Negative Euro Area Interest Rates and Spillovers on Western Balkan Central Bank Policies and Instruments

Welcome Addresses

International Monetary Fund
Published Date:
May 2017
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I am pleased to welcome you to this regional conference to discuss macroeconomic and monetary policies related to the effects of the eurozone’s low inflation rate and the negative interest rates. I very much welcome this opportunity to debate on links and implications of such tendencies on the Western Balkan countries.

The Western Balkan countries need more technical, evidence-based, and un-politicized debate. This conference is about technical expertise feeding good policies. And it might contribute to foster the integration of the Western Balkans region. Since I am not a technical expert, let me just point to some general political considerations.

First of all, I am very pleased that this conference is taking place in Tirana, Albania. I take this as a clear sign that Albania is about to get rid of its image as an isolated location, and that it seeks open exchange and strong international links.

How does the current political landscape in Europe as well as in the Western Balkans look in general? The situation does not seem as smooth and stable as we were used to a couple of years ago, but rather volatile and less predictable. If we look at Europe, there is BREXIT, nationalist tendencies, the upcoming French elections. If we look at the Western Balkan countries, there are the known tensions within the region, there is an ongoing crisis mode in some countries, there are general ups and downs that we are almost getting used to as political everyday life.

Against this relatively volatile political background, it is important that the macroeconomic framework does not add unnecessary volatility and insecurity to societies in Europe and the Western Balkans. In fact, I am pleased to note that in the Western Balkans, the macroeconomic situation presents overall a rather comforting picture over the past years, a picture of a relatively stable economic environment and growth. That is good news!

Europe and the Western Balkans are not only two neighboring regions; they are closely linked to each other. Geographically, looking at the map of Europe, the countries of the European Union are practically embracing the six Western Balkan countries. Economically, Europe is the most important commercial partner for the Western Balkans region; Montenegro and Kosovo even have the euro as a national currency. And politically, all Western Balkan countries are looking toward Europe or the EU, are somehow on the path toward EU accession (cf. Albania). On the other hand, also Brussels emphasizes the importance and its strong link to the Western Balkan countries, for instance with the so-called Berlin process.

Therefore, the topic of today’s conference is relevant for a sound, healthy, transparent, and predictable relationship between the Western Balkans and Europe that extends in the area of macroeconomic stability.

What is in it for Switzerland? Why is the Swiss Government supporting this regional conference? Let me emphasize three considerations:

  • 1. Switzerland is interested in building a strong and stable Western Balkan region with strong ties to Europe – both in the spirit of a European partner in the heart of Europe, and in the spirit of development and cooperation.

  • 2. Based on the Swiss experience, I am convinced that macroeconomic and financial sector stability is crucial for economic growth. After all, financial and macroeconomic stability and prosperity are common goals for all the countries gathered here. A sound monetary policy supports macroeconomic stability and growth. It fosters a conducive environment for private sector initiatives. That is why my government assists various countries in the region and around the globe in strengthening monetary policies. This conference is part of that effort.

  • 3. There is so much we can learn from others who have faced problems related to macroeconomic or monetary policy developments linked to the eurozone. Can you think of a country neighboring the eurozone that had to adapt monetary policies in response to developments of the euro? Well, Switzerland, exactly. Two years ago, the decision of the Swiss National Bank to drop the guarantee of a floor to the Swiss franc exchange rate vis-à-vis the euro was a shock, almost a traumatic experience for the Swiss economy and society. A representative from the Swiss National Bank will address this conference later, so you will be able to hear more about this story. But also experts from similar non-euro area countries will share their experiences. We all, and particularly the Western Balkan countries, do not have to reinvent the wheel. Peer exchange and sharing concrete experience are enriching and powerful.

I am pleased to note the experts and researchers from many different countries are present here. I hope you all will contribute and benefit from the exchange, the discussions, and conclusions of this conference.

Let me express my gratitude to the Bank of Albania and the International Monetary Fund for the initiative to gather representatives and experts here in Tirana and for organizing this conference.

I wish us all a very fruitful and inspiring event.

Christoph Graf, Ambassador of Switzerland in Albania

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