Croatia edges closer to joining the Eurozone and the Schengen Area

croatia eurozone schengen

The Croatian Prime Minister, Andrej Plenković, hopes to lead his country into the Eurozone within the next few years.“Croatia will work intensively on the introduction of the euro as a currency”, he said.

Last month, Plenković met with the Finnish Foreign Minister, Timo Soini, to gain his support. Soini offered his country’s assistance in its bid to join both the Eurozone and the Schengen Area.

The Croatian Minister of the Interior, Davor Bozinic, also met with the EU Citizenship Commissioner, Dimitris Avramopoulos to discuss Croatia joining the Schengen Area. After the meeting. Bozinovic said: “I can say that Croatia’s accession to the Schengen Area is a shared interest of Croatia and the European Commission.”

The pair discussed immigration into Europe from the Balkans and agreed on the importance of a comprehensive, unilateral migration policy. Bozinovic also thanked Avramopoulos for the extra funding Croatia had received to strengthen its borders.

Croatia hopes that a decision will be made before the chairmanship of the Council of the European Union is rotated in 2020.

When can Croatia expect to join the Eurozone?

In regards to joining the Eurozone, many political and economical commentators believe Croatia joining the single currency within the next few years is unrealistic.

andrej plenkovic
To join the Eurozone, Croatia will need to meet a range of criteria including the convergence criteria. The Maastricht Treaty states that a country cannot join if its debt surpasses 60% of GDP. At the very minimum, Croatia will need to demonstrate a stable, long-term debt-reduction tendency.

Croatia must also meet the requirements regarding inflation, interest rates, fiscal deficit, and public debt. Once a country shows it meets all the conditions, it can become a part of the Exchange Rate Mechanism of the EU for a period of at least two years.

Although Croatia is not part of the Eurozone, approximately three-quarters of savings in Croatian banks are in euros. Croatians also tend to use euros for expensive purchases such as cars and property.

Speaking in an interview for CNBC International, the Governor of the Croatian National Bank, Boris Vujčić, said joining the Eurozone will cost Croatia very little, but to join Croatia will need to make structural reforms.

The public discussion over the pros and cons of joining the Eurozone has already started. There are numerous opponents of the euro who will continue to argue that Croatia will lose its monetary sovereignty if it joins.

Vujčić said there is no special date when Croatia must become a Eurozone member. He said if everyone agrees, they will move towards the goal gradually, without any dates.