ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(80)623
Vol.1980/0198

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COMMISSION OFTHE EUROPEAN COMMUNITIES
COM(80 )623final
Brussels .30october
hr
.
v
χ;Α
j
»y;j/
AIDE-MEMOIRE
ONTHE FIXING OPTHE ECSC LEVY RATE AND ONTHE DRAWING UP
OP THE ECSC OPERATING BUDGET FOR 1981
C0M(80 )623final

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Page
Preface
I, GENERAL INTRODUCTION 5
A. ECONOMIC CONTEXT 5
1.The economic outlook for 1980 and 1981 5
2.Outlook inthe coal industry 8
3«Prospects intheiron andsteel industry 11
B. POLICY CONTEXT 12
1.Coal policy 13
2.Iron and steel policy 15
3*Social policy 18
4»Financial activities - 20
C. FINANCIAL CONTEXT 22
II.ANALYSIS OFREQUIREMENTS REPORTED AND RESOURCES A V AILABLE 24
FOR THE FINANCIAL YEAR 1981
A. REQUIREMENTS REPORTED FOR 1981
1.Ordinary requirements
2.Requirements not entered inthe budget :
loans for financing subsidized housing
3w Summary ofrequirements reported25
25'
39
41

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- Page
B. ORDINARY RESOURCES A V AILABLE 41
1.Resources for thefinancial year 41
2.Covering ofrequirements not entered inthe
budget 45
3.Summary ofpossible ordinary resources
available for 1981 45
III.BRAFT OPERATING BUDGET FOR 1981 46
A. COMMISSION APPROACH 46 .
B. FINANCING PROPOSALS 47
C. DRAFT BUDGET 49
. " ■i
ANNEXES ^
A. IMPLEMENTATION OFTHE ECSC OPERATING BUDGET FOR 1979 50
B. FORECAST OUTTURN OFTHE ECSC OPERATING BUDGET FOR 1980 . 51
C. PROVISIONAL SITUATION OFTHE ECSC AT30JUNE I98O 53
D. DRAFT ECSC OPERATING BUDGET FOR 1981 54
E,CONTROL OFECSC ACTIVITIES 55

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AIDE-MEMDÏRE
on "thefixing of "the ECSC levy rate and onthe
drawing upoftheoperating budget ofthe ECSC for 1981
/
Itiscustomary for the news ofParliament tobesought before the
Commission takes adecision ,onthe levy rate and the ECSC operating
budget for thefinancial year 1981 .
This aide-memoire forms the basis for the consultation ofParliament .
Itisdivided into the following chapters : v
I*General introductions '
II.Analysis ofrequirements reported and resources available for
thefinancial year 1981 ;
III.Draft operating budget . .
Specific factors affecting the covering ofbudgetary requirements for
1981 aredescribed inChapter III.
Atpoint 16ofitsResolution of22May 1980 (OJNoC147 116June 1980 )
onthe Court ofAuditor *sreport onthe ECSC'sfinancial and budgetary
activities for the financial year 1977 and onthe discharge inrespect
ofthat financial year ,Parliament instructed theCommission /High
Authority tosubmit areport "onits ooncept ofcontrol and howitoould
beexercised ".
The Commission ^thoughts onthis aresetoutatAnnex Eto"this
aide-memoire • -
1
0
1 ' ' v
0 0
The aide –m^moire isalso being sent tothe ECSC Consultative Committee
for information . •

