Croatia: Full Steam Ahead Towards Eurozone!

It is official: On January 1, 2023, the Euro will be Croatia’s legal tender and payments with the existing Kuna is to be phased out completely within two weeks that will follow.

The European Union has July 12, 2022, removed the final obstacles to Croatia adopting the euro, enabling the first expansion of the currency bloc in almost a decade as the exchange rate fell to its weakest level against the dollar in 20 years.

The European Union (EU) finance ministers, in the presence of Croatia’s outgoing finance minister Zdravko Maric, approved July 13, 2022, three laws that paved the way for Croatia to become the 20th member of the eurozone on January 1, 2023.

Created in 1999 among 11 countries including Germany and France, the euro has gone through seven previous enlargements starting with Greece in 2001. The appeal of euro membership is reflected by the last three expansions, which brought in Baltic states between 2011 and 2015. The last EU member country to join the European single-currency area was Lithuania in 2015.

Croatia’s acceptance into the European Union on the 1st of July 2013 evidently marked the beginning of the end of the Kuna as Croatia’s currency ever since its proud introduction amidst the ravages of Homeland War during which Croatia defended itself from brutal Serbian aggression on 30th May 1994. Entering the European Union in 2013 brought with it many changes be they for better or for worse and one of the most significant is upon Croatians with Croatia entering the Eurozone in 2023.

Many predict that the effect of this transition will make life even harder for ordinary people especially pensioners while others continue convincing the people that bringing in the euro will be better than “the invention of sliced bread”. Preparations are underway to ensure that everything is ready for the new currency. The production of coins and monetary paper notes has commenced full speed ahead during the past two weeks.

Despite the “very strong challenges” of high inflation and dented economic growth, Croatian outgoing finance minister Zdravko Maric said he is pleased to see his country switch to the euro. At this time when the Eurozone itself is facing rising levels of inflation and stagnating growth, the decision for Croatia to join the EU’s common currency may come as a surprise to quite a few.  A lot of economists in Germany, however, see things differently. Especially as the next candidate after Croatia is Bulgaria, which has already applied for membership and aims to become the 21st country to introduce the common currency in 2024. Croatia is the third poorest country in the EU, Bulgaria with a gross domestic product of less than 10,000 euros per capita ranks last in economic power.

Croatia is not giving up a stable currency, but rather hopes to benefit from the more favourable debt conditions in the monetary union. The country relies more than any other EU state on tourists, who generate a fifth of gross domestic product and find holidaying much easier when they needn’t grapple with exchange rates. Meanwhile, most private and corporate bank deposits are held in euros, along with more than two-thirds of debt totalling about 520 billion kuna ($75 billion). Euro-area membership will lower interest rates, improve credit ratings, and make Croatia more attractive to investors, according to Croatian National Bank Governor Boris Vujcic.

The European Central Bank has already announced that it will use a new monetary policy instrument to ensure that interest rate differentials within the monetary union remain low during the crisis. The Germany based Kiel Institute for the World Economy worries that because of years of misguided developments in the Eurozone with ultra-loose monetary policy and lax debt rules, the monetary union is only attracting the wrong people. Brussels was desperate to give the signal that the Eurozone is growing, especially since Brexit. And it is noted that Croatia’s entry into the Eurozone represents a most significant event for the EU since Brexit. It is suggestive of concern that strong EU member states of Sweden and Denmark still do not want to introduce the euro or enter the Eurozone. The Kiel Institute has also expressed the opinion that as long as the major problems of the Eurozone monetary union have not been solved, the circle should not be widened: “As long as you haven’t stabilised your house, you shouldn’t grow.

The Euro has been the currency of the European union since 1999 and with Croatia joining the Eurozone, changes will be visible in the upcoming period from small households to large companies. The question on everyone’s mind is will life be more costly with 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.

“It’s a wonderful club to be a member of, but it requires commitment, dedication, continued respect of the rules, and I know that we can expect no less from Croatia,” European Central Bank President Christine Lagarde said.

