Prime Minister Andrej Plenkovic said on Wednesday that the aim of his government was to make all the necessary preparations for the adoption of the euro on 1 January 2023, adding that this would require the implementation of a national plan for the replacement of the national currency with the euro.
Plenkovic on Wednesday chaired the 7th meeting of the national council for the adoption of the euro as legal tender in Croatia, at which the national plan for the replacement of the Croatian kuna with the euro was adopted. This strategic document was jointly prepared by the Croatian National Bank and the government and was put to public consultation today so that it could be adopted by the government before the end of the year.
Provided it meets all the criteria, Croatia could introduce the euro as early as 1 January 2023, and in order to organise its introduction, it needs to implement the national plan for the replacement of the kuna, Plenkovic told the press after the meeting.
The national plan sets out legislative, administrative and logistical activities needed to complete the process of replacement of the kuna with the euro, including price, deposit and loan conversion rules. Its fundamental principle is to protect consumers by replacing the kuna with the euro at no cost and according to a fixed conversion rate and by establishing a mechanism to prevent any miscalculation or undue price increases.
“This is a complex and technically demanding process, and effective organisation and coordination as well as communication with the citizens is essential,” Plenkovic said.
Six coordinating committees
To achieve this, six coordinating committees will be set up – for cash exchange, for legislative adjustments, for the adjustment of general government, for the adjustment of the financial sector, for the adjustment of the economy and consumer protection, and for communication.
The National Council for Euro Adoption will play a pivotal role in the currency changeover, and the process itself will be overseen and coordinated by the Steering Committee, in which the Prime Minister’s Office, the Ministry of Finance and the Croatian National Bank will have a key role.
Fulfilling the Maastricht criteria and reform measures under the action plan
The European Central Bank (ECB) and the European Commission announced on 10 July that Croatia had entered the European Exchange Rate Mechanism (ERM II), while at the same time the Croatian National Bank established close cooperation with the ECB.
Entry into ERM II is a key step in the process of adopting the euro, whereby the government has achieved one of its main political goals, Plenkovic said.
In order for Croatia to accomplish its goal of joining the euro zone on 1 January 20’23 it needs to meet the Maastricht criteria of nominal convergence and implement the reforms provided for in the action plan. These include eight measures in four areas to which Croatia committed when entering ERM II and they relate to preventing money laundering, strengthening the business environment, strengthening public sector governance and strengthening the judicial system.
“These are the four fundamental areas for which the government committed to taking key steps over the next two years, along with fulfilling the Maastricht criteria,” Plenkovic said.
The Maastricht criteria relate to exchange rate stability, price stability, interest rate stability and two important indicators of public finance – a budget deficit and public debt.
“In our opinion, the most important thing for us is to keep the deficit below 3% of GDP,” Plenkovic said. Finance Minister Zdravko Maric and Croatian National Bank Governor Boris Vujcic also emphasised this.
Vujcic said that the risk to meeting the Maastricht criteria would be lower next year than it had been earlier this year, mainly because of expectations that the situation surrounding the coronavirus pandemic would return to normal.
Citing current projections, Maric said that this year, as a one-off effect of the pandemic, the budget deficit was expected to reach 8% of GDP and public debt about 87% of GDP, adding that all relevant stakeholders expected the economy to start recovering next year.