The boycott of retail chains represents an important message from citizens and a realistic reaction to the rising cost of living, but there has been no reaction from the executive branch in terms of taking concrete measures and talking to representatives of retailers, announced the vice president of the Social Democrats (SD), Boris Mugoša.
"It is really important that citizens show what they think through this form of disobedience. However, these boycotts should have some consequences. First of all, the executive branch was expected to take concrete measures and hold meetings with representatives of retail chains, but, unfortunately, that reaction was absent," Mugoša said in an interview with the Mina-business agency.
He believes that it is important for the Government, as the most responsible, to take concrete measures, but also that it is very important to establish why prices in Montenegro are so high. According to him, it is also important to hear the opinion of domestic agricultural producers, who will be significantly affected.
"The boycott will have a greater impact on domestic agricultural producers who sell most of their products through retail chains," Mugoša said.
He said that citizens, through a one- and two-day boycott of retail chains, showed that they were disappointed with the huge price increases in the previous period.
"Significant price increases have been occurring for several years in a row, as evidenced by official Eurostat data, which showed that prices increased by 40 percent between 2021 and last year," Mugoša said, adding that these data indicate significantly higher price increases than in many eurozone countries, even up to four times compared to some of the most developed countries.
He stated that, as the chairman of the parliamentary Committee on Economy, Finance and Budget, he initiated a thematic session to discuss the issue of high prices, and recalled that within the Government itself there are different opinions about the boycott, given that the Prime Minister supported it, while the Minister of Economic Development has a different position.
Mugoša announced that there has been interest for a long time in considering potential oligopoly in the market, or a collusive economy, in order to determine why prices in Montenegro are so high.
"There are several segments here - from importers and distributors to huge state levies. Some analyses show that state levies here are much higher than in some EU countries, and the state is not giving up its share of levies," said Mugoša.
He also reminded that excise taxes on certain products have recently been increased, but new ones have also been introduced.
"That is why it is important to look at the issue and offer a systemic response. For a long time, I have been proposing concrete measures, taking care not to enter the zone of populism or superficiality, but I have literally proposed concrete ones," Mugoša said, adding that the SD had once proposed limiting margins.
He said that this amendment has become an integral part of the law, on the basis of which actions such as Limited Prices are implemented, which are temporary in nature, but do not solve the problem in a long-term, systemic and sustainable manner.
"We have had some kind of boycott for almost a month, and we have no results in terms of taking systemic measures," Mugoša said, adding that he expected the Government to organize a meeting with employer representatives.
He believes that it is necessary to strengthen domestic production and diversify the economy, which must not be reduced to tourism and trade.
"We import 770 million euros of food annually, almost two million a day, while at the same time the total export from Montenegro of all products and services is around 600 million. This means that we import much more food than we export goods and services in total. This also means that we have serious systemic problems, for which, unfortunately, we are not making a serious step forward in that regard," said Mugoša.
He warned of the situation facing domestic agricultural producers, who are quite vulnerable, because they depend on whether their products will be sold in retail chains.
Mugoša believes that the Montenegrin economy relies predominantly on VAT, which makes up almost half of the budget's revenue, while the decrease in turnover in stores affects precisely that type of tax.
"On the other hand, citizens cannot drag down some processes. They can initiate them, which is why I think the one-day and two-day boycotts represented a strong message from citizens, but they cannot take on the responsibility of running the system. It is known who runs the system and who makes the final decisions in this regard," Mugoša explained.
He said he expects the topic to be discussed in parliament, but that it is up to the executive branch to take concrete steps.
Mugoša believes that the price structure should be analyzed, which includes retail chain margins and government levies, as well as higher customs duties on some products.
"It is very important that we look at all segments and try to do something together to stabilize prices. The reaction of citizens to the increase in the cost of living is completely realistic. On the one hand, wages are increasing, but there is also a drastic increase in prices, which neutralizes the increase in wages," Mugoša said.
He said that action could be taken in the area of state taxes, but also to see where retail chains can correct certain margins.
"The market is free, prices are formed in the way they are formed, but the dialogue between government representatives and employers must be continuous, to improve the business environment, and employers have that socially responsible aspect in their business," Mugoša said.
He added that citizens initially reacted to the one-day and two-day boycotts in much larger numbers, and less and less when it came to some kind of selective boycotts.