For Croatia to be able to switch to Euro many conditions had to be met. As stated in the Maastricht Treaty, there are four conditions for entering the Eurozone:

Price stability – inflation rate cannot be over the average inflation rate of 3 member states with the best price stability enlarged by 1,5 percentage points;

Sustainability of public finance – the general country deficit to GDP ratio must not be over 3% and the general country debt to GDP ratio must not be over 60%;

Currency stability – at least 2 years must be spent in ERM II (European Exchange Rate Mechanism) without significant oscillations or devaluation to central rate;

Convergence of long-term interest rates – interest on long-term government bonds may not supersede referent values of interest on bonds of the 3 member states with the best price stability enlarged by 2 percentage points.

Croatia’s government adopted a national plan to replace the Croatian Kuna with the Euro in December 2020. The main goal of the plan is to ensure a seamless transition to Euro. One of the key factors in achieving this, lies in the hands of the IT sector that will need to adapt all systems to the new currency. Also, the new currency must be physically distributed among the private, corporate, and public sector. Even though everything will be paid in Euros from the 1st of January 2023 there will be a transition period of two weeks in which people may pay with Kunas but must receive Euros back. Non-cash transactions will be exclusively in Euros. Banks will exchange up to 100 bills or 100 coins of Kunas to Euros in one transaction free of additional fees which will also ease the way to fully integrating the Euro in the economy.

To better prepare for Euro all prices will be listed dually in Kunas and Euros from the 5th of September 2022, as the first Monday in September, and will be displayed as such until December 31st, 2023. Aside from the price being listed in both currencies, the fixed exchange rate will also be displayed.

This will ensure people getting used to the change of prices before the Euro is implemented. Salaries will also be displayed in dual currency and converted to Euros according to the fixed exchange rate so there shouldn’t be a negative financial impact to people’s lives in general. Getting used to the new prices will however take a while to get used to even if the prices do not rise. The government will also try to regulate sellers so that prices do not rise significantly though surely everyone will feel the differences due to the currency change.

Whether the introduction of the Euro will bring Croatia more benefits or more difficulties remains to be seen in the New Year but as with any change it is up to all of Croatians to make the whole process unfold as easily as possible and move forward into the future with the hope of it being a better one for Croatians and for future generations to come. Hopes as they go are intangible and real living brings them to life either in the positive or negative sense from everyone’s perspective. Almost half of the right-wing parliamentary opposition in Croatia consider the introduction of the euro at this time as unadvisable and damaging to the already lowered living standards that are under enormous downward pressure with increasing inflation, energy crisis and war in Ukraine. Ina Vukic

Communist Yugoslavia Secret Services Archives Needed To Fight Against Organised Crime

The report on cooperation in the fight against organised crime in the Western Balkans was adopted by the Foreign Affairs Committee on Tuesday 26 October 2021 by 60 votes in favour, 4 against and 6 abstentions.  In the report Members of the European Parliament urged governments in the region to significantly increase their efforts to go forward with reforms in the rule of law and the fight against corruption and organised crime. The report says that the Western Balkan countries (Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Kosovo, and Serbia) are countries of origin, destination, and transit for human trafficking, and they serve as a transit corridor for migrants and refugees and as a location for money laundering and firearms trafficking.

There is a lack of genuine political will in fighting the organised crime in these countries and MEPs want Western Balkan countries to address fully the shortcomings of their respective criminal-justice systems, including the length of legal proceedings. While not located within the Western Balkans for the matters addressed in this report, Croatia as a country that used to be a part of communist Yugoslavia until 1991 still has a great deal to answer for and fight against when it comes to organised crime and corruption.

The report said that Members of the European Parliament insisted that “fighting organised crime and advancing towards European Union integration are mutually reinforcing processes and call for an accelerated integration process.” The EU should, according to its Members of Parliament, support these efforts through financial assistance and practical cooperation. Call me a pessimist and a cynic in this if you like, but judging from the fact that organised crime and corruption are rooted in these societies of former communist regimes or similar political and social realities, the EU money dished out to root out corruption will be largely swallowed up by the same corruption, to feed itself, unless political power landscapes are changed in those countries or the EU actually controls every euro given and does not give money away.

As a member state of former Yugoslavia Croatia has also inherited widespread corruption as organised crimes from it. As such, Croatia could play a significant role in its input into fighting organised crime in those countries of Western Balkans that have their eye on being members of an extended EU member country because it possesses “inside knowledge” of organised crime. But given the alarming level of organised corruption still plaguing Croatia one must doubt as to whether much will change in Western Balkans on account of Croatia’s input. To be effective in this Croatia would need to shed most of its public administration heads and replaced them with those who have no links whatsoever with the corrupt echelons. Or, assisting the EU in this role from Croatia should be persons who would not qualify for lustration if lustration was to occur as well as not be a descendant, child, or grandchild of those who would qualify to be lustrated whether now living or not. It sounds like a big ask but, in essence, it is not because Croatia has quite a number of those who would qualify and who had during the life of former Yugoslavia either lived there or lived abroad as part of the diaspora.

