July 3, 2019 / 12:50 PM / 2 months ago

Croatia set to launch bid for euro adoption waiting room

FILE PHOTO: Croatia's Minister of Finance Zdravko Maric is seen at the government building in Zagreb, Croatia May 4, 2017. REUTERS/Antonio Bronic/File Photo

ZAGREB (Reuters) - Croatia will formally launch a bid to join the European Exchange Rate Mechanism (ERM-2), an early stage on the route to membership of the euro currency, by the end of this week, its finance minister said on Wednesday.

Zdravko Maric said the government would authorize him and the central bank governor on Thursday “to sign and send a letter of intent”.

Croatia hopes to be allowed to join ERM-2 next year. If the European Central Bank and euro zone members then give the green light, it could adopt the euro in 2023 at the earliest.

Maric said Croatia would in its letter make clear the commitments it aims to meet in the next 12 months. They refer to keeping the stability of the financial and banking system on track, positive fiscal performance, stronger cooperation with the ECB and some structural measures like improving the business climate.

The Croatian central bank keeps the kuna currency EURHRK= in a managed float regime allowing just mild fluctuations, normally at between 7.4 and 7.7 to the euro.

In recent years, amid strong inflows of euros the kuna has been almost exclusively exposed to appreciation pressure, which the central bank has occasionally tamed by buying euros from commercial banks. The last time it intervened was in February.

In a poll conducted by the central bank earlier this year 52% of Croats were in favor of adopting the euro while 40% were against.

The officials, including the central bank, say that adopting the euro is the best choice for a country whose most important trading partners are in the euro zone and where some 80 percent of currency savings are denominated in the euro.

Reporting by Igor Ilic; Editing by Hugh Lawson

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