How affordable are the costs compared to benefits brought by the euro to the Kosovo’s economy

Since January 1, 2002, pursuant to UNMIK Regulation[1] no. 1999/4, the EURO (‘’EUR’’) was adopted as the legal currency in Kosovo, and was made the factual currency of the country. All client accounts held by the Central Bank of the Republic of Kosovo (CBK) and commercial banks were converted from DEM into EURO, on an irreversible currency ex-change rate of DEM 1,95583 per 1 EURO. As a result, in practice, while the Euro is legal and while accounts are held in this currency, almost all transactions made in Kosovo are titled and made in Euro. The use of a sustainable currency was important to maintaining a macro-economic stability and played a decisive role in rebuilding the people’s trust on the financial sector. On the other hand, the CBK does not emit currency, and as such, it does not perform any monetary and exchange policies. The currency regime adopted by Kosovo may be rather challenging, given the absence of traditional monetary instruments and the exchange rates. Therefore, the main concern remains whether fair policies (both fiscal and regulations related to the financial sector) will support this regime. The purpose of this paper is to demonstrate costs and benefit brought upon the Kosovar economy by the use of Euro as a main currency in circula-tion, and how affordable are the costs in comparison to benefits brought by the Europeanization of the Kosovo’s economy. [1] UNMIK - United Nations Mission Interim in Kosovo