September the 6th, 2022 - Croatian public procurement issues and disputes will be settled solely in euros when we enter 2023, even if they were initially concluded and contracted in Croatian kuna.

As Poslovni Dnevnik/Marija Brnic writes, on the first day when officially all prices must be expressed in euros in addition to Croatian kuna, many were surprised that in the very recently announced tenders of state and public bodies and institutions, as well as companies, the highest prices willing to be paid for a particular job were not stated in the new currency (euros) at all.

In all contracts on the Electronic Croatian Public Procurement Bulletin, absolutely all the latest offers are displayed exclusively in kuna.

Evaluations carried out in euros

For the private sector, a large fine of up to 100,000 kuna is foreseen for non-compliance with the obligation to properly display prices in both kuna and euros until the end of 2022. What we're seeing with the failure to display prices in both euros and kuna in this sense is (rather surprisingly) nothing to do with the classic sluggishness of Croatian state bureaucracy, but about the use of an opportunity provided by legislation.

The so-called guideline for adjusting Croatian public procurement procedures to the process of replacing the Croatian kuna with the euro, which was prepared in July by the Directorate for Trade and Public Procurement Policy of the Ministry of Economy and Sustainable Development, discussed this in depth. That official document provides details on how the introduction of the euro will be treated in Croatian public procurement procedures, and the starting point is that in public procurement, there is actually no obligation to display prices in both kuna and euros.

This also applies to the preparatory period, which began on July the 15th 2022, as well as the dual pricing circulation period, which began on September the 5th.

Over the past month or two, some legal experts have pointed out to their clients the situation in which they may find themselves when engaged in these procedures, especially in cases where bids are submitted this year and evaluations are due to be performed only in 2023. They advised them to be guided by the official kuna-euro ratio immediately when forming their offers, regardless of whether the tender for a specific job provides for it or not.

As stipulated in the guidelines, in cases where the bids are submitted by December the 31st of this year, and the evaluation is carried out the following year, companies should display their prices in kuna amounts, and the evaluation will be performed in euros. This takes into account the fact that the conversion will take place automatically, at a fixed conversion rate, and in the full amount, not rounded to two decimal places, i.e. in the amount of 7.53450 kuna for one euro.

The guidelines specifically emphasise that the conversion of currencies must not under any circumstances result in an increase in the price or value of goods and services.

Concluded contracts in kuna

In all Croatian public procurement procedures started this year, for which the appeal procedures within the State Commission for the Control of Public Procurement Procedures are set to be resolved after the New Year, and the selected bidder is rejected, the most economically advantageous offer will have to be made solely in euros.

In Croatian public procurement cases initiated this year, but with their bid submission deadlines marked out in 2023, the value of the work will be assessed only in kuna, and the currency will be the euro during the selection process which follows. As far as already concluded contracts are concerned, for all issued purchase orders until the end of this year, invoices will need to be issued in kuna, and after that in euros.

For the executed parts of contracts this year, for which invoices were issued this year, but the company is set to pay it in 2023, they will be carried out in euros. For framework agreements of a longer duration, invoices will be issued in kuna until the end of the year, and thereafter in euros. After the New Year, the only currency for Croatian public procurement procedures of any type will be the euro.

For more, make sure to check out our dedicated business section.

August the 29th, 2022 - Croatian Eurozone accession is just around the corner, with all requirements filled, all boxes ticked and the date for entry marked out for the 1st of January, 2023. The public is still divided on the issue, however, so what are some of the advantages and some of the risks and costs of Croatia finally becoming a Eurozone member?

As Poslovni Dnevnik/Marina Marovic writes, here is no alternative to joining the Eurozone for Croatia, as it was part of the referendum the country held on joining the bloc. It did so back in July 2013 and according to experts, all the benefits of Croatian Eurozone accession greatly exceed the potential costs and risks. The Croatian economy has an extremely high degree of euroisation despite still using the kuna as it is tied to the euro, and around 70% of people's savings in Croatia are in the bloc's single currency.

