ardian fullani : the development of, and challenges for, the albanian economy opinion of mr ardian fullani, governor of the bank of albania, published in the albanian daily newspapers “ panorama ” and “ albania daily news ”, 2 december 2013. * * * soon enough representatives of the international monetary fund ( imf ) will come to albania to judge on the performance of the albanian economy and its perspective. during their mission to tirana, fund representatives are expected to discuss the country ’ s economic outlook in the medium run, from the perspective of the imf vis - a - vis the perspective of the albanian authorities. given the latest economic developments in albania, the possibility of signing a new cooperation agreement between the imf and albanian authorities has been a persisting question in public debates. my approach to this issue has been to fully support negotiating a new agreement with the imf. i am certain our economy will only benefit from it, especially under the current circumstances, as the attitude of the imf towards developing economies has become more flexible. presently, the biggest challenge facing the albanian economy is recovering its activity, ensuring stable economic growth and employment. on the other hand, all the economies of central and southeast europe are also facing these challenges. the main objective remains enhancing competitiveness : in other words, creating and boosting production capacities to produce high - quality goods and services at lower costs compared to our competitors. currently, both our economy and the economies in the region are too small to generate sufficient domestic demand that would promote employment, and, for them, to cope with the competition from the asian economies is costly. at the same time, our economies are small against the economies of central europe ; they suffer from low productivity, implying that, in the current conditions, the production quality and quantity for unit of labour is lower than in our direct partners, both at regional and global levels. higher production and employment rates are the only alternatives that lead to creating values that would guarantee convergence with advanced european economies. in central european economies, this phenomenon happened at the end of 1990s thanks to capital investments from european and global markets. factors that supported these capital flows weakened at the outbreak of the global financial crisis and withdrew totally after the sovereign debt crisis. at present, the global markets have withdrawn from eastern europe economies and from other developing countries. in the absence of free capital from abroad, structural reforms in the labour, capital, and land markets and pension system remain the only possibilities to attract foreign capital and investments to

however, some proposals have given rise to concerns also within the ecb. in particular, those proposals relating to an extensive use of fair values raised concerns about the possible adverse implications on the volatility of bank income and, eventually, on bank behaviour and on financial stability. as a consequence, the ecb contributed to this debate, highlighting the concerns and showing their relevance. the more recent proposals from the iasb moved into the direction of limiting the use of fair values for those items that can be reliably measured. the revised proposals should help to avoid undesirable consequences such as an artificial increase in income volatility. at the current juncture, the ecb is carrying out an exercise to check the likely impact of the new standard. while these issues apply to all financial markets, the eu faces a particular challenge relating to the advancement of the single market. the introduction of harmonised eu rules regarding the setting - up of financial statements are considered to be a crucial step towards the further integration of the financial markets in the euro area and the european union. indeed, improved comparability of disclosed information would facilitate cross - border investment and further market integration. thus, in 2002 the european parliament and council adopted a regulation requiring listed companies to prepare consolidated financial statements in accordance with ias from 1st january 2005. a specific endorsement process is in place to ensure legal certainty and consistency with eu public policy concerns. this process already allowed to endorse all ias with the exception of the two standards concerning recognition, measurement and disclosure of financial instruments. recently, in order to deal with the remaining controversial issues, the commission took the initiative to establish a high - level dialogue between all the constituencies interested in high quality accounting principles. i remain confident about the positive impact of prudently implemented international accounting standards on the stability and efficiency of financial markets in the eu. the third area relates to the strengthening of financial regulation in industrialised countries. here, let me recall that recent crises exposed weaknesses in the risk management practices on the part of creditors and investors in industrial countries, pointing to the importance of financial market regulation and supervision. we all are aware of the importance of effective financial regulation and supervision to maintain financial stability and protect consumers, also in light of the increased complexity of financial services and products. let me say one word on one important aspect of financial regulation, which is the reform of the basel capital accord, coined basel ii. i am convinced that our host, mr. caruana,