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Montenegro hopes EU talks will help tackle graft and crime

PODGORICA -- Montenegro is set to open EU accession talks that the tiny Balkan country hopes will help it overcome a serious economic crisis and stamp out corruption and organized crime.

European Union ministers agreed earlier this week to open membership negotiations with the former Yugoslav republic, but warned that it will have to step up its fight against corruption and ensure judicial independence.

The decision must be endorsed by leaders of the 27-nation bloc at the summit in Brussels on Thursday and Friday.

“The main problem Montenegro faces today is an alarming social and economic situation,” political analyst Daliborka Uljarevic told AFP.

“The number of those fighting for survival is growing, the budget is shrinking ... while healthy investments are rare,” she added.

The country has a population of just 650,000, but the unemployment rate is at 13 percent, while public debt reached 50 percent of its gross domestic product (GDP) in 2011.

Montenegro has a relatively undiversified economy relying heavily on foreign investment which drove an economic boom between 2006 and 2008.

The biggest problem for the tiny country now is the KAP aluminum plant which the state nationalised in February.

In the takeover, the state guaranteed 131 million euros (US$147 million) in debt owed by the plant — a significant sum given that the gross domestic product of the country reached just about US$4 billion in 2010, according to World Bank data.

“The KAP debt could freeze the country's financial system and the guarantees the government gave to foreign creditors represent an imminent danger to the country's public finances,” economic analyst Mila Kasalica said.

Montenegro's economy grew by 2.7 percent last year but for 2012 the government forecasts an expansion of just 0.5 percent.

“Montenegro not only needs the 'soft' strength of the European Commission that imposes priority for reforms but also European investors,” said Podgorica university professor and former European integration minister Gordana Djurovic.

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