ZAGREB, February 4, 2019 - Croatia's public debt at the end of October 2018 was 280.3 billion kuna, which is 3.1 billion or 1.1 percent less than at the same time in the previous year, and could stay below 75 percent at the end of 2018, Raiffeisenbank Austria (RBA) said in an analysis of central bank data on Monday.

Compared with September 2018, public debt shrank by 1.5 billion kuna or 0.5 percent, figures from the Croatian National Bank (HNB) showed.

The annual decrease was due to a fall in both the external and the internal component of public debt. At the end of October 2018, compared with October 2017, the external component declined by 1.9 billion kuna or 1.8 percent to 103.2 billion kuna, while the internal component dropped by 1.1 billion kuna or 0.6 percent to 177.1 billion kuna.

General government guarantees issued on the domestic market reached 6.4 million kuna, of which 2 billion kuna accounted for guarantees for loans issued by the Croatian Bank for Reconstruction and Development (HBOR), while general government guarantees issued on foreign markets stood at 5.3 billion kuna.

On the last day of 2018, enforced state guarantees in the amount of 2.5 billion kuna were paid for Uljanik, which will result in the deterioration of the general government budget balance and affect public debt dynamics, RBA analysts said.

Ultimately, the amount of guarantees settled will be higher given that only a portion of the principal has been paid so far, while interest is yet to be paid. However, trends in fiscal statistics will remain relatively favourable, RBA said.

RBA predicts the public debt to GDP ratio will stay below 75 percent at the end of 2018, down about nine percentage points from its highest level recorded at the end of 2013.

At the end of September 2018, Croatia's public debt amounted to 281.8 billion kuna or 74.5 percent of GDP.

More news on the Croatian economy can be found in the Business section.

ZAGREB, Feb 4 (Hina) - A total of 499 counterfeit kuna banknotes were detected in Croatia in 2018, which was 97.2% or 246 banknotes more than in 2017, while the number of euro counterfeits increased by 89.5% to 1,488, the Croatian National Bank (HNB) stated on Monday.

A total of 236 counterfeit kuna banknotes were withdrawn from circulation from July to December 2018, and given the average of 258 million kuna banknotes in circulation in the second half of 2018, 0.91 counterfeit kuna banknotes were detected per one million genuine banknotes in circulation in the said period.

In the second half of 2018, most frequently counterfeited domestic currency denomination was a 200-kuna banknote, with 124 counterfeits or 52.5%, and 50- and 500-kuna banknotes, which together accounted for 36.4% of total registered kuna banknote counterfeits, the bank reports.

In the second half of 2018, a total of 285 counterfeit euro banknotes were withdrawn from circulation.

In that period "the largest number of withdrawn counterfeits were 50-euro banknotes (157 banknotes), accounting for 55.1% of the total number of registered counterfeit euro banknotes."

"As regards their number and quality of production, counterfeit banknotes registered in 2018 did not cause any disturbances in the cash operations of specialised institutions and the public or large-scale financial damage," the central bank said.

More news on the Croatian National Bank can be found in the Business section.

For some, the mere idea of the introduction of the euro in Croatia is enough to induce passionate debate. For others, the introduction of the single European currency is the next step to leaving the country's tumultuous past behind, and joining the ''ever closer union'' that Eurocrats in Brussels speak so highly of. While the United Kingdom managed to secure a way out of the currency's introduction much earlier, Croatia had to agree to take on the euro in order to join the bloc.

Introducing the euro in Croatia is likely to bring problems as well as solve them, but what use is the adoption of the single currency when many of Croatia's national institutions are in total disarray? Until state institutions can be brought into line, the introduction of the euro and the overhaul that involves will only work to contribute to existing issues, rather than help to solve them.

As Ana Blaskovic/Poslovni Dnevnik writes on the 9th of January, 2019, just over a year after the announcement of the Croatian Government's intention to introduce the euro, encouraged by positive signals from Europe, Croatia will send a letter of intent to enter the exchange rate mechanism (ERM) by the summer. The aforementioned mechanism is known as the ''waiting room" for a country's introduction of the euro as its currency. Although the letter is only the first formal step in the process of replacing the kuna with the formerly problematic single currency, its content is not merely a pleasant yet rather empty formality.

The letter will involve the Croatian Government agreeing on a series of concrete reform moves, in a relatively short period of about a year. "The ball is now in the government's court to make a list of moves that can be completed within a year, within the gauge that they're achievable, easily measurable, and are written in the letter of intent," an interlocutor close to the central bank told Poslovni Dnevnik.

