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.

Thursday, 16 September 2021

Croatia Set to Amend 118 Laws and Regulations Before Switching to the Euro

ZAGREB, 16 Sept 2021 - The government on Thursday adopted a conclusion on amending 46 laws and 72 regulations until 15 July 2022  as part of the roadmap for the euro changeover process.

Finance Minister Zdravko Marić informed the cabinet that in the last month, the competent agencies had itemized a total of 118 laws and regulations which should be amended within the national plan for the adoption of the euro.

The time frame for Croatia's admission to the euro area in 2023 thus entails the amending of the necessary legislation until 15 July 2022.

Prime Minister Andrej Plenković recalled that three days ago, the European Commission Executive Vice President  Valdis Dombrovskis, who attended the 11th meeting of the national council for the introduction of the euro as Croatia's official currency, strongly supported the work and ambitions of the government and other Croatian institutions to join the euro area.

Last Thursday the Irish Finance Minister and Eurogroup President, Paschal Donohoe visited Zagreb and said that Croatia had made important and positive progress on the road to euro area membership.

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

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.

For more, follow our business section.

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.

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.

Tuesday, 27 July 2021

Will Croatia Euro Coins Be Able to Feature Tesla?

July 27, 2021 - Last week, the Croatian National Bank announced five motifs to be featured on Croatia euro coins, with the image of Nikola Tesla being the most popular one according to the vox populi. However, these are just the first steps of the process of creating Croatian euro coins. Who has the ultimate say on whether Tesla is to be kept or to be scrapped off? A look into the procedure of approving the designs of euro coins.

The announcement of five motifs chosen to grace the national side of Croatian euro coins that came last Wednesday was soon greeted by a statement on the official website of the National Bank of Serbia. In it, NBS objects to the Croatian idea of using the image of Nikola Tesla. It's described as ''an appropriation of the cultural and scientific heritage of the Serbian people.'' Serbia also stated it would file a complaint if Croatia put his image on one of the coins.

The question is, to whom would these complaints be filed, and to what effect? Is there a set legal way to get Croatia to remove Tesla from the coins not yet minted? (Un)surprisingly, there are a few precedents guarding the question, as this is not the first time that one country objected to the design of another country's euro coins, claiming it belonged to its own national heritage.

In 2005, Slovenia's use of the Prince's Stone on the 2 cents coins launched a protest from the Austrian state of Carinthia. Prince's Stone is an ancient Roman column that was used during the early Middle Ages in the ceremony of installing the rulers of the Slavic principality of Carantania. The ceremony was conducted in the Slovene language, and Caranthania was located, in part, on the territory of present-day north-eastern Slovenia. The stone itself used to be kept in a museum in Klagenfurt, the capital of Carinthia, where it was considered a historical icon of the state. The Carinthian state government (headed by the then-governor Jorg Haider) issued a resolution of protest on October 25, 2005, which was rejected as "not to be taken seriously" by the Slovene foreign minister Dimitrij Rupel.

Ten years later, in 2015, Belgium issued a €2 commemorative coin (individual Member States are allowed to issue commemorative coins to celebrate subjects of major national or European relevance). To mark the Battle of Waterloo, and the 200th year anniversary of the defeat of Napoleon,  the coin featured an image of the monument at the site. France objected, saying that the image carried a negative connotation. 

According to the COUNCIL REGULATION (EU) No 729/2014 on denominations and technical specifications of euro coins intended for circulation, when a eurozone country wants to issue a new €2 commemorative coin, it is required to send a draft design of the coin to the Council, the European Commission and to other eurozone countries. In the end, as RFI wrote in 2015, ''Brussels has been forced to scrap 180,000 coins worth 1.5-million-euros that it had already minted before Paris got wind of the affair.''

And in 2013, Slovakia re-thought its idea of issuing commemorative coins with the images of Christian saints and missionaries Cyril and Methodius with crosses and halos above their heads, as some Member States pointed out that the designs went against the ''principle of respect for religious diversity in Europe''. 

