Monday, 13 September 2021

Switching to Euro Will Help Croatia Enjoy Better Credit Rating

ZAGREB, 13 Sept 2021 - Finance Minister Zdravko Marić said on Monday that the introduction of the euro as the sole legal tender would impact Croatia's credit rating, and quoted the Fitch agency's presumption that the country's admission to the euro area would raise its credit rating by two notches.

Addressing a meeting of the National Council for the introduction of the Euro as Official Currency in Croatia, which was also attended by the EC Vice President Valdis Dombrovskis, Minister Marić recalled that the 2020 COVID-19 pandemic triggered off a rise in the budget gap, and last year the general government deficit amounted to 7.4% of the country's GDP.

This year, it is estimated at 3.8%.

According to the latest estimates, the budget deficit in 2022 will fall to 2.6% of GDP and to 1.9% in 2023, while in 2024 it is projected to be 1.5% of GDP.

Marić recalled that as a consequence of the higher budget deficit, the public debt also rose in 2020 when it reached 88% of GDP.

This year, the public debt is likely to fall by two percentage points to 86.6%, and in 2022, it is expected to be reduced by a further three percentage points.

Marić expects the public debt to be 76.8% of GDP at the end of 2024.

He announced a shift of the focus to inflation, noting that inflation trends were now present worldwide.

Croatian National Bank (HNB) Governor, Boris Vujčić, said that Croatia's admission to the European Exchange Rate Mechanism (ERM) II had brought the country under the Single Supervisory Mechanism (SSM) and it also joined the Single Resolution Mechanism (SRM).

Concerning the HNB, we are already in the bank union to a large extent. Our experience from participation in the SSM and SRM is good, we have adjusted ourselves to that, Vujčić said.

Commenting on fears of higher prices being triggered off by the euro changeover, the governor pledged the protection of consumers and good communication.

"We are preparing the code of ethics which will be offered to businesses and services to sign, whereby they undertake fair performance during the euro changeover, he explained.

We will introduce monitoring and we will use the best practices of countries that have already converted their national currencies to the euro, he said.

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Monday, 13 September 2021

Prime Minister Confident Croatia Will Be Ready to Join Euro Area on January 1st, 2023

ZAGREB, 13 Sept 2021 - Prime Minister Andrej Plenković said on Monday he was confident Croatia would be ready to enter the euro area on 1 January 2023.

Speaking at the 11th meeting of the national council for the introduction of the euro as Croatia's official currency, Plenković said Croatia had the full support of the European Commission and the European Central Bank to join the euro area.

"We approached this process in a very structured way, carefully. We believe we will fulfill in time all the commitments we undertook by entering the Exchange Rate Mechanism."

He said the government regularly discussed reform implementation in money laundering prevention, the business environment, public administration management, and the justice system, adding that he was confident all the ministries involved would fulfill what had been agreed.

Highly euroized economy

Plenković reiterated that over 60% of Croatia's export was to EU member states, over 60% of tourists in Croatia came from the euro area, over two-thirds of savings and half the loans in Croatia were in euros and that Croatia was already a highly euroized economy.

The experience of the countries which joined the euro area shows that it benefitted both their citizens and economies. Entering the euro area will eliminate the currency risk and exchange costs, reduce interest rates, boost foreign investment, and increase the possibility of financing on the capital market, which we are sure will have an additional effect on our credit rating, Plenković said.

That will also facilitate exports and tourist arrivals, he added.

By comparing pay and price trends in new member states, one can conclude that gross wages increased considerably in relation to price growth, he said. "Living standards increased considerably after the introduction of the euro."

Plenković reiterated that Croatia would have €25 billion in EU funds at its disposal in the years ahead.

"We expect an advance of €818 million could arrive in Croatia in the weeks ahead and, with the GDP growth we saw in the second quarter and which, after such a successful tourism season, will certainly be such in the third quarter as well, to embark on strong economic recovery, strengthening the resilience of the Croatian economy, quality of life, and raising the standard of our fellow citizens."

