radovan jelasic : remittances to serbia speech by mr radovan jelasic, governor of the national bank of serbia, on the occasion of the international conference on remittances, berlin, 29 november 2007. * * * dear mrs. minister, mr. minister, your excellency, ladies and gentlemen, it would be true to say that citizens of serbia are its main article of export since no other “ article “ brings in more foreign currency than the serbian diaspora sending remittances from abroad. this is particularly true of the serbian diaspora in germany as over 700, 000 serbian nationals still live there – let us be clear on this, i am referring to those still holding serbian passports, or better to say, yugoslav passports! though our fellow citizens have left serbia, and done so for various reasons of economic or political nature, in order to obtain better employment opportunities or to flee the war - torn regions, etc. – they all share a common denominator. all of them are sending money to serbia. and, they are sending lots of it! based on our estimates, around usd 3, 0 billion or 8. 1 % of the gdp was sent to serbia in 2006, of which over usd 300 million from germany alone! these transactions have two important aspects : social – assistance to those who had stayed behind, care for the elderly, supporting relatives, and economic – investment in the smes, residential building, purchase of property, investment in their own or their children ’ s education, etc. however, our estimates show that only half of all remittances take the formal route, i. e. reach serbia through banking channels, which certainly has nothing to do with the quality of the banking sector in serbia since 80 % of the sector is in majority ownership of well ranked strategic owners from the eu countries - austria, italy, france and greece. this means that the majority of such money is brought into serbia by people crossing borders, which naturally has a negative impact on all those participating in such dealings : • there are side - effects to money senders in terms of undesirable costs, safety exposure and loss of tax benefits ( if the aim is to support relatives ) ; • money recipients must pick up the money and hopefully take it to a bank, which is not a simple matter as they do not fully qualify for use of banking products, such as credit cards, mortgage loans, etc. why is money still being

moreover, indirect effects of past oil price increases and euro depreciation are still coming through as witnessed by the continued rise in producer price increases for consumer goods. other short - term factors, such as increases in indirect taxation or in administered prices, may also prevent consumer price inflation from falling rapidly below 2 % over the next few months. i should also like to emphasise that market participants consider the current level of consumer price inflation as temporary. bond yields in the euro area indicate that the general expectation is for inflation to be within the ecb's definition of price stability in the medium term. the ecb is committed to fulfil this expectation. the current uncertainty regarding the prospects for world economic growth heightens the need to maintain the foundations for strong non - inflationary growth in the euro area as well as to strengthen the potential of the economy. the ecb shares the objective of the governments and citizens of the euro area of a growing prosperity in the euro area. by focusing on the maintenance of price stability over the medium term, the ecb is making an essential contribution to the achievement of this objective. at the same time, it is of paramount importance that all policy actors help to maintain the current favourable outlook for growth and inflation in the euro area. first, it is crucial that social partners continue the process of wage moderation seen in the past. this will not only facilitate the task of monetary policy, but will also contribute to continuing the process of reducing unemployment in the euro area. in addition, long - term growth perspectives for the euro area will benefit if governments intensify their efforts to progress along the path of fiscal consolidation. i consider that budgetary plans recently expressed in countries'updated stability programmes are not very ambitious as tax cuts are not accompanied by appropriate expenditure restraints. if the macroeconomic environment remains as favourable as expected, the envisaged fiscal policy stance could add to demand pressures. fiscal policy could, thus, become an additional source of upward risks to price stability. in addition, the stability programmes do not make the necessary progress in addressing long - term fiscal challenges. these challenges include, inter alia, the budgetary adjustments needed in many countries to cope with population ageing. more efforts are also needed in the ongoing process of implementing structural reforms to foster the growth potential of the euro area. this is of crucial importance to promote the supply of labour and capital and to innovate and disseminate new technologies and production methods. more flexibility in labour markets and