June 1 (SeeNews) - The European Commission and the European Central Bank gave positive assessments of Croatia's progress towards euro adoption as of the beginning of next year, they said on Wednesday.
“Today, the European Commission has concluded that Croatia is ready to adopt the euro on 1 January 2023, bringing the number of euro area Member States to twenty,” the European Commission (EC) said in a press release.
The conclusion is set out in the EC's 2022 convergence report, which assesses the progress that the seven non-euro area member states - Bulgaria, Czechia, Croatia, Hungary, Poland, Romania and Sweden, have made towards joining the euro area.
The report finds that Croatia fulfils the four nominal convergence criteria and its legislation is fully compatible with the requirements of the treaty and the statute of the European system of central banks/ECB, it said. The criteria involve the price stability criterion, the government budgetary position criterion, the exchange rate criterion and the long-term interest rate criterion.
“Today, Croatia has made a significant step towards adopting the euro, our common currency. Less than a decade after joining the EU, Croatia is now ready to join the euro area on 1 January. This will make Croatia's economy stronger, bringing benefits to its citizens, businesses and society at large. Croatia's adoption of the euro will also make the euro stronger,” the president of the European Commission Ursula von der Leyen said in the statement.
The Commission's assessment is complemented by the ECB's own convergence report, which is issued every two years, and assesses progress towards euro adoption by seven EU countries that have not yet joined the euro area.
“The ECB’s assessment concludes that Croatia is within the reference values of the convergence criteria,” the ECB said in a separate statement.
However, it warned that there are concerns about whether inflation convergence is sustainable over the longer term in Croatia. "In order to prevent the build-up of excessive price pressures and macroeconomic imbalances, the convergence process must be supported by appropriate policies," it added.
In April 2022 the 12-month average rate of HICP inflation in Croatia was 4.7%, below the reference value of 4.9% but this rate is expected to increase gradually over the coming months, driven mainly by the higher commodity prices, broadening price pressures and further aggravation of supply bottlenecks as a result of the Russia-Ukraine war, according to the ECB.
Croatia, together with Bulgaria, joined the exchange rate mechanism (ERM II), seen as the training grounds for the euro adoption, and the EU's banking union, on 10 July 2020.
The European Union's Council will make the final decision on the adoption of the euro in Croatia in the first half of July this year, following the necessary procedures and discussions in the Eurogroup and in the European Council, and after the European Parliament has given its opinion, the Croatian central bank said in a separate statement.