Dombrovskis: EC strongly supports Croatia's work and ambition to join the euro area

The European Commission Executive Vice President of for an Economy that Works for People Valdis Dombrovskis said at the meeting the Croatian government had shown a strong political will and set ambitious goals.

The Commission strongly supports the work and ambitions of the government and other Croatian institutions to join the euro area, which requires meeting all Maastricht criteria, he added.

Your economy is recovering well and will receive support via the recovery and resilience plan. Croatia is the biggest recipient of EU funds. 11.6% of GDP has been allocated to Croatia in grants, he said.

Dombrovskis said taking the euro path was worth it as it would lead to a more prosperous economy.

Asked by the press about the current inflationary pressures and if prices would go up once Croatia joined the euro area, the Commissioner said one should carefully monitor the impact of introducing the euro on prices also while preparing to introduce it in order to prevent significant price growth.

He said that when the euro was being introduced, product prices were being monitored in two currencies, among other things so that citizens could get used to prices in euros.

The relevant authorities will also have to monitor prices. Latvia, for example, where Dombrovskis was prime minister, conducted a campaign for a fair and equitable introduction of the euro.

Everything that was necessary was done to prevent the introduction of the euro from being used to raise prices, and even retail chains took part in the campaign, he said.

He added that no significant price increase was registered in the Baltic countries that entered the euro area last.

Plenković told the press there was no need for a referendum on euro adoption, explaining that during its referendum on its European Union's admission, Croatia also assumed the obligation to enter the euro area.

For more on politics, follow TCN's dedicated page.

Monday, 30 August 2021

Bridge MP Says Croatia Turning into an EU Retirement Home

ZAGREB, 30 Aug 2021 - Zvornimir Troskot, a member of parliament from the opposition Bridge party, said on Monday that the economic situation in the country was not good despite the government's boasting about it being excellent, and he also criticised insufficient production and the country's heavy reliance on tourism.

"It is good that GDP has grown by 16.1% in the last quarter considering our open tourism strategy but we have also been lucky because Spain has been on lockdown due to the pandemic and Greece due to wildfires," Troskot said at a news conference.

He noted that experts did not comment on the impact of inflation and price growth on GDP growth.

"If there are no more external shocks like the pandemic and lockdown, we will return to Croatia's economic reality, namely a 91% share of debt in GDP. That is why we should talk about real structural reforms in the economic sector because during the lockdown, too, the hospital system spent enormous amounts of money despite the fact that hospital care was less available than normally," he said, calling also for a reform of the judiciary.

Economy based on tourism, instead of on production

Troskot believes that public sector investments are yet another problem and recalls that the government has said that EU funds intended for recovery from the coronavirus crisis will eventually end up with private enterprises.

That money will possibly reach entrepreneurs through public procurement and we know how those allocations are made and that they do not reach entrepreneurs, he said, noting that his party had proposed transferring EU funds directly to entrepreneurs who had 68 prepared projects instead of financing public infrastructure projects that should not be a priority at the moment.

The MP also said that the national economy was not based on production, as evidenced by projects like the Pelješac Bridge, which, he said, was good, however, the EU funds approved for it had ended up in the accounts of Chinese, Greek and Austrian companies working on it.

We have based our economy on tourism instead of on production which creates jobs and which is the best instrument to fight inflation, he said.

"When we look at the whole picture, we get the impression that Croatia is becoming exclusively a tourist destination and is turning into a retirement home for the EU," he said, noting that 310,000 Croatians, born between 1984 and 1999, had emigrated to Germany.

He warned that in Slovakia wages in the past 15 years had grown by one thousand euros, while in Croatia they had increased by 327 euros, or a mere 20 euros annually.

Referendum on euro introduction

Asked if Bridge would support the campaign of the Croatian Sovereignists calling for a referendum on the introduction of the euro, Troskot said that his party was in favour of introducing the euro, but that Croatia was still not ready for it because it lacked own production and was not ready for the strong competition in the EU.

"Yes to the euro because we assumed that obligation under the Lisbon Treaty, but not for the time being because we are still not ready for it," he said.

For more on politics, CLICK HERE.

