Phasing out dinar in Kosovo: European Commission calls for transition period

Phasing out dinar in Kosovo: European Commission calls for transition period

The European Commission has added its voice to calls for Kosovo to allow more time before phasing out the dinar, the currency used by its Serb minorities, from its monetary system.  

Political tensions are high and the Commission is the latest among Western countries to express its disapproval after Kosovo rolled out a new regulation ordering the complete removal of the dinar from its monetary system. 

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The rule, which came into force on 1 February, states: «The only currency accepted for cash payments or transactions in Kosovo is the euro,» leading to renewed political tension not just with Belgrade but with its Western allies.

«The Commission regrets that this decision was adopted without prior consultation,» a spokesperson for the European Commission in Brussels said on Friday. 

Banning transactions in dinars could effectively lock out the local minority of Serbs, who use the currency widely, from the financial system in Kosovo. That could bring about another crisis with Serbia.

The Commission’s spokesperson highlighted the difficulty locals face. For example, the salaries of those who work in healthcare or education are paid in dinar by Serbia.  

«Given the impact this decision might have on the daily lives of Kosovo Serbs and other communities throughout Kosovo, the commission is especially concerned about the impact on schools and hospitals, given the apparent absence of alternatives at this moment.»

The Commission calls on Kosovo to ensure that the transition period is sufficiently long and also urges an «EU-facilitated dialogue» between Belgrade and Pristina.

History makes dialogue hard

Following the war between the two territories that ended in 1999, Kosovo declared independence from Serbia in 2008. However, the latter has never officially acknowledged it. The two sides are regularly locked in bitter disagreements, even over minor issues such as licence plates. 

Kosovo adopted the euro in 2002, despite neither being a member of the European Union nor the eurozone, the area sharing the euro currency.

Although Kosovo has adopted the euro, it has tolerated the use of the Serbian dinar over the years because of the approximately 120,000 Serbs living there. They receive their salaries and pensions in dinar.  

Belgrade supports the Serbian community in Kosovo, with jobs and financial aid to the equivalent of €120 million each year.

The new ban leaves Kosovo Serbs with a vast amount of uncertainty. As a result of it, several banks in northern Kosovo started to close on Tuesday because they could no longer operate without a new licence or authorisation from the central bank.

One local resident made his views clear. «I have the impression that everyone is playing with us,» Zoran Ilic from Mitrovica told AFP. «No one tells us anything … I’m fed up with politics.»

Western governments call for ban to be suspended

Serbia has chosen this moment to consider reintroducing compulsory military service. However, President Aleksandar Vučić, making the announcement on Tuesday, cited tensions in the Balkans and elsewhere in Europe as a reason for considering doing so, rather than the potential currency crisis.

Meanwhile, Kosovo’s biggest political and financial allies are urging the country to suspend the ban amid fears of a rise in political and diplomatic tensions. 

«We are concerned about the impact of the regulation in particular on schools and hospitals, for which no alternative process seems viable at the moment,» Reuters reported, quoting a joint statement issued on Saturday from the ambassadors of France, Germany, Great Britain, Italy and the United States.

The ambassadors called for a longer transition period and asked that the public be given a clear direction as to what was going to happen.

Why does Kosovo want to ban the Serbian dinar?

Authorities in Kosovo said that the new regulation has been introduced to fight corruption and money laundering. 

First Deputy Prime Minister Besnik Bislimi said the new ban would put a stop to the flow of unregulated money from Serbia. AFP quoted him as saying: «Money continues to cross borders in travel bags and then be distributed by unregistered and unlicensed offices.» 

The Serbian government sees Kosovo’s move as provocative and analysts say it is almost certainly going to damage continuing efforts to calm tensions between Belgrade and Kosovo.


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