May 4, 2023 - The unemployment rate in the eurozone decreased marginally in March, dropping by 0.1 percentage points compared to the previous month, and unemployment in Croatia decreased by the same amount, according to a Wednesday Eurostat report. In the 20-member eurozone, the unemployment rate measured by the International Labor Organization (ILO) methodology was 6.5 percent in March, dropping from 6.6 percent in comparison to February, according to data from the European Statistical Office.

In the EU, as Index writes, it was six percent, remaining at the previous month's level. For comparison, in March 2022, it reached 6.8 percent in the eurozone and 6.2 percent in the EU. Eurostat estimates there were 12.96 million unemployed in the EU in March 2023, of which 11.01 million were in the eurozone.

A comparison with February shows that the number of unemployed in the EU decreased by 155,000 and in the Eurozone by 121,000. On an annual level, their number decreased by 353 thousand in the Union and by 365 thousand in the eurozone.

Croatia in the company of Lithuania and Slovakia

Spain and Greece are still the only ones with a double-digit unemployment rate, which reached 12.8 and 10.9 percent in March, respectively. Italy and Sweden follow, with unemployment rates of 7.8 and 7.3 percent, respectively. In Croatia, the unemployment rate measured by the ILO methodology was 6.2 percent in March, dropping from 6.3 percent in February. In March 2022, it amounted to 6.7 percent.

According to Eurostat data, 112,000 citizens were unemployed in Croatia in March, three thousand fewer than in the previous month, according to revised data. The tables show that compared to the same month last year; their number decreased by 10,000.

The closest to Croatia in March were Slovakia and Lithuania, with an unemployment rate of six and 6.4 percent. The Czech Republic had the lowest unemployment rate in March, at 2.6 percent. Germany and Poland follow, with 2.8 percent, and Malta is close behind, with an unemployment rate of 2.9 percent.

Marginal drop in youth unemployment

The unemployment rate of citizens under the age of 25 was 14.3 percent in the eurozone in March, having slipped by 0.1 percentage point on a monthly basis. At the same time, in the EU, it dropped by 0.2 percentage points to 14.3 percent. In March of last year, Eurostat tables show it was 14.2 percent in both areas.

The statistical office estimates that 2.76 million young people were unemployed in the EU in March, of which 2.26 million were in the eurozone. The number of unemployed young people in the eurozone in March was thus higher by 91 thousand than in the same period in 2022, and in the EU by 105 thousand, Eurostat announced.

Four above 20 percent

Spain had the highest youth unemployment rate in March, at 29.5 percent. Greece follows with 24.2 percent, Italy with 22.3 percent, and Sweden with 21.9 percent. Among the EU countries with data available to Eurostat, Germany had by far the lowest youth unemployment rate, at 5.6 percent. Austria and Slovenia follow, with 7.6 and 7.9 percent, respectively.

In the first quarter of 2023, Croatia had an unemployment rate in that age group of 17.4 percent, with 26,000 unemployed, according to a Eurostat report. For the sake of comparison, in the fourth quarter of last year, it recorded an unemployment rate of a revised 17.9 percent, with 27,000 unemployed youth, according to the tables of the European Statistical Office. Eurostat did not only have data on youth unemployment in Romania.

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

November the 11th, 2022 - This week in Croatian politics, we've had everything from still apparently not really knowing what's going on with Sberbank's shares in Fortenova and talk of the alleged Croatian desire to squash corruption, to more cash for foster parents, a blast from the past with COVID-19 and of course, Croatia's Schengen approval.

The Croatian Government is seeking additional financial help from the European Union following the coronavirus pandemic

With the utterly dire situation being faced by Ukraine following Russian invasion early this year and inflation causing us to have to dig deeper and deeper to make ends meet, the global coronavirus pandemic which rocked the world in 2020 almost seems like a distant memory. The government however is still working on patching up the enormous holes it left in the state budget and now wants additional financial help from the powers that be in Brussels.

Assistance in the amount of 550 million euros from the SURE instrument will be sought by the Croatian Government, and with the decision it recently made on that, it also obliged state-owned companies to pay 60 percent of last year's net profit into the state budget for the year 2022.

