December 30, 2022 - After all Croatian citizens deposit their Croatian kuna and lipa in the banks, there will be enough money in physical form to pave 50 kilometres of road or mark the way from the bottom to the top of Mount Everest. But, of course, the banks will not do that, and this huge physical mass of money will be used for isolation purposes. For reference, the estimate is that there will be 5,200 tonnes of coins, which is the weight of 124 Zagreb trams. There will also be more than 500 million banknotes.

As 24Sata writes, in order not to further pollute the environment by burning banknotes that contain colouring, they will not be burned but shredded into pieces smaller than a millimeter. They will then be used as insulation in public construction works. After 28 years, which is how long the Croatian kuna has served in Croatia, it will be concreted into the country's history, literally. 

"When it's replaced with the euro, there will be the same amount of money in circulation as when the kuna was around. So, for example, the number of 100  Croatian kuna banknotes will be replaced by a proportional number of 10 and 20 euro banknotes", explains Tihomir Mavricek, the executive director of the cash sector of the CNB for Hina.

Fun fact, the Croatian kuna proved to be a fairly safe banknote that was not often counterfeited, as confirmed by the CNB. They explain that 200 kuna denominations were the most counterfeited, about a hundred per year. For example, in 2019, 506 banknotes were counterfeited, 157 in 2020, and 198 in 2021. For comparison, 4,280 euro banknotes were counterfeited in 2019, 237 in 2020, and 228 in 2021. Counterfeit money directly damages the person who receives such a note.

The withdrawal of kuna surpluses began in September. Around that period after each tourist season, surplus kuna is usually withdrawn into the vaults. The amount has increased this year. The kuna will be withdrawn gradually, banknotes can be changed indefinitely, and coins for three years. The CNB clarified that they know how much money they will print and mint each year. The cash cycle of money in the CNB starts from planning the needs for banknotes and coins for the following year. It depends on many factors, such as inflation, expected growth rates, etc.

Then the CNB orders money from printing shops and places where kuna and lipa are minted. From the CNB vault, it is shipped by trucks accompanied by special agents to eight cash centres in Croatia. Banks are supplied with cash from these centres, planning their needs daily depending on client announcements and the needs of the ATM network. Over the past 11 years, the amount of money in circulation has doubled and reached a level between HRK 41 and 42 billion. Mavricek says this was influenced by the increase in the standard and accumulated inflation. In recent months, businesses and citizens have had around HRK 30 billion in circulation. It will all become insulation.

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

December 1, 2022 - Tihomir Mavricek, executive director of the Cash Sector of the CNB, spoke about the introduction of the euro in Croatia for the N1 television. One month before the introduction of the euro as an official means of payment in the Republic of Croatia, citizens were able to purchase initial packages of euro coins.

Poslovni reports. "The initial package of euro coins contains 33 coins, three coins of 2 and 1 euro, 5 of 20, 50 and 10 cents, 3 of 5 cents, 4 of 2 cents, and 5 of 1 cent. The total value is 13.28 euros, and our citizens will be able to get it for exactly one hundred kunas in all branches of banks, post offices, and Fina", said Mavricek.

"They must not be used for payment until January 1, 2023," he emphasized for N1.

He also clarified why these euro coins are not allowed to be used by citizens and why they would not be valid in, for example, Slovenia. With the first of January, the euro becomes a means of payment.

"Until then, citizens could have problems if they pay with these coins, and they could also receive a fine because it is not a legal means of payment until then," said Mavricek.

He states that this is one of the last steps to prepare for introducing the euro in Croatia. He also referred to euro banknotes. "All the necessary quantities of euro banknotes are in our vaults; they are already being distributed to the banks."

He added that ATMs would be adjusted in December to dispense euros from January. "From January 15, the entire network of ATMs will dispense euros."

Mavricek mentioned another critical change that will facilitate the transition to the euro. "The CNB has agreed with the banks that from December 15, the fee for withdrawing banknotes from ATMs of other banks will be abolished, for kuna until the end of December, and for euros from January 1 to 15."

What will happen to kuna coins after the changeover to the euro?

"From the first of October, when we urged our citizens to deposit extra kuna in banks, coins started to arrive, and they will be taken care of safely. This means that in three years, they will be sold as secondary raw materials when they cease to be a means of payment. It is a huge logistical task, and it takes time," Mavricek said, adding that kuna coins can also be recycled into euros.

