Bulgaria and Croatia have been accepted into the eurozone's obligatory two-year 'waiting room," the European Exchange Rate Mechanism 2 (ERM-2).
The European Central Bank (ECB) said July 10 that the two countries will also join the EU's banking union, with the ECB directly supervising their largest banks from October 1.
The green light from eurozone finance ministers and ECB paves the way for the first enlargement of the eurozone since Lithuania joined the 19-member common currency zone in 2015.
Countries typically remain in the ERM-2 mechanism for about two years before starting the practical procedures to join the eurozone, a process that takes roughly another year.
To join the eurozone, Croatia and Bulgaria will need to fulfil their commitments to pursue "sound economic policies" aimed at economic and financial stability, the ECB said.
As part of the ERM-2, the ECB set the base rate for the conversion of the Bulgarian lev at 1.956 against the euro while the Croatian kuna's rate was set at 7.535.
If the two currencies hold within a band of plus or minus the set rate then they are allowed to formally join the euro.
With reporting by Reuters and Bloomberg
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