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Croatia Set to Adopt the Euro in January 2023

Categories : Cash connects people, Cash is a symbol of national sovereignty
June 7, 2022
Tags : cash changeover, Croatia, Euro, Euro Area
Croatia set to become the 20th member of the eurozone on January 1, 2023, following favourable assessments by the European Commission and the European Central Bank.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

On June 1, the European Commission published the ‘2022 Convergence Report’, which assesses the progress of EU member states which are not part of the euro area towards joining. Bulgaria, Czechia, Croatia, Hungary, Poland, Romania and Sweden are the seven non-euro area member states legally committed to adopting the euro. The report has concluded that Croatia is ready to embrace the euro on January 1 2023, bringing the number of euro area Member States to twenty. Denmark benefits from an opt-out clause from the Economic and Monetary Union.

Simultaneously, the European Central Bank published its biennial Convergence Report, concluding that Croatia is within the reference values of the convergence criteria – price stability, sound public finances, exchange-rate stability, and long-term interest rates. The report also concludes that Croatian law is compatible with the Treaties and the European System of Central Banks Statutes.

The 20th Member of the Euro Area

The positive assessment by both institutions paves the way for approval during the European Council in June and admission into the euro area on January 1 2023. Croatia would become the 20th Member of the currency union and the first new Member to join since Lithuania in 2015.

Euro banknotes and coins were first introduced in 12 countries on January 1. Today, 19 EU member states share the euro, representing over 340 million people and 78% of the population of the EU. The euro has also been unilaterally adopted by some non-EU member states, in what is known as euroization, including in Andorra, Kosovo, Montenegro, Monaco, San Marino, and Vatican City.

Croatia has a population of 4 million people and a GDP per capita of just over $14,000 (World Bank 2020), compared to a euro area average of just under $38,000.

The Cash Changeover

According to the National Euro Changeover Plan adopted in December 2020, Croatia’s launching of euro notes and coins will have three phases (see Chart 1).

Chart 1. Time Schedule of the Cash Changeover Activities

Source: National Euro Changeover Plan, 
Government of the Republic of Croatia; Croatian National Bank

The preparatory phase will start six months before the introduction of notes and coins, with a public campaign inviting citizens to deposit surplus cash into their kuna bank accounts. It will be followed by the front-loading of banknotes and then coins first to banks and then the sub-frontloading to retailers and businesses.

The initial supply of banknotes will be borrowed from the Eurosystem. The coins, on the other hand, which feature a European and a national side, will be minted in Croatia.

The introduction of the euro banknotes and coins will mark the start of a two-week dual circulation period, during which both the euro and the kuna will have a legal tender status.

After two weeks of dual circulation, Consumers will be able to exchange kuna, free of charge, at banks for six months and then at the central bank for up to three years from the date of introduction of the euro.

This post is also available in: Spanish