Just how ready is Croatia to join the Eurozone? The topic is one that has many sides to it and a lot of opposition from both the public and from certain politicians and political parties, yet it seems the Croatian Government is steaming ahead with their plans for the country to enter into the Eurozone and abandon the kuna.
As Poslovni Dnevnik/Jadranka Dozan writes on the 19th of May, 2019, the Croatian Government has proposed urgent amendments to the ZOKI, which creates a normative framework for the accession process to the banking union, a step that implies officially applying for the country’s entry into the ERM II Exchange Rate Mechanism.
However, the Republic of Croatia has not yet submitted the aforementioned type of official request for entry into the ERM II Exchange Rate Mechanism, which is considered to be one of the first steps towards official entry into the controversial Eurozone.
This news could see more steps actively taken to enter into the banking union and establish “close co-operation with the European Central Bank (ECB)”, which is usually part and parcel of a request to enter the ERM II.
In addition to the fact that the process of close co-operation with the ECB was the subject of a panel discussion on the first day of the Croatian Money Market conference in Opatija in Kvarner, the Croatian Government issued a proposal for a supplement to the Credit Institutions Act on Wednesday for public consultation, which refers precisely to the creation of a normative framework for the assignment of certain tasks to the European Central Bank.
In practice, this means, in the first instance, Croatia’s inclusion in a Single Supervisory Mechanism (SSM), and that means that in the furure, the ECB will be able to carry out comprehensive assessments of such credit institutions, while for example, Asset Quality Review has so far covered euro-denominated countries.
At the aforementioned Opatija conference, the introductory speech on the path to Croatia’s entrance into the Eurozone was given by an envoy to the President of the Republic of Croatia, with the Croatian Minister of State Property, Goran Marić, also having a part to play. It was stated that the single currency is one of the important aspects of unification, ie, in Croatia’s accession to the European Union, and that Croatia has an obligation to respond readily and properly to this process.
That means, as was stated, the need to carry out all of the necessary preparations – monetary, political and others, including those aimed at the wider public, with a view to understanding the changes and eliminating fear, propaganda and potential insecurity. The main focus of the presentation of the Governor of the Croatian National Bank (HNB/CNB) Boris Vujčić was the macroeconomic prospects and challenges, and this is usually a reference to structural reforms without which Croatia will lag behind in reaching the level of development of much older EU member states, especially in terms of Croatia’s development in comparison to other, older member states of the Union.
Croatia’s business climate in us is still not good enough, remotely. To improve the country’s overall business environment, the governor emphasised that what is particularly important is the raising of the quality of Croatia’s institutions which greatly affects the general level of investment into the country, and that this is a key to faster productivity growth.
Therefore, in the first quarter of 2019, the indicators are solid: strong growth in industrial production, personal consumption and construction, the continued growth of exports (as well as imports) and favourable labour market trends (but with the increasing and very concerning problem of a lacking labour force owing to Croatia’s demographic crisis).
In the case of economic slowdown today, however, there is a significant fiscal space that, at least according to Boris Vujčić, should be used in the case of a recession occurring. Otherwise, the Croatian National Bank expects to further reduce surplus on current and capital account balances this year, as well as significant appreciation pressures on the Croatian kuna.
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Click here for the original article by Jadranka Dozan for Poslovni Dnevnik
