The inevitable path of Croatia adopting the Euro as the official currency is gathering pace as the Prime Minister announced that it is a strategic goal of the government.
“The economic benefits of the Euro are many, the currency risk in the economy will be eliminated, the cost of borrowing will drop for all domestic sectors, and citizens and businesses will have lower financing costs than they would if Croatia stayed outside the euro area,” stated Prime Minister Andrej Plenkovic.
And it seems that the public won’t be asked their opinion as to whether the country should ditch the Kuna and adopt the Euro in the form of a referendum as the Prime Minister reiterated that the people have already decided when they voted to join the EU. As part of Croatia’s accession into the EU family there was the obligation to adopt the Euro as the official currency.
“The euro is the second largest and strongest global currency used by more than 340 million people in the euro area,” added Plenkovic.
And he backed up his belief that Croatia should start using the currency of Europe with some hard facts. Plenkovic emphasized that around 76 percent of Croatians already save in Euros rather than in Kunas, meaning that Croatia has the highest deposits of Euros of all EU member states outside the euro area. He added that almost fifty percent of loans and mortgages are in Euros and that businesses export almost 60 percent of their goods into the Eurozone.
So when will Croatians start paying in Euros rather than Kunas?
In the second half of 2020 Croatia is expected to enter the European Exchange Rate Mechanism II upon confirmation of compliance with all conditions. Then the country would spend about 2 to 3 years in this mechanism, meaning that the full introduction of the Euro as the official currency would be somewhere between January 2023 and January 2024.
And although there is still some fear amongst citizens that prices will rise overnight the fact that most major transactions in Croatia are already carried out in Euros should help to ease those fears. Houses, cars, boats, land, in fact most things of larger value are quoted in Euros already.
And one major benefit of introducing the Euro would be the increased spending by tourists. Exchanging their home currency into Kunas tends to mean that tourists don’t exchange more than they really need. And there is also the positive effect it would have on interest rates, it is believed by financial experts that the introduction of the Euro would bring interest rates in line with the Eurozone, basically meaning lower interest rates for both private loans and business loans.