ZAGREB, January 7, 2019 - The Croatian National Bank Governor Boris Vujčić said on Monday that Croatia was ready to take steps to enter the European Exchange Rate Mechanism (ERM), a system for the preparation of the introduction of the euro, stressing that European partners supported Croatia's efforts to introduce euro, owing to its quality indicators and the resilience of the banking sector.

Vujčić attended a conference called "Five Years with the Euro", organised in Riga by the European Commission to mark the introduction of the euro in Latvia.

He underscored that it was much harder to introduce the euro today than it was when Latvia did, as it was much harder to enter the European Union today than it was in the past.

Commenting on meeting the criteria for entering the euro area, Vujčić said the most difficult thing was to enter the ERM II, because there are no clear criteria that a country needs to meet to enter that mechanism.

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ZAGREB, December 1, 2018 – Croatian National Bank Governor Boris Vujčić said on Friday that Croatian citizens would not have conversion costs when the country entered the euro area and that the ERM II exchange rate with which Croatia was expected to enter the Exchange Rate Mechanism could be known as early as next year.

He was responding to questions from the press at the government after the first meeting of the national council for the introduction of the euro in Croatia.

As part of ERM II, the national currency of a member state is tied to the euro and a median exchange rate is established. It is the result of a balanced exchange rate, which means the currency must not be either undervalued or overvalued.

"There will be no conversion cost. It will be automatic, based on the exchange rate to be established earlier," Vujčić said, adding that the rate might be known as early as next year. "That will be the rate with which we will enter the Exchange Rate Mechanism and which we will de facto have to maintain while in the Mechanism, which essentially means that this will be, possibly with very small oscillations, the conversion rate."

He said there would be no cost for citizens and that their deposits and loans denominated in euro would have to be changed based on that exchange rate.

Asked if this meant that the exchange rate with which Croatia would enter ERM II would be very close to the current exchange rate given that it would not be able to vary markedly as of next year, Vujčić said the rate would be close to the one Croatia had over the past 25 years, which "didn't oscillate much."

He recalled that the government and the central bank presented a joint euro strategy late last year, which underwent public consultation and which the government adopted in May.

Vujčić said talks about the next steps were being held with European partners and that the first step was entering ERM II, which envisages close cooperation with the euro area and joining the banking union.

He added that the European Commission and the European Central Bank were conducting due diligence of Croatia's economy as a prerequisite for continuing the talks.

Vujčić said he would soon resume talks on the contents of a letter which he and Finance Minister Zdravko Marić would send about membership of ERM II and in which Croatia would commit to certain things. By entering ERM II, Croatia must meet five convergence criteria which the Commission evaluates and if Croatia meets them, it enters the euro area, he added.

Addressing the same press conference, Minister Marić said that a country was invited to ERM II if it had a stable economy, sustainable growth rates and no imbalances.

Asked about the date of entering the euro area, he said the government's euro strategy did not specify formal deadlines for entering either ERM II or the euro area, and that one must also keep in mind that European partners would follow the whole process and make decisions about Croatia.

Marić recalled that 2005 was the last year when an EU member state entered ERM II and said Croatia must do all that was necessary so that, when certain steps intensified, it was as prepared as possible.

Asked about the previously mentioned five to 7-year deadline for entering the euro area, he said it was realistic.

The first meeting of the national council for the introduction of the euro was chaired by Prime Minister Andrej Plenković. It was attended by several ministers and representatives of employers and unions.

Marić called the meeting very constructive, saying employer and union representatives would not have attended had they anything against Croatia's entering the euro area.

Asked about employers' claims that they had not been sufficiently consulted about a minimum pay rise, he said Labour Minister Marko Pavić had announced that the government would correct the minimum pay by the end of the year but that the actual amount was not made public until the very end.

Marić said he was pleased that, even before VAT on fresh meat and fish, fruit, vegetables, eggs and nappies was due to be slashed on January 1, some retail chains had started to correct their prices.

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ZAGREB, October 29, 2018 - During the dialogue with citizens by European Commission Vice President for the Euro and Social Dialogue Valdis Dombrovskis on Monday, Finance Minister Zdravko Marić underscored that Croatia could join the Exchange Rate Mechanism (ERMII) by 2020 and that, for the improvement of the living standards of people at risk of poverty, it would be necessary to boost economic growth and employment by concerted action.

Asked whether a referendum would be held regarding the introduction of the euro in Croatia and when it could be introduced, Marić underscored that the government's idea and wish is "by 2020 to join the Exchange Rate Mechanism II," which would last for a minimum of two years plus one more for adjustment and meeting the strictest criteria such as those relating to interest rates, exchange rates, prices, deficit and public debt. He also said that the referendum for accession to the EU was compulsory and that joining the EU comprehended introducing the euro.

I think that there won't be any need for a referendum and that is why in that context we have launched this debate, publicly, to argument the introduction of the euro so as to explain it as much as possible to all citizens, experts and broader public, Marić said.

