PRESS RELEASE
Questions and Answers at the press conference of the Governor on the monetary policy decision of the Supervisory Council of the Bank of Albania, 31 August 2011

Question- What would be the effects on the economy from the government’s latest fiscal policy decision on fuel price increase?

Answer- Shocks by fuel prices have been evident over the medium-term period in the Albanian market. The Bank of Albania deems that these shocks are well-factorised by the monetary policy decisions, including expected future developments.

Question- Taking into account the latest developments, more specifically the merger of the two Greek banks, one of which has a branch in Albania, do you think the Albanian banking system is threatened?

Answer- As regards the situation of Greek banks operating in Albania, stress-tests showed rather positive results. I think that the Greek crisis is under a well-controlled situation and the crisis recovery strategy is effective. Any move, including the merger of Alpha Bank with Eurobank EFG, is a very positive move integrated in the international strategy for the Greek crisis resolution. This is in the sense that the Greek banks management, revenues and expenditures, capital, and investments will be the core objective of this strategy for positive results.

Regarding the effects in Albania, I would say that the Albanian banking system is solid; it is moving towards a long-term stability and stands ready to lend. As I have recently pointed out, the main issue is to push demand up and, over the last months, we have noted improvement especially in the demand from individuals.

Mergers or regroupings of Greek banks by acquisition or other forms are, in my view, a positive development and should be taken as a good omen for the medium- and long-term management of this crisis. The Albanian banking sector is well-capitalised and capable of generating profit.

Question- What would be  your comments regarding the latest statements by the head of the International Monetary Fund on the banking system situation in Europe calling for urgent action to cope with these added uncertainties. Do you think this is also applicable to Albania?

Answer- The global banking situation, as I have said in earlier statements, is undergoing a process of reorganisation and is taking up a new philosophy with prudence at the heart of it. This means that reorganisation, the establishment of a new banking code will not be merely about taking short-term measures to exit the situation. It will be e new code, which will see towards the future to ensure long-term stability for the banking system in the global context. The crisis showed that the banking system needs to be well-organised, well-controlled, with a new code of ethics, in order to be a solid global system.

This is certainly not a sporadic move that is expected to yield its results in the short run. I think that it is an international political concurrence achieved under the circumstances of changes in markets and emergence of new actors, while a number of risks are still present. On the other hand, there are also positions of groups of countries as there are initiatives by individual countries.

Referring back to Albania, taking into account that over the past 20 years the Albanian politics has been rather orthodox about the country’s debt, budget deficit, inflation, market development and  financial stability, I would say that these are significant achievements for a small, open and free-floating exchange rate economy, such as the Albanian one, which is developing in the global economy context with the aim to be an organic part with added values not only for the region but also for Europe. 

Under the current conditions, I believe that keeping debt, budget deficit (latest decision to cut expenditures), inflation, banking system and financial stability in control as well as having an open market, liberalisation of capital and current accounts and a free-floating exchange rate are requisites for Albania to be able to generate economic growth and be able to keep up with the challenge of the united Europe.

The Albanian banking system proved to be a solid one during the crisis period. It left the crisis with no single scratch, in spite of some “dust on its robes”, which is normal given the circumstances. This would mean that we need to be cautious in keeping the parameters unchanged, in order to be consistent in our medium-term policies and abide by the fundamental principle that macro-economic stability, financial stability and fiscal stability are inextricably linked with each-other.

A good harmonisation of these policies will undoubtedly lead Albania to a place where it would contribute to economic growth and generate stability for the region and beyond.

Question: Would you run for a second term as the Governor of the Bank of Albania?

Answer- Every man would like to cope with his challenges to the very end. A  great statement of one of the most successful US presidents says that there is no limitation to a man’s activity. Most important is that what he does is seen as added contribution, regardless of who the beneficiary is. In this context, I would say that the stance of the Bank of Albania, my personal position as an important part of it, and our open and consistent communication give added optimism to run our race of challenges to the finish line. I believe that Albania, as I stated above, has all the potential to be an added value for Europe, in the future. Let us all give our contribution in this regard.

Question- First, has higher borrowing by the government from the banking system penalised lending to businesses and second, what is your appeal to the government in this regard? 

Answer- The point you raised does not seem to me to be the case. Before and during the crisis, in contrast to many other countries, through a good harmonisation of its fiscal and monetary policies, Albania had extra space to manoeuvre and has proven it by keeping inflation stable and anchoring inflationary pressures. Today, our biggest challenge is to generate demand, which has shown good recovery signs over the past months. I think that we need to give our contribution to create the much-needed optimism in the economy to boost demand. Higher demand would be transmitted to economic growth.