Judging by the Bulgarian version of the letter that Sofia officially sent to a number of European Union addresses at the end of July, the answer to the question of what exactly Andreja Plenković's government could or should put on paper doesn't need great philosophical effort put into it. There is already a list of specific recommendations from Brussels for the Republic of Croatia.

Reforms is a word that everyone in Croatia gets sick of hearing, and this next political move involves a well-known series of infamous reforms, the implementation of which has been largely shifted to ''next year''. The euro in Croatia however, demands certain reforms be met, and sooner rather than later.

For example, there are administration reforms (including those regarding salaries), reforms to the utterly bizarre Croatian justice system, the establishing of a more just system of social benefits and rights, the strengthening of the fiscal framework, and the introduction of property taxes, a controversial idea which Plenković has moved around quite a lot on.

"The European Commission supports member states' efforts to introduce the euro, not only politically, but in also providing the necessary technical assistance and potential financial resources," said Valdis Dombrovskis, adding that Croatia is very serious in its intentions and is working intensively to meet the conditions for its eventual entry into the eurozone. One of the panelists at that conference was the Croatian National Bank's Boris Vujčić, which is also regarded by all as a firm sign of Croatia's support.

"The most difficult thing to do is to enter the ERM II, because there are no clear criteria that a country needs to meet in order to enter the exchange rate mechanism. Once you're in the ERM, the criteria for introducing the euro is clear, although some of it is constantly changing, so you do need a bit of luck on your side in order to be able to fulfil it,'' said Latvia's governer. One thing is certain, unlike the correspondence Croatia has had with the European Commission until now (primarily concerning becoming a member of the EU), the rules for a country's adoption of the euro are much stricter.

Make sure to stay up to date for more information on the intended introduction of the euro in Croatia and much more by following our dedicated politics page.

Click here for the original article by Ana Blaskovic for Poslovni Dnevnik

ZAGREB, January 8, 2019 - The European Commission Vice President responsible for the Euro and Social Dialogue, Valdis Domobrovskis, said on Tuesday that Croatia was working hard on the introduction of euro as its official currency, and that the process of Croatia's admission to the 19-strong euro area would be similar to the process involving Bulgaria that had already sent a letter of intent.

Croatia is working seriously and intensively to create the prerequisites for its admission to the euro area, Latvian Dombrovkis told the press on Tuesday in Riga on the margins of a conference on Latvia's five years in the euro area.

In 2019, Latvia is celebrating five years in the euro area, and it will also be twenty years since the European citizens can pay in euros.

The two-day conference in the Latvian capital city was organised by the European Commission. Dombrovskis recalled that the expansion of the euro area was an open procedure based on rules, and that all EU member-states, except Denmark and Great Britain, were obliged to introduce the euro as their official currency. There are no deadlines for the obligatory adoption of the euro as the sole legal tender in an EU member-state.

The European Commission supports member-states' efforts to introduce the euro, and provides not only political but also the necessary technical and financial support, the Commissioner said.

He said that the next financial perspective would also include a programme of financial support to the reforms carried out by EU member states aspiring to join the euro area membership.

Croatia and Bulgaria have expressed their intention to join the euro area five years after the last round of its expansion.

Aspirants are expected to enter the European Exchange Rate Mechanism II (ERM II) as well as the Single Supervisory Mechanism (SSM). The SSM, which refers to the system of banking supervision in Europe, comprises the European Central Bank and the national supervisory authorities of the participating countries.

The ECB thus can supervise local financial institutions and the process implies the implementation of legislative, operative and technical preparations, all of which takes time.

Croatia will likely enter the ERM II during 2020, a year after the submission of its letter of intent.

Bulgaria, which in 2018 sent a letter to the ECB and other European institutions about its plan to join the ERM II, will probably enter the ERM II in mid-2019, according to Dombrovskis.

After that, it will take at least three years for Bulgaria to adopt the euro provided that Sofia meets all the criteria: two years in the Exchange Rate Mechanism and a minimum one year for the evaluation of the aspirant's achievements and for practical preparations for the replacement of its currency lev with the euro.

More news on the Croatian monetary policy can be found in our Business section.

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.

More news in the Croatian National Bank can be found in our Business section.

Germans could be left without cash if a threat of a general strike of 12,000 employees who transport money to ATMs is fulfilled. Although they could quickly pay with their bank and credit cards, the lack of cash would anger the Germans, since they, just like Croatians, like to pay with cash. On the other hand, some countries in northern Europe are even thinking about the abandonment of cash money altogether. Advocates say this approach would eradicate the grey economy and tax evasion, while the opponents warn about a loss of privacy, reports Večernji List on January 7, 2019.

