A long way to the EU average: Spajić announced a big salary increase, but refuses to answer how

It is good to set ambitious goals, but behind them there must be a lot of work, changes and reforms, says Raško Konjević. The Union of Free Trade Unions says that political turmoil is hindering progress and economic development. EUROSTAT data show that Montenegro "falls far behind" the average salary in the EU

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Spajić at the Prime Minister's Hour, Photo: BORIS PEJOVIC
Spajić at the Prime Minister's Hour, Photo: BORIS PEJOVIC
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

In order to reach an average salary like in the European Union (EU), reforms must be deep and transformative. A better business environment, higher productivity, stable public finances and the political scene are some of the improvements needed to enter the "European club".

This is how "Vijesti" interlocutors comment on the Prime Minister's announcement Milojko Spajić, who on April 16, before the Foreign Affairs Committee of the European Parliament (EP), said that by the time Montenegro is proposed for membership, it could have a higher average salary than the EU average.

Several members of the executive power, as well as the president of the state Jakov Milatovic, they said that Montenegro's goal is to become the 28th member of the EU by 2028.

According to data from the European Statistical Office (EUROSTAT), the average monthly net income of a single person without children in the EU in 2023 was 2.351 euros.

The average net salary in Montenegro, as announced by the Statistics Authority (Monstat), was 825 euros in March.

The difference in gross earnings is even greater - EUROSTAT data from 2021 show that the average gross earnings in the EU amounted to almost 2.800 euros, while in Montenegro, according to Monstat, it was 1.003 euros.

The Prime Minister stated before the Committee that the average salary in Montenegro will be 1.000 euros by the end of the year, without specifying the month in which this will happen. He repeated that on Thursday at the Prime Minister's Hour.

The Europe Now Movement (PES) announced on February 11 that Spajić will resign if the average and minimum wages are not increased to 1000 and 700 euros by October 31 of this year.

For more than two weeks, Spajić's cabinet has not answered the questions of "Vijesti" about how the government plans to increase the average salary by more than 1.500 euros in three and a half years and whether they will resign if they do not fulfill the promise.

There is no magic wand

Secretary General of the Montenegrin Association of Employers (CUP) Rasko Konjević told "Vijesti" that there is no "magic wand" that will turn Montenegrin earnings into European ones.

"There is only the possibility of creating a European business environment in which the domestic economy, i.e. employers, will be a true partner - part of the decision-making process and creation of an environment that will be able to produce better results, and thus better conditions for employees in our companies", he points out. .

To create a European business environment: Konjević
To create a European business environment: Konjevićphoto: CUP

Konjević assessed that companies as a whole, not governments, enter the EU, and that by receiving a positive Report on the Fulfillment of Interim Benchmarks (IBAR), Montenegro will step into the final section of the European road.

He added that it is good to set ambitious goals, but behind them there must be a lot of work, changes and reforms.

"The matter will be dominant on us when we are ready to receive the invitation for membership. Is it possible in 2028, but it implies a lot of work, energy, reforms, dialogue and stability. Of course, this also means maintaining a good climate for enlargement in the new composition of European institutions. An important segment of those reforms is the creation of a better business environment, which can create conditions for the further strengthening of the Montenegrin economy", says the interlocutor.

Decades of work await us

The Union of Free Trade Unions (USSCG) says that the political turmoil present in recent years is further hindering the progress and economic development of Montenegro.

"First and foremost, it is very important to establish a stable political scene and strengthen the tripartite dialogue of social partners who are key in making decisions of importance and interest for the economy and citizens", the USSCG assessed for "Vijesti".

That trade union organization states that, according to EUROSTAT data published in the middle of last year, the gross domestic product (GDP) per inhabitant according to the standard of purchasing power in Montenegro was 50 percent of the EU average.

825

In March, the average net salary in Montenegro was EUR 2023, while in the EU, a single person without children in 2.351 earned almost three times more - EUR XNUMX

They pointed out that the purchasing power of Montenegrin citizens is many times lower than that of Luxembourg, a country with which Montenegro is often compared, mainly because of its size and population.

