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Croatia Adopts the Euro

Categories : Cash connects people, Cash is a public good, Cash is a social network, Cash is a symbol of national sovereignty
January 3, 2023
Tags : Cash centres, cash changeover, Croatia, Euro
On January 1, Croatia became the 20th member of the euro area. Euro banknotes and coins started circulating in the economy, and the Hrvatska Narodna Banka joined the Eurosystem and the Single Supervisory Mechanism.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

The 20th Member of the Euro Area

The euro entered into circulation in Croatia on 1 January, bringing the number of European Union (EU) Member States using the single European currency to 20, gathering 347 million people.

Croatia is the eurozone’s first new member since the three Baltic nations, Estonia, Latvia, and Lithuania, adopted the single currency in 2011, 2014, and 2015. The former Yugoslavian republic joined the EU only ten years ago. The euro adoption comes on the back of a long campaign to demonstrate that Croatia can adhere to the currency zone’s criteria for economic convergence. Croatian Finance Minister Marko Primorac told Politico last week that he expected the country’s debt-to-GDP ratio to fall steeply in the coming years as the recovery from the pandemic continues.

A Progressive and Tested Cash Changeover

Since Sunday, 1 January 2023, the euro will gradually replace the kuna as the currency of Croatia. In line with a consistent record of exchange-rate stability, the kuna is exchanged at a conversion rate of 1 euro for 7.53450 Croatian kunas. The two currencies will be used alongside each other for two weeks. When receiving payment in kuna, the change is given in euros. This will allow for a progressive withdrawal of the kuna from circulation.

The dual display of prices in kuna and euro became compulsory on 5 September 2022 and will apply until 31 December 2023. To protect consumers and address their concerns about unjustified price increases in the changeover period, a Business Code of Ethics has been introduced to ensure the stability of prices for goods and services by helping businesses to recalculate and display prices correctly. The Code of Ethics is enforced by the State Inspectorate, which will also monitor the prices of frequently-purchased products and services during the changeover. Companies who sign up for the initiative can display their logo to reassure customers and will lose this right if found to be in breach of the Code.

Commercial banks have received euro banknotes and coins in advance from the Hrvatska Narodna Banka (the country’s central bank) and have, in turn, supplied euro cash to shops and other businesses. Kuna banknotes and coins can be exchanged for euro banknotes and coins at the Financial Agency and post offices until 30 June 2023. The exchange of kuna banknotes and coins at commercial banks is possible until 31 December 2023. It is free of charge for all exchanges done before 1 July 2023, up to a limit of 100 kuna banknotes and 100 kuna coins. Commercial banks can charge a fee for changes as of 1 July 2023. Croatia’s central bank will exchange kuna banknotes and  coins without a time limit until 31 December 2025. This service is free of charge.

70% of automatic teller machines (ATMs) in Croatia already distribute euro banknotes, and the rest will follow as soon as possible after that (within two weeks). Commercial banks will publish online information on which ATMs distribute euros to facilitate the process.

Hrvatska Narodna Banka Joins the Eurosystem

“I welcome Croatia to the euro family and to the ECB Governing Council table in Frankfurt. Croatia worked hard to become the twentieth member of the euro area, and it succeeded. I congratulate the Croatian people. It shows the euro is an attractive currency which brings stability to its members.” Christine Lagarde, President of the European Central Bank (ECB)

The euro area’s central banking system comprises the ECB and the national central banks of those countries whose currency is the euro. With Croatia joining the euro area, Hrvatska Narodna Banka (its central bank) becomes a member of the Eurosystem. Hrvatska Narodna Banka also becomes a full member of the Single Supervisory Mechanism, although the country has been part of the close cooperation framework since October 2020.

The ECB is currently responsible for directly supervising five significant institutions in the country and overseeing 16 less important institutions there. As part of its supervisory tasks, the ECB is also responsible for licensing banks and assessing the buyers of qualifying holdings in all banks. Hrvatska Narodna Banka already has a representative on the ECB’s Supervisory Board.

This post is also available in: Spanish