18:54 / 19.07.2022.

Author: Katja Miličić

How will the switch to the euro affect prices and interest rates?

Boris Vujčić

Boris Vujčić

Foto: Vijesti / HRT

Croatia is set to adopt the euro in January of next year. Is this the right time to enter the eurozone, what are the logistical challenges of switching currencies, and how will the change affect interest rates and retail process? 

These were just some of the issues addressed at a conference focusing on what the euro will bring, held in Zagreb on Tuesday.


Prices have been rising for some time for reasons unrelated to the upcoming currency switch and many people are concerned that this will drive up prices even further. Croatia's largest supermarket chain, Konzum, has started displaying prices in both kunas and euros. The government has ordered all retailers to begin showing prices in both currencies by September 5. Konzum's CEO, Zoran Mitreski, says their stores will not be raising prices because of the switch.


"That's why we started showing prices in both currencies early, so people can follow along. Prices are rising for another reason, inflation. Our suppliers sometimes raise their prices several times a month and we have no choice because we have to offer these products to our customers,” said Mitreski.


Another issue is loans. What will happen to loans taken out in kunas?


"All kuna loans will be converted to euros at the fixed rate that was announced, 7.53450 and the variable interest rates that have been indexed will be carried over and indexed to the euro," said Dinko Lucić, CEO of Privredna banka Zagreb.


National bank governor Boris Vujčić responded to critics who say this is not the right time to switch currencies.


"If we were not entering the eurozone, our interest rates would now be already much higher, as is the case in member states that are not about to enter the eurozone, such as Poland, Czechia, Hungary, and Romania. Interest rates in these countries are now between 7 and 8 percent at their central banks. Housing loans have rates of 4 to 7.5%, while in Croatia, they are below 3%,” said Vujčić.


The central bank says Croatia is already reaping some of the benefits of the eurozone and underscores that this is reflected in the country’s credit rating and in the markets.


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