European Western Balkans

EC on Montenegrin loan from China: EU does not repay the loans from third parties

Montenegrin highway under construction; Photo: jbdodane / Flickr

BRUSSELS – European Commission Spokeswoman Ana Pisonero stated that the EU does not help with repaying the loans from the third parties, adding that the EU would contribute to the sustainability of public debt of Montenegro by supporting sustainable investments.

Montenegro has asked the EU for assistance with paying off a $1bn Chinese loan for an incomplete highway project that has imperilled its finances. In 2014, the country signed a deal with China’s ExIm Bank to finance 85 per cent of the cost of a road with a dollar-denominated loan worth almost $1bn, Financial Times wrote yesterday. China holds one-quarter of Montenegro’s debt, and despite massive delays on the highway’s construction, the first repayment is due in July.

If Montenegro were to default, the terms of the contract give China the right to access Montenegrin land as collateral. A new Montenegrin government, a coalition of forces that removed the Democratic Party of Socialist from power after 30 years, took the reins in December. It faces a host of challenges, including the fact that the tourism-reliant economy collapsed by 15 per cent last year, according to the IMF, FT reminded.

The European Union has established a concrete instrument to support major infrastructure projects in the Western Balkans, Ana Pisonero said, stressing that the Economic and Investment Plan, presented in October last year, would help leverage funds from other public and private investors, including the European Investment Bank, under very favorable conditions, Vijesti report.

European Commission Spokesman Peter Stano also commented on the issue today.

“We do a lot with Montenegro and other partners in the region to help them on their way to align with EU standards, with reforms and all the other things and we continue to stand by them but we are not repaying the loans that they are taking from third parties,” Stano told a daily news briefing, N1 reported.

He said that, when it comes to actions by partner countries in taking loans or entering into economic relations with other parties, every country is free to establish their own investment objectives.

“Talking specifically about Montenegro and China the EU has concerns over the socio economic and financial effects of some of China’s investments which can have effects in the country. There is a risk of macro-economic imabalances and debt dependency. The motivation for undertaking such steps, taking such loans needs to be checked with the Montenegrin authorities,” Stano added and recalled the EU economic and investment plan for Western Balkans which he said would mobilizing up to 9 billion Euro for investments in transport, energy, green and digital transition, sustainable development and jobs.

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