Taking into account the increase in public expenditures by 2.2 billion euros from February the 1st, 2020 to the end of April, 2022 due to national measures taken to address the socioeconomic consequences of the outbreak of the coronavirus pandemic, Croatia decided to request additional financial assistance from the SURE Instrument in the amount of 550 million euros, stated Finance Minister Marko Primorac, noting that the SURE Instrument (a European Union instrument for the issuing of temporary support to reduce the risk of unemployment in an emergency situation) provides extremely favourable financing conditions.

He also stated that on October the 25th, 2022, the Council of the EU adopted an amendment to the Implementing Decision of the Council, which approved Croatia's request for additional financial assistance to be paid out in the amount of 550 million euros.

European Chief Prosecutor Laura Codruta Kovesi says there is a will to stamp out corruption in Croatia

Laura Codruta Kovesi stated that corruption can unfortunately be found absolutely everywhere and there are no "clean" countries anywhere in Europe. She added that Croatia is showing its willingness to uncover and investigate criminal acts that harm the financial interests of the European Union.

"There's a myth that I would like to dispel today. If Croatia or Bulgaria or Romania have more cases of corruption that come to light than some other EU member state, it doesn't mean that these countries are more corrupt than others. There is no 'clean' country in Europe. Corruption is everywhere," said Europe's chief prosecutor.

"Here in Croatia, I see the will to uncover these criminal acts, to investigate them, and I think that is very important because when we talk about corruption and the fight against financial fraud, how the authorities position themselves is very important. If they sweep everything under the rug and don't uncover any cases, it doesn't mean that things are clean. I think the number of cases shows that there is political will... And that everyone is doing an excellent job," she pointed out.

She said that all cases are equally important, whether they involve ministers or ordinary people, because everyone is equal before the law and investigations into corruption are conducted in the same way. More than 1,200 cases of corruption are now under investigation by the European Public Prosecutor's Office (EPPO), but she said she couldn't talk about them publicly and couldn't comment on individual cases and cases which are currently under investigation.

It is estimated that the loss from VAT fraud, especially related to organised crime, amounts to 60 billion euros annually across the EU. In the first year of the EPPO's operations, criminal assets worth 250 million euros were confiscated. The EPPO's annual budget otherwise stands at a massive 44 million euros.

The Fortenova saga continues, and it has now come to light that the Dutch court never gave its approval for the sale of Sberbank's Fortenova shares to anyone

The competent Dutch court did not approve the sale of Sberbank's stake in Fortenova to an investor from the United Arab Emirates, claims the Croatian Ministry of Foreign Affairs, stating that permission was neither sought or issued at any point.

The Croatian Ministry of Foreign Affairs asked the Dutch Ministry of Foreign Affairs for an answer to the question of whether the Dutch authorities had given approval for the above transaction. They received an answer that permission was never requested, nor was it issued.

The MVEP states that the ministries will cooperate in order to determine all of the relevant information regarding the violation of the EU sanctions regime which has caused this scandal. It should be noted that the approval for the sale of Sberbank's 43 percent stake in Fortenova was not even given by the competent authorities right here in Croatia.

According to the EU regulation, a possible exemption can be provided for such transactions in the event that the competent authority of that EU member state grants its approval, but considering that the competent authorities here in Croatia and up the Netherlands have not done this, it is likely that the mystery surrounding the Fortenova saga will continue.

The police contact the State Attorney's Office of the Republic of Croatia in regard to the Fortenova situation

Interior Minister Davor Bozinovic recently confirmed that the police have approached the State Attorney's Office of the Republic of Croatia (DORH) regarding the sale of Sberbank's shares in Fortenova. He also pointed out that at the stage when the Council for the Implementation of Sanctions is in session and they are collecting all the necessary information, nobody can give any concrete answers.

When asked if the Arab investor to whom Sberbank sold its stake in Fortenova is coming to Croatia and if there will be a meeting in the government, Bozinovic repeated that he did not know and that there were many things that needed to be investigated and clarified before he could speak on anything.

When asked if the government had received SOA's report on Fortenova, he said that SOA regularly reports to the state and institutions about this and other such matters. When asked repeatedly whether he had received information from the SOA, he answered in the affirmative, but added that he could not reveal anything at this moment in time.

The government increases allowances paid out to foster parents 

Prime Minister Andrej Plenkovic stated at a recent government session that by increasing the basis for calculating the compensation to be paid out to foster parents and maintenance allowance for the year 2023, an additional step forward will be made for 2,504 Croatian foster parents.

"We are making an additional step forward for 2,504 foster parents and 5,838 beneficiaries in foster families," Plenkovic said, adding that this is a continuation of the increase in financial resources being poured into the field of foster care.

