engleski

CAUSES AND CONSEQUENCES OF AN EARLY DE FACTO EUROIZATION: THE CASE OF CROATIA

In economic terms the EU/EMU entry is envisaged as a process of first meeting the Copenhagen criteria and adopting the Acquis Communautaire before joining the EU, and, then, meeting the Maastricht criteria before joining the EMU. Some countries in CEE, however, are in a situation of having a high level of de facto euroization of their financial systems already before joining the EU. Reasons for this high level of euroization are diverse, ranging from historical currency substitution to carry trades, all helped by high level of banking market penetration from the eurozone. Recent crisis has accentuated the risks of having a highly euroized financial system. In many cases these risks were not adequately understood before the crisis, and not adequately dealt with. Post-crisis there is a lot of emphasis on the risks of fx lending, and a quest for the possibility of a de-euroization in order to reduce those risks. We look at the case of Croatia, as a highly euroized economy, and analyze the causes and consequences of a high level of euroization, as well as tools available to reduce the risks associated with it in the context of a run-up to the EU, and eventually the EMU.

EMU; de facto euroizaton; financial systems; crisis

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