FEATURE-Montenegro's first EU step is afterthought to euro
PODGORICA, Oct 15 (Reuters) - For most European Union states, adopting the euro currency is the final step in a long and difficult journey through rigid membership rules and regulations.
For Montenegro, which signed its first accord with the EU on Monday and will need years to become a member, the euro has been a reality since 2002, when it adopted the currency unilaterally.
The euro sign is everywhere in the small Adriatic republic, from billboards advertising loans to cardboard price displays in vegetable markets, making it feel like any formal euro zone state.
Economists say that after teething problems in the first two years, its use motivated the government to apply sound fiscal policies and improved Montenegro's image, directly contributing to a boom in tourism and real estate.
"It's great they have the euro, it makes everything so easy, and it's stable," said Briton Marie-Louise Morrison, leafing through property catalogues in the medieval town of Kotor.
The picture was very different seven years ago. In late 1999, the rump Yugoslav federation of Serbia and Montenegro faced ruin after a decade of war and 78 days of NATO bombing to force Serb forces out of the breakaway province of Kosovo.
Montenegro's government -- not in any case in control of monetary policy, which was decided by Serbia -- weighed its options and decided to adopt the German mark, the currency of choice in a region ravaged by hyperinflation.
AIRLIFT OF HARD CURRENCY
It was a far cry from the process other countries have to follow in qualifying for euro adoption -- first winning acceptance into the EU trading bloc, and then keeping the national currency stable for at least two years while bringing inflation, budget deficits and overall debt within the EU's target ceilings for joining its monetary union.
Independent economist Mila Kasalica said the country went into the experiment of adopting a foreign currency almost blind.
"There were only three, four professional papers on dollarisation published by the IMF, and they were not conclusive as to the long-term development effects," Kasalica said.
"In the end, it was a political decision realised through diplomatic channels." The process was novel, but simple.
"The government approached Commerzbank in Frankfurt with part of our hard currency deposits, our reserves, our gold, as guarantees, and asked for a loan, larger than the original collateral amount, as grounds for a currency delivery contract," Kasalica said.
"Commerzbank had to get approval from the Bundesbank to take the cash out of Germany," Kasalica said. "And then the government brought it into the country, on the plane." Continued...
