Montenegro's biggest challenge in Chapter 17 will be how to protect the financial system, and the biggest fear is whether domestic institutions will be able to respond to that challenge, said economic analyst Ana Nives Radović.
Radović told the Mina-business agency that the Montenegrin and European public have not yet had the opportunity to find out the clear, final position of the European Commission (EC) and the European Central Bank (ECB) regarding the conditions for closing Chapter 17, which refers to the economic and monetary union, even though the issue has been raised several times.
"This is because so far no candidate country has entered the membership process from the position of a user of the euro," said Radović.
She stated that she has been following this process for more than a decade and that when communicating with her European colleagues, she often came across a number of different answers, which were often conditioned by the current crises at the time.
"Those answers varied from the most explicit claims that monetary integration is not possible without adjusting the exchange rate of the national currency to the fact that a different approach could be used in this case," added Radović.
According to her, the only thing common to all those views is that the epilogue of any accession to the formal monetary integration of Montenegro would not threaten any segment of EU public finances solely due to the fact that Montenegrin gross domestic product (GDP) is even several hundred times smaller than the GDP of most current members.
"This means that, in order to protect the single monetary system, the European institutions will not introduce additional protection mechanisms, but that the zone of potential risk is in the public finances of Montenegro, that is, it is up to the domestic institutions to create all the preconditions for the unhindered acceptance of what is insisted on," explained Radović.
When asked what are the benefits that Montenegrin citizens will have after adapting to European economic policy, Radović answered that the advantages that Montenegro will have when it adapts to European economic policy can follow if all the conditions that the EU justifiably insists on are met.
"In those circumstances, the state would have cover for the use of the common currency that we now have with the tacit approval of European institutions, without any act defining the conditions of use," added Radović.
According to her, adaptation to European economic policy is what preceded the processes of European and monetary integration in other countries, and includes the size of the budget deficit, long-term interest rates, the share of public debt in GDP, price stability, as well as the stability of the exchange rate, which, from the Montenegrin negotiating position, insists on being replaced by someone else.
"From this angle, you can best see how big the problem of Montenegrin public finances actually is." One of the Maastricht criteria stipulates that the share of public debt in GDP does not exceed 60 percent. "Even before this percentage was exceeded, Montenegro had a serious problem on this front, which means that Montenegrin institutions took the Maastricht criteria too lightly when it comes to the desired debt threshold," added Radović.
When it comes to the criterion related to the share of public debt in GDP, Radović believes that there are only two ways to reduce it.
"The first is a drastic suppression of the debt, for which there are unfortunately no prospects in these circumstances, and the second is an increase in the GDP in which the existing debt, provided it does not increase, would occupy a smaller share, for which there are only partial prospects," claims Radović.
If we add to that, as she stated, the level of the budget deficit and the interweaving of measures necessary to achieve both of the mentioned criteria, it is possible to understand why domestic officials have repeatedly heard expressions of hope "that the EU will see through our fingers".
"Unfortunately, even at this stage of the integration process, except through several documents related to the procedure, this area was not approached strategically, nor was there even a semblance of a possible solution proposed by any political entity, and I'm afraid that the criteria alone will not force us to do so," announced Radović.
The specificity of Montenegro in the negotiations with the EU on Chapter 17 is the fact that Montenegro has been using the euro as an official means of payment since 2002.
Radović said that what can be seen now is that the participants in the negotiation process are asking to enter the closure of Chapter 17, insisting that Montenegro keep the euro.
"This clearly speaks of the lack of institutional capacity to manage one's own currency, which is where most of the concerns come from," said Radović.
According to her, this is nothing but an indirect recognition that the Montenegrin financial system is not able to deal with monetary sovereignty.
"For the EU, this is a clear signal of the absence of a strategic approach, poor planning policy and a high level of economic instability," added Radović.
When asked when we can expect the closure of Chapter 17, which was opened on June 25 last year, Radović replied that the process, depending on the approach that is determined in the EU, could either last several years or go on indefinitely.
"The shortest way is to, due to the situation that we already use the euro, insist on only part of the criteria and give deadlines for their implementation." This path is also the most dangerous because it does not change much in the Montenegrin financial system for the better, but only satisfies the form," said Radović.
This means that Montenegro would enter the EU, as well as formally the Eurozone, with a large part of the existing problems.
"The longest road is strict and detailed insistence on the creation of all valid preconditions for the fulfillment of each individual criterion, and there is no guarantee that this process will be completed in due time if we continue to insist that the EU close its eyes to major problems," concluded Radović.
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