Prime Minister’s communication after extraordinary cabinet meeting

Press conference by Prime Minister Edi Rama after cabinet meeting:

 

Thank you! Today we held an extraordinary cabinet meeting, outside of the regular weekly calendar, to make a decision and declare a state of emergency in the energy sector and the electricity supply. The decision on declaring the state of emergency was made due to an overall situation following a skyrocketing electricity price surge in the international markets and the decision allows the government to intervene either through financial tools or instruments of administrative nature. This way, through today’s decision we clear the way also towards implementation of the specific plan to tackle the situation and the plan will be announced to the public tomorrow.

–Have you estimated the financial cost of this package and how long it will last?

PM Edi Rama: Of course we have calculated everything, but the specific plan to tackle the crisis will be announced to the public tomorrow. In the meantime, we can’t help but refer to the experts’ analysis and the analysis being carried out by the governments of various countries. It is a similar situation in terms of the blow we sustained because of the pandemic, in the sense that every country has been affected. Of course, unlike the pandemic, various countries also have different characteristics, but they are all mulling ways to deal with this situation.

Experts believe that the crisis will go on and it is likely to reach its height by mid next year and, at the same time, they even think that once the peak of the crisis is overcome, prices will not return to the pre-crisis level. However, this remains to be seen. What we have to do is to protect our customers, certainly under a bottom-up set of priorities, considering first those most in need and then moving up further, through small business and further up, the higher income earners. The order of priorities will start from the weakest to the strongest and not the other way around.

In the meantime, it is worth drawing attention to the fact that the only electricity price hike during our terms in office took place back in 2015, when we launched the energy reform. In that case too, the electricity price was set at a rate that fails to cover the cost, but it helps to protect the residential and small business consumers. On the other hand, to put it clearly, the difference – and this is very important – the difference between the previous electricity price rate and the new one at that time for around 200,000 households and individuals is covered by the state. So, the electricity price for the retired people, the families under the social welfare benefits scheme is covered by the state budget through an amount of around $30 million a year, as a compensation for the price increase. Do the math. These are things that normally people tend to forget and it would be good to recall them.

–Mr. Prime Minister, the concern…(inaudible)….more money from the annual economy, given also the fact that prices of a good part of food products keep increasing each day. Will there be a new electricity price hike and, if yes, what would be the percentage of price increase? And if the electricity price increases, will it remain unchanged once the energy crisis is over?

PM Edi Rama: First of all, this is not the primary thing worrying each citizen. This is what worries us and the citizens all together. If the solution was to be found at the electricity price hike, then we would have not been doing what every citizen would do for his or herself. We are here to embody the citizens’ concerns and you should know that because of my duty I sleep less than any citizen, exactly because I feel this concern of every citizen.

On the other hand, it is for now very important that we…[inaudible] … these are the market prices. This is a global situation, but it is impossible for me to think that I can run together with the rushing energy prices.  I agree. However, on the other side, it would be best that those worried about this and who rightly express it, when they are told the nonsense, suggesting that Albania is rich in water and therefore Albania doesn’t depend and is not affected by the global crisis, because Albania generates electricity itself, Albania produces oil itself, but this situation is a result of wrongdoings. These should all be left aside, so that we can better understand each other what we are talking about.

First, Albania doesn’t generate – and this is a fact – the whole amount of electricity it needs.

Second, Albania certainly sells electricity, but why do we do so?

Because, in the event of torrential rains, the country faces two options; either to sell electricity, or discharge the huge water inflows due to the heavy rainfall. And not just discharge water, but flood huge areas. Then it has no other choice, but to sell it. Of course, when the weather is rainy, the electricity price is lower and you are forced to sell electricity at a time when the demand in the countries around you is not high. Albania is forced to import and purchase electricity in the event of prolonged drought, because an economy 100% dependent on the rainfall has its good side, as it generates clean green energy, but it also has its negative side, because it lacks sources to objectively plan them and when it sells it does so at cheaper prices, just because the demand for electricity is lower. When the country purchases electricity, at the height of drought and hot weather, it buys it at a very high price, because the demand is much higher and it is not Albania the one to set the market prices, but the demand and supply.

