Wednesday, 9 March 2022

Marić: Total Cost of Introducing the Euro About HRK 2 Billion

ZAGREB, 9 March 2022 - The cost of adapting the system to introduce the euro currency will cost about two billion kuna, Finance Minister Zdravko Marić revealed during a debate on the euro currency bill in the Sabor on Wednesday, underscoring that the positive aspects of that process outweighed the negative ones.

"We need to introduce the euro as soon as possible because Croatia is a highly eurorised country. Introducing the euro will mean a higher credit rating and hence lower interest rates. The business community also supports the euro, and being part of the euro area will better protect us in times of crisis," Marić said in response to concerns raised by lawmakers that introducing the euro would be an additional shock to citizens.

"When looking at the pros and cons of the euro, the balance is tipped towards the positive effects," Marić said.

He revealed that the total cost of adapting the entire system to the euro would cost about HRK 2 billion.

He said that consumer protection mechanisms have been foreseen and that in addition to dual prices, supervision would be conducted to prevent any unjustified price increases.

In those countries where the euro was introduced prices were rounded off, which meant an average increase of between 0.2 to 0.4 percentage points, while other inflationary pressures not related to euro introduction will be addressed by the government through measures to buffer the shock, Marić explained.

As far as the criteria regarding inflation are concerned, Croatia will meet them, he underlined.

Marić noted that the exchange rate to replace the kuna has been set at 7,5345 kuna for one euro and that it won't slide more than 15% up or down. The precise exchange rate will be known in July, he said.

For more information on Croatia's adoption of the euro, check out our dedicated business and politics sections.

Wednesday, 9 March 2022

Lawmakers Discuss Introduction of Euro

ZAGREB, 9 March 2022 - Before the start of a formal debate in the parliament on the government's proposal for the introduction of the euro as the official currency in Croatia, two parliamentary groups expressed their opposition to the proposal.

"Croatia is not ready to enter the euro area. Do not wander into the fog", Marijan Pavliečk of the Croatian Sovereignists  (HS) told Finance Minister Zdravko Marić.

"Conduct structural reforms. Bring some order to public finances and then when we stand on our own feet, let the people decide in a referendum", Pavliček added.

Miroslav Škoro (ZPH) claimed that the Croatian economy is not ready to enter the euro area.

On the other hand, the leader of the Croatian Peasant Party (HSS) Krešo Beljak undoubtedly supports the changeover to the euro.

"That is the last stop on the Euro-Atlantic integration journey and that is something we wanted back in 1990 already and something we will all benefit from regardless", he said.

Beljak added that he hopes that in the meantime the euro exchange rate won't go crazy when the kuna is exchanged for the euro.

Dario Zurovec (Fokus) too appealed to his colleagues to consider the benefits of the euro. "These are times of an unstable market when the price of raw materials and energy are jumping. We need a stable currency and the euro is the second-most stable currency in the world", he underscored and recalled that the Croatians are saving in euro and that the price of real estate and cars are shown in euro.

"This is a natural course," said Zurovec ahead of a first reading of the bill on introducing the euro as legal tender in Croatia.

For more information on Croatia's adoption of the euro, check out our dedicated business and politics sections.

Friday, 10 December 2021

Croatia Set to Adopt Law on Euro in April 2022

ZAGREB, 10 Dec 2021 - Finance Minister Zdravko Marić said on Friday that the bill on introducing the euro currency in Croatia was being prepared and the draft could be outlined in mid-January while its final adoption could be expected in April next year.

In addition to that bill, it will be necessary to amend 46 laws and 70 by-laws prior to the euro changeover, Marić said at a conference on Croatia's accession to the euro area, organised in Rovinj by the Večernji List daily and Istria County authorities.

The blueprint for the euro adoption envisages that on 1 January 2023 Croatia ought to be ready to enter the euro area while the formal announcement of accession to the euro area is expected mid-2022.

"At that moment, Croatia will practically enter the final phase and the preparations for the euro changeover will have to be stepped up," said Marić and recalled that almost 1.1 billion coins and 500 million kuna banknotes have to be withdrawn and banks, post offices, Fina and companies need to be pre-supplied with sufficient euro coins and banknotes.

