There is no average salary of 1.000 euros for a year. There is no average pension of 600 euros for a year. No full employment for a year. The three key promises from the previous election campaign are NOT in the Europe Now 2.0 program presented yesterday, so they are not there for the next 4 years either. And, that's good; we finally have the recognition that the initially given promises - impossible.
At the moment when the simple math of the above-mentioned promises was done, someone smart enough in PES realized that they had exaggerated the promises, which resulted in a drastically different economic program compared to the original one.
However, the new program is also full of inaccurate data on the achieved budget savings, arbitrary constructions on legal solutions that should bring new funds to the budget, imprecise wording regarding the fate of the PIO Fund, but also unfounded promises about a minimum pension of 450 euros and a minimum salary of 700 euros.
In short, the innovated Europe Now 2.0 program represents a significant departure from the pre-election promises of an enormous increase in average wages and pensions while reaching full employment in 12 months. In addition to the above, the realization of the program conceived in this way is questionable because there is a high risk and uncertainty of the implementation of the proposed, succinctly explained reforms, which is shown in table 1.
I will start by quoting sentences from the program that was presented yesterday and which I will give a really brief review.
"First - it is necessary to reduce non-productive spending by 150-200 million euros - we did the same in March 2021 when, with the help of the program budget, which was implemented for the first time in Montenegro, we identified expenses that did not go to salaries or pensions, neither on social security, nor on capital investments, nor on the AGRO-budget".
A simple review of the execution of the budget for 2021 from the SAI report shows that the savings compared to 2020 amounted to only 23,4 million euros (see table 2).
The following statement is added to the above: "By reducing unproductive spending, we return to a fiscally sustainable framework, and we open up space to implement measures that have a short-term effect on the budget - such as a minimum pension of 450 euros, which will be the first proactive measure that citizens will feel as early as January 2024." .
Basing the increase of the minimum pension from 250 to 450 euros in a sustainable way, through savings of only about 20 million euros per year, is not grounded in economic practice. In fact, a fiscally unsustainable framework will be created in public finances that will lead to the need for further borrowing and will not have a fiscally neutral effect.
The part of the ES 2.0 program about the success of the program budget is particularly interesting. Here's what the State Audit Institution says about it in the 2021 budget audit: "According to the Law on the Budget of Montenegro for the year 2021, 157 programs are planned, of which 26 (17%) contain indicators, while 131 or 83% of program contents are without indicators. Likewise, 51% or 122 subprograms did not have indicators, while 118 subprograms or 49% had indicators".
From the above, it is clear that the program budget in 2021 had serious shortcomings in the set indicators that are important for monitoring the implementation of the program budget, and therefore the persistent insistence on the success of the program budget is worrying.
Furthermore, in the ES 2.0 program it is written: "We will vote on additional measures on the revenue side, such as fuel marking, the law on games of chance, etc. We will apply the law that we adopted in 2022 and we will collect 80% of the tax on all illegally acquired property".
The main problem with this promise is that this was already promised once during the preparation of the budget for 2022. The result of these promises in 2022 had a financial effect of a total of zero (0) euros, while the planned collection is about 50 million euros.
It is interesting that it is from these zero euros that extensive infrastructure is planned to be financed: "Thus, we will provide the financial framework necessary for the construction of traffic infrastructure, namely two highways and two expressways, which is defined in our program as one of the key priorities and which represents a necessary prerequisite for the future economic development of Montenegro."
A cursory review of the mentioned projects reveals that several billion euros are needed for their implementation, which means that the proposed measures, even if they are implemented, are not sufficient even for the credit financing of the proposed infrastructure.
I am slowly coming to the most critical part of the program, the PIO Fund reforms: "Also, we will carry out a comprehensive reform of the pension system, which implies the separation of the earned and the social part of the pension. The social part of the pension will be financed by stopping abuses in social welfare, which can be prevented with the social card that was in the drafting stage in the 42nd Government."
A total of two unrelated sentences are dedicated to the most important reform that Montenegrin society needs to implement in the foreseeable future - the reform of the PIO Fund, which has been in a deficit of around 2006 billion euros since 1,6.
From the two sentences of the program, it is unclear what PES will do in this matter, so additional clarification should be sought in order to prevent the risk of canceling contributions to the PIO Fund, which is quite real.
The financial construction of the following thesis from the program is also unclear: "As a fourth step - 12 months after the formation of the Government (by the end of 2024, if it is formed shortly after the parliamentary elections), we will implement a comprehensive reform that will include a minimum wage of 700 euros, a new tax reform that would free employers from fixed costs such as which are direct taxes, which would create a balance between the rights of workers and the sustainability of the economy".
I repeat once again, it is good that there is no mention of the average salary of 1.000 euros. However, there is mention of an increase in the minimum wage from 450 to 700 euros by exempting employers from direct taxes. My question for the PES representatives is only one - from which means will such a large tax exemption for employers be financed, if not from contributions to the PIO Fund, if we have previously exhausted all possibilities for additional revenues from which pension increases and critical infrastructure are planned to be financed.
Finally, PES promises: "With the Europe Now 2.0 program, Montenegro will have the most competitive economy in Europe, with maximum respect for workers' rights, which will lead to a great investment momentum in 2025 and the economic revival of Montenegro".
I have to admit that reaching the status of the most competitive economy in Europe is like a promise in the pageant about world peace - it sounds nice but everyone knows it's impossible.
I remain open to discussion on this topic and publicly invite PES representatives to organize a discussion on the topic of the Europe Now 2.0 program in the coming days.
The author is the CEO of Fidelity consulting
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