BRUSSELS — The European Union is set on Tuesday to remove the final obstacles to Croatia adopting the euro, enabling the first expansion of the currency bloc in almost a decade.
At a Brussels meeting, EU finance ministers will approve three laws to allow Croatia to join the eurozone as the 20th member on January 1, 2023. Lithuania, in 2015 was the EU’s last country to join the European single-currency zone.
In the 27-nation EU, adopting the euro offers economic benefits stemming from deeper financial ties with the currency bloc’s other members and from the European Central Bank’s monetary authority.
More tangibly, it means that any of the current eurozone’s 340 million inhabitants who visit Croatia will no longer need to exchange their cash for Croatian kuna.
Euro entry also has political rewards because the shared currency is Europe’s most ambitious project to integrate nation states, giving them a place in the EU core. That means a seat at the EU’s top decision-making tables.
The euro was created in 1999 by 11 nations, including France and Germany. It has been through seven previous enlargements beginning with Greece 2001.
One of the reasons that euro membership appeals is evident in three previous expansions which included Baltic countries between 2011 and 2015. The eurozone struggled to control a Greek debt crisis, which threatened to destabilize the currency alliance.
A combination of European emergency loans to five financially vulnerable member countries and an ECB pledge to do “whatever it takes” to save the euro enabled the currency bloc to weather the turbulence and emerge stronger.
To join the euro, a country has to satisfy a number of conditions. This includes low inflation and sound finances. It also requires a stable exchange rate, low borrowing costs, and stable public finances.
Croatia is small and impoverished, which means that its euro entry will not have significant economic consequences on international markets. It has approximately 4 million inhabitants and a per-capita income of 13,460 euro ($13,500). This is half the national average.
Nonetheless, against the backdrop of the Russian war in Ukraine and Kyiv’s hasty application for EU membership, Croatia’s imminent adoption of the euro sends a potentially significant political signal.
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Croatia, which was at war during Yugoslavia’s violent fall in 1990s, joined the EU. Croatia applied to the EU in 2003, and was accepted into the bloc in 2013. It was also the last expansion of the EU.
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