The economy of the Federal Republic of Yugoslavia (FRY) was devastated during the 1990s. Economic reform since the end of 2000 has marked a sea change in policy that has already had a number of positive effects. Difficult decisions have been taken to implement some structural reforms, and the economy has been substantially liberalised and stabilised. Inevitably there are risks to the hitherto positive macroeconomic developments, especially in Montenegro that has relied heavily on foreign aid. Export-led growth may suffer from the economic slowdown in Europe, the FRY’s largest market. At the same time, the economy needs...