Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 30 April 2013. *  *  *  Today, on 30 April 2013, the Supervisory Council of the Bank of Albania reviewed and approved the quarterly Monetary Policy Report. Based on the most recent monetary and economic developments in Albania, and following the discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 3.75%. The Supervisory Council deems that the current monetary conditions are adequate to meet Bank of Albania's inflation target in the medium term. The present interest rates and liquidity situation in the economy provide simultaneously the necessary monetary stimulus to boost domestic demand. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** According to INSTAT data, economic activity in Albania increased 1.6% in 2012. The Albanian economy showed signs of weakness during the past year, reflecting an overall uncertainty in the internal and external environment. Nonetheless, against the backdrop of unfavourable developments, the main indicators of domestic and external balances remained within healthy parameters. During this period, inflation ranged within the Bank of Albania target band and indicators of banking system soundness improved. Maintaining these balances provides the right macroeconomic premises for sustainable and long-term growth.
A banking union is necessary for the smooth functioning of a monetary union for the following three reasons: •  It breaks the link between banks and sovereigns by bringing banking supervision and crisis management to the federal level. With the banking union, banks will be considered as euro area institutions over and above their nationality; it will ensure that credit conditions in the euro area will not depend on where you are but on who you are, which is what should be expected of an efficient financial market. •  It allows re-integration of the European banking system. A supra-national supervisor is in fact better placed to assess the risks of cross-border activities and therefore to protect and encourage such activities; it is not subject to national biases that can lead to the temptation of economic introversion. It is therefore more credible and strengthens stability and confidence in the area;  •  Moreover, it restores the full efficacy of monetary policy. If our monetary policy impulses are not transmitted uniformly to all of the area’s countries because of the bank-sovereign link, it undermines the very foundation of Europe’s monetary union; remember that three quarters of the financing of the euro area’s economy consists of bank loans. By breaking this link, a banking union would restore the federal dimension of monetary policy. Today the first pillar of the banking union is being constructed: the Single Supervisory Mechanism.