February the 10th, 2023 - Croatia is among only three European Union (EU) member states to have actually improved its budget balance when compared to the pre-pandemic year of 2019.

As Jadranka Dozan/Poslovni Dnevnik writes, the energy crisis and ongoing high inflation has forced the national governments of the majority of EU member states to implement various generous packages of fiscal incentives, from various subsidies and one-off benefits to reductions in VAT rates. As rising inflation followed the coronavirus pandemic, some enacted as temporary measures until coronavirus no longer pised an economic threat were prolonged, and some new ones were also introduced, primarily related to energy and food.

For many of these measures, which were conceived as temporary as mentioned above, the deadlines finally expire in the next few months, and among them are the shock absorbers that the Croatian Government introduced for gas and electricity prices in the spring and autumn package of measures last year. As things stand, it's realistic to expect new prolongations throughout the EU as a bloc, in the same form or with some modifications. The global overviews regularly published by the VATcalc portal, specialised in VAT, are also on that same track.

Belgium, for example, has already converted last year's temporary VAT reduction from 21% to 6% into a permanent one for electricity, natural gas and other supplies in heating systems, and excise tax reforms have also been announced. Under the influence of double-digit inflation, Greece extended their reduced VAT rates on certain goods from 24% down to 13%, which is already the fourth extension of the temporary rate reduction introduced during the coronavirus pandemic. Currently, the duration of this measure is planned until the middle of this year.

At the same time, already this fall, the German Government, along with the introduction of temporarily reduced VAT rates on gas (from 19% down to 7%) until the end of March 2024, also extended the application of the lower VAT rate for catering and hospitality establishments for the second time. From the end of 2022, it was extended until the end of this year.

Although statistics suggest a slowdown over the last two or three months, inflation is simply still very high. Last year, 16 out of a total of 27 EU member states ended the year with double-digit rates (in Hungary, Lithuania and Latvia, they were above 20%), and almost as a rule - wage growth trotted quite far behind the rising prices. Very soon, the Croatian Government will also announce a new framework or a possible extension of the measures regarding electricity and gas prices.

At the end of next month, the deadline for applying the lowest VAT rate of 5% to natural gas deliveries, for which as part of last year's April package of measures for Croatia, the rate was permanently reduced from 25% to down 13%, and exceptionally temporarily - down to a mere 5%.

As part of Croatia's autumn package, a scheme was designed to limit or mitigate the rise in electricity prices for households, the public and non-profit sector, and enterprises, also with the now looming date of March the 31st, 2023 as the expected deadline. It remains to be seen what the solutions will look like from April on, i.e. whether the 5% rate for gas and the existing price limit model for electricity will only be left as it is until a new deadline is drawn up.

However, given the drop in standards (despite nominal growth, the average salary in Croatia has fallen by 5% in real terms over the past year), as well as the fact that an election year is coming, it is easy to assume that issues related to peoples' living standards will gain additional importance. This also facilitates a better state of public finances compared to recent expectations. According to the latest consensus forecast by FocusEconomics, until recently, analysts expected a deficit of around 2% of GDP in 2022. However, it seems that the beneficial effect of inflation (especially with a good summer tourist season) on filling the budget was significantly stronger.

More specifically, in a weekly overview of selected economic and financial topics, the chief economist of the Croatian Association of Employers (HUP), Hrvoje Stojic, stated that Croatia "had returned to the budget surplus zone, namely 1.1% of GDP in the consolidated general government budget". This ranks Croatia among only three EU member states that have improved their budget balance compared to the pre-crisis year of 2019.

Admittedly, the surplus in the budget is primarily highlighted by HUP within the wider context of the question of the expediency of introducing an additional income tax and the generally high tax burden compared to the rest of the EU.

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

January the 18th, 2023 - Despite all of the panic and in many cases confusion surrounding Croatian euro introduction, ongoing inflation and price hikes, prices for an array of products actually fell back in December last year.

As Jadranka Dozan/Poslovni Dnevnik writes, quite on the contrary to public perception and the current clamor and naming and shaming of the culprits for price increases in the context of Croatian euro introduction, December 2022 ended with a monthly drop in consumer prices.

According to the National Bureau of Statistics (CBS), at the end of the 2022, prices were on average 0.3% lower compared to what they were in November, which brought the annual inflation rate down from 13.5% in November to 13.1% at the end of December. Looking at the annual average, consumer prices last year were 10.8% higher than they were just one year before.

Last month's decline is, admittedly, primarily the result of lower transportation costs, i.e. the price reduction of petroleum products during December. In addition, seasonal reductions in clothing and footwear, as well as somewhat lower housing and utility costs (in the part influenced by fuel prices) also contributed to the monthly decline to a slightly lesser extent.

In short, as the transportation category accounts for about 15 percent of expenses within the consumer basket, their drop by 4% "overpowered" the price increases in the food and non-alcoholic beverages group. The share of this group in the expenses of the average household budget is significantly higher (26%), but the prices of food and beverages on a monthly level, according to the CBS, increased by a significantly smaller 1.2%. That's what the average more or less looks like, but some food products went up in terms of cost significantly more in December.

