12 ms·

"... does the switch to Euros carry any disadvantages to average Croatian citizens?" It carries tremendous disadvantages. In fact, I'm quite surprised that at

by rsync 4y ago

"... does the switch to Euros carry any disadvantages to average Croatian citizens?" It carries tremendous disadvantages. In fact, I'm quite surprised that at this late date, with a greater understanding of what it means to force your citizens to use the Deutsche Mark, that they have made this decision. With all due respect to Croatia and the lovely people that live there, they cannot compete globally with Germany in any interesting export market. The typical tool that a nation uses to deal with that reality is the relative value of their currency. Consumers of import goods then have a choice to make between German quality and (for instance) Spanish pricing. ... and now that lever will be gone. At this point I think it is fairly well understood what the economic - and social - ramifications of this are and, again, I am actually quite surprised they've made this choice.

toomuchtodo 4y ago
It’s a trade off. You give Germany and France more control, but they are incentivized to backstop you. It seems the countries continuing to join the EU understand this and are at peace with it. Tourism is one of the larger sectors in Croatia’s economy, so frictionless travel between them and other EU members is likely worth the arrangement. They also have a floating LNG terminal, very valuable due to recent events. https://www.countryreports.org/country/Croatia/economy.htm https://www.countryreports.org/country/Croatia/economy.htm
- mytailorisrich 4y ago
  I don't think there is 'Germany and France' anymore these days. There is Germany and their goodwill towards France, if any, [edit:] because all the power and leverage has been with Germany for years now. Recent years have shown that Germany will of course focus on its own interests and policies and ignore France/rest for the EU whenever they deem fit to do so, while France is in a weaker position. At least it used to be that France had military power going for themselves but recent policy changes in Berlin should really and finally set alarm bells ringing in Paris.
  - toomuchtodo 4y ago
    My shorthand is lazy, but it’s no different than California ($3.3T GDP), Texas ($2.1T), and New York ($2T) carrying the rest of the US states. Europe is stronger together than apart (economically speaking), and this is a good deal for everyone involved (my two cents). I admit there is always a bit of contention when macroeconomic stress limits are tested. Such is the nature of unions.
    - rsync 4y ago
      I disagree - it is quite a bit different. The United States and the individual states share both a fiscal and monetary union. The EU, on the other hand, is a monetary union but not a fiscal union and our expectations for that arrangement range from hopeful to outright fatalism.
      - toomuchtodo 4y ago
        I agree with you in theory/academically but disagree with you that the difference matters in application. The only difference is the force with which the dissenting or economically weaker parties can be dragged by the majority; in both cases, the dissenting are still getting dragged (and drag applied to the majority). There is no appetite in either case to dissolve the monetary union. Witness how poorly it went for the UK leaving the EU, and that’s with maintaining their own currency.
        cjbgkagh 4y ago
        In the UK much of the popular support for the EU was from people looking to escape their own god awful politicians, that things didn’t go well after leaving, due to the same god awful politicians, wasn’t a big surprise. Technically one way to fix it would be to elect better politicians, but it’s the UK so that doesn’t seem to be an option.
      - cjbgkagh 4y ago
        The plan was always to use a debt crisis to turn the monetary union into a fiscal union. I guess therein lies the fatalism. But fiscal unions were much easier to form when money was gold backed and financialization wasn’t so rampant. Plus people have seen the effects of Germany being able to export unemployment via its surplus is it upsetting other Europeans and building anti-EU sentiment. In my view the debt crisis is structurally baked in and guaranteed to happen, what I’m uncertain about is the extent of the backlash EU leadership will receive from the attempt at normalizing fiscal policy.
- atmosx 4y ago
  The countries don’t understand a thing, until it’s too late. Politicians want bigger-size budget to spend (the first 5 years) and the local elites want to avoid possible depreciation of their bank accounts (Italy, Greece, etc). The local elite now will be owned by Brussels within a few years to an extend they can’t imagine. The politicians care too much about their personal careers, they don’t care about the state. Ultimately the Citizens will have to pay the piper, but then again … maybe I am wrong. Joining the EUR in 2000 one could claim ignorance. Joining in 2022, without having infrastructure and industry to compete with Germany, using a currency they completely control is pure suicide. You go looking for someone to take over you country.
