Croatia’s plan to become the 20th country to join Europe’s single currency cleared an important hurdle on Wednesday after EU officials said it met the economic criteria for adopting the euro in January.
The European Central Bank said in the report that Croatia’s economy remained sufficiently in sync with the rest of the eurozone, despite inflation and its public debt soaring because of the fallout from the plague and Russia’s invasion of Ukraine.
The ECB’s thumbs up on Croatia’s economic convergence reflects similar conclusions from the European Commission and is expected to prompt EU leaders next month to approve the Adriatic’s plan to join the euro early next year.
The decision was based on an assessment of Croatia’s convergence in areas ranging from inflation to public debt and marks a success for the country, which has set itself the goal of adopting the euro since joining the EU in 2013.
Several other EU countries are aiming to join the euro, including Bulgaria and Romania, but are further behind in the process. Croatia hopes to enjoy a more stable exchange rate and an improved credit rating after the adoption of the single currency.
Some Central and Eastern European countries, such as Poland, attribute to their independent monetary policy assistance in avoiding a recession after the 2008 financial crisis.
but Croatia Is about to earn more than most companies in the euro. Its tourism sector accounts for about one-fifth of its economy and the country also plans to join the region’s Schengen-free travel zone.
However, the ECB said Bulgaria may face a more difficult challenge in achieving its target of joining the euro in 2024. The country’s inflation rate, which averaged 5.8 percent in the last 12 months, is above the allowable level and has also fallen to legal rule. And institutional quality.
Croatia will be the first new member of the eurozone since Lithuania in 2015. It has a population of nearly 4 million and will be the poorest country in the bloc, with a gross domestic product per capita of just over $ 14,000 by 2020, according to the World Bank. .
This is almost two-thirds less than the average in the eurozone and below the bloc’s poorest economies, Greece and Latvia, both of which have a per capita GDP of over $ 17,500. However, Croatia’s economy is more dynamic than the eurozone as a whole and it has recovered faster from the epidemic than most of the bloc’s countries.
Overall, the ECB said Croatia’s average monthly inflation of 4.7 percent a year to April remained slightly below the “reference rate” of 4.9 percent, calculated by averaging price growth in a selection of eurozone countries with the lowest.
The country’s government debt, equal to 79.8% of its GDP last year, was above the EU fiscal rules, but these have been frozen since the Cubid-19 crisis until at least 2024. The ECB said Croatia’s debt decline to the level of GDP C from 87.3 percent in the previous year “ensured the fulfillment of the debt criterion.”
“Looking ahead, there are concerns whether the convergence of inflation is more sustainable in the long term in Croatia,” the ECB said. “In order to prevent the accumulation of excessive price pressures and macroeconomic imbalances, the convergence process must be supported by appropriate policies.”
For the past two years Croatia and Bulgaria have been part of the European Exchange Rate II mechanism, a system for managing exchange rate fluctuations. Smoothing the entrance path To the single currency, which included ECB supervision of their major banks.
In order to meet the criteria for membership in the eurozone, the two countries also had to take anti-money laundering measures, reforms in insolvency laws and new rules on the administration of state-owned enterprises.
Another report by Sam Fleming in Brussels
Croatia given green light by ECB to join euro in January Source link Croatia given green light by ECB to join euro in January