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Montenegro: People Prepare For 'E-Day'

  • Mark Baker

As with neighboring Kosovo, Montenegro will also have to abandon the German mark as its official currency once the European Union's 12-nation euro-zone switches to the euro in January. Preparations in the EU for adopting the euro have been elaborate, including public-relations campaigns and a two-year test phase during which the euro has been used in company accounts and for financial transactions -- such as buying stocks -- that do not involve cash. But the story is different in the Balkans, where populations still deeply mistrust their banks and where for many the euro is still little more than a vague concept.

Prague, 22 June 2001 (RFE/RL) -- Changing currencies is nothing new for the 600,000 people who live in the Yugoslav republic of Montenegro.

In 1999, Montenegrins switched to the German mark from the Yugoslav dinar as a way for the government to separate itself from the monetary policies of former Yugoslav President Slobodan Milosevic.

That switch worked relatively well. The mark helped to stabilize the monetary system and keep inflation in check at around 5 to 6 percent a year.

But now another currency change is in the works.

On January 1, 2002, the German mark -- along with the 11 other national currencies of the European Union's 12-nation euro-zone -- will be phased out. Within two months, the mark will no longer be recognized as legal tender in the European Union or anywhere else where it circulates -- including Montenegro.

Our correspondent spoke recently with Ljubisa Krgovic, the chairman of the council of the Montenegrin Central Bank, about the problems Montenegrins will face in adopting the European common currency.

Krgovic says that the major difficulty will simply be for citizens and companies to familiarize themselves with the euro now that they've become used to using German marks:

"We think that the [main] problem will be for the economy and for the population to get accustomed to the new currency. We see that as a problem. It will take time."

To help people adjust to the euro, the Central Bank will soon launch a public-awareness campaign. The campaign will start in July and will be aimed not only at the general public, but at private companies that must switch their accounts to euros and to employees of banks.

"The central bank has prepared the overall [educational] plan for the replacement of German marks by euros, and that plan will start -- the implementation of that plan will start -- in July this year."

Part of the campaign no doubt will be to try to convince the general public to trust the banking system following the period of intense dinar hyperinflation in the 1990s, during which many people lost their savings.

"After the period of hyperinflation of the dinar -- the currency in our country -- we are now at the start of the process of trying to regain the trust of the population in the banking system."

Krgovic says that in the past two years -- following the introduction of the German mark -- trust in the system has started to return:

"We believe, in any case, that the population will trust the banking system enough to bring their mark-denominated savings to be replaced into euros."

Krgovic admits, however, that more than half of the estimated total of 250 million German marks in circulation in the republic are still being held outside of the banking system. The lack of a firm figure for how many marks are in the country has made it difficult to plan for how many euros citizens will demand after January:

"At this moment, according to our estimates, we have about 100 to 120 million marks in official channels -- in official circulation -- in the republic. Plus [we have] 100 million to 150 million German marks in homes, which is in cash and also in circulation."

He says that Montenegrin authorities have been in touch with the German central bank, the Bundesbank, to ensure that enough euros will be on hand for the conversion. Banks will begin receiving euros before the conversion date.

"We think that we will need about 250 million marks to be converted to euros -- to be replaced by euros -- to implement the conversion successfully. We think that there will be enough from the current level of the social product [gross domestic product, or GDP] in the republic."

After the euro is introduced in January, citizens will be able to use both euros and marks in daily transactions until the end of February. After that, the mark will be officially withdrawn and the euro will be the only currency in circulation.

Citizens will have the option to physically convert their marks to euros at banks or to set up German-mark bank accounts before January. All checking and savings accounts will automatically be converted to euros on January 1, 2002.

Anyone forgetting to convert their marks to euros by the end of February will not lose money. It's not clear yet whether the Montenegrin Central Bank will continue to accept marks after the February deadline, but in any event the Bundesbank has said it will exchange marks for euros indefinitely.

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