The popularity of cash, despite the simplicity and security of bank card payments, is even growing in some countries. Germans, like Croats, make as much as 80 per cent of transactions with cash. According to the data of the Croatian National Bank, of the 179 million recorded receipts in 2017, as much as 87 per cent was paid in cash. However, the value of card transactions has grown to 37 per cent of the total turnover.

It should be noted that the largest card turnover is recorded during the summer and that 12 per cent of the amount of all card transactions is made with foreign cards, so it is likely that tourists mostly use them. If we take this into account, we can conclude that Croats pay with cards for just a quarter of their purchases. And they use much more their bank debit cards than credit cards.

Nevertheless, the popularity of bank cards is growing year after year, as well as the value of card transactions. Every consumer has 2.5 cards on average, and 79 per cent of citizens have at least one card. This shows that the problem is not the access to bank cards, but the will of the citizens to use them.

Local craftsmen and caterers mostly insist on cash payments, and the unwritten rule is that discounts are more substantial if you pay with banknotes. The reason is the high payment fees that card companies contract with the sellers of services and goods. Since these fees are often, especially in the case of a new company that has no financial history, higher than five per cent, entrepreneurs must increase their prices for that amount. As a rule, fees range from two to five per cent, and this cost is transferred to the consumers. That is why customers usually pay more with bank cards, especially in the case of larger purchases, which typically bring five per cent extra discount if you are ready to pay with cash.

On the other hand, Americans pay for almost half of all transactions with bank cards. Sweden and Norway are moving towards full cash elimination. In Sweden, for example, in five years the share of cash transactions fell from 50 per cent to just 20 per cent. Swedes trust banks and institutions and research has shown that they are not worried by either the 'Big Brother' issue or internet fraud. They recently abolished the largest banknotes, claiming that only criminals use them, and they consider the abandonment of cash an excellent way to fight the grey economy.

More news on the Croatian economy can be found in our Business section.

Translated from Večernji List (reported by Marina Šunjerga).

As tportal writes on the 3rd of January, 2019, The Banker, a magazine which belongs to the Financial Times group and is issued monthly, gave two prestigious awards of recognition to the Governor of the Croatian National Bank, Boris Vujčić, for the year 2018 - one as the best European governor, and the one for the best central banker on a global scale.

The Banker has been following various financial developments across the entire world since 1926. It has been declaring the best regional governor and governor of the year on an international level each year in its January issue, and the winners are based on the magazine's editorial rating and research conducted among bankers and economic analysts.

Recognition from The Banker is guided by the criterion that the winners are those responsible for "stimulating growth and stabilising the economies in which they operate". The recognition is awarded globally, as well as regionally - for Europe, North and South America, the Middle East, Asia-Pacific and Africa. The Banker also gave recognition to the former Governor of the CNB (HNB), Željko Rohatinski, back in 2008.

In the article published by The Banker on the occasion of the award to Croatia's Boris Vujčić, his versatility was emphasised: "Seven years before Croatia's entry into the European Union in 2013, he was the deputy chief negotiator during the successful candidacy of that country for joining the European Union. He was Deputy Governor of the Croatian National Bank and has been Governor since 2012. He has recently co-ordinated central bank management and the development of the Croatian strategy for joining the Eurozone with the chairmanship of the Vienna Initiative steering committee.''

The explanation further states that the Vienna Initiative, which is less known outside of the region, was launched in 2009 at the height of the global financial crisis with a view to securing the financial stability of emerging economies with markets in Central and Eastern Europe. There was a fear that the major Western and Northern European banks, which dominated the financial systems of these countries, would withdraw from lending and cause a catastrophic credit crunch. Since then, the Vienna Initiative has spread to seventeen countries in the region, as well as to international financial institutions, the European Commission, and to several major European lenders.

The Banker cites the role of Boris Vujčić and the Croatian National Bank in ​​keeping hold of Croatia's financial and banking stability during the recent Agrokor crisis. The article also highlights the public advocacy of the governor of the Croatian National Bank for structural reforms - particularly when it comes to education, in order to create market competencies that will dominate innovation and technological progress, as well as a smart immigration policy as one of the measures to address the problem of labour shortage which is currently enfeebling the Croatian economy.

Upon receiving the prestigious recognition, Boris Vujčić said: "I'm exceptionally honoured; this is a great tribute to the Croatian National Bank, and to me personally. This award is further motivation to me to continue working on our goals - price and exchange stability, so that every citizen of the Republic of Croatia knows, with certainty, that what they earn won't lose value. We're also thinking about Croatian companies and the security of their financial operations and financing possibilities. We will continue to monitor banks in order to maintain financial stability, as well as to improve consumer rights and information.

