It took Croatia nearly two decades, from the submission of its request to join the EU, to navigate through the integration process and finally become eligible to join the eurozone. Throughout this period, the Croatian economy underwent substantial changes to meet the requirements for introducing the euro. On January 1, 2023, Croatia switched to the euro, a move preceded by high expectations from Croatians and other economically involved parties. These expectations encompassed reduced vulnerability to risks associated with currency fluctuations, favourable loan terms for the country, and simplified currency usage. This series aims to examine the circumstances and the consequences of introducing the euro in Croatia. Croatia stands at a crossroads in its economic history, contemplating the prospect of adopting the Euro as its official currency. When joining the EU, Hungary stated that it would adopt the Euro but has yet to do so. The second essay delves into the potential benefits and challenges associated with such a momentous decision, weighing the economic, political, and social implications for Croatia and the possibilities for Hungary.
Zsanett Gréta Papp
To better understand the potential benefits and challenges associated with such a momentous decision, one of the main arguments we must consider in favour of adopting the Euro is the aim of increasing national economic stability. By joining the Eurozone, Croatia’s main goals are to benefit from lower transaction costs, fostering a more favourable environment for trade and investment. However, it's crucial to consider the impact on domestic industries and consider potential inflationary pressures during the transition.
The political dimension of introducing the Euro cannot be overlooked, as joining the Eurozone represents a deeper integration into the European Union and signals a commitment to European economic and political cooperation. Yet, the decision also implies relinquishing a degree of monetary autonomy.
Social and Cultural Dynamics
The shift to a common currency extends beyond economic and political realms, as it carries social and cultural implications as well. Citizens may experience a sense of identity and solidarity with the wider European community but concerns about the potential loss of national identity may also arise. Analyzing public sentiment and understanding the cultural nuances involved is crucial to gauge the broader social impact of Euro adoption.
Challenges and Risks
While the benefits are evident (?), the analysis must address potential challenges as well. Examining the experience of other countries that have adopted the Euro (such as Greece), such as inflationary pressures, fiscal constraints, and public sentiment, provides valuable insight. Identifying and mitigating risks will ensure a smooth transition and minimise adverse effects on Croatia's economy.
In conclusion, the decision to introduce the Euro to Croatia is a multifaceted one, requiring a careful analysis of economic, political, and social aspects. While the benefits of increased stability and European integration are tempting, the potential challenges and risks need thorough consideration. (ki kellene picit ezt is fejteni jobban!) As Croatia takes this significant step, a comprehensive analysis is essential to inform policymakers and citizens alike, ensuring a well-informed decision that fits with the nation's long-term interests.
Introducing the Euro in Hungary
The debate surrounding Hungary's potential adoption of the Euro is gaining momentum, sparking discussions on the economic, political, and social implications of such a move. I aim to dissect the pros and cons associated with Hungary embracing the Euro as its official currency.
1) Enhanced Economic Stability:
Adopting the Euro can bring increased economic stability toHungary. The elimination of exchange rate fluctuations within the Eurozone can reduce uncertainty for businesses, encourage foreign investment, and facilitate smoother trade relations. In the last few years, the challenges of COVID-19 and the war between Ukraine and Russia all impacted the Hungarian economy and there were several moments when it seemed to be at risk of destabilizing. Introducing the Euro would ensure long-term stability and the economy would be less vulnerable in this regard.
2) Access to Larger Market and Increased Trade:
Membership in the Eurozone expands Hungary's market access and fosters greater economic integration with other European countries. This can lead to increased trade opportunities, potentially boosting the country's economic growth.
3) Lower Transaction Costs:
Using a common currency eliminates the need for currency conversion in cross-border transactions, reducing transaction costs for businesses and consumers alike. This efficiency can contribute to a more streamlined and cost-effective economy.
4) Monetary Policy Stability:
Aligning with the Euro provides Hungary with the stability of a well-established monetary policy managed by the European Central Bank (ECB). This can contribute to lower interest rates and a more predictable economic environment. This would also ensure that the monetary policy benefits not only the reigning government but – preferably – all of Hungary.
1. Future challenges:
Loss of Monetary Autonomy:
Adopting the Euro means giving up control over national monetary policy. Hungary would no longer have the flexibility to adjust interest rates or devalue its currency independently, potentially limiting its ability to respond to specific economic challenges. During the previously mentioned challenges our government was able to take quick action – whether it had a beneficial impact or not – and tried to mitigate the damage. If there is no national monetary policy the response time in crisis would increase significantly.
1) Economic Divergence:
The Eurozone comprises countries with varying economic conditions. Hungary may face challenges if its economic performance diverges significantly from that of other Eurozone members, as the single monetary policy may not be tailored to its specific needs. As Hungary’s economy is among the weaker ones in the EU this is a particularly significant point to consider. Countries with more economic and political power in the EU won’t be charitable at the expense of their economy.
2) Potential for Inflationary Pressures:
Transitioning to the Euro can lead to inflationary pressures, particularly if prices adjust rapidly. Understanding and managing the potential impact on domestic prices is crucial to avoid negative consequences for consumers and businesses. As inflation is already particularly high in Hungary, a lot of the nation would be affected gravely by this temporary problem.
3) Public Perception and National Identity:
The adoption of the Euro may be met with resistance from those who value Hungary's national currency, the forint, as a symbol of sovereignty and identity. Managing public sentiment and addressing concerns about the loss of cultural and economic autonomy is vital. The current government’s right-wing sentiment doesn’t support the introduction of the Euro and making it about the nation's identity is the easiest way to get people to agree with them. They have been leading a successful campaign against the EU (‘Brussels’ as they put it) so the introduction of the Euro would meet quite a big resistance from the public.
In my opinion, Hungary’s current economic and social state isn’t ready for the introduction of the Euro as shown perfectly by the objective criteria that we do not fit – yet. It’s an important goal for the future and hope that the responsible parties will aim to reach it.
This article was made in cooperation House of European Affairs and Diplomacy - Szeged.