MONACO, Nov 22, 1999 -- (Reuters) Montenegro's introduction of the mark alongside the Yugoslav dinar was not a move to secession but a belief that economic survival depended on the West and not on Belgrade, Finance Minister Miroslav Ivanisevic said.
Montenegro made the mark legal tender earlier this month because "irresponsible" Serbian policies would otherwise drown Montenegro in hyperinflation, he told Reuters in a weekend interview.
"We had a dilemma - sink or hope to save yourself," Ivanisevic said. "If they continue with irresponsible monetary policy, and we're expecting it...hyperinflation will wipe out the dinar."
Ivanesevic was in Monaco with President Milo Djukanovic for a business conference where they appealed for help from foreign governments and investors for Montenegro, Serbia's smaller partner in the Federal Republic of Yugoslavia.
Both Djukanovic and Ivanesevic pointed out that the currency move was not a precursor to a political break with Serbia.
"This move has not been initiated to secede from Yugoslavia," said Ivanisevic.
Ivanisevic, whose pro-Western government has been at loggerheads with Belgrade and Yugoslav President Slobodan Milosevic since before the war in Kosovo, said the break on the economic front was not a matter of choice but necessity.
Montenegro was being excluded from economic and monetary policies dictated by an isolated Belgrade and had no alternative to asserting itself by setting up its own monetary council and embracing the mark in a dual currency system, he said.
Serbia has hit back
Belgrade has hit back, with the Yugoslav central bank imposing restrictions on fund transfers between firms in Montenegro and Serbia.
Inflation is unofficially estimated to be about 100 percent in Yugoslavia, where Serbia, with 10 million people, dwarfs the tiny but strategically important Montenegro, with just over 600,000 people.
They argue that their democratic and economic reforms, and stability in the Balkans, merit foreign financial aid on a scale greater than their economic weight in the Yugoslav federation.
"The international community is not encouraging secession, but on the other hand it is not compensating for our continued participation in the Federal Republic of Yugoslavia," he said.
Belgrade, isolated by what President Djukanovic described as the "disastrous policies of Milosevic", was printing money to try to spend its way out of trouble, Ivanesevic said. Money in circulation in Yugoslavia had almost tripled in the last two to three years from five to 15 billion dinars.
The decision to make the mark legal tender and the currency of payments from November 3 also sparked some protests within Montenegro as more expensive foreign goods appeared in shops.
Djukanovic described the move as a "vital component" of economic reform, although an opposition group close to Milosevic in Montenegro said it was a "classic act of secession."
Ivanisevic said price pressure since the mark was introduced were the result of an "old habit" among traders used to raising prices to insure against immediate erosion of the dinar.
"Traders are used to the old system. They add 20 percent as they used to do in anticipation of it being eaten up by inflation," he said.
The mark was already well established on the black market, so making it official was "legalizing reality", he added.
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