The Serbian government recently presented a new, third package of assistance to the economy due to the crisis caused by the corona virus. This practically showed that the Budget Law is not worth the paper on which it was written, because this package of measures changed it, although less than two months have passed since its adoption in the National Assembly. Since this, the third, package of measures is mostly identical to the first aid package (except that it is less generous, since the “economic tiger” seems to have stopped roaring and started meowing). The aid also applies to the third, which only means that the Government was not ready to learn from other people’s mistakes or from its own. The total value of this aid package is almost 2 billion euros.
Everyone equally, and those who don’t need it
This segment of state aid is mostly similar to the previous one, but there are also some novelties: during three months (March, April and May), the state will pay half of the minimum wage to employees as part of the job preservation program. The novelty is that the program now covers all employees in the private sector, and not only in micro, small and medium enterprises. Another novelty is that there is a special package of measures for individual industries: catering and tourism, car rental agencies will receive another full minimum wage for each employee; city hotels will receive funds for each room and bed (150 and 350 euros each), while car carriers will receive 600 euros per individual bus per month. The already existing guarantee scheme for corporate loans is being expanded by an additional 500 million euros, while a new guarantee program for the most affected companies of an additional 500 million euros is being introduced.
The lack of focus of help remains a serious problem
Targeted measures on individual industries that are most affected by the current situation are only a small part of the total package, while the largest part goes to the payment of part of the salaries for all: both those who were well damaged in the business by the pandemic crisis, but also those who had successful business year. So a lot of money goes where it shouldn’t – the whole program is significantly more expensive, but also less efficient, since its primary goal is to prevent layoffs, by helping companies in trouble to overcome a bad business period and encourage them to keep workers. If you pay this aid to everyone, even to those who have done a great job, then these funds will spill over into the profits of business owners – so one of the conditions for using this aid is that companies do not pay dividends this year, but because they can reinvest or to carry them over to the next year and then pay out. With this approach, we spend more money than we should and the money, unfortunately for all politicians, does not fall from the sky, but is earned bloodily – and we will have to repay every loan we take, with the corresponding interest. Since this program costs us 2 billion euros, and having in mind that the state borrowed recently at an interest rate of 2.35%, that means that this package will help us only for interest, which will cost almost 50 million euros a year. For 10 years, as Eurobonds usually amount, “the price is a real trifle” of almost 500 million euros in interest. If the aid was conditioned by a drop in turnover compared to 2019 as the year before the corona, which would be easily proven by the financial statements at least at this time, since the legal deadline for their submission is the end of February, these costs would be significantly lower.
Payment of aid to citizens: weak effects, unfair and too expensive
Again, the non-discriminatory payment of assistance to all adult citizens is going on, as last year, but now in a somewhat more modest amount of 60 euros, in two installments of 30, which will be paid in April and November. There is also the payment of additional assistance to pensioners of 50 euros. For this UBI (universal basic income) payment program, the same objections apply in the Serbian way as during last year’s experiment: it will have weak economic and social effects, it is unfair and too expensive. From the economic point of view, the presumed intention of the Government is to encourage spending with this measure – 60 euros is a rather small amount, so it is assumed that most citizens will spend it quickly. Higher consumption gives birth to higher production, and that is a recipe for improving economic activities – the only problem lies in the fact that it does not drink water, and not only in Serbia. Fiscal multipliers (which measure how much money the state spends will create new production in the rest of the economy) are quite low since we are part of the globalized world – in Serbia even lower than in some other larger countries precisely because of the small economy. A lot is imported to Serbia, because production for such a small and poor market does not pay off; thus, a large part of this new consumption will end up with the purchase of imported goods, from food to electronics. Thus, this projected economic growth will go to Germany or China (from where we import), while we will be left with debts that we need to repay later. From the social point of view, the smartest social policy is not the one that gives everyone the same, both developers and lawyers, and the unemployed or cleaners. These desired social effects are exhausted and the whole program becomes significantly more expensive – if only poorer fellow citizens were targeted (for example, only the unemployed and those with salaries below the median of 350 euros and low pensions), they could get more money and he would certainly went where he was most needed. It is still not clear why only pensioners were drawn as a special category that should be helped with additional money of 50 euros compared to the others. It is true that pensions are low (the average pension is about half of the average salary), but not all pensioners are poor. The average August pension from the category of employees was 250 euros, and the minimum net salary was 240 euros dinars. Why is a pensioner with an average or above-average pension privileged in relation to someone who works for a low salary?
Perhaps the answer lies in the timing of the new parliamentary elections announced by President Vucic during the formation of the current government – they will be in early April at the latest, most likely to coincide with the elections in Belgrade, which could allow the SNS to count on a better election result. The fact that pensioners are probably the most loyal electorate of Aleksandar Vucic certainly did not harm this calculation – but a reasonable question arises: what will the pension system do for us, if the amount of pensions depends on the will of the person currently running the country, and not on some previously established laws and rules? Then it is cheaper for us to turn off the PIO fond and for the president to personally decide to whom the pension will be. So far, we have witnessed party leaders bribing various interest groups with various promises or moves to vote for them – from promising higher salaries and pensions, to abolishing TV subscriptions or economic development – but so far we have not had a chance to see a legal vote-buying program.
During the previous payment of this money, the question arose on social networks, should we take this money at all? If we don’t need it, are we selling our dignity in some way? I don’t think this kind of criticism is constructive – this money will certainly be distributed, it is stupid that we don’t take it as well, especially since we will return this money by paying taxes in the coming years and decades. If we don’t need it, a constructive move would be to pass it on to someone who needs it more than us – there is a whole list of associations and organizations that can use that money in a noble way, such as feeding the poor or treating the sick, Talas reports.
