Since January 1st of this year, Croatia has finally transitioned its currency to the Euro and joined the passport-free Schengen Area, two major components of today’s European integration. Possessing the title of EU member since 2013, the last decade has seen Croatia transformed from an EU-aspirant into a member of the Union’s 17 deepest integrated countries (members of the Single Market, Eurozone, and Schengen). As Croatia joins Eurozone and Schengen, what benefits will the former-Yugoslav republic experience in the near-future, and how will this affect the rest of the Union?

Croatia’s decade of European integration: From EU accession to the Eurozone and Schengen Area

Croatia welcomed the new year not only alongside its 10th anniversary of EU membership, but as its year of Eurozone and Schengen accession following a long process of assimilating to EU criteria. Indeed, 2023 marked the culmination of the country’s decade-long process of adhering to the EU requirements to join both areas.

1. Eurozone accession

Outlined in the European Commission’s Convergence Report, Croatia became the sole of 7 non-Eurozone EU members in 2022 to fulfil the four convergence criteria necessary to adopt the Euro: adequate price stability, sound public finances, proper exchange rate, and moderate long-term interest rates. And with Croatian legislation also adhering to Treaty requirements and the Statute of the European System of Central Banks/ECB, Croatia was finally been deemed legally fit to adopt the Euro. As the report also noted, Croatia impressively achieved the benchmarks even with the negative economic backdrop of the ongoing Covid recovery and Russian war on Ukraine.

Having fulfilled the Eurozone’s benchmarks, what remained was political approval by the EU’s legislative organs: the European Parliament and Council.

As expected, on the 5th of July 2022, the European Parliament overwhelmingly accepted Croatia’s Eurozone bid, with 85% of votes in favour, 7% against, and 8% abstaining. As Socialist MEP Margarida Marques stated, ‘When European values are being challenged at our borders, this is a clear sign of unity, further integration and a contribution to the strength of the euro as a global currency. The adoption of the euro by Croatia shows that the single currency is a stimulating and solid project that guarantees greater security and stability for citizens.’

A week later, the final decision fell on the EU Council’s Finance Ministers, unanimously approving Croatia as the soon-to-become 20th member of the Eurozone.

With all three main EU decision-making bodies approving Croatia’s Eurozone accession, the country thus commenced practical preparation to adopt the Euro and transition away from its Croatian Kuna at the start of 2023.

2. Schengen accession

On the other hand, Croatia’s process of adherence to the Schengen requirements were less smooth.

Since 2016, Croatia has been under inspection by the Commission on its level of fulfilment of the Schengen acquis. The Commission thus reviewed all the requirements for Croatia to join the Schengen Area, including aspects such as ‘data protection, police cooperation, common visa policy, [and] management of external borders’.  In 2019, the Commission noted that Croatia had adhered to the requirements laid out in the acquis. However, it also noted concern over the country’s record on asylum-seekers’ rights and their asylum process as inadequate with EU rules.

Upon new review in 2020, the Commission reaffirmed its view that Croatia had successfully fulfilled the acquis and implemented the necessary actions to remedy the concerns over the external border management. Though criticism from civil society over Croatia’s asylum procedures prevailed, by December 2021, the Council affirmed the Commission’s 2020 evaluation that Croatia had fulfilled the necessary Schengen requirements.

By November 2022, the European Parliament overwhelmingly supported the accession of Croatia to the Schengen Area and requested the Council to do the same. However, the Parliament also requested the Commission to conduct further investigations regarding alleged migrant push-backs on Croatia’s border.

Nonetheless, the EU Council unanimously approved Croatia’s accession to the Schengen Area the following month. The event thus culminated the decision-making procedure, approving Croatia’s official addition to the area to coincide with its Eurozone accession at the beginning of 2023.

Romania and Bulgaria will have to wait

While the Council approved Croatia’s accession to Schengen, Romania’s and Bulgaria’s applications to join the the same area were vetoed by Austria. Even though the Commission conveyed support for all three country’s bids, Austria expressed concern over illegal migration, with its Interior Minister, Gerhard Karner, stating how ‘it is wrong that a system that does not work properly in many places would get expanded at this point’. Having recorded 100,000 illegal migration crossings into Austria in 2022, many of whom entered the EU via Bulgaria and Romania, it is likely both South Eastern European countries will need to address Vienna’s concerns before they are accepted within the Schengen Area.

Stability and steady growth: Croatia’s desperately needed benefits from accession

So far, Croatia’s transition towards a new currency and external border has been swift and successful, according to the Commission.

At a time where inflation soured to 13.5% (3.5% higher than the Eurozone average) because of heightened energy and food prices, experts expect Croatia’s accession to the Eurozone to better shelter the country’s economy from the storm caused by the war in Ukraine. The accession is also expected to ease trade with fellow Eurozone members, which make up the bulk of Croatia’s trading partners. In Brussels, emphasis was placed on how the Eurozone enlargement will strengthen the credibility and confidence of the Euro. 

As for Schengen, it is expected Croatia’s accession to the passport-free area will greatly benefit its vital tourism industry which accounts for 20% of its GDP. Nevertheless, border checks with non-Schengen neighbours Bosnia, Montenegro, and Serbia will presumably be strengthened as the EU and its border-security organisation Frontex take up new responsibilities along Croatia’s eastern and southern borders. It comes as EU justice and interior ministers meet to strengthen security along the Schengen external borders.

Conclusion

The accession of Croatia to the Eurozone and Schengen Area mark a milestone in Croatia’s European integration. Having successfully adhered to Schengen and Eurozone criteria only ten years after its accession to the Union, it is clear that Croatia has effectively transitioned its economy, overcoming its socialist legacy and becoming a promising young democracy with a functioning market system. Though the effects of the country’s accession to both areas has been so far successful, its long-term benefits or consequences are yet to be seen. If Brussels wishes to maintain the credibility and attractiveness of Schengen and the Euro, the EU will have to make sure Croatia’s accession to both zones is smooth and beneficial for both parties. Nevertheless, now a member of the 17 most deeply integrated European countries, Croatia will certainly play a significant role in determining the future of European integration.