Montenegro’s Europe Now Movement and European Alliance lawmakers debated the government’s announced Euro Model alongside representatives of NGO Action for Social Justice and an economist, with Europe Now lawmaker Vasilije Čarapić citing 100% wage growth against cumulative inflation of 43% since the Europe Now 1 and 2 programmes. Their differences centred on whether higher incomes have kept pace with prices and how the proposed model would affect pensioners and businesses.
The discussion included European Alliance lawmaker Boris Mugoša, Mladen Grgić, a doctor of international law and political economy, and Ines Mrdović of NGO Action for Social Justice. They raised concerns about domestic price pressures, the competitiveness of smaller firms and the economic consequences of the announced programme.
Wages and price pressures
Čarapić put Montenegro’s average wage at more than 1,000 euros, compared with 700 euros in his estimate of what it would have been without Europe Now 1 and 2. He argued that the programmes showed tax reforms could influence and preserve the market, increase productivity and allow it to grow faster than predominantly imported inflation. He described the programmes as constructive responses to inflation.
Grgić assessed inflation as having a strong external component as well as domestic causes that consumers cannot readily separate when making purchases. Mugoša likewise described inflation as imported but said developments in Montenegro’s own market also contributed. Citing Montenegro’s statistical office, Monstat, Mugoša put the annual inflation rate in September at 5.5%, not 5.2%, compared with 3.8% in the European Union.
Mugoša cited a product whose price in Montenegro was 44.7% higher than in the European Union. He linked imported and domestic price pressures to the economy’s competitiveness, arguing that improved competitiveness could produce a better relationship between prices. Čarapić, by contrast, said a small economy such as Montenegro could adapt through administrative reforms that ensure workers receive dignified incomes.
Čarapić also pointed to the experience of new European Union members, which he said faced higher inflation before accession, and placed Montenegro in that pattern. Grgić offered a different assessment of the wage programmes: although they had increased pay, he argued that inflation had almost brought the gains back into line with earlier wages. He described the wage increases as artificial and said the programmes were making less economic sense.
Trade, competitiveness and tourism
Mugoša put Montenegro’s foreign trade deficit last year at 4 billion euros, the largest on record, and said the share of imports covered by exports had reached its lowest-ever level. He described this year’s figures as worse and criticised the government for not taking measures to reduce the impact of imported inflation. In his assessment, competitiveness is the link between external price pressures and conditions in the domestic market.
He contrasted large companies with smaller businesses. Montenegro’s 65 large companies, representing 0.3% of the total, had no problems, according to Mugoša, while 96 micro or small businesses had faced difficulties for six years and employed 80,000 people. Annual funding for competitiveness was 4 million euros, or 0.12% of current budget revenues, an amount he considered insufficient.
Food trade was another example Mugoša used to illustrate the gap in domestic production. Montenegro imports meat worth 150 million euros a year and exports 30 million euros’ worth. It exports fruit and vegetables worth 8 million euros annually, against imports of 50 million euros. Mugoša said this year’s agricultural budget was smaller than last year’s and argued that domestic production could not develop on that basis.
The European Alliance has submitted an initiative to cut the tax rate on tourist accommodation to 7%. Mugoša said the rate had stood at 7% from 2006 to 2024 before it was raised to 15% without an analysis. Following the increase, Montenegro had the third-highest such rate in Europe, above Bulgaria, Italy, Greece and Albania, according to his assessment.
Mugoša also tied competitiveness to Montenegro’s longer-term growth prospects. At a gross domestic product growth rate of 3%, the country would need 25 to 40 years to reach the European Union, he estimated. His proposals focused on the funding available to businesses, the shortfall in food production and the tax rate facing tourism accommodation providers.
Euro Model and pensions
Mrdović said citizens had received low wages and pensions for years while millions accumulated among some people. The announcement of a new government programme had created a political situation in which neither governing parties nor the opposition could oppose higher incomes, she said. Around 120,000 pensioners were affected by differing proposals for their incomes, including assistance of 100 euros or pension increases of 50 or 60 euros.
She called on political parties to offer a substantive programme to increase pensions and said pensioners must not be neglected if Montenegro joined the European Union in a year or two. Mrdović warned against treating pensioners as if “a crust of bread, a glass of milk and a handful of medicines” were enough. State borrowing was one possible solution, she added, saying citizens were no longer concerned about whether money was available.
Čarapić argued that pension income should be considered separately from workers’ pay. Montenegro’s export-capable production base had been damaged over decades and could not be restored quickly, in his assessment. Higher wages lead to higher pensions, he said, while today’s low pensions reflect the low wages retirees received during their working lives. Without Europe Now 1 and 2, the average pension would be 380 euros in the best-case scenario, he estimated.
Čarapić said the Euro Model would increase pensions but would not double them. Grgić rejected its description as economic reform, calling it a political measure aimed at the largest group of potential voters. He described the model as “devoid of any economic logic” and questioned its ethics. Grgić also said the government had neglected the economy for three years and that pensioners would fare worst because, in his view, they were not seen as a source of political votes.
Grgić described the prime minister’s announcement as vague and unserious, saying it left numerous questions unanswered and had already triggered expectations of inflation. A change in consumer expectations could shock businesses, particularly micro and small firms, prompting them to adjust prices ahead of January, he said. He outlined five potential waves of inflation: after the announcement, as the programme is specified, when it is implemented, when service providers raise prices and when regulatory agencies respond.
On other economic indicators, Grgić said real indicators in education and health were at 2019 levels and investment was lower than before. The details of the Euro Model and its effects on prices and pensions remained points of disagreement in the discussion.
