Montenegro's Euro model faces scrutiny over wage hikes and fiscal risks

Montenegro's government is preparing to submit its 'Euro model' economic program to the European Commission for evaluation. Scheduled for implementation in January 2027, the plan aims to significantly increase minimum net wages based on education levels: €1,000 for primary education, €1,250 for secondary, and €1,400 for higher education. The model also includes the complete removal of pension and disability insurance contributions.

The proposal has drawn significant criticism from various sectors. The Chamber of Economy warns that the plan will disproportionately impact micro and small enterprises, potentially leading to reduced investment, slower hiring, or even layoffs. The Bar Association of Montenegro expressed concerns that rising labor costs could reduce the number of legal trainees.

Economists and political figures have highlighted potential fiscal risks, including a growing budget deficit and the need for increased Value Added Tax (VAT) to fund the changes. Some analysts suggest VAT might need to rise from 21% to 25% to cover the estimated €300 million to €500 million budgetary gap. While supporters argue the model follows European practices to prevent brain drain, critics label it a risky intervention that could undermine national competitiveness.