The government provides 160.5 million kuna in EU cash for the construction of a new port terminal in Osijek

The Croatian Government recently secured state co-financing in the amount of 160.5 million kuna for the construction of a bulk cargo transshipment terminal in the Port of Osijek. Government decisions have as such given consent to the Port Authority of Osijek to assume obligations at the expense of the state budget throughout 2023, 2024 and 2025 in the total amount of 160.5 million kuna.

Back in September this year, the Board of Directors of the Osijek Port Authority made a decision to enter into a contract for the construction of a new port terminal with GH Holding from neighbouring Slovenia. The value of the works was determined in the total amount of 143.5 million kuna without VAT, or 179.3 million kuna with VAT, with a deadline of 28 months.

The financial resources needed to settle the anticipated contractual obligations have been secured from the European Cohesion Fund and the State Budget of the Republic of Croatia for 2022 and projections for the years 2023 and 2024.

The new terminal for transshipment of bulk cargo in Osijek will be located on the right bank of the Drava River in the eastern part of the port area, and it will include two new connections spanning a length of 240 metres, the installation of facilities for the transshipment, loading and unloading and transport of goods, an access road which will be 300 metres long, railway tracks with a length of 610 metres, crane tracks and roads with a length of 285 metres, a substation and the construction of the necessary communal infrastructure, according to the State Secretary in the Ministry of Maritime Affairs, Transport and Infrastructure, Josip Bilaver.

The construction of the brand new Osijek port terminal will reduce traffic congestion in the city centre and the negative impact on the environment and noise, and the safety of ships in the port will increase, he added.

Croatia is given the nod to join Schengen by the European Parliament

Last but by absolutely no means least, the moment we've all been waiting for has finally arrived and Croatia has been given the final nod from the powers that be to join the Schengen zone at long last. This is certainly a moment HDZ is likely to run with as a scamp of their perceived success in Croatian politics.

In his opening address at a recently held government session, Prime Minister Andrej Plenkovic said that the European Parliament had just voted for Croatia's entry into Schengen.

"We are very satisfied with the presentation of the Commissioner, that is, the Vice-President of the EC, who gave very clear and strong support. There were 534 votes in favour of Croatia's membership of the Schengen zone," said the Prime Minister, congratulating Interior Minister Davor Bozinovic and the whole team who have been leading the activities to push for Croatian Schengen accession for the past few years.

"We are moving towards the final steps of the final adoption at the level of the EU Council on December the 8th" said the Prime Minister, adding that "with this, in addition to the decisions already made regarding membership in the Eurozone, Croatia will complete its two goals of deeper integration within the EU with both Schengen and Eurozone entry as of the 1st of January, 2023.

"These are such major capital foreign policy state goals that have now finally been realised, and in the years ahead we will have the opportunity to talk about the fruits of Croatia's additional international positioning," he said.

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

ZAGREB, 30 March 2022 - Expectations for Croatia's economy improved in March however, uncertainty prevails due to the war in Ukraine which is bothering managers and consumers in the EU and the euro area, triggering a wave of pessimism, shows a report released by the European Commission on Wednesday.

The Economic Sentiment Indicator (ESI) for Croatia picked up in March by 1.5 points compared to February and now stands at 109.1 points.

The strongest improvement was seen in managers' expectations in the industry, improving by 2.9 points with consumer confidence also improving by 1.7 points.

Given the high inflation, trade confidence slumped with the indicator declining by 3.5 points compared to February.

Construction confidence declined by 2.6 points while expectations in the services sector went down by 0.7 points.

In the next few months, managers expect employment to fall, which is shown in the decrease Employment Expectations Indicator of 3.3 points.

The Economy Uncertainty Indicator eased significantly compared to the previous two months, rising by 5.1 points.

Pessimism in Europe

A wave of pessimism has caught managers in the EU and euro area following the Russian invasion of Ukraine, the problem with supply chains and the energy and raw materials price hikes.

The ESI in the EU and the euro area dropped substantially by 5.3 and 5.4 points respectively from February.

Consumers are concerned with the high price of energy and a surge in living costs. Consumer confidence slumped by 9.4 points in the EU and 9.9 points in the euro area.

Retail trade confidence deteriorated by 4.9 points in the EU and 5.3 points in the euro area.

Industry confidence fell by 3.4 points in the EU and 3.7 points in the euro area.

