Bernard Kouchner issued a decree on Friday replacing the Yugoslav dinar with the Deutschmark as official legal tender in Kosovo.

The move has been attacked as "violating Yugoslav sovereignty" by the Yugoslav official news agency Tanjug.

All public accounts and customs duty will now be calculated in Deutschmarks, Mr Kouchner said.

Bernard Kouchner: Issued decree

The move does not outlaw the use of the dinar, but its use "will not be encouraged", he said.

The United Nations Mission in Kosovo (Unmik) will charge an administration fee on all official transactions for people who "insist on paying in dinars".

Mr Kouchner's deputy for economic affairs, Jo Dixon, said: "There is no question of creating a new currency.

"We are merely legalising a situation that already exists."

Tanjug said the move was in violation of UN Security Council resolutions on Yugoslav sovereignty, which Mr Kouchner "should be the first to respect".

The Deutschmark is widely used in Kosovo, especially since the end of the Nato bombing campaign in June.

Money-changers charge often extortionate rates to convert unstable dinars into the "safe" currency.

UN resolution 'contravened'

The dinar is still the preferred currency in most small shops, bars and markets.

Unmik said it had not consulted Belgrade on the change.

Tanjug says the move is in contravention of UN Security Council Resolution 1244, which says the international community recognises Kosovo as part of Yugoslavia.