BELGRADE, Dec 7, 1999 -- (Reuters) Police in Montenegro and Serbia cracked down on black market currency trading over the weekend - Montenegro to shield its new dual currency system and Serbia to shore up the struggling Yugoslav dinar.
But the actions, which appeared to indicate an unusual bout of cooperation between authorities normally at loggerheads, only weakened the currency across the two-member Yugoslav federation.
Both in Belgrade and Podgorica, the dinar slipped to 19-20 to the German mark during the weekend from 18.5-19.5 on Friday. It is officially fixed at 6.0 to the German mark in Serbia.
"It may look as a rare orchestrated action between Belgrade and Podgorica, but they are defending different things, though the nature of the action is the same," said a Belgrade-based economist, who asked not to be named.
On Monday afternoon, the Montenegrin monetary council, supervising the dual currency system, officially lowered the dinar down to 20 to the mark, from its previous official rate of 17.5, Dimitrije Vesovic, member of the council said.
"This may sound as if the black market has just scored a goal, but we will not allow it to happen again. In future, the moment the rate moves on the black market we will adjust the official rate to it. In future, we must at least play to draw," Vesovic told Reuters from Podgorica.
"We are not going to defend the dinar. The dinar is being printed by Belgrade, in three shifts as I hear and we cannot protect the currency. All we are trying to do is protect the standards of living," he said.
Serbia and Montenegro have been at odds since a pro-Western leader was elected in Montenegro in 1997. The coastal republic moved ahead with reform while Belgrade remained determined to preserve its communist-style system.
Montenegro last used its police to crack down on the black market in 1994 after Yugoslavia had just introduced a new dinar to stem hyper-inflation.
By contrast, police activities aimed at stabilizing the dinar have been frequent in Serbia over the past few years.
Police arrest dealers in Montenegro
The pro-government Montenegrin daily Pobjeda said on Monday that police in Podgorica had arrested 15 currency dealers during the weekend, seizing DM 20,000 German and 45,000 dinars.
"Acting on a Montenegrin government order to crack down on the currency black market, the police organized several raids during the weekend on all street dealing spots in Podgorica and elsewhere in the republic," Pobjeda said.
Late on Friday, the Montenegrin government said it had ordered the Interior Ministry to undertake all measures to prevent any foreign exchange activity on the streets.
Montenegro introduced a dual currency system a month ago, legalizing the German mark as a parallel legal tender, aimed at protecting its economy from inflation spilling over from Serbia.
But the Podgorica Cabinet failed to declare internal convertibility of the dinar to put an end to the black market.
"First they introduce a partial measure, under strict party control and when it fails, they turn to the police," dissident Montenegrin economist Nebojsa Medojevic told Reuters.
"They arrest dealers, whole-heartedly recommend banks to take over foreign exchange business, and the result is a further fall in the dinar," he said, adding that although the black market had been forced underground, it had not been stamped out.
In Belgrade, the police action was meant to tame the German mark amid media reports that money printing presses have been reactivated and the mint was working 24 hours a day.
On Monday, Belgrade street dealers withdrew from street corners as the police acted to shore up the dinar. The result was an even weaker dinar.
"It's now traffic police chasing us. It's a total mess. With the police at your back, you've got to charge a bit more to include the risk," one street dealer told Reuters.
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