I don't recall too much excitement among Germans when the country adopted the euro 20 years ago. There was widespread skepticism whether the common European currency would work out as planned. This was accompanied by a certain nostalgia. The country's previous currency, the deutsche mark, or D-Mark, had allowed postwar Germany to grow incredibly prosperous. Many in Croatia feel similarly wary about swapping their own currency for the euro.
While Croatia's currency did not produce a level of prosperity on par with Germany, it certainly guaranteed a degree of autonomy. Hardly anybody shed a tear for the Yugoslav dinar. And after 30 years of having its own currency, the kuna, Croatia now asks itself whether having the European Central Bank in charge will be better than Belgrade during Yugoslav times.
Germans have now come to realize that the euro and ECB have worked out well, by and large — even though the latter is infamous for its slow decision-making, as its interest rate policy shows. The buying of government bonds, too, is somewhat controversial.
The ECB's job is to find the right balance between the interests of large, wealthy eurozone members and the smaller, poorer ones. Many Croatians, however, ask themselves whether ECB head Christine Lagarde will really devote much time to thinking about how Croatia can be helped.
Who benefits from the euro?
Croatian Prime Minister Andrej Plenkovic has lauded the new currency, saying tourists will now find it easier to visit Croatia. Foreign companies, he said, will also be able to invest in the country with a greater chance of making a profit. This, however, raises the question of whether Plenkovic has become a spokesperson for tourists and retail chains, or his own people.
There are few Croatian companies that have strong business ties with the eurozone. Plenkovic, meanwhile, boasts of having kept the country's finances under control amid turbulent economic times, though few believe this. Due to the COVID pandemic and ongoing war in Ukraine, the ECB has relaxed its convergence criteria by introducing discounts and exceptions. That said, the key question remains whether Croatia, whose economy heavily depends on the tourist trade, can keep up with the big economic powers in the EU.
The economic crises continue. While the cost of fuel continues to rise, there have been calls to increase defense spending. Yet doing so will be easier as part of the mighty eurozone. This is a clear advantage.
No illusions
After 20 years, the euro remains a learning-by-doing project where not everyone understands how it is supposed to work: A common currency, yet different tax rates and financial rules. What did the Greek financial crisis teach us? And what did we learn from the Spanish and Portuguese cases? Did they think they could spend all the money they want and Germany would foot the bill?
The eurozone members will be asking themselves whether Croatia will present a financial burden. The country is certainly an economic lightweight. And any financial aid will serve as little more than a temporary help, like crutches for an otherwise healthy athlete. And while the Croatian football team managed to take third place in the Qatar World Cup, Croatian companies are nowhere near as successful as Luka Modric and his teammates. They simply cannot compete in the economic top league, so to speak.
Many Croatians have abandoned the illusion that the euro will guarantee them prosperity. On the contrary. They fear that one day the EU troika of the European Commission, the European Central Bank and the International Monetary Fund could force Zagreb to make drastic cuts, just as was the case in Greece. If this does become necessary, please don't push for cuts that hurt pensioners, teachers, the needy and the health care sector!
A currency that can unite, or divide
The idea of the euro is to unite the continent. In Germany, however, many vividly remember the Greek debt crisis. It taught us that the currency can also divide Europe. Many in Germany, for example, recall the day a Greek newspaper at the time published a montage of then-Chancellor Angela Merkel wearing a Nazi SS uniform.
The gap between rich EU member states and poor members is widening, and the introduction of the euro will not save many of Croatia's problems. New schools may be built, but the money to pay teachers will still be lacking. In fact, many teachers long ago left for Germany, where they can earn more money working as roofers and bus drivers than as teachers back home. This is an issue that will continue to be discussed.
This article was originally published in German.