Croatia will become the 20th country to join the eurozone on January 1, 2023.
European Union finance ministers have given Croatia final approval to adopt the euro on January 1, 2023, replacing the Croatian kuna.
“I want to congratulate my counterpart, Zdravko Maric, and all of Croatia on being the 20th country to join the eurozone,” said Zbynek Stanjura, the Czech Republic’s finance minister, who holds the rotating EU presidency. Tuesday .
It is the currency bloc’s first expansion in nearly eight years, just as the euro has fallen to its lowest level against the US dollar in 20 years.
The previous EU country to join the European single currency area was Lithuania in 2015.
In the EU of 27 countries, the introduction of the euro offers economic benefits resulting from deeper financial ties with the other members of the currency bloc and with the monetary authority of the European Central Bank.
The bank plans to raise interest rates this month for the first time in 11 years to tackle record inflation of 8.6 percent.
More tangibly, it means that one of the 340 million residents of the current eurozone who visit Croatia will no longer have to exchange their money for kuna.
Euro imports also have political rewards, as the shared currency is Europe’s most ambitious project to integrate nations, putting them at the heart of the EU. That means a seat at the highest decision-making tables in the EU.
The changes come as the euro exchange rate briefly touched $1 for the first time in 20 years on Tuesday, before recovering immediately.
There are fears that a worsening energy crisis in Europe linked to Russia’s war in Ukraine could send the eurozone’s economy into a tailspin.
Seven previous enlargements
The euro, which was created in 1999 in 11 countries, including Germany and France, has undergone seven previous enlargements, starting with Greece in 2001.
The appeal of euro membership is reflected in the last three enlargements, which brought in the Baltic States between 2011 and 2015.
During that period, the eurozone tried to contain a debt crisis that Greece had caused and which threatened to break the currency alliance.
A combination of European emergency loans to five financially vulnerable member states and a commitment from the ECB to do “whatever it takes” to save the euro enabled the currency bloc to weather the turbulence and grow stronger.
Joining the euro requires a country to meet a number of economic conditions. These relate to low inflation, sound public finances, a stable exchange rate and limited financing costs.
Croatia is relatively small and poor, so joining the euro will have limited international economic impact.
The country has a population of about 4 million and the wealth per capita was less than half the eurozone average at EUR 13,460 ($13,500) last year.
Nevertheless, against the background of Russia’s war in Ukraine and Kiev’s hasty application for EU membership, Croatia’s imminent adoption of the euro sends a potentially important political signal.
Croatia itself was at war in the early 1990s during the violent break-up of Yugoslavia. The country applied for EU membership in 2003 and joined the bloc in 2013. That was the last time the EU expanded.