However, all of these disputes were started and resolved between the EU Member States, not a Member State and a third country, as is the case with Serbia. As European Commission Deputy Chief Spokesperson Dana Spinant said on Friday, ''the design of the national side of euro coins is decided by the country adopting the euro.''

The designs have to be passed from the Croatia National Bank to the National Council for the Introduction of the Euro for approval and then have to be confirmed by the government of Croatia.

That doesn't mean that the design lays solely in Croatia's hands.

The abovementioned Council Regulation also states that ''each Member State (....) should take into account the fact that euro coins circulate in the whole euro area and not only in the issuing Member State'', and should ''avoid the use of inappropriate designs''.

Recognizing the potential problem when it comes to defining the term ''inappropriate'' the Regulation states that ''uniform conditions'' for the approval of the designs should be laid down and also that ''in view of the fact that the competence for an issue as sensitive as the design of the national sides of the euro coins belongs to the issuing Member States, implementing powers should be conferred on the Council.'' 

Therefore, Croatia has to submit draft designs to the Council, to the Commission, and to the other Member States whose currency is the euro at least three months before the planned issue date. Since Croatia is set to enter the eurozone in 2023, that criterion shouldn't be difficult to meet. 

Within seven days following the submission, any Member State whose currency is the euro may, in a reasoned opinion addressed to the Council and to the Commission, raise an objection to the draft design proposed by the issuing Member State if that draft design is likely to create adverse reactions among its citizens.

If the Commission considers that the draft design does not respect the technical requirements set out by the Regulation, it shall, within seven days following the submission, submit a negative assessment to the Council.

If no reasoned opinion or negative assessment has been submitted to the Council, the decision approving the design shall be deemed to be adopted by the Council.

In all other cases, the Council shall decide without delay on the approval of the draft design, unless, within seven days following the submission of a reasoned opinion or of a negative assessment, the issuing Member State withdraws its submission and informs the Council of its intention to submit a new draft design.

Since there are essentially two criteria to meet - the suitability of the design requirement and the technical requirement, both assessed by other Member States (the EU), the only tool any country outside of the EU can use is its political influence on a Member State to try and come up with a reasoned opinion as to why a draft design is ''likely to create adverse reactions'' - but only among its (a Member State's) citizens.

There is nothing in the Regulation on the influence the design may have on the non-EU countries. In fact, the Regulation even makes sure to point out that the other Member States whose currency is not the euro are excluded from deciding. Will Croatia be able to keep Tesla on its coins?  If these provisions are anything to go by, then yes. 

For more on politics, CLICK HERE.

Monday, 26 July 2021

Croatian National Bank Answers Important Question About Eurozone Entry

July the 26th, 2021 - The Croatian National Bank has revealed just how long we'll be able to make payments in both Croatian kuna and in euros as the country prepares to join the Eurozone at the beginning of 2023, as is currently planned.

As Poslovni Dnevnik writes, according to previous announcements, Croatia should enter the Eurozone and as such finally adopt the on January the 1st, 2023, and before the euro officially becomes the country's official currency in replacement of the kuna, many preparations will have to be made.

When it comes to just who will be in charge of the technical realisation of some important things about the introduction of the euro and how the euro will work at the very beginning, the Croatian National Bank confirmed for Net.hr that the new euro coins of the Republic of Croatia will be made at the Croatian Monetary Institute.

"The production of euro circulation coins with the Croatian national symbols will begin at the earliest six months before the day of the introduction of the euro, ie after the EU Council Decision that Croatia will introduce the euro," the Croatian National Bank explained.

With the day of the introduction of the euro as the national currency of the Republic of Croatia approaching, a sufficient amount of euro coins will be prepared for circulation to meet the needs of all people and business entities, the national bank added. What everyone is interested in at the moment, however, is just how long it will be possible to use both kuna and euro in parallel before the kuna is phased out and placed in this history books entirely.

