Futile subsidies – the course that leads Serbia’s economy into recession

By Gojko Vlaović

“The Austrian company Gierlinger Holding, the owner of the Mitros Meat Company from Sremska Mitrovica, announced that “based on a detailed analysis” a decision was made to stop production at the Mitros factory and that the deadlines for shutdown will be determined later.

In the first quarter of 2015, the Serbian government concluded a contract with the Mitros Fleischwaren Company on state subsidies in the value of 5.8 million euros according to which the Austrian employer has to hire 300 new workers in the factory in Sremska Mitrovica.

By the way, Gierlinger Holding is not the first foreign employer in Serbia that took subsidies from the state only to later shut down their factories after the expiration of contractual obligations and leave employees jobless. Unfortunately, the assumption is that it will not be the last.

The example of Gierlinger, and previously Turkish Jeanci and Bertex Textiles and Italian Geox, clearly indicate the senselessness and short-sightedness of the Serbian government’s strategy to motivate foreign and domestic private companies to invest by giving them state employment subsidies. In this way, the salaries of their employers are paid by Serbian taxpayers, while the foreign employer pays the employees either the minimum or low wages and thanks to the subsidies, generates lucrative profits.

Once the state’s obligation to finance the salaries of employees expires, some foreign employers decide to shut down production and look for new markets that provide cheap labour in order to make extra profit. In this way, investors line their pockets with handsome profits and take capital out of the country, while workers in Serbia remain jobless.

Not only by distributing subsidies left and right, but also by prescribing low tax rates for foreign investments, determining the amount of the minimum wage that is below the value of the minimum consumer basket and passing numerous anti-labour legal solutions, the current government clearly demonstrates that it works in the service of the interests of big capital and not the citizens of Serbia.

This is precisely why the government stubbornly continues to insist on the pernicious neoliberal economic concept, the results of which are that Serbia is among the countries with the lowest wages and the highest unemployment rate in Europe.

It is quite evident that the direction which implies that the functioning of the economy is entirely based on foreign investments, encouraging the myth of the “superiority” of private capital and financing infrastructure projects from international loans is a complete failure.

Accordingly, this course that leads Serbia’s economy into recession should be changed as soon as possible and measures should be implemented for its sustainable development and progress. In order to accomplish that goal, the government needs to listen to experts and do what it is currently not doing, i.e. starting the reindustrialization process.

Only the formation of large economic systems can ensure the smooth operation of small and medium-sized enterprises.

The government also must establish a national investment bank that would finance projects of domestic companies and thus ensure that the economy operates smoothly and pays out regular salaries for its employees.

When it comes to subsidies, they should be abolished, and factories that received salaries only to be later abandoned by their foreign owners should be taken over by the state and the state should re-instate their production. Funds allocated for subsidies should be directed towards education, healthcare and social benefits.”

(Danas, 10.10.2023)


This post is also available in: Italiano

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