Debt-Trap Diplomacy: EU Rebuffs Montenegro’s Plea to Help It Repay China’s $1B Loan

Written by | Friday, April 16th, 2021

The European Union will not help Montenegro pay off its almost €1 billion loan from China that the western Balkan state borrowed to build a highway, which has since turned into one of the world’s most expensive roadworks. „We are not repaying the loans they are taking from third parties,“ says European Commission, referring to an unfinished highway project that has plunged the EU accession candidate into a debt crisis. Montenegro’s senior government officials have urged the EU in recent weeks to help the country repay the loan, which amounts to one-quarter of the country’s overall debt, and has shone a spotlight on China’s influence in the Western Balkans.
A spokesman for the EU said that it “does not repay loans of partners which they took from third parties”, although he did express concern “over the socioeconomic and financial effects of some of China’s investments in Montenegro”. He continued that Brussels was willing to work with the country, a candidate for EU membership, to put its debts on a sustainable footing. “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,” the EU executive said, noting the financing was at “very favourable conditions”.
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 Abazovi? said last month Brussels 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. Montenegro, with a population of 622,000, had a debt of 4.33 billion euros or 103% 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.

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