The financial sector will have to adapt and then there is one huge common task and that is to inform and protect consumers as an integral principle of the entire process.

Prices will have to be expressed in both currencies as of August next year and that should also help alleviate inflation pressure.

"As of 1 January 2023 we will change over to the euro overnight and then have another two weeks for both currencies in circulation and citizens will be able to continue to pay in kuna but after that payments will be in euro. The dual prices will remain for at least one year," he underscored.

"Prime Minister (Andrej) Plenković and (HNB) Governor (Boris) Vujčić and I are lobbying our European colleagues for Croatia to be the next country to enter the European monetary area. We all know that we have a highly eurorised society and economy. And the HNB too, is integrated into the European system of central banks, so it is natural to head towards what is stipulated in EU accession agreements," he said.

The conference further heard that despite some of the economic risks that may occur by relinquishing the national currency, changeover to the euro opens a series of economic opportunities.

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

Sunday, 24 October 2021

Campaigners Have to Collect 368,867 Signatures for Euro Referendum Petition

ZAGREB, 24 Oct, 2021 - The Ministry of Justice and Public Administration sated on Sunday that the campaigners who are against Croatia's plan to switch to the euro have to collect at least 368,867 valid signatures for their petition for the referendum initiative "Let's Preserve the Kuna".

One of the conditions for calling a referendum is that at least 10% of eligible voters sign the referendum petition, and on 24 October, the ministry established that there were 3,688,671 eligible voters in the country's electoral rolls, which means that the 10% quota is 368,867.

The organising committee for the referendum initiative on the preservation of the kuna as the sole legal tender has already announced the start of its campaign to collect signatures for the referendum petition. 

Currently, the euro (€) is the official currency of 19 out of 27 EU member countries which together constitute the Eurozone, officially called the euro area.

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Tuesday, 21 September 2021

Introduction of the Euro: What Will the First Two Weeks Look Like?

September 21, 2021 - Speculation and doubts continue to appear about the future financial scenario in Croatia after the eventual introduction of the euro in the country as an official currency, displacing the kuna, and CNB Governor Boris Vujčić gives some clues about what it would look like in the first weeks.

Pay in kunas, get euros back. At least this is how the first two weeks in Croatia would look after the introduction of the Euro on January 1, 2023, reports Poslovni Dnevnik. The objective is to stop the circulation of what would be the old Croatian currency at that time and to start the circulation of the euro. To provide more information and details, RTL Direkt interviewed CNB Governor Boris Vujčić, who in addition to the introduction of the euro, also talks about inflation and tacit minuses.

Why is the Minister of Finance so tough about not lowering VAT, couldn't the introduction of the euro be used to reduce it?

You have to ask him about VAT. As for inflation, I would say that a good part of inflation really comes from food especially now in the summer while in the first half of the year most of the inflation came from rising energy prices. At the moment, about half of the rise in inflation is energy, and now in the summer, food, vegetables and fruits are practically poor due to partly weather conditions.

Aren't you afraid of rising inflation? In the US it is somewhere around 6 percent…

The US has a higher inflation rate, but the economy is overheated there, they also have strong fiscal stimuli that are stronger than European ones and I do not see that at this time such an inflation rate could happen in Croatia, we expect that year-round inflation rate to be 2.2 percent. This is, in principle, the goal of the European Central Bank, so we should not be concerned about that. The problem is if there is a change in expectations, wage growth, but we do not see that at the moment. A significant part of that inflation comes from the fact that the so-called supply chains in the world at this time were disrupted. The Crown has disrupted all that, now you have continents where there are a lot of containers, some countries where you don't have them. You have a situation that road traffic, air travel, is still at a very low level and everything that flew with passengers on airplanes cannot fly… Then companies formed very large stocks that they never had and that logistically present a problem, say in the car industry you have full car parks that you can’t reach at the moment. It all takes some time to clear up and get back to what we had in 2019, one good mechanism, and then prices will slowly start to fall. I would say it won’t happen in the next 6 months.

Especially rising real estate prices. Housing squares are not in the inflation basket?

