Croatia to join European Stability Mechanism soon, contributing €422.3m

NEWS 20.01.2023 16:42
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Source: Photo by Markus Spiske on Unsplash

By becoming a member of the European Stability Mechanism (ESM), Croatia will gain additional protection and security, especially in times of crises, and Zagreb will contribute €422.3 million in paid-in capital to access that organisation, the government reported on Friday.

The cabinet drew up the final draft bill on ratifying the ESM Treaty on Friday.

Finance Minister Marko Primorac noted that the ESM Board of Governors had adopted a resolution approving Croatia’s membership on December 5.

The European Stability Mechanism is an intergovernmental organisation established by member states of the euro area in 2012. Its mission is to enable the countries of the euro area to avoid and overcome financial crises and to maintain long-term financial stability and prosperity.

ESM shareholders are exclusively euro area member states. It has a total capital of almost €705 billion.

By joining the ESM, Croatia will contribute €422.3 million in paid-in capital, through five annual instalments.

“Capital contributions are based on a Member’s respective share of the EU total population and gross domestic product (GDP). Croatia will benefit from a temporary correction, whereby new ESM Members whose GDP per capita is less than 75% of the EU average make a reduced contribution to the ESM’s capital. This applies for a period of 12 years after the date of adoption of the euro,” according to the explanation of the ESM on its website.

After the expiration of the temporary correction period in 2035 Croatia will pay an additional capital of €233 million, Primorac explained.

By ratifying the treaty on the establishment of the ESM and the agreement on its amendments, Croatia gains additional protection and security, especially in times of crisis, and this is one of the visible benefits of Croatia’s membership in the euro area, added Primorac.

“It boosts resilience of the economy and the financial system to crises, because, as a member of the ESM, Croatia will have access to additional sources of financing, which will only be available to member states of the euro area,” concluded Primorac.

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