-5-
I. GENERAL INTRODUCTION
This chapter summarizes theinformation necessary forsetting thedraft
ECSG operating budget for 198^initseconomic ,political andfinancial
context .
A. ECONOME GC0NTEXT
1.The economic outlook for 1980 and 1981
Following aperiod ofrelatively good rates ofgrowth (anannual average
of3®4% between 1976 and1979 )?economic activity isnowslackening in
theCommunity .With thedeflationary impact oftherise inoilprices
in1979/80(estimated ataround 150% from theendof1978 to1July 1980 )
mainly toblame }theCommunity 'sGDPinreal terms canbeexpected to
decline asbetween thefirst andthesecond half of1980 ;thegrowth
rate fortheyear asawhole could beaslowas1,25$ *
Asthis slackening ineconomic growth iscoinciding with aquite
substantial increase inthe active population ,partly due todemographic
factors ,unemployment hasbeen rising again since thebeginning ofthe
year ,even though theshortage ofskilled labour persists incertain
industries *
The effect ofrising oil and commodity prices isnowbeing felt sharply
atthe retail stage «Insome countries this has sparked off
compensatory wage rises ,though inothers the secondary effects have to
CvkV3 extent "besn contained ,For theCommunity asawhole ,theimplicit
retail price irc.ex isexpected torise byapproximately 12%inI98O (though this
fig~-rs includes increases inrates ofindirect taxation ),Thegapbetween the
highest arc .lowest rt.ie ofinflation haswidened toabout 15percentage
points in1980®

-6-
FortheCommunity asawhole thebalance ofpayments deficit is
expected toamount to31000Billion ECUin1900 (largely onaccount of :
•theeffect oftheoilprice increases decided oninJune ). The
current-acooont deficit oftheFederal Republic ofGermany isexpected
toaccount forroughly athird ,oftheCommunity *soverall deficit in
1980 .Financing this should notpose major problems ,whereas the
size ofthedeficits ofsome ofthesmaller Member States does give .
cause for concern .
\
Figures currently available suggest that growth could gradually pick up
again in1981 .Private consumption ,which islikely toremain stagnant
formost of1980 ,should beboosted byanimprovement inreal disposable
incomes asprices rise more slowly than nominal incomes .Inaddition ,
theprocess ofinventory adjustment ,which ishaving aconsiderable
deflationary effect in1980 ,isprobably nearly complete andshould be
followed inthesecond half of1981 byamore normal pace ofBtock –building .
Exports ,particularly toOPEC countries ,should beamoderate plus
factor both this year andnext .Allinall ,Community GDPshould begin
toincrease again next spring ,even though theyear-to–year rate ofgrowth
will substantially fall short oftherate achieved in1980 .It
must beremembered that thes aggregate forecasts enoompass somewhat
different growth prospects forthevarious Member States individually .
Thefollowing table shows thetrend inCommunity GDPbyvolume between
1978 and 1980 . . .

GROSS DOMESTIC PRODUCT IN VOLUME TERMS
change over theprevious year )
1978 1979 1980 1
DenmarkI
I
1,0 3,5 -1
IFederal Republic ofGermany 3,2 • 4,6 2
Prance 3.8 J>2 13/4
Ireland j 6,0 j! 1-9>■'1 •
Italy 2,6 ! 5,0 33/4 !
Netherlands 2,5 2,2 1
Belgium 2,4 2,4 11/4
Luxembourg |4,3 2'7 3/4
United Kingdom 3,1 0,9-21/2
Community 3,0 3,4 11/4
1Rounded *
Source :EURO STATand Commission départ ment s.

2.Outlook fortheCoal industry
During thefirst sixmonths of1980 theconsumption picture ofthe
Community 8scoal market wasstrongly coloured "bytheeconomic situation
intheUnited Kingdom and ,inparticular ,"bythesteel strike inthat
country *Theshift inoutput toother Member States during that period
waseven more marked forpigiron ,aselectric furnace steel production
intheUnited Kingdom islargely inthehands ofprivate companies
andwasnotseriously affected ."bythestrike atthenationalized
British Steel Corporation Taking account ofthese factors andthe
general recession during thesecond half of1980 ,coke consumption during
theyear islikely tobearound 45Mt.
Inthefield ofelectricity generation ,1980 islikely towitness only
marginal growth .Infact ,asubstantial drop intheUnited Kingdom and ,
probably ,aslight drop inGermany maymore than counterbalance modest
growth inother Member States andlead tolower gross electricity >
production intheCommunity in1980 than intheprevious year .The
principal reasons arethedepressed level ofeconomic activity ,the
after-effects ofstrikes intheUnited Kingdom ,amild winter and ,probably
energy saving measures . ,
Theshare ofconventional thermal intotal electricity generation was
substantially lower duetoanextra 7®1TWhofnuclear generation ,
mainly inPrance ,andtoanextra 3.3TWhofhydraulic generation ,
resulting from exceptionally high snow andrainfall .However ,these
factors will probably bereflected inadrop inoil–burn ,andthelevel
ofcoal consumption will have been maintained ataround If6Mt,thesame
astheprevious year .
Except foraslight rise inooal consumption bythecement industry ,
1980 will have witnessed litile change from theprevious year inthe

