The European Commission said Wednesday that Croatia had met all the criteria to join the eurozone, paving the way for the country to become the single currency's 20th member on January 1.
Croatia's switch from the kuna to the euro will come less than a decade after the former Yugoslav republic joined the European Union, setting a new milestone in the bloc's further integration.
The EU's executive said Croatia had met the strict conditions to be part of the single currency, including keeping inflation in the same range as its EU peers, as well as embracing sound public spending.
Joining the single currency "will make Croatia's economy stronger, bringing benefits to its citizens, businesses and society at large," said European Commission President Ursula von der Leyen.
"Croatia's adoption of the euro will also make the euro stronger," she added.
The European Central Bank also gave a positive opinion in a separate report released on Wednesday.
Croatia expressed willingness to adopt the single currency upon joining the EU in 2013, and Brussels' decision comes as the euro has just celebrated its 20th anniversary.
Croatia still needs the endorsement of the EU's finance ministers, who are expected to give their full backing in July.
"The indications which we are having are positive. So normally, I would expect that the procedure goes through and Croatia will be able to join the euro area as of next year," said EU Executive Vice President Valdis Dombrovskis.
Dombrovskis, the commission's most senior economic official, will travel to Zagreb on Thursday to formally present the opinion to the Croatian government.
Croatian Prime Minister Andrej Plenkovic expressed confidence his country would join the currency club in the new year.
The country's aim was to enter the Schengen open-borders zone on the same date, Plenkovic said at a press conference in Berlin.
Price hike fears
On January 1, 2002, millions of Europeans in 12 countries gave up the lira, franc, deutsche mark and drachma for euro bills and coins.
They have since been joined by seven other countries: Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and, finally, Lithuania in 2015.
Bulgaria is the next county in line to join the euro, and it has stated its willingness to adopt it as of January 1, 2024.
However, eurozone members are worried about the long-term stability of the Bulgarian economy, and Sofia has yet to garner the same political support as Croatia.
EU governments are wary of repeating the mistakes of the euro's early days, when countries such as Greece were rushed into the single currency with shaky finances, setting the stage for the eurozone debt crisis.
Like euro-adopting citizens before them, many Croatians fear the introduction of the euro will lead to a hike in prices — in particular that businesses will round up prices when they convert from the kuna.