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    Copyright: The following text is for personal information only. Any professional use or publication in written or electronic form is subject to an agreement with AIM, 17 rue Rebeval, F-75019 Paris, France

    MON, 20 DEC 1993 19:00:15 GMT

    Montenegro - a new package of Government measures

    HOW TO SURVIVE

    Summary

    In a catastrophic economic and social situation, facing a monetary crash which is announced for next month at the latest, Montenegrin Government adopted a package of measures for survival during the winter. The main objective of these measures is - provision of the bare minimum for survival of the population and maintenance of the present minimum of production. Industrial production for the ten months of this year has dropped for 44 per cent in relation to the same period last year. It is estimated that only 30 per cent of the budgetary needs of Montenegro are satisfied from existing sources, and the rest is supplemented from the primary issue. The inflation in the course of October amounted to 20 thousand per cent, and if measured by the increase of the value of the German mark in comparison to the dinar, it amounted to as high as 54 per cent. It is anticipated that in December inflation will be 60 thousand per cent and the rise of prices about 500 thousand per cent. Payment of wages in foreign currency is seriously considered, and the Government has already distributed provisions for winter in hard currency to the public sector - 70 German marks to each employee. Economy trends are becoming an attractive political issue and the ground for conflict of the authorities in Belgrade and Podgorica.

    "We have no long-term plans. We must survive with a minimum of food and a minimum of heating. This is the maximum we can provide at the moment." These words of Mihailo Ljesar, the Vice-President of Montenegrin Government, maybe lapidary, but convincing, speak best of the general economic and social catastrophe Montenegro is facing after nineteen months under the sanctions. On account of them one can also anticipate what the position of the Government itself is like. At the time when almost everyone is linking the beginning of next year with expectations of a complete monetary crash, Montenegrin Government is offering its public a package of measures attempting to create a model for the survival through the winter. prezivljavanja tokom zime.

    During the past ten days, Prime Minister, Milo Djukanovicc, drawing a considerable attention of the media, made a tour of several major enterprises in Podgorica and Nikssicc, and held a number of consultative meetings with enterpreneurs, where he promoted the new package of measures, which, of course, includes a series of demands addressed to the federal institutions. What is essentially the contents of this program? According to what Mihailo Ljesar said, the main objective of the whole package can be brought down to the provision of the bare minimum for the population and maintenance (in certain branches, even increase) of the existing level of production. Montenegrin industry has, for several years now, been gradually reducing production. Only for the first ten months of this year, in relation to the same period last year, a drop of 44 per cent was recorded. Hence, the Government will allocate additional resources amounting to the value of about five million German marks to help maintain the level of the production. About two and a half million will be provided for trade, about a million and a half for industry, for agriculture 700 thouusand, and about 200 thousand for transportation. Ljesar assessed that the social product of Montenegro at the moment is only about 50 million German marks a month, and only for the public sector it is necessary to provide about 26 million marks in December. It is impossible to cover such expenditures by income, especially because many enterprises are evading tax and contribution payments from the wages, since they are paying to their workers in food. That is the reason why the Government will introduce measures for strict control of tax payments, and it will try to force the enterprises and banks to apply their own foreign currency and commodity reserves, the total value of which is assessed to amount to almost 100 million marks, or one fifth of this year's social product of Montenegro, according to the words of Miodrag Gomilanovicc, Minister of the Economy.

    The problems with financing, better to say, survival of the state are truly enormous. Filling of black holes in the budget with newly printed bank notes from Topccider swirled the hyperinflation to unbelievable heights. It is assessed that at the moment only about 30 per cent of Montenegrin budgetary needs are satisfied from existing resources, and the remainder is financed from the primary issue. The Prime Minister himself admits: "We have chosen inflation on purpose. We are printing money in order to provide for bare survival". But, the Government is insisting again upon reduction of public expenditures and incerase of revenues. The first is planned to be achieved by reduction of the share of wages in the expenditures from 35 down to 25 per cent, and the latter task means introduction of the hidden economy (the Government assesses that at this moment about half of the turnover of commodities is carried out on the hidden market.