-9~
quantities a-to ."bed "bymarkets other than those ofthe iron and steel
and the electricity g-^aerating industries .
Onth„other hand yco?.l production in1980 islikely tohave exceeded
that ofth3year before "byseveral million tonnes and toheofthe order
of241-243 Ht,;The principal reason has "been rising productivity in
the Unit 2dKingdom against a "background ofunchanged output inBelgium
and Germany and areduction of1MtinPrance .
Coal imports in1980 vri.ll prove tohave "been substantially higher than
inthe previous year andarelikely tohave exceeded 65Mt.Thelargest
increase will have originated from the USA.
Coal and coke stocks have shown arising trend .However ,they were at
anunusually lowlevel atthebeginning of1980 «The shaky performance
ofthe steel industry during the second half ofthe year and the general
economic recession throughout the Community led torises inproducers'
coal and coke stocks ,"but coal consumption forelectricity generation
isexpected tokeep the growth ofproducers *stocks tomoderate
proportions .
There has "been little inthe way ofchanges inlist prices ofCommunity
coals since early in1980 .Onthe other hand ,world –wide rises infob
prices ofsteam coal and higher freight ,aggravated byhigh demurrage
charges due toport congestion incertain areas ,particularly onthe US
east coast ,have fuelled acontinuing upward movement incifprices of
steam coal imported into the Community from third countries .Whereas
towards the end of1979 cif &&& ■prices for steam coal were still on
average slightly below US$40,prices in1980 reached between about
US$45and US$55 *while theCommission 'sindicative price forcoking
coal wasintheregion ofUS^70.

-10-
■»
Against the •unpredictable economic prospects for1981 ,onedevelopment
la'owtalAi vlithe «v*xgtwwtng Impos -Hana -atotfc® oaal mas'ks't ef
consumption forelectricity generation .While aslate as1975 coke ovens
used more coal than power stations ,by1979 thelatter required twice
asmuch coal asthe former .
With twoplants ofatotal capacity of1278 MWandcapable of "burning
either coal oroilentering operation in1930 andafarther 600MWplan J:
using coal orblast furnace gasduein1981 ,plus measures inMember states
designed topromote theuseofcoal–fired generating capacities ^coal
consumption bypover stations mayexceed 180Mtin1981 .Depending
ondemand byother coal consumers ,this would represent between 53%and
60$oftheentire coal market .
Nosimilar predictions arepossible with regard torequirements bythe
-steel industry .The full economic effects ofthe steep oilprice rises
in1979 3-^3 .early I98O andtheir duration arenotyetsclearly discernible ,
but itisvirtually certain that requirements bycoke ovens inI98I will
bebelow therecent peak of87.1Mtin1979 *-
Thegeneral industrial market canbeexpected tocontinue togrow slowly
in1981 ,probably absorbing more than 20Mtofcoal andcoka ,without
counting inhcuse electricity generation .However ,thepotential for
large increases incoal consumption bythis sector isunlikely tobe
evident until later inthe deca<de .
Demand fordomestic heating must beexpected todecline further ,probably
tobelow 18Mtc .Ontheother hand ,inthelonger term ,thespace-heating
market forfactories .;offices andother ma.jorconsumers islikely to
witness agrowing number ofconversions from oiland ,possibly ,gas
tocoal-firing .
Community coal production ,which hasbeen stable ataoout 240Mtsince
1977s will probably remain around this level in198-*Or other hand ,
nopredictions CC-JS.beas,&e wi'th .r9g»»ro .to^japortsj except that the
rise ofre-sent jeers is^Klikelj' topsrsi.st nercfc yesro

