ardian fullani : albania ’ s cooperation and coordination with the republic of italy speech by mr ardian fullani, governor of the bank of albania, on the occasion of the first edition of the italian week in albania, tirana, 5 may 2014. * * * honourable president of the senate, honourable prime minister, your excellencies ministers and ambassadors, it is a special pleasure for me to address this important activity on albania ’ s cooperation and coordination with the republic of italy, our main economic partner. years ago, two italian missions, dubbed “ arcobaleno ” and “ pelikan ”, provided food and order for albania. nowadays, albania is about to being granted eu candidate country status. in this long journey, amid achievements and challenges, italy ’ s support has always been there for us, and for that, we are most sincerely grateful. albania and italy are natural partners. besides and beyond the geographic proximity, all the dimensions of economic and social development, such as the level of technological, financial and human capital development, demographic and labour market characteristics, exploitation and processing rate of natural resources, and strategic development plans render our two countries natural partners. this close partnership and cooperation between our countries has its roots in antiquity. despite the mutual benefit from economic and financial exchange on a voluntary basis, technology and capital have flowed mainly in one direction, from italy to albania. technology and financial capital inflows have fostered trade exchange, exploitation of natural resources, and promotion of processing industry, consequently the country ’ s economic development. given the factors and stage of economic development, this cooperation is expected to continue in the period ahead, with italy remaining one of the main partners for the albanian economy, in spite of dynamics in the composition of our trading partners. at a glance, italian direct investments in albania have doubled from the pre - crisis level. however, the share of italy in total foreign direct investments has averaged only 14 % during 2007 – 2012, showing that financial and capital integration is not commensurate with trade integration between the two countries. trade exchanges between italy and albania have expanded from 35 % in 2007 to 37. 5 % in the last two years, hence strengthening the position of italy as our main trading partner. demand from the italian economy continues to play a key role in albanian exports and industry expansion, but it remains limited to certain branches. it is a fact that the presence of the italian economy is not homogeneous across all the sectors of the economy. the high

, the implementation of effective fiscalstructural reforms faces several tough challenges. first, they should preferably be part of a broad package of other necessary structural reforms. as such, the assessment of the potential impact on the economy is usually complex and requires a comprehensive approach. the technical expertise to make a correct assessment of the likely effects of reform is paramount for an efficient design. second, and closely related to the previous point, the planning of such reforms has to take into account the institutional and legal framework in each country. indeed, the political decision - making process, the type of government, the existing domestic laws, in particular at constitutional level, and external rules like those included in the stability and growth pact for european union members, are important aspects to be taken into account. sometimes, the improvement of this institutional and legal framework is in itself an important prerequisite for the feasibility and success of other reforms. third, the technical expertise required for the planning of reforms should have a strong base in the country implementing them, along with ‘ national champions ’ supporting the reforms on their own merits. domestic “ ownership ” is critical. reforms should never be understood by society as an imposition from abroad, either from the imf or from the european institutions. www. bportugal. pt fourth, careful attention needs to be paid to the communication strategy and redistributive mitigation measures. both are key to ensuring adequate support from the public and to containing populist appeals targeted at those parts of society that are potentially most adversely affected by the reforms. indeed, some of these reforms may involve long implementation periods, with transitional arrangements, and often lead to changes in the distribution of income and wealth. this may create pockets of discontent in spite of the clear overall benefits for the society. lack of understanding of these challenges by decision - makers may seriously jeopardise the expected outcomes. last but not least, the length of the political cycle often proves insufficient to provide the right incentives for the effective implementation of fiscal - structural reforms. therefore, broader agreements across the political spectrum, if possible, significantly increase the likelihood of reform success. however, by their nature and especially in those countries most in need of them, such agreements have been quite hard to achieve lately. all in all, i am convinced that sustainable public finances and better long - run economic performance pose significant challenges that should be tackled without delay. the longterm benefits of structural reforms decided today will far outweigh