Construction confidence remained broadly unchanged.

Services confidence (+1.3) improved for the second month in a row in the EU, driven by managers’ markedly more positive assessment of past demand, and thanks to epidemiological measures being eased. In the euro area it improved by 1.5 points.

The Employment Expectations Indicator decreased (-1.1) in the EU and by 0.9 points in the euro area.

The European Commission’s Economic Uncertainty Indicator rose abruptly in March (+10.7 points to25.8), "driven by growing uncertainty about the impact of the war in Ukraine on the future economic situation of consumers and businesses."

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

ZAGREB, 3 March 2022 - The government on Thursday sent the parliament a bill on the introduction of the euro as legal tender in Croatia for first reading, and, among other things, the bill concerns the basic principles of euro introduction, possibilities of exchanging kuna for euros and the period of both currencies being in use.

Finance Minister Zdravko Marić said the bill defines that, after the Council of the EU decides to introduce the euro and adopts a regulation determining a fixed conversion rate, the government will make a decision announcing the date to introduce the euro, the fixed rate of conversion, the start and end date of both currencies being in use, and the start and end date of dual price display, as well as other issues related to euro introduction.

The bill also defines fundamental principles to introduce the euro, including the principle of consumer protection, the principle of banning unjustified price increases, the principle of continuity of legal instruments, the principle of efficiency and economizing, and the principle of transparency of consumer information said Marić.

Cash exchanges will be possible in banks, FINA financial agency branches, and post offices for a period of 12 months as of the introduction of the euro.

"Citizens will be able to exchange 100 notes and 100 coins per transaction without any fee. After the 12 months expire, exchanges will be conducted in the Croatian National Bank without any fee, and it will be possible to exchange notes for an unlimited period and coins for a period of three years after the introduction of the euro," he underscored.

The period of both kuna and euros being in circulation will last 14 days after euro introduction. The bill also contains details regarding exceptions (poker machines, slot machines, ATMs).

The bill also contains regulations regarding dual price displays as a measure to protect consumers. Commercial enterprises will be obliged to show dual prices clearly, visibly noting the exchange rate. That obligation will apply as of September this year and ends at the end of 2023.

The bill defines also exceptions from dual price display where that isn't practical, for example at market stalls, mobile sales, farms, warehouses, slot machines, recyclable packaging, gift cards, and so on).

The bill defines rules for the conversion of deposits in accounts, kuna payment orders, kuna loans, kuna leasing contracts, and the like as well as adjusting interest rates where necessary. The bill also envisages the obligation to report to clients about the conversion, which must not put consumers in a less favorable position than the one they would be in if the euro had not been introduced.

The bill also brings rules related to preparing the budget and financial plans for the year preceding the year of euro introduction, rules for business bookkeeping, rules on reporting, bodies in charge of oversight, and rules related to violations.

"And that is assuming Croatia meets the set conditions and the process of introducing the euro is completed and the euro is introduced on 1 January 2023," said Marić. 

A total of HRK 32.8 million of budget bunds has been secured in 2022 to implement the bill, plus an additional HRK 3.6 million in 2023 and HRK 0.9 million in 2024.

A total of HRK 13.3 million has been secured in the state budget for the financial plans of extra-budgetary users in 2022, and HRK 1.4 million in 2023.

County budgets for 2022 have been secured HRK 5.78 million while city budgets have HRK 15.89 million secured for 2022 for the implementation of the law.

Public consultation on the bill was conducted between 17 January and 15 February 2022 and 128 comments were submitted. The bill will be discussed under the regular procedure.

For more, check out our politics section.

February 7, 2022 - After four days of controversy over an alleged case of plagiarism, Stjepan Pranjković finally decided to withdraw his Croatian euro coin design proposal.

On February 4, Total Croatia News shared the official announcement by the Government and the Croatian National Bank (CNB) regarding the four winners of the Croatian euro coin design proposal competition. In a government session that day, it was confirmed that the 2 euro coin would feature the geographical map of Croatia; the 1 euro coin would feature the kuna, the symbolic animal of Croatia; the 50, 20, and 10 cent coins would feature Nikola Tesla; and that the 5, 2 and 1 cent coins would feature the Glagolitic alphabet.

