Serbia and Montenegro came to an agreement only to cooperate in some political fields (e.g. a defence union). The states have their own economic policies and currencies. Serbia and Montenegro does not have a unified capital any more. Though most institutions are in Belgrade, some have been moved to Podgorica.
Upon its creation in 1992, the United Nations, and many individual states (especially the United States) had refused to recognise the remaining confederation of Serbia and Montenegro as the continuation of the Socialist Federal Republic of Yugoslavia, although they accepted it as constituting a state. This was due to the ongoing Yugoslav wars, which had prevented agreement being reached on the disposition of federal assets and liabilities, particularly the national debt. The Federal Republic of Yugoslavia was finally re-admitted to the United Nations in 2000 after several years of suspension.
Mismanagement of the economy, an extended period of economic sanctions, and the damage to Yugoslavia's infrastructure and industry caused by the Kosovo War have left the economy only half the size it was in 1990. Since the ousting of former Federal Yugoslav President Slobodan Milosevic in October 2000, the Democratic Opposition of Serbia (DOS) coalition government has implemented stabilization measures and embarked on an aggressive market reform program. After renewing its membership in the International Monetary Fund in December 2000, Yugoslavia continued to reintegrate into the international community by rejoining the World Bank (IBRD) and the European Bank for Reconstruction and Development (EBRD). A World Bank-European Commission sponsored Donors' Conference held in June 2001 raised $1.3 billion for economic restructuring. An agreement rescheduling the country's $4.5 billion Paris Club government debts was concluded in November 2001; it will write off 66% of the debt; a similar debt relief agreement on its $2.8 billion London Club commercial debt has been reached in July 2004; 62% of the debt have been written off. The smaller republic of Montenegro severed its economy from federal control and from Serbia during the Milosevic era and continues to maintain its own central bank, uses the euro instead of the Yugoslav dinar as official currency, collects customs tariffs, and manages its own budget.
The southern Serbian province of Kosovo, while technically still part of Serbia (according to United Nations Security Council Resolution 1244), is moving toward local autonomy under the United Nations Interim Administration Mission in Kosovo (UNMIK) and is dependent on the international community for financial and technical assistance. The euro and the Yugoslav dinar are official currencies, and UNMIK collects taxes and manages the budget. The complexity of Serbia and Montenegro political relationships, slow progress in privatization, and stagnation in the European economy are holding back the economy. Arrangements with the IMF, especially requirements for fiscal discipline, are an important element in policy formation. Severe unemployment remains a key political economic problem.
Serbia, and in particular the valley of Morava is often described as "the crossroad between the East and the West", which is one of primary reasons for its turbulent history. The valley is by far the easiest way of land travel from continental Europe to Greece and Asia Minor.
Major international highways going through Serbia are E75 and E70. E763/E761 is the most important route connecting Serbia with Montenegro.
The Danube, an important international waterway, flows through Serbia. The largest sea harbour is Montenegro's Bar.
