In an economic context, "buying time" refers to strategies employed to delay or avoid fulfilling promises or obligations. This notion becomes extremely important in situations where politicians make ambitious pre-election promises, such as unsustainable increases in wages and pensions, and achieving full employment, but then face practical or financial challenges in fulfilling them. These promises often target the basic needs and expectations of the working class and retirees, creating a strong emotional and social connection that can be understood as a concretization of hope.
After coming to power, one of the frequent tactics to delay the fulfillment of those promises is to use the bureaucracy and legislative processes as an excuse for not implementing reforms, which can take years, as we have witnessed since June 2023.
The "Big Time Purchase" trilogy refers to the never-before-released Europe Now 2 (ES2) program and provides a multidimensional look at the controversy and mystery surrounding it.
Big promises without being grounded in numbers
To begin with, let's remember the big promises from May 2023, which can be reduced to the following: we will work less, we will receive higher salaries and pensions; with all that, we will have full employment. All in 12 months.
"We will save 200 million in non-productive costs", "As we have announced since September 2022, the "Europe Now 2.0" program will be implemented in a completely identical way to the "Europe Now 1.0" program. "A year of fiscal consolidation and the implementation of various measures is needed so that citizens feel all the benefits of the continuation of our successful program from December 2021"
However, what does the Draft Law on the Budget of Montenegro for 2024 bring us? Instead of systemic reforms, the 2024 budget follows the same continuity as the previous one, without significant changes. Fiscal consolidation has not only not been done, but on the contrary: in the budget for 2024, we have fiscal expansion on the expenditure side. Current expenses are higher by 252 million euros or 13% than the previous year, while it should be especially emphasized increase in non-productive costs for ten million euros (and not a reduction of 150 to 200 million euros, as was announced and from which the announced reform would be financed).
In May, a comprehensive reform of the pension system was announced, which implies the separation of the earned and 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 phase in the 42nd Government".
The draft law on the budget of Montenegro for 2024, the social part of the pension not provided; the increase in minimum pensions is financed from other current incomes and not from "stopping social abuses".
"Those unproductive costs are a euphemism for swagger and corruption, which is why our public debt is 4 billion euros = 20 years x 200 million euros.” As already stated, non-productive costs did not decrease in 2024, but quite the opposite - they increased, which implies a logical continuation of practices of arrogance and corruption.
"We will apply the law that we adopted in 2022 and we will collect 80% of the tax on all illegally acquired property". Simply put, this income is simple not in the budget for 2024.
The ES2 program is shrouded in secrecy
The ES2 program was pompously announced in May 2023 through clear billboards, targeted short form videos, effective catchphrases and a firm promise: "The Europe Now program was implemented 2 to 12 months from the day the 44th Government of Montenegro took office".
What do we have in reality? After 8 months, the ES2 program has not been released. Chronologically, the announcement of the program was announced immediately after the elections (June), then after the formation of the 44th Government of Montenegro (October), then after the budget rebalancing (November) and finally in December, when it was announced that the reform measures of the ES2 program would be implemented in the budget for the year 2024.
When all the mentioned deadlines passed in silence, we got the latest publication deadline - the fiscal strategy is waiting to be prepared in the second quarter of 2024.
The ES2 program is wrapped in a mysterious veil, becoming a kind of mythological document in the public discourse, which would therefore certainly be found in the oeuvre of Živko Nikolić. Despite the frequent mention that the program is worked out to the last detail and ready for publication, until now no one has seen it. Therefore, the publication of this program becomes necessity and urgent need, primarily because of the citizens' right to be informed, but also because of the economy, which is crying out for a stable and predictable economic environment, given the announced deep and pervasive impact that ES2 can have on all segments of the Montenegrin economy.
All this indicates that the ES2 program was neither written nor developed at the time it appeared. Although we have often heard how it is "ES2 program ready and elaborated in detail" it is becoming more and more obvious to citizens that this program actually even to this day it has not been written, much less elaborated. Instead, institutional expertise is currently being used to prepare and develop the ES2 programme.
How else can one understand the situation in which does not publish a supposedly detailed and ready program that promises the revival of Montenegro within 12 months, while at the same time paying attention to less important things that seem trivial compared to the importance of the ES2 program?
In addition to the deafening silence, the excuses for delaying the delivery of the ES2 software are often heard recently: "The budget for 2024 is a measure of what is possible", "We have to pay back old debts", "Everything cannot be done overnight". However, these justifications absolutely cannot be accepted, because all these factors were already known in May 2023; no one insisted on making promises that they already knew could not be fulfilled.
The ES2 program has no foundation in known practice
In addition to the numerous risks that it entails, the ES2 program, which provides for the abolition of pension contributions and the transfer of pension funding entirely to VAT and similar taxes, and the continuation of pension payments of various amounts, it is not known anywhere in the world.
According to publicly available data, of all OECD member countries, only New Zealand has a mandatory pension contribution rate of 0%, which is foreseen by the ES2 program. However, unlike in Montenegro, pensions in New Zealand, which are financed from the budget in this way, are the same for all pensioners and amount to about 850 euros per month.
Additionally, New Zealand's personal income tax is much higher and progressive: it starts at 10% and progressively increases to 39%. Let us remind you that the ES2 program implies an equal increase of all salaries by 25%.
Tomorrow: Calculation of the net fiscal effect of ES2, collision with strategic documents, comparison of ES1 and ES2.
The author is the CEO of Fidelity consulting
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