eunbil · GT0N1431 · 2006-07-07 00:00:00 — COMMISSION OF THE EUROPEAN COMMUNITIES , xxx COM(2006) yyy final 2006/aaaa (CNS) granting a Community guarantee to against losses under loans and guarantees for projects outside the Community (presented by the Commission) Context of the proposal 110 Grounds for and objectives of the proposal This proposal for a Council Decision deals with the renewal of the Community budget guarantee to () for financing operations from its own resources in various non-member countries. The current EIB mandates, i.e. the general external lending mandate (Council Decision 2000/24/EC, as amended) and the separate mandate for projects in , , and (Council Decision 2005/48/EC) will expire at end January 2007, with a possible 6-month extension, in case the loans granted by the EIB have not attained the overall amounts set out in the relevant Council Decisions. The legislation on the EIB general external lending mandate requires the Commission to report on its application by 31 2006. The report accompanying the legislative proposal (COM (2006) 323), hereinafter referred to as "Report", summarizes the results of the activities carried out by the EIB under the current mandates and sets out the orientations of future EIB activities. Two Staff Working Papers, one reviewing regional outlook (SEC (2006) 790) and the other providing a detailed assessment of the existing mandate (SEC (2006) 789) are annexed to the Report. The EIB"s activities outside the EU have traditionally made up around of its total activities (billion in 2005, of which billion under Community guarantee). The main regions of its current activity are pre-accession and countries, though it also undertakes substantial operations in , Latin and South , and is progressively expanding its operations in and . Activities in ACP countries are carried out under the Agreement with resources or with EIB resources with a guarantee from Member States. The EIB traditionally undertakes operations outside the EU in support of EU external relations policies based on formal mandates from the Council; successive Council mandates have widened the geographical scope of EIB"s activity. The financing operations provided for in such Council Decisions are recognised by non-EU partner countries as visible support from the EU. Furthermore, the Community guarantee prevents such operations, which often bear a significantly higher level of risk than the EIB"s operations within the EU, from affecting the credit standing of the Bank, and allows the EIB to maintain attractive lending rates outside the EU. Table 1 of the Report shows that loan signatures as at (i.e. around of the duration of the lending mandates) represent of the overall lending ceiling of million, but that there are significant differences by region. The EIB expects to sign the balance of the amounts available under the different regional ceilings in 2006, except under the , , and mandate, where first operations are expected to be signed in 2006 and the remainder in the first half of 2007. EIB"s operations in third countries represent a crucial complement to limited EU budget funds to increase the effectiveness and the visibility of the EU"s external action. While the Community budgetary external assistance is focused on lower income countries and support to the social sectors, EIB operations are of particular relevance in middle-income countries and in infrastructure, financial and commercial sectors. Considering that the EIB has originally been set up and structured financially to operate within the EU, the mandates under Community guarantee cover represent the key tools which allow the EIB to carry out operations outside the EU, by providing the necessary political and financial backing by the Community for countries and projects which would not normally fit within the EIB"s standard guidelines and criteria. 130 Existing provisions in the area of the proposal As noted above, there are currently two Council Decisions in force (2000/24/EC, as amended, and 2005/48/EC) which provide a Community guarantee to the EIB for extra-EU operations. The existing mandates under Community guarantee expire in January 2007 and this proposal would put in place a Community guarantee for the period 2007-2013. The proposed Decision would continue the provision of a Community guarantee to EIB external lending, whilst making some modifications, as follows: * A single legal basis will cover all different regions as well as the Reserve Mandate mentioned below. The blanket guarantee coverage of will be applied to the whole mandate. * Introduction of a new geographical breakdown of the ceilings to reflect the existing proposals for new EU external relations policies and instruments. * A clearer definition of the EU policy objectives in each region to be sought by EIB operations under the mandate. * Introduction of a Reserve Mandate, not allocated to any single region, for activation in cases of natural disasters, post-conflict reconstruction or developments in strategically important countries. * Clarification of the nature of the Community guarantee so as covering risks of a political or sovereign nature. The guarantee coverage would be extended to both types of financing operations mentioned in the EIB Statute, i.e. loans and guarantees (under the current mandates only loans are covered) * Reinforcement of the requirements relating to the linkage of EIB external activities with EU policies, through strengthened cooperation between the Commission and the EIB and enhanced reporting. * In line with the practice established under the existing mandate for , , and , selected individual countries shall become eligible as and when they fulfil appropriate conditionality consistent with EU high level agreements with the country in question on political and macro-economic aspects, as determined by the Commission in consultation with the EIB. EIB operations will take place following the signature and ratification of the necessary Framework Agreement between EIB and the country concerned. 