Poland will benefit from adpoting Euro, says Vujcic

Investing.com -- As per the comments made by Boris Vujcic, a member of the European Central Bank’s Governing Council, Poland’s economy, despite not adopting the euro, is still influenced by the central bank’s decisions. Vujcic, in his speech at the conference "The Golden Years – The Future of Money in Poland" on March 25, 2025 in Warsaw, highlighted the potential benefits of Poland adopting the euro, citing lower credit costs as a significant advantage.

Vujcic, who is also the Governor of Hrvatska narodna banka (HNB), the central bank of Croatia, shared insights from Croatia’s experience with euro adoption. He presented a comprehensive overview of the economic benefits and costs, emphasizing that the benefits outweighed the costs in the short run.

The benefits of euro adoption, as outlined by Vujcic, include the elimination of foreign exchange risk, reduction in borrowing costs, lower transaction costs, and greater resilience to crises. For instance, Croatia, a previously highly euroized country, saw its foreign currency debt drop from EUR 77 billion (115% of GDP) in December 2022 to just EUR 0.5 billion (0.7% of GDP) after adopting the euro.

Vujcic also noted that interest rates in Croatia have converged with those in the euro area since the adoption. This convergence resulted from two factors: a positive impact on the risk premium and an increase in banking system liquidity.

The adoption of the euro has facilitated trade, tourism, and investment by eliminating the need for currency conversion. It’s estimated that the disappearance of currency conversion costs has saved the non-financial sector approximately EUR 160 million annually.

In terms of resilience, the adoption of the euro has increased the Croatian economy’s ability to weather financial shocks. The government debt is now entirely in domestic currency, and households, corporations, and banks are no longer exposed to foreign exchange risk.

The costs of adopting the euro, as per Vujcic, were mostly small and one-off, including the loss of monetary autonomy, a mild increase in consumer prices, and one-off changeover costs. He noted that the loss of monetary autonomy was more a theoretical than a real cost for Croatia due to the country’s business cycle synchronization with core euro area countries.

Despite the high-inflation environment, Vujcic pointed out that the impact of the euro adoption on prices was negligible. The one-off financial costs related to the currency changeover were estimated to be between 0.5-1.0% of the GDP.

In his final remarks, Vujcic iterated that the euro has brought significant and permanent economic benefits to Croatia, including greater macro-financial resilience. The Croatian economy has performed well since joining the euro area, despite the challenging external environment and tighter financial conditions. The impact of the euro adoption on inflation was negligible, aligning with the experience of other countries that introduced the euro before Croatia.

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