site.btaCroatian Finance Minister to BTA: We Are Ready to Assist Bulgaria on Its Way to Euro Area
“The Ministry of Finance and the Croatian Central Bank are ready to help our Bulgarian counterparts if they turn to us for advice on adopting the euro,” said Croatia's Finance Minister Marko Primorac in a special interview with BTA. His country will officially become the 20th member of the eurozone on January 1, 2023.
Earlier this week, Primorac received a Bulgarian delegation led by Deputy Prime Minister for EU Funds Management Atanas Pekanov, which included experts from the Bulgarian National Bank and the Ministry of Finance.
Primorac pointed to the clear rules his country has adopted in order to raise Croatian citizens' awareness of Zagreb's path to the eurozone - from the double display of prices to how they are rounded to the second decimal place. This is precisely one of the measures to counter public fears fueled by expectations that the adoption of the single currency will in itself push up inflation.
The Croatian Finance Minister also pointed out that his country has to pass 77 bills before January 1 related to adopting the single currency, although the country's application for the euro area was approved in July.
In a BTA interview, Minister Primorac spoke about the benefits of adopting the euro to the economy, and the important steps for raising awareness of them among the citizens and companies.
Q: What was the main challenge for Croatia on its way to the euro area?
A: One of the biggest concerns of the public was the fear of inflation. So, after explaining in detail to citizens and businesses that adopting the single currency will not cause price rises, and getting the support of experts and other political forces, the process becomes more difficult to reverse.
Q: According to the latest Eurobarometer survey, support for the adoption of the euro in Croatia has dropped, although it is still above 50%. Do you think the trends will reverse again and confidence in the single currency will increase once your country enters the euro area?
A: Certainly. At the moment, a huge part of deposits and loans are denominated in euro, their share reaches 70%, which means Croatia has high hopes for the adoption of the single currency.
It is important to note that, following the announcement of the decision to join the euro area, and given the fact that we will become part of the European Stability Mechanism (ESM), the country's credit rating was raised by two notches. We have thus reached the highest score on this indicator in our history, and we expect this will have a positive impact on the interest rates on debt, which in turn will affect interest rates for households and businesses.
From today's point of view, we can say that the benefits of the euro area are already visible and so I believe that support for the euro will grow.
Q: What other benefits will the adoption of the euro have for households and businesses?
A: The elimination of currency risks, which also affects our public debt, is one such benefit. I expect it will also have a positive impact on foreign direct investment. As for the direct benefits for citizens - the total costs of currency conversion - currently around EUR 180 million a year - will be reduced, which is not to be ignored.
As a country open to tourists, we believe that the euro will make it easier for our guests because they will not have to exchange their currency before spending it here.
Q: Do you expect the euro to contribute further to the already high inflation?
A: Actually, no. If we turn back and look at the experience of the last few countries that have joined the euro area, we see that inflationary pressures in those countries have been in the range of 0.0 to 0.4%, and I do not expect any significant risk along those lines. However, we are currently feeling this pressure from other sources, which we all know about and need not be named.
I believe that the Government must be transparent in this process, because if there are clear rules, such as the dual indication of prices in our national currency, the kuna, as well as in euros, with a clear exchange rate, if all this is explained to the citizens, they will know that with the so-called rounding of prices, inflation cannot become high, compared to the preliminary expectations.