"This is for the simple reason that you do not see concrete results of the boycott, and citizens have to meet their basic needs. If you say that one retail chain should be boycotted, citizens will spend their money in another, after which they will return to shop in the market they previously boycotted. So, citizens have to meet their basic needs, and there are no results in price correction, while the state stands aside and does not take concrete measures," said Mugoša.
He reminded that the state extended the Limited Prices campaign until the end of April, but that it did not offer an adequate solution, because there are a number of products where prices have increased drastically.
"If you limit the margin on one part of the product, traders will compensate by increasing prices on other products. Then you have citizens who are rightfully dissatisfied and therefore concrete measures should be taken," Mugoša said.
He added that he hopes that the topic will be raised in the Parliament in the next seven to ten days.
"The Competition Protection Agency is also an important link here, in order to determine whether there is a possible agreement between retail chains on price formation. It is very important to look at all aspects of this issue, because if we only look at one segment, we will not reach a final solution, but will constantly face these challenges," concluded Mugoša.
He announced that this year's budget is sustainable if the Government borrows 1,4 billion euros, but that a rebalance could occur at some point.
"On the other hand, the budget is sustainable, if you borrow 1,4 billion euros, you will be able to survive this year. Next year, borrow another billion, and then another billion, that way you can function to a certain extent. Of course, we are not a huge economic system, so there could be some major shocks. However, this public debt policy will exceed the Maastricht criteria by the end of 2027, and then we should already be part of the EU story," Mugoša said.
He added that the percentage of public debt in some EU countries is higher, but that the essence lies in its structure.
"The question is why we are borrowing. Borrowing for the capital budget is justified, but of the three billion euros of its current side, 280 million or less than ten percent refers to development projects. If the highway is excluded from that 280 million budget, 180 million would remain for all other projects, of which there are 350. A separate story is what goes into the capital budget to satisfy party appetites before the local elections," Mugoša said.
He said that the capital budget for this year, if the part intended for the highway is omitted, is smaller than last year, when it amounted to 220 million euros.
"A few years ago we had 80 projects in the capital budget, and now there are 354. It's an illusion that we're doing a lot, but in essence that's not the number. It's important to list a million projects and say that Montenegro will be a construction site, and when you enter the structure you see that it says - from the cemetery to the house, from the house to the house, and that these are essentially not capital projects," explained Mugoša.
He believes that the economy can function in the short term on the basis of huge debts, but that citizens must be aware that they will repay their debts.
"Unfortunately, it happens that we borrow at significant interest rates, and we do not have a good credit rating on the financial market. I believe that we need to have a serious conversation. The problem is that we do not have an economic development strategy for the next ten or 20 years, but with the arrival of each new government, what the previous one did is canceled and new reforms are launched," said Mugoša.
He recalled that in the last four and a half years, three governments have changed and that each had its own reforms, but that nothing has been done systematically to diversify the economy.
"We cannot function like this. We are vulnerable to external and regional crises, which show how many structural problems we have. Our economy is growing, but it is not developing. Gross domestic product (GDP) is growing, but when you look at its structure, it is growth in personal and state consumption, while there is no growth in investments and the real economy," Mugoša explained.
On the other hand, the economy, according to him, is not developing.
"Micro enterprises make up 93 percent of the total number and employ 41 percent of employees in Montenegro. These enterprises are the essence of the economy, but for the last five years they have been operating at a loss. There is also illiquidity, where in the last five years we have had 2,7 thousand more enterprises in a blockade," Mugoša said.
According to him, last year Montenegro recorded the largest foreign trade deficit in the last 15 years, importing 3,5 billion euros more than it exported.
"We have serious challenges in the economy, which we cannot gloss over. We cannot manipulate the real feelings of people dissatisfied with their living standards, revealing only one side of the story to them, while hiding the fact that essentially nothing is being done," Mugoša said.
In Montenegro, every year we have a budget that is predominantly consumer-oriented and very little development-oriented.
"We have a need to constantly borrow in huge amounts, and on the other hand, a large part of the economy is suffering, especially domestic producers and small and micro enterprises," said Mugoša.
He added that the problem of an insufficiently diversified economy is not from four or five years ago, but has been going on for many years.
