Move towards ERM Membership Likely in Second Quarter

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Croatian National Bank (HNB) Governor Boris Vujčić announced that a letter of intent for ERM membership (European Exchange Rate Mechanism II) was expected to be sent “some time in the second quarter of this year.”

Photo: Anto Magzan/PIXSELL

Responding to questions to the press after delivering a lecture on Croatia’s prospects of entering the euro area at the Croatian Academy of Sciences and Arts (HAZU), Vujčić said that the letter would certainly not be sent by the end of this month and would most likely be sent “some time in the second quarter”.

“In any case, first there will be a report from the European Commission, then we will continue consultations with our partners – the European Central Bank, the Commission and the Eurogroup, and after that we will decide on an exact date,” Vujčić said, adding that he hoped Croatia would soon get out of the excessive imbalance procedure, on which the Commission is soon to release a report.

 

Asked if Croatia could be expected to join the exchange rate mechanism in 2020, the governor said this was a tentative time frame, but he would not speculate about an exact date.

Vujčić said that Croatia “de facto” meets all five nominal convergence criteria, while “de iure” it does not meet one relating to exchange rate stability. He said that the exchange rate stability requirement can be met only within the exchange rate mechanism, and that this is the first key step for entering the mechanism.

On the other hand, there is a range of indicators relating to excessive macroeconomic imbalances, such as public debt, external debt, unemployment rates and labour market participation. “Here we stand much better than we did five years ago because external imbalances have been reduced as a result of the decline in public debt, which right now is three times faster than that required by the EU procedures.”

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