Croatia launched Thursday (4 July) a bid to join Europe’s Exchange Rate Mechanism II, the two-year waiting room for eurozone candidates which pegs their currencies to the euro, the national bank said.
Zagreb hopes to join the ERM II mechanism in mid-2020 and could adopt the euro three years later at the earliest.
A letter of intent to join the mechanism sent to the eurozone countries and EU institutions, signed by Finance Minister Zdravko Maric and HNB government Boris Vujcic, was accompanied by a plan for reforms Croatia will undertake before entering it, a national bank (HNB) statement said.
The application for the mechanism was enabled by “significant improvement in reducing (the country’s) macroeconomic imbalances”, it said.
“Economic recovery, export growth, fall of unemployment, consistent fiscal adjustment and strong fall of foreign debt reduced vulnerability of Croatia’s economy,” it said.
It resulted in Croatia leaving the EU’s Excessive Deficit Procedure in 2017.
In agreement with EU institutions, Croatia committed to reforms in six areas namely to improve public sector administration as well as reduce administrative and financial burden on the economy, the statement said.
Croatia joined the European Union in 2013 and its economy remains one of the bloc’s weakest.
In April the average salary was 6,434 kunas (€870, $981) and unemployment stood at 8.5%.
While officials stress the benefits of introducing the euro — about 80% of bank deposits are in euros and Croatia main trading partners are in the eurozone — surveys show that people remain split over the issue with support for the euro ranging between 39 and 52%.
Croatia follows in the footsteps of Bulgaria for joining the single currency. Bulgaria joined the EU in 2007 and its ambition is to enter the euro waiting room in the second half of 2019.