Manufacturers in Montenegro have expressed apprehension regarding the proposed Euro Model wage reforms, advocating for a gradual implementation alongside enhanced investment incentives. They caution that increased payroll expenses, without corresponding productivity improvements, may undermine the competitiveness of local industries.
The concerns were articulated by representatives from various sectors, including metallurgy, metal processing, small and medium enterprises, and accounting firms, through the Chamber of Economy of Montenegro.
They highlighted that wage increases mandated by administrative measures could lead to heightened production costs, potential job losses, delayed investments, and diminished competitiveness against imported products. Export-oriented businesses may be particularly vulnerable as they often operate in markets where passing on increased labor costs to customers is not feasible.
To mitigate these challenges, manufacturers argue that any wage growth must be paired with strategies aimed at enhancing productivity per employee. The Chamber has called for a notable expansion of Montenegro’s existing €3.5 million competitiveness-support program in 2027.
Proposed priorities for this expanded program include initiatives focused on industrial automation, digitalization, energy efficiency, acquisition of new equipment, and workforce development. Such measures could help alleviate some of the financial pressures from higher payroll costs by improving energy consumption and production efficiency while increasing output value.
This intervention introduces an investment-policy aspect to the ongoing discussions about the Euro Model. Previous concerns predominantly centered around the fiscal implications for central government entities, municipalities, tourism sectors, and public utilities.
Now, manufacturers are raising alarms about the potential impact of these reforms on Montenegro’s industrial landscape. This issue is particularly crucial given that manufacturing currently constitutes a relatively minor segment of the economy compared to tourism, real estate, and services.
If escalating labor costs deter industrial investments, Montenegro risks becoming increasingly reliant on imports and consumption-driven economic growth. This concern is especially pertinent for metallurgy and other energy-intensive sectors already grappling with fluctuating electricity prices and stringent EU environmental regulations.
Companies are facing simultaneous pressures to invest in decarbonization and automation while labor costs are projected to rise. Consequently, a more robust competitiveness program could fulfill dual objectives: mitigating the impact of wage increases and promoting modernization essential for accessing EU markets.
Banks and development finance institutions may also contribute by aligning public incentives with financing options for machinery upgrades, digitalization efforts, and energy efficiency projects. However, no increase to the €3.5 million program has been approved as of yet.
The central policy dilemma revolves around whether Montenegro will approach wage reform primarily as an income enhancement measure or integrate it into a comprehensive strategy focused on productivity and industrial investment. Without this latter component, manufacturers warn that higher wages could lead to increased prices, reduced employment opportunities, or decreased investment rather than fostering sustainable improvements in living standards.
