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THE United Nations administration in Kosovo announced yesterday that it was dropping the Yugoslav dinar and that from today all official dealings would be in German marks.
The UN is also to set up a customs service at the border with the Former Yugoslav Republic of Macedonia. The announcements mark a step in severing Kosovo's ties with Yugoslavia and appear to go against the spirit of UN Security Council Resolution 1244, which confirms Kosovo's status as part of Yugoslavia.
However Bernard Kouchner, the UN administrator, said this was "not the start of independence for Kosovo".
The British official picked to oversee reconstruction and the economic revival of Kosovo said yesterday that all currencies would be legal tender but the province would use the German mark as its preferred currency.
"The situation is that all of us, and all residents in Kosovo, may make transactions in any currency that they see fit," Joly Dixon said. He said the Yugoslav dinar, until now the only currency officially accepted, was still valid but its use would be discouraged. All taxes would be collected in marks and not sent to Belgrade.
The decree merely legalises the existing situation. In Kosovo, as in much of the Balkans, the mark is the main currency in daily use.
Hashim Thaci, leader of the Kosovo Liberation Army, yesterday promised to disarm all his troops as details emerged of a plan to allow some of them to become part of a lightly armed civilian emergency force. Mr Thaci said in Paris that the KLA would fulfil all its commitments under the peace accords. He said the KLA would become a political party to run in free elections and would co-operate with Kfor peacekeepers in the United Nations administration.
Under the Kosovo peace agreement, the 9,000-strong KLA is being disarmed this month under UN supervision. But Nato and the UN have now agreed that about 3,000 members will form a uniformed force armed with sidearms, which will be a civilian force, according to Western officials involved in the discussions, and will be tentatively called the Kosovo Corps. Talks are still continuing on the exact number and type of weapons it can carry.
The KLA sees this as the potential core of a national army. But M Kouchner, insisted that it was not a new army, and would be based on the model of the French Sécurité Civile. The main task would be fighting forest fires, handling disasters and acting as paramedics.
Mr Thaci and other KLA leaders have made clear that the corps must defend Kosovan interests, and said that full independence for the province remained the KLA's ultimate goal.
His remarks in Paris were intended to counter criticism that Kosovan militants are sabotaging the accords by continuing a campaign of terror and harassment against remaining Serbs. He said in London this week that he was committed to establishing a "society of tolerance" in Kosovo and that the KLA would be successfully demilitarised on time.
The deadline set for demobilisation is September 19. Yesterday Alain Richard, the French Defence Minister, and Mr Thaci discussed how this would be achieved. French troops have clashed with Albanian militants, especially in Mitrovica, where French peacekeepers have been involved in violent confrontations between Serbs and Albanians.
Javier Solana, the Nato Secretary-General, travels to Kosovo on Monday for talks with M Kouchner. He will meet commanders of the peacekeeping force in Pristina and Prizren and local political leaders.
A small number of British diplomats may soon establish a low-key presence in Belgrade, five months after Yugoslavia cut relations with Britain over Nato's bombing campaign. Two British officials paid an exploratory visit to the Yugoslav capital this week to assess security, to check the damage to their embassy by anti-Nato protesters at the beginning of the 11 week-long air campaign and to hold talks with officials.