During question time at the Faculty of Economics, one student claimed that the "European Union is turning a blind eye to economic crime," noting that the grey economy accounts for 30% of domestic GDP, placing Croatia immediately after Bulgaria and called out Minister Marić that by introducing the euro he wanted to pass the buck in that regard onto the European Union.

Marić responded "that is not passing the buck," and added that every country that has an above-average share of services (in GDP), not just tourism but other activities too, have a portion of grey economy. He said that not one EU Finance Council meeting went by without debating so-called circular fraud, aggressive tax planning and everything else "which is not a problem that is particular to Croatia but in many other countries too."

Responding to a question about the current social state of affairs in the EU, Dombrovskis said that the European economies have shown a growth for the past six years.

As far as the social picture is concerned, he underscored the level of employment. Europe currently has the highest historical level of employment - that means more people have a job in the EU than ever before. At the same time, when discussing the social picture it is necessary to be aware that the consequences of the crisis can still be felt, including a growing income gap, he said.

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ZAGREB, October 29, 2018 - Valdis Dombrovskis, the European Commission vice-president for the euro and social dialogue, said on Monday the Commission supported Croatia on its journey to the euro area, not just politically, but also through a structural reform programme, noting that economically 2018 was a good year for Croatia.

The Commission can help countries working on introducing the euro technically and financially, he said after meeting with Prime Minister Andrej Plenković and cabinet ministers.

At the meeting we discussed economic and fiscal matters and it must be said that 2018 has been a good year for Croatia. The economy shows robust growth, close to 3%, which is the European Union average, Dombrovskis told reporters, adding that a budget surplus was also recorded.

He said the government had announced its intention to join the Exchange Rate Mechanism (ERM II) in 2020 as a step towards introducing the euro, calling this a sort of waiting room before joining the euro area. Countries usually spend two years in ERM II but it may be longer.

Commissioner welcomes pension and other reforms

Dombrovskis underlined the need for awareness of the importance of structural reforms, saying they played an important role, not just for joining but also successfully participating in the euro area. He added that countries which intend to join must show a certain economic resilience.

He welcomed the reforms which have been launched, including the pension and education reforms, the strengthening of the financial sector, and efforts to reduce non-performing loans and to bolster the financial situation and sustainable economic growth. Dombrovskis also pointed to the macroeconomic imbalances which still exist in Croatia.

Finance Minister Zdravko Marić said the government was aware of the job ahead, such as dealing with unemployment. He added, however, that it was very important for Croatia to have exited the Excessive Deficit Procedure.

Agriculture Minister Tomislav Tolušić said Croatia "is doing its job, with which the European Commission is happy."

Euro adoption strategy

Dombrovskis arrived in Croatia for a two-day working visit and is due to be received by President Kolinda Grabar-Kitarović. He will meet parliamentarians and hold a roundtable discussion on the introduction of euro and the European budget at the Zagreb Faculty of Economics.

A year ago, the government and the Croatian National Bank (HNB) launched a document entitled "The Strategy for the Adoption of the Euro in the Republic of Croatia". On that occasion, Prime Minister Plenković said that his cabinet had set two important goals: one of them is to make Croatia prepared in 2019 to join the passport-free Schengen zone, and the other is to enable Croatia to join the euro area. Plenković said then that his cabinet's target would be to enable Croatia to enter ERM II in 2020 when Croatia will hold the rotating EU presidency from 1 January to 30 July.

I don't want to speculate on the date for the adoption of the euro. What is realistic and what we are working on is to make sure that 2020, when Croatia chairs the rotating presidency of the Council of the EU, is the year Croatia can become part of ERM II, he said at the presentation of the strategy on 30 October 2017.

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ZAGREB, September 4, 2018 - Croatian Prime Minister Andrej Plenković met with Finnish Foreign Minister Timo Soini in Zagreb on Monday, expressing hope that a decision on Croatia's accession to the Schengen area would be made by the start of 2020, a government statement said.

Finance minister plans major tax cuts, while the rescue of the Uljanik shipyard and Petrokemija could cost more than six billion kuna.

ZAGREB, July 2, 2018 - The next five years of Croatia's EU membership will be marked by two goals, joining the Schengen and euro areas, while the Pelješac bridge will symbolise the first five years, Prime Minister Andrej Plenković said on Monday at a conference on the first five years of Croatia's EU membership. "We have set ourselves two goals on the European journey. Schengen first, the euro area second. They will mark the next five years of membership," he said.

ZAGREB, May 23, 2018 - Croatia fulfils all the criteria but one to join the euro area and that is the exchange rate criterion as it is not a member of the Exchange Rate Mechanism (ERM II), which it is required to be for at least two years, the European Commission's Convergence Report 2018, released on Wednesday, notes.

ZAGREB, May 11, 2018 - The government on Thursday adopted the strategy for the adoption of the euro as the legal tender in Croatia, and Economy Minister Martina Dalić said that the introduction of the new currency could be expected in five to seven years' time.

ZAGREB, May 10, 2018 – Živi Zid president Ivan Vilibor Sinčić on Thursday criticised the government's decision to adopt a euro introduction strategy, saying his opposition party was against it and that it advocated that the kuna remain Croatia's currency.