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> Experts say the adoption of the euro will help protect Croatia’s economy at a time when inflation has been soaring globally since Russia’s invasion of Ukraine

> Experts say the adoption of the euro will help protect Croatia’s economy at a time when inflation has been soaring globally since Russia’s invasion of Ukraine in February led to heightened fuel and food prices. Wikipedia notes that the kuna has been pegged to the euro for some time: > The modern kuna was introduced on May 30, 1994, starting a period of transition from the Croatian dinar, introduced in 1991, which ended on December 31, 1994.[10] One kuna was equivalent to 1,000 dinars at a fixed exchange rate. The kuna was pegged to the German mark from the start. With the replacement of the mark by the euro, the kuna's peg effectively switched to the euro. So I doubt there will be much effect on the rate of inflation after the switch.

jacquesm 4y ago
It will help the locals tremendously because their income will now be in the same currency as most of their debts. This trick has been used by banks all over the eurozone: charge the debt to the locals in euros but they can only earn income in the local currency. So if the local currency slides against the euro - as they invariably do - a larger and larger fraction of the income goes to servicing the debt. Even Poland still suffers from this today.
- Octokiddie 4y ago
  Unless the peg breaks, the currency doesn't "slide."
  - jacquesm 4y ago
    The peg usually is in the period just before the switch to the euro, if the period is longer then invariably the peg breaks and the local currency will slide, sometimes quite a bit in a very short period.
    - tokai 4y ago
      The DKK has been pegged to the euro since '99. The rate has changed by 0.03 over the last 15 years.
      - jacquesm 4y ago
        Yes. But Denmark could have easily joined in all those years, they chose not to and that's their right. But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (Poland, Bulgaria, Romania, and to a lesser extent Hungary and Czechia). Denmark negotiated an exception and the fact that in 22 years it hasn't made any difference in terms of valuation means that they simply missed out on some international commerce.
        tokai 4y ago
        All that is besides the point. The issue was if a peg can be indefinitely - and it can.
        _Tev 4y ago
        > But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (... Czechia) ČNB actually intentionally weakened CZK in 2013 and for several years after. And in the long term CZK appreciates against EUR rather than the opposite. "struggling to keep parity" is just not true.
    - qwytw 4y ago
      > The peg usually is in the period just before the switch to the euro > if the period is longer then invariably That totally incorrect for most currencies in the countries which joined the EU in 2004 or later. The Croatian Kuna was never free floating and pegged to the Euro/DM since it was introduced 1994.
  - secondcoming 4y ago
    IIRC, in the case of Poland people had mortgages pegged to the Swiss Franc. A central bank can only peg to one currency.
    - jacquesm 4y ago
      Depended on the bank. Quite a few in Euros, some in other currencies, even USD. But if you wanted your mortgage in Zloty then suddenly the interest was twice as high.
      - landemva 4y ago
        Hmmm so banks offered a choice to be a forex speculator, and some took the lower interest rate bait. The risk is dramatic forex moves which make it near impossible to make payments.
      - int_19h 4y ago
        It makes sense that a currency that is more likely to lose value within the term of the loan would lead to a higher interest rate, no?
kmlx 4y ago
i read an opinion that inflation might actually grow because some will put up their prices during the switch.
- kergonath 4y ago
  I don’t have a reference offhand, but surely this analysis has been done when the euro coins and notes were introduced in 2002.
  - kmlx 4y ago
    the opinion i read was from a croatian minister warning retailers about this phenomenon especially in a high inflation environment where products will increase in prices no matter what.
- jq-r 4y ago
  The inflation in the last couple of months has been very high. The price of groceries (and pretty much everything else) has been increased at least by 35% and climbing with no end in sight. A lot of basic stuff doubled in price. It is maddness, but the government is saying that economy is great which is a fat lie.
  - astrange 4y ago
    Inflation is a sign of a good economy - it means people can afford price increases ie they are employed. (But it really annoys everyone because wages don’t grow as quickly as prices.) A recession (“bad economy”) tends to stop inflation because people stop spending.
    - qwytw 4y ago
      Not 35% inflation. That's never a good sign. > Inflation is a sign of a good economy Tell that to Argentina...
      - astrange 4y ago
atoav 4y ago
I am from the area (not Croatian tho). Even if you look just at the map of the country you will realize that Croatia is basically mostly Mediterranean. As such tourism is very important for the region. Having the same currency as your tourists (mostly people from the north, to a lesser extent people from the east and northeast) helps a lot. Schengen helps also, but even before people could just drive there without noticing the border.
- plextoria 4y ago
  Schengen and Euro definitely put Croatia on my list of destinations. It’s much more comfortable to travel without having to bother with exchange rates. No passport control at the airport is also a nice bonus. I can’t describe that feeling when I travel to another country without going through border checks, it’s so liberating.
- senko 4y ago
  > Schengen helps also, but even before people could just drive there without noticing the border. Not during the summer. There were usually big queues at border crossings during every summer weekend. This should alleviate that a bit - the pressure will just move elsewhere in the road network, but will hopefully be easier to manage.
- virtualritz 4y ago
  I drove in and out of Croatia six times last summer always coming/going from Slovenia. Long queues and passport checks every time. So if what you say is true and you can drive without noticing the border there must be some bias. Possibly depending on which country of the Schengen zone you're entering Croatia from.
  - deleted 4y ago
    [deleted]

