Croatia ready to adopt euro in January 2023

Croatia will adopt the euro on January 1, 2023. Bulgaria’s hopes of doing likewise in 2024 look increasingly slim, however. 

Challenging conditions mean that only limited progress has been made by non-euro EU members on economic convergence with the euro area since 2020, according to the European Central Bank. 

The bank, which on June 1 published its biennial report assessing the progress of seven non-euro area EU members (six of which are in emerging Europe: Bulgaria, Croatia, Czechia, Hungary, Poland, Romania; the seventh is Sweden) did however give the green light for Croatia to adopt the euro on January 1, 2023. 

The European Commission – in its own, complementary assessment – also found that Croatia fulfils the four nominal convergence criteria. 

While the European Parliament, as well as the leaders of the bloc’s 27 member states, will still have to approve Croatia’s euro membership, the ECB and Commission’s positive assessment make the process a formality. 

Last week, Croatian MPs approved a law that paves the way for the introduction of the euro currency next year. The country will be the 20th to adopt the single currency, and the first since Lithuania in 2015. 

Croatia, along with Bulgaria, has been part of the European Exchange Rate Mechanism II since 2020, a system for managing exchange rate fluctuations and smoothing the path of entry into the single currency, which includes ECB supervision of their main banks. 

In April 2022 the 12-month average rate of HICP inflation in Croatia was 4.7 per cent, below the reference value of 4.9 per cent for the criterion on price stability, while the country’s general government budget balance was just below the three per cent deficit threshold in 2021. Its debt ratio was above the 60 per cent reference value, but on a downward trajectory. 

“Today marks a historic milestone on Croatia’s European journey, reflecting the determined efforts the Croatian authorities have made to meet the criteria for entry into the euro area,” said Paolo Gentiloni, Europe’s economy commissioner. “The Croatian people can now look forward to joining more than 340 million citizens already using the euro as their currency, a rock of stability in these turbulent times.” 

Zdravko Marić, Croatia’s finance minister, welcomed the assessments of the ECB and Commission, and said that euro membership would further integrate Croatia’s economy “with the most developed group of countries in the world”.