Serbia and Montenegro go separate ways

Six weeks after winning independence, Montenegro's prime minister claims to have further strengthened his grip on power by concluding a financial divorce with Serbia.

This week, the two ex-Yugoslav republics signed a disassociation agreement to forge ahead as separate members of international finance institutions.

Milo Djukanovic, the prime minister, said in an interview with the FT that the deal would allow each state to work out its own economic development strategy with the World Bank, International Monetary Fund and European Bank for Reconstruction and Development, as well as sort out remaining questions relating to shared Serbian-Montenegrin assets and debts. "After this agreement, there should be no outstanding issues," Mr Djukanovic said.

The financial agreement follows Montenegro's May 21 referendum on independence, which was approved narrowly by voters under heavy European Union supervision.

Since then, the new state's relations with Serbia, its politically-troubled larger neighbour, have shaped up "very positively and more dynamically than we expected," he said. The 45-year-old prime minister, who steered the small republic through communism's collapse, now hopes to steer the ruling coalition through parliamentary elections, called for September 10, "to consolidate Montenegrin independence".

Parliament will draft a new constitution by the end of the year, he said. Independence has helped boost Podgorica's stock market, which has gained 50 per cent since the referendum. Tourism is stronger this summer, local officials say, in spite of a mild slump among lower-spending Serbian visitors. Regardless of Belgrade's threats during the referendum campaign, cross-border traffic still flows smoothly, and Montenegrin citizens continue to enjoy affordable domestic rates for Serbian healthcare and education.

Mr Djukanovic's party has likewise climbed in polls, whereas the pro-union opposition has collapsed. Yet the government is preparing for a fresh challenge from the anti-corruption Movement for Changes, which will launch itself formally as a political party on Saturday. Nebojsa Medojevic, leader of the four-year-old group of free-market technocrats, describes a "political-financial criminal elite" around the prime minister allegedly selling off the country to "global speculators," including Russian businessmen, in shady privatisation deals.

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