Photographer: Simon Dawson/Bloomberg

Croatia Sets 2020 Target for Entry to Euro-Area Waiting Room

  • Premier Plenkovic says preparation measures to focus on debt
  • Agrokor issues won’t impact Croatia’s euro-entry plan, he says

Croatia bucked the trend of eastern European Union countries putting off their commitments to adopt the euro by setting 2020 as a target date to join ERM-2, the waiting room for the common currency.

The newest EU member plans to join the exchange-rate mechanism, where all new euro members must remain for two years to show currency stability, and it will focus on cutting public debt to ensure it meets the five criteria necessary to swap its kuna for euros, Prime Minister Andrej Plenkovic said in an interview in Tallinn, Estonia.

“We are converging in the direction of fulfilling the Maastricht criteria, especially by reducing debt,” Plenkovic said. “I want to use this trend when we have economic growth, a low budget deficit and low unemployment to launch activity that would lead us first of all to the ERM-2 in 2020 and then couple of years later into the euro area.”

EU officials are discussing ways to reform the currency area, including a proposal by French President Emmanuel Macron for a euro-zone budget. Poland, the Czech Republic and Hungary, the bloc’s biggest eastern economies that joined nine years before Croatia, have bucked their obligation to eventually adopt the euro and don’t currently have target dates.

Plenkovic also said that the government’s takeover of Agrokor d.d., the largest retailer in the Balkan region that is now under special administration, wouldn’t affect euro-zone entry.

In the last two years, Croatia has trimmed its public debt levels, the biggest challenge for it to meet the Maastricht criteria, which demands euro-zone applicants have public financial obligations of less than or decreasing toward 60 percent of gross domestic product. Finance Minister Zdravko Maric in January said the public debt may fall to 83 percent of GDP by the year end, from 85 percent in 2016.

The Adriatic nation exited the EU’s budget monitoring procedure this year after the government trimmed the deficit to 1.6 percent of GDP in 2016. Officials expect the gap to narrow further this year after the state posted an unprecedented surplus in the first six months.

    Before it's here, it's on the Bloomberg Terminal.