"...It is evident that decades of work and commitment await us in order to even come close to the standard of living of that country".

A thousand is not impossible, but...

Raško Konjević says that the goal of an average salary of 1.000 euros is not impossible, especially if it is encouraged by the "further relaxation" of labor costs by employers.

"The state of the labor market is partly already putting pressure on employers to increase wages. The idea of ​​continuing to reduce labor costs is certainly a good one in order to achieve better business conditions and the possibility of 'spilling' these costs into the wages of employees", explains Konjević.

He emphasized that the stability of public finances is important for the overall economy, that is, the business environment:

"Any instability negatively affects economic flows. And we operate in quite complicated regional and wider relations, so any additional internal instability in these conditions is more visible".

USSCG points out that they support every effort of the Government to increase citizens' incomes, but that they must have a clear picture of how to get there.

Speaking about the "Europe Now 2" program, which was the platform of PES in the parliamentary elections held in June last year, the USSCG states that the public still knows almost no details.

"USSCG will support any idea that is sustainable and that would bring economic benefits to employees and citizens, but not at the cost of jeopardizing public finances."

They estimate that the citizens of the third age have so far been the only ones to feel the benefits of that program, but also that they were the most vulnerable and on the edge of existence during the entire period of the crisis.

"That is why it is especially important to preserve the PIO Fund, which at one point, before the increase in pensions at the beginning of the year, was almost self-sustaining. In that direction, we will carefully monitor the situation in the coming period", said the USSCG.

Spajić is on the Prime Minister's Hour, answering a question from the head of the Parliamentary Club of the Social Democrats (SD) Boris Mugoša, repeated that the average salary will be 1.000 euros by the end of the year.

Mugoša asked whether during this year and in what way the promise of increasing the average and minimum net wages of all employees in Montenegro by about 25 percent will be fulfilled.

"The average salary will be 1.000 euros by the end of this year, as we said and promised, it will happen. Don't worry, there will be more earnings for you too, the net earnings will increase and there won't be any problem. Regarding the International Monetary Fund (IMF), I see that you get information from the media that constantly attack the Government, they are the media that highlight one statement and hide the other. Do you know what the IMF also said in the same report, that they are apologizing in a nice way for not being right, that Montenegro will enter the capital market and borrow eight percent, as they predicted at the time. We issued a bond at 5,8 percent," Spajić said.

Mugoša stated that since Spajić has been in politics, Montenegro has borrowed two billion euros, and that his government has borrowed one billion euros in nine months. Last year, as he states, Montenegro imported 3,8 billion euros and exported 670 million euros, and that the problem is that no electricity is exported this year.

“You didn't answer my question. You promised all employees in Montenegro, private and public sector, a 25 percent increase in net earnings. I spoke about the impressions of the World Bank, the European Bank and the IMF. "One year after the announcement of the reform, Croatia increased its real earnings by 24 euros, and it has 2 billion from EU funds and a much better ratio of imports and exports and credit rating," he said.

Fiscal strategy until the end of June

In his written reply to Mugoš, Spajić stated that they had fulfilled everything promised, and that it would be the same for further increases in minimum and average wages.

He pointed out that the fiscal strategy will include all planned measures, with a precise definition of their impact on the fiscal and macroeconomic framework.

This document, as stated, will be completed by the end of June, after which it will be sent to the Assembly for consideration.

The Prime Minister added that all measures proposed by the Government will be carefully considered through social dialogue and respect for the economy, trade unions and a responsible attitude towards finances.

"We are dedicatedly working on the preparation of a new fiscal strategy that will include all planned measures while precisely defining the impact of those measures on the fiscal and macroeconomic framework. It will be completed by the end of June, after which it will be sent to the Assembly for consideration. This is precisely the measure of the strategic action of this government, in contrast to the previous ones that did not prepare such an important fiscal policy document, which brought uncertainty to the economy, citizens and investors", Spajić said.

