COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 61 final 
Brussels, 28 February 1991 
X AMitlorvil flrannlal aid for countries 
in the Midkile East and the Mediterranean 
affected by the Gulf war 
Communication from the Commission to the Council 
ASkJitional financial add for countries 
in the Middle East and the Mediterranean 
affected by the Gulf war 
Communication from the Commission to the Council 
1. Introduction 
The Gulf war has had a severe impact on the economies of the countries as a 
whole in the Mediterranean and Middle East area. Many of these countries 
have fragile economies; most have structural balance-of-payments deficits 
and are heavily indebted. 
To a greater or lesser extent these economies are experiencing sharp falls 
in revenue (tourism, exports, investment, remittances from expatriate 
workers and so on) and increased costs (budgetary expenditure relating to 
returning migrant workers, increased insurance costs, reconstruction). 
In the context of an international campaign launched as long ago as August 
1990, the Gammunity and its Member States have provided financial aid 
totalling ECU 1 500 million to the "front-line" states. This support for 
their balances of payments is in addition to the increased finances 
provided by the New Mediterranean Policy - which will be implemented from 
late i99i. 
However, two of the economies severely affected by the conflict have only 
very limited access to the budgetary resources of the New Mediterranean 
Policy and have not been included in the exceptional measures so far 
adopted. The economies in question are those of Israel and the Occupied 
Territories. 
On 4 February the Council adopted the principle that financial aid should 
be granted both to Israel and to the Occupied Territories, combining 
Community budgetary resources with bilateral add from the Member States. 
2- Assessment of the needs 
The Commission has evaluated the financial impact of the Gulf War on both 
economies. The Commission based its assessment on the available objective 
data, independent evaluations carried out by non-Community countries or 
organizations and the requests received from the parties concerned. 
Where Israel is concerned, the main financial implications of the Gulf War 
were calculated for a limited period of four months from the outbreak of 
hostilities (mid-nJanuary), excluding any military expenditure and working 
on the assumption that, since this is a developed economy, it would soon 
recover from these effects once the war was over. 
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In this connection, the main financial effects of the war on the Israeli 
economy are production losses caused by the disruption of normal activity 
in urban areas (chiefly in the first two weeks), loss of revenue from 
tourism, the additional costs of civil defence and reconstruction, loss of 
earnings from the export of goods and services and losses in various other 
fields such as transport and foreign investment. 
These losses amount to an estimated total of USD 3 - 3.5 billion (ECU 2.2 -
2.5 billion. 
In the case of the Occupied Territories, the maiji financial losses 
concerned are the earnings lost by individuals affected by the curfew and 
banned from working in Israel (chiefly during the first 30 days), the loss 
of remittances from Palestinian workers in the Gulf states, the loss of 
official financial transfers from the Gulf states, the reduction in exports 
to Jordan and the Gulf states, and losses in various other fields such as 
transport. 
The loss of individual earnings was calculated for a four-month period on 
the assumption that the restrictions would be lifted at the end of that 
period, while the other factors were estimated for the whole of 1991 so as 
to take account of the difficulty which the Occupied Territories will 
experience in staging an economic recovery. The total is USD 700-800 
million (ECU 500-580 million). 
The cumulated total financial losses for both economies is thus put at USD 
3.7 - 4.3 billion, or ECU 2.7 - 5.15 billion. 
3- Action by the Community and the Member States 
Israel and the Occupied Territories, unlike the front-line states, are not 
receiving international aid. Moreover, the traditional sources of 
financial aid to Israel are very different from those of the aid to the 
Occupied Territories. 
Consequently, Community add proper must take account of the undertakings 
already made, or being made, to Israel and to the Occupied Territories 
respectively. 
In this connection, the Commission wishes to point out Germany's 
undertaking to provide Israel with EM 1 500 million of aid (including EM 
250 of economic aid) and the requests made by the Israeli government for 
sped a! assistance from the United States - by far the most important 
traditional donor of aid to Israel. The Commission also wishes to point 
out that there has been a marked slow-down in official aid flows from the 
Gulf States to the Occupied Territories. 
In view of the foregoing and, in particular, the bilateral aid from the 
Member States, the Commission considers that the proportion of the 
financial aid to be charged to the Community budget should be less than 10% 
of the estimated total financial losses. Accordingly, the Commission 
proposes that the Council decide to grant exceptional financial aid 
totalling ECU 250 million to be divided between Israel and the Occupied 
Territories. 
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In a separate Communication the Commission has proposed a revision of the 
financial perspective (SEC(91)338 final), so as to include the above ECU 
250 million. It also proposes the attached draft Council Regulation on 
financial add to Israel and the Occupied Territories. 
Annex 1 
PROPOSAL FOR A COUNCIL RBOTATICN 
CN FINANCIAL AID TO ISRAEL AND THE OCCUPIED TERRITORIES 
- s • 
Annex 1 
EXPIANATORf MEMORANDUM 
1. On 4 February 1991 the Council agreed on two schemes to provide 
financial add to TCT^I and the Occupied Territories, which are 
suffering in different degrees the adverse effects of hostilities in the 
Gulf. 
In the case of Israel, economio activity in general is suffering. 
