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Interview of Tijana Stankovic, deputy minister of Finance, for the Netherlands based Associated Press Agency

Published date: 22.12.2011 09:14 | Author: Ivona Mihajlović

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The pessimism about the euro is not shared on the edges of the European Union. The small Balkan country Montenegro uses the euro unilaterally, without even being a member of the EU. And they are happy with it too.

(From our correspondent Joost van Egmond)
PODGORICA (GPD) _ Euro Crisis? For a Montenegrin it is like the weather: you can't influence it and it will blow over. ,,it's not up too us", says Milos, passing through the main street of the capital Podgorica. ,,The EU will fix this and I trust them."
Montenegro, a small state in the Balkans, is not a member of the European Union, let alone of the eurozone. But it does use the euro as its currency. Without agreement with either Brussels or Frankfurt Montenegro adopted the European currency when it was established in 2002. They have no say in the euro policy, but also do not need to contribute to rescue funds. They take the euro as it comes.
This attitude also prevails in government buildings. ,,We are witnessing the economic turbulences in Europe," said Tijana Stankovic, deputy minister of Finance.,, We must adjust ourselves as best as we can."
Nostalgia for the old currency, the dinar, is rare in Montenegro, and with good reason. The land was part of the Yugoslavia of Slobodan Milosevic, which cost the Montenegrins their savings. The monetary policy of Yugoslavia at that time meant: spend what you want and print the difference in banknotes. It led to unprecedented hyperinflation. Yugoslav dinars evaporated in your hands, while desperate people tried to change them into real money, preferably German marks. No one accepted dinars anymore.
The response of Montenegro was to legalize what people were already doing: the mark became, the lawful currency of Montenegro in 1999, even before the country broke away from Serbia in 2006. The Montenegrin central bank opened an account in Germany, took out marks and flew them to Montenegro. In 2002, when the mark ceased to exist, this automatically meant a transition to the euro.
'The euro is widely appreciated, "said Milenko Popovic, an economist at the Montenegro Business School.,, After these bad experiences people are strongly inclined to a hard currency. That will not change soon."
While the euro brought Montenegro the blessing of price stability, it's use is not without problems. First, it is against the wishes of the EU. Countries that adopt the euro on their own initiative, bypass the criteria of the Maastricht Treaty. It leads to the bizarre situation that the country should start EU accession negotiations next year, but through the back door has already obtained one of the prizes of membership.
Yet the EU in practice does not pressure the country too hard. Montenegro, with 650,000 residents, is too small to really impact on the fortunes of the euro area. Moreover, the history makes the country a special case. ,,They didn't act as pirates", the EU ambassador in Podgorica, Leopold Maurer, says. ,,They tried to stabilize their country."
Moreover, the irony is that Montenegro, at least officially, meets almost all requirements of 'Maastricht'. The national debt is just below 50 percent of the gross national product, and the budget deficit should be eliminated in two years. That's better than many euro countries. Secretly Montenegro hopes even to become the first country that simultaneously joins both the EU and the eurozone.
A bigger problem is the straitjacket which Montenegro is in. The country loses competitivity by the strong currency and the euro makes devaluation impossible. At the same time interest rates are high, despite the hard currency. The Montenegro government pays more than 7 percent interest for its bonds, a sign that the market is suspicious. Furthermore, the removal of currency barriers attracted much foreign investment, but that money can just as easily go the other way.
According to economist Popovic the uncertain liquidity is a major problem. He expects a wave of bankruptcies in the coming months, many companies are already having their bank accounts blocked. ,, We have become completely dependent on the whims of foreign investment. We have solved one problem by creating another."
Yet no one believes that Montenegro would be better off with its own currency, not even Popovic. ,,We do not have the capacity nor the discipline. If it were possible the government would now just be printing money. I see no alternative to the euro."
And what if the euro itself disappears? ,, We strongly believe in the future and stability of the euro, "says Stankovic. ,,If the currency would collapse, we would have the same arrangement as more than a decade ago." In short, the country would follow Germany. ,,We have not made that choice", she says almost apologetically. ,,The citizens did. The market always finds the best solution."