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AP: Montenegrin PM: We won't abandon euro

Published date: 29.11.2011 15:09 | Author: PR Bureau

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(AP) PODGORICA, Montenegro — Montenegro Prime Minister Igor Luksic said Monday his government won't abandon the euro as its currency, despite concerns that the eurozone crisis could damage the small Balkan economy.

Luksic said in an interview that he does not believe the euro will collapse or that his country of some 650,000 people will suffer an economic crisis like Greece's, even though both nations rely heavily on tourism and foreign investment.

"I think that the tying of the Montenegrin economy with the euro is a much better option than the adventure of printing our own currency," Luksic told The Associated Press.

Montenegro adopted the euro when it was launched in 2002, circumventing the rigorous economic criteria imposed on nations already in the bloc but not yet ready to adopt its common currency.

Back then, Montenegro was still part of Serb-led Yugoslavia but was looking for ways to separate its economy from the dominant republic, which had become an economic basket case during the Balkan wars backed by Serb strongman Slobodan Milosevic.

Luksic said the key reason for Montenegro's insisting on the euro is because the introduction of its own currency would require "tremendous costs."

Luksic projected a 2.5-percent GDP growth for the next year, but he left open the possibility that the eurozone turbulence could cause lower growth or even a recession in his country, which became independent in 2006.

"We are far from being complacent and we cannot say that the crisis is behind us," Luksic said, adding that the country's current foreign debt is about 44 percent of GDP.

"The main reason for concern is the fact that branches of foreign banks in Montenegro could stop providing loans," he said. "Our banking sector relies on banks that are dominantly from the EU."

However some economic experts in Montenegro are pessimistic about euro's survival and warn that its collapse in eurozone could backfire on Montenegro.

"The worst scenario is in the case of a chaotic abandonment of the euro, after which Montenegro could find itself in an almost hopeless situation," said Milenko Popovic, a professor at the private Mediteran University in Podgorica.

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Associated Press writer Dusan Stojanovic contributed from Belgrade, Serbia.