Croatia’s criminal-justice system is certainly there where Western Balkans’ is and it needs a complete overhaul, however, we are not likely to see this occur while those aligned with the former communist Yugoslavia mental set control all aspects of public administration including judiciary.

The Report says that the main factors that make Western Balkans societies vulnerable, are the lack of employment opportunities, corruption, disinformation, elements of state capture, inequality, and foreign interference from non-democratic regimes such as Russia and China. Croatia, even after 30 years of seceding from Yugoslavia still has these problems plaguing its progress and everyday life.

Links between organised crime, politics and businesses existed before the break-up of Yugoslavia and have continued since the end of the conflicts of the 1990s, and Members of the European Parliament “condemn the apparent lack of will of the responsible authorities in the region to open the former Yugoslav archives and for files to be returned to governments if they want them.”

The report welcomes the conclusion of cooperation agreements between Eurojust and the governments of Albania, North Macedonia, Montenegro, and Serbia, as well as the authorisation to open negotiations with Bosnia and Herzegovina. MEPs urge the Council to authorise as soon as possible the opening of negotiations for a similar agreement with Kosovo.

It is of great interest to monitor how the recommendation from the Report that says that “Responsible authorities should open the former Yugoslav archives” will fare. Knowing the utterly corrupt persons that held the corrupt and criminal Yugoslavia together, influence of whom poisons many a responsible authority in former Yugoslavia countries, including Croatia, the opening of all archives is likely to be stalled for generations to come. Unless of course there comes a time when the political landscape changes and new generations, unpolluted by communist Yugoslavia nostalgia, come to be the authority that makes such decisions.

Suffice to say that there are multitudes of politicians in power or those holding authority in Croatia for whom the opening of Yugoslav archives would reveal alignment with UDBA (communist secret services in former Yugoslavia) communist purges operations and grand thefts for personal gain; an abominable, criminal past that included persecution and assassinations of anti-communist Croats and stealing public wealth for personal gains. Further problem for the opening of Yugoslav archives rests in the fact that when former Yugoslavia crumbled apart Serbia retained much of the archival material pertaining to the country’s federal depository held in its capital city Belgrade. Serbia did not do the decent thing and returned to all the former states of Yugoslavia their rightful archives – Serbia kept them all and it is not a member state of the European Union. Those archives would undoubtedly also reveal, among many other facts, the nasty historical fabrications Serbia has engaged in against its neighbouring countries, particularly Croatia and Bosnia and Herzegovina.     

Communist Yugoslavia Secret Service files (UDBa) hide everything that the lustrated or those prosecuted for endangering human freedoms, political and civil rights, destroying families would be accused or members of the service lustrated or those prosecuted for endangering human freedoms, political and civil rights, destroying families and various blackmails and interfering in political and economic life and installing in political parties would be charged with. But Croatia’s criminal justice serves largely those it needs to protect from such lustration or prosecution. Secret service files hide everything unknown that would shed light on various historical and political deceptions, montages and that it would produce grounds for a different understanding of the 20th century history that is based on facts rather than communist or Serb fabrications.

Plights by several Croatian politicians in the opposition to the HDZ or SDP governments since year 2000 for the opening of accessibility to all Yugoslav archives, wherever on the territory of former Yugoslavia they may be held, have been numerous. Lobbying for the opening of the archives has been quite rich. But all to no avail! Will EU succeed where others have failed!?  The answer to the question “what is in those secret services files” appears with more urgency as Yugoslav secret services files continue to remain a “taboo topic” despite the landscape where, on surface, all the government officials and leaders swear to their personal commitment towards the truth! EU has been asking for access to those archives for over a decade and this Report regarding fighting organised crime on Western Balkans is just another notch in the string of asking.