-11-
3.Prospects inthe iron andsteel industry .
T979 ended with total EG3G crude steel output of140.2 million t,which was
exactly what hadbeen forecast .Asexpected ,therise inproduction that
began inthesecond quarter of1978 accelerated andthen continued until the
end of1979 .Foraproduction capacity then estimated at203.5 million t,
output in1979 represented acapacity utilization rate of68.8$ ,asagainst
65.5$ in1978 .
\
Total ECSC crude steel production in1980 isalready certain tobewell down .
Inthe first sixmonths ,when demand wasstill firm but output suffered from
theprotracted strike intheBritish steel industry ,,output ofcrude steel
was68,.34million t,2%down onthefirst half of1979-
Theeconomic outlook forthesecond half of1980 presages adecline in
demand ,particularly from themotor andconstruction industries ,while
short-term indicators inmost ofthesteel –using industries have been in ,
decline since mid-1979 *Demand from certain capital goods industries is
alone inoffering theprospect ofremaining firm inafewCommunity
countries .
Demand forsteel ,already declining intheCommunity inMayandJune ,was
particularly lowinthesummer months ,normally avery slack period .At
themoment allthe signs arethat thegloomy picture will persist until
theendoftheyear ,even iftheseasonal demand ofthefourth quarter
turns outtobeclose tothenormal .Shorter delivery times ,thedownward
trend ofprices andexorbitant storage costs ,mainly duetoheavy financing
costs ,constitute .somany reasons forbelieving that demand isunlikely to
pick up.
Atthebeginning of1980 ,after theCommisBion hadraised guide prices by
3%forflat products andbyvanaverage "]%forlong products ,some improvement
wasnoted intransaction prices forthefirst quarter .Atthesame time ,prices
forexports tonon-member countries yielded extra earnings astheUSdollar
held upwell over thefirst months oftheyeax,butinthefollowing months
conditions deteriorated somewhat asfalling demand brought depressed prices
andthedollar fell back toitsstarting value *Prices forflat products

-12-
areonce again inadequate while prices for .long products arestill not
fully BfttlaffcQtery forth«most Eodsrn firms ,pM-tiaulwly mini-foun&riaB
which forsome time have enjoyed thebenefit ofanadvantageous price for
scrap metal# Itistobeexpected that most ofthe large andmedium –sized
firms aregoing toincur losses again this year ,under thepressure of .
rapidly rising production costs .
Given theadverse trend ontheCommunity andworld steel markets ,crude
steel output for1980 isexpected tocome outataround 130million t,some
6.5$ below the 197.9 level .Against acurrent production capacity of
roughly 208.1 million t,this gives a"capacity utilization rate ofless than 65%iu
1980 compared with 68.8$ in1979-This year should therefore come inbelow
1978 interms ofboth nominal output andtherate ofutilization .
Asregards theoutlook for1981 ,thefirst sixmonths will most certainly be
nobetter than thesecond half of1980 .Hotuntil thesecond half of1980 is
there anyhope ofindustrial activity picking up.Soasthings stand andwith
anormal trend inCommunity andworld consumption ,Community production of
•crude steel should settle around 128million t,which includes Greece 's
output .
B.'P0LICY C0NTEXT
Thegeneral objectives oftheECSC aredetermined foralltime byArticles .1
to5oftheTreaty ofParis .
Forboth coal andsteel ,theCommission atintervals presents general
objectives orguidelines bearing onthefuture development oftheECSC
industries .Coal isalso oneoftheparticular items covered bygeneral
papers putoutbytheCommission onthesubject ofCommunity energy policy .
Themedium-term guidelines forboth coal andsteel also cover manpower
questions ,thus indicating thecontext surrounding thevarious social policy
activities inwhich theCommission /Sigh Authority engages pursuant tothe
Treaty .Intwoannual reports –theReport ontheResults oftheSurvey on

