Europe helps Montenegro cut Chinese debt, negotiations in final stage

Montenegro’s finance minister said on Thursday (June 17) that a European country’s financial institutions are ready to refinance $809 million of Montenegro’s debt to China, enabling the small Adriatic nation to save money and lower interest rates, Reuters reported from Belgrade.

China sees the Western Balkans, including Albania, Bosnia, Kosovo, North Macedonia and Serbia, and Montenegro as part of its “One Belt, One Road” to expand its influence.

Beijing has invested billions of dollars in the region, mainly by providing soft loans in infrastructure and energy. This could create complications for the EU’s eastern expansion.

The loan, provided by China in 2014, was used to build a stretch of road from Montenegro’s Adriatic coast to the Serbian border. Montenegro is a NATO member and a candidate for EU membership. The Chinese loan sent Montenegro’s total debt soaring to 103 percent of its economic output, forcing the Montenegrin government to seek help from the EU.

At a meeting of Montenegro’s parliamentary finance and budget committee, Finance Minister Milojko Spajic declined to say which institution because of a confidentiality agreement with the European financial institution, but said discussions were in the “final stage.

On June 11, Reuters reported that the EU had turned to two state-owned development banks, KfW and AFD, as well as Italy’s state-owned Banco Casa de Depositarias (CDP), to kick off financial assistance to Montenegro.

“The interest rate on the (Chinese) loan was 2 percent (in U.S. dollars), while now the EU is giving us a loan at 1 percent (in euros) instead, with a 20-year repayment period and a six-year grace period,” Spadic told the commission.