What will the first two weeks be like?


September 21, 2021 – Speculation and doubts continue to emerge about the future financial scenario in Croatia after the possible introduction of the euro in the country as the official currency, moving the kuna, and CNB governor Boris Vujčić gives some clues as to what it would look like the first few weeks.

Pay in kuna, collect euros. At least that’s what the first two weeks in Croatia would look like after the euro was introduced on January 1, 2023, reports Poslovni Dnevnik. The aim is to stop the circulation of what would at the time be the old Croatian currency and to restart the circulation of the euro. To provide more information and details, RTL Direkt interviewed CNB Governor Boris Vujčić, who, in addition to the introduction of the euro, also talks about inflation and unspoken capital losses.

Why is the Minister of Finance so hard not to lower the VAT, could the introduction of the euro not be used to reduce it?

You must ask him questions about VAT. As for inflation, I would say that a good part of the inflation really comes from food especially now in summer when in the first half of the year most of the inflation came from the increase in the prices of the energy. Right now, about half of the rise in inflation is related to energy, and now, in the summer, food, vegetables and fruits are practically poor due to the weather conditions.

Are you not worried about rising inflation? In the United States, it is around 6% …

The United States has a higher rate of inflation, but the economy is overheating there, they also have strong tax incentives which are stronger than the Europeans and I don’t see such a rate of inflation. inflation could occur in Croatia, we expect that year. inflation rate round to 2.2 percent. This is, in principle, the aim of the European Central Bank, so we should not worry about it. The problem is whether there is a change in expectations, wage growth, but we are not seeing it at the moment. A significant part of this inflation comes from the fact that the so-called supply chains around the world at this time were disrupted. The Crown turned it all upside down, now you have continents where there are a lot of containers, some countries where you don’t. You have a situation where road traffic, air transport, is still at a very low level and anything that has flown with passengers on planes cannot fly… area, you have full parking lots that you cannot reach for the moment. This all takes a while to clear up and get back to what we had in 2019, a good mechanism, and then prices will slowly start to go down. I would say that will not happen in the next 6 months.

Especially the rise in real estate prices. Square dwellings not in the inflation basket?

They are not. I am in favor of having these prices in the basket and what the European Central Bank, where we are going now, has done, and what will be the norm … that these prices will also start to be included in the basket, however, this will not will last only two, three years. At the moment, we only have the so-called implicit prices via the rents and they don’t reflect the fact that real estate prices have increased significantly, and they have increased because there is a lot of liquidity, a lot of money, part of which flows into the real estate industry. For example, interest rates that are at zero, or in the countries around us in the eurozone are even negative on citizens’ deposits – some of these citizens take money from banks and carry and buy goods real estate, which inflates real estate prices.

Are you not worried that we are entering the eurozone just when euro inflation starts?

I will not tell. I don’t see it as a danger. I don’t see the inflation that we measure through the market basket as a medium term danger when we enter the Eurozone, but I do see the risks associated with these prices that we are seeing in the bond market right now, real estate where a lot of money was flowing and even cryptocurrencies. This bubble can still burst, as you know, financial crises arise, but it can burst easily, prices can stabilize, which will depend on a lot of things, in my opinion there is first of all a risk. Not these consumer prices.

What do you think would be the best advice for citizens?

Since I don’t see a big risk with inflation itself, so I don’t think it shouldn’t be assured by investing in those types of assets that are already priced too high, a declared Vujčić.

The governor on the introduction of the euro

How many kuna, physical, banknotes are in circulation?

You got a billion and a hundred million coins and about half a billion paper money. It’s a demanding logistics operation, you have to pull everything.

What will it look like? I go to the store, I pay in kuna, the change is given to me in euros?

That’s right. Until 01.01. is HRK, from 01.01. is either in kuna or in euro for two weeks, after which it is only euro, provided that when you pay in those two weeks you pay in kuna, the euro is returned to you. And we collect all the kuna.

And so what about them? Are they going to catch fire somewhere?

Coins are a bigger problem. I already said it’s like 120 ZET trams. We have to store it and store it somewhere, because it’s money for another three years, as long as that changes. As long as they change, they are money. We agreed with the Croatian army…

Are you building a safe somewhere?

We are going to build a safe, but at the same time we have agreed with the Croatian army. It’s really difficult from a logistical point of view.

To find out more, be sure to check out our dedicated business section.

About Rodney Fletcher

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