“I Was Receiving Frenzied Calls From All Sides. The Country Was On Fire.”

Editor’s Note: The following is an excerpt from a forthcoming article based on a May 2025 conversation with Igor Lukšić.

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Igor Lukšić: I remember those months vividly.

As finance minister, I recall being in Washington attending annual meetings of the IMF and the World Bank, and those were very bleak days for the international financing community. 

When Lehman Brothers went down, it was a terrible shock for everyone.

Then Hungary was in trouble and everybody was worried about what comes next.

I remember sitting in an office of our representative at the World Bank along with the governor of our central bank and a couple other colleagues literally dictating to a colleague as he typed out a draft law putting together policy solutions. We sat in the room together and crafted draft legislation which had to be hurried through all the legislative committees and then the full parliament to make sure that we had all the tools to respond to such a great danger. It was such a big red alarm and we needed to move fast.

We were trying to make sure that we are able to fulfil all our debt obligations and also stabilize the banking sector. There was such a bad memory in Montenegro of the banking sector collapsing in the early nineties while Yugoslavia was crumbling and of the deposits of many people, including my parents, disappearing all of a sudden. That was still so vivid in the memory of the people. So it would have been catastrophic to let things go laissez-faire and let things try to resolve themselves.

And I am very fond of Austrian economics, but it does not mean I’m an anarchist. I don't think that as a policymaker in such a context you can just say ‘Okay, let it play out and then we'll see tomorrow what happens’. No. You bear such a tremendous responsibility for what's going on in your country.

It was all very precarious because people started withdrawing deposits from banks - there was a run starting on, not just one, but on all banks. 

So we decided - among other measures such as loans to banks in case of need, which was controversial - to offer a blanket guarantee which said that the government stands behind all deposits. And we enacted legislation which made such a guarantee for a time.

And of course, such a guarantee could only be sustained for a relatively short period of time. So after a year and a half when fears subsided, we decided to let that law, which was temporary, roll off.

At that point we went back to more standardized solutions: deposit insurance that protects depositors up to a certain amount, similar to the deposit insurance schemes that exist throughout the developed world. 

It was such a dangerous situation because it wasn’t only the banks that were in trouble - it also spilled over to the whole economy. 

Back then, our industrial production was based on aluminium smelting, which accounted for 50% of our exports. There was also an important steel factory back then, too. 

And all of a sudden, I was receiving frenzied calls from all sides. The country was on fire.

We needed to move quick. So it was definitely very challenging times for us. 

I also remember waging a lot of tough battles with the IMF team that wanted to pursue what might be called a very ‘neoliberal’ set of policies. 

Based on our calculations back then, those policies would have turned what was a recession of 4% to 5% of GDP into a depression of at least 10%, which would have been devastating.

So we resisted and decided not to go down the IMF road, but to try to get out of the mess on our own, and we managed - somehow. 

Let's just say it was extremely tough. 

And on a more personal level, it was also a very beautiful period for me because we had twins at the beginning of 2009. 

It all converged to the same half a year or so. So lots of sleepless nights, for two different reasons.

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