Therefore, kuna devaluation is simply not an option, because the balance effect would be significantly more difficult for the Croatian economy to handle than any gains on the export front.

The biggest advantages of Croatian Eurozone accession

This high rate of Croatian euroisation originates from the time of the former state of Yugoslavia when, due to hyperinflation, the German mark was the currency used to preserve the value of money in the country. This means that regardless of Croatia having its very own currency for less than three decades, this sense of illusory monetary sovereignty will not actually be lost, but the risks involved in everything financial will be greatly reduced.

The absolute biggest advantage of Croatian Eurozone accession on January the 1st, 2023 comes in the form of significantly lower risks and reduced borrowing costs. In addition to the reduction in interest rates, which also maintains a better investment rating, additional borrowing will be made much easier because joining the Eurozone frees up significant funds (about 160 billion kuna in total) currently tied up as minimum foreign currency claims. In addition to that, the country's banks will reduce currency risks and improve overall stability.

In addition to lower interest rates and borrowing costs, Croatia will become more attractive for both investors and tourists (75 percent of them come from the Eurozone, and tourism makes up 20 percent of the nation's economic activity). Additionally, conversion costs for capital transactions such as the sale of property and land, the prices of which have been expressed in euros for a long time now, will be reduced.

Aside from property and other forms of real estate, renting an apartment or buying a car is also usually expressed in euros. By joining the Eurozone, Croatia is merely formalising some of the existing conventions. An additional advantage is that Croatia will be able to count on ECB support in case of any liquidity problems.

Croatian banks will lose out when it comes to conversion fees (about a fifth of their profit, or 1.5 billion kuna), and have additional ATM costs (totalling about 900 million kuna). Exchange offices will largely be out of business. The one-time cost of introducing the euro in Croatia will cost the banks an enormous 100 million kuna, and the cost of the entire adjustment will be paid for by other sectors of the economy, especially retail and telecoms. The average cost for large retail chains will stand at around 30 million euros, for telecoms it is around 20 million euros, and for smaller companies the cost of introducing the euro isn't expected to exceed 10,000 euros.

Uncertain times...

Croatian Eurozone accession is finally occurring in incredibly uncertain times in which it is really difficult to comply with all the requirements for convergence - known as the Maastricht criteria - and yet all the basic indicators were assessed as positive and successful in the latest report and decision back on July the 12th, 2022 The biggest risk is in the galloping rate of inflation.

Back in April 2022, the annual average rate of HICP inflation in Croatia stood at 4.7%, which is below the reference value of 4.9% for the price stability criterion. This value was decisive for the final decision on Eurozone accession in 2023. That said, by the time June rolled around, inflation crossed over into the concerning land of double digits, and the last July value of 12.3% was significantly higher than the average inflation in the Eurozone of 8.6%. The Baltic countries, all of which are now members of the Eurozone, have already registered inflations of more than 20%.

Just joining the euro brings a one-time increase in prices, but on average such an increase amounts to about 0.3% and in the context of current inflation is negligible. The dual display of prices (in both kuna and euros) serves to reduce this risk, and in general, the preparation for the introduction of the euro in Croatia is systematic and thorough, so that these risks are minimal.

In the long term, one would expect convergence of both prices and real income, but in practice there are many other factors that influence whether this actually happens or not. In addition to inflation - foreign exchange markets have experienced tectonic shifts. Croatia is now joining the club of prestigious countries when the euro is at its worst so far - and is at parity with the dollar, which has not happened in the last 20 years. There are several reasons for a strong dollar and a weak euro, but the most important one lies in the fact that the ECB is reluctant to raise interest rates.

The reason for the ECB's lack of reaction is multifaceted, but the fact is that inflation in the EU hasn't been caused by an increase in demand, but rather by an increase in energy and food prices. On the other hand, inflation across the pond in the United States of America is more a consequence of the post-pandemic recovery of the economy than anything else.

For more, make sure to check out our dedicated politics section.

August the 28th, 2022 - Croatian business entities are now intensively preparing for the country's Eurozone accession, which is now very rapidly approaching. All wages which would have otherwise been paid out in Croatian kuna for the month of December 2022, will be paid out in January 2023 in the new currency - euros.

