ZAGREB, May 11, 2018 – The government on Thursday adopted the strategy for the adoption of the euro as the legal tender in Croatia, and Economy Minister Martina Dalić said that the introduction of the new currency could be expected in five to seven years’ time.
Joining the euro area is one of the obligations we assumed under the Treaty of Accession to the European Union, however, the treaty does not specify the date when Croatia is supposed to introduce the euro as the legal tender, it depends on each member-state, Dalić told the government.
She informed the cabinet members that there were the two types of criteria for the euro adoption: a set of criteria for nominal convergence and a set of criteria for real convergence.
When it comes to the first set, including fiscal deficit, trends and the amount of the public debt, price stability, exchange-rate stability and long-term interest rates, Croatia has already met those criteria to a large extent, according to Dalić.
The real convergence criteria is about the pace of the catch-up process when it comes to a level of income in Croatia in comparison to the European Union wage level. Our level is on par to the average level which other member-states had when they launched the process of introducing the euro, she said. To accelerate the real convergence is our permanent duty which we have to do in the coming period, and is in connection with many measures being undertaken in the economic system, Dalić said.
Entering the Exchange Rate Mechanism (ERM II) for at least two years before adoption of the euro is also one of the conditions.
The pertinent activities will be conducted and coordinated by the Croatian National Bank with the European system of central banks.
In the economic terms, Croatia is a very good candidate for the conversion to the euro and suitable candidate to take part in the euro area. One of the benefits for the euro introduction is the removal of exchange rate risks in the economy, the minister said. The costs of the introduction are short-term, she added.
As many as 80% of savings deposits in Croatia are indexed to the euro, she noted.
In relation to the price trends upon the conversion, the strategy assesses that prices might go up between 0.2% and 0.4% on average in short term.
Dalić said that preparations would be made to cushion such effects on the prices.