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Croatia and what it means to adopt the euro in turbulent times

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Croatia intends to become on January 1, 2023 the twentieth country of the European Union (EU) adopting the euro as its currency, something positively expected by the majority of the inhabitants of the Balkan nation, although many fear a further rise in prices due to the inflation and the war in ukraine.

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The European Commission (EC) will assess in its next convergence report in June whether the Balkan country meets all the necessary criteria for entry into the euro zone.

The president of European Central Bank (ECB), christiane lagardeconfirmed a week ago that Croatia’s path to the eurozone is progressing as planned, so it is “likely” that the country will be admitted soon.

The euro in times of crisis

“No country has entered the eurozone in times of a crisis like this”warns in Zagreb the president of the Croatian Independent Trade Unions (HNS), Kresimir Sever.

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He assures that the unions support the change from the kuna, the current national currency, to the euro, but they ask for more control mechanisms against unjustified price increases.

More than 20% of the 3.9 million inhabitants of Croatia were already at risk of poverty last year, according to the NGO House of Human Rights in Zagreb.

This has generated the debate on whether it is convenient to introduce the single currency at times of economic and geopolitical turbulence, when the rises in fuel and food prices could reduce the standard of living of citizens by up to 50%, analysts warn. local.

Fear of some…

“The euro will bring us more catastrophes. Prices will go up, while wages will remain the same”says for example Mirjana, a saleswoman in a supermarket in the capital.

“We fear that the euro will mean a drop in our standard of living”coincide Jasna and Dragan, a retired couple.

The Law on the adoption of the euro, approved on May 13 in Parliament with a large majority of 117 votes in favor, 13 against and one abstention, was rejected by the right-wing opposition.

“How is a retiree going to survive, with 40 years of work and a pension of 300 euros, when a loaf of bread costs two euros?”objected during the parliamentary debate a deputy of the party “sovereignists”.

In 2021, 62% of Croatian retirement pensions were below the official poverty line, which is 390 euros per month.

Croatia, which joined the EU in July 2013, remains one of the poorest countries in the 27, with the fourth Gross Domestic Product (GDP) per capita at parity to the lowest purchasing power (70) of the community club, only above Slovakia (68), Greece (65) and Bulgaria (55).

…but majority support

However, the polls have shown a stable support for the euro of more than 60%, and the majority of the population trusts that the evolution will be similar to that of other countries, where entry into the eurozone meant an increase in prices of between 0.1% and 0.3%.

“I don’t think we suffered any disadvantage. We already calculate everything in euros. The prices of the apartments are always highlighted, negotiated and concluded in euros, and only then do we calculate the amount in kunas”explains Katica, owner of a real estate agency.

The trade union leader Sever also hopes that the euro will bring a series of improvements.

“The risks connected to the exchange rate and the possible depreciation of the kuna in times of great turbulence will decrease. A message of stability is sent to investors and rating agencies. That is also good for the citizens”underlines.

Completion of integration

the economic analyst Goran Fizulić believes that Croatia is actually late in adopting the euro. “We are a highly euroized economy. We think in euros, we count in euros, we save in euros, we determine prices in euros”. Explain.

According to Fizulic, the standard of living will improve, since the economy will be freed from the permanent cost of conversion (currently 7.5 kunas per euro), as will the essential tourism sector, whose income comes from 70% of visitors from the eurozone. , you will receive a new boost.

The Prime Minister of Croatia, the Conservative Andrey Plenkovicstates that the adoption of the euro, as well as the prompt entry into the Schengen area, with free community movement, represent the culmination of a process that Croatia began when it presented its candidacy for the EU in 2003.

The transition, he promises, will be done “at no cost to citizens” and in a simple, clear and transparent way, “with the protection of consumers”.

From next September 5 and until the year 2024, all prices must be indicated in both Kuna and Euros.

Source: Gestion

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