140 Consistency with other policies and objectives of the Union As highlighted in the Report, EIB external operations, and notably those covered by the current proposal, will complement the activities to be carried out under the external assistance instruments, i.e. Pre-Accession, European Neighbourhood and Partnership, Development Cooperation and Economic Cooperation as well as the Instrument for Stability. EIB operations will fully support EU external action, as determined in the various policy papers mentioned in the proposed legal act or as eventually laid out in future EU policy documents. The linkage of EIB external activity with EU policies will be strengthened via reinforced cooperation between the Commission and the EIB. This will begin with an enhanced association in the planning process, notably in the context of action plans or pre-accession documents and country or regional strategy papers, and during upstream identification and implementation of projects. Strengthening cooperation in this fashion will help ensure that the policy driven character of the new EC instruments is likewise reflected in the implementation of the mandate. The extent of this cooperation will progress on a regionally differentiated basis, taking into consideration the EIB"s importance in the region but also the scope for linkage with EU policies, within the framework of the Pre-Accession, European Neighbourhood and Partnership, and Development Cooperation and Economic Cooperation strategies. Furthermore, the Commission envisages early consultation by the EIB on individual projects. An EIB Financing Operation will not be included under the cover of the Community guarantee in case the Commission delivers a negative opinion on such operation within the framework of the procedure provided for in Article 21 of the Statutes of the EIB. The EIB would endeavour to further enhance co-ordination and co-operation with International Financial Institutions, such as the or the , and with European bilateral institutions, where relevant, on the basis of Memoranda of Understanding covering the different regions under the mandate. In the framework of the new mandate, enhanced reporting procedures will be put in place to ensure that consistency with the external policies and objectives of the Union, as well as cooperation with other IFIs, are adequately monitored. Consultation of interested parties and impact assessment Consultation of interested parties 211 Consultation methods, main sectors targeted and general profile of respondents A joint working party, including representatives from the relevant services of the Commission and the EIB, worked on the preparation of the current proposal and on the accompanying Report. The Commission and the EIB provided the EFC with a progress report and supplementary information providing the main orientations of the current proposal. The EFC, which includes senior officials expert in the economic and financial field from all Member States, discussed this matter during two successive meetings in February and 2006. As a result, the EFC produced a report providing the initial views of the Member States on the main orientations put forward by the Commission and the EIB. 212 Summary of responses and how they have been taken into account The EIB"s views are fully reflected in the current proposal. The above-mentioned EFC report requests the Commission to provide additional information regarding a comprehensive evaluation of the existing mandates and a fuller description of EIB external activity in the global picture of the EU"s external instruments, comprising a needs assessment of the recipient countries, the role of other IFIs and the EIB comparative advantage. The additional information requirements are addressed in the Report and the annexed Staff Working Papers. The EFC report also includes general recommendations, including a) the need to ensure good co-operation between the EIB and other donors or lenders such as IFIs (in particular the ) and other bilateral agencies; b) the need to clarify the nature of the risks covered by the Community guarantee; c) the need to make concrete proposals for a more coherent deployment of EIB operations and Community grants and to clarify the necessary working arrangements; d) the involvement of the Council in the governance of the Reserve Mandate; e) the need for a mid-term review to be based on an independent evaluation. The above recommendations were taken into account in the proposed legal act. Point c) above can only be addressed in the framework of the appropriate legal bases. Collection and use of expertise 221 Scientific/expertise domains concerned Financial and economic expertise. 223 organisations/experts consulted 2249 Summary of advice received and used 225 The views of the EIB are reflected in the current proposal and in the accompanying Report. 226 Means used to make the expert advice publicly available The third countries to be covered by EIB operations under Community guarantee generally have a greater risk profile than EU countries, mainly because of macro-economic, financial and/or political instability, as reflected in the external credit ratings of such countries. The EIB operates on sound banking principles and its Statute is restrictive in terms of the risks it can take. Therefore, without a guarantee from the Community covering political and sovereign risks, the EIB could normally assume the relevant risks only in investment grade countries. A Community guarantee for extra-EU projects provides the EIB with the security required to allow it to finance projects contributing to Community external relations policies without affecting the EIB"s AAA credit rating. An alternative option examined was not to provide a Community guarantee. However this would have led to a non-entry in - or a withdrawal of the EIB from a number