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Montenegrin Bankruptcies Double In 2010

PODGORICA -- The number of bankruptcies in Montenegro has risen by half in 2010 compared to the year before, court records show, suggesting that the European Union hopeful's economy may be in worse shape than was previously thought, RFE/RL's Balkan Service reports.

In the first nine months of this year, 244 companies filed for bankruptcy, up from 166 in the same period last year, records from the Podgorica Commercial Court showed.

Analysts said some bigger companies are also among those which are having difficulties repaying loans, which could trigger a domino effect and undermine the economy.

"This is the result of the very easy conditions under which the loans were approved for businesses," said Bozo Mihailovic, an economics professor at Podgorica University.

Mihailovic said the state needed to amend the legislation regulating bankruptcy, which sometimes take years to complete.

"We've had a very complicated law on bankruptcies and no company finished the process within an acceptable timeframe. For some, it took five years," Mihailovic said.

Analysts and the government have forecast a slight increase in the country's gross domestic product (GDP) in 2010.

Montenegro successfully issued its first international bond last week, raising 200 million euros ($261 million), which analysts saw as a sign of confidence in the country's macroeconomic stability.

But in addition to a rising number of bankruptcies, the government is also concerned about a public deficit of 4.2 percent of GDP and a foreign debt that is about one-quarter of the country's GDP.