On the 20th of March 2009, Tirana Times, wrote on the tendency of the euroization of the Albanian economy. On the 17th of September 2009, while attending the VIIIth International Conference organized by the Bank of Albania, the Prime Minister of Albania declared that the country should adopt Euro as a fluent currency. Drawing advice from the profound tendencies of euroization of the Albanian economy and trying to protect the Albanian economic climate from the bad effects of currencies’ exchange, the prime minister Sali Berisha, has thus launched the debate on the adoption of the European currency which is actually used by a set of coordinated European Union (EU) countries forming the official Euro-zone and two non-EU Balkan states: Kosov롡nd Montenegro.
Albania also wants to hop in the basket of these Euro-nations. With the spectacular fall of the Albanian national currency, the Albanian Lek, and previsions for continuing important Lek-slips and Lek-slides, the pressure to do something is very important. Adopting the European currency seems at first sight to be an appropriate measure. As the debate has started, some range for and some range against a rapid adoption of the European currency. In fact what is most discussed is not the adoption of the measure, but the rapidity of the pace which will lead Albania to become an official or a non-official Euro-zone country.
To the Euro-zone with a reduced speed
Adrian Civici, economist and Dean of the European University of Tirana (private university), believes this to be the appropriate time to introduce the subject and start the discussions, but expects the process to continue and Euro to be implemented as a local currency at a later time, (Ora News, 20.09.2009). He disapproves of a unilateral adoption of Euro, like Montenegro did. Civici thinks the case of Kosov련Kosovo) was different. The monetary policy of the new-born state is also a sui generis case, according to Civici. Instead, Albania should move to the adoption of Euro in a coordinated way, believes the renowned Albanian economist, who expects the process to engage Albanian as well as European Union and Euro-zone countries’ specialists and officials and to ripen in a coordinated action.
The role of the central banks
The main draw-back that Civici underlines could come out of a rapid and uncoordinated adoption of Euro, would be the limitation of the role of the Bank of Albania and of its monetary policies. Monetary policies in developed economies have proven to be instrumental in orienting, supporting or refraining the markets. For example, lowering of basic interest rates by the Federal Reserve or the European Central Bank or central banks of developed economies has supported consumer-oriented policies and, by way of consequence, enterprises’ activity in numerous moments where markets were facing critical situations.
Monetary policies are also instrumental in trying to equilibrate import-export balance. To what extent the Bank of Albania has used or not of these macroeconomic policies is not yet demonstrated. But from a bird’s eye-view on the activity of the central bank, it seems that the major part of its job has been in securing macroeconomic and financial stability and in checking inflation rises.
Risks of price increases
While the introduction of Euro as an official currency is expected to lead to protection from exchange risks exposed on Albania by the on-going devaluation of the Albanian Lek, the introduction of the European currency is expected to lead to price increases in the free market. The European countries that have adopted the European currency have experienced price increases (almost double) within few years of the introduction of the new currency. It is unclear whether similar price increases have been observed in the USA or in the other non-Euro-zone countries. While the decision to introduce a new currency belongs to the state as a multiple body (the government, the central bank and public agencies), control of the state over prices expressed in the free market has not been observed or has not been sufficient to check price increases in the Euro-zone economies.
Conditions for joining the official Euro-zone
The countries which decided to create the Euro money, agreed in 1992 to have a low public debt representing not more than 60 % of the Gross Domestic Product (GDP) and not go further than a yearly budgetary deficit of 3 % of the GDP, recalls Shqip (18.09.2009). Eight years later, when all the joining member states fulfilled these conditions, Euro was born as a currency. Greece, that did not match these criteria at that time, worked on fulfilling them and joined the Euro-zone two years later, recalls the daily which informs that the new entrants in the European Union have still not met the obligations for entering the Euro-zone. As the global downturn hit them in the spring 2009, countries like Romania, Hungary were threatened, among other threats, by exchange rates in a worsening economic climate. Politician and economist voices were raised to ask admission in the Euro-zone without meeting the criteria, but they were dispelled form that request from the European Central Bank, reminds the daily.
Free market tendencies
Whatever be the pace with which Albania will move to the Euro-zone, the euroization of the Albanian economy seems engaged in pursuing its euroistic trend. Actually cars, apartments, rentals, computers, internet subscriptions and many other articles or services are contracted and paid for in Euros. Medical services in private facilities as well as schooling in private schools or universities have also joined the tendency. The article on “The Fall of Lek”, published by Tirana Times on the 20th of March 2009, draws a detailed report on the trends of euroization observed in the Albanian economy.
Historical fact
Fantasy Euros are reported to have been minted in Albania or with Albanian emblems in 2004. They carry the mention “Prov뢠(meaning in English “trial”). One Euro and Two Euro coins, sketch the map of Albania and bear the mention “Europ”. These marks and the different image pattern makes them distinct from the regular Euros. The Euro coins minted by the Euro-zone countries bear strictly same value faces and differ in the rear side only. The rear side is a side where each country is free to stamp its own effigies.
