##ination of this process is well known – the longest period of hyperinflation in the 20th century that lasted for longer than twelve months! we obviously took our time in taking the decision what to do! and recently we received a positive assessment of our decision – inflation has never been lower than recorded at end - may while economic growth has never been higher than recorded in the first quarter of 2007 when it reached as much as 8. 0 %. of course, the media will not be enticed by this fact because it represents a confirmation of what we have been trying to impress on the public for years! prices of the nbs services have never been lower than they are today, and while everybody else is looking for ways to solve their problems almost exclusively by increasing prices, and naturally by taking advantage of their monopoly position, we in the nbs have been continually decreasing prices of our services. the nbs total wage bill recorded in 2004 at total employment of 5, 500, remains adequate today and, i am convinced, will remain so over the next two to three years. the government increased the budget - financed employment last year and has done it this year again. the nbs is not the reason for the existence of the banking sector, but quite the other way around. the state should follow the same principle. i think it is absurd, not amusing, that many ministers are aware of the fact that a cut in employment would mean higher efficiency of government administration, higher quality of services and higher wages, but readily use one and the same pretext : “ why should i be the one to do the dirty job when others have even bigger excess work force. ” the impact of such policy on inflation is obvious as growth in regulated prices contributed 3. 6 percentage points to the 4. 2 % overall growth in prices, of which : prices of electricity by 1. 08 %, communal services by 0. 71 %, cigarettes by 0. 68 %, oil derivates by 0. 50 % and medicaments by 0. 10 %. naturally, all those adjustments in regulated prices mean higher revenue for the budget or some other indirect users of the budget revenue – and when money is more abundant, there is no reason not to spend more. being a keen onlooker of structural reforms, i am personally honestly fascinated by the lack of principles as well as by partiality and randomness in their implementation : - on the one hand, some of the banks with which our citizens hold

radovan jelasic : price stability and state ownership in serbia speech by mr radovan jelasic, governor of the national bank of serbia, at a roundtable discussion with representatives of the government of serbia, belgrade, 3 july 2007. * * * ladies and gentlemen, let me focus on this occasion on two topics : 1. stability of prices in the light of interplay between fiscal and monetary policy, and 2. state ownership. few days ago i heard someone say : “ it is the stable currency that everybody wants at first, and then they want as much as possible of the same currency ”. that is a true picture of serbia today. and, while monetary policy sets a priority to constantly watch over the first part of this sentence, our citizens soon forget that a “ surplus brings on a headache ”, i. e. that by increasing spending we keep going back to the first part of the sentence and demand “ stable currency. ” it is of course unrealistic to expect citizens to gladly forsake some of their earnings in favour of the state so that the currency could remain stable. on the other hand, that is exactly why countries have or should have a responsible and professional government which takes into account medium and long run solutions to macroeconomic issues and is fully aware that the second part of the above sentence “ and then they want as much as possible of the same currency ”, in fact means inflation. in contrast to the nbs whose main objective “ to attain and preserve price stability ” is precisely defined by the law, governments are free to define their objectives and are not bound by any legal formulations. governments often alter their objectives as they go along. they are often unwilling to remember promises made only a few days earlier, not to speak of those made before they came to power or those made in their early days in power. as the governor, i am very pleased that the parliament has clearly defined our objective and that the objective is very good – “ to attain and preserve price stability ”. i am convinced, however, that that particular objective was set much more in line with the principle of “ follow thy neighbour ” policy than due to some deep seated conviction that price stability is key to economic development, improvement in the standard of living of all citizens, attracting foreign investment, etc. for forty years yugoslavia and serbia have been trying to attain “ growth and development ” and putting stability of prices into the second or the third line of interest. the culm