Croatia to send letter of intent to enter ERM II this week

The government will on Thursday authorise Finance Minister Zdravko Maric to sign, together with National Bank Governor Boris Vujcic, and send, by the end of this week, Croatia's letter of intent to join the Exchange Rate Mechanism (ERM II).

ERM II is a sort of waiting room in which each candidate country has to spend at least two years before joining the eurozone.

"The letter of intent shows our intention to enter the exchange rate mechanism, and we also put on paper our tasks which we will do in the next 12 months," Maric told the press after a meeting of the national council for euro introduction, chaired by Prime Minister Andrej Plenkovic, in Zagreb on Wednesday.

The tasks cover the implementation of 19 measures in six areas, and some of the most important segments are reinforcing the capacity of the national statistical office (DZS), continuing the fight against money laundering and terrorism funding, upgrading the country's business climate and improving conditions for doing business by further trimming parasfiscal tariffs, the minister said.

"We will send that letter until the end of this week and the Eurogroup will discuss it at its regular meeting on Monday," the minister explained.

A 12-month deadline for delivering on the commitments specified in the letter will then start running.

Entering the ERM II is a step forward in the introduction of the euro and Croatia is likely to stay in the exchange mechanism for two years during which the country's ability to meet the Maastricht criteria will be tested, Maric said.

An aspirant's admission to the ERM II is to be greenlighted by members of the euro area, a monetary union of 19 of the 28 EU member states and the European Central Bank.

Earlier in the day, Maric recalled that the government had recently sent a letter to the European Central Bank seeking close cooperation, and that the next move was a letter of intent to join ERM II.

Croatia's national council for the euro adoption was set up in May 2018 when it also endorsed the relevant strategy.

The euro area consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Other EU states (except Denmark and the United Kingdom) are obliged to join once they meet the criteria to do so. Denmark and the United Kingdom obtained special opt-outs in the original Maastricht Treaty.

Text: Hina

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