In the Republic of Croatia, the subject of the euro has been around for a long time and there are ongoing discussions about what will happen when the euro becomes the new state currency. Soon this year, we should find out if we have met all the required conditions, but we all already know very well that preparations are in full swing.
The CNB and other banks have been dealing with the following questions for some time – how to double state prices? Do we have enough banknotes and coins, and how will we dispose of the old kuna coins and banknotes? How will we adapt the existing systems without suspension and complete remodeling? And much more…
Although before the introduction of the euro we have to go through some other official processes such as checking the stability of the exchange rate, the sustainability of finances and the formation of the exchange rate, in this situation it is definitely better to wait for the changes in an informed way.
The euro is the currency used by the members of the European Union and, apart from being of monetary importance, it shows the level of connectivity between the members. It is interesting that banknotes are the same in every country, but coins are not – each country can personalize a foreign coin and thus present some of the peculiarities of its country and use its most important symbols.
Why do we expect double pricing?
One of the first changes we can expect is the dual display of prices – the idea is for the residents of the newly joined country to slowly get used to the new currency and get a better feel for the conversion. The double display of prices is done in the first year after the change, and the obligation of our retailers is that all prices and invoices include both kuna and euro from September 2022.
What is dual circulation?
Given that the prices are shown in both currencies, it is expected that in some period citizens will be able to pay with both currencies, right? However, that period is really short – it is only two weeks since the introduction of the euro. Shops and institutions will be obliged to return euros, but exceptions are allowed where there are not enough banknotes/coins in circulation.
Do we have to exchange kuna for euro?
Half a year before the scheduled transition date, the fixed conversion rate determined by the Council of the European Union will be announced. We must keep in mind that after the initial two weeks from the transition, it will be mandatory to use only the euro, therefore many will convert their money in the exchange office even before that. The money you have in the banks will be automatically converted at no extra charge.
However, use your money wisely – until the introduction of the euro, an exchange commission is charged for the conversion, in the first six months after the introduction there is no charge, and after that you have to pay a fee again. Also, before the introduction of the euro, the buying and selling exchange rates are used, and after the introduction, only the previously mentioned fixed conversion rate.
What will happen to the loans?
The situation is quite simple – loans in kunas will be converted into euros at a fixed exchange rate (from the day of introduction). Fixed interest rates will not change, and variable interest rates will be modified as necessary. Loans that are already denominated in euros will not change, but will continue to be managed as loans in euros.
What about the real estate market?
The real estate market has been giving people big headaches for several years – prices are rising, square footage is getting more expensive, and people have fewer and fewer choices. Will the euro somehow help the whole situation? Observing the various markets where the euro was introduced, a conclusion was reached that indicates that there is actually no change in prices.
Most landlords and retailers already quote prices in both currencies, so no dramatic change is expected. There are many other factors that can have a greater impact on real estate prices – flow between countries, loan subsidies…
Is there a hidden problem?
The fact that the euro will not change the price of real estate does not mean that real estate prices will not change in general. The problem could arise when comparing salaries, real estate prices and grocery prices. However, this problem existed even before the conversion to the euro – now this ratio will be very clearly unbalanced.
When all amounts are in the same currency, it's easier to subtract two numbers and notice a pessimistic calculation – life really isn't cheap anymore. It should be kept in mind that this is not caused by the conversion of the amount into euros and that the transition process is not a cause for concern, but rather that the real estate market itself is problematic.
The introduction of a new currency is a process that takes some time, and now that you are familiar with what it looks like, you can adequately prepare for this big change that awaits us all. It will encompass all of us and it doesn't necessarily have to be of a bad character – it is important that we are informed and that we understand what will change and what will remain the same.