Friday, 23 July 2021

PM: Serbian Bank Can Have Opinion but Has no Say Concerning Tesla and Euro Coins

ZAGREB, 23 July 2021 - Prime Minister Andrej Plenković said on Friday that the Serbian National Bank (NBS), which contests Croatia's intention to put the image of Nikola Tesla on euro coins, could express its opinion on the matter and could take a stand, but that that had no influence in the decision making.

"Nikola Tesla was born in Smiljan on the territory of Croatia. And he lived most of his life in the USA. It is citizens who have recommended that one of the future euro coins should include the image of Nikola Tesla, we do not appropriate anybody," Plenković said after the NBS said on Thursday that putting Tesla's image on the national side of euro coins if Croatia joined the euro area "would represent appropriation of the cultural and scientific legacy of the Serb people."

Plenković elaborated that the suggestion made by Croatians amounted to a great gesture, having in mind the fact that Tesla was of Serb descent and his own merits globally were unquestionable.

We can be proud of that. I cannot see why somebody may deem it as a problem. If I were on the helm of the National Bank of Serbia, I would send congratulations (for such a decision), the Croatian PM said.

The NBS responded with its objections after Plenković announced that Tesla's image would appear on 50, 20 and 10 cent euro coins when Croatia joined the euro area.

The Croatian National Bank Currency Committee on Wednesday defined a final proposal of motifs for the national side of Croatia's future euro coins. This will now be considered by the National Council for the introduction of the euro as Croatia's official currency, after which the government will adopt a conclusion.

The Croatian coat-of-arms, a geographical map of Croatia, the marten (after which the Croatian currency is named), the Glagolitic script and Tesla are motifs that have been proposed.

For more on politics, CLICK HERE.

Wednesday, 21 July 2021

Croatian National Bank (HNB) Currency Committee Proposes Five Motifs For Euro Coins

ZAGREB, 21 July, 2021 - The Croatian coat-of-arms, a geographical map of Croatia, the marten (Croatian: kuna), the Glagolitic script and Nikola Tesla are motifs proposed for the Croatian side of euro coins, the Croatian National Bank (HNB) said on Wednesday.

The HNB Currency Committee today defined the final proposal for motifs for the national sides of future Croatian euro coins, which will now be considered by the National Council for the Introduction of the Euro as Official Currency in the Republic of Croatia, and then the government will adopt a conclusion.

The Croatian coat-of-arms will be used as a background on all coins, and other motifs will be used on coins of different denominations so that the 2 euro coin will feature a geographical map of Croatia, the 1 euro coin the marten, the 50, 20 and 10 cents coins Nikola Tesla, and 1, 2 and 5 cents coins the Glagolitic script.

The HNB said the main criteria for the selection was that the motif is acceptable to the general public and that it is a national symbol.

The rating given by citizens via an online survey at euro.hr, in which nearly 50,000 citizens took part, and a structured national survey on a sample of 1,000 citizens also influenced the Committee's final decision.

Based on the selected motifs, the HNB will announce a tender for the design of the national side of the euro coin. In mid October, the HNB will send the design of the motifs to the European Commission and the Council of the European Union, the press release said.

The production of euro coins with the Croatian national side should start at least six months before the introduction of the euro, that is the decision of the Council of the EU that Croatia is introducing the euro.

For more about politics in Croatia, follow TCN's dedicated page.

Friday, 2 July 2021

Five Motifs for Croatian Side of Euro Coins Put to Public Consultation

ZAGREB, 1 July 2021 - The Croatian coat-of-arms, a geographical map of Croatia, the kuna coin, the Glagolitic script and an image of Dubrovnik are the five selected motifs for the national side of the euro coin put to public consultation on Thursday.

Citizens will be able to rate the five proposed motifs on the website euro.hr and add another, sixth motif of their choice.

Their suggestions will be used by the Croatian National Bank Currency Committee in making the final selection, the National Council for Euro Introduction said after its ninth meeting on Thursday.

The public consultation will last until 15 July.

For the latest news from Croatia, follow TCN's dedicated news page.