Success in achieving our goals contributes to creating a better environment for economic growth and the development of the entire country. And finally, we believe - and in this way we'll communicate with all citizens and companies, inform and answer every question and dilemma - that our entry into the Eurozone can further stimulate economic growth and development, make our country stronger within European frameworks, and thus serve for the prosperity of every citizen of Croatia.''

Make sure to stay up to date with our dedicated business and politics pages for much more.

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.

For more on the Croatian National Bank, click here.

With talk of a brand new digital Croatia becoming ever louder, it seems that the powers that be are following suit.

As Bernard Ivezic/Poslovni Dnevnik writes on the 14th of November, 2018, when talking about digital money, especially in the context of whether or not Croatia really needs a form of ''cryptokuna'', the example of Sweden was pointed out. Due to the high level of digital payments and the development of practices where retailers and banks have begun refusing paper money, Sweden decided to introduce a digital krona.

Croatia will not take the same path as Sweden and simply introduce digital currency, but it will have an instant payment system from December onwards, not only in euros but in Croatian kuna. This was announced at the BUG F2 Future of Fintech conference held in Zagreb by the executive director of CNB/HNB (Croatian National Bank)'s payments sector, Ivan Biluš.

The new system will most help banks to carry out business with their fintch players, especially Apple, Amazon, Facebook, Google, and Microsoft. It will also affect the strength of their relationships with card holders who see the ability to make fast payments anywhere as perhaps the most important thing. Biluš noted that the system, which would have the support of the CNB TIPS payment system, will be launched alongside that of the European Central Bank (ECB) on the 30th of November, 2018.

"As of January 2019, we'll not only have European instant payments in Croatia which are based on the euro, but also Croatian ones [based on the kuna], which will enable the instant transfer of the kuna", says Biluš. He said that banks in Croatia could negotiate the terms of the new service with the CNB/HNB by December, but also stressed that he didn't expect the first commercial example of the service to actually be on the market before January next year.

TIPS will enable banks to offer services that are already on offer in the United States and in the United Kingdom, where customers can quickly transfer money from their bank account using IBAN to a foreign IBAN account.

Some of the most well known applications which use fast pay include PayPal, Venmo, Square Cash and Zelle, but also Google Wallet and Facebook Messenger. Despite the country's desire for a digital Croatia, these apps are not yet available with such a payment function here on the Croatian market.

Biluš repeated several times during his presentation that the race between the fintech and the banks is an unequal one, but that major changes are expected on both sides shortly. He said that the EU, with the ECB, has its own interest in creating a single digital market for the European Union and that it was that which made the central bank enter into this business.

Although the ECB initially announced that the TIPS would cost 0.2 cents per transaction, work within ten seconds and set a limit on the transaction amount to 15,000 euros, the executive director of the payment sector at the CNB claims that the transaction cost will be 0.1 percentage points, and that the money transfer will be able to be completed in no more than two seconds.

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Click here for the original article by Bernard Ivezic for Poslovni Dnevnik

Finances are something that are constantly on every adult's mind to some degree or another, but just how much does the average Croat have deposited in the bank and in other credit institutions?

As Poslovni Dnevnik writes on the 31st of October, 2018, the absolute value of these deposits in the continental part of the country is 35.8 percent higher than it is in the coastal part of the country, primarily because of Zagreb's continental location, the city in which 28 percent of all deposits in the country are concentrated.

With their typical policy of low interest rates on savings, Croatia's banks have helped to widen the construction sector in the often overlooked eastern part of Croatia, particularly in the City of Osijek, the seat of the largest Slavonian county, Osijek-Baranja County, in a welcome move which has at least partially awakened the construction sector, Glas Slavonije writes.

So, much much does the average Croat have deposited in the bank? It's something many wonder about, despite the common lack of desire to discuss personal finances.

Namely, a good amount of those individuals who have tens of thousands of euros in deposits, have been the most disappointed with rather unstimulating interest rate (0.01 percent), and they often withdraw their money from the bank and invests in the purchase of real estate, most often in apartments. Over the last couple of years in Osijek, the housing construction sector has resumed its business operations to a certain degree. The fact that this is no real exception was confirmed at yesterday's round table on the occasion of the marking of World Savings Day held in the headquarters of the Croatian Chamber of Commerce (HGK).

''At the end of 2017, the average resident in Croatia had about 45,600 kuna of deposits in credit institutions, while classic term deposits represent the largest single part of the financial assets of households in both Croatia and the Euro region. Due to the fall in passive interest rates and the introduction of savings taxes, citizens have diverted their funds into equity and other investment funds,'' stated Zvonimir Savić from HGK.

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