Those who claim that the electricity price is that high, while the wages and salaries are that low, I can tell them that it is not Albania to decide, and the market doesn’t care what your name is when you address the market to purchase electricity. The market doesn’t care whether you are called Germany or Albania. In this sense, we draw attention to the fact that this is a global crisis. We can’t draw comparisons between Germany’s purchasing power and that of Albania, but we say that it is precisely because of this that the crisis is more challenging for us, is way too difficult and it is more challenging and much difficult for the citizens alone, but it is so also for the government, because, after all, it is the government that helps citizens by using its financial capacities, which are created through the contribution of all citizens, and are not opportunities created by rain.

These are things we need to understand in order to clearly know what we are talking about. Of course, the bottom line is that the government has to protect consumers and this is unquestionable. If we were here just to announce that the prices are increased and therefore you have to pay, we would then just be doing the role of the transmission lime and the role of news announcers. We are not here to do so. We are here to raise a dam between the storm coming from the international market and the door of the home of every Albanian citizen. This is why we are here and just like we didn’t let people on the street when their roofs collapsed due to the earthquake, just like we didn’t let them on the streets when the invisible enemy showed up, of course we won’t let them alone now too. There is no doubt about it, but things can’t be done in the blink of an eye, or at the press of a button, they can be done through proposals or ideas unfounded on facts and figures.

Because the question matters when it comes to another aspect as well; Is this just for now or will it be permanent? Who might know that?

Experts today say that the crisis will have a peak, which might last until mid next year, but they also acknowledge they don’t forecast the prices to return to the pre-crisis rates. It all remains to be seen how accurate this forecast is, and how much the electricity prices would fall.

As far as other products prices are concerned, we should all clearly know this is the system we have chosen 30 years ago. We can no longer discuss what would happen with prices of other products. If we consider the bread price since’90s onward, you would see that the bread price has kept increasing and the increase reflects the market, the demand and supply ratio. No bread would be produced, if it was to stockpile in warehouses or bakeries. It is the market that determines prices, and not the governments. The state used to dictate prices under the communist regime, but we have closed that chapter 30 years ago.

On the other hand, the question and the request that since the prices rose, you should increase salaries, it doesn’t work this way, because the salaries can’t be increased when I want to do so. I have repeatedly stated that there is no prime minister who wouldn’t wish to increase salaries and pensions immediately when people would call for the government to do so. It is like the case of a small family, who might ask why don’t you give children more money? Where am I supposed to find it?

You can find it through work, or borrow it. If you would borrow money to spend more than you can afford at home, you would one day end up putting your own house up for sale.

These are balances and if it was the case that you can increase wages at will of everyone, why Germany or France are not increasing wages to 20,000 euros per person? Why don’t these countries announce pension hikes to 10.000 euros per person? Why other countries in the region haven’t done this?

The wages are increased based on the economic capacities of the country. The country’s economic capacities increase the entire chain of value and generate more revenues. The revenues are distributed in the form of salaries and pensions. In order for us to boost the country’s economic capacities, we have to work a lot harder and move forward more patiently and in a more determined way. But having said that, we can’t shun any pledge we have made. We have pledged that the minimum wage will increase year after year and it will surge to 320,000 lek starting January 2022. Our goal is to increase the minimum wage to 380,000 to 400,000 within this term in office. We have promised this and we will deliver. We will also increase the wages of teachers, medical workers and the public administration employees each year. The private sector will definitely do the same thing.

– Mr. Prime Minister, you said that the plan to tackle the energy crisis will be announced tomorrow. However, has the government taken into consideration the proposals earlier forwarded by the opposition leader Lulzim Basha, who has revealed a concrete seven-point plan, suggesting removal of the fuel tax, VAT cut from the current 20% rate to 6% for basic food products, respecting the law on the real electricity price and calling off the OSHEE’s luxury spending?

