As Novac/Martina Klepo/Augustin Palokaj writes on the 7th of July, 2019, a meeting between Eurozone finance ministers took place in the Belgian capital of Brussels, during which the formal request made by the Republic of Croatia for entry into the Eurozone, ie the so-called ERM II exchange rate mechanism, was discussed. This is the first step towards the introduction of the euro.
The letter of intent was sent by the Republic of Croatia to European institutions on Thursday by Finance Minister Zdravko Marić and Governor of the Croatian National Bank Boris Vujčić on behalf of the country. Croatia was in turn provided with numerous reforms it had to ensure were done.
As can be revealed unofficially, it seems that the Eurozone’s finance ministers will formally accept the Croatian request, just as they did one year ago for Bulgaria, giving the Balkan country the green light to initiate the introduction of the euro and replace the Bulgarian lev.
If we’re judging from the case with Bulgaria, the Eurozone’s finance ministers will set a time frame of about one year in which the country will have to take certain steps which we’ve already reported on and linked above, and carry out the domestic task it has committed itself to in order to enter the ERM2. Each country must remain in this sort of ”waiting room” for at least two years before actually entering the Eurozone.
Despite the fact that back in January this year, Valdis Dombrovskis said that Bulgaria’s upcoming ERM2 entrance was to be expected ”in the middle of this year”, an official call for that has not yet arrived.
The length of this process depends on the country itself, ie, what it will need to engage in to ensure it can fulfil the measures it has committed itself to in order to enter, so it may take longer than a year if needed. The goal of Croatia’s authorities, of course, is to enter the ERM2 within one year, and officially enter the Eurozone, thus abandoning the kuna and adopting the euro as its currency, by 2023 at the latest.
During that period, Croatia should also join the banking community, increase measures to prevent money laundering, and take other measures as preparations for entry into the eurozone. Among the most important measures are the need to improve the performance of statistics, greater public administration efficiency, and reduce business barriers. These measures are not only related to the Eurozone, but are also part of the specific recommendations that the European Commission has provided to Croatia in the context of convergence reports.
When asked if there are any political obstacles to entry into the Eurozone, and if any such things are expected, Prime Minister Andrej Plenković said during his stay in Brussels that he didn’t expect anything like that “at this stage”.
However, this doesn’t mean that Slovenia, for example, won’t create issues and barriers for political reasons, ie, for Croatia’s continued refusal to accept the decision in the dispute over the border. Slovenian politicians have often made it clear that they will not support Croatia’s entry into the Eurozone or Schengen because, as they believe, “Croatia violates the principles of the rule of law”.
However, the question is how much Slovenia will manage to gain the understanding of other member states in that regard. For the European Union, it was important to prove that the euro as a currency was still attractive and that the Eurozone’s expansion continued despite the Greek crisis that seriously jeopardised the eurozone and threw the euro into troubled waters.
Croatia will also be able to count on the technical and financial assistance of the European Union during the process of introducing the euro. The European Commission has also proposed a special fund for this purpose, and Jean Claude Juncker, President of the European Commission, announced that such assistance will be offered during a recent visit to Zagreb.
Entry into the Eurozone is one of two key strategic goals Croatia has had since joining the EU six years ago, in July 2013. For Croatia, joining the Eurozone is much more than just a financial issue.
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