ISSN 2330-717X

Nations Take Action To Lessen Financial Crisis


By Muhamet Brajshori

As the economic crisis drags on, banks throughout the region are taking measures to restore citizens’ confidence in banking systems and to reduce the effects of the crisis on household budgets.

Kosovo drafted a deposit insurance law that should increase confidence in the financial system. The law is now pending in parliament, and may not be passed until autumn.

The Serbian government increased its deposit guarantee for savings from 3,000 to 50,000 euros. The National Bank of Macedonia has taken similar actions. And the Albanian economic sector is becoming sensitive to the indirect credit risk rising from the increased exchange rate and the rate volatility, according to the Bank of Albania. Individual banks’ sensitivity to assumed shocks has also increased.

Dritan Keliu, an economics professor and head of the Tirana-based Balkan Centre for Economy and Trade, told SETimes that the financial sector in the region depends on developments in Western Europe.

“All the banks in the region are branches of European banks, or have percentage of shares from those, especially from Greece which are mainly in Albania and Serbia. For this reason, the governments must observe how the ‘mother’ banks in Europe are affected by the crisis, to be able to take actions in their countries,” Keliu said.

Kosovo is already in a financial crisis – its unemployment rate is at 45% and the annual wage is 6,500 euros, the lowest in Europe, making Kosovars particularly vulnerable to the financial crisis, but the government is making efforts to stabilise the economy.

“The financial sector in Kosovo continues to be stable and sustainable as a result of the partial integration with the European financial sector, effective supervision by the Central Bank of Kosovo and added caution by banks in the country in the placements of their investment,” Muharrem Shahini, finance ministry spokesman, told SETimes.

However, not all agree with the government’s optimism. Lumir Abdixhiku, executive director of RIINVEST Institute, criticised the government for not taking the measures previously. He said that the crisis will undoubtedly affect Kosovo — at the least through the reduction of remittances and reduced foreign investment.

“The government’s policies are nonexistent in the case of any eventual crisis [affecting Kosovo]. Our country makes more reactive than proactive policies. [The government] has failed to build the foundations of a sustainable private sector,” Abdixhiku told SETimes.

But Shahini said Kosovo’s financial system is stable.

“In order to provide additional liquidity to the financial system in place, Kosovo has allocated a fund of 46m euros from the budget [to cover] the liquidity reserve,” Shahini said.

And, he said, that might not even be necessary. “The current crisis of public debt in EU countries is not expected to have an impact on the local economy,” Shahini said.

However, Abdixhiku disagreed. Greece has been a serious investor in the region, and its weakness in recent years has reduced the opportunities for investments in Kosovo.

“I believe that Kosovo is far from immune to the European crisis. Macro-economic indicators continue to indicate a low record, unemployment still remains at 40%, and inflation rates last year reached 8%. For a poor country like Kosovo, the economically marginal effect of the crisis is smaller,” he said.

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The Southeast European Times Web site is a central source of news and information about Southeastern Europe in ten languages: Albanian, Bosnian, Bulgarian, Croatian, English, Greek, Macedonian, Romanian, Serbian and Turkish. The Southeast European Times is sponsored by the US European Command, the joint military command responsible for US operations in 52 countries. EUCOM is committed to promoting stability, co-operation and prosperity in the region.

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