Failing aluminum complex threatens Montenegrin economy

The debt of a failing aluminum complex in Montenegro is threatening the tiny Balkan state with economic collapse, reported Radio Television Serbia (RTS) on Saturday.

The Aluminum Plant Podgorica (KAP) is jointly managed by the Montenegrin government and the Central European Aluminum Company (CEAC) controlled by Oleg Deripaska, a Russian billionaire, each with roughly 30 percent of the shares.

According to Minister of Economy Vladimir Kavaric, the Montenegrin government would likely assume payment of the first tranche of 22 million euros due to the Deutsche Bank in February. He said this could "lead to the collapse of the financial system" as the creditors for the remaining debt of 131 million Euros come due: Hungary's OTP Bank in April and the Russian VTB Bank in 2014.

In the past two years the public debt in Montenegro has doubled to 47 percent of GDP. Kavaric said Montenegro would have to borrow the necessary funds to cover the KAP debt, for which it has not budgeted.

Kavaric said the Montenegrin government would like to negotiate with creditors to postpone commitments and also negotiate with strategic partners to assume the state debt in KAP.

The company has been plagued with labor disputes as it slashed its 2,300 workers from its labor force of 3,500 in 2008.

Although KAP represents the largest single source to Montenegrin GDP and exports, it has been running a daily deficit of 200,000 euros since the economic crisis of 2008.