19:37 / 21.07.2022.

Author: Katja Miličić

Croatia officially announces switch to Euro

Croatia has less than six months left to prepare for the currency switch

Croatia has less than six months left to prepare for the currency switch

Foto: HRT / HTV

Croatia's government officially announced on Thursday the decision to switch to the euro as the country's official currency. 

The announcement is merely a formality as Croatia has already been cleared by the EU to join the Eurozone on January 1, 2023.

At a meeting of the government's council charged with managing the transition on Thrusday, Prime Minister Andrej Plenković said the goal of joining the eurozone had been achieved in a very challenging time.

"The euro is the anchor that makes us safer, more protected from all external shocks and crises," Plenković said.

Croatia has started minting its own euro coins. Some retailers have started showing prices in both kuna and euros, ahead of the September deadline when all shops will have to do so. Croatia's central bank will have to obtain a sufficient amount of euro notes. Banks will also have to reset their ATM machines so that all machines are operating in euros by January 15.

Central bank governor Boris Vujčić said that the HNB had struck a deal with banks not to charge customers a transaction fee from December 15 to January 15 if they are using another bank's ATM.

As prices rise due to inflation, many consumers worry retailers will use the currency switch as an excuse to drive up prices even more. In an effort to protect consumers, the Ministry of Economy has come up with a Code of Ethics, which retailers can sign onto and receive a certificate attesting to their participation.

“During the final process of the introducing the euro all mechanisms should contribute to the creation of a safe environment for consumers, which means that business entities should adhere to the Code of Ethics,” said Pleknović.

This is intended to show consumers that the businesses are operating in good faith.

Croatia has also set a fixed conversion rate at 7.5345 kuna for 1 euro. Meanwhile, the European Central Bank has raised interest rates, but Governor Vujčić says this will not have a significant effect on Croatian consumers and the economy. Croatian banks say they are not planning to raise interest rates for now but this may change if the ECB raises rates again in the fall. Vujčić said that even with a 1 percentage point increase, the cost of loans would not increase significantly and no major shocks are expected. He added that the switch to the eurozone has shielded Croatia for more severe interest rate fluctuations.

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