The Europe Now 2 program is not fiscally neutral, it exposes public finances to external influences and makes them additionally dependent on fluctuations in final consumption, it was assessed in the Fiscal Strategy analysis carried out by the Cabinet of the Montenegrin President, Jakov Milatović.
In the conclusions of the analysis of the Fiscal Strategy of Montenegro for the period from now until 2027, it is stated that in the event that significant economic growth does not occur, there are no measures to compensate for the lost revenues, so its sustainability is called into question.
"While the short-term positive effects of this program are the growth of net income and the reduction of inequality, by stimulating final consumption, it will continue to stimulate inflation in the country, thus neutralizing the increase in disposable income for the largest number of citizens. Therefore, a detailed analysis of the effects and impact of the program on the standard of citizens and the competitiveness of the economy," states the analysis, which was done, as announced, as a contribution to the public debate on that document.
An additional recommendation is to define a methodology for determining the minimum wage that would include the growth of the cost of living and the movement of the average wage, all with the aim of increasing the predictability of the economy and minimizing the political influence in its determination.
"It is necessary to take a detailed look at the changes that may occur in the calculation of future pensions as well as changes in the employee's annual personal coefficient, so a detailed analysis is recommended that would eliminate potential inconsistencies and ensure the long-term sustainability of pension payments," the analysis states.
The planned reforms, as announced, carry the risk of fundamentally changing the structure of the pension system in Montenegro, where the pension, instead of an economic one, would become a dominantly social category.
The conclusions state that there is no clearly presented and documented connection between the measures and policies proposed in the Draft Fiscal Strategy and previously defined goals, such as accelerating economic growth, creating new jobs and accelerated convergence towards the countries of the European Union.
"Therefore, decision-makers are recommended to create and implement those measures and policies that will result in an increase in the rate of economic growth in the long term, and these can only be structural reforms on the supply side accompanied by the strengthening of institutions and an adequate legal framework," said Milatović's Cabinet.
Planned investments in capital projects are, as specified, significantly lower than what is needed in order for a country, with the level of income and level of infrastructure development such as Montenegro, to achieve sustainable economic growth.
"Capital investments are key to improving infrastructure, so economic theory recommends that they be at the level of seven percent of gross domestic product (GDP), which was mostly the case with the countries of Central and Eastern Europe during the period of their accelerated economic growth," the announcement states.
According to them, it is necessary to improve transparency and consistency in the planning of economic policies, which would contribute to greater predictability and trust in the credibility of economic policy makers, as well as stimulating economic activities.
"It is necessary to take into account the significant regional inequalities that exist, which were not taken into account during the planning of measures, so it can lead to the deepening of already existing regional differences", the analysis states.
The high level of budget deficit, the growth of interest costs and the growth of public debt in the coming period, as assessed, will not contribute to the stability of public finances, so it is necessary to take concrete measures in order to minimize fiscal risks, to maintain the budget deficit at a level of less than three percent of GDP. and, which is also an obligation in the EU accession process, and the public debt was reduced.
"The surplus of current spending is a positive, but not sufficient feature of the forecasted fiscal framework, so it is recommended that decision-makers actively devote themselves to improving fiscal discipline, fighting against the gray economy, and improving the efficiency of public spending," the announcement concludes.
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