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On January 1st: Croatia introduces the euro and becomes a Schengen country


Croatia becomes the 20th euro country. While the tourism industry is positive about the new currency, many people in the country fear rising costs of living.

Enlarge image

The Croatian national currency kuna will be replaced by the euro in a few days

Photo: EIBNER/Joachim Hahne;

/ imago images / Eibner

On January 1, Croatia will introduce the euro instead of the previous national currency, the kuna.

At the same time, the EU member on the Adriatic joins the border-free Schengen zone.

For millions of vacationers from Germany, this means double relief: you no longer have to exchange money and save on exchange rate losses;

and you can reach your destination without having to wait hours at the Slovenian-Croatian border crossings.

The exchange rate is fixed: one euro equals 7.5345 kuna.

There is a transitional period until January 14, during which payments can still be made in both currencies.

Kuna from your last holiday can be exchanged at banks in Croatia free of charge until the end of 2023 - up to 100 coins and notes per transaction.

Tourism industry hopes for boom

Tourism in particular has high expectations of the new currency.

The country with the long Adriatic coast and the many picturesque bays and islands thrives on tourism.

The statistics show 16 million foreign holidaymakers, including 3.4 million Germans, for the first eleven months of 2022. There were 17.3 million, including 2.9 million Germans, in the record year 2019, the last year before the corona pandemic.

The holiday country is also popular with Austrians, Slovenes and Poles, but also with Italians, Czechs and Britons.

Never before has the introduction of the euro been accompanied by such global economic upheavals as it is now.

Russia's war in Ukraine, increased energy costs and delivery problems in the wake of the corona pandemic proved to be inflation drivers across Europe.

At 13.5 percent, the inflation rate in Croatia in November was slightly above the EU average of 10.1 percent.

Valdis Dombrovskis, Vice President of the EU Commission, put the one-off effect of the introduction of the euro at 0.1 to 0.3 percentage points based on previous experience.

In the medium term, however, this will be offset by lower currency conversion costs and lower interest rates.

Inflation is forecast to drop to 5.7 percent in 2023.

The Croats, on the other hand, are based on their own life experience and expect that retailers and service providers will »round up« the conversion wherever they can.

The popularity of the introduction of the euro is therefore limited.

According to a survey in April, 55 percent of citizens are in favor of the euro and 42 percent are opposed to it.

Banking sector anticipates short-term losses

What holidaymakers gain from the elimination of exchange fees, Croatia's banks lose.

According to experts, the loss of profit will amount to 1.4 billion kuna (185 million euros), around 20 percent of the profit generated by the sector.

From the point of view of economists, however, the advantages outweigh the medium and long term.

Participation in the euro means more resilience against external shock effects and better access to financial markets.

The currency risk for lenders is reduced, Croatia can get loans with lower interest rates.

The elimination of controls at the borders with Slovenia and Hungary and for ferries to Italy (for air travelers within the Schengen area from March 26) makes life easier for holidaymakers, business travelers and commuters.

To underline the symbolic effect, EU Commission President Ursula von der Leyen will come to the Slovenian-Croatian border crossing at Obrezje-Bregana on New Year's Day.

Because of the rather cautious acceptance of the introduction of the euro, the government of Prime Minister Andrej Plenković is refraining from any major celebrations.

Croatia has been a member of the European Union since 2013.

Since then, all EU citizens have enjoyed freedom of movement there.

That means they can work or study in the country and have rights similar to those of almost four million Croatian nationals.

Source: spiegel

All news articles on 2022-12-26

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