The stock exchange flourishes - the economy collapses

What made possible the progress of the stock exchange under last year's circumstances?

It is true that despite the difficult economic and political conditions the Stock exchange works in, considerable progress was made, primarily in trade. 1643 transactions worth around 176 million DEM were concluded last year. In our circumstances, where the growth of inflation accounts for tens of thousands of percent, it is quite clear that there is no possibility of developing trade with proprietary securities. Because of the general instability, at this moment it is not possible to trade with long-term securities, so that short-term securities which do not exceed 30 days with high monthly interest account for 90 percent of the overall trade.

But this interest is much lower than that offered by commercial banks...

This is where the explanation for the increase in trade at the Stock exchange lies. Only in this way could we increase last January's trade worth around a million and a half DEM to 43 million DEM in December. We wouldn't have been able to do this without having narrowed the gap in relation to the passive and active interest in banks. Also, last year we had no problems in getting those funds back. The increase in trade continued this year too which brought the Stock exchange into a qualitatively new position in view of the fact that we are developing an information system which will entirely be connected into one network. On the other hand, we have invested great effort in order to promote the basic principles of the stock exchange way of doing business. One of them is that the price of capital is the result of the offer and the demand, that is, it reflects market conditions, taking into account the security of the investor as the most important factor. Greater instability on the overall financial market brings into question the further work and survival of the Stock exchange because this kind of increase in transactions and their value requires sure firms that issue securities. Unfortunately, there are fewer and fewer such firms. There is no Stock exchange without a stable and healthy economic policy. If something is not done on the macro-economic plane soon, problems will also reach the Stock exchange. It is enough to mention the foreign exchange policy, that is the fact that it is not known what the entire economic situation will be like in the next few weeks or months. How does one, in such circumstances, create the image of an issuer of securities, when some of our best firms are already in an extremely difficult situation. I think that the new federal government will first have to define an appropriate monetary policy of the central bank. I say appropriate, not advocating the unlimited printing of money but rather circumstances that do not allow a strict division between the economic and the monetary policy. The government and the central bank must create a healthy and stable economy and a market and legal framework for an increase in savings and in the rational investment of domestic capital.

Are you speaking about the time after the international sanctions?

I am convinced that a lot can be done even under the sanctions. You cannot expect an economic expansion without doing business with the world, but the time of the blockade could be used for preparing and defining strategies in a series of very important fields. For instance, what kind of privatization policy will this country conduct, how does it view foreign investments, what will the fiscal policy or the foreign exchange policy be like and many other things. All these questions will have to be answered one day and I do not see why the decisions wouldn't be prepared even under the sanctions. What do sanctions have to do with a transformation of pension funds into investment funds? Or, why not create a legal and market infrastructure for the more effective functioning of the financial market and the stock exchange on that market? Why don't we have an organized foreign exchange market? In other words, imagine if the sanctions were to be lifted tomorrow. All this has to be done for the purpose of seriously doing business with other countries. Here I mean serious partners and serious capital, because they will not go where there are major legal and economic shortcomings, which means that one can only expect the laundering of money. We have proof that there is still serious foreign interest in doing business with us, and with the Belgrade stock exchange.

The somewhat worn out but unavoidable question is how long can we endure under the sanctions?

The answer is quite simple: for as long as there are goods in stores. We see that it is easiest of all to produce money; money will not run out. A downfall on the Stock exchange starts when firms can no longer fulfill their obligations, and that will be the first reliable sign that store shelves are about to be emptied. Then the economy will come to a standstill.