Investment inthe Community Coal and Steel Industry and the Financial Report
onECSC Financial Activity -the ECSC publisher faots and figures onthe
recent and foreseeable trend ofinvestments and what the Community isdoing
tofinance them .
Thefollowing remarks arenot inte'nded totake theplace ofthedata in
those reports ,but are Simply concerned with certain key points orrecent
developments which the Commission .wants tohighlight inestablishing itsdraft
ECSC operating budget for 1981 .Theindustries themselves ,the ECSC'ssocial
policy andfinancial activity inthe budgetary year aredealt with inturn .
Butthere isonepoint that must bemade atthe outset -on 1January 1981
Greece becomes amember andwill automatically besharing fully inECSC
revenue andexpenditure ,contributing 3million EUAtothe ECSC reserves in
three equal annual payments . ;
1.Coal policy guidelines
Developments onthe world energy market since 1979 have confirmed the
soundness ofthe Commission 'scoal policy since 1974 »The objective proposed
in1979 -"tomake more use ofsolid fuels inelectricity generation ,sothat
by1990 coal aridnuclear energy would represent atotal ofatleast JOto75%
ofprimary energy used -was approved bythe Council inJune 1980 .Emphasizing
the Community 'sefforts tomake itself even less dependent onoil,the Council
also decided that by198O oilshould account for nomore than about 40%
ofgross energy consumption .Last April the European Council stressed the
need toagree onacommon energy strategy for 1990 »andlaid the emphasis on
replacing oil'bycoal andnuclear energy .
Since the Council meetings ofOctober and December 1979 both failed toreach
agreement onthe Commission 'sproposals tomaintain pit production atits
1973 level ,simply adapting and improving 1967 arrangements for coking coal
forthe iron andsteel industry ,the Commission ,inthe wake ofthe massive
price increases decreed by"the OPEC countries ,presented some new ideas for
energy policy •(C0M(80)1 30,20March 1980).Inits newapproach the

-14-
Commission proposes Community action ontwomajor fronts -energy pricing
and .taxation ariinvestment intheenergy industry .
Asregards investments involving coal ,thefollowing sectors wpuld be
considered forCommunity financing :
(a)extraction ,theobjective being toboost productivity andcut
long-term costs ;
(b)gasification andliquefaction ofcoal ;
(c)thebuilding ofcoal-fired power stations andconverting oil-and
gas-fired stations tocoal ;
(d)converting industrial furnaces tocoal ;
(e)transport andtranshipment facilities ,notably inports ;
(f)creating coal-extraction capacity outside Europe asasource of
Community supply .
TheCouncil should becontinuing itsdeliberations onthese ideas shortly .
Under Article 54oftheECSC Treaty theCommission isstill granting funds on
commercial terms forindustrial investments -inCommunity coalfields .Under
theECSC budget itplans ,asin1980 ,togrant loans with interest subsidies
forprojects whichlsatisfy thecriteria defined inanotice toundertakings
(OJNoC79,29•3-19^0)•Itwill also continue toencourage coal research
within theECSC under Article 55»andwill maintain itsefforts toincrease
theappropriations setaside inthegeneral '"budget fordemonstration projects
involving goal gasification andliquefaction (Council Regulation EECNo726/79»
9April 1919 ).

