It was not true therefore that ordinary Albanians were duped by the schemes rather they understood how they worked and believed they
It was not true, therefore, that ordinary Albanians were duped by the schemes; rather, they understood how they worked and believed they would continue because a collapse would mean the destruction of the entire ruling order.The schemes began to cause international concern more than a year ago, and some members of the government and the governor of the national bank lobbied unsuccessfully for them to be shut down.Then something began to go wrong. During the summer the various schemes began an interest-rate war which made the payments more and more unrealistic - up to 100 per cent per month. Perhaps the sheer weight of investors forced some schemes to up their interest rates as a way of attracting new capital.Another theory, offered by a prominent Albanian with links to both the government and banks, was that one source of dirty money was switched off - namely the profits from the illegal sale of Iraqi oil that were being laundered, he alleged, by the first big scheme to go under - which was run by a gypsy woman called Sudje.In order to stay afloat, the source said, Sudje had to turn into a pyramid by default, her interest rate rises sucked capital away from the other schemes and the ensuing rates war led to the present crisis.Still the government did not act, partly because it had a local election campaign to fight in October in which the ruling party's main slogan, printed on posters overtly sponsored by the finance companies, was: "Vote Democrat and everybody profits."It did not take long for the rot to set in. The schemes, which had previously accepted any currency, began restricting deposits to Italian lire, or in the case of Xhaferri and Populli, the schemes that went under most recently, to Albanian lek.It was the risk of the market being flooded with billions of lek, a sure recipe for severe inflation, that pushed the government into action - with some stern prompting from the International Monetary Fund which sent a delegation in November to try to negotiate a package of limited credit for this year.
The negotiations are now on hold, a factor which will almost certainly keep the heavyweight investors out of Albania for the time being.Xhaferri and Populli were closed down last week, just before they were supposed to pay out three months' interest, and their funds - estimated by the government at around $255m (pounds 157m) - frozen. A third big fund from Vlora called Gjallica has promised to make payments that are already overdue next Wednesday, but it too has almost certainly gone bust and its assets - some $300m (pounds 185m) according to some estimates - frozen by the government.That leaves the big heavyweights - Mr Alimucaj's company Vefa, Kamberri of Vlora and Silva of Tirana - out in the field, but for how long nobody knows. Vefa, which runs supermarkets, chicken farms, hotels and other interests, has become closely identified with the government. Its collapse would be catastrophic, economically and politically.President Sali Berisha, asked about Vefa at a news conference, failed to vouch for its creditworthiness and said government auditors were checking its books - an ominous signal. Some political sources say he is anxious for Vefa survive at least until next month, when he is up for re-election via a vote in parliament.Deep cracks are appearing, though, in the Democratic Party structure, with tension particularly high between Mr Berisha and his prime minister, Aleksander Meksi.The Albanian people now find themselves staring into an abyss. Not only have they lost their savings, but the most significant part of their income, too. If they stop spending, shops and small businesses will start failing and the whole system will come crashing down.
Last weekend, the closure of Xhaferri and Populli led to riots that destroyed city council buildings, courthouses and police stations across the country. If Vefa and the other companies blow too, as informed opinion believes they must, the popular reaction may be nothing short of terrifying.. It was difficult to know whether to feel blessed or horrified. The ritual immersion of the ashes of Mahatma Gandhi in the River Ganges was proceeding smoothly, when suddenly the wind changed; and we were inhaling the Mahatma. The flotilla of motorboats carrying family, officials and ashes had arrived early at the pontoon, moored mid-river.
