Companies Planning to Use the Euro to Increase Prices Will Be Monitored by the State Inspectorate

– Croatia is on the right path to entering the eurozone and is in a good position to join other member countries using the euro currency on January 1, 2023. By that date, it has an ideal opportunity to recover its economy and make it more resilient, as well as to implement structural reforms such as modernizing public administration and the judiciary – stated Declan Costello, Deputy Director-General at the Directorate-General for Economic and Financial Affairs of the European Commission, at the conference Croatia: On the Path to the Euro, held on Monday at the International Hotel in Zagreb, organized by the European Commission and Lider, which can also be followed online.

At the first panel discussing how the introduction of the euro will affect the business community, Costello also emphasized that for many countries, except perhaps Greece, the transition to the euro has gone ‘smoothly’, with citizens and companies quickly adopting the new currency in practice without major difficulties. He sees the support of all institutions in the eurozone, including the European Central Bank, as a significant advantage that Croatia will have with the introduction of the euro. However, of course, everything will depend on us, that is, on how Croatia will implement changes to meet its obligations, respond to the demands placed upon it, and how progressively it will strive to reduce external debt.

Nataša Mikuš Žigman, State Secretary at the Ministry of Economy and Sustainable Development, listed some current preparatory activities of the Government, primarily through legislation, with the Law on the Euro expected to be published by the end of this year and adopted in the first quarter of next year.

– We are also working on adapting the financial and banking system and a communication strategy towards the economy and citizens. Through the Committee for Economy and Consumer Protection, we plan to prepare and adopt an Ethical Code to which traders should voluntarily adhere, and the idea is to award labels to those who correctly calculate prices, which would be publicly displayed in stores and guarantee that prices are correctly calculated and accurately presented – explained Mikuš Žigman.

Namely, the greatest public concern regarding the introduction of the euro is the danger that the prices of products and services in Croatia will drastically increase. Žigman announced that the State Inspectorate will be responsible for those traders and service providers who are not fair and try to take advantage of the conversion.

– In other countries, there has not been a drastic increase in prices, it is around an average of 0.23 percent. All countries that have adopted the euro have improved the living standards of their citizens, and the euro has received strong support, for example, in Latvia and Lithuania. Through the Committee for Economy and Consumer Protection, we will monitor prices in the market six months before and one year after the conversion, to prevent any potential larger price increases – emphasized Mikuš Žigman, adding that according to the latest Eurobarometer research, 61 percent of citizens support the introduction of the euro.

Regarding the initiative for a referendum, it was stated at the conference that a referendum on the introduction of the euro is not current because Croatia automatically agreed to it by signing the accession agreement, and concerning a potential referendum for a delay, Mikuš Žigman sees no professional or scientific justification when discussing the benefits for the Croatian economy.

The discussion also included two representatives from the private sector, two exporters who explained how the conversion will affect their future business. Josip Divić, Chief Financial Officer of AD Plastika, mentioned that his company exports 100 percent of its production and has all revenues in euros, and that with the introduction of the euro, the company will eliminate currency risk and exchange rate differences to which it has been exposed until now, with effects visible on the company’s net result and the possibility of opening up space for other risks that may affect the company’s results. According to Divić, the effect of exchange rate differences in recent years has amounted to approximately one million kuna annually. However, he also pointed out that exporters would prefer a weaker kuna.

– For exporters to have support and for their product to be more competitive, the kuna needed to weaken, not be fixed – believes Divić.

Tihomir Premužak, CEO of Vetropack Straža, believes that nothing would have changed for the Croatian economy if it had had the euro instead of the kuna during the pandemic, and he sees only positive effects on the sales side of his company, given that 75 percent of Vetropack Straža’s production is sold for export. The main raw materials are purchased in euros, and loans and insurance policies are also paid in that currency.

– I spoke with fellow entrepreneurs and asked them if they see any negative side to the euro, but no one could name any. I expect stability in budgeting and managing companies – concluded Premužak.

Mikuš Žigman also listed several advantages that the state itself will have from the introduction of the euro, namely that the state will also eliminate currency risk, allowing it to borrow more favorably abroad. Croatia’s rating will increase by two notches, which enhances investment potential, and we expect monetary revenues at the level of 50 million euros annually. Additionally, Croatia will have the opportunity to participate in the bodies of the European Central Bank and thus influence European monetary policy.

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