Montenegro hopes to join EU and euro in 2028, eyes bond sales

FRANKFURT (Reuters) -Montenegro hopes to join the European Union and the euro zone in 2028, Prime Minister Milojko Spajic said on Tuesday, in what would mark some progress in the EU's stalled eastward expansion.

Spajic told reporters the small Balkan nation, whose economy almost doubled in the last five years, was also looking to sell fresh government bonds to institutional or retail investors.

The EU has been making a renewed push to bring in new members since Russia's invasion of Ukraine in 2022, saying the outbreak of war has highlighted the danger of having "grey zones" just outside the bloc that are not firmly part of the West.

Spajic said he was aiming to meet the remaining criteria set by the European Commission -- mainly relating to building up institutions -- by the end of next year and to start accession talks in 2027.

The 27 existing members of the EU, which began accession talks with Montenegro in 2012, would then need to approve the country's entry to the bloc.

"If we have 27 hands supporting our candidacy, we are hoping to see ourselves in the EU in 2028," he said after meeting German businessmen and politicians.

Spajic hoped Montenegro, which adopted the euro well before gaining full independence from Serbia in 2006, would also be admitted at the same time to the euro area, a club of 20 countries that have a seat at the European Central Bank.

Under EU rules, this will require it to keep its inflation and long-term interest rates within a given spread of those of the euro area's best-performing members.

Inflation in Montenegro, which imports more than it exports including energy and food, averaged 3.1% in the 12 months to July, above the euro area and EU averages. It was last 4.7%.

Economic output, however, has grown to 7.8 billion euros last year from 4.2 billion in 2020, Spajic said.

Net salaries doubled from 500 euros in early 2022 to 1,000 euros this year thanks to tax cuts, he added.

But the Montenegrin central bank raised some questions about the government's revenue and debt projections last year.

Spajic, a former Goldman Sachs credit analyst, defended his government's performance and the reciprocal independence of the executive branch and the central bank.

"Our deficit is around 1% for the first eight months of the year," he said.

He said his government was weighing new debt sales to institutional investors in London, Frankfurt or Tokyo, or a retail bond for the domestic audience.

(Reporting By Francesco Canepa; Editing by Bernadette Baum)