They are not. I am in favor of having these prices in the basket and what the European Central Bank, where we are going now, has done, and what will be the standard… that these prices will also start to be included in the basket, however, this will only be through two, three years. At the moment we have only the so-called implicit prices through rents and they do not reflect the fact that real estate prices have risen significantly, and they have risen because there is a lot of liquidity, a lot of money, part of which flows into the real estate sector. For example, interest rates that are at zero, or in the countries around us in the eurozone are even negative on deposits of citizens - some of these citizens take money from banks and carry and buy real estate, which inflates real estate prices.

Aren't you afraid that we will enter the eurozone just when euro inflation starts?

I wouldn't say. I don't see it as a danger. I do not see the inflation we measure through the consumer basket as a medium-term danger when we enter the eurozone, but I see the risks arising from these prices that we see at the moment in the bond market, real estate where much money has flowed and even cryptocurrencies. That bubble can always burst, as you know, financial crises arise, but it can blow out easily, prices can stabilize, which will depend on a lot of things, in my opinion, there is primarily a risk. Not these consumer prices.

What do you think would be the best advice for citizens?

Since I do not see any great risk from inflation itself, then I do not think that it should not be insured by investing in those types of assets for which the price is already too high, said Vujčić.

The Governor on the introduction of the euro

How many kuna, physical, banknotes are in circulation?

You have a billion and one hundred million coins and about half a billion of paper money. It is a demanding logistical operation, it all needs to be pulled.

What will it look like? I go to the store, I pay in kunas, the change is returned to me in euros?

That's right. Until 01.01. is HRK, from 01.01. is either kuna or euro for two weeks, after that it is only euro, with the proviso that when you pay in those two weeks, you pay in kuna, the euro is returned to you. And we collect all the kuna.

And then what about them? Are they going somewhere to catch fire?

Coins are a bigger problem. I already said it’s like 120 ZET trams. We have to store and store it somewhere, because it is money for another three years, as long as it changes. As long as they change, they are money. We agreed with the Croatian Army…

Are you building a safe somewhere?

We will build a safe, but at the same time, we agreed with the Croatian Army. It’s really all together logistically difficult.

For more, make sure to check out our dedicated business section.

Friday, 17 September 2021

What Exactly Will Increase in Price With Croatian Eurozone Accession?

September the 17th, 2021 - One concern for many that comes with Croatian Eurozone accession is price hikes. Just how much will prices rise, and will it be overall or only in regard to certain items?

As Poslovni Dnevnik writes, the controversy over Croatian Eurozone accession, aside from solely political views, boils down to a debate on whether prices will rise, and if so, by how much. According to data obtained by Jutarnji list from the Croarian National Bank (CNB), it can be expected that after the conversion from the kuna to the euro, people will very likely have to slightly higher amounts for some items than they were used to.

This has been shown by the statistics based on the experience of other Eurozone member states that went through the process of introducing the euro at some point in the past, and in which it was shown that the biggest price increases should be expected in the catering sector, more precisely in restaurants and cafes. That said, other service sectors will not be spared a rise in prices either...

As Andrea Pufnik from the CNB explains in her paper “Effects of the introduction of the euro on consumer price movements and the perception of inflation”, the experience of the Netherlands shows that restaurant prices increased by 3.5 percent after the introduction of the euro. In Finland they increased by two percent, while Austria and Greece, slightly smaller increases in the hospitality segment were recorded, from 0.2 to 0.5 percent, as reported by Jutarnji list.

According to experts looking into this, the reason for these price increases has a lot to do with the so-called ''menu-cost model'', more precisely, most restaurants will be forced to print new menus and this cost will spill over to consumers in the shape of price hikes.

Statistics also show how price increases could occur in the segment of cleaning, repairing and renting clothes, as witnessed, for example, by citizens of France, Germany and Estonia. Hair and beauty services in general could also become more expensive following Croatian Eurozone accession, and prices are also expected to rise in the services of IT, audiovisual and photographic equipment.

However, certain products will also become more expensive as a result of the ''rounding up'' of prices, which could be most noticeable in bakery products and newspapers, according to the Pufnik research.

Namely, prices being round up is one of the most common reasons for price increases, which is most pronounced for products that initially had slightly lower prices, which include newspapers and bakery products.

