Croatia’s membership, future enlargements… how long will the euro continue to conquer the continent?
On 1 January 2023, Croatia became the twentieth of the twenty-seven countries of the European Union to adopt the single currency introduced in 2001. A decision in line with the already very advanced economic integration that precedes and describes Bulgaria and Romania. Europe’s confidence in its own currency.
It’s a build that has been shaken a few times, still flawless, and has taken a few hits from tobacco. “The 2008 financial crisis; the 2012 eurozone debt crisis that weakened the entire monetary union. Covid-19, the war in Ukraine today and energy tensions”List Clémentine Gallès, chief economist at Societe Generale Private Banking.
But it is growing, bringing closer and closer the twenty European nations that have used the euro since Croatia’s accession.
Croatia: 2nd stage of integration
“I was surprised by the calmness and self-confidence of the Croats. Even if there is criticism from time to time, they have a positive opinion about Europe as a whole.”, slips Zdravko Cerovicki, former entrepreneur, president of Croatia-Occitan, one of the diaspora associations of the Balkan country in France. 1er January, ten years after joining the European Union, Zagreb ditches the kuna and adopts the euro.
“It is the economy that uses it extensively in economic and financial transactionsBanque de France economist Violaine Faubert notes. Imports and exports were mainly in euros, and the euro zone was already its first trading partner.
The debt of the state, companies and individuals was mainly expressed in European currency. “Since independence, Croatians have made a number of capital goods and real estate purchases in euros since they first used the mark”Zdravko Cerovicki notes.
What economic benefits?
Companies trading with themselves, fellow travelers, and partners in the eurozone no longer have to exchange currencies and bear the costs. “Any transaction denominated in euroscontinues Florian Le Gallo, co-author of the note with economist Violaine Faubert, caused uncertainty and therefore costs for hedging against possible fluctuations in the kuna-euro exchange rate. This disappears with the single currency and reduces financial costs for households and businesses.”
? [Blog] New member in the area?? By 1 January 2023: Croatia. ??
A new perspective #economic for an already well-integrated country#EU.
Acceptance#euro should further strengthen its growth and convergence. #BdFeco ? https://t.co/NWGa2mOmtC pic.twitter.com/z8S2jpKK3c
— Bank of France (@banquedefrance) December 20, 2022
In addition, his colleague notes that their access to the European market will be facilitated. Now Pierre Jaillet, a lecturer at Iris (Institute of International and Strategic Relations) and researcher at the Jacques-Delors Institute after a career as an economist at the Banque de France through the European Commission and the IMF, shows that Croatia has joined. “especially with favorable financial terms. Over ten years, it is financed at 3.4%, compared to 5.2% for the Czech Republic and 9% for Hungary. Its inclusion in the European Stability Mechanism offers it a safety net in times of severe difficulties. and its exit is an additional asset in terms of tourist attraction.” This activity accounts for 20% of its GDP, the most modest in the Union, at 0.5% of European GDP.
The political stakes of enlargement
Croatia’s efforts to meet the criteria for joining the monetary union, “legislative – independence of the central bank… – and economic – stability of exchange rates and prices, public finance… -“Quoting Florian Le Gallo, show it “The euro remains attractive, it’s always positive to be able to show it”Clementine Galles says.
“This membership allows to continue European integration, strengthens the existing framework, Member of the Committee on Currency Issues of the European Parliament, Deputy Stephanie Yon-Courtin said this.. It also offers a better geographical and political balance between member states.” eastward with this expansion.
? monetary policy
1 video of 3 minutes, 1 sheet of 3 pages and 1 #quiz 5 questions to understand what #Monetary Policyits activity on the economy and the role of central banks that conduct it, on its website #ABCdeleconomie ? https://t.co/UqWvBWE3KG pic.twitter.com/tAqfv39nu4
– EDUCFI Bank of France (@Educfi_BDF) December 26, 2022
Does the euro reduce differences between countries?
Bringing economies together, reducing poverty, lifting Europe as a whole, reducing gaps in living standards. This “Capturing economies structurally is a big problem. However, Judge Pierre Jaillet, there is no more rapprochement in the euro zone, the momentum has stopped. For some countries, this remains, but we have entered more into the logic of disagreement.especially “among the main economies of the zone”. And the southern states are experiencing problems.
Pierre Jaillet, Assistant Research Fellow at the Jacques Delors Institute, is a guest on Good Morning https://t.co/aIqXw3YX2y
— BFM Business (@bfmbusiness) December 30, 2022
Previous entrants owned the euro, the Baltic states “Very well managed since 2014 with growth of 3% against an average of 2% for the euro zone”. Lithuania’s GDP per capita rose from 70% of the eurozone average GDP to 90% in nine years.
Will Croatia, which is currently considered a weak growth, be able to join this movement? “Significant short-term gains for Croatia should not translate into medium- and long-term brakes on its development.”
Those who are not there
“All the countries included in the European Union are bound to join the monetary union, except for specific exceptions”, recalls Florian Le Gallo of the Banque de France. One of these exceptions no longer applies, which is the United Kingdom. The second is Denmark. However, he chose to do it “Part of the exchange rate mechanism, its currency is tied to the euro”Pierre Jaillet says. The Danish krone benefits from stability linked to the euro, in return for which it has effectively given up as members of the Monetary Union. “the ability to play on the currency and conduct an autonomous monetary policy”Analyzes Clémentine Gallès.
The next to join the single currency will be Bulgaria and Romania. If the decision is not recorded, first “2024, the second is planned for 2028, 2029Pierre Jaillet explains. In relation to them, there are other institutional variables that should be taken into account, especially corruption, the performance of the administration, and supervision of the banking system.
That leaves Sweden, Poland, the Czech Republic and Hungary. Swedes have voted against joining the euro. For others, “There must be political will to nominate a candidate, it is not there yet”Florian Le Gallo observes.