With the start of the new year in a few hours, Croatia will adopt the European single currency and enter the European market. passport free Schengen area almost a decade after joining the European Union.
At midnight on January 1, 2023, the Balkan country of about four million people will Break up into its own kuna currency and became the 20th member of the eurozone.
Experts say adopting the euro will help protect Croatia’s economy at a time of soaring inflation globally since Russia’s invasion of Ukraine in February, which led to soaring fuel and food prices.
It will also be the 27th country in the passport-free Schengen area, the world’s largest, allowing more than 400 million people to move freely around the member states.
However, Croats have mixed feelings about the changes.
While many welcome the end of border controls, some worry about the currency conversion, with right-wing opposition groups arguing that it only benefits big countries like Germany and France.
“We will cry for our kuna, the price will go up,” said Drazen Golemac, a 63-year-old pensioner from the Croatian capital Zagreb.
His wife, Sandra, disagrees, saying that “the euro is more valuable”.
“Nothing has changed on January 1, it’s all denominated in euros for two decades anyway,” said secretary Neven Banic.
Croatian officials have defended the decisions to join the eurozone and Schengen, with Prime Minister Andrej Plenkovic on Wednesday saying those are “two strategic goals of deeper EU integration”.
‘Stable and safe’
Croatia, a former Yugoslav republic that fought in the war of independence in the 1990s, joined the EU in 2013.
The euro has a large presence in the country.
About 80% of bank deposits are denominated in euros, and Zagreb’s main trading partners are in the euro area.
Croats have long valued their most valuable possessions like cars and apartments in eurosshows a lack of confidence in the local currency.
“The euro certainly brings [economic] stable and secure,” Ana Sabic of the National Bank of Croatia (HNB) told AFP news agency.
Croatia’s inflation rate hit 13.5% in November.
The Balkan country is joining the eurozone at a time when the bloc itself is in turmoil as the European Central Bank (ECB) tries to tame inflation after spending the past decade rolling out unprecedented stimulus measures to stimulate growth when it is at extremely low levels.
“We need to be careful that the domestic causes we are seeing, mainly related to fiscal measures and wage dynamics, do not lead to inflation becoming fixed,” said ECB President. Christine Lagarde told the Croatian newspaper Jutarnji list.
Lagarde offered no new policy hints in the interview but said the bank must “take the necessary measures” to bring inflation down to 2% from near 10% currently.
Lagarde added that the bloc’s expected winter recession, driven by soaring energy costs, is likely to be short and shallow, as long as there are no further shocks.
Admission to Schengen
Croatia’s accession to the borderless Schengen area will also boost the Adriatic’s key tourism industry, which accounts for 20% of gross domestic product (GDP).
However, border checks will only end on March 26 at airports due to technical issues.
Croatia will still apply strict border controls on its eastern border with its non-EU neighbors Bosnia and Herzegovina, Montenegro and Serbia.
The fight against illegal migration remains the main challenge in securing the EU’s longest external land border at 1,350 kilometers (840 miles).