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The eurozone is bringing in the new year with a new member, in a symbolic sign of European unity as Russia continues its war against Ukraine. Croatia is now the 20th country to adopt the euro, marking a milestone for the nation of nearly 4M people, which has sought out closer ties since its EU accession in 2013. Croatia will also join the border-free Schengen area – a bloc of 26 countries that has enabled a population of 420M to move freely among members – making it the largest border-free area in the world.
The transition: The kuna can still be used until Jan. 15, though anyone paying in the old currency will receive their change in euros. After that date, bills and coins will be permitted to be exchanged at any Croatian post office until June 30, and at any Croatian bank until the end of 2023. For those taking longer to part with their cash, kuna coins can be exchanged at Croatia’s central bank until December 2025 and banknotes until further notice.
“Croatia is the country that stands to profit the most from entry into the eurozone,” noted Boris Vujcic, governor of the Croatian central bank. “When your currency depreciates against the euro it means your debt is worth more, so your borrowing costs as a country are higher to reflect this risk.” At the time of writing, the euro is up 0.6% at $1.0610.
Go deeper: Croatia already relies on the euro for more than half of its foreign trade and nearly three-quarters of tourists. Joining Schengen is likely to support the country’s tourism industry, which accounts for over 20% of GDP, though there are more mixed feelings with regards to euro adoption. Many say it will usher in a period of economic stability and safety, especially as inflation soars across Europe, while others say it would only benefit larger countries like France and Germany.
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Authore – Abhi bhardwaj
