At the signing on Tuesday for Croatia to join the eurozone are (from left) Croatia's Finance Minister Zdravko Maric, European Commission Executive Vice-President Valdis Dombrovskis, and European Economy Commissioner Paolo Gentiloni.VIRGINIA MAYO/AP
European Union finance ministers on Tuesday signed off on Croatia's adoption of the euro at the start of next year, when it will become the 20th member of the eurozone. The final approval for the country's use of the single currency comes as the euro dropped to its lowest level in 20 years.
The Balkan nation joined the European Union in July 2013, after it was granted candidate status for membership of the bloc in 2004. The conversion rate of the kuna, Croatia's currency, is set at 7.5345 per euro under an exchange mechanism with the European Central Bank.
ECB President Christine Lagarde described Tuesday's outcome as "a result of tremendous efforts by Croatia and its citizens to meet all the necessary economic and legal requirements".
"Politically and economically, we are stronger together, especially in these uncertain times. Our common currency, the euro, offers protection against the headwinds we face," she said.
Croatia's adoption of the euro will come eight years after the last eurozone expansion to include Lithuania in 2015.
European Commission Executive Vice-President Valdis Dombrovskis said the move "will complete Croatia's full integration into the European Union".
"A strong and larger euro area reinforces Europe's influence internationally," he said on Tuesday at the signing of the legal acts for Croatia to adopt the euro.
Boris Vujcic, the governor of the Croatian National Bank, applauded the move. He said that the single currency will offer citizens and businesses "concrete, direct and permanent benefits".
"The currency risk will disappear to the greatest extent, and Croatia will be more attractive to investments and safer in times of crisis. The euro is also a key value of European unity and will enable us to play an even more active role in the European project," he said in a statement.
Historic fall to parity
The Tuesday decision came on the day that the euro fell to parity with the US dollar for the first time since the currency was introduced on Jan 1, 2002, amid growing concerns that the EU could plunge into a recession as a result of a protracted Russia-Ukraine conflict.
Inflation in the 19-member eurozone hit a record 8.6 percent in June. In its spring economic forecast released in May, the European Commission marked down the real GDP growth in both the EU and the eurozone to 2.7 percent in 2022 and 2.3 percent in 2023, from 4 percent and 2.8 percent (2.7 percent in the eurozone) in its winter forecast released in February.
Yanis Varoufakis, a Greek economist and former finance minister, said Croatia's decision will cause self-harm.
"Here is why countries like Croatia, Bulgaria etc. should stay out of the toxic eurozone, as Poland & Czechia are wisely doing," he said in a tweet on Tuesday, posting a link of his article on the Project Syndicate site in January criticizing the "unmitigated failure" of the euro on the 20th anniversary of the single currency.