Dinar caught in Greek maelstrom

Published on 25 May 2012 at 10:58

The debt crisis in the eurozone also affects countries that have not adopted the euro. Le Mondeexplains that Serbia has been struck by sudden drop in the value of its currency, which —

… fell to 116 dinars against the euro, forcing the the country’s central bank to intervene and spend €80 million of its reserves.

The domestic context in Serbia following a presidential election on 20 May has contributed to this steep decline in market confidence —

Investors moved en masse to offload the currency, [...] in the wake of the failure of the Tadic coalition government, which had come to embody the country’s aspiration to enter the European Union, and the surprise victory of right-wing leader Tomislav Nikolic, who is now experiencing difficulties in forming a government.

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Belgrade is also largely dependent on “foreign banks based in EU countries, many of which are Greek and Italian.” This is one of the main reasons for concern over the prospect “of another credit squeeze in the region,” notes the French daily.

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