Belgium, (Brussels Morning Newspaper) Croatia is preparing to join the eurozone as inflation continues to rise, reaching approximately 10% in the eurozone and 13% in Croatia in September.
In preparation for the switch, the government has been stressing the advantages of scrapping the kuna and switching to the euro, according to France24 reporting on Sunday.
As part of the transition, retailers have to list prices in both currencies – with the European Commission pegging the exchange rate at 7.53 kuna per euro – and the system is to remain in place until the end of 2023.
Ana Šabić, head of European cooperation at the Croatian National Bank (HNB), pointed out that joining the eurozone will bring resilience as the country will be able to borrow at more favourable terms.
According to analysts, European countries outside the eurozone are more vulnerable to inflation. They noted that the European Central Bank (ECB) has reversed its expansive monetary policy in recent months and started upping interest rates in a bid to rein in inflation.
Goran Šaravanja, chief economist at the Croatian Chamber of Commerce, expressed belief that now is “an ideal moment for the euro switch.”
“When major uncertainty dominates the global economy, for a small and open economy like Croatia it’s always better to be a part of a larger association like the eurozone,” he stressed.
Croatia’s tourism, which accounts for roughly one fifth of the country’s GDP, relies on European source markets and Croatia’s main trading partners are eurozone members. Approximately 80% of bank deposits are denominated in euro and Croats value apartments and automobiles in the EU currency.
Cars and apartments were valued in the German mark since the Yugoslav era, until Germany switched to the euro roughly 20 years ago.
According to Eurostat figures from 2018, the average wage in Croatia stood at 1,179 euro, in contrast with EU average of more than 2,300. According to estimates, 300,000 pensioners in Croatia receive just over 260 euro per month.
Last year, an initiative calling for a referendum on accession to the eurozone fell through, with organisers warning that expansion of the eurozone only benefits large members like France and Germany.