The eurozone could grow by 4 million people on 1 January 2023, if EU leaders approve later this month the Commission's recommendation to let Croatia adopt the single currency.
Croatia could be the next country to join the eurozone after the Commission gave its approval on Wednesday.
If the move is endorsed by the Eurogroup and EU Council later this month, Croatia could adopt the EU's official currency as early as 1 January 2023 — six months before it celebrates its tenth anniversary as an EU member. It would thus become the euro area's twentieth member.
The endorsement from the Commission is based on its latest Convergence Report reviewing member states' preparedness to join the euro area.
Out of the seven member states under review — Denmark has an opt-out — Croatia is the only one to fulfil all criteria necessary for accession. These include compatibility of the national legislation with the provision of central bank independence, price stability (comparatively low inflation on a level similar to the euro area), fiscal stability (deficit not exceeding 3% of GDP as mandated by EU rules), exchange-rate stability and durable convergence (comparatively low long-term interest rates).
An EU official told reporters that "it is also true there was a very strong political determination from the part of the Croatian authority" to join the euro and that "this, for example, has not been the orientation taken by the other countries in the waiting room, so to speak."
The official also dismissed concerns that Croatia would not be "a safe member of the euro area" or a "repeat of Greece", arguing that since the euro crisis of 2008, the eurozone has created new institutions, including a banking union and supervisory mechanisms, to better monitor financial institutions.
"Croatia is a very small, open economy," the official stated, and "its banking system is largely owned by large banks in very large countries" which provides another layer of security.
Croatian Prime Minister Andrej Plenković welcomed the announcement on Twitter, writing: "Croatia will soon become a member of the Eurozone, thus achieving one of our strategic goals."
"The euro will make the Croatian economy stronger and bring significant benefits to Croatian citizens and society!" he added.
The positive evaluation of Croatia was also cheered by Commission members including President Ursula von der Leyen who said that adopting the single currency "will make Croatia's economy stronger, bringing benefits to its citizens, businesses and society at large. Croatia's adoption of the euro will also make the euro stronger."
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, praised Croatia's "great commitment, diligence and perseverance" towards fulfilling the conditions to adopt the single currency" while Paolo Gentiloni, Commissioner for Economy, hailed it as a " historic milestone on Croatia's European journey."
"The Croatian people can now look forward to joining more than 340 million citizens already using the euro as their currency, a rock of stability in these turbulent times," Gentiloni added in a statement.
The euro entered into circulation on 1 January 2002 and all member states are in principle committed to adopting the euro once they fulfil the conditions but there is no set timetable and it is up to them to take the necessary steps. The Convergence Report also evaluated Bulgaria, Czechia, Hungary, Poland, Romania and Sweden.
It found that Romania currently fulfils none of the requirements while Sweden was the only country apart from Croatia to be within the price stability range.