For example, when compared to November, the price of butter in Croatia rose by as much as 11% (22.8% on an annual basis), eggs by 9.2% (compared to December the year before, they were 64.5% more expensive), and more than the average monthly increase in food prices also increased the prices of bread, pork, fish, milk and dairy products, fish, olive oil, and so on.

Overall, the annual inflation rate for food and non-alcoholic beverages stood at 19% at the end of the year. If only food is considered here, then annual growth has only been slightly moderated, from 19.7 to a barelt different 19.6%.

However, in addition to the aforementioned prices of eggs and butter, a number of foodstuffs on an annual level record price increases of more than 20 percent; from bread, cheese and sugar, which at the end of 2022 compared to the end of 2021, increased in price by more than 30% (bread by almost 33%, cheeses by 34%), to, for example, frozen vegetables which carried almost 45% higher prices on average.

Although last month's prices of oil derivatives indicated that it would be a significant inflation shock absorber, some analysts will say that they still expected inflation to remain at around 13.5% at the end of December.

For the Croatian Employers' Association (HUP), the latest data from the CBS isn't remotely unexpected. They also pointed out that the annual rate could culminate in January, after which it should fall once again over the coming months. The rise in service prices basically reflects the incomplete recovery of aggregate demand after the coronavirus pandemic finally subsided, as well as the labour shortage and the delayed adjustment to last year's input price increases - these are just some of the main points of the comments of HUP and their chief economist Hrvoje Stojic.

In addition to all of the above, they are reminiscent of signals related to core inflation. If volatile food and energy prices are excluded from all of this, the basic measure of inflation simultaneously shows its annual growth at 9.7%, from 8.9% back in November.

"This indicates that inflation will remain at high single-digit levels for the foreseeable future," they stated from HUP. In terms of the twelve-month average, after last year's 10.8 percent, according to their forecasts, this would mean a drop to the still relatively high 7.5 percent inflation this year. The expectation of lower monthly inflation dynamics is explained by the expected decline in aggregate demand, i.e. the technical recession over the first half of the year, as well as the stabilisation of energy prices, the normalisation of supply chains and a certain decline in the prices of food raw materials.

Energy prices, which are currently in decline thanks to an extremely mild winter across all of Europe, are still being calculated with a relatively high uncertainty factor.

"Despite government subsidies, electricity prices are still about four times higher than pre-2021 levels, which is symptomatic of a long-term energy crisis. This summer, a new race between EU member states to fill gas storage will begin, so the European Commission (EU) needs to provide new mechanisms for stabilising those energy prices,'' they pointed out from HUP. If the proposed price limit had been in effect last summer, the EU probably wouldn't have provided sufficient quantities of gas even to those who were perfectly able pay at the prices above the typical price limit.

The simultaneous fall in inflation across the Eurozone during the first half of the year could encourage speculation about the end of the cycle of growth of the ECB's reference interest rates. However, HUP is remaining strong in its belief that core inflation across the Eurozone, as well as right here in Croatia, will remain well above the ECB's inflation target of around 2% in the foreseeable future.

"Furthermore, fiscal expansion continues and wage growth accelerates, which may also affect price expectations. For this reason, a further increase in the deposit rate to 3.25-3.50 percent by the summer of 2023 is to be expected in the ongoing and seemingly tireless fight against inflation. The rise in interest rates along with the simultaneous planned reduction of the ECB's balance sheet at a rate of 15 billion euros per month from March onwards will also contribute to the deterioration of financing conditions in a situation where financing needs are growing strongly in many Eurozone countries, including in this country, where Croatian euro banknotes and coins are now the new currency.

If we stick to the latest figures from the CBS on inflation across the country in the month preceding Croatian euro introduction and the confusion surrounding conversion and ongoing inflation, it remains to be noted that in 2022, in addition to food and non-alcoholic beverages, above-average price growth was also recorded in the categories of restaurants and hotels (17.1%), furniture and household equipment (16.1%) and housing and related utilities (16%).

Due to the market movement of oil prices, and due to the Croatian Government's various economic measures, the transportation sector ended in 2022 with an annual growth of only 8.4 percent. If only fuels are considered within that category, where annual inflation stood at a whopping 21.5 percent in January last year, 2022 ended with a price increase of only 6.7 percent.

For more on Croatian euro introduction and inflation, make sure to check out our news section.

January the 13th, 2023 - This week in Croatian politics has been dominated by many stores and service providers upping their prices and allegedly taking advantage of what's known as ''rounding'' following Croatian Eurozone accession. Plenkovic has also been busy dismissing ministers once again, and the reaction to that has been varied. 

Price rises are hitting pockets and bank accounts

Croatia officially (and finally) entered the Eurozone on the 1st of January, 2023, with the kuna still permitted to be used as legal tender until the 15th of this month, after which only euros will be allowed to be used to make payments for goods and services across Croatia. As most people expected, there were price increases which came along with the euro, and while this is something that has occurred to some extent or another in all countries which have adopted the bloc's single currency, introducing it during a period dominated by economic woes and inflationary pressures likely didn't help much either. 

Shops have increased their prices for many basic goods and in some cases, there appears to not have even been an attempt made to hide it. With individuals feeling the blow to their back pockets and bank accounts more than ever, the government was asked to step in and control the situation, with many claiming that companies are taking advantage of the introduction of the euro. 

