Croatia adopts the euro and joins the Schengen area

Croatia adopts the euro and joins the Schengen area

UPDATE DAY

Croatia has adopted the euro and joined the Schengen area of ​​free movement, two major milestones for this small Balkan country which joined the European Union almost a decade ago. 

At midnight (23:00 GMT) on Saturday, Croatia said goodbye to its currency, the kuna, to become the twentieth member of the eurozone.

It becomes at the same time the 27th State to have joined the Schengen area, a vast area within which more than 400 million people can travel freely, without internal border controls.

Local newspapers hailed the two events on Saturday, with the daily Vecernji List calling them a “crowning achievement of EU membership” for Croatia, where European Commission President Ursula von der Leyen is expected for the occasion on Sunday. .

This country, which has been in the European Union since July 2013, declared its independence from Yugoslavia in 1991 and the ensuing conflict (1991-1995) left some 20,000 dead.

“Strategic Objectives”

Croatian leaders regularly underline the benefits that they believe their 3.9 million compatriots will derive from joining the euro zone and the Schengen area.

“Two strategic objectives for further integration in EU,” Conservative Prime Minister Andrej Plenkovic insisted on Wednesday.

Experts say euro changeover will help protect Croatia's economy, one of the weakest in the EU , in a world plagued by runaway inflation, a severe energy crisis and geopolitical insecurity since Russia began its invasion of Ukraine on February 24.

In November, inflation reached 13.5% in Croatia, compared to 10% in the euro area.

Eastern European countries that are members of the EU but do not have opted for the euro, such as Poland and Hungary, have proven to be even more vulnerable to soaring prices.

For the Governor of the Croatian Central Bank (National Bank of Croatia, HNB) , Boris Vujcic, the abandonment of the kuna, which had been put into circulation in 1994, is the “only reasonable policy”.

“The euro certainly brings economic stability and security,” Ana Sabic, an HNB official, told AFP.

All segments of society — individuals, companies and the state — will benefit from the adoption of the euro, she insisted. 

Experts cite in particular the elimination of exchange risks and better conditions for borrowing.

“Elite Club”

Croats, for their part, have mixed feelings: while they generally welcome the end of border controls, the change of currency inspires mistrust.

In recent days, customers have done so queuing outside banks and ATMs to withdraw money, fearing payment problems in the aftermath of the transition period.

After midnight, the governor of the central bank in this respect symbolically withdrew euros from one of these ATMs in the center of Zagreb. 

Many of them are also concerned that the introduction of the euro will lead to higher prices — in particular that companies will round them up when converting.

“We will cry our kuna, the prices will explode”, laments in the capital Drazen Golemac, a 63-year-old pensioner. His wife Sandra, however, wants to be optimistic and says she is sure that “the euro has more value”.

For Marko Pavic, an employee of a tourist agency, “Croatia joins an elite club”. But “the euro was already a measure of value, psychologically there is nothing new,” he says.

“Nothing changes on January 1, everything has been calculated in euros since two decades anyway”, also observes Neven Banic, another employee.

The euro is also already very present in Croatia. About 80% of bank deposits there are denominated in this currency, its main partners are in the euro zone and tourism, which constitutes 20% of its GDP, is supplied by a large European clientele.

< strong>Boost for tourism

Croatia has welcomed four times more tourists this year than it has inhabitants and the entry into the Schengen zone will give a boost whip to this sector.

Long queues at its borders with its EU neighbors Slovenia and Hungary will be a thing of the past.

On Sunday, 73 border posts will close. In airports, the change will take place on March 26, for technical reasons.

At the same time, the situation on Croatia's borders with its non-EU neighbors — Bosnia, Montenegro and Serbia — does not will hardly change: it already applies the rules of the Schengen area there.

The repression of illegal immigration remains, however, a major challenge. Since joining the EU, Croatia has inherited the heavy task of protecting an external land border of more than 1,350 km long, most of which is shared with Bosnia.

It is on the so-called Western Balkan route taken by migrants, but also by traffickers of arms, drugs and human beings.

After the ebb in clandestine crossings linked to the health crisis, Croatia registered 30,000 illegal migrants in the first ten months of 2022, an increase of 150% compared to the same period of the previous year.