Croatia is #20

[jj2007]

Croatia's banks lose ... about 20 percent of the profit generated by the sector

Poor banks (where is the weeping bitterly icon when you need it?)

It reminds me of the time when Czechoslovakia split into the Czech Republic and the Slovak Republic. I was in Prague at the time and the city was littered with exchange offices. They took Czech crowns and gave you Slovak crowns and kept a tiny little fee of 12%

Croatia adopts the euro and becomes a Schengen country

Croatia becomes the 20th euro state. While the tourism industry is positive about the new currency, many people in the country fear rising living costs.
26.12.2022, 10.17 am

On 1 January, Croatia will introduce the euro in place of the previous national currency, the kuna. At the same time, the EU member state on the Adriatic will join the border-free Schengen zone. For millions of holidaymakers from Germany, this means a double relief: they no longer have to exchange money and save exchange losses; and they reach their destination without often hours of waiting at the Slovenian-Croatian border crossings.

The exchange rate is fixed: one euro equals 7.5345 kuna. There is a transitional period until 14 January during which payments can still be made in both currencies. Kuna from the last holiday can be exchanged free of charge at banks in Croatia until the end of 2023 - up to 100 coins and notes per transaction.

Tourism industry hopes for boom
Especially the tourism industry has high expectations of the new currency. The country with the long Adriatic coast and the many picturesque bays and islands lives strongly from tourism. 16 million foreign holidaymakers, among them 3.4 million Germans, are recorded in the statistics for the first eleven months of 2022. 17.3 million, among them 2.9 million Germans, were in the record year 2019, the last year before the corona pandemic. The holiday destination is also popular with Austrians, Slovenians and Poles, but also with Italians, Czechs and Britons.

Never before has the introduction of the euro been accompanied by such global economic upheavals as at present. Russia's war in Ukraine, increased energy costs and supply problems in the wake of the Corona pandemic proved to be inflation drivers throughout Europe. At 13.5 per cent, the inflation rate in Croatia in November was slightly above the EU average of 10.1 per cent. EU Commission Vice-President Valdis Dombrovskis estimated the one-time effect of the introduction of the euro at 0.1 to 0.3 percentage points, based on previous experience. In the medium term, however, this will be offset by lower currency conversion costs and lower interest rates. According to forecasts, inflation is expected to fall to 5.7 per cent in 2023.

Croatians, on the other hand, are going by their own life experience and expect that trade and service providers will "round up" where they can when converting. The popularity of the introduction of the euro is therefore limited. According to a survey conducted in April, 55 percent of citizens are in favour of the euro, 42 percent are against it.

Banking sector expects losses in the short term
What holidaymakers gain with the abolition of exchange fees, Croatia's banks lose. Experts estimate that the loss of profit will amount to 1.4 billion kuna (185 million euros), about 20 percent of the profit generated by the sector. In the medium and long term, however, economists believe that the advantages outweigh the disadvantages. Participation in the euro means more resistance to external shocks and better access to financial markets. The currency risk for lenders is reduced, and Croatia can obtain loans at lower interest rates.

[hutch--]

I confess I have no sympathy for the banking industry, they will hang on to a lurk to the bitter end to extract the last unit of currency before change is imposed on them.