A week before Croatia joined the EU 1st July 2014, its central bank governor, Boris Vujcic, expressed the desire to see his country become a euro-zone member as rapidly as possible. According to him this might be possible by 2017-18.
At this juncture it appears absolutely premature to speculate on the entry of Croatia into the euro-zone, which it must do when the conditions are ripe for it.
The country joins the EU in anything but good shape. Its economy has been in recession during the last five years. It continues to suffer from profound structural weaknesses, 20 per cent unemployment, inadequate competitiveness, rampant corruption, poor collective bargaining framework, and not even a fully independent judiciary.
Its central bank discount rate stands at a high seven per cent, compared to the ECB rate 0.5 per cent. Its credit rating is no more than BBB.
Its public debt is just below the EU 60 per cent threshold of GDP, comparable to other Balkan countries. But as we have seen in other EU countries during the last years that may change rapidly.
Croatia should therefore focus on its economic, administrative and financial reforms before daring to enter the single currency area with its formidable constraints. Fighting corruption and implementing its EU commitments should be its overriding priorities in the years to come.
For the rest, the government would be well advised to take lessons from the way in which the three Baltic countries have overcome their crippling economic crisis and prepared for introducing the Euro.
2020 might be the earliest realistic target date for euro zone membership.
Eberhard Rhein, Brussels
Author : Eberhard Rhein