STRATEO, Belgrade, February 2 – The European Union, along with four European countries and the United States, has pressured Kosovo this week and last into suspending its decision to ban the usage of the Serbian dinar in areas where Kosovo Serbs constitute a majority.
Kosovo’s Central Bank announced earlier this month that all payments should be made in euros, and as of Feb. 1, the Serbian dinar will not be allowed into circulation. Belgrade criticized Kurti’s move, claiming it was aimed at depriving Serbs, mainly in the north of Kosovo, of their payments and that the suspension of the dinar would lead to an exodus.
Most Kosovo Serbs are on Belgrade’s payroll, and the dinar is also used for the payment of pensions, health, and social benefits. Fearing tensions, the Quint, a group of countries comprising the United States, Italy, France, Germany, and Britain, which are also Kosovo’s biggest allies both politically and financially, have asked Kurti to delay the implementation of the decision.
The European Union also expressed concern, stating that the decision of Kosovo’s central bank is a cause for worry. In a statement, the office of EU spokesperson said that although Kosovo’s regulation aims to enhance the transparency of financial flows, ensure financial stability and combat money laundering and counterfeiting it will also affect the financial support that Kosovo Serbs receive from Serbia.
The EU said it was concerned about the consequences that this decision might have on the daily lives of Kosovo Serbs and other communities throughout Kosovo due to absence of prior consultation, on its impact on schools and hospitals, given the apparent absence of alternatives at this moment.
The EU urges Kosovo to ensure a sufficiently long transition period and to find a negotiated solution to this issue in the framework of the EU-facilitated Dialogue.
It urged both Belgrade and Pristina to address it within the framework of the ongoing dialogue.
The ball was in Kosovo’s yard at the time this analysis was written, and Kurti decided to postpone the decision. Henceforth, the dinar would be banned, but not quite yet.
In economic terms, the ban on the circulation of dinars in Kosovo would not significantly harm citizens who typically receive their income and benefits in dinars. The value could be converted to euros, which is unilaterally adopted as currency in Kosovo, like Montenegro’s adoption of the German mark and later the euro.
Technically, the procedure would be the same as in the case of Bosnian pensions, which are not paid in Bosnia’s convertible mark but in euros. Serbia should seek a bank in Kosovo licensed by its Central Bank through which payments would be made under a contractual relationship.
Another possible solution could be the transfer of dinars to the NLB Komercijalna Banka’s branch in the town of Raska, just inside Serbia proper. This bank would take over accounts of its clients from Kosovo starting February 1. However, this would increase costs for Kosovo clients due to travel expenses and the conversion of dinars to euros.
Serbia allocates around 120 million euros annually for spending on Kosovo, but analysts suggest the real value may be at least double that due to informal transactions.
The real currency issue is not as significant from a financial standpoint; it is more about the political component of the dispute, representing a new step in the withdrawal of the Serbian institutions from Kosovo. Therefore, in this new tug-of-war between Belgrade and Pristina, the biggest victims can only be Kosovo Serbs if the Serbian government remains defiant in insisting on using dinars.
But it seems that Belgrade may be inclined to adopt the other solution and score a point. If it switches payments to euros, it will show cooperativeness and seize back some initiative it lost after the Banjska incident.
(By Sasa Djogovic and STRATEO staff)