As Novac/Gordana Galovic/Jutarnji list writes, due to the upcoming introduction of the euro, Croatian business entities are undergoing the demanding process of adjusting their accounting processes, preparing financial statements, paying out wages, reporting taxes and other similar activities in euros. According to data from the Central Bureau of Statistics (CBS), at the end of June 2022, there were 316,052 registered business entities operating in Croatia, of which 56 percent or 176,882 are active.

Most commercial companies, 141,743 of them to be more precise, are active, and 93,393 are trades and the like. The main cost for everyone is the adjustment of IT and accounting systems.

Invoices, wages and payment slips, giro account statements, delivery notes, purchase orders, receipts and other accounting documents on the basis of which business events are entered in the business books must be expressed in the official currency of whatever country they're being carried out in. This means that companies report them in kuna until December the 31st of this year, and after January the 1st, 2023, this will all be done exclusively in euros. Invoices and other accounting documents dated before and on December the 31st, 2022, which companies will issue after January the 1st, 2023, regardless of whether they contain dual amounts in kuna and euro, must be issued in euros.

Croatian business entities will pay all of their outgoings in euros from January the 1st, 2023 onwards. Only during the period of dual circulation, i.e. the first fourteen days of January 2023, can cash kuna be used as legal tender when paying in cash. If something is paid cashless, from January the 1st, 2023, it will be automatically paid in euros because the amounts on deposit, savings and transaction accounts, other payment accounts, payment instruments and other records will be converted from kuna to euros without any charge, with the application of a fixed conversion rate and in accordance with the rules for conversion and rounding.

Companies will need report their profit tax returns, as well as their income tax returns for 2022, but submitted in 2023, in kuna. An exception is for corporate tax payers whose tax period begins before the introduction of the euro and ends after the day of the introduction of the euro, they may submit their corporate tax return for that tax period in euros.

When it comes to companies that are obliged to submit annual financial statements, all those whose business year is equal to the calendar year will need to prepare and submit annual financial statements for 2022 in kuna.

If Croatian business entities receive an invoice after closing the business year for the previous period, it must be in euros. The exception is companies whose business year is different from the calendar year. If the last day of their financial year is after the day of the introduction of the euro, they must state all of their data for the previous business year in their financial statements in euros.

For more, make sure to check out our dedicated lifestyle section.

August the 3rd, 2022 - Are Croatian exchange offices doomed to failure as Croatian Eurozone accession rapidly approaches, and with the sending of the kuna to the history books set to take place on the 1st of January, 2023?

As Poslovni Dnevnik writes, six hundred kuna for one hundred euros has become a common amount that is obtained when exchanging these currencies during the height of the summer tourist season when you have to convert money at local Croatian exchange offices. That is all due to alter with the arrival of the euro as the country's official currency, and the need for Croatian exchange offices to exist at all will be greatly reduced. Many will close their doors and never open them again, reports HRT.

If you ask the tourists spending time (and money) here in Croatia themselves, everything is very clear and simple, adopting the bloc's single currency is a good move for Croatia. But when it comes to Croatian exchange offices, most of them anyway, they'll have to think about another business model entirely if they want to survive the introduction of the euro from the first of January next year.

"It will be difficult for Croatian exchange offices who will continue to try to work only in the foreign currency exchange business to survive because 80, 90 percent of the turnover takes place around the purchase and sale of euros, and without this turnover it will be difficult for them to survive," warned Sergi Gabor, president of the Association of Croatian Exchangers.

Financial experts have hope and believe that most Croatian exchange offices can be transformed and remain in business when the changeover happens, and that not all of them will be closed due to the demand for digital money, as well as savings and exchanges being done in other currencies.

"Perhaps there will be a continuation of turbulent economic trends at the level of Europe or the world, and in that case it will be possible that in Croatian exchange offices, there will be a tendency for people to be dealing with other currencies such as the Swiss franc or the US dollar,'' believes Hrvoje Japuncic, a financial expert.

