The Governor of the Croatian National Bank (CNB) Boris Vujcic said on Thursday that the introduction of the euro in Croatia will bring significant and lasting benefits in the form of greater resilience to crises, more favourable financing conditions, greater competitiveness and cost efficiency.
Banks' operations will be facilitated because most of the currency risk and currency-indicated credit risk will be eliminated, banks will have direct access to euro area money markets and Eurosystem monetary operations, and regulatory costs will be reduced, Vujcic said.
Vujčić gave a lecture "Croatia one step closer to the euro area" at the 25th scientific-professional conference Financial Market, organized by the Croatian Banking Association (HUB).
He emphasized that all the preconditions for the introduction of the euro on 1 January 2023 have been met and that a formal decision of the EU Council is expected in July. Confirmation of meeting the nominal convergence criteria is due in June, and a decision by the EU Council on the introduction of the euro in Croatia is expected in July.
In the second half of the year, euro coins will be minted, banknotes will be procured, double pricing will begin, and adjustments in the financial sector, companies and the state will be completed.
He stated that operational preparations are proceeding according to plan, that all segments of society will be ready to switch to the euro and that special attention will be paid to consumer protection.
The Governor of the CNB assessed that despite the increased inflation, Croatia will meet the criterion of price stability, the criterion of exchange rate stability, fiscal criteria and the criterion of long-term interest rates.
Introduction of Euro to bring great financial benfits states CNB governor
Speaking about the economic benefits of the introduction of the euro, Vujcic emphasizes the elimination of currency risk, more favourable borrowing conditions, lower transaction costs, greater resilience of the economy to crises.
He stated that public finances will no longer be exposed to currency risk, the regulatory cost for banks will be reduced - by reducing the reserve requirement from 9 percent to one percent and abolishing the obligation to cover foreign currency liabilities with foreign currency claims.
Eliminating the costs associated with the conversion will, he says, mean savings for the non-financial sector, although the loss for banks and exchange offices will be around 1.2 billion Kuna a year.
The introduction of the euro permanently eliminates the risk of depreciation, eliminates the possibility of disturbances in the foreign exchange market, banks will be able to borrow in euros from the Eurosystem, and significant benefits from access to the European Stability Mechanism (ESM) whose loans have low interest rates and long deadlines repayment.
The costs of the introduction of the euro will be relatively small and one-off, with a slight and one-time impact on prices and one-time costs of conversion and exchange of banknotes, and the introduction of the euro will mean the loss of part of independent monetary policy. rates and exchange rate.
Under the influence of the introduction of the euro, consumer prices in Croatia are expected to increase by 0.2 percentage points in the year of the introduction of the euro.