Will Croatia join the Eurozone?

“Croatia will work intensively on the introduction of euro as a currency”, said the Croatian Prime Minister Andrej Plenković. Euro brings global political and economic credibility, underlined the PM during the opening of a conference about the Strategy for the introduction of the euro in Croatia. He hopes that Croatia will join the Eurozone under his mandate as Prime Minister. On the hand, many economists claim that Croatia is still far away from achieving that goal.

If Croatia wants to introduce the euro as official currency, some criteria have to be fulfilled, such as the convergence criteria. According to the Maastricht Treaty, public debt cannot surpass 60% of GDP. It does not strictly mean the limit of 60% of GDP, but the share of debt in GDP has to show stable and long-term reduction tendency.

There is no special date until which Croatia must become a Eurozone member, said officials from the Croatian National Bank. The public discussion on the costs and the benefits of the Eurozone is set to start this autumn. The discussion will consider the position of the public, as well as the state policy regarding this, and if everyone agrees that it is a worthwhile goal, then we are going to move towards that goal gradually, without any dates, said Governor of Croatian National Bank Boris Vujčić.

Before becoming a Eurozone member, a country must achieve the defined criteria in terms of inflation, interest rates, fiscal deficit and public debt. After that, a country becomes a part of the Exchange Rate Mechanism of EU where it has to spend at least two years, said Dejan Rebernik from the Croatian National Bank.

In addition, Croatia is a heavily euroized economy, about three-quarters of savings in Croatian banks are in euros, stressed out Governor Vujčić in his interview for CNBC International. Joining the Eurozone will have very little costs for Croatia, but in order to get in the Eurozone you need to have a structurally good economy, and in order to do that, you have to do structural reforms, announced Governor.

Since Croatia has become a member of the EU, its economy is strongly integrated in European commercial and financial flows, which means that Croatia is a suitable country for joining the monetary union. The ones who oppose Croatia joining the Eurozone say that it will lose its monetary sovereignty. Another problem with introducing the euro are technical-administrative costs, and also the loss of active exchange rate policy. For certain nationalists, the replacement of Croatian kuna by euro will have an impact on Croatian national identity and their pride. However, it will make Croatian identity certainly more European.