    But Montenegro alone can hardly have a major impact on the inflation. The official inflation rate in October amounted to about 20 thousand per cent, and as much as 54 thousand if measured in relation to the rise of the value of the German mark. Optimists anticipate that December inflation rate will amount to the "meagre" 60 thousand per cent, while "realists" foretell a rise of the prices of about 500 thousand per cent. In Montenegro, voices accusing Serbia for the inflation stampedo are increasing lately.

    The Government is planning to provide for the existence of the population by a regular distribution of food within a program of family supply. All the needs in food of Montenegro have already been met, the Government sources claim, mostly from abroad. At the same time, after negotiations with the Trade Union which had announced a general strike, a new method of determining wages was introduced. The lowest wage in Montenegro was determind to amount to the value of 35 marks according to the official exchange rate, and Milivoje Jaukovicc, the Minister of Labour at the moment, and according to unofficial sources, the future Vice-Governor of the National Bank of Yugoslavia, had firmly promised that the official exchange rate would be regularly adjusted to the one on the black market.

    Very reliable sources claim that, in the course of preparations of the package of measures in the Government, the possibility of transferring to the system of foreign currency wages was seriously considered, or at least of allowing the enterprises (which find it appropriate) to pay their workers' wages in foreign currency. After all, the idea was abandoned fearing primarily of an outflow of foreign currency into the other federal unit and, on the other hand, because of the calculation that only about 15 thousand workers in the Repiblic would be paid in foreign currency, and the others in dinars, which would incerase the already tremendous chaos in the monetary sector. But, the course of hyperinflation cannot be swerved, so that the Government, trying to act rationally, was the first to breach the regulations concerning wages, and without any long-term plans and ambitions to make a monetary system out of it, started paying winter provisions in foreign currency (to great satisfaction of the public sector employees). At this moment, about 30 thousand employess in Montegrin education, health and the administration are receiving their 70 marks each.

    Hence alsmost unobserved, two significant novelties were introduced in Montenegro, with a number of political consequences. First, the term "reper" was introduced as the new unit of account (and not "point" as in Serbia), which reminded many of "perper" (the name of ancient Montenegrin money used in the beginning of this century, at the time of King Nikola I), and second, the idea supported by the Liberal Union much earlier to introduce foreign currency as the official payment facility in Montenegro was initiated. One should not have any illusions about significant changes of the monetary system. Prominent Montenegrin enterpreneur, Vladimir Nikaljevicc, Director of the "Crnagoracoop" from Danilovgrad, thinks that in the next period chaos will operate - as payment facilities, both commodities, foreign currency, and dinars will be accepted, so everyone will find one's way around as best suits one.

    Economic trends and social welfare are becoming a very popular political topic. Almost all the political parties in Montenegro are turning the focus of their activities to survival. It is clear that while the employees, without the assistance of smuggling and spending previously acquired supplies, could not survive even with the salary of 35 German marks, the majority of enterprises do not have eneough even for that. Fear of hunger and especially of the disappearance of the dinar as the "measure of all values" and the payment facility is becoming a political fact. Complete monetary crash is experienced as the final act of a general economic, social and political drama.

    The authorities in Podgorica are doing, or at least trying to leave the impression that they are doing all they can to provide for the survival of the population, but they are at the same time stressing that their measures within the FRY, cannot yield results. The esential demands are almost spontaneously and in a unison addressed at Belgrade. The Government of Montenegro cannot influence the monetary and the market chaos in the country. The trade embargo of Serbia, as Prime Minister Djukanovicc stated, "brought Montenergo in an unequal position", while monetary penetration into the system of the country by Banjaluka are empoverishing it even more. That is the reason why, Djukanovicc at one of his most recent meeting with enterpreneurs, publicly warned that he would demand resignation of the Federal Government, if it did not ensure operation of a common market and monetary order. What is the scope of power and competence of the federal authorities to influence the tresspassing of the agreed monetary policy or the removal of the border barriers in Prijepolje is well known by now, so that all the attacks on the federal authorities are futile. It is becoming more obvious that the question how to survive, refers not only to the population, but to the Government as well.

    Dragan Djuricc AIM Podgorica