Some politicians, such as Kreso Beljak, believe that PM Andrej Plenkovic already spends too much time meddling with things that politics shouldn't be spending much time on, and although he himself has admitted that he has been hopping over the border into Slovenia to do his shopping because it's cheaper, he has said he doesn't blame Plenkovic for the euro price hikes. He believes that the market and the level of demand determines the price of goods, and that Plenkovic's government should spend more time making sure wages match the cost of living rather than spending time trying to lower prices.

It's easy enough for someone such as Beljak who lives in Samobor, which is very close to the Slovenian border, to shop and spend less in Slovenia, especially now Croatia has joined Schengen and the border between the two nations is no more, but most of the population expects government intervention. A recently held government session saw the matter discussed at length. The differences between Slovenia and Croatia and why the same products are cheaper over the border have also been explained.

The government did decide on some measures to try to combat the issue with price hikes following euro introduction, however, and Plenkovic has made no effort to hide his sheer disappointment with those trying to take advantage of the situation.

Plenkovic promises action against ''unjustified price increases''

"This is nothing other than pure profiteering and we oppose it," Plenkovic said about unjustified price increases in his opening speech at the aforementioned recently held government session. He announced that inspections will be carried out in stores and called on them to lower their prices to the level they were at before the introduction of the euro. The government also tasked the Ministry of Economy to use all possible measures to collect complete and accurate information on price movements and monitoring.

"We found that some individuals have obviously seen fit to take advantage of the euro conversion to raise their prices for no reason. I'd like to thank the business entities that adapted in accordance with the proper regulations and those who didn't impose any unjustified price increases," said the Prime Minister.

He said that they and most other people were expecting minimal price increases, but that we're unfortunately now witnessing something else entirely, which is profiteering. He stated clearly that his desire is to protect individuals during this transition period and recalled the measures that the hovernment adopted during the COVID-19 crisis.

Then he talked about inflation, a burning topic for Croatian politics of late. "What's happening to us is happening to everyone else as well, but everyone else [in Europe] has a higher rate of inflation than we have here in Croatia and we're fighting against a phenomenon that reduces peoples' purchasing power, and that's why we'll sanction all phenomena that leads to an increase in inflation. The purpose of introducing the euro is to empower the domestic economy, not that the state gives billions and that someone gets rich at the expense of the people, so it's important that everyone understands that those who are doing this will not get away with it and that the state will act, and it will act on behalf of everyone," he said.

"There's just no justification for what has increased, for people to raise their prices like they have, it's pure greed. The government will do everything in its power to prevent this from continuing to happen. All authorities will contribute to uncovering unfair practices and everyone will be tasked to act on this. I call on everyone to distance themselves from those who have unjustifiably raised their prices, I'm also calling on all business entities to revise their prices and adjust them back to those from the end of December," said Plenkovic.

"The state will not simply sit back and watch this happen without doing anything about it. Everyone who thinks that they can cast a dark shadow on the strategic success of the state will not succeed. The Tax Office, Customs, and the State Inspectorate all know this. They will go out into the field to correct what individuals are doing for absolutely no reason," the Prime Minister warned.

The measures, as explained by Economy Minister Davor Filipovic

"All business entities, including credit institutions and other financial service providers, and all those who have raised their prices against the law, are obliged to revise the retail prices of their goods and services and make sure that they're determined by the price levels of December the 31st, 2022," Minister Filipovic said.

"The inspectorate, tax, customs, ministries, Croatian National Bank (CNB) will implement increased levels of supervision over entities within their jurisdiction without delay," he said.

In addition, the Ministry of Economy will be put in charge of preparing and launching a digital platform for monitoring prices.

State Inspectorate boss Andrija Mikulic chimes in on increased monitoring, inspections and supervision

The head of the State Inspectorate, Andrija Mikulic, spoke about price increases and unjustified price increases and the number of inspections being carried out at this moment in time. "We've started with the inspections," Mikulic assured, adding that more than 8,000 inspections have been carried out since September. "We found 1,744 violations of the law," he added.

"Since January the 1st, 2023, we've received an increased number of reports about price increases, whether in trade, catering and hospitality or service activities. Bearing in mind that business entities freely set their own prices, inspections have begun based on the received reports. From January the 2nd to the 4th, over 200 inspections in the field of retail trade were carried out, including at bakeries and service activities, mainly hairdressing, body care and different kinds of maintenance services.

"We will determine whether price increases we uncover are unjustified or not. If it is established that they can't be justified, misdemeanor measures will definitely be taken".

In the service industries (hairdressing salons and the cosmetics/beauty field), increases ranging from 10 to a whopping 80 percent were observed. In the tourism industry, within which 151 inspections have been carried out, about 50 irregularities were observed, as well as price increases of up to 10 percent. In 306 inspections, 96 violations were determined.

Mikulic assured once again that the proper measures will be taken against those who are taking advantage of the introduction of the euro and of inflation in order to try to pull the wool over peoples' eyes and line their own pockets at the expense of individuals.

For more, make sure to check out our dedicated section, and keep an eye out for our Week in Politics articles which are published every Friday.

January the 12th, 2023 - Eurozone Croatia is now finally a reality, and while the country grapples with the new currency, price hikes and attempts to get rid of kuna left in sock drawers and under mattresses, one Zagreb cafe owner is sick to the back teeth of being paid in mountains of lipa coins for coffee.