For more on Croatian Eurozone accession, make sure to check out our dedicated politics section.

July the 19th, 2022 - Croatian euro coin production has officially kicked off as the country's accession to the Eurozone rapidly approaches, marked out on the calendar to take place on the 1st of January, 2023.

As Poslovni Dnevnik writes, on Monday the 18th of July, 2022, Croatian euro coin production finally began at the Croatian Mint in Sveta Nedelja near the City of Zagreb, and Prime Minister Andrej Plenkovic (HDZ) and Governor of the Croatian National Bank (CNB) Boris Vujcic both attended the ceremony marking the start of production as Croatia's entry into the Eurozone draws ever closer and the final loose ends are tied up.

The whole Croatian euro coin production process looks really impressive, six presses are currently working in the Croatian Mint in Sveta Nedelja, where they can produce between five and eight hundred coins per minute. The daily capacity of the factory itself is a massive four million coins, and about seventy employees are working on the rollout of these brand new coins in time for the official change over the the bloc's single currency next year in three shifts, as reported by HRT.

It is interesting to note that the plates for the coins themselves are procured in other European countries, through various tenders, and the tool intended for the Croatian euro coin production was produced right here in the Republic of Croatia.

As we approach the beginning of Croatia's membership of the Eurozone and the Croatian national currency (kuna) spends its final few months in circulation as legal tender, people will be able to purchase the new Croatian euro coins themselves as of December the 1st, 2022, while the Croatian National Bank (CNB) will be supplying the country's banks beginning in October.

For more on the countdown to Croatian Eurozone membership and other politics stories, make sure to check out our dedicated politics section.

July the 17th, 2022 - All hands are firmly on deck with employees having to work hard in three shifts to make sure the new Croatian euro coins are going to be ready by the end of this year for the official introduction on the first day of 2023.

As Poslovni Dnevnik writes, the governor of the Croatian National Bank (CNB), Boris Vujcic, recently said that the current crisis we're in due to rising inflation and the ongoing war in Ukraine best illustrates the advantage of the Republic of Croatia finally joining the Eurozone.

"The markets already know this, they know exactly what the exchange rate will be here in Croatia, and because of that, we didn't even see any pressure on the weakening of the kuna, nor did we have to intervene or raise our interest rates. Other European Union (EU) member states that are not part of the Eurozone, such as Hungary, Poland, the Czech Republic and others, have already experienced pressure on their own respective currencies and interest rates, which are rising very strongly, which spills over into the home loan and business loan market, while in Croatia, they're thankfully still at a historic low,'' explained Vujcic

''If we weren't set to officially join the Eurozone, the situation would be different in this country,'' he noted.

The governor also announced that the minting of Croatian euro coins will start on Monday. The process, as he said, is logistically demanding, because Croatian euro coins all need to be minted by the end of this year, and it will have to be done in three shifts.

"We're on the verge of minting all of the Croatian euro coins," he said, adding that the second major demand will be the withdrawal of the current kuna banknotes from use.

''As for the conversion from the Croatian national currency to euros, it will be automatic from January the 1st, 2023, and all loans that aren't in euros will remain at the exchange rate that had already been established. Those who have loans with a fixed interest rate will see everything remain the same as it was when the kuna was being used, and those who have a variable rate will see it adjusted in such a way that the consumer doesn't end up in a worse position after the conversion than they were before it,'' he explained.

''Consumers are going to remain in the same situations as they were before,'' assured Boris Vujcic.

For more, make sure to check out our dedicated politics section.

June the 25th, 2022 - For many Croatian exchange offices, this summer season will be their last. Croatia's Eurozone entry is set to take place at the very beginning of next year, and for a number of offices, the doors are being well and truly locked.

As Jadranka Dozan/Poslovni Dnevnik writes, the beginning of summer and the height of the tourist season is also the usual time of the "main harvest" for Croatian exchange offices, with the biggest turnovers in that niche market occuring during the months of July and August.

