Wednesday

27th Jul 2016

EU to question Montenegro's use of euro

As Montenegro prepares to sign a pact on closer links with the EU, the bloc's finance ministers meeting today (8 October) are set to warn that the country's use of the euro as its national currency is not in line with EU rules.

"Unilateral 'euroisation' is not compatible with the treaty, which foresees the eventual adoption of the euro as the endpoint of a structured convergence process within a multilateral framework," says a draft statement to be adopted on Tuesday (9 October), according to the Financial Times.

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  • Podgorica is due to sign a key EU agreement on 15 October (Photo: European Commission)

Montenegro, the ex-Yugoslav country of over 620,000 inhabitants adopted the euro in 2002, switching from the German mark that it had been using since 2000.

By contrast, Serbia uses the Dinar. The two states were part of a federation until June 2006 when Montenegro declared independence and set off on a separate path to EU membership.

Podgorica is set to move a big step further on 15 October when it signs a stabilisation and association agreement with the EU, considered the waiting room for membership of the 27-strong union.

But it is precisely as a result of this move that the issue of the euro is coming under the spotlight as the adoption of the single currency is part of a complex process with specific procedures.

It has to be approved by political leaders as well as key EU institutions, such as the European Central Bank. Formal approval can only be granted once the country meets a set of economic and institutional criteria.

But the Frankfurt-based bank did not previously object to the use of the euro in Montenegro and diplomats suggest the EU would hardly take the bizarre step of asking Podgorica to drop the currency first and re-join it later, the Financial Times reports.

Instead, the statement is considered as a way to stress the formal legal and economic preconditions of eurozone membership, according to the UK paper.

Apart from Montenegro, the euro is also used in the south-Serbian province of Kosovo which is trying to become independent.

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