He said that the introduction of the euro laid the foundation for the crisis in Europe, but that going back now would be even a greater catastrophe. He said that Croatia should be in no hurry to join the eurozone.

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He compared Croatia to Spain in terms of the poor flexibility of foreign exchange rates and the balance of payments deficit.

The governments of small countries, such as Croatia, do not have much room for manoeuvre. The government should accept demands of outside players, but need not do more than necessary. The Croatian government cannot say no to demands from the European Union, but should adapt, Krugman concluded.