"We will process and cut the banknotes on the banknote processing systems, and then the rest will be taken care of," he concluded.

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

November 24, 2022 - Euro in Croatia: on the first day of 2023, the euro will become the official currency in Croatia. Paying in kuna (only in cash) will be possible until January 14. Preparations for the introduction of the euro in Croatia from January 1, 2023, are proceeding without any problems and according to plan, as was pointed out this week at the session of the National Council for the introduction of the euro.

As Poslovni / N1 write, Croatian citizens are already mostly familiar with what awaits them from the first of January. One of the questions that remain, however, is what will happen to the utility bills for December, which will arrive in January.

The utility bills for the December consumption will be issued in January 2023 and will be expressed in euros, according to the Croatian Association of Bankers.

For all payment slips that the citizens receive in advance and on which the amount of payment is in kuna, and they pay them after the introduction of the euro, the bank is obliged to make payment in euro in the amount corresponding to the amount of kuna specified on the payment order. The bank will act this way until July 1, 2023, says the Croatian Association of Bankers.

It is crucial to emphasize, they remind, that from the 5^th of September until the 31^st of December 2022, the dual pricing continues. This means that the final amount of the bill will be in HRK and EUR with the fixed conversion rate specified.

There are exceptions to that:

• value shown for prepaid electronic communication services (prepaid vouchers)
• the value and amount stated on the payment order based on an invoice or other individual document, i.e. based on the displayed price
• the value shown on cards for public payphones
• the value printed on the SIM card packaging

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

November 3, 2022 - There are less than two months left until the introduction of the euro. And while the citizens are already slowly getting used to the new currency, with the mandatory dual display of prices, preparations for the practical introduction of the euro are in full swing. What about the ATMs?

As HRT reports, from the first of December, Croatian citizens will be able to buy initial packages of euro coins, and in the middle of next month, the adaptation of ATMs for the payment of banknotes will begin. "For now, everything is going according to plan. Banknotes are arriving continuously, we are minting our Croatian coins. There is a lot of work, but we will be ready on January 1", said CNB Governor Boris Vujčić, in a guest appearance on HTV's central Dnevnik.

When asked what will happen from the night of December 31 to January 1, he said that there is a combination of computerised/automated and purely physical cash distribution.

"ATMs must be ready to dispense cash in euros, although we will have a co-circulation of two weeks between kuna and euro. A large number of ATMs will deliver euros on January 1st, and some will be able to deliver kuna until December 31st. We will coordinate this so that it is easy for people to get cash", he said, pointing out that it would be easiest to deposit cash in banks where it will be automatically converted on January 1.

He also commented on the inflation

"The inflation is caused by completely different things, not the introduction of the euro. It will increase somewhat after the introduction of the euro, but very little compared to this rate of inflation that we have, which is primarily caused by disruptions in the energy market, and partly also in the food market. The euro itself, when we introduce it, will contribute very little to the inflation rate", Vujčić pointed out.

The European Central Bank's decision to increase key interest rates entered into force today.

"In Croatia, the largest part of loans are cash loans - almost a million, and they are practically all at a fixed interest rate. Of the housing loans, of which there are a little over 200,000, 15 percent are fixed, and the rest are variable. Those who will feel the increase in interest rates are those whose rates are not fixed, he said and explained: 1 percentage point increase in interest rates on a medium loan, a medium housing loan, increases the monthly repayment installment by approximately 5 percentage points. So, on an average medial loan with an annual repayment of 3,600 euros, we have an increase in repayment by approximately 180 euros per year. This is not something people should worry about", the CNB governor pointed out.

He also said that the recession is not here yet

"We can see a slowdown in economic activity. Our growth forecast for next year is 1 percent, but there are risks. The biggest risk is the question of whether there will be a reduction in energy sources or not. If there is no reduction, then we will get through this winter relatively well, and if there is a need for a reduction, then we have a recession", concluded Vujčić.

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

ZAGREB, 10 July 2022 - The Economic and Financial Affairs Council for EU (Ecofin) convenes on Tuesday to adopt the final three legal acts which will enable Croatia to introduce euro as its currency on 1 January 2023.

One of those three acts concern the decision on the adoption of the euro by Croatia.

Also the amendment will be adopted to the provision whereby the 19-member euro area will welcome Croatia as its 20th member. Currently the euro area has more than 340 million inhabitants and is the second strongest economy globally. The euro zone accounts for 15% of the global GDP.

