ardian fullani : concerns of the prospective erm ii members speech by mr ardian fullani, governor of the bank of albania, at the conference “ the mission of contemporary central bank ” organized by the national bank of poland, warsaw, 15 december 2006. * * * your honor mr. balcerowicz, honorable governors, dear colleagues, ladies and gentlemen, i would like to take this opportunity to thank mr. balcerowicz and the national bank of poland for the invitation. it is an honor for me to take part in this discussion and to share my thoughts concerning the challenges facing prospective erm ii members. the central theme of this conference – the mission of the contemporary central bank with the focus on euro adoption – is of crucial importance for countries aspiring to become members of the big eu family in the not - too - distant future. drawing from the experience of current and prospective members, accession to this family is a complex and challenging process. as a test of the nominal convergence of a country, the erm ii mechanism has attracted a lot of academic interest and criticism. conceptually speaking, the erm ii directly precedes the full integration in the emu. ( i ) erm ii as a step towards emu to put the erm ii in a proper context, we need to be clear on the fact that it is an early necessary step before euro adoption. therefore, entry into ermii is conditional on the economic and political readiness for entering the emu. several considerations need to be made. by adopting a single currency, the country foregoes independent monetary policy and the central bank can not act as a lender of last resort. the loss of monetary policy independence can be problematic if a country has achieved little in the way of real convergence ( both structural and cyclical convergence ) and is susceptible to asymmetric shocks. on the other hand, the loss of the lender of last resort function by the national central banks implies high and protracted fiscal costs in the case of financial crises. for this reason, a healthy and resilient financial system would be required for participating in the monetary union. it is partly a reflection of these economic challenges that the new eu members appear to be following different trajectories towards emu. on one hand, slovenia, the baltic countries, malta, cyprus and slovakia have proceeded to join the erm ii with a view to enter emu in the future. the other countries, notably the larger

to remain so in the future as well. in my recent communications with my counterparts and in the various meetings with senior officials of foreign banks ’ main headquarters i have truthfully presented our country ’ s economic situation and i have required from them to keep their interest in the albanian economy unchanged. i avail myself of this opportunity to address to the albanian entrepreneurship. you have to keep being active and focused on formulating and implementing your future business plans. this would be the only way for you to remain well - capitalized, lucrative and credible to the banking system. in the current economic conditions, private entrepreneurship should be a supporter and promoter in the formulation of domestic strategies at home, in the region and broader, and in their implementation process. all conditions are in place for the albanian business to go beyond the official regional borders, hence, becoming a factor in ensuring a stable regional activity. this also means a real integration into the targeted standards. concluding, i would like to highlight that the small countries like albania, should be optimistic, flexible and adaptive to challenges. only in this way, they may find themselves able to sail into the international waters. thank you.