ZAGREB, Jan. 1 (Xinhua) -- Croatia entered the eurozone and the European Union's (EU) border-free Schengen area on New Year's Day. To mark this historic occasion, Ursula von der Leyen, president of the European Commission, visited the country on Sunday.
This was the first time a European country joined both the eurozone and the Schengen area on the same day, an important milestone for Croatia, an EU member since 2013, and its government headed by Prime Minister Andrej Plenkovic.
"By entering the eurozone and Schengen, Croatia achieves two strategic goals of the country's deeper integration into the EU," Plenkovic said at a government session held at the end of 2022.
"We have been working hard on this since 2016, and despite numerous and demanding criteria that were set before us, as well as the various crises that we went through in that period, we fulfilled all those demanding reform efforts," he said, noting that 2022 was a year that "we will remember for a long time."
BENEFITS
On Jan. 1, Croatia became the 20th member of the eurozone and the euro becomes its official currency. On the same date, it also became the 27th member of the Schengen area, which was created in 1985 to allow free movement for all 420 million nationals of the signatory countries.
"By entering the eurozone, currency risks will be eliminated. It is important to emphasize that the majority of our public debt, over 70 percent, is denominated in euro. By accepting the euro, this currency risk will be eliminated," the country's Finance Minister Marko Primorac said at the government session at the end of last year.
Primorac's view was echoed by local political analyst Davor Gjenero, who maintained that the adoption of the euro will make the currency risk much lower.
"For 25 years, the Croatian National Bank has been maintaining a fixed exchange rate of the kuna to the euro, and the introduction of the euro will bring more stability and the currency risk will be much lower," Gjenero told Xinhua, noting that the inflation rate is higher in countries outside the eurozone than in those inside the zone.
Moreover, after adopting the euro, the interest rates on new loans will be lower, Gjenero added.
Croatia's Schengen area membership will bring many benefits to the country, especially to its tourism industry, Ljubo Jurcic, an economic expert and professor of the University of Zagreb, commented.
"It will be much easier for foreign tourists to visit Croatia, the tourism sector will enjoy great benefits," Jurcic told Xinhua, adding that the use of the euro is bound to facilitate the tourists' stay in the country.
Most visitors to Croatia come from Germany, Austria and Slovenia, all of which are Schengen members, Jurcic said.
Croatia's membership of the eurozone and the Schengen area is expected to further boost its lucrative tourism industry. The small country of 3.9 million people hosted four times as many visitors in 2022, mostly from other EU countries. Tourism revenues account for about one-fifth of the country's gross domestic product (GDP).
CHALLENGES
Croatia's entry into the eurozone and the Schengen area brings benefits as well as challenges as some locals are worried about the potential price hikes after the introduction of the common currency, as the merchants and traders are widely expected to round prices to the nearest euro. Inflation also remains a major worry for the population.
Those who hope to profiteer from the use of the euro should be punished, Jurcic said, noting that the government has made preparations to crack down on them.
As the Croatian government has enforced dual pricing in both kuna and euro since September, the adjustment period should not be long for Croatians and people should be able to get used to the euro soon, Gjenero said.
However, the introduction of the euro has already caused troubles for the locals as days before the year-end holidays long queues had formed in front of the banks as ATMs were temporarily out of service because of the monetary system change and people had to wait for hours to withdraw their money and change kuna into euro.
Another key question is whether Croatia as a Schengen area member will be able to monitor the EU's longest external land border with Bosnia and Herzegovina at a time when illegal migration is still rampant.
By November last year, Croatia had registered the arrival of around 30,000 illegal migrants, almost 150 percent more than in the same period of 2021.
Membership of the Schengen area access is also expected to make it much easier for criminals to travel and communicate, Croatia's police chief Nikola Milina has warned recently.
The country's police officers "are ready for all challenges in order for Croatia to remain a safe country, where citizens can live peacefully," Milina said.
After joining the Schengen area, Croatia will remove 73 border crossings with Slovenia and Hungary. Border checks at the country's airports will be abolished on March 26.
To help people adjust to the use of the euro, as of Jan. 1, the dual circulation of kuna and euro will last two weeks. After midnight on Jan. 14, only euros will be used. However, banks and post offices will continue to convert kuna into euro throughout 2023. The fixed exchange rate is 1 euro equals 7.5345 kuna. ■