Governor Rohatinski gives parting speech as he steps down from office

Published: 4/7/2012

Today was the last session of the CNB Council chaired by Dr Željko Rohatinski .

On this occasion, the fourth governor of the Croatian National Bank since the country's independence, who has performed this duty for the past twelve years, underlined the key features that characterised this period, and in particular the six-year term of office of this composition of this highest body of the central bank, a period marked by price, exchange rate and banking system stability, against the backdrop of global financial crisis.

Deputy Governor Dr Boris Vujčić and Dr Silvije Orsag, a member of the CNB Council during both terms of office, thanked Governor Rohatinski for his work, the results achieved and the manner in which he pursued monetary policy.

The concluding/parting words given by Dr Rohatinski are presented in the following text:

Let me just say a few, more or less appropriate words, to mark the occasion. It is a coincidence that our last session of the CNB Council in this composition falls exactly on 4 July, the day celebrated in the USA as Independence Day. It is coincidental but also symbolic. Independence is a concept that all central banks have always strived for and have more or less succeeded in achieving but have always found it hard to maintain, particularly during the periods of crises when the central banks as issuing institutions are always of particular social interest. Our path to independence started back in 2001 with the Act on the Croatian National Bank. We tried to maintain our independence both during the work of the previous Council and through our joint efforts on this Council and I hope we will maintain it in the future.

As history has shown, it is exactly central bank independence that is key to a country's sound economic life. As regards our position, views on the central bank always differed greatly, depending on who gave them, under what conditions and what motivated them. However, as we all know, the toughest critics in each profession and so in ours are our colleagues, because by judging others they indirectly judge themselves. And this is why they are more critical by intent than other critics. However, we eventually received all possible recognition from our colleagues for our high competence, responsibility and effectiveness in our work, regardless of the manner in which we performed this work and which very often differed, for various reasons, from the manner in which they perform their work.

We started our work on this Council at the time when the sentiments regarding the possibilities of virtual enrichment, with no changes in the fundamentals of economic situations, in the world and some countries rode high. It was at the time when the "bubbles", or whatever word we use to translate this term, were at their peak. Our job then was to somehow contain the fire by whichever means that stood at our disposal. We end our job here under completely different circumstances, at a time that started with a general panic which turned into a period of wandering, disorientation and inability to cope with the situation and find the way out of the global financial crisis. In an effort to save what was there to be saved in Croatia, we also resorted to solutions which were contrary to all that we had done at the beginning, and provided large monetary injections.

How did we do all that? Among us there are professors of monetary economy and professors of macroeconomy and people with large practical experience in this field. We all know that we have never worked by the book, or followed manuals, tried methods, or some alleged paradigms, particularly not dogmas. Our job was primarily to watch what exactly was going on and under what exact conditions, rather than in ideal model conditions, and then to use the only means at our disposal, our common sense. Standard procedures and models, they are all great, but often of no use in practice because the conditions in time and space can never be the same.

What will follow us as it has followed us until now, is a general view that we have pursued a neoliberal policy, whatever that word means, which is absurd, not to say a notorious nonsense. We operate in the conditions of a liberalised system that we agreed to liberalise when we opted for accession to the European Union. We liberalised our financial system when we opened our borders for the entry of foreign capital. It had to be compatible with the systems we are striving towards. In such a liberalised system, our policy was not liberal, our policy was a policy of utter interventionism. Very often you can find surveys by international financial institutions such as the IMF, the World Bank, the BIS, and the ECB on the experiences of individual central banks and the actions they took in individual situations. Very often you would find this information in a table format with individual measures and countries listed and ticks indicating the measures implemented by individual countries. If you looked up Croatia in these tables, you would find all the measures ticked. No one has led such an interventionist policy as we did, be it a good or a bad thing, but liberal or neoliberal policy or anything like that....

And the widely-debated issue of the exchange rate; the stable exchange rate, whatever the word "stable" might mean, which, if you look at a graph really is stable, would not be stable were it not for such an interventionist policy. Had it not been so, fluctuations would have been very large. My strong personal belief is that the system would not be able to withstand them. But I am not talking about the exchange rate, I am talking about the way we have pursued the policy, this was a highly interventionist policy. What we did and what we eventually did not have to do and were prepared to do. As the crisis peaked, or rather, as the panic generated by the crisis peaked, we were also prepared to take some very unorthodox measures that caused consternation in the ECB, one of them being to close the borders for the exit of foreign capital from the banking system. When Switzerland did that two years later, there was no consternation.

Naturally, the way in which we operated was closely watched and strongly criticised both in the country and abroad. However, we had the power to ignore non-benevolent criticism and to push ahead along the path we believed was the correct one. We went even further. Many times we stressed the fact that no monetary policy, be it the best one, can be ideal and solve the problems alone. As we have pointed out, there always has to be an interaction, there always has to be a consistent set of central bank, Government and other state institution policies. Things can start changing only with such a consistent set of policies in place. We made that clear and even sometimes gave expert suggestions as to what these other policies should be and how to pursue them. In doing so we were well aware that, due to the specific position of the central bank, it would be easier for us to take some measures or do some operations than it would be for, for instance, the Government with its parliamentary cycle, its electorate, the general public, etc. But our position was that, if we who are gathered around this table, were personally prepared to take great personal risks on several occasions, and you must remember the different situations that we have found ourselves in, from threats to terminate the stand-by arrangement to threats to block EU accession negotiations, I think that gave us the moral right to ask from others to take certain risks too.

Naturally, this was not welcomed by many and led to aversion, intolerance, anger, even personal animosity. This element played a key role in the events that led up to today's session. Someone had to pay the price and I am proud that it was me to be paying for it. I am proud of all we have done in the past six years together, the way we have done it, and how we defended our positions never hiding behind anyone. And if I had to single out something as a moral virtue, so rare in politics, than it would be the fact that when we spoke, we spoke the truth, without misleading anyone or embellishing the truth, without cheating anyone or concealing the truth, whether or not our truth met with the approval of others or not. And therefore, I would like to thank you for all our joint efforts in the previous six years and wish you every success in your future work and personal life. Thank you.