“The trap is being set on the Croats as well”
Croatia’s entry into the Euro and Schengen zone has been met with widespread indifference. Eyes are elsewhere and full of serious concerns: the coming recession, exorbitant energy bills, rising rates. If we want to be happy about the entry of this new member, we can say that the euro zone retains a strong pull, because here a small country (0.33% of European GDP) will aspire to a single currency. shield against current risks: inflation and sovereign debt risks. The euro protects and reassures: that would be the result of this new enlargement. In a short video released on January 1, 2023, the President of the European Central Bank (ECB), Mrs. Christine Lagarde, enthusiastically welcomed the arrival of Croatia. He reminds us of the eurozone as a happy family that unites its members and brings them together. This reassurance, to put it mildly, seems a little far from reality. Does Croatia join the happy family? Does happiness await him? More than ever, such talk and pious wishes need to be tested with facts.
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First, Croatia’s economy has been largely tied to the eurozone since the 1980s and 1990s through the mark, the former German currency. In 1991, when Croatia gained independence, 90% of deposits were denominated in marks, and before the adoption of the single currency, 80% of bank deposits were already denominated in euros. The country could only join the euro, sealing the country’s monetary fate against the backdrop of a strong German currency. In 2020, Croatia joined the European Exchange Rate Mechanism, a front chamber against the euro. The country also had to make budgetary efforts to exit the excessive deficit procedure in 2017. Its abandonment of the currency, the kuna, crowns the partially achieved European integration. For the rest, the Croatian population heard the same selling points as other nations: a credibility premium for paying less interest on the country’s debt, lower conversion costs that stimulate tourism, increased attractiveness in foreign direct investment, trade growth and inflation control.
“Croatians are warned: leaving the euro could lead to very heavy costs. By the way, democracy takes him seriously according to his rank. Establishing irreversibility is the best way to abolish universal suffrage. »
Given the twenty-three years of the euro, it is largely legitimate to be skeptical of the performance of the single currency: weak growth area, little solidarity, logic of austerity, exchanges that do not increase significantly due to the uniqueness of the currency, and impossible economic policy. After that, the trap closes on the Croats as well, and the Governor of the Central Bank of Croatia says this in hardly veiled words. In an interview with the newspaper echoes On December 28, 2022, Boris Vujčić claims that “ Leaving the European Union is, of course, never possible. Who can stop a country from leaving the EU if it decides to? But once in the euro zone, the exit process would be much more difficult and costly than what would happen in the UK, a country that is not part of the euro. “. Croats are warned: leaving the euro could be very costly. Here we find the chilling words of former European Commissioner Yves de Silguy: ” The Euro is a highway without an exit lane “. By the way, a democracy takes it seriously by its rank. Establishing irreversibility is the best way to abolish universal suffrage.
A forgotten Greek precedent
After that, the regulation will be done on a case-by-case basis, and the same logic of savings as in the European Semester will fall on Croatia. The country is one of the poorest in Europe, with around 20.5% of the population living below the poverty line, not to mention a strong underground economy that accounts for around 30% of GDP. Salaries remain modest and there is little advancement. The average salary is 943.54 euros. To get a glimpse of what awaits Croatia, just read the European semester’s European tips to see the savings. Croatia is required to adopt a neutral fiscal policy and control public spending. And contrary to the hopes of the domestic elite, the euro will not be a factor of economic convergence and will create more heterogeneity. The Greek precedent had to stick in people’s minds. As for tourism, here again the example of Athens is worth considering: the strong euro years between 2001 and 2008 damaged the country’s tourism. If the euro appreciates further against the dollar, tourism in Croatia will suddenly become less competitive.
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The Croatian economy is now stuck in the fiscal logic created by a single and economical currency. There is a high chance that the population will wake up with a hangover. As for the Euro family, he is not happy and cannot be. The Eurozone is not a zone of solidarity, and the little it represents is always subject to austerity conditionality in terms of social protection, the labor market or even the ideological and limited promotion of liberalization activities. This creates heterogeneity and the ECB’s monetary tightening shows how monetary policy is wrong and struggles to make a satisfactory statement with the budget column. Not to mention the lack of a currency policy: there was never any serious debate about the correct exchange rate between the euro and the dollar. The euro zone is marked by weak growth. How can this giant, which weighs more than a quarter of Europe’s GDP, determine a satisfactory monetary policy for both Croatia and Germany? As long as governments insist on sacrificing business and its demands, the euro, a sovereign currency, can continue to exist. The Eurozone will never create a salary spring for people. It will remain the currency that will strengthen the power of financial markets. The euro is not the money of the people, it was designed, thought and lived against it. It is the Croats’ turn to find out.
