As Croatia Joins Eurozone and Schengen, Producers Expect Positive Change

Olive oil pro­duc­ers in Croatia are opti­mistic about the small Adriatic country’s immi­nent ascen­sion to the Eurozone at the start of next year.

On January 1^st Croatia will become the twen­ti­eth mem­ber of the sin­gle cur­rency union, com­plet­ing a stated objec­tive of the coun­try since it joined the European Union in 2013.

“The intro­duc­tion of the Euro will strengthen our econ­omy, it will be an anchor of sta­bil­ity, will make us more resis­tant and pro­tected from exter­nal shocks and crises and will con­tribute to the improve­ment of invest­ment cli­mate,” said Marko Primorac, Croatia’s finance min­is­ter.

Multiple olive grow­ers and oil pro­duc­ers told Olive Oil Times that they antic­i­pate join­ing the Eurozone will favour their busi­nesses.

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They cited the sim­pli­fi­ca­tion of their account­ing pro­ce­dures, bet­ter for­eign exchange rates to third-party mar­kets and boosted sales from increased tourism as some of the main ben­e­fits of the deci­sion.

“In my opin­ion join­ing the Eurozone is a very good thing,” Vedrana Rakovac, the award-win­ning pro­ducer behind OPG Rakovac, told Olive Oil Times. ​“Being in the Eurozone is some­thing that feels very nat­ural for us.”

Located in Istria, a penin­sula in the Adriatic Sea shared by Croatia and Slovenia, a Eurozone mem­ber, Rakovac fre­quently trav­els to the Eurozone, and many of her cus­tomers live in the sin­gle cur­rency union.

“In Istria, we live near the cur­rent Eurozone bor­der,” she said. ​“We are used to deal­ing with Euros, and we always accepted pay­ment in Euros, as well as in Croatian kunas and had pricelists in both cur­ren­cies.”

“Our day-to-day busi­ness prac­tices will be eas­ier,” Rakovac added. ​“We are a small pro­ducer. We write our receipts by hand. In the sum­mer, when we have a lot of vis­i­tors in our lit­tle tast­ing room, writ­ing the receipts in kunas – because of Croatian reg­u­la­tion – as well as in Euros because our cus­tomers pay in Euros, was quite tire­some.”

Rudolf Nemetschke, an invest­ment banker and award-win­ning pro­ducer at Avistria, told Olive Oil Times that he believes join­ing the Eurozone will immensely ben­e­fit pro­duc­ers who export their olive oil to other coun­tries in the cur­rency union and glob­ally.

Nemetschke, who pro­duces olive oil in Croatia to export to Austria, said join­ing the sin­gle cur­rency will elim­i­nate incon­ve­niences and expenses asso­ci­ated with for­eign exchange (FX).

“Exports, espe­cially to other mem­ber states of the Eurozone, will be much eas­ier in the future and also much cheaper for the pro­ducer, as FX fees no longer have to be paid,” he said. ​“But also exports to non‑E.U. coun­tries will profit, as the Euro is much eas­ier to trade than the kuna, with far lower spreads and lower FX fees.”

He added that the recent depre­ci­a­tion of the Euro against other global cur­ren­cies would make Croatian olive oil cheaper to import out­side of Europe.

Marina Božac Marjanović, the award-win­ning pro­ducer behind Stancija St. Antonio, agreed that join­ing the Eurozone will sim­plify the pro­ce­dures to export olive oil to other cur­rency union mem­bers and hopes the change will result in more sales to cus­tomers in other mem­ber coun­tries.

“However, we don’t think con­vert­ing to the Euro will change any­thing regard­ing exports to other coun­tries in the rest of the world,” she added. ​“The impact we expect to see would only be on the coun­tries in Eurozone.”

Officials in Zagreb, Croatia’s cap­i­tal, who cham­pi­oned the deci­sion, believe adopt­ing the Euro would result in a more sta­ble exchange rate and improve the country’s credit rat­ing.

However, its oppo­nents argue that it will raise prices at a time when annual infla­tion in the coun­try has reached dou­ble dig­its.

Nemetschke said ris­ing prices due to the adop­tion of the Euro would pos­i­tively impact pro­duc­ers when sell­ing their olive oil but would also raise pro­duc­tion costs.

“My esti­mate is that prices of high-qual­ity Croatian – espe­cially Istrian – olive oil will rise, which is good for the grow­ers and pro­duc­ers,” he said.

