The European Commission, in its Report for Montenegro 2025, leaves no room for interpretation: fiscal policy is guided by improvisation, not strategy; the budget process is unpredictable and non-transparent; state-owned enterprises are a systemic risk; statistics are unreliable, and the institutions that should control state spending are weak.
In short, the European Commission is saying what should be obvious: Montenegro does not know exactly how much it spends, where it spends, or why it spends.
As stated in the Report, the Government, through the "Europe Now 2" (ES2) program, weakened its own revenue base, increased current spending and opened the door to a new wave of debt: "Recent measures that weaken the revenue base and increase current spending, coupled with large upcoming repayment obligations, point to significant fiscal vulnerabilities.", it is explicitly stated in the Report.
In other words, the government is spending more than it has, taking on additional debt while simultaneously having to pay off debts, all of which are financed with expensive interest rates. Instead of wisely building reserves for unforeseen situations, Montenegro is now ruthlessly spending what it does not earn. The European Commission warns that "The newly adopted fiscal policy measures do not ensure compliance with fiscal rules or the creation of fiscal reserves that would strengthen resilience" economy to shocks", and that “the strategy does not foresee compliance with deficit and debt rules.”
The European Commission unequivocally states that Montenegro is pursuing a policy of fiscal improvisation because major decisions are made thoughtlessly, ad hoc and based on political billboard promises, rather than in-depth economic analyses in cooperation with the expert public. Instead of using the period of revenue growth due to the influx of a large number of foreign citizens to consolidate the budget, the Government continues to increase public spending and spend the future of all citizens.
The rule of law, which the EC insists on, also implies responsibility for the conscious violation of the fiscal rules of the Law on Budget and Fiscal Responsibility, which the expert public pointed out during the preparation and implementation of the famous billboard program Europe Now 2. It is a matter of time before the creators of the bizarre economic logic, who equated pensioners with 15 and 40 years of service, will face the consequences of their decisions.
A major problem is the EC's statement that the institutions that should control the system still do not exist. The Fiscal Council, which should be an independent guardian of fiscal responsibility, "not yet operational", until the Assembly appointed its members.
""Europe Now 2": the most expensive political campaign ever
The Europe Now 2 program has suffered a rapid collapse because it has become a fiscal experiment with populist elements that are destructive to public finances. The Commission clearly warns: “The main element of the fiscal strategy is the reduction of the tax burden on labor, which leads to a significant loss of revenue, which is only partially compensated by compensatory measures.”
What is written means that the Government of Montenegro consciously reduced its revenues in order to increase political popularity, and it achieved the opposite effect because it is clear to even an economic layman that the formula: lower taxes + higher salaries = smaller budget, is not sustainable in the short term.
Fiscal euphoria was short-lived as inflation “ate up” modest increases in wages and pensions. However, the consequences of such policies are long-term: the state permanently lost its ability to more generously finance healthcare, education, social programs, and pensions.
In reality, “Europe Now 2” permanently increases expenditures, reduces revenues, and pushes the system into fiscal anxiety: productivity does not grow, the economy does not diversify, the state ruthlessly spends unearned and covers the hole with expensive debts. It is now becoming clear to everyone that ES2 was a billboard “reform,” not a serious economic plan, the bill for which will reach future generations.
The results are already visible: The Health Fund receives less funding than it needs, and hospitals are waiting for a budget rebalance. While spending on political parties and other unproductive spending increases, citizens are left without therapy. Fiscal populism is entering a critical phase in which there is no more money to adequately finance the entire social system, which is slowly but surely collapsing.
Budget without credibility
The European Commission estimates that Montenegro still lacks budgetary discipline that would guarantee the credibility of public finances. "The late adoption of the 2025 budget has created limitations in its execution, especially in launching new capital projects and disbursing earmarked funds."
After the formation of the new Ministry of Public Works, which serves more for self-promotion and digital marketing, capital projects are delayed, funds are blocked, and municipalities and ministries cannot plan expenses in a quality way. In parallel, the "budget for citizens", a document that should explain to the public how money is spent, does not exist.
The government boasts about the Public Investment Council, but the Commission notes that "mechanisms for assessing large projects are not complete." In other words, there is a body that decides on hundreds of millions of euros, but no methodology that measures the benefits of those billions. Investments are still planned according to political, not economic criteria. Interstate agreements are concluded, which are fertile ground for corruption.
The budget, in such an environment, becomes a political tool of one party (which knowingly abuses it), rather than an economic instrument for all citizens.
Paper endures everything, the system endures nothing.
The European Commission has been repeating the same thing for years: Montenegro passes laws, but does not implement them. Although the Law on Budget and Fiscal Responsibility was adopted in 2014, the Fiscal Council still does not exist. The Commission now insists: "Implement the law and establish the Fiscal Council in time so that it can consider the budget proposal for 2026."
Special emphasis was placed on state-owned enterprises - from EPCG and Željezara to ToMontenegro and Plantaže. The Commission is seeking “a comprehensive statement on fiscal risks, including an analysis of SOE risks and corporate governance reform”.
In other words, state-owned enterprises are, for the most part, de facto bottomless pits. They formally operate independently, but their losses, subsidies, and guarantees end up being borne by citizens. The government uses them as a political instrument, not as an economic resource.
Without control over state-owned companies, Montenegro cannot talk about fiscal sustainability. In this vacuum, institutional irresponsibility grows: laws are written for Brussels, but not implemented in Montenegro.
The consumer spiral as a state strategy
The Commission warns that Montenegro is returning to a consumption model instead of development. Growth has slowed, tourism is stagnating, and expenditures are rising. “The budget deficit increased in 2024, but was in line with the revised target; however, fiscal vulnerabilities remain due to high debt refinancing needs and measures that weakened the revenue base.”
This is the formula for a crisis: less revenue, more spending, and ever-increasing debt with high interest rates. In a euroized economy, without monetary flexibility, such a policy leads to a crisis of confidence. If fiscal discipline is not introduced, public debt will break the legal limit of 60% of GDP as early as 2025.
The Commission points out that "all relevant actors must improve capacities for producing public finance statistics in accordance with ESA 2010 standards". Progress, however, is "limited".
Therefore, public finance statistics are not yet available; with the implementation of the ESA2010 standard, the debt-to-GDP ratio will increase significantly.
Summary of the EC Report
"Europe Now 2" is not a reform, but a consumerist feast at the expense of the future. The budget is not an instrument of development, but a propaganda billboard for one party. State-owned enterprises are not economic assets but party loot. Fiscal rules have been brutally trampled on and institutions that should control wastefulness do not exist.
That is the anatomy of fiscal improvisation: a system in which decisions are made impulsively, without data, without methodology, and without awareness of the consequences.
A fiscal time bomb is ticking rapidly...
The author is the CEO of Fidelity consulting
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