Last year, almost a third of the total annual turnover of authorised Croatian exchange offices was realised solely during those two summer months, and from the beginning of June to the end of September, 50 percent of the year-round turnover took place.

For many Croatian exchange offices, especially those for which these jobs aren't just a "side" activity, this summer, given the introduction of the euro at the beginning of next year, could be the last in which they remain in business.

According to the annual report of the Croatian National Bank (CNB) published this week, about 850 authorised Croatian exchange offices were active across the country at the end of last year, with a slightly higher number of them holding CNB licenses, a total of 1,146 of them.

Those who provided foreign currency trade services throughout the year or seasonally did so through approximately 3,500 Croatian exchange offices, where they traded a total of 31 currencies. However, out of 25.1 billion kuna in annual turnover (of which 18 billion kuna refers to purchases), more than 87 percent or 21.7 billion kuna was realised in euros (15 billion kuna through purchases, and the rest through the sale of euros). The majority of the remaining turnover refers to the US dollar (5.6%) and the Swiss franc (4.7% of the turnover).

Compared to pandemic-dominated 2020, last year's turnover within Croatian exchange offices increased primarily due to the recovery of the travel and tourism industry, by about 30 percent or almost six billion kuna. The first four months of this year also brought year-round traffic growth to offices.

According to the CNB, by the end of April, exchange offices across the country had generated a massive 6.73 billion kuna, compared to less than 5 billion kuna in the same period last year.

Authorised Croatian exchange offices achieved a record turnover back in 2017 (30.2 billion kuna), although in the meantime the inflows of tourist foreign currency grew. For example, in the record year of 2019, exchange offices made less than 30 billion kuna worth of foreign cash exchanges.

To a large extent, the explanation lies in the growing trend of non-cash payment transactions. By accepting foreign payment cards (cards issued outside of the borders of this country), transactions worth 20.8 billion kuna were realised last year.

Compared to the first year of the pandemic, 2020, it's equal to twice as much, compared to pre-pandemic 2019, not even four percent less, and compared to the exchange record in 2017, the value of transactions with foreign payment cards performed in Croatia last year was about 4.5 billion kuna higher.

There is no doubt that with the introduction of the euro in 2023, the number of CNB licenses for these jobs will fall even further. Most of the approximately (seasonally or year-round) 850 active Croatian exchange offices also perform other activities and currency exchange operations aren't their main activity.

The CNB estimates that they are the core business for approximately 200 legal entities, which in turn provide these services at approximately 400 exchange offices. It is also estimated that they employ between 600 and 800 employees.

For more, make sure to check out our dedicated business section.

June the 18th, 2022 - Croatian MP Miro Bulj has boldly claimed that there could be no worse time possible for Croatian Eurozone accession, for which it has had the green light and into which it will enter on the 1st of January 2023, replacing the kuna with the euro.

As Poslovni Dnevnik writes, Croatian MP Miro Bulj (MOST) spoke recently with N1 television about possible changes to the Law on Referendums. He says that MOST is against the way of defining which topics could be decided in a referendum. Bulj also believes that the imminent introduction of the euro couldn't be possibly coming at a worse time.

"In the sense of defining the topics [which could be decided in a referendum[, what they did with the constitutional referendum for which we collected 400 thousand signatures, is more than sad. We'll oppose it. We can change it to make it easier to collect signatures, not to limit them in advance and define the appropriate topics. We know that the Constitutional Court is under the control of HDZ, that these are the Godfathers and that it's a purely political body. That body is meaningless. We strongly oppose this and we will monitor how other political options will behave,'' warned Bulj, talking about the amendments to the Law on Referendums.

Croatian MP Miro Bulj also said that the HDZ had enjoyed great levels of support from other political parties when it came to the epidemiological measures introduced in the fight against the spread of the novel coronavirus, which had a hugely negative impact on the economy.

"It doesn't mean anything to them that we have more voters than we have residents, it's a disastrous proposal. This is a blow to the foundation of and the Constitution of the Republic of Croatia,'' believes Bulj.

