Montenegro’s 25 municipalities are seeking measures to protect their budgets from the possible effects of the Euro model, after the Community of Municipalities of Montenegro submitted an impact assessment and a compensatory package to Prime Minister Milojko Spajić. The proposals, backed by all 25 municipalities, are intended to preserve local funding for development projects and public services.
The association said local governments’ shared request was to “ensure the stability of their budgets”. It warned that lower revenues combined with rising expenditure could reduce capital investment, particularly in smaller and northern municipalities, put pressure on local public services and contribute to further population outflows.
Municipal estimates suggest the changes could affect income-tax revenues and Equalization Fund transfers in 2027, while increasing wage spending in local administrations, institutions and municipally owned companies. Danilovgrad estimates its personal income-tax revenue could fall by about 36.7%, while its Equalization Fund revenue could decline by up to 33.87%.
Municipalities outline budget pressures and remedies
Podgorica, the Capital City, estimates a roughly 10% decrease in personal income-tax revenue. Zeta expects its receipts from personal income tax and the Equalization Fund to remain at their 2026 realised levels. Across local administrations and institutions, estimated wage-cost increases range from 26% in Podgorica to 45% in Berane.
Podgorica also estimates that transfers needed by its municipal companies would rise by about 8 million euros. The association said the combined revenue losses and expenditure increases would leave less money for capital projects and make it harder for local governments to maintain services.
The proposed package calls for retaining existing percentages of personal income-tax revenue allocated to municipalities. If that arrangement is not accepted for all local governments, northern municipalities, Zeta and Tuzi want the current percentages maintained for them to support more balanced regional development. The association also proposed that the state compensate Equalization Fund beneficiaries twice a year for reductions caused by the legislation, measured against their receipts in 2026.
Other measures include a new property tax law to improve collection and prevent multi-million-euro outflows from local budgets. The association proposed raising the tourist tax to a range of one to four euros and directing 10% of its proceeds to the Equalization Fund. It also wants the state to provide funding for responsibilities transferred to municipalities, especially in social and child protection.
If funding for those transferred duties is not provided, the association proposed delaying until 1 January 2028 the application of legal provisions that create new municipal costs. Its other proposals include changes to support sustainable financing for municipal utilities, repayment of rescheduled tax liabilities and a sustainable pay system for local civil servants and employees.
The package also seeks more stable municipal revenues from the use of forests, and the transfer of some powers and income from coastal-zone management to coastal municipalities. It proposes involving municipalities in planning temporary structures in national parks and sharing revenue generated on that basis.
The association called for several scenarios assessing the Euro model’s effects on municipal revenues, spending and the economy, including possible changes in employment and other macroeconomic and fiscal indicators. It also requested a regulatory impact assessment for municipalities and their association to review. A further meeting between Spajić, municipal presidents and mayors, with ministers responsible for implementing the measures, is proposed.
The association said timely consideration and implementation of the proposals were needed to maintain infrastructure investment and public services, and to address residents’ needs. It described the measures as protecting local financial autonomy in line with the European Charter of Local Self-Government and Council of Europe recommendations.