  - toomuchtodo 4y ago
    Greece and Italy can’t blame Brussels for structural demographics and no industry worth young people sticking around for though, right? If your country is just a runner up economically, you didn’t have much leverage to begin with. With monetary policy control, you can print, but without the underlying economic engine to back that printing, you end up as Turkey (bad) or Venezuela (worse). Only in aggregate can you monetize the debt.
    - atmosx 4y ago
      > Greece and Italy can’t blame Brussels for structural demographics and no industry worth young people sticking around for though Greece and Italy choose to be part of the EUR, so now they have to pay the price of a choice they made. However, there is a structural problem with the way the common currency is constructed. This has little to do with individual countries and everything to do with the eurozone. The EURO created a union with a common central bank that lacked a common state to have its back, while simultaneously allowing states to carry on without a central bank to have their backs in times of financial crisis, when states must bail out the banks operating in their territory. Now during the good times, cross-border loans created unsustainable debts. Then, at the first sign of financial distress (either a public or a private debt crisis), the writing was on the wall: a eurozone-wide spasm whose inevitable outcome was sharp divergence and enormous new imbalances. The beneficiaries of this situation are some countries and not others, but this is not sustainable in the long run. The EU needs to create a proper banking union and then most likely most to a sort of political integration. Unfortunately the EURO as currently constructed, made that impossible by pitting one country against another.
- jq-r 4y ago
  > They also have a floating LNG terminal, very valuable due to recent events. You can have all the LNG terminals in the world, but if your government and judicary are completely corrupted, normal citizens won't get a cent out of it. And that's happening over here in Croatia.
moonchrome 4y ago
Croatian Kuna was basically pegged to Euro by Croatian central bank. Large amount of loans and savings were in Euro already. Switching to euro was mostly a formality at this point.
- darrenf 4y ago
  I visited Dubrovnik in early December expecting to spend mostly euros, given the peg and impending switch. In reality I used only kuna. Almost all restaurants, market stalls and shops were accepting HRK only and none of the ATMs were dispensing EUR. To me it seemed so bizarre with only 3 weeks to go - and a big contrast to my experience in Amsterdam before their switch in 2002.
  - deleted 4y ago
    [deleted]
  - input_sh 4y ago
    Next 14 days are the most bumpy part of the ride. Whenever you purchase with HRK, you'll get your change in EUR. ATMs that are dispensing HRK will stop working, but those that dispense EUR will be available for no fees regardless of the bank.
  - jq-r 4y ago
    Well, nobody was accepting euro much (legally), because well, it would be illegal. Dunno how it was in Amsterdam in 2002, but for the next 15 days a lot of smaller businesses just won't work until the 15th when kuna is officially not accepted anywhere anymore and everything has to be in Euro.
robbintt 4y ago
I don't know anything about this stuff, either. Why does it work in the US to have the midwest on the same currency as California?
thaumasiotes 4y ago
> The typical tool that a nation uses to deal with that reality is the relative value of their currency. Consumers of import goods then have a choice to make between German quality and (for instance) Spanish pricing. > ... and now that lever will be gone. Because Croatian prices will be equal to German prices? Why?
- Xylakant 4y ago
  Why do you expect that to happen? Finnland uses the Euro and has different prices from Germany, so does Latvia, Spain, Italy, France,… if the prices for goods depended on the currency alone, we’d all have the same prices. But we don’t. And the Croatian currency was pegged to the EUR anyways, so if you’d be right and the currency dictates the price, they’d already have the same price in all but name.
  - thaumasiotes 4y ago
    Did you mean to respond to me?
senko 4y ago
> The typical tool that a nation uses to deal with that reality is the relative value of their currency ... and now that lever will be gone. That lever hasn't been there in a while. Croatia could never lift the peg to Euro without massive disruption to almost everyone here. A few years ago, Switzerland lifted its peg. Only a very small number of Croatian mortgages have using CHF at the time (the rates were better then EUR or HRK ones) and the resulting damage was huge (bankruptcies, people's lives' ruined), still having repercussions ot this day. Compared ot that, virtually all of the mortgages (and other types of loans) are either calculated in Euro or pegged to Euro directly or indirectly. If the peg had ever lifted, you'd have rioters in all the major cities the next day.