Wednesday, 11 November 2020

Euro Adoption to Have Positive Impact, Particularly on Tourism, Says Ministry

ZAGREB, Nov 11, 2020 - Euro adoption in Croatia will generate a significant and permanent benefit for the economy and the positive effects will be particularly reflected in tourism due to the size of that sector and its high share of tourist demand in EU member states, the Ministry of Tourism and Sports said on Wednesday.

"Visitors from countries where the euro is legal tender generate almost 70% of Croatia's total tourism revenue and about 60% of total bed nights come from the euro area. Introducing the euro will also help boost international cooperation, investment and promotional effects on the tourism sector," the ministry said in response to a query from Hina following a meeting of the National Council for Euro Adoption.

The ministry underscored that Croatia is strongly integrated with the euro area through trade, hence introducing the euro in Croatia will generate significant benefits for the economy.

"It is important to observe and estimate how introducing the euro will affect individual sectors in Croatia, primarily tourism which accounts for a significant share of Croatia's GDP and additionally generates a multiplying effect on other economic activities," the ministry said.

It underlined that "available empiric research mostly indicates positive implications for tourism in introducing the common currency."

Research indicates that introducing the euro has positively impacted foreign investments, hence it can be expected that introducing the euro will encourage investors in Croatia, primarily as there will no longer be any uncertainty related to exchange rates and because of greater transparency in doing business, the ministry concluded.

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Sunday, 30 August 2020

Should Croatia Join the Euro? No, says Nobel Winner

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.

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Saturday, 6 June 2020

HGK: Croatia Meeting Conditions For Entry To Euro Area As Planned

ZAGREB, June 6, 2020 - Findings of the ECB's assessment showing that all the major commercial banks in Croatia have met capital adequacy requirements and passed stress tests means that Croatia is a step closer to the European Exchange Rate Mechanism (ERM II), the Croatian Chamber of Commerce (HGK) said on Friday.

Therefore we can expect the country to join the euro area in 2023, as planned, the HGK says in a press release after the Croatian National Bank (HNB) stated that the comprehensive assessment conducted by the European Central Bank showed that the five leading banks in Croatia are well-capitalized and resilient to shocks.

Zagrebacka banka (ZABA), Privredna banka Zagreb (PBZ), Erste & Steiermaerkische Bank, OTP banka Hrvatska and Hrvatska Postanska Banka (HPB), which were covered by the comprehensive assessment conducted by the ECB, do not face any capital shortfalls as they did not fall below the relevant thresholds used in the asset quality review (AQR ) and the stress test, the Croatian central bank reported earlier on Friday.

The findings are also the confirmation of the stability and good quality of the Croatian banking system, the chamber underlines in its comment.

This is also an act of recognition of our members from the banking system and of the whole economy, says the HGK.

The chamber reiterates some of the advantages of the membership of the euro area such as the access to funding through the European Stability Mechanism, the fact that the HNB would no longer have to maintain the stability of the kuna, and the consequent higher credit ratings for the country.

Banks covered by ECB assessment make up four-fifths of total banks' assets in Croatia 

The five banks that fared well in the ECB comprehensive assessment make up 79% of the total assets of the banking system, the HGK notes.

Croatia sent its letter of intent to join the Exchange Rate Mechanism (ERM II) to the ECB on 4 July 2019.

The finance ministers of the euro area's 19 member states and Denmark, the president of the European Central Bank (ECB) and a representative of the Danish central bank's governor discussed the letter at a meeting in Brussels, after which the finance ministers issued on 9 July 2019 a statement in which they "welcome the intention of the Croatian authorities to put in place the necessary elements for a successful entry into ERM II."

The euro area statement said then that the ECB could complete its assessment of Croatia's compliance with the commitments outlined in the letter of intent in about a year's time.

In case of a positive assessment, a decision would be made on Croatia's ERM II participation, a sort of euro waiting area where it should spend at least two years, which means Croatia could introduce the euro in 2023 at the earliest.

Croatia would simultaneously join ERM II and the Banking Union.

Sunday, 19 May 2019

Croatia Edges Closer to Eurozone, Official Request Coming Soon?

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

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