Montenegro's prime minister Milo Djukanovic, left, and European Council President Herman van Rompuy at a meeting earlier in 2010.
The European Council agreed on December 17 2010 to give Montenegro candidate status for EU membership.
Speaking to journalists in Brussels, European Commission President Jose Barroso said: "This is a strong signal of our commitment to the future of the Balkans".
Montenegro, which has a population of about 672 000, separated from Serbia after a referendum in May 2006 and by vote of parliament a month later.
The South East European state has seen its earlier economic boom seriously hit in the past year, especially given downturns in the property and tourism businesses, and recently approved a budget for 2011 that provides for substantial cuts in state spending in a move to bring down its deficit.
The country uses the euro as its official currency, although this is a result of unilateral adoption. Montenegro is not a member of the euro zone.
The European Council decision follows a recommendation by the European Commission, officially presented in November 2010 by European Enlargement Commissioner Stefan Fuele to Montenegro's prime minister Milo Djukanovic.