Political independence through monetary dependence? The case of Montenegro

ABSTRACT

As an economic policy, currency substitution – the use of a foreign currency in lieu of a domestic currency – is rarely associated with nationalism. This is due to a natural tendency to equate nationalism with economic mercantilism and with the political need to foster nationalist feelings among the population. This need not to be the case, though, as the case of the newly independent Montenegro demonstrates. How can we explain the apparent inconsistency between nationalist leaders fighting for independence and opting to use the currency of the European Union (EU), the quintessential supra-national entity? This paper suggests that conventional explanations need to be complemented with a contextual historical analysis of nationalism. By incorporating the fluid and multifaceted nature of nationalism which, in the hands of skilful political elites, can be reframed to include apparently contradictory positions, I suggest that euroisation has been extremely consistent with nationalist goals. As the content and directionality of nationalist discourse shifted, the euro was transformed into a symbol of national identity in this Newly Independent Country.

KEYWORDS:

• Currency substitution
• nationalism
• monetary sovereignty
• the Euro
• Balkans

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 I will use the terms euroisation and dollarization interchangeably.

2 I consider the 15 poorest countries based on GDP per capita as of 2006. Of these, there is data available for 11 from the CEIC database.

Additional information

Notes on contributors

Nicola Nones

Nicola Nones graduated in political science at the University of Bologna in 2013 where he focused mostly on Italian electoral politics at the regional level. Over time, his main interests have shifted towards international relations and political economy. He received a MA in International Relations from the University of Bologna in 2016 and a MA in International Political Economy from the London School of Economics in 2017. He is currently a PhD candidate at the University of Virginia, Politics department. His main interests lie at the intersection of political economy of finance and political communication. He study on how actors in financial markets process information through the media. He have related interests in the political economy of money and trade and, more specifically, on how political considerations affect the decision to adopt a foreign currency as legal tender (i.e. dollarization) or a national currency and how security concerns influence the pattern of trade relations. His main regional focus is Western Europe.