Photo: archive, BGNES
In early 2023, Croatia introduced the euro. Many then feared rising prices and lower living standards. But the skeptical expectations of those who protested the loudest were not justified, it says Mother well.
On January 1, 2023, Croatians had a double reason to celebrate – not only the arrival of the New Year, but also the accession to the Schengen area. Finally, the possibility of traveling without waiting in lines for passport control had been discovered. Some commentators even noted that the small country had only at this point actually entered the EU.
However, Croatia’s accession to the Eurozone on the same date was not so euphorically received. The Croatian kuna, introduced after independence in the 1990s, was replaced by the single European currency.
The fear of the euro
“The restrained reception of the euro was not justified,” economic analyst Goranko Fizulich told DV. “Many were afraid of change, of rising prices and that their standard of living would drop. A lot has been written about this issue in the media. But those who understood what the introduction of the euro meant could not wait. This act, along with Croatia’s admission to Schengen, was a huge step forward for the country.”
The Croatian government tried to dispel the population’s fears about the euro in a timely manner. Even months before the introduction of the single European currency, all prices in shops had to be indicated in both kuna and euro. This measure remains in force until the end of 2023 – in the name of price transparency.
Moreover, the euro in Croatia was an unofficial currency even before its official introduction. Prices in a number of sectors have been quoted in euros for years – for example, cars, real estate, rents or construction. A number of travel agencies also announced their prices in euros, and a large part of the savings of the Croatians was far from being in kuna – the trust in the European policy of monetary stability was greater than in the local Central Bank.
Some took advantage
However, in the first months after the introduction of the euro, citizens complained massively in the media about the increase in prices, receipts were constantly published before and after the change of currency. And indeed – some establishments definitely took advantage of the situation to round up the prices or significantly increase them.
A dough product that could previously be bought for 75 cents suddenly increased in price by 10 cents. In places, the price of a cappuccino increased from 1.65 to 1.80. The price jumps are not big, but it is something that is in front of people’s eyes every day and for a large part of them it also plays a role in financial terms.
Economic expert Fizulic, who is a former Minister of Economy, still believes that the new currency is not to blame for the decline in the living standards of some citizens. “I am convinced that even without the euro, the purchasing power would have decreased. This affects mostly those people whose incomes are below average, and they are not few. Along the euro, prices are probably up between one and two percent – but not more.”
Price growth even without the euro
Inflation in Croatia for June 2023 is one of the highest in the EU – 8.3 percent. And in terms of income – the average net annual salary is 11,000 euros – the country is at the bottom of the ranking. Croatia’s main problem, however, is not the new currency, but the large gap in income, the unfavorable economic structure and too high government spending, Fizulic says.
On the one hand, the VAT rate in Croatia is the second highest in the EU at 25 percent, which is almost as much as in Denmark or Sweden. In this way, the bloated state apparatus is financed. On the other hand, too few goods are produced for export. Most of the money is earned from tourism, Fizulic points out. And in this area, the prices are oriented towards tourists from Germany, Italy or Austria – all countries where people have significantly higher purchasing power. “Where tourism plays an important role, prices have also increased. But this would not have been different if the Croatian kuna had remained,” the economic expert further explains.
The story of the euro – a story of success
Fizulic is of the opinion that Croatia’s accession to the Eurozone is a success: “Anyone who has business relations abroad – both in tourism and in other industries, knows how much is saved by not having to exchange money anymore and accounting for rate fluctuations. It is much easier and more profitable to travel if there is no need to constantly exchange kuna. And this is also important psychologically: you already have a currency that is safe and stable – you don’t need to buy currency for travel.”
Because of this, Fizulic says, the euro has meanwhile enjoyed wide acceptance in Croatia. “Today, almost no one would say that it should not have been introduced – not even those who protested vociferously at the beginning.”
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2023-08-12 07:18:00
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