"Where does one get the right to say that the constitutional changes for which MOST collected signatures aren't constitutional? They can't say what the people think about the Constitution. It was the same with the definition of marriage. This is a direct interference of HDZ and the Constitutional Court in the interest of Andrej Plenkovic, who has also taken over the judicial system. This isn't something new, it's a blow to democracy, it's shameful act and an anti-national blow to the Constitution,'' said Croatian MP Miro Bulj.

Bulj's beliefs on Croatian Eurozone accession

"It couldn't possibly be coming at a worse moment," Bulj said when asked if it was the right time to send the kuna to the history books and introduce the new currency, adding that we need to be taking care of our natural resources and as such, our farmers.

"We must help our farmers during these difficult times, not be spending our time on preparing to introduce the euro. It's clear to Finance Minister Zdravko Maric how much inflation will rise to and what will happen, but it's more important to listen to Brussels than the interest of the Croatian people. They've played games and it's obviously more important to Plenkovic to be the one to introduce the euro than listen to the interest of the people. Nobody knows what will happen when the euro is introduced,'' concluded Croatian MP Miro Bulj.

For more, check out our dedicated politics section.

May the 25th, 2022 - Former CNB governor Damir Odak has discussed Croatia's current final preparations for entrance into the Eurozone, scheduled for the very beginning of next year.

As Poslovni Dnevnik writes, the Croatian kuna that has been deposited into banks by the last day of this year, will ''wake up'' on January the 1st, 2023, as euros, said former CNB governor Damir Odak.

Odak was a recent moderator of the round table ''The expected impact of the euro on banks'' which was held as part of a larger conference called ''The Financial Market'' in Opatija. Former governor Damir Odak said that then, at the time of conversion, the amounts will be ''divided by 7.5 and something'', kuna and euro bank accounts will be merged into one single account, and of course, all Croatian bank accounts will have new balances shown in the new currency - the euro. Whoever comes to an ATM or branch to withdraw cash will receive euros instead of kuna, he explained, as Novi list reports.

The round table was attended by the presidents of the leading domestic banks, all of whom are preparing for the huge project of introducing the euro as Croatia's currency in 2023. In some banks, as it was said, there is a ''general mobilisation'', to make sure that everything is in order so that all processes run smoothly and the transition to the new currency is as painless as possible.

Mario Zizek, President of the Management Board of Addiko, says that the project of introducing the euro is priority number one in that bank. "It often happens to all of us that projects slip out of people's full attention within a few days, but with the introduction of the euro, this is far from the case," said Zizek. Balazs Bekeffy, President of the Management Board of OTP banka, says that, based on the experience of others, some services and products may become more expensive, but this will not be anything drastic.

Liana Keseric, President of the Management Board of Raiffeisen Bank, said that they have five key focuses at this moment in time: their clients, leadership, risk management, technology and processes. Marko Badurina, President of the Management Board of Hrvatska postanska banka, says that despite the short-term costs, the long-term net effects are positive. Christoph Schoefboeck said additional cost optimisation will be needed.

By joining the Eurozone, the day before, CNB Governor Boris Vujcic reminded the banks that they would have the full help of the European Central Bank/EC) at their disposal, which is something the CNB had issues with due to its limited maneuver due and the already very high ''euroization'' of the banking system. Therefore, many restrictions will be lifted, the required reserve will be significantly reduced, and the obligation to cover foreign currency liabilities with foreign currency claims will be abolished. Therefore, a new wave of liquidity awaits them. However, it has also been said that banks are also facing negligible costs due to the adjustment of all of their internal processes, IT systems, applications, information campaigns, and also the loss of some jobs, such as those held by people working in exchange offices.

The most interesting presentation was given by the President of the Management Board of Privredna banka Zagreb, Dinko Lucic. He said that banks are big advocates of the introduction of the euro in Croatia precisely because they aren't looking at the short term, because if they did only take that into consideration, he said, then they'd really have high costs. Lucic recalled the experience of Slovakia's accession to the Eurozone:

"According to the experience there, and knowing the opportunities here, for larger banks on the Croatian market, the costs related to the introduction of the euro could range between 10 and 17 million euros, which is a serious cost in the short term. In the long run, however, we expect an increase in economic activity, greater attractiveness of the state for foreign investment, greater need for financial instruments and we see this as an opportunity to partially compensate for the costs incurred,'' said Lucic.

