CEE Special | Challenge no. 5 Euro adoption
In the fifth CEE Special Report from the series entitled "CEE - 10 challenges for the new decade", we look at prospects for euro adoption in the CEE region. Croatia seems set to enter ERM-II in July. Adoption of the euro can be expected in 2023-24 at the earliest, with the final timing dependent on post-COVID-19 economic and fiscal adjustment. Hungary and Romania enjoy a high level of public support for euro adoption, but lack the preparation.
Slovakia and Slovenia are so far the only two CEE countries that have fully integrated into the EU in the sense that they have become members of the Eurozone. After the Baltics joined the Eurozone in 2011-15 and the UK decided to leave the EU, the weight and voice of non-euro countries has declined. We expect that, during this decade, at least one country, Croatia, will become a new member of the Euro Area. Croatia’s strong aspiration for euro adoption should be confirmed very soon by entering ERM-II, where it is likely to stay for at least two years before the final assessment of Maastricht criteria is conducted.
Croatia is the only non-euro country that meets all Maastricht criteria except the last one – participation in ERM-II. Before being allowed to enter ERM-II, Croatia had to complete some new tasks that had not been required for other member states before – establishing close cooperation with the ECB, which included an asset quality review of the five systemically important banks, and making some prior policy commitments related to macro-prudential, anti-money laundering and governance measures.