And, the third legal act concerns the fixing of the conversion rate of the kuna for the euro.

The outgoing minister Zdravko Marić will attend the Ecofin meeting in Brussels for the last time in his capacity as the Croatian minister of finance after he recently resigned from the government.

Deeper integration

Entering the euro area is one of the remaining two strategic goals for Croatia's deeper integration in the European Union. The other goal is the country's admission to the passport-free Schengen Area, and the decision to this effect is likely to be adopted in September.

As a result, Croatia is to complete its deeper integration into the EU in 2023, ten years after it joined the European Union.

Croatia's fulfillment of all convergence criteria for euro area

On 16 June 2022, the Eurogroup endorsed the positive convergence assessment of Croatia, agreeing that Croatia has fulfilled all convergence criteria required to join the euro area, proposing that Croatia should introduce the euro on 1 January 2023.

The Eurogroup's move ensued after on 1 June both the European Commission and the European Central Bank (ECB) issued the convergence reports informing the EU Council about the progress made by Member States towards achieving the criteria for joining the euro area.

One of the four criteria is price stability.

Furthermore, the aspirant is expected to have sound and sustainable public finances which means that the country should not be under the excessive deficit procedure.

Also, exchange-rate stability is one of the criteria and under this criterion the country has to participate in the Exchange Rate Mechanism (ERM II) for at least two years, without strong deviations from the ERM II central rate and without devaluing its currency's bilateral central rate against the euro in the same period.

And finally, long-term interest rates are included in the criteria, which should not be higher than two percentage points above the rate of the three best-performing member states in terms of price stability.

In both reports on 1 June, Croatia received a very favourable assessment: not only did Croatia meet all the criteria, but the sustainability of its convergence has been assessed more favourably by the ECB than in its 2020 report and much more favourably than in its earlier reports.

The reports highlight that the Croatian legislation is compatible with the EU Treaties and the Statute of the European System of Central Banks and of the European Central Bank.

Croatia was assessed more closely than the other countries under review, given the fact that the Croatian authorities have announced their intention to adopt the euro as of 1 January 2023.

HNB enters Eurosystem, monetary authority of euro area

Croatia's entry into the euro area also means that the Croatian National Bank (HNB) enters the Eurosystem, which comprises the European Central Bank (ECB) and the national central banks of the Member States whose currency is the euro.

The Eurosystem is the monetary authority of the euro area with its primary objective being the maintenance of price stability for the common good. Acting also as a leading financial authority, the Eurosystem aims to safeguard financial stability and promote European financial integration. 

The ECB has the central role in the Eurosystem, and the main body of the ECB is its six-member Executive Board which consists of the President, the Vice-President and four other members. All members are appointed by the European Council, acting by a qualified majority.

The ECB Governing Council is the main decision-making body of the ECB. It consists of the six members of the Executive Board, plus the governors of the national central banks of the euro area countries.

Dual price display

In September, the four months prior to the switching to the euro, the obligation of dual price display both in national currency (kuna) and the euro goes into effect in Croatia.

The two-week period of dual circulation of both currencies will run as of 1 January.

Coins produced in Croatia

Euro banknotes are taken from the ECB, while euro coins will be produced in Croatia. Euro banknotes are identical in all the euro zone's members, while the euro coins have national sides with national symbols.

There are eight euro coin denominations, ranging from one cent to two euros.

Concerning Croatia's symbols, all coins will have the Croatian chequerboard in the
background.

The coin of 2 euro also includes Croatia's map, the coin of 1 euro has the motif of marten, 10c, 20c and 50c coins have the motif of researcher Nikola Tesla, while 1c, 2c, and 5c coins have the HR letters written in the Glagolitic script.

Coins with the Croatian national side can start to be minted once the Council of the EU adopts a decision on the introduction of the euro in the Republic of Croatia.

(Hina) ms

ZAGREB, 7 May 2022 - Finance Minister Zdravko Marić said on Saturday he was pleased with Fitch's latest credit rating of Croatia, adding that accession to the eurozone will mean that the rating will additionally improve.

Fitch Ratings yesterday reaffirmed Croatia's investment rating at BBB with a positive outlook, estimating that the recovery of the country's tourism industry will support the economy at a time of slowing exports and that eurozone entry will mitigate financing risks.

Speaking to the press, Marić said citizens, enterprises and the government could be satisfied because the credit rating was maintained.