"We have had a problem with economic diversification for many years, but you cannot use the argument that it was not done before, so it is not needed now. On the other hand, the reforms that were implemented in the previous period were based on the wrong foundation, and then we have what is happening to us now," Mugoša said.
He believes that it is necessary to ensure the growth of the competitiveness of the Montenegrin economy.
"If we become an EU member in two or three years, how will our employers be competitive with those from Europe?" Mugoša asked, adding that he proposed that 3,7 million euros be allocated annually for the competitiveness of the economy, while a few years ago, when the revenue side of the budget was lower, six million were allocated," Mugoša said.
He believes that Montenegro will have a problem of a shortage of labor, which is already evident, but also that domestic employers are facing enormous competition.
"We are constantly spinning some story, but we are not doing anything concrete to move things from the deadlock, we are not improving business conditions, especially in tourism. We need to sit down and agree on some things," Mugoša said.
He said that it seems to him that some moves are being made in certain segments that could cause a lot of damage to the sustainability of the Montenegrin economy in the long term.
Commenting on the four-day budget debate in parliament, in which opposition party MPs did not participate, Mugoša said that it was a farce full of platitudes, and that it was deliberately protracted.
"Due to some behind-the-scenes agreements, the presentations dragged on for four days, even though there were not many MPs presenting on the budget. It was a mask, a farce for what was happening behind the public eye, which was the so-called haggling or bargaining, or a form of trade between coalition partners in power, in order to reach a conclusion regarding capital projects," Mugoša said.
He said that 100 amendments were first submitted, which were then withdrawn, in order to adopt a conclusion that changes the budget justification, which is essentially non-binding.
Mugoša added that since the change of government in 2020, we have over two billion euros in debt, and another three billion are planned by 2027.
"I always say that we don't really have to borrow to repay old debts and finance the implementation of the capital budget from borrowing, but you can, through more efficient operations, return something from the surplus of current consumption. Unfortunately, in Montenegro you see that expenditures are constantly growing, which the state cannot compensate through revenues, so it goes into debt and increases tax rates," said Mugoša.
He stated that in this surge of populism, he is bothered by the fact that only one side of the story is being told to citizens - that their salaries have increased.
"For a significant number of citizens, the gross salary, which is a legal category, was not increased, but the net salary, by reducing contributions, but then the state realized that it was short of money, because it waived contributions, so it transferred this to an increase in the value added tax rate and the introduction of new excise duties. This results in citizens having a higher salary, but also higher prices," Mugoša said.
He said that the Montenegrin economy is actually an economy of sun and snow.
"It bothers me that we are not taking care and systematically changing the economy, which we have reduced to an economy of sun and snow. If we have snow in the winter - great, if we don't - it's a serious problem. When summer comes, we look to the sky to see if there will be sun from May or if we will have a rainy May or possibly the beginning of June, which creates big problems for our budget," explained Mugoša.
He recalled that he proposed amendments to the budget that related to the costs of official travel and representation, service contracts, and consulting and legal services, but that they were all rejected.
"The budget projects that 9,1 million euros will be allocated for travel and representation, 2,5 million more than last year. We proposed that these 2,5 million be directed to beneficiaries of family financial support, but this was rejected," said Mugoša.
He also proposed that out of the 16,6 million euros planned for temporary contracts, one million be directed to free snacks and transportation for children from socially vulnerable families, but that was also rejected.
"We proposed that out of the 45 million euros earmarked for consulting services, two million be redirected to improving the competitiveness of the economy, but that was also rejected," said Mugoša.
The last amendment related to legal services, planned at 9,5 million, of which 1,5 million euros were to be directed towards new employment.
Mugoša believes that the proposed amendments were specific and did not increase the expenditure side of the budget.
"I proposed redirecting certain funds from expenditures on official travel and consulting contracts to social welfare, improving competitiveness and creating jobs, but all of that was rejected. I regret that during the year the need for additional funds on these items will become apparent and then they will try to make some kind of redirection and rebalance," Mugoša said.
He believes that the problem was that the amendments were proposed by the opposition.
"As if narrow party interests were more important than the general interest. After all, as if anyone would know in a few months who proposed the amendments, it would be important to direct those funds where they are needed," Mugoša said.
