.ly/3dTWhPn
On Wednesday, the ECB also published its own convergence report. - https://bit.ly/2XQm1GF (Original version in French by Mathieu Bion)