PM Edi Rama: First, I would ask you to verify what I already stated at parliament’s session yesterday. Verify the price level of oil and gasoline in 2013. Verify the oil price offered at the filling stations throughout the territory of the Republic of Albania; how much did Albanian drivers used to pay for a litre of oil and gasoline back in 2013. Was the oil price cheaper or more expensive than today? Only then we can discuss everything else, but the theory suggesting cutting prices and lifting rates here and there has its own problem. It is all about money the state budget is denied, but how the government is then supposed to provide support to people, if we are to remove all the financial opportunities that are created by the citizens’ contributions. We talk about Germany, France, Italy and other rich countries, but do the math and calculate how much citizens pay from their salaries in contribution to these states? The state budget revenues are created thanks to the contributions. How much do they pay in social insurance contributions so that they can receive higher pension payments when they retire in these countries? How much people there pay in health insurance contributions so that better health care is provided? All these services are made possible through the contributions.

In terms of defence tools, we are very clear about what we are going to do, and the demands to make the state coffers run dry are Sude and Vehbi-era atavisms.

We are the party and the government of neither Sude nor Vehbi.

–Such crises cause strong blows to the budget of the countries. What are the risks this crisis poses to our state budget?

PM Edi Rama: The reason why we have been working around the clock by analysing the issue from all sides and why I insist that when we address the concern we are in our absolute right, because after all every citizen at the moment he sees he is facing a danger for his own household financial, he would certainly voice his concern and will ask the government to act, because this is why the government is there and this why it has been voted for. But in the event of a crisis like this it is important that every citizen is open to listen to the arguments so that then we figure out what we can do, how we will do it and for how long we will have to face a looming crisis. So, in this respect, such an approach is important, just as our goal is to protect the consumer right now, but we cannot totally undermine the further economic growth plans.

The economy cannot grow through subsidies. It can’t grow through indulgences. The economy grows when productivity as a whole grows and of course the economy grows with the boost of investments. Therefore, we don’t want to threaten any of these two. We did the same thing in the wake of the earthquake and the pandemic and that’s why the country’s economy grew 18 %, the strongest in the region, in the second quarter of this year. To those who ironically laugh at this, I tell them that 18% growth is not an 18% economic growth more than it the pre-pandemic growth, but it is an economic growth that is recovering strongly after it shrank due the pandemic. The double-digit growth is being recorded in many countries, not only in Albania, but the double-digit growth is not a natural one, yet it is a growth resulting after the reaction to the crisis.

Economy has recovered. The employment rate is now higher than the pre-pandemic rate. So, the number of registered employees is higher than their pre-pandemic number. The economy has recovered and we need to maintain this upward trend. We shouldn’t stop the growth trend – through the planned investments, the planned wage hike – by plunging into this crisis and dealing with only, because we have a lot of other things to deal with.

It would be the easiest thing to do and decide to eliminate any tax and tariff. But the VAT rate cut or elimination has historically shown it is an effective move, just like it is the case with the agricultural inputs, which serves as a lesson for everyone to realize that it fails to reduce prices, because prices are dictated by the market, while in a capitalist market economy the government has no power to force private companies how much they should sell their product.

When it comes to the electricity, the government’s capacity in Albania is a result of the fact that we can exercise a certain control over the price, not a full control, but a certain one, because the state operates both as electricity generator and distributor, because if we were to find ourselves in same conditions like some other countries – Spain for example has no support of whatsoever regarding the electricity generation as the sector is totally controlled by the private companies and therefore the authorities there have to negotiate with them. In Great Britain there is even a greater problem, because you all know that the electricity supply is like the telephone card that you have to recharge and nobody is held responsible whether one has electricity in his or her home or not. This is the fact. We don’t face such maximum capitalist savageness, because we can’t afford it and the market liberalization, which is the best thing to be done, has been a very carefully conducted process and I am pleased for not going further than that, as many suggested us when the situation was favourable, but there comes the day like now and if the market was fully liberalized then we would all have been under the mercy of the fate and we would be able to do nothing, just like we can do nothing to prevent the oil and gasoline price increase.

The state currently applies a preferential and controlled electricity price for the bakeries. This is how far the state can go. The overall price hike is an unstoppable process since the ‘90s, when we entered this system. Prices go up and down depending on the demand and supply ratio. They are all goods produced by the free market and sold and purchased in a free market and the question we need to ask ourselves is that the purchase power of Albanian consumers is seemingly higher than what they say, because otherwise no goods would have been sold.