- kmlx 4y ago
  > the resulting damage was huge (bankruptcies, people's lives' ruined), still having repercussions ot this day. same thing happened in other countries in eastern europe. it was a mess, but to me it showed that people don’t really understand what they’re signing.
  - throwaway2037 4y ago
    This: <<it showed that people don’t really understand what they’re signing.>> It demonstrates that regulation was too weak. They shouldn't have allowed people to borrow huge sums of money (to buy a house) in foreign currency. It was a recipe for disaster.
    - kmlx 4y ago
      i don’t agree with this. it’s essentially up to the people to decide what’s best for them. and i’m sure the lesson has been learned now re. CHF. of course the lesson should have been taught at some point during formal education, but alas. plus, to top it all off, there are countless financial products to isolate yourself from fx fluctuations. it’s just that education is lacking.
dkjaudyeqooe 4y ago
> With all due respect to Croatia and the lovely people that live there, they cannot compete globally with Germany in any interesting export market. > The typical tool that a nation uses to deal with that reality is the relative value of their currency. The typical tool they use is product pricing. Why devalue the savings and assets of Croatians who don't participate in exports? The irony of your claim is that Croatians use the euro as a store of value in preference to the kuna because of the (perceived) vulnerability of the kuna to devaluation, or even elimination. They've lived through several wars and attendant changes in sovereignty were bank savings were simply wiped out or the old currency was severely devalued in a forced exchange. People tend to bring up this "important tool" but ignore that by itself it's of little value (see Italy for instance: so many devaluations, still a fiscal basket case) and ignore the severe impact devaluations have on the income as assets of people who have worked hard and done nothing to deserve the haircuts they recieve in currency devaluations. More often it's used as a tool to avoid economic reforms (again Italy).
- foobarian 4y ago
  > Croatians use the euro as a store of value in preference to the kuna Not only that, but they have used the German Mark before in favor of the dinar. And dollars as well in seafaring regions. There are pop songs from the 80s made about this. [1] Pop the lyrics into Google Translate Croatian --> English: https://cuspajz.com/tekstovi-pjesama/pjesma/djurdjica-barlovic-milicevic/dosla-marka-dinaru-na-more.html https://cuspajz.com/tekstovi-pjesama/pjesma/djurdjica-barlov... [1] https://www.youtube.com/watch?v=dZfzjPrWO5o&ab_channel=DekySimper https://www.youtube.com/watch?v=dZfzjPrWO5o&ab_channel=DekyS...
- jq-r 4y ago
  In reality, Croatians never stored too much value in money (be it kuna or euro, or deutch mark), they've stored it in real estate. Why? Because taxes are one of the highest in the world, and in return people get next to nothing. So instead they've built houses (usually by themselves), especially on the coast and islands so they could rent them. Real estate is like a big piggy bank. This has it's own set of problems nowadays though.
derriz 4y ago
There is no "tremendous advantage" available to small countries in being able to devalue their currency. A currency devaluation may, in theory, make a country's exports more competitive but it does so by imposing a real cut on every citizens income. It also makes all imports more expensive leading to inflation so in the end, it cannot not solve the underlying problem. There are no examples of countries becoming wealthier simply by manipulating the value of their currency. Nor does it make me taller if I decide from now on to measure my height in cm instead of inches.
- Ekaros 4y ago
  China probably gained something by manipulating their currency, but it is also very very special case. In general stability is better for small countries. And Euro is big enough to be stable enough.
troad 4y ago
> With all due respect to Croatia and the lovely people that live there, they cannot compete globally with Germany in any interesting export market. This fails Econ 101. Gains from trade occur even if one country is absolutely worse at making and selling everything than another. You may want to revisit the concept of comparative advantage. Their currency is also currently pegged to the euro, so this is absolutely no change from a macroeconomic perspective. It just reduces the barriers to trade, including tourism.

