European Union finance ministers on Tuesday formally approved Croatia becoming the 20th member of the common euro currency at the start of 2023.

The move was hailed as the culmination of an "amazing journey" for a Balkan nation once at war.

Croatia's accession marks the eurozone’s first expansion since 2015 and comes just as the euro has dropped to its lowest level against the dollar in 20 years.

European Commission Vice President Valdis Dombrovskis said Croatia’s accession confirmed that the euro remained an "attractive, resilient and successful global currency" and a symbol of strength and unity.

"This is particularly important at such a challenging time when Russia's aggression against Ukraine continues to send shock waves around the world," Dombrovskis told a ceremony to mark Croatia’s accession.

The European Council, the grouping of 27 EU governments, adopted three legal acts required to allow Croatia – an EU member state since 2013 – to introduce the euro on Jan. 1.

One of those acts set the conversion rate for entry at 1 euro to 7.53 Croatian kuna, with Croatia now having a few months to prepare the practicalities for the currency switch.

‘Amazing journey’

Croatia, in southeastern Europe, has been an independent country since 1991 when it left then-federal Yugoslavia, which, along with Bosnia’s secession a year later, triggered years of devastating war with Serbia.

Neighboring Slovenia, also a former Yugoslav republic and now an EU member, adopted the euro in 2007. Lithuania was the last EU country to join the European single-currency area in 2015. Nineteen countries are currently in the eurozone.

Croatia was led by nationalist strongman Franjo Tudjman until his death in 1999 and to qualify as an EU member took steps to fight corruption and improve governance, which included the conviction of Ivo Sanader, prime minister from 2003 to 2009.

Croatian Finance Minister Zdravko Maric described the EU’s green light to adopt the euro as a "big historical day" for his country, whose stunning Adriatic coast is a major tourist destination.

EU Economy Commissioner Paulo Gentiloni hailed Croatia’s imminent entry into the eurozone as an "extraordinary result."

"What an amazing journey it was for Croatia. For my generation, Croatia experienced the first (European) war after the end of World War (II)," he said, referring to the 1990s Yugoslav conflict.

To adopt the euro, Croatia had to fulfill the criteria of price and exchange rate stability, sound public finances and moderate long-term interest rates, all measured against EU benchmarks.

Economic benefits

Adopting the euro offers economic benefits stemming from deeper financial ties with the currency bloc’s other members and from the European Central Bank’s (ECB) monetary authority.

The bank plans to raise interest rates for the first time in 11 years this month to combat record inflation of 8.6%.

More tangibly, it means that any of the current eurozone’s 340 million inhabitants who visit Croatia will no longer need to exchange their cash for Croatian kuna.

Euro entry also has political rewards because the shared currency is Europe’s most ambitious project to integrate nations, giving them a place in the EU core. That means a seat at the EU’s top decision-making tables.

The changes come as the euro’s exchange rate very briefly touched $1 for the first time in two decades Tuesday before immediately going back up. There are fears that a worsening energy crisis in Europe tied to Russia’s war in Ukraine could send the economy into a tailspin.

Created in 1999 among 11 countries, including Germany and France, the euro has gone through seven previous enlargements, starting with Greece in 2001.

The appeal of euro membership is reflected by the last three expansions, which were brought in Baltic states between 2011 and 2015. During that period, the eurozone was scrambling to contain a debt crisis that Greece had triggered and that was threatening to break apart the currency alliance.

A combination of European emergency loans to five financially vulnerable member countries and an ECB pledge to do "whatever it takes" to save the euro enabled the currency bloc to weather the turbulence and emerge stronger.

Croatia is relatively small and poor, so its euro entry will have limited international economic implications. The country has a population of around 4 million and per-capita wealth that, at 13,460 euros ($13,500) last year, was less than half of the euro-area average.