Croatian bid to join the Exchange Rate Mechanism (ERM II) and Banking Union

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Publication Date 2019-
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Overview and information relating to Croatia's intention to join the Exchange Rate Mechanism (ERM II) and the Banking Union, seen as a first stage to full accession to the Eurozone.

Further information:

The Croatian authorities sent on 4 July 2019 a letter to the main European Union (EU) institutions setting out an Action Plan for joining the Exchange Rate Mechanism (ERM II) and the Banking Union. At the margins of a meeting held on 8 July, relevant stakeholders discussed the prospects of Croatia's participation in the Mechanism, and welcomed the intention of the Croatian authorities to put in place the necessary elements for a successful entry into ERM II.

Decision (EU) 2020/1016 was adopted on 24 June 2020 on the establishment of close cooperation between the European Central Bank and Hrvatska Narodna Banka (Croatian National Bank). This was published in the Official Journal on 13 July.

On 10 July 2020, relevant stakeholders agreed to include Croatia's national currency (kuna) in the ERM II. The central rate was set at €1 = 7.53450 kuna. The agreement was largely based on the commitment by Croatian authorities to join the Banking Union and ERM II simultaneously and the completion by the country of a set of measures, described in their 2019 letter of intent.

This was seen as an important milestone in the country's efforts to join the Eurozone. Croatia is required to participate in the mechanism without severe tensions and without devaluing their currency central rate against the euro on their own initiative, for at least two years before the country can qualify to adopt the common currency.

Related Links
Commentary and Analysis
EurActiv, 14/09/2018: Is Croatia ready to join the eurozone?
Euro|topics, July 2019: Croatia wants to introduce the euro
Bruegel: Blog, 18/07/2019: Croatia’s path into the banking union
ING: Article, 10/07/2020: Bulgaria and Croatia set to join the lengthy ERM II process

EurActiv, 11/05/2018: Croatia accelerates plans for joining the eurozone
Reuters, 03/07/2019: Croatia set to launch bid for euro adoption waiting room
RTÉ News, 04/07/2019: Croatia set to launch bid for euro adoption waiting room
Bloomberg, 05/07/2019: Euro Hopeful Croatia Sets Sights on Adoption as Early as 2023
Politico, 05/07/2019: Croatia launches euro bid
EurActiv, 05/07/2019: Croatia launches bid to join euro waiting room
Total Croatia News, 05/07/2019: Letter of Intent Sent, Croatia to Introduce Euro in 2023?
Bloomberg, 08/07/2019: Croatia’s Reforms for Euro Bid Backed by Region’s Finance Chiefs
Reuters, 08/07/2019: Euro zone welcomes Croatia's bid to join euro at the earliest in 2023
Dubrovnik Times, 28/02/2020: Croatia edging even closer to adopting the Euro and ditching the Kuna
Total Croatia News, 09/06/2020: Croatia Gets Green Light, One Step Closer to Eurozone Entry
The Sofia Globe, 10/07/2020: Bulgaria, Croatia accepted into ERM2 euro zone ‘waiting room’
Bloomberg, 10/07/2020: Croatia, Bulgaria Cleared to Join Waiting Room to Adopt Euro
RFE/RL, 10/07/2020: Bulgaria, Croatia Join Eurozone's 'Waiting Room'

Letter by Croatian authorities to the European Union on ERM II participation, 4 July 2019
Eurozone: Press Release, 08/07/2019: Statement on Croatia's path towards ERM II participation
European Commission: Letter to ERM II parties on Croatia and assessment of prior commitments of Croatia (8 July 2020)
European Central Bank: Application letter from the Croatian authorities - including the annex with the post-entry commitments to be taken at the time of ERM II entry (9 July 2020)
European Commission: Press Release, 10/07/2020: Commission welcomes Bulgaria and Croatia's entry into the Exchange Rate Mechanism II
European Central Bank: Press Release, 10/07/2020: Communiqué on Croatia
European Central Bank: Press Release, 10/07/2020: ECB establishes close cooperation with Croatia’s central bank
EUR-Lex: Official Journal of the European Union: Decision (EU) 2020/1016 of the European Central Bank of 24 June 2020 on the establishment of close cooperation between the European Central Bank and Hrvatska Narodna Banka

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