EU says it can’t help Montenegro on China loan but can on financing

PUBLISHED: Mon, 12 Apr 2021 16:12:57 GMT

By Jan Strupczewski

BRUSSELS, April 12 (Reuters) – The European Union cannot help EU-hopeful Montenegro repay its debts to China, but can help it complete a highway plan that started with a huge loan from Beijing, the European Commission said on Monday.

The small Balkan republic will struggle this year to start servicing a 1 billion euro loan from China that it took in 2014 to build the first phase of the highway linking the port of Bar on Montenegro’s Adriatic coast to landlocked neighbour Serbia.

Montenegro’s Deputy Prime Minister Dritan Abazović said in March the EU should therefore help the country refinance the loan, taken out by the previous Montenegro government, to protect the EU candidate from becoming dependent on China.

Asked about the call for help, a Commission spokeswoman said that every country was free to make its own investment decisions but that the “EU did not repay loans from third parties.”

Montenegro will have to find its own way to handle the Chinese loan, spent on a 44 km stretch of the 165 km motorway, the spokeswoman said, but the EU was willing to help with money for the rest of the road through its 9 billion euro Economic and Investment Plan for the Western Balkans.

“We are providing a mix of grants, guarantees and preferential loans from international financing institutions such as European Investment Bank and the European Bank for Reconstruction and Development,” she said, noting the financing was at “very favourable conditions”.

Montenegro, with a population of 622,000, had a debt of 4.33 billion euros or 103 percent of GDP last year and its repayment ability has been weakened by the COVID-19 pandemic which is undermining its main source of income — tourism.

The motorway is at the heart of an intense debate about Chinese influence in Europe, both within EU member states and countries aspiring to join the bloc such as Montenegro and its Western Balkan neighbours Serbia, Macedonia and Albania.

As Beijing extends its economic reach under the ambitious Belt and Road Initiative, poor countries across Asia and Africa have seized on attractive Chinese loans and the promise of transformative infrastructure projects.

The Commission said Chinese influence was a concern.

“The EU has concerns over the socioeconomic and financial effects some of China’s investments can have. There is the risk of macro-economic imbalances and debt-dependency,” the spokeswoman said. (Additional reporting by Aleksandar Vasovic in Belgrade; Reporting by Jan Strupczewski; Editing by Toby Chopra)

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