Lara Plečko
The Euro has been the currency of the European union since 1992 and with Croatia joining the Eurozone, changes will be felt in the upcoming period in the running of small households to the operations of large companies. The question on everyone’s mind is will life be more costly with the Euro?
Croatia’s acceptance into the European Union on 01 July 2022 marked the beginning of the end of the Kuna which has been Croatia’s currency since its introduction on 30 May 1994. Entering the European Union brought with it many changes, be they for better or for worse, and one of the most significant is upon us with Croatia entering the Eurozone in 2023. Preparations are underway to make sure that everything is ready for the new currency.
For Croatia to be able to switch to the Euro many conditions had to be met. As stated in the Maastricht Treaty, there are four conditions for entering the Eurozone:
- Price stability – the inflation rate cannot be above the average inflation rate of three member states, with the best price stability enlarged by 1.5 percentage points;
- Sustainability of public finance – the general country deficit to GDP ratio must not be over 3 percent, and the general country debt to GDP ratio must not be over 60 percent;
- Currency stability – at least two years must be spent in ERM II (European Exchange Rate Mechanism) without significant oscillations or devaluation to the central rate;
- Convergence of long-term interest rates – interest on long- term government bonds may not supersede referent values of interest on bonds of the 3 member states with the best price stability enlarged by 2 percentage points.
Croatia’s government adopted a national plan to replace the Croatian Kuna with the Euro in December 2020. The main goal of the plan was to ensure a seamless transition to the Euro. One of the key factors in achieving this lies in the hands of the IT sector that will need to adapt all systems to the new currency. Also, the new currency must be physically distributed among the private, corporate, and public sectors. Although everything will be paid in Euros beginning on 01 January 2023, there will be a transition period during which people may pay with Kunas but must receive Euros back. Non-cash transactions will be exclusively in Euros. Banks will exchange up to 100 bills or 100 coins of Kunas to Euros in one transaction free of additional fees which will also ease the way to fully integrating the Euro in the economy.
To better prepare for the Euro all prices will be listed dually in Kunas and Euros from 05 September 2022 (the first Monday in September), and will be displayed as such until 31 December 2023. In addition to prices being listed in both currencies, the fixed exchange rate will also be displayed.
This will ensure people get used to the change of prices before the Euro is fully implemented. Salaries will also be displayed in dual currency and converted to Euros according to the fixed exchange rate so there shouldn’t be a negative financial impact to people’s lives in general.
However, getting used to new prices will take a while, even if prices do not rise. The government will also try to regulate sellers so prices do not rise significantly, though surely everyone will feel the differences due to the currency change.
Whether the introduction of the Euro will bring us more benefits or more difficulties remains to be seen in the new year, but as with any change, it is up to all of us to make the whole process unfold as easily as possible and move forward into the future with the hope of it being a better one for us and for future generations to come.
XLNC MAGAZINE | No. 10 | Autumn 2022