Many people thought they were prepared for the birth of Eurozone Croatia, but it seems as if most of us have forgotten the unholy amounts of rather pointless lipa coins we all have lying around at home, in jacket pockets and more than likely under the living room rug. These tiny golden coins which have more or less always been somewhat good for nothing are now an even bigger thorn in the side than they were when the kuna was the official currency. Cafe owners are now being bombarded with them.

As Poslovni Dnevnik/Zvonimir Varga writes, there are only a few days left during which people can continue to pay for items and services in kuna and lipa, and some people are using the opportunity to get rid of excess coins while it lasts.

While banks and other financial institutions are happy to transfer small denominations such as lipa into a bank account without any major problems, cafe owners are faced with a bigger problem. Some people have decided to make the recent cafe-based nightmare of ''becoming an unwilling exchange office'' come true leave all of their lipa change on their tables. As previously mentioned, even when the kuna was the country's official tender, nobody was a fan of lipa coins, people are even less of a fan now that the kuna is set to enter the history books entirely.

To make matters worse for cafe owners and staff, some people simply leave their money on the table and leave after having a coffee, and one Zagreb cafe owner from the Jarun lake area has had more than enough of having lipa coins thrown at him.

After finishing their drinks, one couple left a pile of kuna, lipa and even equally annoying euro cents on their table and left while the waiter was busy doing something else. The staff of the cafe were not even that annoyed by the fact that they ended up being paid like that as such, but by the fact that the couple left the coins in this way and got up and left.

"What kind of people are they, it looks like they ran away" asked one of the waiters, while another concluded: "This way of paying is shameful!".

For more on Eurozone Croatia, make sure to keep up with our news section.

January the 6th, 2023 - This week in Croatian politics, we've once again been dominated by headlines (both good and bad) about the introduction of the euro in Croatia, the country's accession to the Schengen passport-free zone, and price hikes.

Croatia finally joins Schengen

After being a member of the European Union (EU) since July 2013, Croatia has now finally taken a step into much deeper integration by joining the passport-free Schengen zone, the largest such zone on the planet, which enables the totally free movement of over 400 million people. The move will facilitate the ease of travel into and out of Croatia though land borders, with airports set to follow in March. The scenes we've all unfortunately become familiar with of endless queues at the Slovenian border to enter the country each summer, sometimes going on for hours on end, are now a thing of the past. With the opening of the Peljesac bridge back in July 2022 also, very similar queues at Neum (neighbouring Bosnia and Herzegovina's only small piece of coastline) were also resigned to the history books.

Croatian Schengen accession was long awaited, and a nail-biting decision process saw the southeastern European nation readily accepted, while two other candidates, Romania and Bulgaria, still have to wait. For a nation which relies extremely heavily on tourism and for which tourism is its strongest economic branch by far, passport-free entry from the rest of the Schengen zone will be of an enormous benefit, as for a great many people, Croatia is a country one can drive to without much of an issue. The same can be said of air traffic, which will (as mentioned above) begin following the new Schengen rules in March, by which planes coming into the country from other Schengen member states will be treated as domestic flights.

Businesses and particularly Croatian exporters have made no effort to hide their elation with Schengen membership, as it is something the latter in particular have been hoping and pushing for for many years now.

Croatia joins the Eurozone and officially adopts the euro as its currency

The big news doesn't end with joining Schengen, with the country also joining the Eurozone on the very same day (the 1st of January, 2023). No country has ever successfully joined both of these EU zones on the very same date before, and Croatia has had a lot of adjusting to do despite having a long time to prepare for the changes to both border and monetary policies. The scrapping of the kuna, which has been Croatia's official currency since May 1994, and the adoption of the bloc's single currency, has been a mixed bag for most of the population. While many are thrilled about further EU integration and no longer being victims of exchange rate fluctuations, others are mouring the loss of Croatia's control over its own monetary policy (despite the fact that the kuna has been stable and also tied to the euro in many ways for years), and are worried that prices will quickly start shooting up for all kinds of goods and services.

While people scramble to use the last of their kuna and annoying little lipa coins given the fact that kuna cash can still be spent across the country until the 15th of this month, change will only be returned in euro banknotes and coins. Introducing the brand new currency during inflation which is still spiralling is far from ideal, and many price hikes which we've seen since the introduction of the euro have unfortunately been the result of not only a new currency, but the difficult economic situation we're still finding ourselves in during the post-pandemic, raging Russia-Ukraine war period.

Many forget that the reason there was no referendum on joining the Eurozone or not was because it was signed and sealed and agreed when the country joined the EU. Unlike nations which had been founding members or were very old members, such as the United Kingdom, which could freely opt out of ever adopting the euro, it was part of the deal for Croatia and as such the referendum on joining was also the referendum on adopting the bloc's currency.

Some have raised their prices, and the government is on their case

Keen eyes have been observing the prices in the first week of euro adoption, with some going up and some staying as they were. Certain goods and services are slightly more expensive than they were in the pre-euro era, while others, such as the prices for tickets issued by Croatian Railways (HZ), have remained the same as they were when they were being expressed solely in kuna.

