Eurozone finance ministers to discuss Croatia’s inclusion

The Eurozone finance ministers will meet today to discuss enlargement to Croatia.

At their previous meeting, the ministers recommended that Croatia become the 20th member of the euro area, which the Economic and Financial Affairs Council approved in their subsequent session. Croatia will switch to the euro on 1st January 2023.

While Croatia demonstrated stable inflation rates between 2017 and 2021 and has reduced government debt by 14% from its 2014 peak, some concerns remain. The European Central Bank (ECB) has highlighted that Zagreb must implement policies to boost product market competitiveness, or convergence with the rest of the Eurozone may not be sustainable. The country is currently facing price pressures amid the Ukraine war, although similar inflation levels are present across the EU.

Expect today’s meeting to see the finance ministers set the final exchange rate for converting Croatia’s currency, likely at 7.53 Croatian kuna to 1 euro, and discuss measures to minimize the risk of further inflationary effects. If Croatia is able to implement the ECB’s recommendations, it is likely to see lower interest rates and better credit ratings as a result of euro membership in the medium to long term, increasing its attractiveness for foreign direct investment.