In the Oooupied Territories, the arrival of repatriated workers and 
a significant reduction in remittances from the Gulf states simply 
aggravate an already seriously deteriorated economic situation. 
2. The costs involved - up to ECU 250 million - will be borne by the 
Community iudget (1991). Before the relevant appropriations can be 
entered in the 1991 budget by means of a supplementary and amending 
budget, the ceiling for heading No 4 ("Other policies") in the financial 
perspective for 1991 must be raised. The Commission will p\*t forward 
the necessary proposals in due course. This action should help 
alleviate the adverse effects of the Gulf war on the populations of 
Israel and the Occupied Territories. 
3. It is intended that these finances be used to provide Israel with 
financial add in the form of a loan to support the country's balance of 
payments. Where the Occupied Territories are concerned, financial aid 
is to take the form of a grant, which should help to improve economic 
and social conditions there and to integrate Palestinians repatriated 
from Kuwait (by providing jobs, housing, hospitals, etc.). 
4. Arrangements should be made to enable this financial add to be used in 
ways suited to the specific problems of Israel and the Occupied 
Territories. In the case of Israel, the operation will be carried out 
before the end of 1991; in the case of the Occupied Territories, 
institutional constraints may require implementation over a three-year 
period. 
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PROPOSAL FOR A COUNCIL REGULATION 
on financial add to Israel and the Occupied Territories 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic Community, 
and in particular Article 235 thereof, 
Having regard to the proposal from the Commission, 
Having regard to the opinion of the European Parliament, 
Whereas the Community has decided to mount an operation to give financial 
aid to Israel and the territories on the West Bank of the River Jordan and 
the Gaza Strip occupied by Israel (referred to as the "Occupied 
Territories") in order to help alleviate the adverse consequences of the 
war in the Gulf; 
m 
Whereas the Community must have the means to undertake the sadd operation; 
Whereas the amount of Community financial resources needed to carry out 
this operation in 1991 has to be estimated and whereas the definitive 
amounts are adopted by the budgetary authority within the financial 
perspective covering the period 1908 to 1992 annexed to the 
Interinstitutional Agreement of 29 June 19881; 
Whereas the breakdown of funds as between Israel and the Occupied 
Territories will have to be based on an analysis of the socio-economic 
effects of the war, the sections of the population affected and their 
standard of living; 
Whereas the economic and financial capacity of Israel and of the Occupied 
Territories is such that financial aid to Israel should take the form of 
loans and for the Occupied Territories could take the form of grants; 
Whereas the undertaking of this operation is such as to contribute to the 
achievement of Community objectives; 
Whereas the Treaty does not provide, for the adoption of this Regulation, 
for powers other than those of Article 235, 
HAS ADOPTED TEES REGULATION: 
lOJNoL 185, 15.7.1988, p.33. 
Article 1 
The Community shall provide financial aid for Israel and the Occupied 
Territories. 
Article 2 
The amount necessary for the implementation of the operation referred to in 
Article 1 is estimated at ECU 250 million - principally in the form of 
loans to Israel, the rest in the form of grants to the Occupied 
Territories -to be committed under the 1991 budget. 
Article 5 
The add to Israel shall be earmarked in particular to cover import costs, 
while the aid to the Occupied Territories shall be earmarked to cover the 
cost of alleviating the socio-economic problems (health, education, housing 
and so on) faced by the population as a result of the Gulf war. It shall 
be provided in instalments. 
The general guidelines governing this aid and its breakdown as between 
Israel and the Occupied Territories shall be adopted in accordance with the 
procedure laid down in Article 5. 
Article 4 
The Commission shall ensure that the funds are used in accordance with the 
aims of ths Regulation by the beneficiaries, which shall be required to 
provide a programme specifying the use to be made of the funds, and 
afterwards a report on the actual use made thereof. 
Article 5 
1. The Commission shall be assisted by a Committee composed of 
representatives of the Member States and chaired by a representative of 
the Commission. 
2. The representative of the Commission shall submit to the Committee a 
draft of the measures to be taken. The Committee shall deliver its 
opinion on the draft within a time limit which the Chairman may lay down 
according to the urgency of the matter. The opinion shall be delivered 
by the majority laid down in Article 148(2) of the Treaty in the case of 
decisions which the Council is required to adopt on a proposal from the 
Commission. The votes of the representatives of the Member States 
within the Committee shall be weighted in the manner set out in that 
Article. The Chairman shall not vote. 
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The Commission shall adopt measures which shall apply immediately. 
However, if these measures are not in accordance with the opinion of the 
Committee, they shall be communicated by the Commission to the Council 
forthwith. 
In that event, the Commission shall defer application of the 
measures which it has decided for a period of two months from the 
date of communication. 
The Council, acting by a qualified majority, may take a different 
decision within the time limit referred to in the previous 
subparagraph. 
Article 6 
The Commission shall present to the European Parliament and the Council an 
initial report on the implementation of the aid operation carried out under 
this Regulation by 30 June 1992. A final report shall also be presented as 
soon as the operation is completed. 
Article 7 
This Regulation shall enter into force on the third day following that of 
its publication in the Official Journal of th3 European Communities. 
This Regulation shall be binding in its entirety and directly applicable in 
all Member States. 
Done at Brussels, 1991 
For the Council 
The President 

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