-In 2013 you pledged to cut the VAT rate on electricity to six percent from 20% for the household consumers. Are you considering a VAT cut for household consumers? I am asking you this question taking notice of the fact that France, Spain, Italy are already launching such initiatives to suspend the energy tax as part of efforts to cope with the crisis and, on the other hand, is this a disaster we can’t avoid or is it a result of mismanagement given the fact that Albania has sold electricity at a very low price ranging from 40 to 80 euros, while the energy stock market price was 120 euros, and we are now purchasing at a price of 230 euros.

KM Edi Rama: What you are refusing to realize in this case too is that you, the journalists, stand between us and the public, because citizens find themselves in a different position and it is their right not to pay much attention to our arguments amid the fear and anxiety over the surging energy prices. The argument is that the electricity is sold at a cheap price, because we export electricity when the market demand is low and we are forced to sell it because we can’t stop generating electricity at our hydropower plants as otherwise we would be forced to flood huge swathes of land. Will you understand this? What are the reasons we sell electricity? Why are we building the Skavica hydropower plant today? Skavica HPP  will serve as the reservoir to balance the inflows and would allow us that the unnecessary water inflows for a certain moment are not discharged, but be reserved instead.

As soon as the Skavica HPP is built and becomes operational then we will be playing completely differently in terms of playing the market, because we will be powerful enough to dictate when we will decide to sell, and this won’t be dictated by our inability to reserve the water inflows, as we currently face two options only, either sell energy or discharge the water inflows. Which one would you prefer? There is no third way. Work on construction of Skavica HPP has just kicked off and we will build the plant within this term in office, hopefully, if unpredicted things do not happen. Construction of this HPP will allow us to keep huge water reserves. On the other hand, it is true what I have said, just like it is true what I am saying today. There is no evidence showing that consumers would benefit from tax cuts. This was the case with the agricultural inputs, with the ones to benefit being the sellers of these inputs.

I would invite you not to confuse things by citing the case of France, because France enjoys a completely different position as it runs nuclear power plants. France has not been hit by this crisis of today, because France makes the nuclear power plants operational and increases production. And France is doing none of the things you claim.

Germany has been hit by the crisis after the country shut down its nuclear power plants and after lowering predictability by creating higher dependency on the Russian gas and all of these developments influence Albania for a simple reason and this is because Albania is part of the whole. As long as everyone accesses the market to purchase electricity, the market doesn’t care whether your name is Muhamed Veliu or Edi Rama. Do you wish to buy a new jacket? The jacket’s price tag is this.

– Mr. Prime Minister, the oil price was 107 lek in 2013, while it costs today around 70 lek. Based  on the 2013 standard, the retail sale price today should be around 150 lek.

PM Edi Rama: Again, the comparison I highlighted was a very simple one. Today, people complain that the oil price has increased beyond…

It costs 27 lek more. However, my question was something else.

PM Edi Rama: Your question was something else and it has nothing to do with what I am saying. The today’s outcry is that we face extreme oil prices.

It is not the government to decide the retail oil price at the filling stations. One should clearly know this. The price tag is set by the market. We have chosen this system since when you were just born or you were about to be born, as many of you here are younger than the democracy in this country. It is not the government to decide prices. One complains that the oil price has gone up immensely. No, this is not true. Oil price used to be higher than today. That’s it. Your father used to pay more to buy a litre of oil, because you hadn’t a driving license back then. It is as simple as that. I am talking about the oil price. I invited you to verify my remarks. It seems you have made such a verification since yesterday and it turns out I am telling the truth. The oil and gasoline prices used to be higher in 2013. Whether this was because of the stock market or not, this is something else. Although the current oil price includes two additional components, namely the circulation tax and the carbon tax, the oil price is still cheaper than it used to be in 2013. This is a fact.

