Kosovo Bans Serbian Dinar - A Risky Gamble for Kosovo - Seeker's Thoughts

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Kosovo Bans Serbian Dinar - A Risky Gamble for Kosovo

Kosovo government officials have decided to suspend their plan of forcing residents in its Serb northern municipalities to use euros following outcries from Western governments, but the move serves as a warning of more trouble ahead for Serbs in Kosovo.

Besnik Bislimi, the deputy Prime Minister, announced on January 31 that a new rule restricting local transactions to euro transactions would take effect starting February 1. There would also be an undetermined transition period for northern towns.

Ethnic Tensions

U.S. policy has invested decades into maintaining peace in Kosovo, a young European democracy which declared independence from Serbia in 2008. Unfortunately, interethnic tensions are rising quickly - jeopardizing EU integration prospects for this Balkan nation. Eleanor Beardsley from NPR visited recently to see what was transpiring there.

Jovana Radosavljevic runs a non-profit in Leposavic, a Serb-dominated town in northern Mitrovica. She can "feel" tensions in the air.

She reports that since the currency ban, her team has received threats and some colleagues have left.

Pristina's decision to restrict cash payments in dinar will have an adverse impact on thousands of families receiving pensions, salaries and social benefits from Serbia in dinar currency. US Ambassador Jeff Hovenier criticized this as unnecessarily raising tensions while diminishing Kosovo's ability to advocate for itself - calling on both sides to resolve this through EU-brokered normalization talks as soon as possible.

Human Rights Issues

Kosovo's decision to ban use of Serbian dinar in its northern provinces alarmed Western governments, who fear further tension with Belgrade. Pristina postponed enforcement after facing opposition from EU member states and members of Kosovo Serb communities.

IDPs often face security threats and resistance from local communities when returning to their homes or visiting them. Dragica Gasic, a Kosovo Serb who returned home in Gjakove/Djakovica reported being insulted, having her home entered and items being stolen from her apartment building.

Local NGOs and international organizations continue to provide IDPs with housing, economic support, free legal aid for civil registration, resolution of property claims, work rights securing, personal documents acquisition etc. Additionally, the government offers financial social assistance but the maximum eligibility threshold remains too low to effectively protect displaced individuals against poverty - this limit will be reviewed to ensure it provides adequate protection.

Financial Implications

Currency regulation in Kosovo not only inflames tensions with Serbia, but has significant financial ramifications for Kosovo as a whole. Part of Serbia's budget annually funds services provided to Albanian contractors, construction projects, and shops across Kosovo according to Agim Shahini of the Kosovo Business Alliance.

The new rules prohibiting cash transactions in currencies other than euros would close off many avenues of commerce, particularly in northern Kosovo where many Serbs reside and tens of thousands depend on pensions and salaries distributed from Belgrade.

The US Embassy in Pristina and ambassadors from France, Germany, Italy, Britain and the US have condemned Kosovo's currency ban and called on it to reconsider; but its government insists they'll comply with law as they work toward digitizing more functions of government that were once done manually and downsizing its public-sector workforce - though these efforts may take longer to take effect than anticipated.

Legal Issues

Kosovo's Central Bank notes that this change does not impact banks such as Bank Postanske Stedionica and NLB Komercijalna Banja Luka, which have accepted dinars since long.

The US Embassy in Pristina has strongly opposed a new rule they consider offensive, with other Western governments and ambassadors from so-called Quint countries (France, Germany, Italy, Britain and the US) following suit and calling for its suspension in enforcement. Serbian President Aleksandar Vucic described it as an attack against his 100,000 strong Serb minority living in Kosovo and Metohija.

A European Commission spokesperson expressed concerns over the effect of the ban on daily life in Kosovo. They called upon the Central Bank to allow an adequate transition period before implementation begins and encouraged EU-facilitated dialogue between Belgrade and Pristina as a means to resolve this matter.

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