Plenkovic has even been threatening stores and the government has thought up the idea of creating a so-called ''black list'' of companies which have increased their prices following Eurozone accession, which some have referred to as a stupid and useless idea. The government has openly stated that it will not the body to drag prices back to what they should be, but that it will do everything in its power to force the businesses trying to cheat the situation for a euro or two more to do it themselves. Measures to tackle these abuses have been outlined here.

It's more than safe to say that people are rightfully feeling betrayed after months and months of being told by the powers that be that any prices increases will be temporary and minimal. You can read more on price increases and so-called ''price rounding'' by clicking here.

For more, make sure to check out our dedicated politics section and keep an eye out for our Week in Croatian Politics articles which are published every Friday.

January the 6th, 2023 - Euro Croatia is now finally here after a very long wait to introduce the nation's brand new currency - the currency used throughout the majority of the European Union (EU). There have been a few growing pains and concerns being aired as the country sends the kuna to the history books, and now we need to tackle the issue of fraudulent euro banknotes.

As Poslovni Dnevnik writes, as the now Schengen and Euro Croatia gets used to its new monetary reality, it's time for people and businesses alike to be aware of the new dangers - the circulation of fake euro bankotes. The police have issued multiple warnings that in recent days they have received more reports that fraudsters are using movie props of banknotes in this new Croatian currency instead of original euros for payment.

In this sense, the Brod-Posavina County police have cited several cases in which fraudsters used said fake euro banknotes, on which was written: "Souvenir production", i.e. "This is not legal, it is to be used for motion props" .

To make it easier for people to verify the authenticity of these potentially fake euro banknotes, the Croatian National Bank (CNB) recommends four steps - feel, look, move, check.

People have been instruced to take a second or two to really feel the texture and relief of the banknotes in their hands, to look at it in the light (as would often be done in stores when handing money to the cashier) and checking whether or not they have a watermark and a protective thread on them, as well as a transparent number and a window with a portrait.

To verify their authenticity, people can tilt the euro banknote and check the hologram, the colour-changing number, the shiny strip and the portrait window.

There is also micro writing on euro banknotes that can be checked using a magnifying glas if you really want to go that far with your investigationsd, and additional features can be checked using a UV lamp. The police will likely continue to rehash these warnings as we go forward, and an instruction video on how to check your notes has been published on the Croatian National Bank's website.

For more, check out our dedicated news section.

January the 2nd, 2022 - Croatian exporters haven't been shy about their joy at the country finally joining the Eurozone and Schengen, stating just how much easier this will make doing business, and how there is now much more room for wage growth.

As Poslovni Dnevnik/Marija Brnic writes, the introduction of the euro was mostly called for by Croatian exporters, and they've been calling for it since the country joined the EU back in July 2013. For years now, Croatian exporters have endlessly appealed to the Croatian National Bank (CNB) for a change in the exchange rate policy and a weakening of the kuna in order to enable them to be more competitive on international markets, and they also called for the introduction of the euro, which has now finally occurred, and which would simplify their jobs and all of their financial planning, not to mention lead to the overall improvement of borrowing conditions from banks.

One of the most passionate of all was Darinko Bago, the long-time president of the board of Koncar and until recently the president of the Croatian exporters association, who is now very satisfied that Croatian Eurozone accession has finally happened.

Timely government reactions

Bago, while having hoped Eurozone accession would have happened earlier, believes that even though we're ''late to the party'' as it were, it's better now than never.

"Over the last 20 years, the EU has lost more than 36 percent of its market position, the second problem is the drop in the birth rate, and thus its own demand, which is the generator of growth, and the third is the bloc lagging behind, because today, the European Union does not have, for example, a chip factory, and it's still energy dependent. Russian aggression against Ukraine only increased inflation, because the problems started when China unilaterally abolished subsidies and the transport of goods became more expensive, which created a problem with the import of products of lower value and larger quantities into the EU, and then the coronavirus pandemic and the war in Ukraine only increased the vulnerability of the EU. Of course, all of this also affects Croatia, because two-thirds of Croatian imports and exports take place with the EU,'' Bago pointed out.

"The European Commission (EC) is spreading clouds of money around some countries and this is happening in a non-transparent manner, how the money is used isn't really being monitored, nor are any of the effects it produces," concluded Bago. However, even under such conditions, Croatian entry into the Eurozone and Schengen opens up a far better perspective for Croatian exporters, and the decisive factor for the effects on exports and the overall economy will be that the Croatian Government reacts promptly to EU processes and reacts in the right way.

"For us, 2022 was the year of further European integration, and now comes the year of real struggle to maintain the economy," says Bago.

Hrvoje Stojic, chief economist of the Croatian Association of Employers, recalls that Croatian exporters and their products have already benefited from European integration. Since joining the EU in 2013, it has more than doubled to date. Entry into the Eurozone combined with Schengen accession, along with existing membership in NATO, will additionally structurally include Croatian exporters in global value chains, and as such open new opportunities for significant export growth.

"The disappearance of the currency risks, the strong drop in exchange fees, the improvement of financing conditions thanks to the improvement of the perception of risk, also give greater predictability when conducting business. Stronger institutional and market pressures have a positive effect on the competitiveness of private companies and their tendency to invest in order to maintain or strengthen competitiveness. Viewed at the level of a comparable credit rating, membership in the Eurozone enables Croatia to have a 1.5 to 2 percentage point lower cost of financing compared to those who aren't Eurozone member states," Stojic points out.