Stjepan Pranjković with Boris Vujčić, Croatian National Bank Governor. (Photo: Igor Kralj/PIXSELL)

The four winners were present at a symbolic event after the session, where each one offered more details about the creative process behind their Croatian euro coin design proposal and also received a special gift from the Croatian National Bank. It is also known that each of the winners would receive a prize of 70,000 kunas.

Public reaction was mixed. While some applauded the designs, some others criticized them. Many, for example, considered that choosing the map of Croatia was a very simple and easy idea, and others also called Nikola Tesla's coin part of political propaganda about the debate on its origins.

However, the biggest controversy would come the next day when suspicions began to spread on social networks about an alleged case of plagiarism. Some people found the design of the one-euro coin quite familiar, specifically because of the kuna animal layout. Thus, several users began to find little coincidence in the resemblance between the design of the coin and the image of the British wildlife photographer Iain H Leach of a pine marten, the name by which the animal is known in English.

Shortly after, they managed to make contact with Leach, who in turn expressed his ignorance of what happened and, in addition, criticized that his permission was not requested to use an image that in the end would win a prize of at least 9,300 euros. Some users even shared a screenshot in a public Facebook group called Bring Your Own Laptop Online, where Pranjković would have asked for help to transform the photo into editing software, by adding special lighting effects to give it a metallic look.

Finally, after several days of intense criticism, Telegram.hr reports that Pranjković sent a letter to the Croatian National Bank in order to withdraw his proposal and also apologize for the unpleasant atmosphere created by the controversy.

"It was a great honor for me to participate in the process of selecting the national side of the Croatian euro coin. However, motivated by the unpleasant atmosphere created in the media and social networks, as well as the pressures I was exposed to regarding my design of the reverse of the one euro coin with a kuna motif, I decided to withdraw my design proposal for this motif and waive any rights to on the basis of participation in the competition for the motif of a one-euro coin", said Pranjković.

"I made this decision so as not to aggravate this situation or contribute to further possible uncertainties. I am sorry that there have been controversies regarding my work that could harm this important process for the Republic of Croatia. I did not intend to hurt anyone's feelings, so I apologize to everyone, especially to the Croatian National Bank, the Government and the Croatian public ", concluded Pranjković.

The CNB's Money Commission announces that it will hold an emergency session today and will comment on Pranjković's letter. By the way, after the media suspected that Pranjković used someone else's photo for his design, the CNB's Commission reported yesterday that they had launched an urgent inspection of his design.

Speculation regarding the possible alternatives has been present on social networks, with some proposing that the original photographer be credited, that another design be used that also has the kuna as a motif, and others also propose that an entirely different motif be used. However, the outcome of the Croatian euro coin design proposal is uncertain pending the CNB investigation.

For more, check out our lifestyle section.

ZAGREB, 10 Jan 2022 - The unemployment rate in the European Union (EU), the euro area, and Croatia in November dropped to its lowest level since March 2020 and the outbreak of the COVID-19 pandemic, according to a report by Eurostat released on Monday.

The European Union's unemployment rate, measured by the International Labour Organisation (ILO) methodology, in November, fell by 0.2 percentage points compared to the month before, to 6.5%.

In the euro area, it slid by 0.1 percentage point to 7.2%.

In both areas, the joblessness rate thus reached its lowest level since March 2020, when COVID-19 started spreading across the world.

According to Eurostat, there were 13.984 million unemployed persons in the EU in November 2021, including 11.829 million in the euro area.

Compared to October 2021, their number declined by 247,000 in the EU and by 222,000 in the euro area. Compared to November 2020, the number of unemployed persons decreased by 1.659 million in the EU and by 1.411 million in the euro area.

In November 2021, Spain and Greece were the only EU countries to record a double-digit unemployment rate, of 14.1% and 13.4% respectively.

Croatia's unemployment rate, measured by the ILO methodology, dropped to 7.1% from a revised 7.3% in October. An earlier estimate for October indicated an unemployment rate of 7%.

That is the lowest unemployment rate since the outbreak of coronavirus in March 2020, when it was 6.5%. In the February before the pandemic, it was 5.9%.

In November, Croatia thus ranked alongside Finland and Latvia, which had unemployment of 7.2% and 7.3% respectively.

There were 127,000 unemployed persons in Croatia in November, according to Eurostat, or 4,000 fewer than in October. Compared to November 2020, their number decreased by 26,000.

The lowest unemployment rate in November was registered by the Czech Republic, of 2.2%. It was followed by the Netherlands (2.7%), Poland (3%), and Germany (3.2%).