He said that Montenegro's problem is the huge growth of unproductive consumption, which must be rationalized.
"We see what is happening to us in public administration. On the one hand, you have the prime minister saying that the number of employees in public administration has been reduced, while the relevant minister says that this number has been drastically increased. I said in parliament that there should be no more mention of optimizing the number of employees, because we understood it as an increase," Mugoša said.
He added that there is an increase in employment in unproductive positions in public administration, and that the system cannot function like this, because the expenditure side of the budget is constantly being pumped.
"Where can we increase revenues except through levies on the economy and citizens, which will lead to price increases again. If you have more money in circulation, if you administratively increase certain items without keeping track of the other side, the increase in money in circulation alone leads to inflation. On the other hand, you increase VAT rates, introduce new excise duties and all of that burdens inputs in price formation, and then you have their growth," explained Mugoša.
He believes that a flawed system has been created for decades, and that a good part of the price increase is a consequence of the structural vulnerability of the economy and certain administrative reform measures that only focused on that segment.
Mugoša also warned that the functioning of the economy cannot be reduced to a billboard.
"You promised citizens on the billboard an increase in pensions of 50 to 60 euros, and now you see that this only applies to those who have a pension of over 730 euros. That's 12 thousand out of a total of 120 thousand pensioners, while the rest will have a smaller increase. Then you tell everyone a 25 percent increase in net wages, and it doesn't happen. Then you promise full employment, and it doesn't happen. Then you say a seven-hour working day. Then this price increase happens," Mugoša said.
He believes that a serious conversation is necessary about how the economy will develop in the next ten to 20 years, and not about everyone changing it in their own way.
When asked what would have happened if the salaries of employees had not been increased through the implementation of the Europe Now 1 and 2 programs, and if prices had increased, he replied that this was an argument that needed to be fully debunked.
"This is the manipulation that someone was against increasing wages. We were also saying back then that we were in favor of increasing wages, but that it should ensure a better life, because the data shows that the standard of living has not increased. So, no one is against the increase, but that the increase must result in a better standard of living, and not be done because of pre-election promises," Mugoša said.
On the one hand, according to him, earnings have increased, but on the other hand, prices have gone wild, or rather, their drastic growth. In that segment, nothing has been done except for temporary price-limiting actions, which are good, but have a temporary character.
"A lot of things were done in that area that shouldn't have been done. Not to mention the promise of a minimum wage of 700 euros, and when it became clear that it couldn't be done, they invented two minimum wages of 600 and 800 euros, so now you have a problem in the system, where a kind of disproportion, discrimination and dissatisfaction are being created," Mugoša said.
He also believes that the Government should not announce monthly data on the budget surplus or deficit, because it is not a relevant statistical category.
"Why? Because you can not pay invoices, so that your income comes in, but you have not paid your expenses, because the invoices have not yet arrived or you have postponed them and then you show a surplus. So for ten months they said how everything is working fantastically with the budget, how we have ten months of surplus, only to have a deficit of over 200 million two months towards the end of last year, because many invoices arrived for collection at the end of the year," explained Mugoša.
This, according to him, creates a mask that everything is functioning fantastically and that a surplus is recorded, while the year ends with a deficit.
"I think there is a lack of honesty towards citizens about the real state of the Montenegrin economy, rather than constantly creating a false picture," Mugoša said.
He said that the adopted amendments to the Law on Pension and Disability Insurance, which relate to beneficiaries of proportional pensions, represent a step forward, given that they provide for the payment of the difference to the minimum pension in Montenegro if the sum of pensions does not exceed 450 euros.
"This is a kind of step forward in that area. I am mentioning proportional pensioners from 2020, because they have been skipped several times, and these are people who received 80, 90 or 100 euros when their pensions from multiple countries are added together," Mugoša said.
He recalled that at the end of 2023, he proposed a conclusion that the status of beneficiaries of proportional pensions would be resolved as of April last year. Unfortunately, nine months have passed since the Government failed to comply with what it accepted and the Parliament adopted.
"Finally, we have this legal solution that is indisputable, that should have happened, it just didn't have to wait. I hope that proportional pensioners will be satisfied, although we have to keep in mind that for everyone who receives minimum pensions, the situation is frozen when it comes to adjustment until the end of this year," concluded Mugoša.
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