achieve and maintain price stability. achieving this objective implies keeping inflation at 3. 0 %. our monetary policy employs the inflation targeting strategy, whereas the exchange rate employs a free floating regime. the monetary policy of the bank of albania is forward looking ; it aims to be a flexible, balanced and transparent policy. bis central bankers ’ speeches the albanian economy has been facing, for some time, a sluggish economic environment. during 2014, our monetary policy was drafted and implemented amid low inflationary pressures and below - potential economic growth. annual inflation, in 2014, averaged 1. 6 %, standing lower than the 1. 9 % average rate recorded a year earlier. the low inflation rates were dictated mainly by low pressures generated in the domestic economy, as well as by the low inflation rates in our trading partners and low inflation expectations by economic agents. according to the albanian institute of statistics ( instat ) data, the albanian economy grew 1. 9 % in 2014, against the 1. 5 % growth in the previous year. economic growth was driven mainly by the domestic demand and – excluding construction – it was reflected in activity expansion across all the sectors of the economy. economic activity grew, benefitting from the eased financing conditions as well as the improved confidence and balance sheets of the real and financial sectors of the economy. these factors contributed to the increase in private consumption and investments. excluding the payment of arrears, the fiscal policy has been consolidating during 2014. on the other hand, trade exchanges with abroad did not generate positive impulses for economic growth. regardless of the higher growth rate, the albanian economy continued to operate below its potential. as a result, production capacities were not fully utilised and the situation has dictated unemployment rates, which go beyond the equilibrium level. as we have mentioned earlier, the spare capacities in the labour market lead to low increase in wages, production costs and final prices in the economy. these phenomena have been present in albania during 2014. in bank of albania ’ s opinion, aggregate demand is the main problem facing the albanian economy ; thus, addressing it requires the increase of macroeconomic stimulus. reflecting the above, our monetary policy has been increasingly accommodative. the bank of albania lowered the key interest rate three times in 2014, bringing it down from 3. 0 % to 2. 25 %, and further down to 2. 0 % in the first quarter of 2015. our monetary operations consisted in continuous liquidity injection in the banking system,

of debt dynamics. let me say upfront that the commission's proposal is a step in the right direction. that said, the " fiscal rules trilemma " iv provides a useful matrix to analyse its merits relative to current rules. the trilemma states that it is impossible to fulfil simultaneously the following three objectives : i simplicity, which can also be understood as political intelligibility and ownership ii flexibility, i. e. the ability to adapt to specific economic situations or unforeseen developments, and iii enforcement, i. e. the extent to which the rule is binding. in practice, the current stability and growth pact includes too many – and too complex – flexibility provisions and escape clauses to compensate for the " one size fits all principle ", while efforts to improve its enforceability proved ineffective. the reform must strike a better balance between these three features – simplicity, flexibility and enforcement – in order to make the fiscal framework more effective and operational. as regards simplicity, the fact that the new framework is built around a single operational indicator, i. e. a net primary public expenditure aggregate, is a major improvement compared to structural deficits. in principle, this new indicator should be easier for governments to measure and oversee, and would entirely fall within their control. it is also simpler to use as a communication tool in the public debate, which would help to make the new rules politically intelligible and acceptable. on flexibility, the proposal goes a long way towards better tailoring the efforts required to country - specific circumstances. the expenditure path would be defined in a pragmatic process, based on a debt sustainability analysis and after a thorough discussion between the commission and member states. each country would commit to a national medium - term plan including structural reforms and public investment programmes. this process acknowledges that debt heterogeneity is too high between 2 / 3 bis - central bankers'speeches member states to dictate a single debt reduction rule – 66 % of gdp in germany vs 144 % in italy in 2022 – while enhanced dialogue with national authorities should improve political ownership and hopefully compliance with the framework. but this brings me to enforcement. we should nevertheless seek to ensure that the national plans do not turn into political negotiations and result in insufficiently ambitious fiscal adjustments. i must admit that i do not 100 % believe in the wisdom of institutional processes or in enlightened economic debates for sufficiently steering national cycles. they must be complemented with common rules and anchors