Proposal for a COUNCIL DECISION on the adoption by Croatia of the euro on 1 January 2023
Date: 2022-06-01
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Croatia, EMS exchange-rate mechanism, Economic and Monetary Union, Euro Group (euro area), economic convergence, euro

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   EUROPEAN COMMISSION  Brussels, 1.6.2022  COM(2022) 282 final 2022/0179 (NLE)  Proposal for a COUNCIL DECISION on the adoption by Croatia of the euro on 1 January 2023  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

On  3  May  1998,  the  Council  decided  that  Belgium,  Germany,  Spain,  France,  Ireland,  Italy, 
Luxembourg, the Netherlands, Portugal, Austria and Finland fulfilled the necessary conditions 
for the adoption of the euro on 1 January 1999. Denmark and the United Kingdom made use 
of their opt-out clauses and were therefore not assessed by the Council. Greece and Sweden 
were considered by the Council as Member States with a derogation. 

On 19 June 2000, the Council decided that Greece fulfilled the necessary conditions to adopt 
the euro on 1 January 2001. The countries that joined the European Union on 1 May 2004 (the 
Czech  Republic,  Estonia,  Cyprus,  Latvia,  Lithuania,  Hungary,  Malta,  Poland,  Slovenia  and 
Slovakia)  became  Member  States  with  a  derogation  in  accordance  with  Article  4  of  the 
respective Act of Accession. 

On 11 July 2006, the Council decided that Slovenia fulfilled the necessary conditions to adopt 
the euro on 1 January 2007. 

Bulgaria and Romania, who joined the European Union on 1 January 2007, became Member 
States with a derogation in accordance with Article 5 of the respective Act of Accession. 

On 10 July 2007, the Council decided that Cyprus and Malta fulfilled the necessary conditions 
to adopt the euro on 1 January 2008. 

On  8  July  2008,  the  Council  decided  that  Slovakia  fulfilled  the  necessary  conditions  for 
adopting the euro as of 1 January 2009. 

On  13  July  2010,  the  Council  decided  that  Estonia  fulfilled  the  necessary  conditions  for 
adopting the euro as of 1 January 2011. 

Croatia  joined  the  European  Union  on  1  July  2013  and  became  a  Member  State  with  a 
derogation in accordance with Article 5 of the Act of Accession. 

On  9  July  2013,  the  Council  decided  that  Latvia  fulfilled  the  necessary  conditions  for 
adopting the euro as of 1 January 2014. 

On  23  July  2014,  the  Council  decided  that  Lithuania  fulfilled  the  necessary  conditions  for 
adopting the euro as of 1 January 2015. 

Article  140(1)  of  the  Treaty  on  the  Functioning  of  the  European  Union  ('the  Treaty')  states 
that at least once every two years or at the request of a Member State with a derogation, the 
Commission  and  the  European  Central  Bank  have  to  report  to  the  Council  on  the  progress 
made  by  Member  States  with  a  derogation  in  fulfilling  their  obligations  regarding  the 
achievement of economic and monetary union. 

Based on its own report and that of the ECB, the Commission should submit to the Council a 
proposal for a Council decision, in accordance to the procedure laid down in Article 140(2) of 
the  Treaty,  to  abrogate  the  derogation  of  the  Member  States  fulfilling  the  necessary 
conditions. 

Both the Commission and the ECB  convergence  reports were released on 1 June 2022. The 
reports  include  an  examination  of  the  compatibility  between  Croatia's  national  legislation, 
including the statutes of its national central bank, with Articles 130 and 131 of the Treaty and 
the Statute of the ESCB and of the ECB. 

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The  reports  also  examine  whether  a  high  degree  of  sustainable  convergence  has  been 
achieved,  by  reference  to  the  fulfilment  of  the  convergence  criteria,  and  take  account  of 
several other factors required under the final sub-paragraph of Article 140(1) of the Treaty. 

In its convergence report, the Commission concludes that Croatia fulfils the conditions for the 
adoption of the euro. 