For more on politics, follow TCN's dedicated page.

ZAGREB, 10 Dec 2021 - There is a strong consensus that accession to the euro area will benefit the Croatian economy and households, Finance Minister Zdravko Marić told reporters in the northern Adriatic resort town of Rovinj on Friday after a conference on this subject organised by the Večernji List newspaper and Istria County. 

That's why Croatia should do all that is necessary to reduce and minimise any negative risks, such as inflation, and take advantage of positive effects, which outnumber negative ones, for the benefit of its economy and citizens, Marić said.

"Over the past few months we have been witnessing price increases, but they have nothing to do with our eurozone entry. That's a global issue caused by disruptions to supply chains and increases in prices of energy and resources," he added.

Noting that inflation was the biggest risk on Croatia's path to eurozone membership, Marić cited statistics showing that inflation had been around 4% in the past several months and around 2.5% for the whole of this year, which puts Croatia "slightly below the EU average."

Croatian National Bank Governor Boris Vujčić said that Croatia was the country that would profit the most from eurozone membership.

"One of the benefits of joining the European monetary union is the reduction of foreign exchange risk, which is biggest in Croatia among all EU countries that have not yet adopted the euro. We have a very high level of euroisation. Most of the debt of all sectors in Croatia, including households, companies and government, is tied to the euro. In kuna, it amounts to over HRK 520 billion, which means that 75% of the debt of all sectors is either in euro or indexed to the euro," Vujčić said.

He added that with entry into the euro area interest rates would start to fall, the sovereign credit rating would increase and Croatia would become more attractive to tourism and investment.

For more on politics, follow TCN's dedicated page.

ZAGREB, 10 Dec 2021 - Finance Minister Zdravko Marić said on Friday that the bill on introducing the euro currency in Croatia was being prepared and the draft could be outlined in mid-January while its final adoption could be expected in April next year.

In addition to that bill, it will be necessary to amend 46 laws and 70 by-laws prior to the euro changeover, Marić said at a conference on Croatia's accession to the euro area, organised in Rovinj by the Večernji List daily and Istria County authorities.

The blueprint for the euro adoption envisages that on 1 January 2023 Croatia ought to be ready to enter the euro area while the formal announcement of accession to the euro area is expected mid-2022.

"At that moment, Croatia will practically enter the final phase and the preparations for the euro changeover will have to be stepped up," said Marić and recalled that almost 1.1 billion coins and 500 million kuna banknotes have to be withdrawn and banks, post offices, Fina and companies need to be pre-supplied with sufficient euro coins and banknotes.

The financial sector will have to adapt and then there is one huge common task and that is to inform and protect consumers as an integral principle of the entire process.

Prices will have to be expressed in both currencies as of August next year and that should also help alleviate inflation pressure.

"As of 1 January 2023 we will change over to the euro overnight and then have another two weeks for both currencies in circulation and citizens will be able to continue to pay in kuna but after that payments will be in euro. The dual prices will remain for at least one year," he underscored.

"Prime Minister (Andrej) Plenković and (HNB) Governor (Boris) Vujčić and I are lobbying our European colleagues for Croatia to be the next country to enter the European monetary area. We all know that we have a highly eurorised society and economy. And the HNB too, is integrated into the European system of central banks, so it is natural to head towards what is stipulated in EU accession agreements," he said.

The conference further heard that despite some of the economic risks that may occur by relinquishing the national currency, changeover to the euro opens a series of economic opportunities.

For more on politcs, follow TCN's dedicated page.

September 21, 2021 - Speculation and doubts continue to appear about the future financial scenario in Croatia after the eventual introduction of the euro in the country as an official currency, displacing the kuna, and CNB Governor Boris Vujčić gives some clues about what it would look like in the first weeks.

Pay in kunas, get euros back. At least this is how the first two weeks in Croatia would look after the introduction of the Euro on January 1, 2023, reports Poslovni Dnevnik. The objective is to stop the circulation of what would be the old Croatian currency at that time and to start the circulation of the euro. To provide more information and details, RTL Direkt interviewed CNB Governor Boris Vujčić, who in addition to the introduction of the euro, also talks about inflation and tacit minuses.

Why is the Minister of Finance so tough about not lowering VAT, couldn't the introduction of the euro be used to reduce it?

