Croats Told to Move Cash From Beds to Banks as Euro Nears

(Bloomberg) -- Croatia's central bank urged people to start shifting their stashed-away kuna banknotes from mattresses or sock drawers to banks to ease the country's adoption of the euro, expected next January. 

The European Union nation of 4 million expects to get a final decision by euro-area member states on the date it can join the single currency in July. Bulgaria also plans to switch to the euro in 2024.

“Citizens who keep large amounts of kuna at home, whether these are savings ‘in socks' or cash for transactional needs, may prepare for the euro switch by reducing the amounts of cash they hold, either by depositing them in banks or gradually spending them,” the central bank said in an emailed response to questions. “That way they would simplify the process of conversion for themselves.”

Similar to other former communist countries, Croats often keep cash at home out of distrust in the state and banks. Popularly known as “sock savings,” cash kitties were popular during the high inflation and political turmoil that the nation experienced as recently as the 1990s. 

The central bank has no estimates on how much of the 36 billion kuna ($5.4 billion) currently in circulation is being held by citizens.

While both currencies will be accepted as legal tender the two weeks after the formal switch, people will be able to exchange kuna in banks through 2023 and even later at the central bank.

The central bank's total cost related to the currency switch in the three years ending in 2024 is estimated at 916 million kuna ($138 million). 

Commercial banks have said that while conversion may cost them 1 billion kuna annually in lost exchange fees, it will reduce currency risks and improve stability. 

©2022 Bloomberg L.P.