The draft fiscal strategy represents a significant deviation from pre-election promises and the post-election calculator used to develop the "Europe Now 2" program - there is no minimum wage of 700 euros, no average pension of 600 euros, no increase of 25 percent for all employees who receive a salary over 565 euros, no working hours of seven hours, no full employment, all of which had to be achieved by the first of November this year.
This was pointed out by the director of "Fidelity Consulting" Miloš Vuković yesterday at the round table of the Ministry of Finance on the draft fiscal strategy.
The same evaluations were expressed by almost all the participants of the round table, who pointed out in their discussions that nothing is being done to reduce the state administration, but that it is only increasing.
It was ordered to give crumbs through an increase in net salaries, while on the other hand, the PIO Fund is collapsing, which will be in the red when contributions of 400 million euros are abolished, that the regular increase in pensions is being tried to be presented as an increase, and that all pensions would have to increase by around 21 percent to meet the pre-election increase.
It was pointed out that it is unfair to almost equalize salaries for beginners and those with longer working experience, as well as pensions for someone who has worked for 40 years and someone who has worked for 15 years....
The union's position is that salaries should be increased through an increase in the calculation value of the coefficient, and not through the abolition of contributions, it was pointed out that the state is collapsing domestic production through the planned introduction of an excise tax on "still wines"...
The participants of the round table complained that the prime minister did not attend Milojko Spajic, his chief of staff Branko Krvavac who, according to the Prime Minister's admission, is the creator of the program and the Minister of Finance Novica Vuković. From the round table, it was ordered to "walk around Paris during the Olympic Games", and that they sent the directors of the directorates (assistant ministers) in the Ministry of Finance "to receive criticism even though they are not guilty of anything".
Representatives of the Ministry of Finance and advisers to the Prime Minister Milena Milović they repeated that the public finance system is sustainable, that all citizens will receive the promised salary increase, that the tax policy is predictable, that nothing will be financed from debt except for capital projects...
Congratulations to the Government
"So, when we look at the numbers, 400.000 citizens of Montenegro were let down in June 2023, to put it mildly. Therefore, I take the opportunity to congratulate the Government and the Ministry of Finance for abandoning the 'Europe Now 2' program, which was known from the start as impossible to implement," Vuković pointed out.
According to him, the Draft Fiscal Strategy slightly violates the Maastricht criteria and the law on budget and fiscal responsibility through the planned deficit of 3,4 percent at the end of 2027, while the public debt in 2027 will reach a value of 65 percent of GDP.
"Additionally, our public debt is increasing from 4,5 billion euros to 5,6 billion euros or 25 percent in just three years. The draft fiscal strategy is sparse with data. Tables with the number of employees, pensioners, as well as the "mathematics" of how certain numbers were arrived at in the projections are missing, which is why I believe that it is not sufficiently transparent. Additionally, there is a lack of detailed data on the planned infrastructure projects with clear amounts and deadlines for their implementation so that they can be monitored," said Vuković.
First, the pension system had to be reformed
He assessed that the first structural shortcoming of this document is its prematurity in relation to the previously necessary development of a sectoral policy dealing with the reform of the pension system.
“Pension reform is a major undertaking that can have a significant impact on people's lives, so it is crucial that the process is managed carefully and thoughtfully to ensure a fair and efficient system. This reform represents an ambitious undertaking, the planning and implementation of which represents an extremely complex task. Therefore, the fiscal strategy is not a document that can deal with such a radical reform of the pension system without the necessary detailed and complex analyzes through sectoral policies, because it is adopted for a period of three years while the reform of the pension system is carried out for the next 40 years and must be the product of consensus after an extensive discussion of all social actors. "Also, the pension system reform strategy must be a precursor to the fiscal strategy, and not its consequence, as is the case now," Vuković pointed out.
The FS conceived in this way will create a huge transitional cost of financing pensions, which, he believes, will fall on the burden of all citizens in the long run, and will especially affect the poorest sections of the population.
"I would like to remind you that in 2023, the PIO Fund had the lowest deficit in its history of only 35 million euros, which achieved its financial balance. According to the proposed Fiscal Strategy Draft, the PIO fund deficit in 2025 will amount to 383 million euros or about five percent of GDP with a similar trend in the following years," said Vuković.
Another structural deficiency of the document, he believes, is the contradiction of the effects of reducing the tax burden on the labor market.
"The government defends the adoption of a fiscal strategy conceived in this way, a "heavy" three percent of GDP per year, because, as it says, it creates the most favorable tax framework for employers in order to encourage employment. However, the fiscal strategy itself clearly states that the unemployment rate at the end of 2027 will remain at a high level of 9,8 percent. You will admit - such a high unemployment rate is contradictory to the basic premise that the FS is passed in order to create new jobs, for which three percent of GDP is spent annually", said Vuković.