by rsync 4y ago

toomuchtodo 4y ago

It’s a trade off. You give Germany and France more control, but they are incentivized to backstop you. It seems the countries continuing to join the EU understand this and are at peace with it. Tourism is one of the larger sectors in Croatia’s economy, so frictionless travel between them and other EU members is likely worth the arrangement. They also have a floating LNG terminal, very valuable due to recent events. https://www.countryreports.org/country/Croatia/economy.htm https://www.countryreports.org/country/Croatia/economy.htm

mytailorisrich 4y ago
I don't think there is 'Germany and France' anymore these days. There is Germany and their goodwill towards France, if any, [edit:] because all the power and leverage has been with Germany for years now. Recent years have shown that Germany will of course focus on its own interests and policies and ignore France/rest for the EU whenever they deem fit to do so, while France is in a weaker position. At least it used to be that France had military power going for themselves but recent policy changes in Berlin should really and finally set alarm bells ringing in Paris.
- toomuchtodo 4y ago
  My shorthand is lazy, but it’s no different than California ($3.3T GDP), Texas ($2.1T), and New York ($2T) carrying the rest of the US states. Europe is stronger together than apart (economically speaking), and this is a good deal for everyone involved (my two cents). I admit there is always a bit of contention when macroeconomic stress limits are tested. Such is the nature of unions.
  - rsync 4y ago
    I disagree - it is quite a bit different. The United States and the individual states share both a fiscal and monetary union. The EU, on the other hand, is a monetary union but not a fiscal union and our expectations for that arrangement range from hopeful to outright fatalism.
    - toomuchtodo 4y ago
      I agree with you in theory/academically but disagree with you that the difference matters in application. The only difference is the force with which the dissenting or economically weaker parties can be dragged by the majority; in both cases, the dissenting are still getting dragged (and drag applied to the majority). There is no appetite in either case to dissolve the monetary union. Witness how poorly it went for the UK leaving the EU, and that’s with maintaining their own currency.
      - cjbgkagh 4y ago
        In the UK much of the popular support for the EU was from people looking to escape their own god awful politicians, that things didn’t go well after leaving, due to the same god awful politicians, wasn’t a big surprise. Technically one way to fix it would be to elect better politicians, but it’s the UK so that doesn’t seem to be an option.
    - cjbgkagh 4y ago
      The plan was always to use a debt crisis to turn the monetary union into a fiscal union. I guess therein lies the fatalism. But fiscal unions were much easier to form when money was gold backed and financialization wasn’t so rampant. Plus people have seen the effects of Germany being able to export unemployment via its surplus is it upsetting other Europeans and building anti-EU sentiment. In my view the debt crisis is structurally baked in and guaranteed to happen, what I’m uncertain about is the extent of the backlash EU leadership will receive from the attempt at normalizing fiscal policy.
atmosx 4y ago
The countries don’t understand a thing, until it’s too late. Politicians want bigger-size budget to spend (the first 5 years) and the local elites want to avoid possible depreciation of their bank accounts (Italy, Greece, etc). The local elite now will be owned by Brussels within a few years to an extend they can’t imagine. The politicians care too much about their personal careers, they don’t care about the state. Ultimately the Citizens will have to pay the piper, but then again … maybe I am wrong. Joining the EUR in 2000 one could claim ignorance. Joining in 2022, without having infrastructure and industry to compete with Germany, using a currency they completely control is pure suicide. You go looking for someone to take over you country.
- toomuchtodo 4y ago
  Greece and Italy can’t blame Brussels for structural demographics and no industry worth young people sticking around for though, right? If your country is just a runner up economically, you didn’t have much leverage to begin with. With monetary policy control, you can print, but without the underlying economic engine to back that printing, you end up as Turkey (bad) or Venezuela (worse). Only in aggregate can you monetize the debt.
  - atmosx 4y ago
    > Greece and Italy can’t blame Brussels for structural demographics and no industry worth young people sticking around for though Greece and Italy choose to be part of the EUR, so now they have to pay the price of a choice they made. However, there is a structural problem with the way the common currency is constructed. This has little to do with individual countries and everything to do with the eurozone. The EURO created a union with a common central bank that lacked a common state to have its back, while simultaneously allowing states to carry on without a central bank to have their backs in times of financial crisis, when states must bail out the banks operating in their territory. Now during the good times, cross-border loans created unsustainable debts. Then, at the first sign of financial distress (either a public or a private debt crisis), the writing was on the wall: a eurozone-wide spasm whose inevitable outcome was sharp divergence and enormous new imbalances. The beneficiaries of this situation are some countries and not others, but this is not sustainable in the long run. The EU needs to create a proper banking union and then most likely most to a sort of political integration. Unfortunately the EURO as currently constructed, made that impossible by pitting one country against another.
jq-r 4y ago
> They also have a floating LNG terminal, very valuable due to recent events. You can have all the LNG terminals in the world, but if your government and judicary are completely corrupted, normal citizens won't get a cent out of it. And that's happening over here in Croatia.

