Montenegro, which is the smaller of the two Republics which make up the Federal Republic of Yugoslavia (FRY), has become the target of destabilising activities orchestrated from Belgrade, of which the latest has been described as economic terrorism. Since the elections of 1998, when Milo Djukanovic was elected President in the face of opposition from Belgrade, the Government in Podgorica has been pursuing a radically different policy from that pursued by the Milosevic regime. While Milosevic has defied the international community firstly over Kosovo and latterly over democratic reform in Serbia, Dju kanovic has sought to broaden his contacts with the international community and pursued a policy of reform at home.
Following the Kosovo crisis and the NATO air strikes against FRY the crisis in the FRY economy, which was already severe due to the effect of international sanctions, has taken a marked turn for the worse, with an accompanying plunge in the value of the Yugoslav dinar. As it is part of FRY, Montenegro's currency is the Yugoslav dinar, and monetary policy in FRY is a matter for the Federal Government in Belgrade. The loss in value of the dinar, caused mainly by Belgrade's policy of printing money, has caused hyperinflation in FRY. This hyperinflation threatens the political and economic stability of Montenegro, and is being used to bring pressure to bear on the Government of President Djukanovic. It is possible that Belgrade's ultimate objective is to bring about a situation in Montenegro which will provide a pretext for military action by the Federal Government in Belgrade against the Montenegrin Government.
The Montenegro authorities are planning to move away from reliance on the Yugoslav dinar. They plan to introduce the deutschmark as a parallel currency from early November. Establishing a parallel currency, however, raises many important and complex issues. It is evident that in order to do this they will need external support.
Ireland and its EU partners have been supportive of the Montenegrin Government since the election of President Djukanovic. Sanctions which apply to the rest of the FRY are being lifted in the case of Montenegro and the Republic is invited to participate in the stability pact for south-east Europe. It is clear, however, that the Government of President Djukanovic will require practical as well as political support.