Croatia gets euro despite debt thanks to 'commitment, diligence and perseverance'

Created: 06/03/2022 11:33 am

By: Andreas Hoess

The Croatian kuna will no longer exist for a long time.

© IMAGO/Gudella

The Croatian population has mixed feelings about the possible introduction of the euro.

It shouldn't be long before the Kuna is abolished.

Brussels – German vacationers in Croatia can be happy: the popular holiday destination with its long Adriatic coast and many picturesque bays and islands should get the euro in 2023.

The EU Commission and the European Central Bank (ECB) have just concluded in their convergence report that Croatia meets all the criteria.

The approval of the EU Council should only be a formality and will take place in July.

Croatia: Other countries also violated the EU's stability pact

Croatia has been trying to join the euro area for years.

The fact that the country with its four million inhabitants is now getting the green light cannot be taken for granted.

Strictly speaking, Croatia does not even meet all the stability criteria.

After new debt of 7.3 percent in the Corona year 2020, the deficit in 2021 fell a hair's breadth below the limit of three percent of economic output (GDP) agreed in the Maastricht Treaty.

Whether it stays there permanently remains to be seen.

The EU expects a deficit of 2.3 percent for this year, but the number dates from before the Ukraine war.

With a supplementary budget, the government in Zagreb raised new debt to 2.8 percent in May, and it may rise further.

The overall debt is also far too high.

They were almost 80 percent in Croatia in 2021,

However, only 60 percent of GDP is permitted for euro countries.

However, Germany and France also violated the Maastricht criteria due to Corona and the Ukraine war, which is why the stability pact is suspended.

Croatia showed commitment, diligence and perseverance

The EU is therefore merciful.

Croatia is "on the best way to continue to meet the requirements of the Stability and Growth Pact", according to the ECB's currency watchdogs, who also called for reforms for long-term debt reduction.

Politicians saved these warnings and concentrated on congratulations - probably also because in the confrontation with Russia they are happy about any even closer partner.

Croatia has shown "commitment, diligence and perseverance" in its efforts to join the euro, said Valdis Dombrovskis, Vice-President of the European Commission.

He stressed: "Our currency is a symbol of Europe's strength, unity and solidarity at a time when these qualities are being tested by a war on our doorstep."

Croatian population with mixed feelings

On the one hand, the Croats themselves have high hopes of joining the euro.

The omission of the annoying currency exchange from euro to kuna could give another boost to tourism, which is important for the country.

On the other hand, there are fears that prices will rise with the euro.

Incidentally, it is unclear whether and when Croatia will be followed by a 21st euro state.

In principle, every EU country except Denmark is obliged to introduce the euro as soon as the stability criteria are met.

But Sweden, Poland and Hungary don't really want to.

And the Czech Republic, Romania and Bulgaria would probably do it, but so far they haven't made it.