According to him, the main pitfall of the Fiscal Strategy Draft is the assumption that cash on hand continues to be paid to the same extent as during the implementation of the ES1 program.
"As this is not the case, in this way a large amount of new money is pumped into the system, which will greatly stimulate inflation because wages will rise, and thus pensions will be adjusted, which represents a classic fiscal expansion that cannot last indefinitely . So, it is clear that the state inefficiently spends 240 million euros of fiscal "munitions", which means that in the future it will be left without significant fiscal policy tools. I will remind you that Montenegro does not even conduct an independent monetary policy, so we will be left without any options in case of unforeseen external shocks that are possible", pointed out Vuković.
Pensions will be less by around 26 percent
Union representatives also emphasized that the draft fiscal strategy does not contain what was promised through the "Europe Now 2" program, which is a 25 percent salary increase. The position of the trade unionists is that salaries should be increased through the calculated value of the salary coefficient, and not through a reduction in contributions for pension and disability insurance.
"I do not speak politically because there are many measures that we support. We were only invited to Prime Minister Spajić's office to be told what was going to happen. We have not seen anything being done to reduce the administration, but it is only increasing. Contributions for pension and disability insurance are canceled and a net increase is given. These are crumbs compared to what we are losing, and we are losing a lot. We will have a PIO Fund deficit. According to the data we received from the Fund, there is now a deficit of 100 million, and with this program, as we were told by the Fund, the deficit will be around 400 million. So we get 50 euros each, and we will be short of 400 million, with which we reward employers. With that money, we were able to launch projects that will create new value. We were in favor of increasing the calculated value of the coefficient for wages, and not canceling contributions," said the general secretary of the Union of Free Trade Unions. Srđa Keković.
President of the Union of State Administration Nenad Rakočević he said that they were never against salary increases, but now the salary is not increased, but reduced by reducing the gross earnings.
"It would be logical to increase the calculation value of the coefficient and thus increase salaries, and instead introduce a minimum of 600 and 800 euros. Gross earnings are decreasing, even though net wages are increasing. "According to our calculations, pensions will be 26-27 percent lower due to this reform," said Rakočević.
Former Assistant Minister of Labour Jovo Pajović he said that the draft of the fiscal strategy does not describe the reform of the "Europe Now 2" program, which was presented in the prime minister's exposé.
"There is no average pension of 600 euros that was promised, in order to fulfill that, all pensions should be increased by 21,8 percent, and we have a selective increase in pensions. Someone who worked for 40 years and paid contributions on a salary of 900 euros and someone who worked for 15 years and paid contributions on the minimum wage have the same pension," Pajović said.
He also pointed out that pensions do not increase, but are only adjusted regularly, which is a big difference.
Advisor to the Prime Minister, Milena Milović answered that the gross salary is the responsibility of the employer and that it is not counted in the calculation of the pension, while the gross base is calculated for the pension and it is the responsibility of the employee.
"If there was no increase in average earnings, there would be no increase in pensions either. When we talk about the calculation value of the coefficient, if it were to increase and thus increase salaries, it would create new costs for employers," Milović pointed out.
Member of the URA movement Milos Konatar said that the fiscal strategy is not what was promised in the elections, and that two minimum wages are being introduced, resulting in an average of 700 euros.
"At the same time, not everyone who is a university graduate will have a salary of 800 euros," said Konatar, while Milović added that "this is not socialism."
Filip Lazović (UPCG) said that it was their proposal to introduce two minimum wages in order to avoid what was brought about by the linear increase in wages through the "Europe Now 1" program.
"Everyone is talking about a 25 percent increase, but no one is asking whether the private sector can withstand it. We have a paradox that now it is more attractive to work in the public sector, where salaries are higher, than in the private sector that is financed by the public," said Lazović.
University professor Branka Bosniak stated that at the expense of a safe old age, salaries are now increasing, and in addition, people are being stimulated to retire. She emphasized that it is not fair to equalize salaries, citing the example of someone whose minimum salary will be 800 euros, compared to a faculty professor who is a doctor and whose salary is 900 euros.
"This will increase the number of employees in the public administration even more and encourage the purchase of diplomas," she emphasized.
The cost of fuel marking can be paid by citizens
Secretary General of Oil Companies Drasko Strikovic said that the growth of income in that activity should be replaced by suppressing the gray economy, which oil companies can contribute to, and not by introducing fuel marking, which is foreseen in the draft fiscal strategy.
"Five million euros are planned for fuel marking. It is a complex and expensive project, and the cost of that work can be passed on to the citizens," said Striković.
Dragica Savković in front of the Red Cross, she pointed out that the announced reform will bring them a monthly cost of 10.000 euros, and that they will be forced to stop the home help service, which is implemented through a joint program with the state, while Marina Vujacic (Association of Disabled Youth) said that the jump in salaries, which are close to pensions, will encourage them to retire and that such cases are already happening.
