WRITTEN QUESTION P-3931/00

by Sylvia-Yvonne Kaufmann (GUE/NGL) to the Commission

(6 December 2000)

Subject: Introduction of the Euro in the Yugoslav Republic of Montenegro

1. Is the Commission aware whether and, if so, how and by what concrete means and to what extent the Government of the Federal Republic of Germany and the German Bundesbank have supported and promoted the introduction of the Deutschmark in the Yugoslav Republic of Montenegro?

2. What is the Commission's view of the declared intention of the Government of the Yugoslav Republic of Montenegro of introducing the Euro as its sole currency as of 1 January 2002?

3. Does the Commission take the view that the Yugoslav Republic of Montenegro is currently fulfilling, or can fulfil by 1 January 2002, the stability criteria for membership of the single currency set out in the Treaties (in particular, in Article 121 of the EU Treaty and Protocols 11 and 12 to the Amsterdam Treaty)?

4. What concrete measures to prevent the introduction of the Euro in Montenegro will be taken by the Commission, which states in section III.3 of its most recent strategy paper on enlargement that the introduction of the Euro in new Member States (as in the case of the original Euro-zone participants) will only be decided when it has been ascertained, in accordance with Article 121 of the EU Treaty, whether a high degree of sustainable convergence has been achieved?

5. Does the Commission know whether the Euro is also to be introduced in the Yugoslav region of Kosovo from 2002 and, if so, does Kosovo, in the opinion of the Commission, fulfil the stability criteria enshrined in the EU Treaty and applying to all States participating, or wishing to participate, in the single currency?

6. What concrete measures does the Commission propose to take in order to prevent the introduction of the Euro in Kosovo if the latter does not achieve the stability criteria for membership of the Euro by 2002?

7. How does the Commission view the introduction of the Deutschmark in Montenegro and Kosovo against the background of UN Resolution 1244, which establishes the territorial integrity of the Federal Republic of Yugoslavia?

8. What are the consequences, in the view of the Commission, of the fact that 33 % of all Deutschmark notes and coins are in circulation abroad, and what are the consequences as regards the proof of the Euro against forgery?

Answer given by Mr Solbes Mira on behalf of the Commission

(5 January 2001)

1. The Commission was informed by the German Bundesbank that it has neither supported nor promoted the introduction of the Deutsch Mark (DM) in the Republic of Montenegro. The Deutsche Bundesbank stressed, that there are no legal restrictions as to the use of DM in foreign countries and territories. However, at the same time, the Deutsche Bundesbank has no legal obligations to support countries or territories that decide to use the DM as a legal tender.

2. In November 1999, the Republic of Montenegro decided unilaterally to establish a dual currency system and adopted the DM as a parallel currency. According to the authorities, the decision was mainly driven by an unstable, expansionary monetary policy stance of the National Bank of Yugoslavia, which resulted in significant inflationary pressures throughout the Federal Republic of Yugoslavia (FRY). The establishment of an independent monetary regime from the FRY central bank was an attempt to isolate the Montenegrin economy from the negative consequences of monetary expansion. The change-over was facilitated by the fact that the DM was already circulating in Montenegro, mainly for savings purposes and large ticket transactions such as real estate transactions.

In 2000, the economic objectives stressed by the authorities when the parallel circulation was allowed, have been largely achieved. After a few months, the DM accounted for the vast majority of transactions, and over 90 % of deposits at the central payments bureau were denominated in DM. Moreover, inflation has been decelerating steadily; monthly inflation has been reduced from 5 % in January to 1 % in October 2000. As of 1 December 2000, the Government of Montenegro declared the DM the sole legal tender in the territory of the Republic and abolished the use of the Yugoslav Dinar. As the exchange rate between DM (as well as the other former currencies of the Euro-zone) was irrevocably fixed at the end of 1998, there is no difference between the introduction of DM and the introduction of Euro; therefore the Euro is de facto already introduced in Montenegro.

A different question concerns the procedures of the introduction of Euro notes and coins. It is the Commission's view that the Montenegrin authorities, provided they are aiming at introducing Euro coins and notes, shall contact the Deutsche Bundesbank and the European Central Bank (ECB) with respect to the technical modalities of cash exchanges in countries that do not belong to the Euro area. The European Central Bank recently published modalities for the distribution of front-loaded Euro banknotes outside the Euro area (the Honourable Member is referred to the ECB press release of 14 December 2000).

3. to 6. Montenegro is currently not a member of the European Monetary Union (EMU) and is not seeking membership. Therefore, the stability criteria for membership of the single currency set out in the Treaties do not apply. In addition, Montenegro is not an accession candidate. In this respect, the Copenhagen criteria for assuming membership of the Union as well as the procedures recalled in Question 4, are not relevant. Montenegro has unilaterally introduced the DM/Euro as its sole legal tender, and there are no legal restrictions to do so. Such a unilateral commitment does not impose any obligations on the ECB to supervise monetary policy in Montenegro or to provide liquidity support, and there is no formal co-operation between the ECB and Montenegro.

Under the authority of United Nations (UN) Resolution 1244, the United Nations Interim Mission in Kosovo (UNMIK) has legalised the utilisation of any currency widely accepted in the territory of Kosovo. Under this resolution, the Yugoslav Dinar retains its legal status and can be used to the extent that businesses and people so desire. Thus, albeit recognising that the DM has been the preferred currency in Kosovo for some time, the resolution does not introduce the DM as the sole legal tender.

7. UN Resolution 1244 does not apply for Montenegro. The question of the creation of sustainable monetary and exchange rate arrangements in the FRY should be addressed in the framework of negotiations on the future constitutional relations between Serbia and Montenegro.

Similarly as in the case of Montenegro, the legal utilisation of the DM in Kosovo provides for a stable framework to support economic development. From an economic and social point of view, it would have been impossible for UNMIK to stabilise the Kosovo economy after the conflict, while using the Yugoslav Dinar, a high inflation currency, and having no control on the money supply. As said above, the resolution does not prohibit the utilisation of the Yugoslav Dinar.

8. According to information that the Commission received from the Deutsche Bundesbank, the circulation of DM notes and coins in countries outside Germany does not represent a problem with respect to the conduct of monetary policy, neither to the Deutsche Bundesbank nor to the European Central Bank. No correlation is seen between the circulation of DM notes and coins outside Germany and forgery of Euro notes. The Commission has no reason to disagree with this position.