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Croatia Widens Split, Introduces Currency : Secession: Zagreb declares financial independence from Yugoslavia. Germany recognizes two republics.

SPECIAL TO THE TIMES

The breakaway republic of Croatia introduced its own currency Monday, seeking to secure financial independence even as it strives for international recognition. Lines spilled into the street and post offices were jammed as people sought to change their Yugoslav cash into dinars freshly minted by the Croatian government.

“Every country needs its own money,” said Branka Vincek, 34, as she and hundreds of others packed a small post office, deluging the three clerks with requests.

The long-planned economic move was only the latest crack in the shattering Yugoslav federation. In an action signaled in a Cabinet meeting last week, Germany recognized the independence of Croatia and Slovenia on Monday but said it would not help arm the republics in their effort to break free.

Germany will open diplomatic relations with the two republics Jan. 15.

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And even as the Serbian-led federal army and Serbian insurgents continued to fight Croatian forces in Croatia--including fierce battles reported in the republic’s central regions--Bosnia-Herzegovina formally asked the United Nations to send a peacekeeping force to its territory to avert the spread of the civil war.

In a fax to the Security Council, President Aliya Izetbegovic of Bosnia-Herzegovina said the U. N. force could secure peace, regardless of the situation on his northern border, where thousands of people have been killed in six months of fighting.

In Zagreb, even residents who faced long waits to exchange their money seemed excited and expectant. They said they support the currency switch, asserting that they no longer want to finance the federal army in its undeclared civil war with Croatia.

“We’ve lived through history, you know,” said Maksimilijan Vukelic, 82, as he waited outside a bank on the capital city’s main square. “We’re a lucky generation to have seen this.”

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But with little foreign currency in reserve to back the new money, Croatian banking officials admitted that they have to depend largely on goodwill and trust of consumers. Still, Ante Cicin-Sain, governor of the National Bank of Croatia, insisted that the new Croatian currency is as sound as its Yugoslav equivalent.

There is “as much behind it as there used to be behind the Yugoslav dinar,” he said. “It’s (backed) by the resources of Croatia and the worth of its people and hopefully, the discipline of the policy-makers of Croatia.”

As relations between the republics have disintegrated, arrangements between the banking institutions also have deteriorated. The neighboring republic of Slovenia, which has also declared its independence, instituted its own currency, the tolar, earlier this year.

Croatia had received no new notes from the Yugoslav National Bank since June. Officials said they were running out of currency supplies as prices spiraled. They estimated that they would run out of old dinar notes by year’s end.

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And although Croatia has lost control of about one-third of its territory, banking officials said they had no choice but to act.

“The non-control of Croatian borders means that until today there was a possibility of uncontrolled inflow of money that was printed outside Croatia,” Cicin-Sain said. “With the introduction of Croatia’s currency, we feel protected from the uncontrolled inflow of Yugoslav money that will be printed, most likely now, without any control.”

The currency switch comes at a bleak moment for Croatia’s economy. Inflation is estimated at 230% this year, and unemployment hit 17.5% in October, government figures indicate. Officials said they hope only that the transitional currency will prevent the situation from worsening.

The budget deficit this year was about $1 billion; next year, policy planners said it will be at least $1.6 billion.

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Kirka is The Times’ special correspondent in Zagreb.


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