Croatia poised to clear final hurdle to adopt euro as currency

Source: news.sky.com : 2022-07-12 08:36:00 :

The European Union (EU) is set to remove the final obstacles for Croatia adopting the euro.

It will enable the first expansion of the currency bloc in almost a decade.

At a meeting in Brussels on Tuesday, EU finance ministers plan to approve three laws that will pave the way for Croatia to become the 20th member of the eurozone from January next year.

The last EU country to join the European single-currency area was Lithuania in 2015.

In the 27-nation EU, adopting the euro offers economic benefits stemming from deeper financial ties with the currency bloc’s other members and from the European Central Bank (ECB)’s monetary authority.

The move will mean that any of the current eurozone’s 340 million inhabitants who visit Croatia will no longer need to exchange their cash for Croatian kuna.

Euro entry also has political rewards because the shared currency is Europe’s most ambitious project to integrate nation states, giving them a place in the EU core.

That means a seat at the EU’s top decision-making tables.

History of the euro

Created in 1999 among 11 countries including Germany and France, the euro has gone through seven previous enlargements, starting with Greece in 2001.

The appeal of euro membership is reflected by the last three expansions, which brought in Baltic states between 2011 and 2015.

During that period, the eurozone was scrambling to contain a debt crisis that Greece triggered and was threatening to break apart the currency alliance.

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A combination of European emergency loans to five financially vulnerable member countries and an ECB pledge to do “whatever it takes” to save the euro enabled the currency bloc to weather the turbulence and emerge stronger.

Requirements to join the euro

Joining the euro requires a country to meet a set of economic conditions.

These relate to low inflation, sound public finances, a stable exchange rate and limited borrowing costs.

Croatia is relatively small and poor, so its euro entry will have limited international economic implications.

The country has a population of around four million and per-capita wealth that, at €13,460 (£11,376) last year, was less than half of the euro-area average.

Nonetheless, against the backdrop of the Russian war in Ukraine and Kyiv’s hasty application for EU membership, Croatia’s imminent adoption of the euro sends a potentially significant political signal.

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