Elvis ZaimiOpinion Juris
The central bank has launched a initiative, which has been coined with the name of “policy of de-euroization of the national economy”. It has been formally endorsed by a decision of its Supervisory Council announced on the 7th of February 2018, entitled more narrowly as the“ The policy on the de-euroization of the financial sector”, in order to reduce the high de facto financial euroization of the Albanian economy. This phenomenon, as it has been noted by the monetary specialists, remains a puzzling and counterintuitive development, bearing in mind the background of the country’s historical low track record of low inflation and macroeconomic stabilization.
The document, being assessed by its contents against the benchmark of its future application and expected practical results, can be compressed into a set of declaratory statements for public consumption, because it does not bring together in a logically consistent framework all the relevant elements of a strategic document, as its title “policy of de-euroization” implies.
It seems that once again this organization has failed to offer an institutional solution, and to clarify in an understandable way the public, how its actions contribute to the attainment of the stated policy goal. Moreover, it remains unclear and uncertain that the de-euroization of the national economy, being understood as a comprehensive policy, lies within the scope of the legal mandate granted to the central bank.
In the last days, it has been observed that euro has reached its lowest historical level in the domestic exchange market rate against the Albanian national currency (ALL), but many financial experts argue that this phenomenon is controversial, because it is not justified and cannot be rationally explained by making recourse to the fundamentals of the Albanian economy. By making this assertion, they dismiss as oversimplification the assessment of the factors of depreciation of euro, as they have been conveyed or communicated to the public by the central bank. Many are concerned that the euro depreciation in the exchange market against the Albanian Lek came as a consequence of a massive infusion of euro into the national economy from illegal sources. Hence, it is appropriate to take up once again, the already emphasized issue of the lack of democratic legitimacy, transparency and accountability of this institution.
Since the purpose of a legal document endorsed by a public institution is not to share its internal analysis with the public, or try to expand intellectually by “illuminating” from an economic point of view the public on the disadvantages that euroization brings to the slow growth of the national economy (loss of seniority revenues etc.), it is obvious that the last decision of the central bank does not offer a solid grip to the proper resolution of the puzzling problem of euroization. Neither this documents affords a reliable policy instrument capable of showing democratic responsibility, because It does not mention any operational instruments or legal procedures that will be used by the central bank to translate the de-euorization goal into an achievable objective, within realistic and verifiable forecasts. Instead it is coined in generic terms and an overall broad descriptive account of the disadvantages of the euroization.
Last but not least, if there is to be a comprehensive strategy, it has to go beyond the legal mandate of the Central Bank.
Thus, it remains doubtful as to how the policy of the de-euroization of the economy will bear fruits, as the legal text adopted by the Supervisory Board of the Bank of Albania two months ago remains more in the realm of a public communication strategy propaganda. It does not goe beyond to a commitment of the central bank to align its monetary policy and supervisory role of the banking system with the general economic policies pursued by the Government.
It suffices here to mention that the primary and the paramount mandate of the central bank is to conduct the monetary stability, i.e., in this case it translates that the de-euroization will render more efficient its monetary policy. Supporting the economic policies of the Government is not the function of the central bank, rather it is a secondary task which it can pursue as far as it does not jeopardizes its primary objective.
There is nowadays a broadly accepted idea that institutions, and especially legal institutions are crucial to the process of economic development, but the decision of the Supervisory Council of the Bank of Albania misses this significant point.The institutional sphere and legal rules’ dimension is regretfully excluded from the document, as its drafters have failed to grasp the interrelationship between the legal system and the pace of economic development.
Some points on the institutional structure and legal rules related to the efficient working of the market mechanisms are worth making in this brief note. As finance is largely about contracts, the Albanian civil code does only residually regulates the banking and financing contracts. The country is still missing a payment services/transactions law. The capital market almost does not exist, and the country does not have a law on the foreign exchange transactions. Keeping in mind Douglas North’s concept of institutions when talking of law, we might add to the problematic canvass that the “legal rules of the game”, when it comes to their enforcement are not applied in an equitable manner, but many times are influenced by corruption and crony capitalism.
Therefore, relying more on history and experience, rather than on mathematics for the analysis of the phenomenon of euroization, one might legitimately ask:
Is it a bet against the national currency primarily due to the substance of economic policies, or is it caused by the public distrust on the comprehensive institutional framework of the economic operating environment of the country, still lagging behind best international practices?