“On the other hand, ris­ing prices for power fuel and fer­til­izer will hurt, but it is unclear if these price rises are due to the join­ing of the Eurozone or just tem­po­rary phe­nom­ena,” Nemetschke added.

Rakovac agreed that chang­ing from kuna to Euros would likely increase some input prices for grow­ers and pro­duc­ers.

“But in these times, when the infla­tion rate in Croatia in December 2022 reached 13.5 per­cent, the increase in expenses caused by con­ver­sion is not our biggest fear,” she added.

Paul O’Grady, co-owner and sales direc­tor of Brist, added that European rules are aimed at pre­vent­ing pro­duc­ers from rais­ing their prices to coin­cide with the cur­rency switch beyond a few per­cent­age points. As a result, he said this would likely mit­i­gate some of the poten­tial asso­ci­ated price increases at the time of cur­rency changeover.

Croatia’s final step to join­ing the Euro came at the end of November when the par­lia­ment passed the first national bud­get in Euros instead of kuna by a vote of 77 to 50.

The path to this deci­sion was paved over the sum­mer when the European Central Bank gave Croatia the green light to join the sin­gle cur­rency, prompt­ing E.U. finance min­is­ters to agree to admit Croatia to the Eurozone.

A sep­a­rate deci­sion ear­lier this month will also see Croatia join the bor­der-free Schengen zone, which elim­i­nates bor­der checks with other mem­bers.

While trade asso­ci­a­tions antic­i­pate the deci­sion will boost tourism and con­sumer spend­ing, Nemetschke said it would have lit­tle impact on the olive oil sec­tor.

“The Schengen zone mem­ber­ship will have no direct influ­ence, as Croatia already joined the E.U. free trad­ing zone as a mem­ber years ago,” he said. ​“Maybe there will be pos­i­tive effects because of even bet­ter con­di­tions for the tourism sec­tor, which strongly influ­ences local olive oil sales.”

Božac, O’Grady and Rakovac, all of whom are based in Istria, said they expected to see some increase in sales as a result of the coun­try join­ing the Schengen Zone.

“Being a part of the Schengen zone is only a plus for us,” Rakovac said. ​“Our cus­tomers are often tourists who spend their vaca­tions in south­ern Istria.”

“It was not easy to cross the bor­der and enter Croatia at the peak of the tourist sea­son. It some­times meant wait­ing in the sun for hours,” she added. ​“For goods like olive oil, as well as for peo­ple, easy travel comes hand in hand with easy trade.”

For pro­duc­ers such as Nemetschke, with a more sig­nif­i­cant focus on exports than sales to tourists, the biggest impact of closer inte­gra­tion into Europe for the olive oil sec­tor will be the lib­er­al­iza­tion of laws sur­round­ing land pur­chases by European cit­i­zens.

“The pos­si­bil­ity of free land pur­chase by all E.U. cit­i­zens will raise land prices, maybe even sharply,” he said. ​“This, as a con­se­quence, will raise the cred­it­wor­thi­ness of the pro­duc­ers, espe­cially the farm­ers.”

While the con­se­quences of these changes to land pur­chases remain to be seen, O’Grady thinks the impact will likely be less pro­nounced on agri­cul­tural land than on real estate zoned for hous­ing.

Still, he added it would open the oppor­tu­nity for peo­ple like him­self to come to Croatia, make a liv­ing, and pos­si­bly get involved in grow­ing olives.

“I know, as a for­eigner who came here 20 years ago, that to buy land was con­sid­ered an incred­i­bly ardu­ous process,” he said. Although, O’Grady believes that this sit­u­a­tion would not be preva­lent, lim­it­ing the impacts on land val­ues for olive farm­ers.

However, Nemetschke believes the changes to the com­plex land pur­chas­ing rules, viewed by some as a hin­drance to the sec­tor’s devel­op­ment, may also draw in new investors and invest­ments.

“My expec­ta­tion of ris­ing real estate prices is also very pos­i­tive, as we invested sev­eral years ago, and ris­ing land prices mean bet­ter financ­ing con­di­tions as well as higher hid­den reserves for us,” Nemetschke said.

Despite dif­fer­ing opin­ions on how join­ing the Eurozone and Schengen Zone would specif­i­cally impact olive grow­ers and pro­duc­ers, every­one inter­viewed by Olive Oil Times con­cluded that the result would be mostly pos­i­tive.

“We expect only pos­i­tive changes and are look­ing for­ward to a new year,” Božac con­cluded.