On a roll: Croatia set for new currency, borderless travel

By AP News

Croatia, known for its stunning Adriatic Sea coastline and resort islands, is on a roll: As of Jan. 1 the Balkan country is adopting the EU’s common currency, the euro, and joining the so-called Schengen zone — the 27-nation bloc’s borderless free-travel area — which has prompted officials to say that this will be remembered as one of the country’s biggest achievements since gaining independence in a war 30 years ago

Croatia Euro

ZAGREB, Croatia (AP) — More than nine years after Croatia became the European Union's newest member, the country is on a roll to make the most of its status as the EU member in the Western Balkans.

Croatia is adopting the EU’s common currency, the euro, and joining the Schengen Area, Europe's visa-free travel area, on Jan. 1. Officials in the small nation of 4 million people predict the developments will be remembered as one of the country's biggest achievements since it gained independence during the breakup of Yugoslavia 31 years ago.

Adopting the euro offers economic benefits stemming from deeper financial ties with the currency's 19 other users and with the European Central Bank. It also means that the 340 million people who live in the current eurozone no longer will need to exchange their euros for Croatian kuna and can enter the country known for its stunning Adriatic coastline without stopping at border controls.

“After 10 years of membership (in the EU), we intentionally and deservedly reached the stage where we would become the only country in history to join the Schengen and eurozones on the same day,” Croatian Prime Minister Andrej Plenkovic said at a recent business conference on the upcoming integration milestones.

“Some countries achieved the two goals one after another over a relatively short period of time, but none achieved both on the same day,” he said, adding that the changes "will have a transformative impact on our economy."

But not all Croats are so excited by the upcoming changes, especially the phasing out of their outgoing currency.

Some are sentimental about the kuna, which was introduced to secure monetary autonomy after Croatia’s split from the former Yugoslavia and a 1991-95 war.

“The kuna was a symbol of Croatia’s independence. We were all attached to it, so it will be a bit hard to get over its disappearance," Vladislav Studar, a veteran of the war between the forces of Croatia's government and those loyal to the Serb-controlled Yugoslav army. "But what can we do? Life goes on,”

Stela Roso, a Zagreb resident, agreed: “It is a bit sad that we will no longer use the kuna because it was unique to our country, but in practical terms, (the currency switch) will make no difference to me.”

Croatia joined the EU in 2013, the last time the country admitted a new member nation. To adopt the euro, the country had to fulfill a set of strict economic conditions, including having a stable exchange rate, controlled inflation and sound public spending.

After EU finance ministers gave Croatia the green light in July to join the eurozone, the country’s central bank had to make extensive preparations.

“We secured the (euro) banknotes for front-loading and the full volume needed for next year, and we are almost done minting the needed 600 million coins. around 93% of that number has already been minted,” said Tihomir Mavricek, the executive director of the Croatian National Bank's cash department.

“Since mid-August to the end of November, the amount of the kuna in circulation dropped by 12 billion, equivalent to about 1.7 billion euros, so we have around two-thirds, or some 22 billion kuna, left to phase out,” he added.

The Croatian kuna and the euro will be in dual use for cash payments for only 14 days, but as people enjoy post-holiday sales in January, they will receive only euros in change.

Mavricek described the adoption of a new national currency as “a major monetary reform and a massive logistical undertaking.”

“We are aware that we are switching to a new currency, and clearly there will be some (cash) payment hiccups, especially in the first two weeks, but that will quickly normalize,” he said.

An aggressive public awareness campaign has accompanied the behind-the-scenes technical work. All Croatian households received an instruction manual about the currency switch.

The comparable cost in euros was added to the prices of products sold in Croatia during the first week of September.

“I think the switchover will go smoothly because we have been using the euros before, we exchanged the kunas for the euros, we held savings accounts in euros," Ivanka Boljkovac, a Crotian opera singer, said. "We will get used to (euros) just as we got used to all other changes.”


Dusan Stojanovic in Belgrade contributed.


This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Originally published by Associated Press Valuethemarkets.com, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

Sign up for Investing Intel Newsletter