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This is why the lek is destroying the euro

2023-06-03 11:18:00, Opinione Lutfi Dervishi

This is why the lek is destroying the euro

Journalist Lutfi Dervishi

Everything today has an explanation. Even the unstoppable strengthening of the lek.

Theoretically, currency strengthening is related to a number of factors:

1. Economic Stability: A country with a stable and growing economy attracts foreign investment, which increases the demand for the local currency. Investors have confidence in the stability of the country's financial system.

Practically, it is not that we have increasing interest of foreign investors, on the contrary, even those who are complaining about unfriendly environment.

2. Theoretically, high interest rates affect the strengthening of the currency. When a country offers relatively higher interest rates compared to others, it can attract investors. This increased demand for the local currency strengthens its value.

We practically do not have a high interest rate.

Theoretically, the local currency strengthens when we have:

3. Trade surplus: A country that consistently exports more goods and services than it imports creates a trade surplus. This generates demand for its currency as foreign buyers need to buy it to buy the country's exports. Increased demand leads to currency appreciation.

Practically, we do not have a surplus, but a trade deficit

Theoretically, the currency strengthens when we have:

4. Political stability: Political stability is an important factor for a strong currency. Countries with stable political environments and well-functioning institutions tend to inspire investor confidence, resulting in increased demand for their currency.

Theoretically, we have good institutions and laws, practically...

Theoretically, the currency strengthens when the country has:

5. Strong fiscal and monetary policies: Sound fiscal policies, such as low levels of government debt and balanced budgets, as well as effective monetary policies that manage inflation and maintain price stability. These factors can contribute to a strong local currency.

Practically, debt is high and prices are "crazy".

Theoretically, the local currency is strengthened by:

6. Wealth of Natural Resources: Countries rich in natural resources, such as oil, gas or minerals, can have a strong currency due to the high demand for these resources. This is known as the "resource curse" phenomenon.

Practically, we waste our assets under and above the ground

Economic literature confronted with practice does not explain the strengthening of the lek. The question of where leko gets its power is not fully answered even with:

The increase in the number of tourists

Not even with remittances

Not even with exports

Not even with the income in foreign currency that is generated from online work.

Not even (just) the elections.

If the elections were the main factor

Why does Turkey, our strategic ally, not take advice from us? We enter the elections and the lek strengthens, Turkey enters the elections and the lira weakens, we exit the elections and the lek destroys the euro together with the dollar and everything, Turkey exits the elections and the lira is destroyed...

Why are we selfish and think only of ourselves?