A very positive assessment, a very welcome report in these circumstances which gives us an incentive to continue all that we are doing, with a very likely positive unfolding of events in the remainder of the year as regards Croatia's credit rating, he said.

Fitch revised down its projection of Croatian growth for 2022 from 4.4% to 3.3%, citing base effects, a sharp slowdown in household consumption as high inflation affects consumer spending, as well as the effects of Russia's aggression on Ukraine.

Marić said that was understandable given that about ten days ago the government revised down its GDP growth forecast for this year to 3%.

In the fiscal part, Fitch's report is in line with the government's efforts, achievements and projections, the minister said, underlining that last year the deficit was reduced much more than expected and that this trend would continue this and in the years ahead.

As for potential risks for the rating's trend, Fitch mentioned an increase of the government debt and a significant delay in Croatia's eurozone accession.

"I'm deeply confident that none of that will happen. Actually, I'm sure of that," said Marić.

He recalled that since 2016, the public debt-to-GDP ratio has been decreasing every year except in 2020. "That's one of the basic characteristics and traits of this government's fiscal policy and it will continue."

Speaking of Croatia's eurozone journey, Marić said convergence reports by the European Central Bank and the European Commission were expected early next month. He also mentioned the Maastricht criteria - exchange rate, price and interest rate stability, budget deficit and government debt.

Marić said the deficit and the government debt were the fiscal indicators which opened the prospect of introducing the euro to the greatest extent. "If we hadn't consolidated public finance and done all that we have... we would have waited much longer."

Inflation in April expected to accelerate further

Speaking of inflation, Marić said the data for April would likely show an additional acceleration of the average price rise rate, but without a significant deviation from the average.

In March, inflation in Croatia went up 7.3% and the government has forecast its growth for this year at 7.8%.

Under the Maastricht criteria, Croatia's inflation over the past year should not exceed 1.5 percentage points in relation to the average inflation in three EU member states with the lowest inflation.

Marić said there were clear signals that the lower inflation rates in some member states, for example Greece, would be treated as deviation variables and that Croatia would meet this criterion, too.

He reiterated that Croatia planned to enter the eurozone on 1 January 2023 and that the final decision was expected by the first half of July this year.

At the moment, the introduction of the euro has a virtually negligible impact on inflation, he said, reiterating that in the last seven states which introduced the euro, the inflationary effect in the first year was between 0.2 and 0.4 pp on average.

Reforms as prerequisite for tax relief

Marić was also asked about a reform package proposed by the Croatian Employers Association  which is aimed at raising the net pay and includes raising the non-taxable income and reducing pension and healthcare contributions as well as income tax.

In order to further reduce the tax burden on labour, it is necessary to create the prerequisites by reforming the pension system and especially healthcare, he said, adding that the basic intention of the government's tak reform has been to reduce the tax burden on labour and profit.

For more, check out our politics section.

ZAGREB, 3 May 2022 - Opposition Bridge party MP Zvonomir Troskot said on Tuesday that Croatia should postpone the introduction of the euro, warning that its introduction would cause an additional rise in prices.

"The national economy is not ready yet for euro introduction, that decision should be postponed during this time with the war current in Ukraine, armament in Europe and high inflation. It would not be a prudent move," he told a news conference.

Troskot warned that the introduction of the euro would cause additional inflation, recalling in that context the introduction of the euro in Slovenia and noting that it would cause a drop in the standard of living and a new wave of emigration.

ZAGREB, 26 April 2022 - The Croatian National Bank (HNB) will soon embark on a campaign for the euro replacing the kuna as the national currency which will be very extensive, as befits such an important event as Croatia's accession to the euro area on 1 January 2023, Večernji List daily said on Tuesday.

To raise public awareness of the introduction of the euro, the HNB has prepared a tender for the creation and implementation of a national information campaign, estimated at HRK 27 million, for carrying out the national plan of replacing the kuna with the euro.

As part of the campaign, HRK 6.8 million is envisaged for designing the promotional campaign, HRK 14.5 million for a media advertising strategy, HRK 1.55 million for PR and organising public events, HRK 800,000 for a call centre, HRK 400,000 for a public opinion poll, and HRK 2.95 million for the Euro on Wheels travelling exhibition.

The campaign is aimed at acquainting citizens with all the advantages of introducing the euro, informing them about the date of the introduction, the fixed exchange rate and trends in consumer prices, and at sending the message that the euro will not result in price rises that would undermine living standards.

