(Bloomberg) -- Kosovo’s prime minister stood by new regulations on enforcing the euro as the country’s sole currency, which have been criticized by the US and European Union as disrupting cash assistance to ethnic Serbs using the dinar. 

Premier Albin Kurti said his government won’t interfere with the independent central bank in implementing the regulation, which took effect on Feb. 1. Speaking in an interview with Bloomberg Television in London, the premier reiterated that ethnic Serbs will be given time to adjust. 

“We cannot reverse this decision,” Kurti said on Monday. “We’re not going to have any kind of punitive measures — we don’t want to punish anyone.” 

But the US and the EU have demanded that Kosovo at least delay the currency restrictions. Serbian authorities have decried the changes, saying that they risk blocking essential pension and welfare payments to ethnic Serbs.

Kurti has taken a tough line, saying that the euro’s role in the country is “non-negotiable.” Kosovo isn’t a euro-area member, but adopted the currency as its de facto legal tender over two decades ago. Ethnic Serbs have stuck to the dinar. 

The currency dispute is emerging as a new front in mounting tensions between Kosovo and Serbia, which refuses to recognize the nation as an independent state. The enmity between the two has escalated with some of the worst violence in two decades over the last year, imperiling a fragile peace since the last of the 1990s Balkan wars ended. 

Kurti accused Serbia under President Aleksandar Vucic of failing to sign an agreement that paves the way to normalizing relations between Belgrade and Pristina, a condition for both countries’ ambitions to join the EU. He accused the US and EU of “appeasing” Serbia even as it maintains ties with Russia and China. 

“Appeasement of Serbia should stop from both Brussels and Washington DC,” Kurt said. “I believe they are considering Serbia as a kind of irrational actor that has to be appeased.” 

Still, he said, a deal with Serbia should be struck as soon as possible. 

Serb Hot Line

But the path forward could be blocked by the flare-up over the euro. The US ambassador to Kosovo, Jeff Hovenier, has warned that relations with Washington could take a hit if Pristina doesn’t respond to the criticism. 

The seizure of a Serbian post vehicle and a string of raids in Serb municipalities earlier this month prompted a warning by Hovenier that the tactics would limit the US’s ability to be an “effective advocate” for Kosovo.

Kurti touted a toll-free hot line being set up to inform Serbs about the details of the euro rules and get feedback.  

“We’re going to do a smooth transition,” Kurt said. “We’re going do a hot line where Serbs can call and complain for whatever is not OK according to them.” 

--With assistance from Andrea Dudik.

(Updates with comments on Serbia-Kosovo relations from fourth paragraph.)

©2024 Bloomberg L.P.