Macroeconomic politics is essential to stability

By Jean-Claude Trichet, President of Central European Bank

The disorder in the monetary trade is keeping the world hanging on for more than one year. After a long period of stability, the 2007 was a turning point, with the starting of trouble in financial trade, that will be rememberd for a long time. Central banks, international supervisors and governments all over the world answered and keep on answering firmly to the weaknesses and the materialization of dangers, in order to restore as soon as possible stability and helping circumstances for development.
The source that brought the crisis was a wide underestimation on the risk. This included an underestimation of the risk element and a bad account on the amount of risk that the financial operators had assumed. Some politicians had called the attention during 2006 and the beginning of 2007, that the parts in these trades needed to prepare an important correction. As a chief of meetings for the global economy of the governors of central banks, I have called the attention of my colleagues on this question. At the same time, some reports on financial stability, including that of the European Central Bank, the Bank for International Habitations, the Financial Stability Forum (FSF) and other organisms, have analized the tangibility and warned the appearance of weaknesses.
A number of factors have contributed to the financial ambient that ruled until the half of 2007. The widespreading of the bank model of "creation and distribution" brought to the separation of those risks of credit owning from those of monitoring and managing them. The investitors counted for good that the inventors would had made an adequate treatment of the risks, but there were no guarantees that this was the case. They trusted totally on the ability of valuation agencies to count the risk for new instruments. Beside that, come great financial institutions showed a massiv concentration of the risk, considering the general formatting of the balance-sheet and their capitals. Though the massiv diffusion of the risk is generally an establishing factor at the systemation level, in extreme circumstances, like a global mistrust, the impact is accorgind to the systematic definition. A mistrust at this level was repeated at the half of September of this year.
While we're managing the actual situation, we should also start to determine the ways to strengthen the global financial system in an enduring way. The FSF was the featuring lesson from the crisis and its job was done by the international community. In this context, there are three particular factors to be solved in order to adjust the completely extended underestimation of risks: short terms, lack of transparency and the excess of pro-cycling.
The modern fiscal systems have favorized instruments and intermediators who promisse great returns in short terms. Intitutions feel unter pressure to follow strategies of those who can show high profits in short terms. This process attempts to cause a more discreet behaviour, in which the risk is controlled by easily becoming a secondary question. We should oppose these mechanisms and put right incentives to asure a balance between investitors and long and short term intermediators.
Incentives for the parts in trades should be strengthened in this sence, between them, through revised inner schemes for compensations.
The second point deals with transparency. No matter the great progress in the information technology, the financial system was characterized by a lack of transparency about the final distribution of risks. Two examples of this are the evident complexity of the structured financial products, that even the specialized investitors are not able to estimate correctly, and the missing of normatives for some financial institutions. Moderators are therefore necessary to strengthen the demands for trades where structured financial products are sold, and the strengthening of demands for previously irregular institutions.
Lastly, the pro-cyclic behaviour is more evident in the financial systems. Yet, in the today's financial global system there are mechanisms that intensify the fluctuations. The challenge is to keep an efficient financial system as an engine for the economical growth and to provide its stability at the same time. For example, the adjustments and capital norms as agreed by the Bazel Comitee on the bank supervision and the structures of industry supervision, especially on the risk managing fields, should limit too careless behaviors in backwarding discouraging the excessive conservatorism when crediting on companies and families is more necessary.
An ambitious and effective reformation of the financial system is necessary, yet not sufficient to reestablish an enduring global economic order. The long term financial stability demands macroeconomic policies with a midd-term orientation based on their own stability and support. This means that great inner disbalances should be avoided and hopes should be anchored in solid ways toward midd-term constancy. Mostly, the pro-cyclity cannot be stopped only by regulatory policies but also by macroeconomic policies, where it is not wanted too. In a global context, there's a need to strengthen in significant ways the supervision of the IMF over the economies systematically connected.
Multilateral consultations of IMF with the main partners is a process that might be developed further. It is necessary a greater discipline in the global economy, to incourage stability and to help balancing more properly the short-term and long-term prosperity. "The Financial Times"

Three bullets shot on Aleksandër Malaj

Yesterday night, at about 21.00, Aleksandër Malaj was shot near the village of Berdice, as he was driving from Shkodra toward Velipoja. According to unconfirmed sources from the police, the authors were not identified. Three bullets hit his body. The police was quickly present at the place of the incident, while the victim was sent urgently at the Regional Hospital of Shkodra. Doctors say his situation is critical and he is having all the necessary and possible care under strict vigilance of the police. This citizen has a long conflict and was shot also on May 2, 2007, as he left his home, where he was living closed-in, to go and see his business. At the time he escaped miraculously. Source from the police as well as from the Albanian Missionaries of Peace League confirmed for our newspaper that the ambush was because of his brother, Anton Malaj, who was shot by Kol Shtysi on September 1st, 2005, as he believed Anton was the lover of his wife. At that time, this was considered an attempted murder as the bullets could only cause two holes to Anton's car, without touching his body. As he had no way out, Anton left Albania years ago. The police doesn't give other explanations to the last evening incident, but it is supposed that Aleksandër Malaj is simply a victim, while it is his brother, Anton Malaj, the one wanted to be killed, according to the Canon of Lekë Dukagjini, because Kol Shtysi, from Malësi e Madhe, has publicly accused him, though without evidence, for having an affair with his wife. Other sources confirm that Aleksandër Malaj was menaced several times to force him tell the country of residence of his brother, Anton Malaj. If the victim doesn't make it, this might be registered as the ninth murder for revenge in the region of Shkodra, since January 2009.
Blerti Delija