Greater room for wage growth

Stojic also expects that these positive influences will open up more space for wage growth based on productivity growth, and in the event of a new systematic financial crisis, Croatia will be able to count on the intervention mechanisms of the ECB through access to the European Stability Mechanism, which reduces the risk of potentially expensive banking and balance of payments crises and ultimately serious risks to the country and the domestic economy.

Joining the currency union and the loss of the independent monetary policy of the CNB means the opening of the possibility of enjoying an active monetary policy, which until now, due to exchange rate restrictions, was simply not possible. In addition to that, financial integration with the institutions and the financial market of the Eurozone will be further deepened, making it likely that the costs of not only credit, but also non-credit instruments of financing and export insurance will be somewhat lower.

For more, make sure to check out our news section.

December the 31st, 2022 - Croatian hospitality establishments, particularly bars, restaurants and cafes have been airing the last minute concerns as we are set to introduce the euro as Croatia's official new currency tomorrow. Will they all end up being more or less exchange offices for the next two weeks or so?

As Poslovni Dnevnik writes, will Croatian hospitality establishments double up as unwilling exchange offices during the first half of January? Who will have enough euro coins and cents and who won't? How will cash registers be closed on New Year's Eve? These are all questions currently troubling Croatian hospitality establishments, as with store closures, they'll be the first port of all for all euro transition confusion.

Cash problems

Dalibor Kratohvil, the president of the Croatian Chamber of Trades and Crafts (HOK), said that the state was asked, considering that on New Year's Eve there will be a lot of pressure on Croatian hospitality establishments, to continue making it possible to return the difference when giving people change in kuna.

"The Ministry answered saying that it is clearly written in the Euro Act, in Article 40, Paragraph 2, which says that in the first two weeks of January, in exceptional cases, they can return kuna, if there are no euros available to them at that moment in time,'' said Kratohvil, noting that this is only in exceptional cases such as a shortage of cash in euros.

When speaking about the concrete adaptation of the hospitality sector to the introduction of the euro, Hrvoje Margan, vice-president of the Catering Guild at the Croatian Chamber of Trades and Crafts, said that as far as the technical part is concerned, anyone who is a little more serious about things is ready for it and can do it.

"I think we're all somewhat ready and have a vision of how we'll work, and the biggest problem was that, in order to take some kind of advance supply of money, you had to have enough money in the bank account, and it's not like we're sitting on millions," he stated.

Closing the cash register

He added that IT experts did a good job and prepared the software for the transition to the euro. Thus, if and when a guest pays in kuna, the difference that they must return will be automatically converted into euros. Explaining what will happen at midnight from December the 31st (today) to January the 1st, he stated that, in order to be able to start anew on January the 1st, Croatian hospitality establishments would have to close their cash registers on December the 31st, make a calculation in kuna and then start working again. They'd then have to close all open items until then. The state, he added, came to the rescue and raised the cash limit from 10,000 kuna to 40,000 kuna for this purpose.

Clarifying what could be problematic when the euro comes into force, the vice president of the Catering Guild said that it isn't really a problem if a guest has a bill of 15 euros and pays it with a 200 kuna note, but when someone pays for a coffee of 1.60 euros with a 500 kuna note or more, then issues will arise.

"We're all afraid, not only cafe, restaurant and bar owners, but others as well, of becoming exchange offices," he stated, and when asked what about rounding up of prices and expected price increases, he added that he doesn't expect that to happen because in this situation, when people are looking at every single kuna, there isn't really much room for that.

"I don't know if any of my colleagues touched their prices at all, or if there's been price rounding, I don't expect that there will be any big price increases. Specifically, if we take for example coffee, which is now 12 kuna, it will cost 1.60 euros, or 12.07 kuna, from the New Year onwards, so there won't be a significant difference," he concluded.

For more, check out our dedicated news section.

December the 18th, 2022 - Cafe culture is a big deal in Croatia, from business meetings to concluding contracts to getting together with the neighbours to gossip about other neighbours, it's more or less all done over a (usually) very tiny cup of coffee that one somehow manages to make last for three hours. The sight of kuna and lipa coins left on tables on top of receipts is also common, but how will that sight look following Croatian Eurozone membership?

Croatia is set to scrap the kuna and adopt the bloc's single currency in just two weeks, and there are already issues arising surrounding cash, how to get it, and how to avoid getting stuck with large denominations of euros in cash that you actually can't spend anywhere.

As Poslovni Dnevnik writes, the changing of the national currency is now very much in full swing and many people are already ready to carry out their business operations with the new currency as early as today. However, Dnevnik Nova TV reports that some are worried that there could still be some problems in the first days following the euro's adoption here.

When the first customer wants to come and pay for a coffee in euros in the new year following Croatian Eurozone membership, restaurant owner Franz Letica says he will definitely be ready. He says that he could do business in euros today if it was necessary.

"As far as catering and hospitality in general is concerned, I guess our sector was born ready because we're used to constantly introducing something new and seeing things change at the last minute, so that's normal for us," says Letica.

