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ZAGREB (Croatia), July 9 (SeeNews) - The Eurogroup said it is welcoming Croatia's letter of intent to join the European Exchange Rate Mechanism II (ERM II), the first formal step towards adopting the euro.
"We welcome the intention of the Croatian authorities to put in place the necessary elements for a successful entry into ERM II," the Eurogroup said in a statement late on Monday.
The statement was issued after a meeting of the finance ministers of the euro area and Denmark, the president of the European Central Bank (ECB) and representatives of the governor of Denmark's central bank who discussed Croatia's participation in ERM II in the presence of the European Commission, and the finance minister and central bank governor of Croatia.
Croatia sent its letter of intent to join ERM II last week, hoping to join the mechanism in about a year.
The whole process of joining the euro area is expected to take at least four years to complete, including the two-year mandatory stay in ERM II.
Back in May, the country also formally requested the establishment of close cooperation with the ECB on the supervision of the country's banks under the Single Supervisory Mechanism (SSM). Establishing close cooperation on the supervision of banks is part of the steps the country needs to make on the path to ERM II entry.
Croatia has said it aims to simultaneously enter into close cooperation with ECB and into ERM II.
The Eurogroup noted in the statement that Croatia has made additional commitments concerning the macro-prudential framework, the anti-money laundering framework, the collection, production and dissemination of statistics, public sector governance and reducing the financial and administrative burden. Reforms in these areas will boost Croatia's financial sector, strengthen its institutions and public governance and contribute to its successful participation in ERM II.
"The ECB and the Commission will monitor the effective implementation of these commitments acting within their respective areas of competence as provided for by the Treaties and secondary legislation," the Eurogroup said.
"Once they have provided a positive assessment, a decision will be taken by the ERM II parties on the formal application of the Croatian authorities for ERM II participation. The decision will be linked to the ECB decision on close cooperation, in full respect of the conditions specified in the legal framework. This would imply that Croatia simultaneously joins ERM II and the Banking Union."
ERM II ensures that exchange rate fluctuations between the euro and other EU currencies do not disrupt economic stability within the single market. It also helps non euro-area countries to prepare for joining the euro area. All countries of the euro area participate automatically in the SSM, while EU member states that do not yet have the euro as their currency can choose to participate via establishing close cooperation on banking supervision with the ECB.
The SSM aims to ensure the safety and soundness of the European banking system, to increase its financial integration and stability, as well as to ensure consistent supervision.