jacquesm 4y ago

It will help the locals tremendously because their income will now be in the same currency as most of their debts. This trick has been used by banks all over the eurozone: charge the debt to the locals in euros but they can only earn income in the local currency. So if the local currency slides against the euro - as they invariably do - a larger and larger fraction of the income goes to servicing the debt. Even Poland still suffers from this today.

Octokiddie 4y ago
Unless the peg breaks, the currency doesn't "slide."
- jacquesm 4y ago
  The peg usually is in the period just before the switch to the euro, if the period is longer then invariably the peg breaks and the local currency will slide, sometimes quite a bit in a very short period.
  - tokai 4y ago
    The DKK has been pegged to the euro since '99. The rate has changed by 0.03 over the last 15 years.
    - jacquesm 4y ago
      Yes. But Denmark could have easily joined in all those years, they chose not to and that's their right. But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (Poland, Bulgaria, Romania, and to a lesser extent Hungary and Czechia). Denmark negotiated an exception and the fact that in 22 years it hasn't made any difference in terms of valuation means that they simply missed out on some international commerce.
      - tokai 4y ago
        All that is besides the point. The issue was if a peg can be indefinitely - and it can.
      - _Tev 4y ago
        > But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (... Czechia) ČNB actually intentionally weakened CZK in 2013 and for several years after. And in the long term CZK appreciates against EUR rather than the opposite. "struggling to keep parity" is just not true.
  - qwytw 4y ago
    > The peg usually is in the period just before the switch to the euro > if the period is longer then invariably That totally incorrect for most currencies in the countries which joined the EU in 2004 or later. The Croatian Kuna was never free floating and pegged to the Euro/DM since it was introduced 1994.
- secondcoming 4y ago
  IIRC, in the case of Poland people had mortgages pegged to the Swiss Franc. A central bank can only peg to one currency.
  - jacquesm 4y ago
    Depended on the bank. Quite a few in Euros, some in other currencies, even USD. But if you wanted your mortgage in Zloty then suddenly the interest was twice as high.
    - landemva 4y ago
      Hmmm so banks offered a choice to be a forex speculator, and some took the lower interest rate bait. The risk is dramatic forex moves which make it near impossible to make payments.
    - int_19h 4y ago
      It makes sense that a currency that is more likely to lose value within the term of the loan would lead to a higher interest rate, no?

kmlx 4y ago

i read an opinion that inflation might actually grow because some will put up their prices during the switch.

kergonath 4y ago
I don’t have a reference offhand, but surely this analysis has been done when the euro coins and notes were introduced in 2002.
- kmlx 4y ago
  the opinion i read was from a croatian minister warning retailers about this phenomenon especially in a high inflation environment where products will increase in prices no matter what.
jq-r 4y ago
The inflation in the last couple of months has been very high. The price of groceries (and pretty much everything else) has been increased at least by 35% and climbing with no end in sight. A lot of basic stuff doubled in price. It is maddness, but the government is saying that economy is great which is a fat lie.
- astrange 4y ago
  Inflation is a sign of a good economy - it means people can afford price increases ie they are employed. (But it really annoys everyone because wages don’t grow as quickly as prices.) A recession (“bad economy”) tends to stop inflation because people stop spending.
  - qwytw 4y ago
    Not 35% inflation. That's never a good sign. > Inflation is a sign of a good economy Tell that to Argentina...
    - astrange 4y ago

atoav 4y ago

I am from the area (not Croatian tho). Even if you look just at the map of the country you will realize that Croatia is basically mostly Mediterranean. As such tourism is very important for the region. Having the same currency as your tourists (mostly people from the north, to a lesser extent people from the east and northeast) helps a lot. Schengen helps also, but even before people could just drive there without noticing the border.

plextoria 4y ago
Schengen and Euro definitely put Croatia on my list of destinations. It’s much more comfortable to travel without having to bother with exchange rates. No passport control at the airport is also a nice bonus. I can’t describe that feeling when I travel to another country without going through border checks, it’s so liberating.
senko 4y ago
> Schengen helps also, but even before people could just drive there without noticing the border. Not during the summer. There were usually big queues at border crossings during every summer weekend. This should alleviate that a bit - the pressure will just move elsewhere in the road network, but will hopefully be easier to manage.
virtualritz 4y ago
I drove in and out of Croatia six times last summer always coming/going from Slovenia. Long queues and passport checks every time. So if what you say is true and you can drive without noticing the border there must be some bias. Possibly depending on which country of the Schengen zone you're entering Croatia from.
- deleted 4y ago
  [deleted]