However, some people are worried about the possibility that in those first days of Croatian Eurozone membership, before there is much money in circulation, customers will come to them trying to pay for items with large denominations of 50 or 100 euros. After they return the rest, they wonder if they will have enough money to return any change to others.

Franz has his own solution for that. He says that it is unacceptable that 100-euro notes should ever be accepted for coffee, and he cites Germany as an example: "You cannot buy bread in a store with a 200 or 500 euro note, you must be prepared and take small change with you."

The Croatian National Bank says that the law does not stipulate whether or not a restaurant or shop or cafe owner or indeed anyone else can refuse an excessively large banknote in exchange for goods or services being sold or rendered. 

For more, check out our news section.

December the 9th, 2022 - This week in Croatian politics, we've finally had a bit of good news - Croatia has successfully filled all of the requirements to finally join Schengen and will officially do so on the 1st of January, 2023, on the very same day of Eurozone accession. That isn't all, though...

After a lot of nail biting and waiting, Croatian Schengen accession has been officially approved

After much deliberation, a lot of back and forth and eyebrow-raising from Austria apparently not being quite understood, Croatia got the green light to become a Schengen member state on the first day of 2023. Austria's initial issues with proposed Schengen expansion (which would have also included Romania and Bulgaria, but that won't be the case for now) weren't with Croatia as a country but with Schengen expansion as a whole. One Austrian minister was quoted as saying that Schengen is all well and good until there's a political issue, when it suddenly ''ceases to exist''. I dare say that for as excellent as Schengen is, he's far from alone in those opinions.

Despite all of that, and despite reports from the likes of the Financial Times (FT) that neighbouring Hungary and Viktor Orban could be the ones to throw a spanner in Croatia's Schengen plans, both Austria and Hungary (and even Slovenia, which was expected to cause many more issues than it actually did) gave the green light alongside the other deciding nations.

Croatia is now set to become a fully-fledged member of the Schengen area and in less than one month, border controls will be abolished at land, as well sea border crossings, and then on March the 26th, 2023, the same will be done at the country's airports.

Bulgaria and Romania apparently did not receive support because there was a lack of consensus on them joining. 

"Croatia received the unanimous support of the Council for Internal Affairs and Justice - on January the 1st, 2023, we will become a member of Schengen! During this, a year of delivery, we achieved the government's strategic goals, from which both people and the economy will benefit the most!" Plenkovic tweeted after the official announcement.

ATMs cause trouble as we approach Eurozone accession

Moving the Schengen celebrations and the promise of totally free movement aside for a moment, the same unfortunately can't be said for the freedom of cash withdrawals as we approach the day on which we introduce the euro as our official currency. Thousands of ATMs were put out of function this past week as we prepare to enter the Eurozone, leaving many people scratching their heads about where to get cash. Some ATMs have already had the kuna drained from them and been filled up with euros, and around 40 percent of them across the nation will eventually become unavailable as we get closer to D-Day, or should I say E-Day. 

Throughout this final month in which the kuna remains the country's official currency, around 2700 ATMs will be put out of function. Only those which have the ability to allow both kuna and euro withdrawals will continue to work, with the rest gradually being adapted to the euro.

The mass shutdown of ATMs will begin in about ten days, with a small number being shut down by December the 15th, and from that date, the Croatian Association of Banks (HUB) will publish an interactive map of all ATMs in Croatia that remain active in real-time so that people know where they can withdraw banknotes.

It's worth noting that this is also the time to get that old sock with rolled up notes in it out, lift up the mattress, and check your old coat pockets for 10 and 20 kuna notes. The traditional Croatian practice of keeping banknotes in odd items of clothing hidden somewhere in the house could come back to bite those who fail to bank their extra cash lying around so that it can be automatically converted to euros free of charge when we make the official switch over from the kuna to the euro on 2023's maiden day.

PM Andrej Plenkovic says that those who are against Ukrainian soliders being trained here will have to carry that on their conscience for a long time to come

There has been a lot of talk about the idea and then the plan to train Ukrainian soldiers here in Croatia. President Zoran Milanovic (SDP) quite openly said that he was very much against the idea and that Croatia's unwavering support for Ukraine and warm welcome to Ukrainian refugees said enough. He believed that training soldiers to fight against the Russian invaders here could end up bringing unwanted problems to Croatia's doorstep, a mere 30 years after a bloody war of its own.

Others are totally for the idea, and this includes other EU countries who have agreed to also train Ukrainian soldiers in their fight against continued Russian onslaught. 

Plenkovic claimed that he hasn't yet heard any valid, logical or reasonable argument for possibly not making a decision on Croatia's participation in the EUMAM military aid mission to Ukraine and said that the burden of political responsibility isn't on those who are in favour, but on those who aren't. He said he'd be voting for it and that he didn't understand the political logic of those who have reservations about that decision and mission.

How parliament members will vote on Croatia's participation in the EU military aid mission to Ukraine "will be a mark they'll carry with them in the long term," he added.

It's important that Croatia supports Bosnia and Herzegovina on its EU candidate path, according to its senior international representative

During a recent meeting with the State Secretary for Europe at the Ministry of Foreign and European Affairs, Andreja Metelko Zgombic, the senior international representative in Bosnia and Herzegovina, Christian Schmidt, assessed that it is important for that country that Zagreb fully supports its acquisition of EU candidate status.

