Kosovo has opted to exclusively use the euro within its territory, a move that has raised concerns about potential conflicts with Serbia, particularly among Serbs residing in the northern part of the country who prefer Serbian dinars. In response, the EU has urged both parties to refrain from any actions that could escalate tensions further.
Last week, the Kosovo Central Bank revealed that effective from February 1, a Regulation of Cash Operations would come into effect. The aim of this regulation is to combat counterfeit currency and other forms of financial crimes, specifying that the euro is the sole currency permitted for cash and digital transactions within the country.
The regulation further outlines that non-euro currencies can only be used as assets for safekeeping in physical form, in non-euro bank accounts, or for foreign exchange purposes.
Kosovo adopted the euro in 2002, shortly after the Kosovo War of 1998-1999 and six years before declaring unilateral and formal independence from Serbia. The country’s constitution emphasizes the use of “one single currency,” but some Serb-majority municipalities still use dinars.
Additionally, Serbian banks operating in Kosovo, Kosovo Serbs receiving pensions from Serbia, and employees of institutions that are still part of the Serbian system, such as schools and hospitals, exclusively use dinars. In Serb-majority areas, payments in shops and cafes are also made in dinars.
The Serb List, the primary Serb political party in the country, which saw its former deputy leader Milan Radojicic resign after admitting to leading the September 24 “terrorist attack” dubbed by the EU in Banjska, opposes this decision. They argue that it could be tantamount to the “expulsion of Serbs without the use of weapons” and poses a direct threat to the survival of the Serbian population.
EU spokesperson Peter Stano stated that the EU Commission is currently evaluating Kosovo’s decision and seeking clarification. He emphasized the need for Kosovo and Serbia to avoid unilateral actions that could disrupt the normalization of relations and stability in the region.
The exclusive use of the euro is enshrined in the Kosovo constitution, and the regulation simply reinforces its enforcement. Furthermore, the central bank clarified that voluntary transactions between parties using non-euro currencies do not fall under the regulation’s scope.
Stano called on both sides to address the issue within the framework of the EU-facilitated dialogue. However, it’s important to note that the matter of Kosovo’s official currency, established more than two decades ago, is not included in these talks.
Serbian President Aleksander Vucic has condemned the decision, pledging to use all available means against the perceived banning of the dinar in Kosovo, despite the fact that the dinar has not been banned and can still be exchanged and held in non-euro bank accounts alongside other currencies such as the Albanian lek and US dollar. Those using the dinar can simply exchange it for the euro, as the dinar is pegged to the euro, ensuring no monetary loss.
Vucic has also called on EU Commission President Ursula von der Leyen to intervene and prevent the implementation of the new rule, according to a statement he provided to state-run broadcaster RTS.
It’s important to note that in Europe and around the world, the state typically determines which currencies can be used within a country and which currencies hold official or de facto status. Currently, 20 European countries utilize the euro, along with Andorra, San Marino, Monaco, and Vatican City. Additionally, several candidate countries, such as Albania and North Macedonia, widely accept the euro.
Tensions between Kosovo and Serbia have simmered over the past year, marked by incidents like the injury of 30 NATO soldiers in May 2023 during Serb protests against ethnic-Albanian mayors attempting to enter municipal facilities following local elections that Serbs had boycotted. In September, Serb militia killed a Kosovar police officer and took refuge in a monastery, leading to a shootout with authorities. Following the attack, Kosovo police discovered a significant cache of weapons and ammunition.
Over the weekend, Germany announced plans to increase its military presence under KFOR in northern Kosovo due to the deteriorating security situation. The number of German soldiers stationed in Kosovo is set to increase from 80 to 300, including support staff, with their arrival expected in the spring.