Advisor to the President of the State, Mladen Grgić, said that according to Niji's calculation, the state will lose income of at least 300 million euros, and that the compensatory measures offered in the draft document are below standard.
"Additionally, the growth of inflation will be encouraged through a renewed increase in wages." Inflation is no longer influenced by external factors but by internal ones. The reform will create problems for the PIO Fund," Grgić said.
Milović said that with the draft of the fiscal strategy, the tax policy is predictable and transparent, that they will achieve the 240 million that they planned.
"There is no cataclysmic scenario that we have heard lately. When it comes to the budget deficit, it is due to the capital budget. In order to unlock the economy, we must invest in infrastructure," said Milović.
High inflation corresponds to the budget
Vuković also pointed out that the structural deficiency of the Fiscal Strategy Draft is the lack of response to entrenched inflation.
"The draft does not deal with the basic problem due to which inflation in Montenegro is significantly higher compared to the EU - the chain building of margins that occurs on the part of importers, distributors and finally retailers. In addition, the draft does not contain any measures related to the management of the rapid increase in apartment prices and rents, which creates pressure on domiciled residents who cannot buy an apartment or rent at acceptable prices. These two phenomena should have been treated most strongly in the draft fiscal strategy. However, we know that high inflation suits the budget because revenues cannot be replenished with the planned dynamics of falling inflation," Vuković emphasized.
In addition to the absence of the fight against inflation, from which large capital from certain industries benefits the most, Vuković believes that it is additionally rewarded by the abolition of contributions, which will result in additional profits that will arise as a result of inflation and new credit debts of citizens at expensive interest rates planned for FS.
The "honoring" of employers at the expense of pensions of existing workers represents an unfair model of redistribution of future money of currently employed citizens. Exemption from the aforementioned contributions is a classic transfer of money from the future accounts of citizens to the current accounts of employers, after a year in which record profits of the economy were achieved," Vuković emphasized.
Cabinet budget to the detriment of Plantations and private wine producers
Producers of domestic wines believe that the introduction of an excise tax on still wines is disastrous for that branch, which will shut down small producers, and the company "Plantaža" will also suffer losses.
"We appeal not to introduce an excise tax on still wines. The supply of local wines and the quality of tourist services are causally linked. Montenegro is also the cradle of many autochthonous varieties such as vranc and has great potential for the development of winemaking and viticulture", said Ljubiša Krgović, a representative of this part of the economy, who sent an open letter to the Minister of Agriculture Vladimir Joković and the president of the Chamber of Commerce, Nina Drakić.
Krgović said that in the last 20 years, significant efforts have been made by the state and international donors, and recently through the Ipard program, to raise and revitalize wine production in the private sector.
"We already have about 10 producers who produce from 10 to 50.000 bottles per year. An unreasonable, thoughtless decision was made in the cabinet budget to introduce an excise tax on still wines due to four million missing revenues, which would be disastrous for everyone, especially small wine producers. Such a decision devalues all the efforts made so far to revitalize the wine sector and calls into question the sustainability of this production. The decision particularly affects private producers, while the state-owned company has been receiving state aid in various ways for several years," emphasized Krgović.
According to the CEFT agreement, up to the level of the agreed quota, imported wines are exempt from excise duty, so this decision would expose domestic wines to unfair competition.
The representative of "Plantaž" Sanja Radonjić said that no wine country has an excise tax on wines, and Montenegro imports 25 cents per liter.
"You stated in the explanation of this measure that the wines are harmful and the team itself caused damage to us, who are working to promote the brand and to tourist destinations. In addition, it has been scientifically proven that wine is good for health, that is, consumption in small quantities. "Planaže" are the most present on the domestic market, and if excise taxes are introduced, the prices will be higher," Radonjić pointed out.
Assistant Minister of Finance for Tax and Customs System Biljana Peranović said that with this measure they wanted to "broaden tax coverage" and that "countries from the surrounding area that do not have this excise tax, have a higher tax burden on work".
The false emperor Šćepan Mali
Businessman Vladan Vujović said that it was a shame that the prime minister, the minister and the head of the cabinet went for a walk in Paris and did not come to the public debate.
"I agree that we should start increasing the salary, but we don't have a good starting point," Ivanovic said.
He said that every now and then "some false emperor Šćepan Mali befalls us, that the prime minister lies every now and then and that he should be allowed to blow his mind".
He asked if they had included in the document arbitrations that burden the state finances of "Atlas Group", "Montrose", and potential arbitrations of "Mia Investment", "Maljevik", "Skočiđevojka"...
Note: In the original version of the text, the name of businessman Vladan Vujović was wrongly listed as Vladan Ivanović, while the name of Jov Pajović was listed as Jovo Pejović, for which "Vijesti" apologizes.
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