Croatia sent a letter of intent to enter the European Exchange Rate Mechanism (ERM II) to eurozone members, Denmark and the European Union institutions, making it the first formal step on the way to introduce the euro as the official currency, the Ministry of Finance and the Croatian National Bank (CNB).
With a letter of intent, the action plan was delivered where the reforms were described in detail.
It is expected that the eurozone member states and Denmark will discuss the letter of intent at the upcoming Eurogroup meeting.
With successful participation in the exchange rate mechanism for at least two years, Croatia should formally meet the exchange rate criterion of nominal convergence. Other criteria - price stability, the sustainability of public finances and the convergence of interest rates - Croatia has been satisfying for a while, and a prudent monetary and fiscal policy should ensure that it remains, according to the announcement.
In agreement with the EU institutions, Croatia in its letter of intent pledged to implement reforms in six areas: further strengthening the supervision of the banking system by establishing close cooperation between the CNB and the European Central Bank; strengthening the framework for the implementation of macro-prudential policy by introducing an explicit mandate for measures aimed at borrowers; strengthening the framework for the prevention of money laundering; improving the system for collecting, processing and publishing statistical data; improving public sector governance; and the reduction of administrative and financial burden for the economy.
All measures listed in the letter of intent and Action Plan Croatia are to be implemented by mid-2020, after which the EU institutions will assess whether they have been adequately implemented, and it is expected that after gaining a positive assessment, Croatia will start participating in the exchange rate mechanism, reads the Ministry's press release Finance and CNB.
(Telegraf.co.uk / Tanjug)