The European Commission, in its draft report on Montenegro’s progress for 2024, has highlighted that the “Europe Now 2” program poses risks to public finances.
The report notes that the new coalition government has adopted several significant reforms, including a 52% increase in the minimum pension to €450 starting in 2024. In September 2024, the government also approved a work program called “Europe Now 2.0,” along with a medium-term fiscal strategy.
Key reforms mentioned include raising the average minimum wage from €450 to €700 and halving pension contributions. The Commission warns that these measures present a substantial risk to the sustainability of public finances, despite some compensatory measures and an accelerated investment program.
Additionally, the report states that the Assembly approved the 2024 budget law at the end of December 2023, projecting a significant deterioration in the budget balance with a deficit estimated at 3.4% of GDP. This outcome is driven by expected strong growth in social transfers and capital expenditures, along with a lack of one-off revenues.
The 2024 budget has been revised due to better-than-expected revenue performance and measures related to the “Europe Now 2” program, set to take effect in October 2024.
The Commission emphasizes that Montenegro’s macroeconomic policy is constrained by a lack of autonomous monetary policy. Fiscal policy remains the primary tool for managing aggregate demand. Given the vulnerabilities related to debt, significant future financing needs, and the measures adopted under “Europe Now 2,” the Commission advises careful fiscal management with compensatory measures and an overall stricter fiscal stance.