of countries and a significant increase in funding costs for projects located in other countries. This was deemed not to be politically desirable, considering the need to have balanced EU intervention across the various countries in the different regions. Furthermore, the increase of financing costs for project promoters in acceptable countries would have rendered EIB operations less attractive, thus diminishing the EIB"s leverage to impose EU policy conditions (e.g. procurement, environment, etc.). The same reasoning would also apply if the Community were to charge the guarantee to the EIB, as this would also ultimately increase the cost for promoters. The current proposal strikes a proportionate balance between the need to leave the EIB operational freedom to pursue financing activities according to its own modalities, whilst supporting EU external relation policies, and to ensure that the Community"s guarantee is limited, both in terms of exposure to risk and the nature of the projects which it will cover. Furthermore, the involvement of the Commission as responsible for the Community guarantee ensures a strong political backing to the financing provided by the EIB. A major effect of such backing is to significantly increase the probability of recovery of defaulted amounts thanks to the joint pressure exercised by the EIB and the Commission on defaulting borrowers. This is witnessed by the fact that the only cases where the EIB called on the guarantee in the past (ex-Yugoslavia and ) have been eventually paid back. Legal elements of the proposal 305 Summary of the proposed action The Commission proposes a single legal basis covering the different regions under the mandate. The period covered by the future mandate will coincide with the next Financial Framework 2007-2013. The action will provide a guarantee to the EIB for extra-EU operations, up to certain ceilings established within the proposal. A mid-term review of the mandate will be carried out in 2010, which will allow, where necessary, for a refocusing of the priorities set out in the legal basis. The legislative proposal will be based on Article 181a which provides for economic, financial and technical cooperation with third countries. This legal basis was already used for the revision of the general lending mandate (Council Decision 2005/47/EC) and for the new , , and mandate (Council Decision 2005/48/EC). The proposal falls under the exclusive competence of the Community. The subsidiarity principle therefore does not apply. The proposal complies with the proportionality principle for the following reasons: 331 EIB financing operations shall continue to be managed in accordance with the EIB"s own rules and procedures. 332 The Community guarantee has proved to be an efficient and inexpensive means of covering the political and sovereign risks relating to EIB external operations. Since 1994, a for External Action is in place to provide a liquidity cushion for the Community budget against defaults on guaranteed operations. The renewal of a Community guarantee will allow the existing efficient and economically sound practice to continue. The Commission and the EIB will sign an agreement on the provisions and procedures for granting the Community guarantee. In order to streamline the preparation and appraisal of projects, the EIB will further enhance coordination and cooperation with other IFIs and with European bilateral institutions where relevant. Choice of instruments 341 Proposed instruments: other. 342 Other means would not be adequate for the following reason: A Council Decision is required to establish a guarantee at Community level. Budgetary implication 401 The financial statement included in the legislative proposal summarises the relevant budgetary implications. These implications stem from the need to set aside provisions for the Community guarantee in the for External Action over the period of the next Financial Framework 2007-2013. Additional information Review/revision/531 The proposal includes a review . 532 The proposal includes a revision . 533 The proposal includes a . 570 Detailed explanation of the proposal Article 1 mentions that the Community guarantee will cover EIB financing operations up to a global amount of billion, including a reserve of billion, over the period 2007-2013. The guarantee shall be restricted to of the aggregate amount of the financing operations plus related sums. The overall ceiling shall be broken down by region with the following binding regional ceilings: A) Pre-accession countries: billion B) Neighbourhood and Partnership countries: billion. This is broken down into two indicative sub-ceilings, i.e. countries: billion, and Eastern Europe, Southern Caucasus and : billion. C) Development and Economic Cooperation countries: billion, broken down into three indicative sub-ceilings, i.e. Latin : billion, : billion, and Republic of South : billion. D) Reserve Mandate: billion. Article 2 deals with the list of countries concerned by the legal act and their eligibility. Article 3 specifies that the Reserve Mandate is not allocated to any single region and will be activated in cases of natural disasters, post-conflict reconstruction or developments in strategically important countries. The activation will be decided jointly by the Commission and the EIB, following consultation with the EFC. Parliament will be informed about the activation of the Reserve Mandate. Article 4 details the requirements relating to the linkage of EIB external activities with EU policies, through reinforced cooperation between the Commission and the EIB and enhanced reporting. Furthermore, an EIB Financing Operation will not be included under the cover of the Community guarantee in case the Commission delivers a negative opinion on such operation within the framework of the procedure provided for in Article 21 of the Statutes of the EIB. Article 5 details the modalities of the enhanced cooperation with