Citizens will also be informed about how the government will protect them from unjustified price rises. A public opinion poll has shown that a considerable percentage are concerned that the euro might result in major price prices.

Another aim of the campaign is to increase public support for the euro, reducing citizens' insecurity and the feeling that they will be cheated in the process of switching to the euro.

It will be stressed that introducing the euro as the national currency leads to faster, more favourable and safer doing business, bigger investment, economic growth and higher living standards.

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

ZAGREB, 19 March 2022 - US economist Joseph Stiglitz, who won the Nobel Memorial Prize in Economic Sciences in 2001, has said that Croatia should take some more time before the changeover to the euro, assessing that disadvantages could be higher than benefits due to the ongoing geopolitical risks.

This is an open issue, said this 79-year-old researcher in his address to Croatian reporters in Brussels where he attended the 8th Cohesion Forum.

The 8th Cohesion forum is a large-scale political event held every three years, bringing together high-level representatives from European institutions, central governments, regional and local representatives, economic and social partners, NGOs and academics to focus on the major challenges of European cohesion policy.

Commenting on Croatia's plans to adopt the euro as sole legal tender, Stiglitz said on Friday that from the economic point of view, potential benefits are more restricted than potential costs.

There are arguments in favour of taking some more time before the country's entry into the eurozone. However, it is a political decision, he said.

Croatia is making preparations for the changeover to the euro in 2023, and the country's top officials, including Prime Minister Andrej Plenković, highlight Croatia's readiness to adopt the euro.

Stiglitz, who is the author of the book entitled "The Euro: How a Common Currency Threatens the Future of Europe" said during the European Forum Alpbach  in 2020 that the euro, as sole legal tender, deprived a country of two important instruments which the researcher deems to be essential in adjusting a national economy to shocks. One of those instruments is the possibility of adjusting the exchange arrangements, that is its capacity of using monetary policies and consequently changing interest rates, he explained then.

The euro area currently has 19 members. All EU countries, except Denmark, have the obligation to introduce the euro. Denmark participates in ERM II.

In July 2020, Croatia and Bulgaria entered the the Exchange Rate Mechanism II (ERM II), the key step to entry into the euro area. Until then Croatia had met all criteria to join the euro area except for membership in ERM II.

Upon Croatia's admission to ERM II, Prime Minister Plenković said that the admission to the ERM II meant a lot for the country's financial stability and strengthened its reputation, and also pointed out a high euroisation in Croatia.

For instance, 71% of household savings have been kept in the euro in the last eight years. Also more a than a half of loans are pegged to the euro. Foreign visitors coming from the euro area's member-states generate as many as three fifths of overnight stays in Croatia, and 57% of the value of the commodity exports are to those countries.

ZAGREB, 1 March 2022 - After the euro is introduced in Croatia, consumers must not be in a less favourable position than before the common European currency was introduced, Finance Minister Zdravo Marić said at the conference "Croatia as part of the euro area" in Varaždin on Tuesday.

The conference was organised by the Večerjni List daily and the Vindija food processor. Marić said that regardless of the current situation and challenges Croatia is faced with, it has to see the priorities that have been worked on for many years, and one of those is introducing the euro currency. 

Introducing the euro is considered to be positive for the economy and society.

"I consider that Croatia has more benefit from introducing the euro than any possible lack or fault. The changes and adaptations that are required to be implemented need to emphasise and realise all those benefits while fear and faults have to be brought to the least possible measure," said Marić.

Marić recalled that loans and deposits would be converted to the euro automatically on 1 January 2023 while cash would be exchanged without any fee in the first year in commercial banks, the FINA agency and post offices. After that, it will be possible to exchange coins at the Croatian National Bank (HNB) for a period of three years and banknotes for an unlimited time.

Vindija food company CEO Nenad Klepač said that he mostly expected Croatia to benefit from joining the euro area.

"It will contribute to the long-term improvement of living standards for the Croatian population. We see a lot of new opportunities, primarily on the markets of the euro area, in 19 countries with a population of 340 million," said Klepač.

Erste Bank CEO Christoph Schoefboeck said that the introduction of the euro would be exceptionally demanding and expensive for Croatia's banking system and that the one-off cost was estimated at 80-100 million euros. Schoefboeck nevertheless believes that euro introduction will have a positive effect on the Croatian economy and society.