ZAGREB, 19 March, 2021 - Croatia will enter the euro area on 1 January 2023 at the earliest, and introducing the euro has a number of advantages but for those advantages to be greater the economy needs to be more flexible, including with regard to the labour market, a conference heard on Friday.

The conference, focusing on the introduction of the euro as the official currency in Croatia, was organised by the students' association Financial Club.

Croatian National Bank (HNB) Governor Boris Vujčić said in his opening remarks that Croatia cannot enter the euro zone before 1 January 2023.

"Whether Croatia will enter the euro area on 1 January 2023 or a year or two later, depends on when it will meet the nominal convergence criteria," said Vujčić, recalling that in July 2020, Croatia entered the European Exchange Rate Mechanism II (ERM II), a sort of waiting room for the euro.

He explained that the ERM II envisaged a minimum two years of participation in it so that a candidate aspiring to join the euro area can meet the nominal convergence criteria (Maastricht criteria). On the other hand, if it does not satisfy the criteria, which refer to the stability of the exchange rate, prices and interest rates, the budget deficit and the level of foreign debt, a country can remain in the ERM II indefinitely, Vujčić said.

He recalled a survey indicating that citizens fear that with the introduction of the euro the standard of living will deteriorate and prices will increase. However, surveys in countries that have already introduced the euro indicate that prices increased by 0.23 percentage points on average in the year when the euro was introduced, mostly for everyday goods such as coffee. Prices of such products are relatively lower so their increase could have been relatively high due to rounding off.

"That left the impression in public that prices increased more than they did," explained Vujčić, underscoring that the standard of living did not fall in any country that introduced the euro but rather it improved.

Ćorić: Biggest advantage to companies exporting to euro area

Minister of Economy and Sustainable Development Tomislav Ćorić said that it was clear that citizens would not start living better on the first day of introducing the euro, however, what points to better prospects was the fact that the macro environment in the euro area was free of risks that non-member countries were faced with.

The risk premium in all countries that entered the euro area has dropped, said Ćorić, noting that that was something that in normal circumstances should  bring benefits to Croatia, such as reducing yields on long-term security instruments and lower interest rates on commercial and consumer loans.

Considering, however, that we live in "fairly radical economic times," and a period of very low interest rates, the effects which countries that entered the euro area some ten years ago had would be somewhat lower, however, they would still be significant, he said.

The advantages are potentially biggest for export-oriented companies considering that the exchange rate risk will be eliminated, he said.

Ćorić said that the project for euro introduction was not an end in itself but was primarily a very good tool for Croatia's long-term economic growth and development.

Mačkić: Flexibility of labour market, final goods and services market

President Zoran Milanovic's economic adviser, Velibor Mačkić, conveyed the president's message saying that it was necessary to discuss the benefits and potential harm of Croatia joining the euro area.

Mačkić believes that Croatia has not developed its own institutions sufficiently and that that poses a problem. "The country needs a different economy, a much more flexible economy, to be able to benefit more significantly from the monetary union," said Mačkić.

He added that the labour market and the market of final products and services need to be more flexible.

Mačkić underlined the importance of an efficient fiscal policy and of the reform of the tax system which Mačkić believes needs to change from "a consumption-based to income-based tax system."

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ZAGREB, 25 January, 2021 - The Executive Board of the Central Bank of Hungary (MNB) has decided to give the 2021 Lamfalussy Award, named after the late Baron Alexandre Lamfalussy, the "father" of the euro, to Croatian National Bank (HNB) Governor Boris Vujčić.

The MNB Executive Board said it wanted to acknowledge Vujčić's achievements as HNB Governor, namely the reform of Croatia's monetary policy that had enabled the stability of the kuna in relation to the euro, which led to Croatia's accession to the European Exchange Rate Mechanism II (ERM II) last summer.

The MNB Executive Board also cited Vujčić's role in organising the Dubrovnik Economic Conference, which is attended every year by renowned economists and creators of monetary policies from around the world.

Vujčić, the keynote speaker at an online conference on the future of monetary policy after COVID-19 pandemic, thanked the MNB for the award.

Lamfalussy, a Belgian economist and central banker, was born in 1929 in Kapuvár, Hungary. He studied at the Catholic University in Leuven and Nuffield College in Oxford, where he earned a PhD in economics. He took part in the work of the Delors Commission, which laid foundations for the European Economic and Monetary Union, was the first president of the European Monetary Institute and had a prominent role in the establishment of the European Central Bank and in the creation of regulations of the European financial system.

The MNB established the Lamfalussy Award in 2014.

ZAGREB, April 27, 2020 - The Croatian National Bank (HNB) released HRK 1.17 billion (€155m) to commercial banks on Monday, through a regular open-market operation with a one-week maturity and at an interest rate of 0.05%.

