Integration Perspectives and Synergic Effects of European Transformation in the Countries Targeted by EU Enlargement and Neighbourhood Policies Montenegro Jelena Džankiü Jadranka Kaluÿeroviü, Ivana Vojinoviü, Ana Krsmanoviü, Milica Dakoviü, Gordana Radojeviü, Ivan Jovetiü, Vojin Goluboviü, Mirza Muleškoviü, Milika Mirkoviü, ISSP – Institute for Strategic Studies and Prognosis Bosiljka Vukoviü June 2008 TABLE OF CONTENTS CHAPTER 1 POLITICAL TRANSFORMATION PROCESS IN MONTENEGRO ............. 4 1.1 Introduction........................................................................................................... 5 1.2 The Creation of Democratic Institutions and Their Functioning ............................. 7 1.2.1 Political institutions in Montenegro throughout history: the effect of political traditions on the development of democratic institutions................................................ 7 1.2.2 The constitutional establishment of Montenegro .......................................... 12 1.2.3 Observations ................................................................................................ 26 1.3 The Implementation of the EU’s Democratic Requirements................................. 27 1.3.1 Transparency ............................................................................................... 27 1.3.2 Decision-making processes .......................................................................... 29 1.3.3 Minority rights............................................................................................. 35 1.3.4 Religion ....................................................................................................... 40 1.3.5 The media.................................................................................................... 44 1.3.6 The rights of the political opposition ............................................................ 47 1.3.7 Further observations: corruption................................................................... 48 1.4 The Functioning of Parliamentary Control ........................................................... 49 1.4.1 Parliamentary control over the activities of the government ......................... 50 1.4.2 The political opposition in parliament .......................................................... 51 1.4.3 Other mechanisms ensuring accountability................................................... 53 1.5 The Restructuring of Political Power Relations.................................................... 55 1.5.1 Anni miserabiles: negative transformation 1988–1996 ................................. 56 1.5.2 Anni delusionis: shift of political direction 1996-2006.................................. 60 1.5.3 Anni esperantiae: forecasts of political power relations in the next 10 years . 70 1.6 The Changes of Political Party Preferences, the Struggle for Power, Political Populism ......................................................................................................................... 74 1.6.1 Political parties since 1990........................................................................... 74 1.6.2 Political populism ........................................................................................ 80 1.7 Conclusions and Further Prospects....................................................................... 84 Bibliography: .................................................................................................................. 86 CHAPTER 2 THE ECONOMY OF MONTENEGRO ........................................................ 88 2.1 Introduction......................................................................................................... 89 2.1.1 The economic history of transition (1990-2006)........................................... 89 2.1.2 The domination of private property.............................................................. 90 2.1.3 The improvement of the business environment............................................. 90 2.1.4 Openness and internationalisation ................................................................ 91 2.1.5 The deregulation of macroeconomic activities and economic stability.......... 91 2.1.6 The reform of the administration.................................................................. 92 2.1.7 Development in a broader sense ................................................................... 94 2.2 Macroeconomic Aspects.................................................................................... 100 2.2.1 Economic growth....................................................................................... 100 2.2.2 Consumption of the GDP........................................................................... 102 2.2.3 The GDP and its production....................................................................... 103 2.2.4 Prices and monetary conditions .................................................................. 104 2.2.5 Fiscal conditions ........................................................................................ 108 2.2.6 The development of exports and imports.................................................... 124 2.2.7 Remittances, foreign aids and loans............................................................ 128 2.2.8 Foreign direct investments ......................................................................... 135 2.2.9 Labour market developments ..................................................................... 140 1 2.3 Structural Developments.................................................................................... 146 2.3.1 Monetary policy......................................................................................... 146 2.3.2 Fiscal policy............................................................................................... 149 2.3.3 Privatisation............................................................................................... 155 2.3.4 Business climate ........................................................................................ 166 2.3.5 Trade liberalisation, trade policy ................................................................ 176 2.3.6 Financial liberalisation............................................................................... 181 2.3.7 Informal economy...................................................................................... 187 2.3.8 Infrastructure ............................................................................................. 192 2.3.9 Information and telecommunications technology........................................ 198 2.3.10 The energy sector....................................................................................... 205 2.4 Tourism............................................................................................................. 209 2.5 Welfare and Financial Services.......................................................................... 211 2.5.1 Wages and incomes, and social security benefits ........................................ 211 2.5.2 The consumption of durables ..................................................................... 213 2.5.3 Investments................................................................................................ 214 2.5.4 Savings and credits .................................................................................... 216 2.5.5 The real estate sector.................................................................................. 219 2.5.6 The Stock Exchange, the money market..................................................... 221 2.5.7 Corporate sector banking............................................................................ 225 CHAPTER 3 RELATIONS OF MONTENEGRO WITH THE EU ................................... 228 3.1 Introduction....................................................................................................... 229 3.2 Governmental Organisation and Institutional Structure of EU Relations ............ 230 3.2.1 Dissolving Yugoslavia’s relations with the EU........................................... 230 3.2.2 Directing and Coordinating the EU integration process before independence 233 3.2.3 From Independence to the SAA................................................................. 236 3.2.4 Initialling the SAA – further institutional changes...................................... 240 3.2.5 Post-SAA institutional strengthening.......................................................... 244 3.2.6 Dealing with the EU in the Parliament of Montenegro before independence247 3.3 Political Relations.............................................................................................. 255 3.3.1 Official positions on EU relations – All roads lead to Brussels all the time. 256 3.3.2 Testing EU Montenegrin relations.............................................................. 258 3.3.3 Parliament and opposition reactions ........................................................... 263 3.3.4 Public opinion............................................................................................ 267 3.3.5 Major events marking EU-Montenegro relations ........................................ 270 3.3.6 Negotiations, EU level agreements............................................................. 276 3.3.7 Positions of EU member states................................................................... 280 3.4 Economic Relations..........................................................................................