DW: The government’s economic measures – populism or good move?

Serbia has prepared a 5-billion-euro-worth of economic measures to help the country’s economy to deal with the consequences of of the coronavirus pandemic. The focus of this assistance, as Finance Minister Sinisa Mali pointed out, is on micro, small and medium-sized enterprises.

The programme is practically divided into four sections and provides deferral of tax liabilities, direct financial disbursement to businesses, measures to preserve liquidity and direct assistance to all adult citizens of Serbia with a one-off payment of EUR 100 once the state of emergency is lifted. Companies can pay their tax liabilities in successive instalments, starting with the early 2021.

The second measure is direct assistance to small business owners, whereby the state will pay each employee in a small business a minimum wage for three months, for a total of about 750 euro per worker, and this measure will cover about 900,000 people.

Only companies that have made more than 10% of their workforce redundant will not be eligible for this assistance. Public sector wages and pensions will not be reduced.

The Finance Minister says that the funds for these measures will be provided from budgetary reserves and the capital market.

Populist package

Economist Danilo Sukovic believes that “this is a populist package of measures aimed at strengthening the government’s position by using our money”. Sukovic predicts “that there will be a lot of irrational waste of money” and adds: “I am not saying that no action should be taken, but I think that this global crisis is now being used to implement a package of measures that the government will use to cement its position.”

The editor of Biznis magazine, Radojka Nikolic points out that the announced measures have not yet been properly devised, adding that “first of all, there are no debt reduction measures, since the fiscal liabilities are only postponed for next year. “

The question is what the situation will be like next year, which is why I think it is better to use this time to reduce tax liabilities rather than delay paying them. We have been asking the government for a long time to reduce tax rates and various contributions that companies have to pay,” Nikolic warns.

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In terms of the state covering the minimum wages of employees in small companies, the wage will be paid directly into an employee’s account “but the employer is still obliged to pay tax on the minimum wage,” Nikolic adds.

A hundred euros for everyone – waste of money

Experts believe that the linear distribution of 100 euro to every adult citizen of Serbia cannot be rationally explained.

It is estimated that more than EUR 500 million will be spent for this purpose. Danilo Sukovic underlines that “the aim is not to reward everyone but to protect those segments of the population who are the most vulnerable and have a low income. He asks: “Why should you give a millionaire 100 euros? This again is a measure that solidifies the government’s position in the future.”

Radojka Nikolic also believes that that measure will make the government look good in a certain segment of the electorate: “Why to give that amount to someone whose monthly salary runs into thousands of euros. Not all citizens are financially destitute. This measure is an enormous burden on the budget. We are constantly talking about social cards, which are still not made but would at least have a social significance: those who receive social assistance or other aid, they are the ones that should be helped”.

The debt must be repaid

The total package is estimated to be worth over five billion euros and Danilo Sukovic points out that “most of that money will go towards loan guarantees that someone will have to pay back. Some funds will not be repayable. The loans itself will not be a problem, but when you take out a loan, it means that there are no available funds for other things, such as investments. There will be less money for the construction of roads, education, health care or infrastructure projects, and this will have a negative impact on the development of the country.”

(DW, 01.04.2020)


This post is also available in: Italiano

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