Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Eurozone gains new member and top student

Eurozone gains new member and top student

The currency area’s first new country for eight years pursues fiscally conservative policies.
On January 1, Croatia joins the eurozone, becoming the 20th member of the single-currency bloc — with somewhat awkward timing.

It's not a great moment to be joining the club: the euro slid to parity against the U.S. dollar in July and remains weak despite regaining some ground in recent months. The European Central Bank is on a crusade against inflation, which is causing the economy to slow. A winter recession is now the base-case scenario.

Croatian Finance Minister Marko Primorac is optimistic. "We are certain that the interest rates and the borrowing costs in general will increase in due time," he told POLITICO in an interview. "However, we are certain that the increase for Croatia would be much lower than if we didn't join the eurozone."

There are other benefits, too: Fitch, Moody's and Standard & Poor's all hiked their credit rating for Croatia when Zagreb got the green light from the Commission and eurozone finance ministers in July after fulfilling a set of criteria including price, exchange rate and interest rate stability, as well as budgetary discipline and a ban on monetary financing.

"We also anticipate and expect this to be positively reflected on borrowing costs," Primorac said.

Croatia, the last country to join the EU almost a decade ago, is becoming the eurozone's first new member since the three Baltic nations, Estonia, Latvia and Lithuania, ditched their national currencies in 2011, 2014 and 2015.

The switch has been a long time coming, and Croatians are prepared: The Croatian Kuna has been stable at around €0.13 for months; since September, all prices have been displayed in both currencies; vending machines are being adapted; and new eurocoins are being minted, each with a map of Croatia (€2), a silhouette of a pine marten, or Kuna, the national animal (€1), and electricity inventor Nikola Tesla (for €0.50, €0.20 and €0.10). Starter packs with euro coins are available to those wishing to familiarize themselves with the new currency.

Croatia will also gain a seat at the table of the European Central Bank’s Governing Council, and is in the process of ratifying the European Stability Mechanism treaty, hopefully by January, Primorac said.

"When it comes to the additional shield, which will be there by joining the European Stability Mechanism, we also see this as the additional benefit for the Croatian economy," he said.

If for the country the list of pluses is long, then for the eurozone itself it gets the benefit of gaining a top student. Even though it's a Mediterranean country like Italy and Greece, the bloc's most indebted members, Croatia has held a fiscally conservative policy for years.

Its debt-to-GDP ratio, after ballooning during the COVID-19 pandemic as in all other EU countries, is on a steep downward trajectory, standing at 74.3 percent in the second quarter of this year, compared with 86.3 percent in the same period last year — a 12 percentage-point drop.

"Mediterranean countries tend to be more flexible in this regard," Primorac said. "However, we also have and understand and support the more conservative approach." He added that he expects the debt-to-GDP ratio to fall below 65 percent by 2025.

When it comes to the country's take on the Commission's proposals to revamp fiscal rules, Primorac held back from criticism, instead praising what he called "a good step forward." He added that he understood countries' need to invest more in defense or green projects.
Newsletter

Related Articles

Budapest Post
Close
0:00
0:00
Bill Gates is ‘very optimistic’ about the future: ‘Better to be born 20 years from now...than any time in the past’
China is opening up for foreign investors.
Tesla reported record profits and record revenues for 2022
Germany confirms it will provide Ukraine with Leopard 2 tanks
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Opinion | Israel’s Supreme Court Claims a Veto on Democracy
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Who’s Threatening Israeli Democracy?
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
Hungary ready to sue EU over cuts to Erasmus funding
EU against democracy: Hungary's mail-in poll on Russia sanctions dismissed by Brussels
2023 - The Year of the Rabbit
Israelis rally in three cities against Netanyahu legal reforms
Tesla slashes prices globally by as much as 20 percent
Japan prosecutors indict man for ex-PM Shinzo Abe murder
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
Lisa Marie Presley, singer and daughter of Elvis, dies aged 54
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Dirty bomb fears as URANIUM is found in cargo at Heathrow
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
Saudi Arabia set to overtake India as fastest-growing major economy this year 
International medical experts speak out against COVID-19 restrictions on China
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Saudi Arabia’s female ambassadors: Who are the five women representing the Kingdom?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
A Republican congressman-elect is under investigation in New York after he admitted he lied about his education and work experience.
Brazilian football legend Pele, arguably the greatest player ever, has died at the age of 82.
Hong Kong to scrap almost all its Covid rules
EU calls screening of travellers from China unjustified
Clashes erupt in central Paris after shooting at a Kurdish cultural center
Ukraine President Volodymyr Zelenskyy Addresses Joint Session of Congress - FULL SPEECH
Where is Rishi? Chancellor Jeremy Hunt's excuses about the UK's economic challenges just don't make sense
Former FTX CEO Bankman-Fried finally arrested in Bahamas after U.S. files charges
Corruption works: House Financial Services Chair Waters doesn't plan to subpoena her donor, Sam Bankman-Fried, to testify at hearing on FTX collapse
Ronaldo's new contract...
The EU has outsourced a big chunk of its migration policy to the private sector
Prince William's godmother resigns honorary royal role after exposing her/their racism
British PM Rishi Sunak pledges further action on strikes to 'protect lives'
×