Parliament adopts Act on euro as official currency
On 1 June 2022, the European Commission issued the 2022 Convergence Report, which finds that Croatia is ready to adopt the euro on 1 January 2023. The report establishes that Croatia fulfils the four nominal convergence criteria (the Maastricht criteria) and that its legislation is fully compatible with the requirements of the Treaty and the Statute of the European System of Central Banks. The Commission also issued a proposal for a Council decision on Croatia's adoption of the euro on 1 January 2023.
On the same day, the European Central Bank (ECB) issued its separate 2022 Convergence Report, independent from the Commission's assessment. The ECB's report also found that Croatia fulfils all economic and legal requirements for adopting the euro.
Now, less than a decade after joining the European Union, Croatia awaits the Council of the European Union's final decision on joining the Eurozone and continues in its preparations for the introduction of the euro.
Parliament adopts Act on euro as official currency
On 13 May 2022, Parliament adopted the Act on the Introduction of the Euro as the Official Currency in Croatia,(1) as an ''umbrella'' legal framework for the Croatian legal system.
Following the established practice of other member states, the Act was adopted prior to the Council of the European Union's final decision on Croatia's admission into the Eurozone. The Act should enter into force the day after publication of the Council's decision on the introduction of the euro.
The Act stipulates the basic principles of the introduction of the euro in Croatia, namely the principles of:
- consumer protection;
- prohibition of unjustified price increases;
- continuity of legal instruments;
- efficiency and economy; and
- transparency and information.
The Act prescribes in detail:
- conversion rules;
- the supply and exchange of kuna cash for euro cash;
- the application of anti-money laundering rules on the exchange;
- rules on dual circulation and dual disclosure;
- the principle of continuity of legal instruments;
- budgets, financial plans, business books and financial reports; and
- bodies authorised to supervise the application of the Act.
After the Council renders the decision on the introduction of the euro and the regulation determining the fixed conversion rate, the government will publish, its decision as regards:
- the date of introduction of the euro – which is expected to be 1 January 2023;
- fixed conversion rate;
- the start and end date of dual circulation; and
- dual disclosure.
The Croatian National Bank (CNB) will then start the pre-supply of credit institutions with euro banknotes (four months before the introduction) and euro coins (three months before the introduction), whereby credit institutions must also perform indirect pre-supply to:
- business entities;
- public authorities;
- payment institutions (PIs); and
- electronic money institutions (EMIs).
Further, credit institutions must perform the simplified indirect pre-supply to micro-business entities (five days before the introduction at the earliest) and supply of starter packs of euro coins (a month before the introduction at the earliest) to, among other things, consumers and business entities in order to prepare them for cash transactions in euros.
The Act prescribes in detail the most important activities prior to the introduction – dual circulation and dual disclosure of both currencies. It is stipulated that a dual circulation period in which the euro and the kuna may be used simultaneously in cash transactions will last for two weeks after the euro is introduced (presumably from 1-14 January 2023).
However, the key measure for consumer protection in the euro introduction procedure is the dual disclosure in both kuna and euro, which presumably starts on 5 September 2022 and ends 12 months after the introduction.
In the dual disclosure period, business entities shall be obligated to state their prices in a clear, legible and easily visible way in both euros and kuna using and indicating the fixed conversion rate (eg, in business premises, on the goods, price lists and web sites), including in invoices. This obligation also materialises the application of the principle of prohibition of unjustified price increases.
The obligation of dual disclosure applies in the financial sector to:
- credit institutions;
- other creditors; and
- financial services providers.
All are obliged to state important information for consumers in both currencies during the above period (eg, ATMs, fee tariffs and reports).
Employers will also be obligated to state in both currencies the amounts paid to employees, such as on payslips. Although the existing employment agreements will not have to be amended, salaries and other material rights determined in kuna should be converted into euros by using the fixed conversion rate.
Furthermore, joint-stock companies and limited liability companies shall be obliged to recalculate their share capital and its parts that fall into shares (ie, business shares) by using the fixed conversion rate and rounding up the sum, and report such conversion to the court registry within one year from the introduction (for joint-stock companies) or three years from the introduction (for limited liability companies).
The Act further stipulates that the introduction of the euro does not affect the validity of legal instruments containing kuna, such as:
- legislative and statutory provisions;
- judicial decisions;
- unilateral legal acts; and
- payment instruments other than banknotes and coins.
The Act also stipulates that it does not entitle either party to a valid unilateral termination or cancellation of such instrument, or amendment of its individual provision, unless otherwise expressly agreed between the parties or unless provided by the Act or a special regulation.
For further information on this topic please contact Ivana Manovelo or Hana Fiala at Maćešić & Partners by telephone (+385 51 215 010) or email ([email protected] or [email protected]). The Maćešić & Partners website can be accessed at www.macesic.hr.