On  the  basis  of  its  report  and  that  of  the  ECB,  the  Commission  has  adopted  the  attached 
proposal  for  a  Council  decision  to  abrogate  the  derogation  of  Croatia,  with  effect  from 
1 January 2023. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENT 

Discussions  with  Member  States  on  economic  policy  challenges  in  Member  States  are  held 
under various headings  on a regular basis in  the Economic and Financial  Committee (EFC) 
and  the  ECOFIN/Eurogroup.  These  include  informal  discussions  on  issues  specifically 
relevant  to  the  preparation  of  eventual  euro-area  entry  (including  exchange  rate  policies). 
Dialogue with academics and other interested groups takes place in conferences/seminars and 
on an ad-hoc basis. 

Economic  developments  in  the  euro  area  and  the  Member  States  are  assessed  through  the 
various procedures of economic policy coordination and surveillance (notably under Art. 121 
of the Treaty), as well as in the context of the Commission’s regular monitoring and analysis 
of  country-specific  and  area-wide  developments  (including  forecasts,  regular  publication 
series, and input to the EFC and ECOFIN/Eurogroup). In accordance with the proportionality 
principle and in line with past practice, no formal impact assessment has been carried out. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

3.1. 

Legal basis 

The  legal  basis  for  this  proposal  is  Article  140(2)  of  the  Treaty,  which  lays  down  the 
procedure  for  a  Council  decision  on  euro  adoption  and  for  abrogating  the  derogation  in  the 
concerned Member States. 

The  Council  shall  act  on  a  proposal  from  the  Commission,  after  consulting  the  European 
Parliament,  after  discussion  in  the  European  Council  and  after  having  received  a 
recommendation  of  a  qualified  majority  of  those  among  its  members  representing  Member 
States whose currency is the euro. 

3.2. 

Subsidiarity and proportionality 

The  proposal  falls  under  the  exclusive  competence  of  the  Union.  The  subsidiarity  principle 
therefore does not apply. 

This initiative does not  go beyond what  is  necessary to  achieve its objective and, therefore, 
complies with the proportionality principle. 

3.3. 

Choice of legal instrument 

A Decision is the only appropriate legal instrument according to Article 140(2) of the Treaty. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implications for the budget of the Union. 

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2022/0179 (NLE) 

Proposal for a 

COUNCIL DECISION 

on the adoption by Croatia of the euro on 1 January 2023 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 140(2) thereof, 

Having regard to the proposal from the European Commission, 
Having regard to the report from the European Commission (1) 
Having regard to the report from the European Central Bank (2) 

Having regard to the opinion of the European Parliament, 

Having regard to the discussion in the European Council, 

Having  regard  to  the  recommendation  of  the  members  of  the  Council  representing  Member 
States whose currency is the euro, 

Whereas: 

(1) 

(2) 

(1) 
(2) 
(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

The third stage of economic and monetary union (‘EMU’) started on 1 January 1999. 
The Council, meeting in Brussels on 3 May 1998 in the composition of Heads of State 
or  Government,  decided  that  Belgium,  Germany,  Spain,  France,  Ireland,  Italy, 
Luxembourg,  the  Netherlands,  Austria,  Portugal  and  Finland  fulfilled  the  necessary 
conditions for adopting the euro on 1 January 1999 (3). 
By Decision 2000/427/EC (4) the Council decided that Greece fulfilled the necessary 
conditions for adopting the euro on 1 January 2001. By Decision 2006/495/EC (5) the 
Council decided that Slovenia fulfilled the necessary conditions for adopting the euro 
on  1  January  2007.  By  Decisions  2007/503/EC  (6)  and  2007/504/EC  (7)  the  Council 
decided that Cyprus and Malta fulfilled the necessary conditions for adopting the euro 
on  1  January  2008.  By  decision  2008/608/EC  (8)  the  Council  decided  that  Slovakia 