"During the first two weeks from the day of the introduction of the euro, kuna and euros will remain in circulation at the same time, and traders should return the rest of the money to customers which have paid in kuna exclusively in euros," the Croatian National Bank explainsed After that period, the euro will be the only legal tender allowed in the country, they added.

"In order to ensure a smooth transition to the new currency, in a short transition period, the kuna and the euro will have the status of legal tender at the same time. In other words, people will be able to pay in both currencies in the first two weeks starting from the day the euro is introduced in stores. After two weeks from the day of the introduction of the euro, the euro will be the only legal tender in the Republic of Croatia,'' they stated from the Croatian National Bank.

Money, meaning Croatian kuna, can be exchanged for euros free of charge for the first six months of the euro being in use in the country. However, if someone does forget to exchange any kuna cash they have into euros after that deadline, it will still be possible. Namely, in the first six months from the day of the introduction of the euro by the bank, Fina and Hrvatska posta d.d. will allow kuna cash to be exchanged for euros in all branches free of charge, and in the next six months they will be entitled to charge a fee for this service.

For more, follow our dedicated lifestyle section.

Friday, 25 June 2021

Plenković Expects Croatia To Enter Eurozone In Early 2023

June 25th, 2021 - Croatia expects to join the eurozone in early 2023 and plans to meet all the requirements by then, Prime Minister Andrej Plenković said in Brussels on Friday.

He is attending a two-day EU summit which today will include a eurozone summit.

"That's an opportunity for me to state once again our willingness to meet all the criteria and, after entering the Exchange Rate Mechanism last year, to meet the action plan and create the prerequisites for Croatia to become a member of the eurozone during 2023, hopefully at the beginning," Plenković told reporters.

At the eurozone summit, he said, he will present the timetable Croatia expects regarding accession "given all the achievements in implementing the euro introduction strategy since 2018."

Member states' leaders began the second day of the EU summit by discussing economic recovery from the effects of the pandemic.

Plenković said he expected the Commission to approve Croatia's recovery and resilience plan in July, after which Commission President Ursula von der Leyen would come to Zagreb to personally give the Commission's the green light for the 6.3 billion worth grant plan.

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

Monday, 15 March 2021

Plenković: Croatia Expects to Join Eurozone and Schengen in 3 Years

ZAGREB, 15 March, 2021 - Prime Minister Andrej Plenković said in an interview with the Politico news website published on Monday that it was reasonable to expect that Croatia would enter the eurozone and the Schengen area by the second half of 2024.

"The idea is to do both — accession to Schengen and the eurozone — by the end of this government’s term, so the second half of 2024," Plenković said. "It’s tough, but reasonable."

The European Commission said in 2019 that Croatia had fulfilled all the technical requirements for entry into the Schengen passport-free travel zone, and this should now be endorsed by other member states. Romania and Bulgaria have been waiting for this to happen for years.

In mid-2020 Croatia was admitted to the European Exchange Rate Mechanism (ERM II), a key step towards eurozone membership.

Plenković said that because of the coronavirus crisis the eurozone members could be expected to continue suspending their own rules for fiscal discipline, while those on the path to join the euro could not rely on "such easy self-help tricks."

He expressed regret that Croatia had "stepped away from consolidation and sound public finances" to limit the economic damage of the crisis.

Plenković said that his government would pursue two goals: "Using the recovery fund, the EU budget and private investment to generate growth. And the other one: Go back to the framework of 2017-2019, when my government achieved a budget surplus."