The carbon tax won’t be removed, because the retired people, you are talking about, are not the environment polluters, but consumers of the air that they don’t pollute. How the government is supposed to provide more support to the retired people, social needy categories? Is it going to do so thanks to the rainfall? The rainfall helps us to generate electricity, whereas the support for these categories can be made available through the contributions everyone pays. So, he who pollutes more, he would definitely pay more in taxes and contributions. I am not denying this, but what I am saying is that the oil price is lower today than in 2013. We need to draw factual comparisons about the reality. While the stock market price is something else that has nothing to do with the topic we are talking about. This is all about a totally private sector. Some claim that Albania produces sufficient oil and the country doesn’t need to import fuel.

First of all, Albania doesn’t produce sufficient oil to meet its needs. Second, the oil Albania produces is  crude oil grade, highly viscous and with high sulfur content, which is exported, because its producers are international companies from all over the world. Albanian oil is mainly sold for its industrial by-products, including bitumen and so on and so forth. It is not exported to refill Mercedes or Alpha Romeo cars, but it is exported for its by-products. Albania imports around 600,000 tonnes of oil from the international market each year. And by Albania, I mean the private companies that import oil, just like it is the case in every other country in the democratic world. As far as I know, there is no democratic country, where the state produces oil and offers it up for sale at the refilling stations. This is the system we have chosen. I don’t think we should question the system, but I think we should discuss the divided responsibilities and the government has to become a sort of dam to defend those who are unable to deal with this storm.

The government is not here to relieve and decrease the stress level of those, who enjoy all the opportunities to withstand this situation or even more severe situations, or to relieve stress of those who own two cars and raise the voice more than anyone else. No, the government is here to help the social categories, which are most vulnerable to the crisis and they are primarily the residential and small business consumers.

Small business and the household consumers should benefit support. This is the path to tackle the crisis. We are on the right track and we will keep moving forward no matter how painful and the sacrifices it would take. If all the things this government is doing over the past eight years were to be done since 1991, we would be discussing other issues today. But nothing was done. On the contrary, the energy sector was on the edge of an abyss. We lifted it from the abyss, but it has yet to become a sovereign sector as it all depends on other factors. We need to make the energy sector a sovereign one so that Albania dictates the electricity market prices. And this could be achieved by investing in the Skavica HPP, investing in a programmable energy source. We lack the programmable sources, but we have a source totally dependent on the weather conditions at a time when the climate change is increasingly becoming a serious problem.

A programmable source is the liquefied natural gas, we will introduce through the U.S. government support. Work is underway by investing in the solar energy with some early investment projects being implemented. The same goes for the wind energy. Today we would have been discussing other issues if all of these were to be done earlier. However, we can’t discuss other issues today.

-Mr. Prime Minister, in addition to the rising prices, does the energy crisis also means that the citizens will face power outages during the winter season?

PM Edi Rama: If the citizens were to experience power outages, I would have made it short, telling people to prepare for such a scenario. We are talking about ways to protect consumers, not about possible power outages. It would be easy enough if it was the case for possible power outages. But we are not here to cut the things short. Great Britain is warning today of a power outages plan. Someone of you here cited the case of Italy, but he was wrong. Italy has increased the electricity bill by 40%. Mario Draghi said this is not the real electricity price, because it is not. The government subsidies a part of it. Do you have any family member living in Italy? Ask them how pleased they are with their wages, pension payments and the overall situation and the severe crisis. No shops to offer bread for free to citizens have been opened in Albania or in Tirana. This has actually happened in Milan during the COVID-19 pandemic. This is something you have reported on your TV channels. It has happened in Milan, with people waiting on long queues to receive bread for free.

Let’s be realistic and not forget that a good part of those complaining most are mainly individuals with higher incomes than they declare. Let’s not forget this fact too, because otherwise, if we are to trust them for the income they declare only, then not everything would go as smooth as it is actually going. Verify this too. Albania has the highest amount of small bank deposits and I am not talking about the bank deposits of the wealthy people. Does such amount of bank deposits show that the situation is alarming or stable?

Albania has reached the highest export levels ever. Who stays behind the increased exports? Do we stand behind the exports? No. We export just words, while you import statements and sell them on TV. Exports are created by hard-working people.

All this should make us realize where we are currently and where are we seeking to go, and not lose our edge. Let everyone know, as long as I am here, there is nothing possible that can be done for those in need and that we will not do.