The European Union has expressed concern over a move by Kosovo to restrict all cash transactions anywhere in the country to euros and urged officials in Pristina to allow an extended implementation period to avoid “seriously complicating” the lives of ethnic Serbs in the country who are being forced to move away from the dinar and adjust to a new currency regime.
The restrictions that took effect on February 1 ban financial institutions from using any currency other than the euro for local transactions.
Even though it's not a member of the European Union or its currency zone, Kosovo unilaterally adopted the euro in 2002 to help bring monetary stability and to simplify and reduce transaction costs inside and outside the country.
Belgrade, which has never acknowledged Kosovo's 2008 declaration of independence, still pays many ethnic Serbs at institutions in Serb-dominated parts of the country – where an estimated 120,000 ethnic Serbs still live -- in dinars. Many also hold their pensions and get child allowances in dinars.
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Ethnic Serbs In Kosovo Unsettled By Looming Ban On Serbian Dinar
In 10 of Kosovo's 38 municipalities, where Serbs represent a majority, they have been able to make payments in dinars or withdraw dinars from the ATMs of Serbian-based banks.
Kosovar officials have promised an "easy transition" to ease tensions over the move, but EU spokesman Peter Stano said on February 1 that the bloc “is 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, in particular on its impact on schools and hospitals, given the apparent absence of alternatives at this moment.”
“The short transition period for the regulation’s implementation, combined with a lack of information and practical solutions for all affected communities, risk seriously complicating their lives. 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,” he added.
Serbian President Aleksandar Vucic said he held talks with the Russian ambassador in Belgrade on February 1 over the issue as he looks for a solution to what he called an “irresponsible act” by Kosovo’s government.
The dominant Serbian party in Kosovo, Serbian List, which has long-running ties to radical Serbian nationalists and Belgrade, has accused Kosovar policymakers of trying to achieve the "expulsion of Serbs without the use of weapons." It said the ban on the dinar threatened "the physical survival of the Serbian people."
The Central Bank of Kosovo has justified the move by saying it has a "legal obligation" to regulate the financial system, especially an issue like the currency, which "has remained unregulated for a very long time."
Bashkim Nurboja, the Central Bank’s chairman of the board, told RFE/RL’s Balkan Service that the change “doesn’t stop anyone from accepting money from any country,” it just means the money is converted into euros.
The new regulation also restricts foreign currencies other than the euro to safekeeping in physical form or foreign-currency bank accounts for payments abroad or foreign-exchange activities.
"Currency exchange can be performed in the Republic of Kosovo only through institutions that are licensed by the Central Bank of Kosovo and offer this service," the regulation said.
Dinars have routinely been accepted and disbursed by Bank Postanske Stedionica, NLB Komercijalna Bank, and the Post of Serbia, a Serbian public enterprise.