August 30, 2020 – Should Croatia join the Euro? No, says Nobel prize-winning economist. And Coronavirus is exactly why.
Should Croatia join the Euro? To be honest, we thought this had already been decided upon. But, new comments made by Nobel prize-winning economist Joseph Stiglitz on Saturday 29 August open the question again within the new perspective of the Coronavirus era.
We say new comments, but that’s not exactly true. Stiglitz, who won the Nobel prize for economics in 2001, has long been an opponent of the Euro. He is of the opinion that joining the single currency removes a country’s ability to respond to crises. While it is true that joining the single currency removes a country’s ability to change the exchange rate and deprives it of monetary policy, and thus of changing interest rates, the rub is that Euro countries get more favourable loan deals.
On 10th July 2020, Croatia and Bulgaria joined the European Exchange Rate Mechanism (ERM II), a necessary step in joining the Euro. Both must spend at least two years in ERM II before joining the single currency. Croatia will be eligible to adopt the Euro in January 2023. But what will be the situation with Coronavirus and its economic fallout at that time? Should Croatia join the Euro?
The Euro is the currency for only 19 of the 27 countries in the EU. Some EU countries, such as Sweden and formerly the UK, have flatly refused to introduce the Euro despite many years of EU membership, believing that having a national currency is absolutely necessary to manage economic policy.
“I think that every country that retains its flexibility is well advised,” said Stiglitz, in an online exchange during this year’s Alpbach European Forum. Stiglitz, a former World Bank chief economist and former economic adviser to US President Bill Clinton, is of the opinion that grants available to EU member states should instead be used to deal with times of crises, rather than cheaper loans facilitated by being a member of the single currency.