other IFIs. Article 6 clarifies the nature of the Community guarantee which will cover risks of a political or sovereign nature for financing operations entered into by the EIB. Article 7 includes enhanced reporting and accounting information requirements for both the EIB and the Commission. Article 8 specifies the responsibility of the EIB to pursue possible recovery claims on behalf of the Commission. Article 9 mentions that the detailed provisions and procedures relating to the Community guarantee shall be laid down in a guarantee agreement between the Commission and the EIB. Article 10 mentions that a mid-term review of the mandate would be carried out in 2010 by the Commission on the basis, inter alia, of an activity report from the EIB as well as an evaluation prepared by the EIB"s independent evaluation department. The "Recitals" section includes, amongst other things, the political background to the proposal and the detailed scope of EIB operations in the different regions. 2006/aaaa (CNS) granting a Community guarantee to against losses under loans and guarantees for projects outside the Community THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing Community, and in particular Article 181a thereof, Having regard to the proposal from the Commission , Having regard to the opinion of Parliament , Since 1963, (hereinafter referred to as the "EIB") has undertaken operations outside the Community in support of the Community"s external policies, Most of those operations have been carried out upon request by the Council and have benefited from a Community budgetary guarantee administered by the Commission. Most recently, the Community guarantee was established for the period 2000-2007 by Council Decision 2000/24/EC of granting a Community guarantee against losses under loans for projects outside the Community (Central and Eastern Europe, countries, Latin and and the Republic of South ) and by Council Decisions 2001/777/EC and 2005/48/EC for regionally specific lending actions, With a view to supporting EU external action without affecting the EIBs credit standing, the EIB should be offered a Community budgetary guarantee for operations carried out outside the Community. The EIB should be encouraged to increase its operations outside the Community without recourse to the Community guarantee, particularly in the pre-accession countries and the countries as well as in investment grade countries in other regions, while the nature of the coverage of the Community guarantee should be clarified as covering risks of a political or sovereign nature, The Community guarantee should cover losses under loans and loan guarantees for EIB eligible investment projects carried out in countries covered by the Instrument for Pre-Accession Assistance (hereinafter the "IPA"), Neighbourhood and (hereinafter the "ENPI") and the Development Cooperation and (hereinafter the "DCECI"), where the said loan financing or guarantee has been granted according to a signed agreement which has neither expired nor been cancelled (hereinafter referred to as "EIB Financing Operations"), The EUs external relations policies have been revised and broadened in recent years. This has notably been the case for the Pre-Accession Strategy as set out in the Commission"s 2005 Enlargement Strategy Paper , for Neighbourhood Policy, as set out in the Commissions Strategy Paper of 12 2004 , for the renewed partnerships with Latin and South-East and for the EU"s Strategic Partnership with , and , From 2007, the EUs external relations will also be supported by the new financial instruments, i.e. the IPA, the ENPI, the DCECI and by the Instrument for Stability , EIB Financing Operations should be consistent with and support EU external policies including specific regional objectives. EIB Financing Operations should take place in countries complying with appropriate conditionality consistent with EU high level agreements on political and macro-economic aspects, The link between EIB activities outside the Community and EU policies should be strengthened via enhanced cooperation between the EIB and the Commission at central as well as at field level. Such strengthened coordination should include, inter alia, early mutual consultation with respect to policy matters, preparation of papers of mutual significance and project pipelines. Of particular importance will be early consultation on strategic programming documents prepared by the Commission or by the EIB, to maximise synergies between EIB and Commission activities and measure progress towards the fulfilment of relevant EU policy objectives, With regard to pre-accession countries, EIB financing in those countries should reflect the priorities established in the Accession and European Partnerships, in the Stabilisation and Association agreements and in negotiations with the EU. The focus of EU action in the Western should continue to shift progressively from reconstruction to pre-accession support. In this context, the EIB activity should also seek to encourage the institution aspect, where relevant, in cooperation with other International Financial Institutions ("IFIs") in the region. the period 2007-2013, financing to candidate countries (, and the Former Yugoslav Republic of ) should increasingly take place under the Pre-Accession Facility made available by the EIB, which should be extended over time to cover the potential candidate countries in the Western in line with the progress of their accession process, With regard to countries covered by the ENPI, the EIB should continue and consolidate its activities in the region with its focus on private sector development. As regards Eastern Europe, Southern Caucasus and , the EIB should enhance its activities in and and prepare to enter other countries in the region as soon as they fulfil appropriate conditionality consistent with EU high level agreements with the country in question on political and macro-economic aspects.