Modern Albania by Fred C. Abrahams

Author:Fred C. Abrahams [Abrahams, Fred C.]
Language: eng
Format: epub
Tags: POL058000 Political Science / World / European
Publisher: NYU Press

Head of the VEFA pyramid scheme Vehbi Alimuçaj in his Tirana office, February 1997. © Reuters

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Up until 1996, the pyramid schemes worked. They paid their investors in full and on time. Competing with one another, their rates slowly climbed, but most returns hovered around 6 percent per month, supported by a gradually expanding investment base and income from illegal trade. Albania’s factories lay still but the cafés thrived.

Foreigners invested too. Some flew into Tirana, paid an Albanian $100 to stand in line to make a deposit or to collect interest, and then flew home. Foreign diplomats, missionaries, and aid workers were not immune from the pyramid craze.

Technically all the “companies” were illegal because they did not have banking licenses. But the authorities allowed them to function because they said they were not officially banks. Both the government and international financial institutions tolerated their activity to supplement the struggling state banks.18 When a new banking law in February 1996 mandated that only licensed banks could manage deposits, the governor of the national bank said the pyramids should be closed. The chief prosecutor replied that the new law did not apply.

Berisha had no intention of stopping business. In part, some individuals in the Democratic Party and government were profiting. As an IMF official later wrote, “there were corrupt relationships between the companies’ operators and the highest levels of the Albanian government.”19 More importantly, the president could not stop what had become many Albanians’ means of survival, especially with elections coming in spring 1996. Berisha told this to the IMF and World Bank, who were beginning to warn him that the schemes had grown out of control.

U.S. officials also raised the alarm. “I simply can’t deal with that before the elections,” Berisha told a U.S. diplomat who said he raised concerns about the pyramids.

On the contrary, Berisha supported the schemes. Throughout most of 1996, the larger pyramids advertised on state television. Senior officials attended parties thrown by VEFA and another large scheme called Gjallica, which sponsored the forty-ninth Miss Europe pageant, attended by Berisha and Prime Minister Meksi. In Vlora, the Democratic Party candidate in the 1996 elections had posters with the pyramid schemes VEFA, Gjallica, Cenaj, and Kamberi listed under the slogan “P.D. Everything for Vlora.” Albanians interpreted all of this as signs of government support—a kind of insurance.

In addition, Albanians believed that Berisha had international support. Until the May 1996 elections, Berisha had visited the White House, seen the chancelleries of Europe, and been praised by powerful financial institutions. Surely these leaders knew how Albania was surviving, many Albanians thought. Even those who understood the fragility of pyramid schemes believed the government and its international supporters would not let the schemes fall, at least not before the elections. As one Albanian economist wrote, “Albanians believed in the steadiness of the system.”20

The government’s willingness to close the pyramids weakened further as Berisha’s domestic support declined. He feared losing power after the constitutional referendum defeat in November 1994 and the fear

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