moonchrome 4y ago

Croatian Kuna was basically pegged to Euro by Croatian central bank. Large amount of loans and savings were in Euro already. Switching to euro was mostly a formality at this point.

darrenf 4y ago
I visited Dubrovnik in early December expecting to spend mostly euros, given the peg and impending switch. In reality I used only kuna. Almost all restaurants, market stalls and shops were accepting HRK only and none of the ATMs were dispensing EUR. To me it seemed so bizarre with only 3 weeks to go - and a big contrast to my experience in Amsterdam before their switch in 2002.
- deleted 4y ago
  [deleted]
- input_sh 4y ago
  Next 14 days are the most bumpy part of the ride. Whenever you purchase with HRK, you'll get your change in EUR. ATMs that are dispensing HRK will stop working, but those that dispense EUR will be available for no fees regardless of the bank.
- jq-r 4y ago
  Well, nobody was accepting euro much (legally), because well, it would be illegal. Dunno how it was in Amsterdam in 2002, but for the next 15 days a lot of smaller businesses just won't work until the 15th when kuna is officially not accepted anywhere anymore and everything has to be in Euro.

robbintt 4y ago

I don't know anything about this stuff, either. Why does it work in the US to have the midwest on the same currency as California?

thaumasiotes 4y ago

> The typical tool that a nation uses to deal with that reality is the relative value of their currency. Consumers of import goods then have a choice to make between German quality and (for instance) Spanish pricing. > ... and now that lever will be gone. Because Croatian prices will be equal to German prices? Why?

Xylakant 4y ago
Why do you expect that to happen? Finnland uses the Euro and has different prices from Germany, so does Latvia, Spain, Italy, France,… if the prices for goods depended on the currency alone, we’d all have the same prices. But we don’t. And the Croatian currency was pegged to the EUR anyways, so if you’d be right and the currency dictates the price, they’d already have the same price in all but name.
- thaumasiotes 4y ago
  Did you mean to respond to me?

senko 4y ago

> The typical tool that a nation uses to deal with that reality is the relative value of their currency ... and now that lever will be gone. That lever hasn't been there in a while. Croatia could never lift the peg to Euro without massive disruption to almost everyone here. A few years ago, Switzerland lifted its peg. Only a very small number of Croatian mortgages have using CHF at the time (the rates were better then EUR or HRK ones) and the resulting damage was huge (bankruptcies, people's lives' ruined), still having repercussions ot this day. Compared ot that, virtually all of the mortgages (and other types of loans) are either calculated in Euro or pegged to Euro directly or indirectly. If the peg had ever lifted, you'd have rioters in all the major cities the next day.

