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A small miracle in the Balkans: Ljubisa Krgovic of Montenegro''s central bank tells The Banker how his country made it into the euro-zone. (Central & Eastern Europe: Montenegro).

Article Excerpt
Asked to name a Balkan country within the euro-zone, few financially literate people would probably mention Montenegro. This tiny former kingdom, which is closely linked to Serbia, is not even a member of the European Union, and is unlikely to become one for the next couple of decades. It has a population of only 660,000 and a tiny economy that survives mainly on tourism, the export of aluminium and a little farming, fishing and ship repairing.

France and Germany, the main forces behind the creation of the euro, intended it to be limited to the Franco-German-Benelux core and the UK if it could be persuaded. So their governments were aghast when first Italy, then Spain and Greece, became founder members -- and the inclusion of Montenegro is little short of miraculous.

The reason is political. As Yugoslavia violently disintegrated in the 1990s, the Yugoslav dinar disintegrated with it. Slovenia and Croatia introduced their own national currencies. The dinar was left to circulate only in rump Yugoslavia -- essentially Serbia and Montenegro. But hyper-inflation and distrust of former Serbian dictator Slobodan Milosevic's economic probity meant the real currency in rump Yugoslavia was the Deutschmark.

In November 1999, the increasingly independence-minded Montenegrin regime, led by president Milo Djukanovic, decided to formalise this situation and adopt the Deutschmark as an official parallel...

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