The Report’s other significant recommendation is that political and administrative links to organised crime must be eradicated. This all sounds very great, just like the European Parliament’s declaration condemning all Totalitarian Regimes from the past some 12 years ago (2009). But the European Union authorities still to this day fail to punish or impose consequences upon Croatia for encouraging symbols of communist Yugoslavia totalitarian and murderous regime to thrive on the streets of Croatia that lost rivers of blood in the 1990’s while trying to secede from communist Yugoslavia. All this tells me that the European Parliament and the EU authorities have no real political will to contribute effectively to the achievement of recommendations from the Report on cooperation in the fight against organised crime in Western Balkans. I, for one, would love to see Yugoslav secret services archives open for all to access and study and show the truth but somehow, I fret that in my lifetime I will not see that without a miracle of political change. There appear to be too many individuals with power at some level within the countries’ machinery involved with organised crime in both Croatia and in the Western Balkans and only a miracle can rid the people of that scourge. The miracle, of course, can be shaped at the next general elections. Ina Vukic

EU, Croatia and Brexit

Croatia and Brexit

 

The European Union has seen numerous crises come and go and some staying stubbornly put – e.g. last year’s rejection by many member states to take in EU-stipulated quotas of refugees/migrants, but the 23 June 2016 Brexit vote in the United Kingdom has perhaps forced upon the EU the biggest crisis yet – bigger than was possible to imagine, perhaps? Brexit vote had within days of its results count heralded far-reaching consequences not only for the UK and the EU, but also for the countries seeking EU membership from the Balkans, Turkey etc.

Never before have citizens of an EU member state voted against remaining part of the Union and after more than four decades of its existence the problems of untangling many matters and connections within the EU network of member states are emerging as almost impossible to solve without causing serious damage to one or the other side and to individual people from both sides. By June 2016 UK had grown into and fused with EU flesh and the future of separating that EU flesh appears to entail serious repercussions for all involved.

Prior to Brexit vote the EU has been THE club to join particularly because of UK being its member. UK had been a draw-card for many from Eastern and Southeast Europe to vote “Yes” to EU membership at their own referendums. Arguably, many people from all countries of Eastern Europe and Southeast, such as Croatia in 2013, had held EU membership as an ideal club to aspire to precisely because UK was there, waiting in its desired modernity to embrace them as its own and lobbying for EU expansion. Now that Brexit vote assures UK’s departure from the EU these multitudes of people in these countries are bound to be asking themselves if it was worthwhile for their country to join the EU after all. The repercussions of Brexit vote will remain unclear for many weeks and months to come, as the implications are far reaching. Much will depend on decisions taken by British and EU leaders on a number of issues that will extend beyond the Brexit itself.

The EU, without the UK, is likely to see strengthened campaigns for it to become a union of sovereign states, rather than a federation of nation states that Brussels wants at this stage. Following Eastern European countries’ (e.g. Hungary, Slovakia, Poland…) stance in rejecting the housing of refugees and illegal migrants and in protecting their borders and the ever increasing height of the “national interests” (which by the way was at its highest in Wales and England, in particular, at the time of Brexit vote) suggest that the push for union of sovereign states is about to get heartier in EU.

dr Franjo Tudjman at UN on 22 May 1992

dr Franjo Tudjman at UN on 22 May 1992

A quarter century after Croatia declared its independence from Yugoslavia, British voters have decided, albeit by a narrow margin, to leave the European Union. Throughout various media outlets in Croatia, Croats are currently pulling out of drawers president Franjo Tudjman’s words, even as far back as 1968 when as scientist and historian he wrote that “the European community in the shape of a union between European states could represent the most advantageous framework for a true revitalisation of the idea of co-existence in today’s world”.

European politics can only be purposeful if it brings about the creation of such a European community which will have the capacity of free itself from intolerable tutelage under both super powers (USA and USSR) and become an independent actor within the international life. Such a community in Europe can only be achieved as a union of states of independent European nations who would retain their own national quintessence, the right independent socio-political development within their own borders and to sovereignty in international life. The fundamental European politics that aim towards European community joining its European people’s material and intellectual powers into the idea of active co-existence and unity of diversity are the only politics that have real prospects of success,” wrote Franjo Tudjman way back in 1969 and retained these opinions as to the dynamics and make up of the European community/union well into the 1990’s when he championed Croatia’s independence from communist Yugoslavia.

