Montenegro’s proposed Euro Model reforms have raised concerns over the long-term financing of the pension system and their impact on public finances, prompting calls for an independent fiscal assessment before the legislative package proceeds.
The main concern is the proposed abolition of pension and disability insurance contributions, which would fundamentally change the existing pension financing model and could transfer additional obligations to the state budget.
The government presented the reforms as part of a programme to increase wages and improve living standards. The president called for a comprehensive assessment of their effects on pension sustainability, public expenditure, inflation, employment and business competitiveness.
The requested analysis includes an independent long-term actuarial assessment and a formal opinion from Montenegro’s Fiscal Council, supported by quantified multi-year projections. Concerns were also raised over the absence of sufficient fiscal estimates in the country’s main economic planning documents.
Lower payroll contributions could reduce employers’ labour costs and increase employees’ take-home wages. However, the overall impact will depend on how lost public revenue is replaced and whether higher household purchasing power adds to inflationary pressure. Further consultations were also requested with the Chamber of Economy, employers’ associations, trade unions and municipalities before final legislative decisions.
The reforms are expected to affect wage policy and public finances from 2027. The concerns raised do not establish that the proposed model is fiscally unsustainable, but underline the need for clear financing arrangements and independently verified projections. For businesses and investors, the main issue is whether lower employment-related charges and higher wages can be achieved without increasing risks to pension financing, public debt and long-term fiscal stability.
