The European Union (EU) is preparing to remove the last obstacles to Croatia’s adoption of the euro.
It will enable the first expansion of the currency bloc in almost a decade.
At a meeting in Brussels on Tuesday, EU finance ministers plan to approve three laws that will pave the way for Croatia to become the 20th member of the euro zone from January next year.
The last EU country to join the European Single Currency Area was Lithuania in 2015.
In the 27 EU countries, adopting the euro offers economic benefits stemming from closer financial ties with other members of the currency bloc and the monetary authority of the European Central Bank (ECB).
This decision will mean that the 340 million inhabitants of the current euro zone who visit Croatia will no longer need to exchange their money for Croatian kuna.
Joining the euro also has political rewards as the common currency is Europe’s most ambitious project to integrate nation states, giving them a place in the core of the EU.
It means a seat at the highest decision-making tables in the EU.
history of the euro
Created in 1999 between 11 countries including Germany and France, the euro has seen seven previous enlargements, starting with Greece in 2001.
The lure of euro membership is reflected in the last three enlargements, which brought the Baltic states between 2011 and 2015.
During this period, the eurozone struggled to contain a debt crisis triggered by Greece and threatened to break the monetary alliance.
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A combination of European emergency loans to five financially vulnerable member countries and a commitment from the ECB to do “whatever it takes” to save the euro has enabled the currency bloc to ride out the turmoil and come out stronger.
Requirements to enter the euro
Joining the euro requires a country to meet a set of economic conditions.
These relate to low inflation, sound public finances, a stable exchange rate and limited borrowing costs.
Croatia is relatively small and poor, so joining the euro will have limited international economic implications.
The country has a population of around four million and wealth per capita which, at €13,460 (£11,376) last year, was less than half the eurozone average.
However, in the context of Russia’s war in Ukraine and Kyiv’s hasty application for EU membership, Croatia’s imminent adoption of the euro sends a potentially significant political signal.
