Brussels Behind the Scenes: Euro dreams fulfilled

Brussels Behind the Scenes: Euro dreams fulfilled

BRUSSELS BEHIND THE SCENES
Weekly analysis and untold stories
With SAM MORGAN

Read more:

Euro dreams fulfilled

Croatia is going to join the euro on 1 January 2023 after the Adriatic nation got the nod from the EU’s economy watchdogs. It might well breathe some life back into the full-fat EU enlargement process, which is at risk of stagnating yet again.

Nineteen eurozone countries are about to become twenty, now that Croatia has fulfilled all of the economic criteria laid down by the EU’s bean-counters. It is a welcome boost to the single currency’s standing, in this its twentieth anniversary year.

“Eurozone membership will strengthen the Croatian economy and help us overcome the crisis more easily,” pro-EU Prime Minister Andrej Plenković said after the European Commission published its state-of-play on euro accession earlier this week.

Croatians want the euro, according to surveys, but are concerned about whether the economy is ready for it and worried that prices will increase once the kuna is no longer legal tender.

Plenković has rather deftly skirted the potentially tricky issue of public opinion by regularly insisting that there does not need to be a referendum, because voters already signed up to the euro when they supported EU membership in 2012.


BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.


Joining the single-currency is one more milestone along Croatia’s ‘European path’, which will come 10 years to the day since the newest EU nation became a member of the bloc. The final piece in the puzzle will be Schengen membership and passport-free travel.

In tourism-dependent Croatia, borderless travel with its EU counterparts is something worth fighting for, although that particular issue may be more politicised than joining the eurozone. It may also depend on what the new government in Slovenia thinks about it.

Croatia and its Adriatic neighbour do not always see eye-to-eye on everything, particularly border issues. A dispute over maritime borders is currently on the back burner as Plenković and Slovenia’s now ex-PM Janez Janša chose not to quarrel over it.

Whether his successor, political newcomer Robert Golob, will see it that way is difficult to predict. He hails from the green-liberal part of the political spectrum, while Plenković is from the centre-right conservatives.

Schengen membership needs unanimity and migration-wary leaders in Europe’s northwest have long been wary of Croatia’s borders with its Balkan neighbours. They may choose to spin Croatia’s eurozone prize as reward enough for now when the crunch moment comes.

 

Knock-on effect

EU enlargement-proper is in an odd place at the moment. Before Russia’s invasion, it was fully on ice, as negotiations with existing candidates had stalled and there was no political consensus to open talks with prospective members like Albania and North Macedonia.

Then Vladimir Putin changed everything. Georgia, Moldova and Ukraine have applied to join the bloc; the Commission is currently analysing their bids and will report its findings at a summit in late June.

EU leaders will not agree to grant those countries candidate status, in this author’s opinion. Murmurings and statements made after this week’s Council summit indicate prime ministers and presidents are not interested in opening what they see as a Pandora’s Box.

But could Croatia’s eurozone accession reenergise the bids of those countries already in the system? Perhaps.

Montenegro – which unilaterally uses the euro, but that’s an odd matter for a different column – and Serbia might well see Croatia’s joining of the single-currency as a sign that the EU actually makes good on its promises.

After all, Croatia has at least on paper done everything asked of it, followed the procedure laid down by Brussels and – barring a very unlikely veto at a July summit – been awarded its prize.

If the new pro-EU government in Podgorica survives long enough and sticks to its guns, progress in the accession process could be in the offing. It is furthest along in negotiations but tricky reforms still need to be made.

Serbian President Aleksandar Vučić was sworn in for another term this week, insisting that EU membership is still a big priority. Whether that translates into anything tangible is hard to tell and may hinge on Russia’s fortunes in the medium- to long-term.

Vučić goes where the current takes him. He is reportedly planning to welcome Russian foreign policy tsar Sergei Lavrov in Belgrade soon, so any idea that this leopard is changing its spots is probably fanciful. For now at least.

 

What about all the others?

Croatia is not the only EU country not using the euro yet. Bulgaria, Czechia, Hungary, Poland, Romania and Sweden also have their own currencies and are at various different stages of joining the eurozone.

Arguably, Bulgaria is the only one actively trying to reform its economy to meet all of the criteria. According to the Commission’s new report, the Eastern European nation needs to get price stability under control to become eligible.

Romania wants in but is not as far along on its euro journey, as it currently does not meet any of the other criteria, which include healthy public finances, exchange rate stability and long-term interest rates. It is unlikely to get its house in order anytime soon.

The other non-euro governments actively put in place policies that prevent them from meeting the eurozone criteria, as public opinion either does not favour ditching their domestic currencies or political headwinds count against the idea.

Every EU country – except Denmark which has an opt-out – is supposed to join the euro at some point but the Commission does not exactly enforce this rule.

In Croatia’s case it hasn’t had to.

Once the euro is in circulation it will be fascinating to see what better interest rates and no exchange rates will do for its economy. Croatia may show the single-currency naysayers that they are missing out on a good thing.

 

BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.


Latest News

Copyright © 2021 The Brussels Times. All Rights Reserved.