He stated that they promised an increase in minimum pensions, and that even then there was talk that this measure would be financed from an increase in the general VAT rate, the sale of Elektroprivreda Crne Gore, or debt. Spajić clarified that they did not increase the VAT, nor did they sell the state energy company, that they took on debt only to pay back old debts and finance capital projects, while, as he pointed out, the revenues for the period from January to April were significantly above the plan.

Mugoša also stated that there is no way to increase all net salaries without eliminating contributions for pension and disability insurance, and that revenues in this sector are over 590 million euros per year.

He referred to the projections of the International Monetary Fund (IMF), which previously indicated that if the "Europe Now 2" program were to be implemented, the state's public debt would exceed 100 percent of GDP in 2029, and the financing of such policies would mean that other measures would have to be implemented, which would be very challenging, and one of the measures would be an increase in VAT.

Dialogue to a greater minimum

Increasing the minimum wage, but also all wages in general, cannot be solved by administrative decisions or unilaterally, but solely on the basis of increased productivity and sustainability of the economic system, as well as full cooperation and dialogue between the government and social partners.

This was told to "Vijesta" by the Union of Employers, adding that it is necessary to build an adequate environment and provide all the necessary preconditions in order for the Montenegrin economy to meet the planned goal.

"This primarily includes the implementation of a wide range of reforms that, on the one hand, will result in a high level of productivity and competitiveness of the economy, and on the other, an efficient public administration (state and local) that is professional and has the capacity to service the regular needs of the real sector", explained are.

Raško Konjević is of a similar opinion, noting that it would be an additional cost for employers.

"Employers will not shy away from dialogue and discussions with the Government on all elements of the reforms announced in the Fiscal Strategy, but the stability of public finances is certainly an obligation of the Government. Any additional costs for employers due to the administrative decisions of the Government that cannot realistically be financed will return the flows back, either to the gray economy or to a worse environment. For employers, apart from a valid and significantly better business environment, a predictable and stable tax policy is important," said Konjević.

He notes that employer-employee relations should be redefined in the legal sense in accordance with European experiences, because, as he says, without this, there is no progress in the business environment that can give greater momentum to private initiatives.

"It is up to the Government to propose reforms and through transparent dialogue, especially with the economy, to achieve realistic and sustainable achievements. We must know that there is no real and sustainable increase in wages without an increase in productivity. Anything else is a big risk that must not be 'piled' on the backs of the Montenegrin economy, because the consequences would be bad in the long term," Konjević concluded.

Spajić: Gross earnings are not earnings

At the press conference on April 24, Spajić did not answer the question of the "Vijesti" journalist about how he plans to increase the average salary in Montenegro, i.e. catch up with the EU average by the time of the call for membership.

When Spajić was presented with the fact that, according to EUROSTAT data from 2021, the average salary in the EU was slightly lower than 2.800 euros, he said that this was not true.

To the journalist's answer that the data is correct and that it is about gross earnings, Spajić said that "gross earnings are not earnings."

"When you receive gross earnings, can you use it to buy bread or milk? That's why gross earnings are not earnings, they are calculated with taxes and contributions... In Montenegro, I think there was a very limited number of people who knew what gross earnings were before 'Europe Now 1'. Net earnings are the only thing relevant," Spajić said.

He added that EUROSTAT publishes data on gross earnings, not to inform citizens, but to let entrepreneurs know where the most competitive workforce is.

"Gross earnings are a cost for employers. "When you see gross earnings of 2.700 euros, you run away from that country," Spajić said.

Only Bulgarians earn less

If Montenegro were a member of the EU today, only Bulgarian citizens would have a lower average net salary than Montenegrin.

According to EUROSTAT data, a single person without children in Bulgaria earns 9.355 euros per year, or 780 euros per month.

In December 2023, citizens in Romania earned more than 1.000 euros per month for the first time, with Croats and Hungarians at the bottom of the scale.

On the other hand, citizens of Luxembourg earn the highest average net salary in the EU (4.086), followed by the Dutch, Danes, Irish...

EUROSTAT data for net earnings of EU countries refer to the average net earnings of one person without children, given that different countries have different tax systems depending on the number of household members.

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