Will Montenegro Join the EU and Euro by 2028?

Montenegro is optimistic about joining the European Union (EU) and the euro zone by 2028, as Prime Minister Milojko Spajic announced plans to meet EU criteria and begin accession talks by 2027. This move is significant for the EU's eastward expansion, especially amid geopolitical shifts following Russia's invasion of Ukraine.

Last updated: 30 October 2023 (BST)

Key Takeaways

• Montenegro aims for EU membership and euro zone entry by 2028.
• Accession talks are expected to start in 2027, pending the fulfilment of EU criteria.
• The economy has seen substantial growth, with GDP nearly doubling since 2020.
• Inflation rates in Montenegro are above the EU average, posing challenges for euro adoption.
• Plans are underway to issue new government bonds to investors.

Montenegro's EU Aspirations: A New Chapter

The Balkan nation of Montenegro has set its sights on joining the European Union and the euro zone by 2028, a goal articulated by Prime Minister Milojko Spajic. This ambition represents a pivotal moment in the EU's efforts to expand eastward, particularly in light of increased geopolitical tensions following Russia's invasion of Ukraine in 2022. The idea of integrating more nations into the EU is gaining traction as the bloc seeks to solidify its influence and prevent the emergence of 'grey zones'—countries situated on the periphery of the EU that lack formal ties.

Economic Growth and Stability

Over the past five years, Montenegro's economy has experienced significant growth, with its GDP soaring from €4.2 billion in 2020 to approximately €7.8 billion last year. This growth is attributed to various factors, including government reforms and increased foreign investment. Prime Minister Spajic noted that net salaries have also doubled, rising from €500 in early 2022 to €1,000 this year, thanks to tax cuts aimed at stimulating economic activity.

Challenges Ahead for Euro Adoption

Despite this positive economic trajectory, Montenegro faces challenges on its path to euro adoption. Inflation has been a pressing issue, averaging 4.7% recently, which is above both the euro area and EU averages. Given that Montenegro is heavily reliant on imports for energy and food, stabilising inflation rates is crucial for meeting the criteria for joining the euro zone. Under EU regulations, Montenegro must maintain its inflation and long-term interest rates within a specified range compared to the euro area's most stable economies.

Criteria for EU Membership

To achieve its ambition of EU membership, Montenegro must fulfil certain benchmarks set by the European Commission. These criteria primarily focus on strengthening its institutional framework and ensuring effective governance. Prime Minister Spajic has committed to meeting these requirements by the end of next year, with the hope of commencing formal accession talks in 2027. The 27 current EU member states will ultimately decide on Montenegro's candidacy, making diplomatic relations and support vital for the country's aspirations.

Government Bonds: A Financial Strategy

In a bid to boost its economy further, Montenegro is considering selling fresh government bonds to both institutional and retail investors. This financial strategy aims to attract funds that could drive infrastructure development and other essential projects. By targeting investors in financial hubs such as London, Frankfurt, and Tokyo, Montenegro hopes to enhance its capital market and create a more diversified investment landscape.

Deficit and Financial Management

Despite the positive economic indicators, questions have been raised about the government's revenue and debt projections. The central bank has expressed concerns regarding fiscal sustainability, prompting the government to maintain a cautious approach to public spending. Spajic highlighted that the deficit for the first eight months of the year is around 1%, showcasing a commitment to responsible fiscal management. This figure is reassuring, especially in the context of potential bond sales.

Looking Ahead: The Path to 2028

As Montenegro navigates its way towards EU and euro zone membership, the importance of fulfilling the necessary criteria cannot be overstated. The government’s focus on institutional development and economic stability will play a crucial role in gaining support from existing EU member states. The geopolitical landscape in Europe, particularly following recent events, adds urgency to Montenegro's aspirations, making its progress a subject of keen interest not only within the region but across the continent.

Geopolitical Context: Why This Matters

The renewed interest in EU expansion stems from the shifting geopolitical dynamics in Europe. With Russia's military aggression prompting fears of instability in neighbouring countries, the EU is eager to solidify its borders and integrate more nations into its fold. For Montenegro, this means that its efforts are not just about economic growth but also about contributing to regional stability and security within Europe.

Conclusion: A Pivotal Moment for Montenegro

Montenegro stands at a crucial juncture as it seeks EU and euro zone membership by 2028. The journey ahead is fraught with challenges, particularly concerning inflation and fiscal sustainability, but the government's commitment to meeting EU standards is evident. As the country works towards these goals, its progress will be closely monitored by both domestic and international stakeholders, highlighting the intricate relationship between local aspirations and broader geopolitical realities. Will Montenegro’s journey inspire other nations in the region to pursue similar paths toward integration with Europe?

FAQs

When does Montenegro aim to join the EU?

Montenegro hopes to join the EU by 2028, with plans to start accession talks in 2027.

What are the main challenges Montenegro faces for EU membership?

Montenegro's primary challenges include meeting the EU's institutional criteria and managing inflation rates, which are currently above the EU average.

How has Montenegro's economy performed recently?

Montenegro's economy has grown significantly, with GDP almost doubling from €4.2 billion in 2020 to €7.8 billion last year, and net salaries increasing from €500 to €1,000.

What steps is Montenegro taking to issue government bonds?

The government is considering selling bonds to institutional and retail investors to strengthen its economy and finance development projects.

Why is EU expansion important for Montenegro?

EU expansion is critical for Montenegro as it seeks economic stability, security, and integration with Western Europe, especially in light of regional geopolitical tensions.