The prime minister said he believed Croatia would be able to spend the first euro from the EU recovery fund at the beginning of next year, adding that it was a complicated process. "Unless it’s helicopter money, it’s very difficult and complex. You need a plan, a project, verification, tender, implementation, documentation. If it goes faster, we’ll gladly spend it, but if I’m realistic …"

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

Friday, 23 October 2020

Ambitious Plan Key for Croatian Economy, Not Just Eurozone Entry

As Poslovni Dnevnik writes on the 23rd of October, 2020, the ongoing coronavirus crisis could accelerate the integration of capital markets across the European Union in order to encourage the recovery of small and medium-sized enterprises as soon as possible through alternative sources of financing. What does this mean for Croatia and Eurozone entry, exactly?

Capital market integration should also make it easier for banks and financial investors to invest in the capital of companies that strive for sustainable operations and in line with the European Union's green agenda. New ideas are constantly being sought during these truly unprecedented times in which the coronavirus pandemic brought the world the greatest global economic crisis since World War II. The significant levels of uncertainty and the impossibility of clearly estimating how long it will all last are accelerating various innovative solutions.

Shortly after the crisis caused by the COVID-19 pandemic began, it became clear that its impact on the Croatian financial services sector could be strong and far-reaching. With Croatia's Eurozone entry plans, it was unclear at first what effect the economic woes would have.

However, despite the severity of the unpredictable situation, the Croatian Financial Services Supervisory Agency (Hanfa) believes that we're at a turning point that - if we prepare well - might accelerate our stronger recovery in the capital market.

There are a number of challenges facing the financial sector in the future, from a number of geopolitical tensions, such as trade wars, growing economic and political instability, climate change and rising premium risks to the sustainability of public debt. It's also worth emphasising the problem of corporate liquidity due to the tightening of financing conditions - a pressing solvency problem that will only manifest itself after the expiration of assistance from national governments - which will lead to a possible increase in stress levels across financial markets.

In light of Croatia's economic recovery, especially after the coronavirus crisis passes, a very ambitious European Union plan to establish a Capital Markets Union is of high importance for Croatia, according to Ante Zigman, President of the Hanfa Board, who spoke on the matter during a recent presentation.

As he pointed out, with Croatian Eurozone entry, the continuation of the integration of the capital market into the EU is of significance for the Croatian economy. After the first one back in 2015, in September this year, the European Commission issued a new action plan which by the end of 2022 is divided into three basic goals through as many as 16 different measures. The first goal is to support green, digital, sustainable economic recovery by providing more affordable financing to European companies.

Digitalisation has come into focus because digital changes in the way we pay for things and provide financial services are changing even faster with this crisis forcing our hands. According to the market capitalisation of the 500 largest financial service providers in the world, the rapid growth of the share of the financial payments industry and fintech companies is obvious, and banks are finally losing their dominance in the financial world.

Croatia already has a basis for the growth of new digital financial companies due to changes in methods of payment, where transactions via the Internet and mobile banking are growing rapidly. The growth of young digital fintech competition has some major advantages, such as stronger market competition and lower service prices, reduced market concentration, greater transparency and better access to financial services in general.

The second is to make the European Union an even safer place to save and make long-term investments, and the third is to integrate national capital markets into what would truly be one single market.

In the long run, this should focus more on financing from the banking to the non-banking sector, enable the easier and cheaper financing of sustainable companies that currently don't have access to recover their equity through banks and traditional lending, and the easier transition of the economy to sustainable and environmentally friendly business within a constructive Union-wide plan.

The proposed plan doesn't diminish the importance of national stock markets, but connects them so that through future uniformed and harmonised regulations, investors can find good opportunities for cross-border investment, that large and small investors can more easily invest and that tax treatment of such investments is equalised throughout the EU.

In addition to strengthening new investments, the plan also includes financial literacy of the aging European population as well as the growth of their investments for pensions.

The plan defines the intention to alleviate the tax burden in cross-border investments, standardises bankruptcy proceedings between EU member states in order to protect all types of investments, unambiguously defines the concept of shareholders across the EU to harmonise rules governing the relationship between investors, intermediaries and issuers, and foresees all barriers to the use of new digital technologies in all capital markets being removed in the long run.

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