Regular open-market operations are one of the measures taken by the central bank to increase the liquidity of the banking system for the purpose of maintaining exchange rate and financial stability amid the crisis caused by the coronavirus epidemic in the country.

Today's amount is HRK 100 million higher than last week, when HRK 1.07 billion (€141m) was released at 0.05% interest and with a maturity until April 29.

For today's auction the HNB had received requests for a total of HRK 1.17 billion and granted them all. The settlement date is April 29 and the due date is May 6.

On March 16, the HNB conducted a structural operation, releasing HRK 3.8 billion (€500m) to the banks with a maturity of five years and at 0.25% interest.

In the past weeks the central bank has also undertaken other measures to increase the liquidity of the banking system, including purchases of government bonds. Last month it carried out two fine-tuning operations buying HRK 4.29 billion worth of government bonds. It has announced the next such auction for Tuesday.

More economy news can be found in the Business section.

ZAGREB, April 15, 2020 - The Croatian National Bank (HNB) said on Wednesday it had agreed with the European Central Bank (HNB) to set up a precautionary currency agreement, known as a swap line, that will allow the HNB to borrow up to €2 billion from the ECB in exchange for Croatian kuna.

The HNB said in a press release that the precautionary currency swap line would be activated if needed.

"The currency swap line allows for the exchange of the kuna for the euro in the amount of EUR 2bn," the national bank said.

This swap line gives the HNB "the space to provide additional euro liquidity to Croatian financial institutions, should they need it, without using its own international reserves."

The Croatian central bank said that it "will notify the ECB of the use of euro liquidity acquired through the currency swap line. The currency swap line will remain in place until 31 December 2020, and can be extended if necessary."

In March, the HNB conducted five interventions on the foreign exchange market to maintain the stability of the exchange rate of the kuna, selling a total of € 2.25 billion.

It has also taken some other measures to mitigate the economic impact of the coronavirus pandemic.

More economic news can be found in the Business section.

ZAGREB, April 14, 2020 - The Croatian National Bank (HNB) released HRK 1.32 billion (€174m) to commercial banks on Tuesday, through a regular open-market operation with a one-week maturity and at an interest rate of 0.05%, the same as at the last four auctions.

Regular open-market operations are one of the measures taken by the central bank to increase the liquidity of the banking system for the purpose of maintaining exchange rate and financial stability amid the crisis caused by the coronavirus epidemic in the country.

The HNB received requests for HRK 1.32 billion and granted them all. The settlement date is April 15 and the maturity date is April 22. Today's amount is HRK 200 million (€26m) lower than last week when the banks requested and received HRK 1.52 billion (€200m).

On March 16, the HNB conducted a structural operation, releasing HRK 3.8 billion (€500m) to the banks with a maturity of five years and at 0.25% interest, the largest amount provided in structural operations to date.

More economy news can be found in the Business section.

ZAGREB, April 9, 2020 - The Croatian National Bank (HNB) Council on Wednesday discussed recent monetary and economic trends, informing in a press release about the measures which the HNB has undertaken to maintain the liquidity and stability of the financial system during the COVID-19 pandemic.

The rising uncertainty and fear of a swift spread of the pandemic as well as the measures introduced to contain it resulted in highly volatile international financial markets in late February and March.

Increased pressure on the exchange rate as well as on the securities market has left a mark on trends both in developed and emerging markets, including Croatia. At the end of March, the euro-kuna exchange rate was 2% higher than at the end of February and yields on sovereign bonds and the risk premium also increased.

Since early March, the HNB has launched numerous monetary policy measures, maintaining the liquidity and stability of the financial system.

In March, it made five interventions on the foreign exchange market and several direct transactions, selling banks a total of €2.5 billion. The HNB also released HRK 3.8 billion to banks in a structural operation and HRK 1.85 billion in regular ones.

The required reserves rate has been reduced from 12% to 9%, increasing banks' available funds by HRK 6.33 billion. In order to maintain stability on the sovereign bond market, at the end of March the HNB bought state securities totalling a nominal HRK 4.29 billion.

The annual grown of bank lending increased to 4.8% in February as a result of higher lending to non-financial companies, while the annual growth of household lending mildly slowed down.

More economic news can be found in the Business section.

ZAGREB, March 31, 2020 - The Croatian National Bank (HNB) once again intervened on the foreign exchange market on Tuesday with the aim of maintaining exchange rate stability by selling banks just over €618 million, whereby HRK 4.7 billion was withdrawn from the system.

The HNB sold €618.5 million at the middle exchange rate of HRK 7.608529.

This is the fifth intervention and so far, the largest by the central bank in an effort to maintain exchange rate stability and ease the pressure of the depreciation of the domestic currency, the kuna.

HNB first intervened on the exchange market on March 9 followed by further interventions during the month, selling a total amount of €1.63 billion to commercial banks. With today's intervention that amount has been increased to almost €2.25 billion.