You have to ask him about VAT. As for inflation, I would say that a good part of inflation really comes from food especially now in the summer while in the first half of the year most of the inflation came from rising energy prices. At the moment, about half of the rise in inflation is energy, and now in the summer, food, vegetables and fruits are practically poor due to partly weather conditions.

Aren't you afraid of rising inflation? In the US it is somewhere around 6 percent…

The US has a higher inflation rate, but the economy is overheated there, they also have strong fiscal stimuli that are stronger than European ones and I do not see that at this time such an inflation rate could happen in Croatia, we expect that year-round inflation rate to be 2.2 percent. This is, in principle, the goal of the European Central Bank, so we should not be concerned about that. The problem is if there is a change in expectations, wage growth, but we do not see that at the moment. A significant part of that inflation comes from the fact that the so-called supply chains in the world at this time were disrupted. The Crown has disrupted all that, now you have continents where there are a lot of containers, some countries where you don't have them. You have a situation that road traffic, air travel, is still at a very low level and everything that flew with passengers on airplanes cannot fly… Then companies formed very large stocks that they never had and that logistically present a problem, say in the car industry you have full car parks that you can’t reach at the moment. It all takes some time to clear up and get back to what we had in 2019, one good mechanism, and then prices will slowly start to fall. I would say it won’t happen in the next 6 months.

Especially rising real estate prices. Housing squares are not in the inflation basket?

They are not. I am in favor of having these prices in the basket and what the European Central Bank, where we are going now, has done, and what will be the standard… that these prices will also start to be included in the basket, however, this will only be through two, three years. At the moment we have only the so-called implicit prices through rents and they do not reflect the fact that real estate prices have risen significantly, and they have risen because there is a lot of liquidity, a lot of money, part of which flows into the real estate sector. For example, interest rates that are at zero, or in the countries around us in the eurozone are even negative on deposits of citizens - some of these citizens take money from banks and carry and buy real estate, which inflates real estate prices.

Aren't you afraid that we will enter the eurozone just when euro inflation starts?

I wouldn't say. I don't see it as a danger. I do not see the inflation we measure through the consumer basket as a medium-term danger when we enter the eurozone, but I see the risks arising from these prices that we see at the moment in the bond market, real estate where much money has flowed and even cryptocurrencies. That bubble can always burst, as you know, financial crises arise, but it can blow out easily, prices can stabilize, which will depend on a lot of things, in my opinion, there is primarily a risk. Not these consumer prices.

What do you think would be the best advice for citizens?

Since I do not see any great risk from inflation itself, then I do not think that it should not be insured by investing in those types of assets for which the price is already too high, said Vujčić.

The Governor on the introduction of the euro

How many kuna, physical, banknotes are in circulation?

You have a billion and one hundred million coins and about half a billion of paper money. It is a demanding logistical operation, it all needs to be pulled.

What will it look like? I go to the store, I pay in kunas, the change is returned to me in euros?

That's right. Until 01.01. is HRK, from 01.01. is either kuna or euro for two weeks, after that it is only euro, with the proviso that when you pay in those two weeks, you pay in kuna, the euro is returned to you. And we collect all the kuna.

And then what about them? Are they going somewhere to catch fire?

Coins are a bigger problem. I already said it’s like 120 ZET trams. We have to store and store it somewhere, because it is money for another three years, as long as it changes. As long as they change, they are money. We agreed with the Croatian Army…

Are you building a safe somewhere?

We will build a safe, but at the same time, we agreed with the Croatian Army. It’s really all together logistically difficult.

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ZAGREB, 16 Sept 2021 - The government on Thursday adopted a conclusion on amending 46 laws and 72 regulations until 15 July 2022  as part of the roadmap for the euro changeover process.

Finance Minister Zdravko Marić informed the cabinet that in the last month, the competent agencies had itemized a total of 118 laws and regulations which should be amended within the national plan for the adoption of the euro.

The time frame for Croatia's admission to the euro area in 2023 thus entails the amending of the necessary legislation until 15 July 2022.

Prime Minister Andrej Plenković recalled that three days ago, the European Commission Executive Vice President  Valdis Dombrovskis, who attended the 11th meeting of the national council for the introduction of the euro as Croatia's official currency, strongly supported the work and ambitions of the government and other Croatian institutions to join the euro area.

Last Thursday the Irish Finance Minister and Eurogroup President, Paschal Donohoe visited Zagreb and said that Croatia had made important and positive progress on the road to euro area membership.

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