The adoption of the euro has brought both stability and increased opportunities for the economy, Michael Faulend, deputy governor of the Croatian Central Bank, told BNR. Faulend, who played a central role in Croatia’s euro adoption in 2023, said that while many Croatians still remember the kuna, the advantages of the single European currency are now widely felt.

Addressing Bulgarians, Faulend emphasized that there is no reason to fear the euro. “It will bring many benefits, making Bulgaria more resilient in challenging times, which inevitably occur somewhere in the world and affect everyone,” he said. He added that beyond broad economic benefits for citizens and businesses, the euro also enhances sustainability, which is especially valuable during crises.

When asked about inflation in Croatia, Faulend noted that the euro itself is not a significant factor. Croatia’s annual inflation rate in 2023 was 8.4%, but only 0.2 percentage points of that could be attributed to the currency switch. Comparing cumulative inflation from mid-2021 to present, Croatia’s 32% inflation rate is on par with Bulgaria and lower than in several other Eastern European countries, showing that other economic factors played a larger role.

Interest rates have also benefited from euro adoption. Over the six-year introduction process starting in 2017, rates gradually aligned with those in the eurozone, falling by roughly 100–200 basis points in different lending segments. Today, mortgage interest rates in Croatia are comparable, and sometimes slightly lower, than in Germany, providing citizens with long-term fixed-rate loans at favorable conditions.

Economically, Faulend stressed that the impact has been positive overall. Currency risk has been removed, interest rates have stabilized, and transaction costs have dropped significantly, particularly because 75–80% of Croatia’s foreign trade was already conducted in euros. He reiterated the added benefit of resilience: during periods of high inflation and rising interest rates in 2022 and 2023, Croatia’s economy remained comparatively stable, with government bond spreads holding steady.

In Faulend’s view, the euro has not only strengthened economic fundamentals but also provided Croatian citizens and businesses with tangible financial and operational advantages, creating a foundation for long-term stability and growth.

Source: BNR interview