Business

Croatia to Introduce Euro As Soon As Possible?

By 9 January 2017

In addition to introduction of euro, one of government’s goals is Croatia’s entry into the Schengen Area.

For several years now, a turbulent political and economic debate is taking place about the direction of Croatia’s monetary policies. According to unofficial information, at the beginning of this year the government and the Croatian National Bank (HNB) have agreed that they will prepare a common strategy with the goal of introduction of the euro as soon as possible, reports Jutarnji List on January 9, 2017.

Prime Minister Andrej Plenković and HNB Governor Boris Vujčić have agreed they will coordinate their policies about joining the euro zone because it is the safest option for the long-term financial and monetary stability of Croatia. In addition, Prime Minister Andrej Plenković has decided that another strategic political objective will be Croatia’s entry into the framework of the Schengen Agreement. The first impression is that, in addition to the promised economic growth, the introduction of the euro and the entry into the Schengen Area could become the political legacy of Andrej Plenković and his team.

Given that it is necessary to meet a range of criteria to enter the euro zone, it is clear that the agreement between the government and HNB would include a full range of public policies. Apart from a small group of advocates of the kuna among economists and a few MPs, the new agenda advocated by Plenković and Vujčić should easily receive a broad public support, since in today’s euro zone even the biggest critics agree that euro still represents an achievement.

In a way, thanks to policies of the Croatian National Bank, Croatia has been tied to the euro for a while. The problems in the credit system exploded primarily due to loans indexed to the franc. The orientation towards the euro is confirmed by the decision made by citizens to keep their savings largely in the euro.

Therefore, when it comes to savings, Croatian citizens have clearly not lost their confidence in the euro. On the contrary, those with savings trust the euro more than the kuna. As debtors taking out loans denominated in the kuna, Croatian citizens are willing to bet that kuna will weaken, while as depositors they believe that the euro will preserve the value of their savings.

Therefore, the decision to adapt public policies to the introduction of the euro and the entry into the Schengen Area might seem reasonable.

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