Right after the latest parliamentary elections in July 2020, Croatia, along with Bulgaria, entered the EU exchange rate mechanism (ERM-II), generally considered a waiting room for the Eurozone. The news was illustrated by the blossoming expression on the face of Prime Minister Andrej Plenković, and the promise from Valdis Dombrovskis, Vice President of the European Commission, that this would mean lower interest rates, better integration into the single market, higher investor confidence, and lower conversion costs.
The most realistic date for the introduction of the euro is January 1, 2024. Until then, Croatian National Bank (CNB) Governor Boris Vujcic stresses that Croatia’s obligation is to reduce its budget deficit below three percent of GDP in addition to reducing its public debt. It is envisaged that the conversion of the Croatian kuna to euro will happen at an exchange rate that has not changed for a quarter of a century: 7.53 kuna for 1 euro. This has provoked considerable reaction in Croatian business circles.
Diverging views on the impact of entry into the Eurozone
Among the economists who spoke out, Velimir Šonje, owner of the Arhivanalitika and a fierce supporter of the dominant neoliberal economic regime, expressed a positive outlook. According to his understanding , Croatia is already “euroised” anyway, as its economy has long been imbued with the euro. It follows that Croatia can comply with European Central Bank’s monetary policy with full confidence, which responds to specific needs of member states by changing interest rates.
Professor at the Faculty of Economics in Zagreb, Ljubo Jurčić takes a different view . “The 7.53 exchange rate for the euro has strangled Croatian industry, because domestic production does not pay off with it. That is why the last 25 years have been marked by investing in shopping centres and not in industry. As foreign goods are cheaper due to this exchange rate, it is not worth producing here at all.” In Jurčić’s opinion, even if the exchange rate doubled the price of the kuna against the euro, nothing would change because the domestic industry has already been “killed” by the exchange rate which privileged imports for the last quarter of a century. “With the ERM, we have further buried ourselves at the bottom of the European Union and are becoming what Kosovo was in the former Yugoslavia. “We will be on the infusion drip of Europe, depending on aid funds for poor countries”, concluded Jurčić.
For Ivan Lovrinović, also a professor at the Faculty of Economics in Zagreb, entry to the Eurozone satisfies Prime Minister Plenk