Montenegro is a Southeastern European country bordering Croatia, Bosnia and Herzegovina, Serbia, Kosovo, and Albania. The nation established a joint republic with Serbia following the breakup of Yugoslavia in 1992. An independence referendum held in May 2006 led to Montenegro’s declaration of independence on June 3, 2006. According to the World Bank, Montenegro is a middle-income country. The economy is mostly service-based, which accounts for up to 73% of the GDP, and is transitioning to a market economy. Montenegro has used three currencies between 1918 and present. Although Montenegro's Central Bank of Montenegro does not issue currency, the country is “euroised,” and uses the euro as official currency.
Yugoslav dinar was the currency used by the Yugoslav states, including the Kingdom of Yugoslavia (including Montenegro), Socialist Federal Republic of Yugoslavia, and the Federal Republic of Yugoslavia. The dinar was in use from 1918 to 2003 and was subdivided into 100 paras. In 1941, Yugoslavia was invaded and split up and the Croatian kuna was introduced in the Independent State of Croatia, while the Serbian dinar was used in Nedic’s Serbia. When Yugoslavia reconstituted in 1944, the Yugoslav dinar was reintroduced as the common currency. Between 1990 and 1992, the constituent countries began to break away from the Socialist Federal Republic of Yugoslavia, with four countries declaring independence and issuing their own currency. In 1999, Montenegro decided to adopt Deutsche mark as its official currency, alongside the dinar. In November 2000, the dinar was dropped, and the Deutsch mark became the sole currency.
Deutsch mark was the currency used in West Germany, and later unified Germany, between 1948 and 2002. It was also the official currency of Montenegro between 1999 to 2001. The currency was first issued in 1948 to replace the Reichsmark and served as German’s official currency until the adoption of the euro. In November 1999, Montenegro adopted the Deutsch mark as a parallel currency in an effort to distance itself from the Yugoslavian government. The currency was also adopted to avoid the looming inflation within the country. The Deutsch mark was used as the de facto currency in private and banking transactions throughout the country. Montenegro replaced the Deutsch mark with the euro in 2002.
Montenegro adopted the euro in 2002 to replace the Deutsch mark, without the objection of the European Central Bank. The euro is used unilaterally, since the country has no official status in the European Union. For a country to introduce the euro as its own currency, it has to be a member of the European Union, a status that Montenegro is yet to achieve. The European Commission and the European Central Bank have continued to raise their concern on Montenegro’s unilateral use of euro, prompting Montenegro to be granted candidate status to join the EU. The government of Montenegro is also in the process of adopting certain elements that fulfill the condition for further use of the euro, including adopting fiscal rules. The Central Bank of Montenegro is also not part of the euro system, and thus is unable to mint coins. The euro currency used in Montenegro has no distinctive national design.