Several thousand Montenegrin mothers threatened to radicalise their protests on March 8 unless the constitutional court cancels a 25% benefit cut introduced in January as part of government efforts to improve fiscal stability.
The Democratic Party of Socialists (DPS) introduced generous benefits for mothers of three or more children ahead of the 2016 general election, but these were later slashed as the government was forced to cut public spending in order to stabilise the fiscal situation. Both the International Monetary Fund (IMF) and the European Commission have issued warnings over Montenegro’s soaring public debt burden.
Thousands of mothers, supported by opposition parties, have been protesting against the benefit cuts for days, trying to convince Prime Minister Dusko Markovic’s government to restore the payments to last year’s level. The government reduced financial help allocated to more than 22,000 women earlier this year.
“This is not blackmail, this is not an ultimatum, but we will take radical measures. What these radical measures will be, we will not say until the constitutional court rules,” news outlet CDM quoted Zeljka Savkovic, one of the protest organisers, as saying.
Legislative amendments giving mothers of three or more children who have worked for at least 25 or 15 years respectively lifetime benefits equal to 70% of the average wage came into force in January last year. In February 2016, Montenegro also decided to raise public sector wages by up to 16%. Both decisions were criticised as putting public finances at risk and the opposition claimed they were adopted to help the ruling DPS to win the general election in October 2016.
Now all Montenegro’s opposition parties are supporting the protesting mothers and some of the women have admitted that the biggest of those parties - the pro-Russian Democratic Front (DF) - has offered financial aid to the mothers. However, the protest organisers denied Markovic's accusations that the DF staged the protests to further increase political tensions in the country.
The mothers' protests began the day after the parliament decided to lift the immunity of two DF leaders and allow their arrest by special prosecutors. Andrija Mandic and Milan Knezevic are suspected of playing a key role in an alleged coup plot with the aim of seizing power in the country. The parliament’s decision and the investigation have significantly increased political tensions in Montenegro, where all opposition parties are unhappy with the October 16 general election results and claim that the long-ruling DPS won unfairly.
The mothers’ protest will put more pressure on Markovic's government, which must find a way to seriously reduce public spending and stabilise public debt, which stood at 60.6% of the projected end-year GDP as of end-June 2016.
In February, the European Commission warmed that Montenegro’s fiscal deficit will most likely rise this year despite fiscal consolidation plans, mainly because of the increased spending on social payments. The IMF also predicted that public debt will reach 82% of GDP by 2019 due to the construction of the Bar-Boljare motorway.
There were already signs the government was struggling to deliver on its promises last year. The government had to urgently revise its budget in order to be able to pay the benefits for November and December. Former Deputy Prime Minister Vujica Lazovic proposed at the time that the government should redirect funds originally intended for the first priority section of the Bar-Boljare motorway, but ministers from the opposition quota strongly objected to the idea. The motorway is being financed via a loan from China’s Exim Bank, and Chinese construction companies are doing most of the world.
The government then decided to auction a €100mn four-year T-bond issue in order to cover budget spending. €80.41mn was raised via the T-bond issue on November 14 and it will be used to finance the budget deficit, capital spending and debt servicing, and for fiscal reserves.
According to the budget bill, the government is targeting a deficit equal to 6% of the projected GDP. The government has also adopted measures to cut the budget deficit by 2021. In 2019, the deficit should fall to 3.9% of GDP, while in 2021 the country should have a surplus equal to 0.9% of GDP.
Despite the protests and objections from opposition parties, the cost cutting measures in the 2017 budget plan were well accepted by the central bank.
Public debt is seen rising further in the coming years. In 2019 it is expected to reach 79.5% of the projected GDP compared to 70.7% estimated for 2016. The debt should then start declining, reaching 74.1% of GDP in 2021.