On Tuesday 12 July, the Council of the European Union formally adopted the three legislative acts, including the one setting the definitive exchange rate between the kuna and the euro, which will allow Croatia to join the euro area from 1 January 2023.
“I would like to congratulate my counterpart, Zdravko Marić, and all of Croatia for being the twentieth country to join the euro area”, said Czech Finance Minister Zbyněk Stanjura, whose country holds the six-monthly Presidency of the EU Council, at the ceremony to sign the legislative acts in Brussels.
In addition to the political and economic benefits for his country of adopting the single currency, Mr Marić said that membership represents a “clear signal that European integration is on the way, despite the challenges we face”, such as record inflation exacerbated by energy prices and the fall of the euro against the dollar due to fears of a recession.
For the President of the Eurogroup, Paschal Donohoe, the entry of a new country into the euro area is evidence of the “resilience of the political and economic project” that is the euro. For ECB President Christine Lagarde, there is no doubt: “together we are stronger”. She said that the Governor of the Croatian National Bank will participate in the ECB Governing Council meetings in Frankfurt from September, before becoming a full member from January.
To join the euro area, Croatia had to meet five macroeconomic criteria, including inflation control, public finances under control and participation in the exchange-rate mechanism ‘ERM II’ for 2 years (see EUROPE 12963/1). On Tuesday, EU Finance Ministers set the following final exchange rate between the Croatian kuna and the euro: 1 euro for 7.53450 kuna.
At the beginning of 2023, Croatia will also join the European Stability Mechanism, the euro area’s permanent rescue fund. Its contribution to the callable capital has yet to be decided.
The Vice-President of the European Commission, Valdis Dombrovskis, recalled several inherent advantages of joining the euro area, namely lower financing costs, increased capital flows, the elimination of a significant part of the exchange risks in the banking system, integration into the banking union and increased price transparency.
But citizens generally fear that the transition to the single currency will result in higher prices due to upward price rounding.
After 12 Member States introduced the euro in 2002, seven countries joined: Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015. Bulgaria aspires to join the club in 2024.
See the Council regulation on the conversion rate to the euro for Croatia: https://aeur.eu/f/2lm
See the Council decision on Croatia’s adoption of the euro on 1 January 2023: https://aeur.eu/f/2ln
See the regulation on the introduction of the euro in Croatia: https://aeur.eu/f/2lo (Original version in French by Mathieu Bion)