The fine print in the Report

Nikola Popovski

The old unwritten rule is known that when you are taking a bank loan or, in more modern times, when you are subscribing for mobile phone services, you should be beware of the articles and footnotes of the agreement that are written in fine print. They can determine the essence and perspectives for successful repayment of the loan or the acceptable prices for the many services contained in the mobile phone service packages.

The report of the EU Commission for Macedonia in 2019 does not contain fine print or important remarks that are in footnotes. On the contrary, it is quite clear and simply written, as always. It rarely leaves a doubt or possibility for a double or triple interpretation of its provisions. The European bureaucracy and its politically supervised managers, we must admit, have long built a distinctive and nice vocabulary and a style of written communication that, for example, we lack. They are very precise, direct and clear in communication, especially in that they want to communicate it to “third parties”, a group where we still belong in, unfortunately. This situation for us will undoubtedly last for a long, long time and will continue through a minimum of 3 or 4 more parliamentary and governmental structures in the country.

However, in such one Report on Macedonia, a careful and goal oriented reader can always find the places of seemingly subtle and routine conclusions of the Commission, which is very strong at the same time and moves our (think of the government’s) own knowledge of who we are, what are we and where we are on the European road. This text, without any specific intention, aims to highlight some of those parts and conclusions of the Report, especially those with economic content, and maybe even give warning regarding them. This space does not allow for excessive elaboration, but we will try to be concise. In order not to be misunderstood, it is clear that in communiqué COM (2019) 260 final of 29 May 2019 from the EU Commission to the Council and the EU Parliament it is clearly recommended to start the accession negotiations of RN Macedonia, and that, although it is a recurring situation for a longer period on time, is a very important success for a country that constantly fails to make a real breakthrough.

But let’s start from the beginning. Perhaps one of the most important and painful conclusions in the Report is the one in which the assessment of the existence of a functioning market economy in the country is given and it is said that “Northern Macedonia in the last 12 months has made good progress and is on a good level of preparation in the development of functional functional market economy.” The fact that 28 years after we decided to develop a market economy, we are still assessed that we are in the stage of preparation for the development of a functioning market economy is a little worrying and even disappointing. Three decades are quite sufficient, if not too much, for a former self-governing socialist economy to be transformed into a functioning market economy. But we are seriously failing. Being overburdened with our ignorance, lack of knowledge, reluctance and insincerity, we are actually walking in circles. Anyone who thinks that the time was short, is very mistaken. How could Hungary, Lithuania, Estonia or Bulgaria, and Slovenia do so as of 2004/2006, and we could not do it by 2019? Even if we take into consideration the stagnation due to our specific aggravating circumstances until 1996 and the fatal 2001, we still do not have much justification. From 2002 to date, 17 years passed, and this is more than the time the above mentioned economies had from 1991 to 2004.

The “to do” list is long and maybe not so comfortable for everyone. Especially not for those parts of society and the economy and their protagonists who during these three decades, learned how to and later became accustomed to living very easily on the wings of their unjustified preferential position on the market, in conditions of repressed or complete non-competitiveness in their activities, living in conditions of the monopolistic and oligopolistic sectors, using their acquired market positions to influence the politicians to continue it, on a regular basis, in a “strange” and in an insufficiently clear way to receive the money and public procurements then deliver too low quality for too high prices, work “in black” and not pay or insufficiently pay public fees, etc. This is the cancer of the  dysfunctional market economy. But the EU decided to be much more lenient in seeking therapy, and proposes only four more urgent measures related to greater control over public debt; improving fiscal management by introducing formalized fiscal rules; reducing the informal (gray) economy and improving the position of youth on the entire territory of the country.

One of the slightly strange conclusions in the Report from the aspect of the previous remark is the congratulatory context in which it is pointed out that “the government strives for market based economic policies with an increased focus on social cohesion while improving state aid.” Adding that “financial assistance for business investments and employment have increased, while the criteria for this and the state aid users remain unclear. “The latter is something that is widely criticized in the domestic professional and political public. What the EU is saying “in fine print” is that it is a dangerous practice for a government to nurture its privileged public money users, and that this government is no different. The disruption of the market to which one is paying public taxes, for other economic entities to receive that money for their profitable activities is an illicit attack on the freedom of entrepreneurship and the market.

In such a complex structural economic situation, the authorities add gas to the fire by, as the EU has characterized it, a “deterioration in the structure of public spending” in which “government spending has risen in line with current spending for six years,” which means a reduction in investment spending. Social transfers in the last year reached half of the total public consumption. It is something that even much stronger economies would not be able to sustain, but our own must  endure it. The price is obvious – unmatched economic growth that is barely breaking out to exceed the limit of 3 percent per year. Instead of trying to move the growth upwards, even with their own example of public sector management, especially in public enterprises that produce different goods and services, governments seem to additionally contribute to it in the worst possible way.

The EU report just reminded us that, for example, in the production of domestic energy we behave very irresponsibly and astoundingly badly. If in 2006 we produced solid fuels (coal) in the amount of 1.296 thousand tons of energy equivalent, in 2017 this production was reduced to only 853 thousand tons, and the production of domestic electricity of 7 billion kWh in 2006 only 5.6 billion kWh in 2017 then we really need to ask ourselves how our governments (governments) behave as producers of public goods? Efficiently and responsibly or vice versa, and how do they contribute to our overall economic situation?

Finally, this: VAT taxation still contains exceptions that are not foreseen by the EU legislation, something that was easily introduced here, and is now difficult to get out from, and there is need to include the balance sheets of public enterprises in the fiscal reports of the general government, something that will dramatically change our perceptions for the relatively good fiscal position that our country has.