kmlx 4y ago
> the resulting damage was huge (bankruptcies, people's lives' ruined), still having repercussions ot this day. same thing happened in other countries in eastern europe. it was a mess, but to me it showed that people don’t really understand what they’re signing.
- throwaway2037 4y ago
  This: <<it showed that people don’t really understand what they’re signing.>> It demonstrates that regulation was too weak. They shouldn't have allowed people to borrow huge sums of money (to buy a house) in foreign currency. It was a recipe for disaster.
  - kmlx 4y ago
    i don’t agree with this. it’s essentially up to the people to decide what’s best for them. and i’m sure the lesson has been learned now re. CHF. of course the lesson should have been taught at some point during formal education, but alas. plus, to top it all off, there are countless financial products to isolate yourself from fx fluctuations. it’s just that education is lacking.

dkjaudyeqooe 4y ago

> With all due respect to Croatia and the lovely people that live there, they cannot compete globally with Germany in any interesting export market. > The typical tool that a nation uses to deal with that reality is the relative value of their currency. The typical tool they use is product pricing. Why devalue the savings and assets of Croatians who don't participate in exports? The irony of your claim is that Croatians use the euro as a store of value in preference to the kuna because of the (perceived) vulnerability of the kuna to devaluation, or even elimination. They've lived through several wars and attendant changes in sovereignty were bank savings were simply wiped out or the old currency was severely devalued in a forced exchange. People tend to bring up this "important tool" but ignore that by itself it's of little value (see Italy for instance: so many devaluations, still a fiscal basket case) and ignore the severe impact devaluations have on the income as assets of people who have worked hard and done nothing to deserve the haircuts they recieve in currency devaluations. More often it's used as a tool to avoid economic reforms (again Italy).

foobarian 4y ago
> Croatians use the euro as a store of value in preference to the kuna Not only that, but they have used the German Mark before in favor of the dinar. And dollars as well in seafaring regions. There are pop songs from the 80s made about this. [1] Pop the lyrics into Google Translate Croatian --> English: https://cuspajz.com/tekstovi-pjesama/pjesma/djurdjica-barlovic-milicevic/dosla-marka-dinaru-na-more.html https://cuspajz.com/tekstovi-pjesama/pjesma/djurdjica-barlov... [1] https://www.youtube.com/watch?v=dZfzjPrWO5o&ab_channel=DekySimper https://www.youtube.com/watch?v=dZfzjPrWO5o&ab_channel=DekyS...
jq-r 4y ago
In reality, Croatians never stored too much value in money (be it kuna or euro, or deutch mark), they've stored it in real estate. Why? Because taxes are one of the highest in the world, and in return people get next to nothing. So instead they've built houses (usually by themselves), especially on the coast and islands so they could rent them. Real estate is like a big piggy bank. This has it's own set of problems nowadays though.

derriz 4y ago

There is no "tremendous advantage" available to small countries in being able to devalue their currency. A currency devaluation may, in theory, make a country's exports more competitive but it does so by imposing a real cut on every citizens income. It also makes all imports more expensive leading to inflation so in the end, it cannot not solve the underlying problem. There are no examples of countries becoming wealthier simply by manipulating the value of their currency. Nor does it make me taller if I decide from now on to measure my height in cm instead of inches.

Ekaros 4y ago
China probably gained something by manipulating their currency, but it is also very very special case. In general stability is better for small countries. And Euro is big enough to be stable enough.

troad 4y ago

> With all due respect to Croatia and the lovely people that live there, they cannot compete globally with Germany in any interesting export market. This fails Econ 101. Gains from trade occur even if one country is absolutely worse at making and selling everything than another. You may want to revisit the concept of comparative advantage. Their currency is also currently pegged to the euro, so this is absolutely no change from a macroeconomic perspective. It just reduces the barriers to trade, including tourism.