Croatia, adopting the Euro, ignored the economics

It is predictably going wrong and the worst is still to come.

On January 1st, 2023, Croatia adopted the Euro. Already now, shopkeepers,especially in food, have raised their prices, a very human reflex that is vehemently beingn criticised.  But the real problem, ignored both in Croatia and - astonishingly - in Brussels too, is that producing activities in the country risk going broke. Take agtriculture, 3% of GDP and Manufacturing 12%.  All farmers, all producers, previously protected as they were against foreign competition by the weaker Croat curency, are now exposed. As competiion was weak, they inevitably are often less efficient than foreign farms and producers. A rough estimate is therefore that a third of them will go broke. If so, 5% of GDP will disappear. The same happened in the three Länder of the ex-DDR in 1990 after they joined Western Germany and had to take the WestdeutscheMark as their currency.. Helmuth Kohl also ignored the economics, but Croatia does not have a rich Wetern Croatia like the DDR had its rich Western Germany to cushion the brunt of the problem. We must hope tourism, at 20% of Croatian GDP now, can grow. But will it?

It is strange how the inevitable functioning of macro-economics is so often being ignored by financial people. That happened in Germany at the "Wende" in 1990, then in 2001 in the whole democratic west under US leadership at the start of free trade with China. It was also ignored by Wolfgang Schäuble when he was at the helm in distribution of EU assistance to Greece.  Due to him imposing austerity, Greek GDP fell by 25%! And now, we see it in Croatia. Nobel Prize economists like Paul Krugman, even though he criticised Schäuble, in his world view still ignores the functioning of macro too. John Maynard Keynes surely is turning in his grave.