Report of 1 June 2022 (not yet published in the Official Journal). 
Report of 1 June 2022 (not yet published in the Official Journal). 
Council Decision 98/317/EC of 3 May 1998 in accordance with Article 109j(4) of the Treaty (OJ L 139, 
11.5.1998, p. 30).  
Council Decision 2000/427/EC of 19 June 2000 in accordance with Article 122(2) of the Treaty on the 
adoption by Greece of the single currency on 1 January 2001 (OJ L 167, 7.7.2000, p. 19). 
Council Decision 2006/495/EC of 11 July 2006 in accordance with Article 122(2) of the Treaty on the 
adoption by Slovenia of the single currency on 1 January 2007 (OJ L 195, 15.7.2006, p. 25). 
Council Decision 2007/503/EC of 10 July 2007 in accordance with Article 122(2) of the Treaty on the 
adoption by Cyprus of the single currency on 1 January 2008 (OJ L 186, 18.7.2007, p. 29).  
Council Decision 2007/504/EC of 10 July 2007 in accordance with Article 122(2) of the Treaty on the 
adoption by Malta of the single currency on 1 January 2008 (OJ L 186, 18.7.2007, p. 32).  
Council Decision 2008/608/EC of 8 July 2008 in accordance with Article 122(2) of the Treaty on the 
adoption by Slovakia of the single currency on 1 January 2009 (OJ L 195, 24.7.2008, p. 24).  

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fulfilled the necessary conditions for adopting the euro. By decision 2010/416/EU (9) 
the  Council  decided  that  Estonia  fulfilled  the  necessary  conditions  for  adopting  the 
euro.  By  decision  2013/387/EU  (10)  the  Council  decided  that  Latvia  fulfilled  the 
necessary conditions for adopting the euro. By decision 2014/509/EU (11) the Council 
decided that Lithuania fulfilled the necessary conditions for adopting the euro. 

In  accordance  with  paragraph  1  of  the  Protocol  on  certain  provisions  relating  to 
Denmark  annexed  to  the  Treaty  establishing  the  European  Community  and  the 
Decision taken by the Heads of State or Government in Edinburgh in December 1992, 
Denmark has notified the Council that it will not participate in the third stage of EMU. 
Denmark  has  not  requested  that  the  procedure  referred  to  in  Article  140(2)  of  the 
Treaty on the Functioning of the European Union (TFEU) be initiated. 

By virtue of Decision 98/317/EC Sweden has a derogation as defined in Article 139(1) 
TFEU.  In  accordance  with  Article  4  of  the  2003  Act  of  Accession  (12),  the  Czech 
Republic, Hungary and Poland have derogations as defined in Article 139(1) TFEU. In 
accordance  with  Article  5  of  the  2005  Act  of  Accession  (13),  Bulgaria  and  Romania 
have derogations as defined in Article 139(1) TFEU. In accordance with Article 5 of 
the 2012 Act of Accession (14), Croatia has a derogation as defined in Article 139(1) 
TFEU. 

The  European  Central  Bank  (‘ECB’)  was  established  on  1 July  1998.  The  European 
Monetary System has been replaced by an exchange rate mechanism, the setting-up of 
which was agreed by a resolution of the European Council on the establishment of an 
exchange-rate  mechanism  in  the  third  stage  of  economic  and  monetary  union  of  16 
June  1997  (15).  The  procedures  for  an  exchange-rate  mechanism  in  stage  three  of 
economic  and  monetary  union  (ERM  II)  were  laid  down  in  the  Agreement  of  16 
March 2006 between the European Central Bank and the national central banks of the 
Member  States  outside  the  euro  area  laying  down  the  operating  procedures  for  an 
exchange rate mechanism in stage three of economic and monetary union.(16) 

Article 140(2) TFEU lays down the procedures for abrogation of the derogation of the 
Member  States  concerned.  At  least  once  every  two  years,  or  at  the  request  of  a 
Member  State  with  a  derogation,  the  Commission  and  the  ECB  shall  report  to  the 
Council in accordance with the procedure laid down in Article 140(1) TFEU.  

National  legislation  in  the  Member  States,  including  the  statutes  of  national  central 
banks,  is  to  be  adapted  as  necessary  with  a  view  to  ensuring  compatibility  with 
Articles 130 and 131  TFEU and with  the Statute of the  European System  of Central 
Banks and of the European Central Bank (‘Statute of the ESCB and of the ECB’). The 
reports  of  the  Commission  and  the  ECB  provide  a  detailed  assessment  of  the 
compatibility of the legislation of Croatia with Articles 130 and 131 of the Treaty and 
with the Statute of the ESCB and of the ECB. 