"Croatian support for Bosnia and Herzegovina's candidate status for EU membership is very important," wrote Schmidt on his Twitter profile. Croatian Prime Minister Andrej Plenkovic also expressed his expectation that the Council of Europe would be able to approve the candidate status of Bosnia and Herzegovina by the end of the year. Earlier on, the European Commission had indeed recommended that the Council make such a decision.

The German politician at the head of the international administration in Bosnia and Herzegovina assessed having EU candidate status as important for the entire country. "Obtaining EU candidate status would be a much-needed boost for the country and an important sign for people that the enlargement process is working for Bosnia and Herzegovina," he said.

During that same day, State Secretary Metelko Zgombic headed the delegation that held working consultations with colleagues from the Ministry of Foreign Affairs of Bosnia and Herzegovina. Bosnia and Herzegovina's Deputy Minister of Foreign Affairs, Josip Brkic, also stated on his Twitter that the interlocutors expressed satisfaction with the "extremely good bilateral relations between Croatia and Bosnia and Herzegovina".

"Croatia remains the most important supporter and friend of Bosnia and Herzegovina on its path to both the EU and to NATO," said Brkic.

President Zoran Milanovic visited Chile, the home of a huge number of Croats and their descendents

President Zoran Milanovic went to Chile for the first time recently, on his first trip to South America since taking office in February 2020. It is a vast continent of many opportunities where around 600,000 Croats and their descendents live today. Approximately 160 years ago, the very first wave of Croatian migrants, forced into making difficult decisions by poverty along the coast, set out for Chile. Two more emigrant waves to South American countries followed later, motivated by both economic and political reasons. I won't go into the political ones here.

Historian Ljuba Boric, who works at the Centre for Migration Studies at the University of Santiago de Chile, says that the first Croats arrived there from all over the Dalmatian coast between 1860 and 1870 because of a disease of the grapevines and olive trees which sank their (typically) only means of making a living. They often took up mining careers in Chile.

Milanovic will spend a week in Chile and among other things he;ll meet with Chilean President Gabriel Boric who has been in power since March. Ljuba Boric, who is also related to Gabriel Boric, says that the president's great-grandfather Ivo Boric and his brother Sime came from the island of Ugljan (close to Zadar) to Punta Arenas in about 1885.

Institutions from Croatia, a country with 3.8 million inhabitants according to the 2021 census, have been trying to determine the number of Croats in all of South America for some time now, claiming that approximately 600,000 ''members of the Croatian nation and their descendants live in various countries in South America.''

Milanovic says that the recent reports about bombs being in various large shopping centres have nothing to do with the situation in Ukraine

If you've been following the news over the last few months, every now and then there are very strange reports about shopping centres (usually in Zagreb) being evacuated because there have been reports of a bomb being planted there. Odd indeed. They have all been false alarms and for some extremely bizarre reason, it has become somewhat of a trend to claim bombs are being hidden in shopping centres. Odd indeed, yet again. One of the people who made such a claim was a security guard who simply didn't want to come to work. He has since been dealt with by the authorities, and probably regrets not just calling in sick. Hopefully anyway.

This week, the bomb scare/shopping centre stories got a bit more of a spring in their step and more such scares were announced in multiple shopping centres in multiple areas. In sixteen counties, to be exact! Milanovic has been quick to squash the rumours that it has anything at all to do with the Russia-Ukraine war. On Tuesday he said that he thinks that these weird false reports about bombs have nothing to do with the horrific ongoing situation in Ukraine and said that those making these false claims should be located and arrested because creating panic among people like this for no reason is an act punishable by law.

"Find and aprehend these individuals - these are obviously people who don't have these means (bombs) at their disposal, nor do they have anything to do with them, but they have the capacity to sow fear and panic among people, and that's a punishable offence,'' Milanovic told reporters in Dubrovnik. He added that he believes that it has absolutely nothing to do with the war between Russia and Ukraine, as some have been quick to try to claim. He also said that no normal person would show any sort of support to Russia.

Dubrovnik honoured its defenders and marked the 31st anniversary of the darkest day in its history - the siege

The 6th of December 1991 will remain etched deeply into the memories of all those who were there when the JNA attacked the city, and will forever be an unhealed wound for the Pearl of the Adriatic. 

On the aforementioned date back in 1991, the City of Dubrovnik was viciously attacked by the JNA (Yugoslav Peoples Army), it was the culmination of a siege which sought to raze the globally adored UNESCO World Heritage Site to the ground. A similar and unfortunately successful action was seen much more recently in Palmyra at the hands of ISIS. The horrific bombardment of Dubrovnik resulted in international condemnation of the JNA and rightly became a public relations disaster for Serbia and Montenegro, contributing to and furthering their diplomatic and economic isolation and winning them powerful enemies across Europe and the rest of the world. It was a shot in the foot from which the still-estranged Serbia has hardly ever recovered in the eyes of the international community, and rightly so.

You can read much more about that day, the lives that were lost and the tremendous damage that was done by clicking here.

For more on Croatian politics, make sure to keep up with our dedicated section and follow our Week in Croatian Politics articles which are published every Friday.