According to CNB projections, it is expected that newspapers and books could become 2.06 percent more expensive in Croatia from 2023, financial services 1.9 percent, accommodation services 1.7 percent, footwear 1.6 percent, sports services 1.5 percent, and catering services 1.2 percent.

Some Eurozone member states, such as Finland, also recorded an increase in fruit prices after the introduction of the euro as its national currency, although it is possible that this also happened due to climatological reasons. In Ireland, the biggest jump in prices was in sports and recreational services, in Slovakia the prices of food and non-alcoholic beverages rose the most, while neighbouring Slovenia recorded higher prices in restaurants and cafes, then in footwear and household appliances, and then in transport services.

In principle, various surveys provide different estimates of the effects of the conversion of national currencies into the euro, and Eurostat finds that growth averaged between 0.1 and 0.3 percent for the Eurozone back in 2000 and 2001, while some other surveys suggest price rises of 0.34 percent.

What is certain is that the effects vary from country to country. For example, the risk of price increases is reduced in countries with subdued consumption growth as well as in those member states that introduce mandatory pricing in both currencies in stores before the introduction of the euro, and then price growth is usually subdued in those markets where competition is higher.

"We don't really expect price increases, but we do expect smaller price increases in accordance with the statistics that were recorded in other then new members of the European Union," said Governor Boris Vujcic in attempt to calm people's worries.

For more on Croatian Eurozone accession, check out our dedicated politics section.

Wednesday, 15 September 2021

PM Andrej Plenković Says it's Reasonable to Adopt Euro 9.5 Years After EU Entry

ZAGREB, 15 Sept, 2021 - Prime Minister Andrej Plenković said on Wednesday during the national parliament's Question Time that it was reasonable for Croatia that entered the EU in 2013 to switch to the euro nine and a half years after its admission to the Union.

"It seems a reasonable time frame to me for a country that joined the Union on 1 July 2013 to adopt the euro on 1 January 2023, that is nine and a half years," Prime Minister Andrej Plenković said in response to the question from Marko Milanović Litre (Croatian Sovereignists) whether the citizens should be asked about the adoption of the euro and renunciation of monetary sovereignty.

"You are a new MP. Your predecessors in this same parliament ratified the EU Accession Treaty by 150 votes in favour. Your colleague, Ruža Tomašić, thanks to whom you are sitting here, was a member of the European Parliament in 2013. Your colleague Ilčić has rushed to the EP where he is paid in euro," Plenković said.

The PM said that the strategic goal of his government was to get Croatia into two deeper integrations - the Schengen passport-free travel zone and the euro area.

"We have made sure to fulfil the Maastricht criteria in the present circumstances of a pandemic, earthquakes and crises and have come close to adopting the euro, and now we listen to this initiative of yours. I don't know if we have all slept through this entire period," the prime minister said.

"Is there anyone who still thinks that EU membership is bad for us, after we have absorbed 44 billion more than we have contributed?" he concluded.

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

Friday, 10 September 2021

Croatia, EU Sign Memorandum of Understanding on Start of Euro Coin Production

ZAGREB, 10 Sept 2021 - The European Commission and euro area Member States on Friday signed a Memorandum of Understanding (MoU) with Croatia outlining the practical steps that will allow the country to begin producing euro coins when it receives the go ahead to join the euro area.

The memorandum, signed in Brdo pri Kranju, Slovenia, regulates issues related to the necessary preparations ahead of and up to the actual minting of euro coins, including the acquisition and production of minting tools and coin test runs.

The MoU was signed by Executive Vice-President Valdis Dombrovskis, European Commissioner for Economy Paolo Gentiloni, President of the Eurogroup Paschal Donohoe and Croatian National Bank Governor Boris Vujčić.

The HNB said in a statement that based on the document Croatia could launch preparations, that is, start making a detailed scenario for transition to the euro, start arrangements for the distribution of euro coins and the withdrawal of the Croatian kuna during the changeover, and the selection of its euro coin national side designs.

It can also start technical preparations for the common side of the euro coins, begin preparing mints for euro coin production and buying and making tools necessary to make coins as well as start with coin test runs and start making euro coins.