Council Decision 2010/416/EU of 13 July 2010 in accordance with Article 140(2) of the Treaty on the 
adoption by Estonia of the euro on 1 January 2011 (OJ L 196, 28.7.2010, p. 24).  
Council Decision 2013/387/EU of 9 July 2013 on the adoption by Latvia of the euro on 1 January 2014 
(OJ L 195, 18.7.2013, p. 24). 
Council Decision 2014/509/EU of 23 July 2014 on the adoption by Lithuania of the euro on 1 January 
2014  (OJ L 228, 31.7.2014, p. 29). 
OJ L 236, 23.9.2003, p. 33. 
OJ L 157, 21.6.2005, p. 203. 
OJ L 112, 24.4.2012, p. 21. 
OJ C 236, 2.8.1997, p. 5. 
OJ C 73, 25.3.2006, p. 21.  

(3) 

(4) 

(5) 

(6) 

(7) 

(9) 

(10) 

(11) 

(12) 
(13) 
(14) 
(15) 
(16) 

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(8) 

(9) 

(10) 

In accordance with Article 1 of Protocol No 13 on the convergence criteria referred to 
in  Article  140  TFEU,  the  criterion  on  price  stability  referred  to  in  the  first  indent  of 
Article  140(1)  TFEU  means  that  a  Member  State  has  a  price  performance  that  is 
sustainable and an average rate of inflation, observed over a period of one year before 
the examination, that does not exceed by more than one and a half percentage points 
that of, at  most, the three best  performing Member States  in  terms of  price stability. 
For  the  purpose  of  the  criterion  on  price  stability,  inflation  is  measured  by  the 
harmonised indices of consumer prices (HICPs) defined in Regulation (EU) 2016/792 
of  the  European  Parliament  and  of  the  Council  (17).  To  assess  the  price  stability 
criterion,  a  Member  State's  inflation  is  measured  by  the  percentage  change  in  the 
arithmetic  average  of  12  monthly  indices,  relative  to  the  arithmetic  average  of  12 
monthly indices from the previous period. A reference value calculated as the simple 
arithmetic average of the inflation rates of the three best-performing Member States in 
terms  of  price  stability,  plus  1,5 percentage  points,  was  used  in  the  reports  of  the 
Commission and the ECB.  In the one-year period ending in April 2022, the inflation 
reference value was calculated to be 4,9 per cent, with France, Finland and Greece as 
the three best-performing Member States in terms of price stability, with inflation rates 
of 3,2 per cent, 3,3 per cent and 3,6 per cent, respectively. It is warranted to exclude 
from  the  best  performers  countries  whose  inflation  rates  cannot  be  seen  as  a 
meaningful  benchmark  for  other  Member  States.  Such  outliers  were  in  the  past 
identified in  2004, 2010, 2013, 2014  and 2016.  Currently, it is  warranted to  exclude 
Malta and Portugal from the best performers (18). For the calculation of the reference 
value,  they  are  replaced  by  Finland  and  Greece,  the  Member  States  with  the  next-
lowest average inflation rates. 

In  accordance  with  Article  2  of  Protocol  No  13,  the  criterion  on  the  government 
budgetary  position  referred  to  in  the  second  indent  of  Article  140(1)  TFEU  requires 
that, at the time of the examination, the Member State not be the subject of a Council 
decision under Article 126(6) TFEU that an excessive deficit exists. 

In  accordance  with  Article  3  of  Protocol  No  13,  the  criterion  on  participation  in  the 
exchange-rate  mechanism  of  the  European  Monetary  System  referred  to  in  the  third 
indent  of  Article  140(1)  TFEU  requires  a  Member  State  to  have  complied  with  the 
normal  fluctuation  margins  provided  for  by  the  exchange-rate  mechanism  (ERM)  of 
the European Monetary System, without severe tensions, for at least the last two years 
before  the  examination.  In  particular,  the  Member  State  must  not  have  devalued  its 
currency's  bilateral  central  rate  against  the  euro  on  its  own  initiative  for  the  same 
period.  Since  1  January  1999,  the  ERM  II  provides  the  framework  for  assessing  the 
fulfilment of the exchange rate criterion. In assessing the fulfilment of this criterion in 
their reports, the Commission and the ECB have examined the two-year period ending 
on 18 May 2022. 