Today, on the last day of March, the €/HRK middle exchange rate was 7.609231, which is just over 2% more than it was at the start of March when it was 7.456909.

More news about banks can be found in the Business section.

ZAGREB, March 18, 2020 - Croatian National Bank (HNB) governor Boris Vujčić informed the government on Tuesday that the country possessed very high foreign currency reserves and that system liquidity was more than sufficient to ensure the cash flow for businesses.

Presenting the central bank's measures designed to mitigate the economic consequences of the crisis caused by the outbreak of COVID-19, Vujčić said that he expected a sharp but short contraction of economic activity, primarily as a result of efforts to contain the spread of the coronavirus.

There are forecasts that this situation will be relatively short, lasting three, six or eight months. Of course, the shorter the crisis, the lesser the impact on the economy, the HNB governor said.

Vujčić said that the HNB had prepared three groups of monetary policy measures.

One refers to the stabilisation of the kuna exchange rate and to ensuring foreign currency liquidity. In this context, Vujčić recalled that in the last four interventions, the central bank sold €1.63 billion to commercial banks so as to stabilise the kuna exchange rate at 7.57 per euro.

Foreign currency reserves stand at €19 billion.

The second set of measures focuses on making sure that there is enough kuna liquidity and therefore the central bank has conducted structural and repo operations. On Monday, 750 million kuna was injected into the banking system as a short-term measure, plus 3.8 billion kuna as a long-term measure for a period of five years and at an interest rate of 0.25%.

The third group of measures refers to support to the stability of the state securities market through the purchase of government bonds.

If Croatia were a member of the euro area, some of these measures would not have to be implemented, said Vujčić.

We would also have access to the European system of monetary stability, where €500 billion is available, he said.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, March 16, 2020 - The Croatian National Bank on Monday decided to place a total of HRK 4.55 billion on the open bank market through a structural and a regular operation, of which HRK 3.8 billion was placed through the structural operation for a five-year term and HRK 750 million through a regular operation for a term of one week.

Increasing the liquidity of the banking system is part of the measures that the Croatian National Bank (HNB) is undertaking with the aim of maintaining exchange rate stability during the crisis caused by the coronavirus epidemic, the HNB said in a brief press release.

Last week the HNB announced new monetary measures - the purchase of domestic bonds and a structural operation.

The HNB has accepted all the bids by banks for the placement of HRK 3.8 billion at a fixed interest rate of 0.25% and for a term of five years, the maturity date being 18 March 2025.

Apart from that structural operation, the HNB also offered HRK 750 million to credit institutions via a regular reverse repo auction at an interest rate of 0.30% and a settlement date of 18 March, the maturity date being 25 March.

Today's structural operation is the first since the end of 2018, and the first time since late 2017 that banks have shown an interest at the regular reverse repo auction.

In line with an earlier announcement by the HNB Council, the central bank last Friday purchased government bonds with a nominal value of HRK 212.88 million.

The central bank last week also intervened on the foreign exchange market on three occasions in an attempt to ease the depreciation pressure on the domestic currency.

The bank sold more than €1.2 billion through the three interventions and withdrew a total of HRK 9.1 million from the financial system.

More coronavirus news can be found in the Business section.

ZAGREB, March 14, 2020 - The Croatian National Bank (HNB) on Friday said that the growth of the country's GDP would probably deviate from the initial forecasts to a considerable degree due to the outbreak of coronavirus, and the bank will take measures to help the economy to overcome the situation.

One of the measures which the HNB is going to conduct is a structural operation for five years at the interest rate of 0.25%, and this will be carried out on Monday, 16 March.

In addition, the HNB has started buying state bonds with the aim of maintaining stability on the market of state securities, the HNB Council said in a press release on Friday after the council's meeting.

On Thursday, the HNB stated that "in accordance with the communication of competent institutions so far, with the aim of preventing the coronavirus disease spreading, and in compliance with the measures undertaken at the level of the Republic of Croatia, the CNB (HNB) has started the implementation of measures, which apply to its key tasks, employees, business processes and business premises, that basically ensure the smooth and regular performance of all the key functions of the Croatian central bank, as well as of credit institutions supervised by the CNB."

"The measures are simultaneously directed at minimising the risk of contagion with the COVID-19 virus and its spreading."

If needed, the central bank will also apply appropriate and timely measures to ensure the continuity of work of its Council, i.e. the continuity of operational decision-making at the level of the central bank.

Supervisory requirements were sent to banks for the introduction of measures for a smooth and safe operation in epidemic conditions.

Within its supervisory function, the HNB "continuously monitors the operation of credit institutions with the main objective to maintain confidence in the banking system and promote and safeguard its safety and stability."

More coronavirus news can be found in the Lifestyle section.