"It will be smoother in Croatia than it was in some other countries where the euro was introduced. However, when I compare Croatia and Slovakia, there was a much bigger national consensus in Slovakia on the introduction of the euro, while some recent research shows that there are still many Eurosceptics and those who argue that this is something very negative. That said, the euro brings long-term benefits to society as a whole, that’s for sure. Its importance for crisis stability is particularly evident. The sooner we adopt the euro, the better,'' concluded Lucic.

For more, make sure to check out our dedicated politics section.

May the 6th, 2022 - Croatian euro printing is set to begin on an enormous scale come this July, as Croatia makes the very last preparations to send the kuna to the history books and finally join the Eurozone next year.

As Poslovni Dnevnik/Jadranka Dozan writes, the National Council for the Introduction of the Euro has once again confirmed that all of the current preparatory steps are in line with the plan to switch to the bloc's single currency on the first day of 2023. Recently, the Croatian National Bank (CNB) finally presented the design of the national side of the one euro coin, which was selected in a repeated tender.

The CNB has already begun preparations for large-scale Croatian euro printing, and according to Governor Boris Vujcic, mass production should start during the month of July. Before that, one million kuna's worth of test coins will be made by the middle of next month, the central bank says.

By this summer, the ongoing tender for the services of creating and implementing an informative national campaign to replace the kuna with the euro will be concluded. The estimated value of this public procurement stands at a massive 27 million kuna, and half of the campaign costs are being borne by the European Commission (EC).

Currently, no obstacles are being noticed

All in all, in recapitulating the course of preparatory activities from the 15th session of the Council, it was said that everything is going according to the planned deadlines. The Prime Minister recalled that the Croatian Government adopted a report on the action plan back in late March, which confirmed that all reform commitments made upon entering the European Exchange Rate Mechanism ERM II (in July 2020) had now been met by Croatia.

Croatian euro printing aside, the competent ministers responsible for individual areas of measures from the action plan briefly reported on the activities carried out in the area of ​​improving the business environment, managing state-owned enterprises, strengthening the bankruptcy framework and the framework for preventing money laundering.

The new Minister of Economy Davor Filipovic emphasised the administrative relief that will be felt by the domestic economy with an estimated effect of 686 million kuna, as well as 531 million kuna of reduced non-tax and parafiscal benefits. From the judicial department, they primarily emphasised the changes in the bankruptcy law and the improved framework for the work of bankruptcy trustees.

Increased inflation rates, which according to recently updated government projections rose to a concerning 7.8 percent of the annual average this year, do not pose a problem or obstacle in the context of the convergence criteria for the euro, both the government and the CNB are strongly convinced.

Regarding the inflation criterion (up to 1.5 percentage points above the average of the three best performing countries), Governor Boris Vujcic explained that, for a start, this criterion doesn't refer explicitly to the (three) lowest inflation rates but instead to the best performance.

Imported price pressures

The governor reiterated that the greatest advantage of the euro is shown during financial and other such crises, such as the recent global coronavirus pandemic or the current crisis being caused by the economic consequences of the war in Europe, more precisely in Ukraine.

This, he said, is especially true for small and open economies such as that of Croatia, and the country's lag over the past decade is the result of a stronger decline in the crisis and a longer recovery period, partly due to Croatia's then inability to rely on the ECB's monetary policy. Although inflationary pressures will obviously last longer than expected before the escalation of the war in Ukraine, and imported inflationary pressures may spill over into Croatian prices, the governor underlined that this should not be linked to the introduction of the euro.

People are often afraid of prices being rounded up upon a country's entry to the Eurozone, but now these effects don't really seem crucial. In the seven countries that last entered the Eurozone, prices which were a mere 0.2 to 0.4 percentage points higher were recorded.

For more, check out our politics section.