The largest political party, Croatian Democratic Union/HDZ, is currently preparing for its own leadership elections since Tomislav Karamarko resigned as leader last month; and, in the aftermath of the recent fall of government, snap general elections are due mid-September. Croatian political analysts and journalists are already asking the question: which leader of which party is likely to support an EU Federation of Nation States centrally governed from Brussels and which leader is likely to support an EU as Union of Sovereign States.

European Union is currently shaking from the rubbing of two tectonic plates against each other: the Euro-federalist one and the Euro-sovereignty one. Germany’s Angela Merkel and Brussels’ corridors of power are championing the former while the latter is strongly the agenda of Eastern Europe’s countries particularly the Visegrad Group (Czech, Hungary, Poland, Slovakia) to which Croatia has been aspiring for a while, at least since Kolinda Grabar-Kitarovic’s presidency took power in January 2015. Traces of leanings to a union of sovereign states in EU, or leaving the EU if membership means stripping of national sovereignty of state, can also be seen in Austria’s and Greece’s recent speculations as to a possible exit from the EU; Italy’s, Netherland’s and France’s conservatives increasing anti-EU sentiments and so forth…

 

The likely candidate for Croatia’s HDZ leadership elections in July, EUP Andrej Plenkovic, appears to support the EU Federation option and hence, the Visegrad Group lobby for a union of sovereign states would pose a problem for Croatia and lingering divisions and dissent. One cannot sit on both stools at the same time, as it were. It’s hard to imagine that majority Croats would want the European super state of federation where government is centralised in Brussels and sovereignty of each state erased as seems to be what Plenkovic as HDZ leader might support. It’s been said that such may be the case because EU protects its smaller member states but not all agree with such a view. While attaching oneself to a bigger and wealthier body might provide certain securities it certainly risks losing ones identity or much of it.

 

The remaining EU 27 members have been seeking a quick resolution, asking the UK to trigger Article 50 of the EU treaty that would manage the process of leaving the EU. However, the British government has been reluctant to trigger this ‘clean’ way out. Indeed with Prime Minister David Cameron resigning, with leaders of the Brexit campaign – Boris Johnson and Nigel Farage – leaving the Brexit train, not only does there seem to be no exit plan but also Brexit supporters are left holding the baby, looking down a “what now” abyss.

 

This puts the union in a state of uncertainty and Germany seemingly stepping up into the lobby for enlargement role UK played before – as exemplified by Angela Merkel’s swift statement on 4 July 2016 that Serbia may open its EU membership negotiation on Chapters 23 and 24 and that Croatia had agreed to this. Croatia had been stalling Serbia’s progress in opening Chapter 23 for EU membership negotiations with view to several important legal and judicial issues and missing persons matters outstanding from the 1990’s war against Croatia. The fact that these were issues to clear before Serbia is given a green light for Chapter 23 negotiations, and that green light to Serbia has now been given without adequate explanations in public as to what happened with Croatia’s issues, leaves one asking many distressing questions, particularly regarding justice for victims of Serb crimes in Croatia and Bosnia and Herzegovina. A logical and obvious explanation here is that the EU is working very hard to show the world that Brexit will not stop EU enlargement! However, the cost of such moves as opposed to the cost of nurturing the existing EU member states and leaving enlargement for a later time, could well prove to be too high for EU’s ambitions for the creation of a superstate of itself; member states may retaliate against such centralist decision-making as are those demonstrated this week regarding Serbia’s negotiations for EU membership. I mean, every “Tom, Dick and Harry” stood in Croatia’s way to negotiate its membership over many years and now, only three years after it achieved membership, the EU seems to have parked its criteria at an open town-market where EU membership desirous states can barter their way into membership whichever way and with whatever they want. So much for reasonable and needed criteria that guarantees at least some grassroots homogeneity in EU!

Whether Croats will fall into a position from which they’ll be happy to blindly and mutely listen to everything that comes out Brussels is the most burning question now. This week’s events that gave Serbia green light to open negotiations in Chapters 23 and 24 for EU membership have completely omitted to explain to the Croatian public why that is so and what happened with the issues of protests or requirements Croatia had put before the EU in this regard. I do not believe the Croatian public will wear this lightly and will want explanations. The wounds of the 1990’s War of Independence are still very raw, sacrifices made for freedom and sovereignty and self-determination – still felt heavily and deeply. No politician in Croatia is likely to survive for very long if he/she forgets this fact. EU or no EU. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)

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