The Memorandum enables the continuation of preparations for the production of euro coins with the national side and marks an important step in our plan to make everything ready for the introduction of the euro in 2023, HNB Governor Vujčić was quoted by the HNB as saying, noting that Croatia remained committed to achieving that goal.

The EC, too, reported about the signing of the document, citing Executive Vice-President Dombrovskis as saying that the EC continued to support Croatia in its efforts to join the euro area, from which, he said, it stands to benefit greatly.

"However, before it can adopt Europe's single currency, Croatia must first meet all Maastricht criteria and continue to make progress on technical preparations," he said.

Commissioner Gentiloni welcomed Croatia's commitment to joining the euro area, stressing that it belonged there.

He said that the EC would continue supporting Croatia in its preparations and efforts to meet the convergence criteria.

Croatia is still not a member of the euro area but the kuna has been part of the exchange rate mechanism (ERM II) since 10 July 2020.

The signing of the MoU is one of the normal preparatory steps when a non-euro area Member State intends to join the euro area.

For more on politics, CLICK HERE.

Saturday, 28 August 2021

Croatian Sovereignists Launching Campaign for Referendum Against Euro Introduction

ZAGREB, 28 Aug, 2021 - A member of parliament from the Croatian Sovereignists party, Marko Milanović Litre, said on Saturday that his party was launching a campaign for a referendum on the introduction of the euro, criticising the government for ignoring citizens' opinion on the matter.

Prime Minister Andrej Plenković, Croatian National Bank Governor Boris Vujčić and a whole set of Brussels bureaucrats have decided on their own that Croatia should join the euro area, Milanović Litre said in a Facebook post, noting that his party had launched a campaign to protect the national currency, the kuna.

"Referendum is the only way to accomplish that," he said.

Criticising Plenković and his government's attitude to referendum initiatives and what he called disregard for citizens' role in them, Milanović Litre said that that attitude was evidenced by Plenković's recent statement that "from a formal and legal point of view, a referendum on the introduction of the euro was already held in 2012 and a new one is not necessary."

The MP said that ballots for the 2012 referendum on Croatia's accession to the EU, to which Plenković was referring, featured only one question: "Are you in favour of Croatia's accession to the European Union?" and that the referendum campaign made no mention of accession to the euro area.

The Croatian people have the right to state their opinion on all important topics that affect their lives, notably decisions whereby a part of their hard-won sovereignty is ceded to Brussels, said Milanović Litre, adding that Croatia was poorly prepared for EU membership.

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Friday, 19 March 2021

Croatian National Bank: "45% of Croatia's Citizens Support Euro Adoption"

ZAGREB, 19 March, 2021 - The percentage of Croatian citizens who support the adoption of the euro in February this year has reached 45%, up by four percentage points from 41% in a previous survey, conducted in March 2020, the Croatian National Bank (HNB) said on Friday.

The fourth public opinion poll on the adoption of the euro was carried out for the HNB by the Ipsos agency from 23 February 2021 to 1 March 2021.

Nineteen percent of citizens are against the adoption of the euro, while 26% are either against or in favour depending on other factors, and 10% of the respondents do not know, the HNB said.

Also, they said, an increasing number of citizens think that the effect of the euro will be positive. Some of the advantages they see include easier payment and business, as well as the fact that the euro is the common currency in the euro area, which would make Croatia equal to other members of the monetary union.

On the other hand, they see a decline in the standard of living and purchasing power as the main risk, and over a third of citizens think that the adoption of the euro will further increase prices.

To date, the poll has been carried out four times: in August 2018, in February 2019, in March 2020 and in February 2021. The survey is conducted on a nationally representative sample of 1,000 respondents, aged 18 to 79, using computer-assisted telephone interviewing (CATI), and it covers four thematic units: the use of the euro in the Republic of Croatia by foreign citizens, how informed citizens are on the adoption of the euro, citizens' attitudes to the adoption of the euro and their expectations.

The aim of the survey is to determine whether Croatian citizens support the strategic commitment of the government and the HNB to adopting the euro as the official currency in Croatia and whether they are aware of all the benefits that the adoption of the euro will bring to them and the national economy.

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

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