The euro has existed for over 20 years but many EU member states still have not signed up, with hesitance for political and economic reasons cited as the main stumbling block.
While all EU member states except Denmark are, in theory, obliged to adopt the euro, Sweden, Poland, the Czech Republic, Romania, Hungary, Bulgaria, and Croatia do not yet use it.
Sweden, for example, could quickly join the euro if there was enough political will to do so. But since the Swedish people voted against adopting the currency in a 2003 referendum, Sweden continues to avoid meeting one of the criteria to join, thereby postponing eurozone accession.
Croatian accession in 2023?
Bulgaria and Croatia were admitted to the Exchange Rate Mechanism (ERM II) in July 2020, which pegs national currencies to the euro with only a small margin for exchange rate fluctuation. States must participate for at least two years in ERM II, before introducing the euro.
“It is a kind of testing period to see how the national economy of the candidate country can operate without the possibility of exchange rate fluctuations”, explained Zsolt Darvas, senior fellow at the economics thinktank Bruegel.
Bulgaria hopes to introduce the euro in 2024, and Croatia aims for January 2023, pending final approval.
For Croatia to meet its goal, it needs a positive assessment by the European Commission in spring 2022 and a subsequent decision by the EU Council in summer 2022.
Could inflation be a stumbling block?
The Croatian National Bank is optimistic that Croatia, whose economy relies largely on tourism and services, will meet the EU’s criteria to join.
“Croatia has de facto been compliant with the convergence criteria continuously since 2016.” a bank spokesperson told EURACTIV.
Due to the recent surge in inflation, Croatia might breach the price stability criterion. However, as the price rises are also observable in the eurozone, the Croatian National Bank argued that Croatia should be considered as fulfilling the criterion nevertheless.
Most Croatians believe the introduction of the euro would have positive consequences for the country, according to a 2021 Eurobarometer poll. However, 70% believe it could lead to price increases.