Kosovo is a fertile region lying just to the northeast of Albania, in central former Yugoslavia. It is one of the earliest settlements by the Slavic people who later became the Serb nation – one of the reasons the hard-line nationalists in Serbia were so determined to include it as part of a Greater Serbia during the disintegration of Yugoslavia in the 1990’s.

• It has been inhabited largely by ethnic Albanians since the mid-18th C
• There were mass migrations of native Serbs out of the area in 1691 and 1737, owing to pressures from the Ottomans
• It passed to the Ottoman Empire in the 15th century, and remained under Turkish authority until 1912

Tensions between the Serbian and Albanian communities in Kosovo simmered throughout the 20th century and occasionally erupted into major violence, particularly during the First Balkan War (1912–13), The Great War (1914–18), and during World War II (1939–45). After 1945 the socialist government under Tito systematically repressed all manifestations of nationalism throughout Yugoslavia, seeking to ensure that no republic or nationality gained dominance over the others. In particular, Tito diluted the power of Serbia — the largest and most populous republic — by establishing autonomous governments in the Serbian province of Vojvodina in the north and in Kosovo in the south.

Background

During the disintegration of Yugoslavia in the 1990’s Kosovo unsuccessfully attempted to gain independence, and in 1998-1999 the situation escalated into the so-called Kosovo War – a bitter conflict fought between the forces of the Federal Republic of Yugoslavia, (by this time, consisting of the Republics of Montenegro and Serbia) which controlled Kosovo before the war, and the Kosovo Albanian rebel group known as the Kosovo Liberation Army (KLA) with air support from the North Atlantic Treaty Organisation (NATO), (from 24th March 1999), and ground support from the Albanian army.

In 1999 an emergency release ‘overprinted’ banknotes of Kosovo was conceived as a temporary means of payment, which would replace the former Yugoslav dinar. This replacement of Yugoslav did not happen but, instead, these notes were used as ”obvious” legal tender in the financing and as payment of illegal procurement of weapons for the Kosovo Liberation Army (UCK – Ushtria Clirimtare e Kosoves).

There were 8 banknotes in this set of provisional issues, which were overprinted on Macedonian banknotes.

•        10 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
•        25 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
•        50 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
•      100 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
•      500 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
•   1,000 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
•   5,000 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)
• 10,000 dinares provisional issue (overprinted: UCK – Ushtria Clirimtare e Kosoves / Kosovo Liberation Army)

The war ended with the Kumanovo Treaty, with Yugoslav forces agreeing to withdraw from Kosovo to make way for an international presence. The Kosovo Liberation Army disbanded soon after this,

• some of its members went on to fight for the UÇPMB in the Preševo Valley
• some joined the National Liberation Army (NLA) and Albanian National Army (ANA) in the armed ethnic conflict in Macedonia
• the remainder went on to form the Kosovo Police

In the 1990’s, a prison (Kazneno-Popravni Dom SMREKOVNICA) in the village of Smrekovnica – a place not far from Kosovska Mitrovica – known for many crimes that occurred there during the Kosovo crisis.  

• Smerkovnicës Prison was infamous for the detention, torture and ill-treatment of Kosovan civilians and KLA prisoners
• Releases from this prison were selective and hundreds of prisoners remain unaccounted for
• It was run by an ethnic Serbian police force under the auspices of FYR Serbia until 1999

Smerkovnicës Prison facilities were used  by the French KFOR contingent between 1999 and November 2009

1993 KOSOVO Yugoslavia 1 Dinar ND1990s aUNC , SMREKOVNICA PRISON

Kosovo declared independence on 17 February 2008. As of 13 August 2014, 108 out of 193 (56%) United Nations member states have formally recognised the Republic of Kosovo. Notably, 22 out of 27 (81%) member states of the European Union and 24 out of 28 (86%) member states of NATO have recognised Kosovo. Serbia refuses to recognise it.

Monetary situation prior to 1999

Before the establishment of UNMIK, Kosovo (as part of Serbia) was bound to Yugoslav monetary policy, and the Yugoslav Dinar. However, war-time inflation and tensions with the Federal Republic of Yugoslavia had severely discredited the Yugoslav Dinar. As a result, many preferred to use and hoard foreign currencies instead of relying on the Dinar. The most frequently used foreign currency was the German Mark, although the US Dollar and Swiss Franc were also widely used.

Introduction of the Deutsche Mark

In the immediate post-conflict period, other currencies – especially the Deutsche Mark – were widely used alongside the dinar. In September 1999, UNMIK produced a regulation accepting the use of other currencies; this recognised the status quo. The Yugoslav Dinar was never officially withdrawn from circulation, but its use was “not encouraged”.

The use of other currencies, mainly the U.S. Dollar, also continued. The Bundesbank was not informed in advance, and did not send any additional coins and notes to Kosovo for the change-over. But since there were no restrictions on the import and export of Deutsche Marks, and many Kosovars working abroad had sent money home, it was possible to supply Kosovo with sufficient Deutsche Marks.

The Yugoslav (and later Serbian) Dinar continued to be widely used in Northern Kosovo and Serb enclaves throughout Kosovo.

Immediately after the cessation of violence in June 1999, Kosovo (along with other FYR’s) adopted the German Mark as their de facto currency. This seemed to be a workable solution for a country with no previous experience of an independent currency or functioning central bank. Kosovo unilaterally adopted the euro as its currency in 2002; however, it is not an official Euro Zone member or even a member of the European Union (EU). This territory (or mini-state) never previously issued its own coins or banknotes.

Towards the euro

Like Germany, Kosovo switched to the euro on 1 January 2002. The Deutsche Mark remained legal tender in Kosovo until 9 March 2002.

• The change to the euro was achieved in co-operation with the European Central Bank, and several national banks in the Eurozone
• By December 2001, about 100 million euro in cash was ‘front-loaded’ to the Banking and Payments Authority of Kosovo.
• Kosovo does not mint any coins of its own.

EU membership

Kosovo is a potential candidate for accession to the EU. The European Commission and the ECB have voiced their discontent over countries unilaterally adopting the euro on several occasions in the past, and it is unclear whether Kosovo would be able to accede to the EU while using the euro. Montenegro, which similarly unilaterally adopted the euro in 2002, had a statement attached to their Stabilisation and Association Agreement with the EU that read: “unilateral introduction of the euro was not compatible with the Treaty.”

• The issue is expected to be resolved through the accession negotiations process
• the ECB having stated that the implications of unilateral euro adoption

“would be spelled out at the latest in the event of possible negotiations on EU accession.”

• Diplomats have suggested that it’s unlikely countries will be forced to withdraw the euro from circulation.