The adoption of the Euro by Croatia

Abstract

Croatia; being the last member state to have joined the European Union in 2013 is seeking for early Euro adoption. In fact, it started participating within the Exchange Rate Mechanism on 10 July 2020. In order for Croatia to adopt the Euro, it has to fulfil the nominal convergence criteria. Meanwhile, the Optimum Currency Area (OCA) theory emphasises the real convergence criteria to assess whether Euro adoption is of benefit to the member state in question. Croatia’s early Euro adoption goal, in contrast to ‘older’ European Union member states which are yet to adopt the Euro, makes this study an interesting one. This dissertation sought to firstly assess the Croatian Government’s, the Croatian National Bank’s, the Croatian public’s and the European Union’s institutions’ views regarding this important political and economic decision. These different views were mainly analysed in the light of current developments (Croatia’s participation within the Exchange Rate Mechanism II) and in the light of the Optimum Currency Area theory. Additionally, this dissertation also involved a comparative case study, to assess Croatia’s suitability of joining the Eurozone, by using Slovenia as a benchmark; a comparable country to Croatia whose Euro adoption dates back to 2007. This involved both qualitative and quantitative research and the analysis comprised both nominal and real convergence criteria.