(11) 

In  accordance  with  Article  4  of  Protocol  No  13,  the  criterion  on  the  convergence  of 
interest  rates  referred  to  in  the  fourth  indent  of  Article  140(1)  TFEU  requires  that, 
observed over a period of one year before the examination, a Member State have had 
an  average  nominal  long-term  interest  rate  that  does  not  exceed  by  more  than  two 
percentage points that of, at most, the three best performing Member States in terms of 

(17) 

(18) 

Regulation  (EU)  2016/792  of  the  European  Parliament  and  of  the  Council  of  11  May  2016  on 
harmonised  indices  of  consumer  prices  and  the  house  price  index,  and  repealing  Council  Regulation 
(EC) No 2494/95 (OJ L 135, 24.05.2016, p.11). 
In April 2022, the 12-month average inflation rates of Malta and Portugal were respectively 2,1% and 
2,6% and that of the euro area 4,4%. 

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price  stability.  The  criterion  used  to  assess  the  convergence  of  interest  rates  was 
comparable  interest  rates  on  ten-year  benchmark  government  bonds.  To  assess  the 
fulfilment  of  the  interest-rate  criterion,  a  reference  value  calculated  as  the  simple 
arithmetic average of the nominal long-term interest rates of the three best performing 
Member States in terms of price stability, plus two percentage points, was considered 
in  the  reports  of  the  Commission  and  the  ECB.  The  reference  value  is  based  on  the 
long-term interest rates in France (0,3 per cent), Finland (0,2 per cent) and Greece (1,4 
per cent) and in the one-year period ending in April 2022 it was 2,6 per cent. 

(12) 

In  accordance  with  Article  5  of  Protocol  No  13,  the  data  used  in  assessing  the 
fulfilment  of  the  convergence  criteria  is  to  be  provided  by  the  Commission.  The 
Commission  provided  that  data.  Budgetary  data  were  provided  by  the  Commission 
after reporting by the Member States before 1 April 2022, in accordance with Council 
Regulation (EC) No 479/2009. (19) 

(13)  On  the  basis  of  reports  presented  by  the  Commission  and  the  ECB  on  the  progress 
made by Croatia in fulfiling its obligations regarding the achievement of economic and 
monetary union, it is concluded that: 

(a) 

in  Croatia,  national  legislation,  including  the  Statute  of  the  national  central 
bank,  is  compatible  with  Articles  130  and  131  of  the  Treaty  and  with  the 
Statute of the ESCB and of the ECB; 

(b) 

regarding  the  fulfilment  by  Croatia  of  the  convergence  criteria  mentioned  in 
the four indents of Article 140(1) TFEU: 

– 

– 

– 

– 

(c) 

the average inflation rate in  Croatia in the  year  ending in  April 2022 stood at 
4,7  per  cent,  which  is  below  the  reference  value,  and  it  is  likely  to  remain 
below the reference value in the months ahead, 

Croatia is not the subject of a Council decision on the existence of an excessive 
deficit, 

Croatia  has  been  a  member  of  ERM  II  since  10  July  2020.  During  the  two 
years  preceding  the  assessment,  the  kuna  exchange  rate  (HRK)  has  not  been 
subject  to  severe  tensions  and  Croatia  has  not  devalued  the  HRK  bilateral 
central rate against the euro on its own initiative, 

in  the  year  ending  April  2022,  the  long-term  interest  rate  in  Croatia  was,  on 
average, 0,8 per cent, which is well below the reference value. 

 in  the  light  of  the  assessment  on  legal  compatibility  and  on  the  fulfilment  of 
the  convergence  criteria  as  well  as  the  additional  factors,  Croatia  fulfils  the 
necessary conditions for the adoption of the euro, 

HAS ADOPTED THIS DECISION:  

Article 1 

Croatia fulfils the necessary conditions for the adoption of the euro. The derogation in favour 
of Croatia referred to in Article 5 of the 2012 Act of Accession is abrogated with effect from 
1 January 2023. 

(19) 

Council  Regulation  (EC)  No  479/2009  of  25  May  2009  on  the  application  of  the  Protocol  on  the 
excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the  European  Community  (OJ  L  145, 
10.6.2009, p. 1).  

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This Decision is addressed to the Member States. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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