-15-
2.Iron and gteel policy guidelines
Coi™^s^i£n_s^e£l_market _measTxre^s ^
Themeasure 'sadopted bytlieComqaission ir*1978 and -1979 were
extented for198O ,though some oftherestrictions were
eased somewhat ,thegeneral aimbeing torevert gradually toafree
market soastospeed uptheprocess ofrestructuring theCommunity
steel industry .
With this inmind ,thebinding minimum basic prices forconcrete
reinforcing bars andmerchant bars were waived forthefirst sixmonths
andthen forthe rest oftheyear .Theminimum basic prices forhot
coils were also waived forthesecond half ofI98O .Therules requiring
dealers toabide byproducers *prices andissue certificates ofconformity
tominimum prices were withdrawn .
Inview oftheworsening market situation theCommission was forced to
introduce production programmes forcrude steel aswell aslimiting supplies ,,
Inspite ofthis ,therecession indemand byearly October signalled astate
ofcrisis giving reason tobelieve that voluntary restraint measures areno
longer enough torestore anelement ofbalance tothemarket .
TheCommission hastherefore proposed theintroduction ofacompulsory system
\
ofquarterly production quotas under Article 58oftheECSC -Treaty .
With these newarrangements theCommission hopes torestore market
stability andsatisfactory price levels sothat the
steel industry oancontinue the'restructuring progress andworkers
canbegiven thenecessary assurances astotheir employment prospects *
Attheendoftheyear theCommission will make anappraisal of
thesituation andwill determine ,ifneed be,themeasures that will
apply inI98I inthelight both ofexperience andoftheresults ofthe
efforts made inthesecond half ofI98O .'

■■16 ■"
ν - .
Steel :__Ejc^ernal_aspecxs _ ■,
Asin1978 and . measures relating tothe Community steel market
were supplemented byarrangements for monitoring imports . The Commission
made anumber ofchanges here ,too,inorder tosimplify things by
cutting the number ofunderstandings with the major supplier countries
(12instead of17)»reducing theproduct coverage andmaking the
consultation clause onproducts forfirst processing more flexible .
There isnoevidence that these changes have had anysubstantial
influence ontrade flows with the countries concerned .
The Commission continued topublish basic reference prices for imports
and stepped upsurveillance ofquantities imported .andprices inclose
cooperation with the Member States .
Exports tothe United States ,Iran and'other countries fell back
sharply ,both because ofthe demand trend and because other exporters
are selling harder .
External policy in1981 will ,depend ,asinpast years ,ontheinternal
measures and onthe degree ofcooperation with non–Community oountries
that isfound tobeexpedient .
^ommunrt ^£0£^ions tostructural ^problems
The Code of-Practice for coordinating State aids tothe steel industry
wasadopted bythe Council late inMarch I98O .Specific aids .tothe
steel industry financed byaMember State orbymeans ofState resources
inany form whatsoever are considered compatible with the orderly
functioning ofthe common market provided they donot affect competition '
andtrade between Member States toanextent contrary tothe common
interest . Such aids are permitted provided they comply with oriteria
laid down bythe Commission .
Steel firms that have .embarked onaprocess ofrestructuring have been
able toward off further deterioration ofthe financial situation .

«17
Considerable progress was made inlong products where net capacity
was reduoed by2.3million -tonnes from its 1976 level andefforts were
made toconcentrate onthe most modern works .
Intheflat products sector ,.restructuring measures concentrated on
cutting cost prices inthe production ofpigiron andsteel ,notably -
through more widespread use ofcontinuous casting techniques . Capacity
forthelatter attained 66million tonnes in1980 ,compared with 55million
tonnes in1978 .Incontrast ,reorganization ofhotrolling capacity
did not keep pace with the economic downturn and some excess persists ;
the restructuring process will therefore have tocontinue .
Atfirst sight itmight seem that modernization andrationalization of
the Community steel industry proceeded ataslower pace in1979 and '
I98O than inthe two previous years . But firms have atleast consolidated
their position inbranches where they enjoy more favourable conditions .
For instance ,the share oftotal output accounted for byspecial
steels rose from 9*5$ in1974 to15«5 1979 * •
Despite these advances ,problems remain anditwill only bepossible
todefine them accurately when athorough study has been carried out
with the industry onactual production capacities atthe works ,product
byproduct . >
Although restructuring appears tohave come toahalt the fact isthat
progress isstill being made ,but for social andpolitical reasons it
tends tobesomewhat sporadic .
Restructuring remains the main objective ofthe anti –crisis measures .
The Commission ispressing onwith its endeavours toensure that proper
attempts are made toattain the objective ,despite thefact that some
/undertakings will again befaced with cash –flow problems . Before the
end ofthe year the Commission istosend the Council afull report
onrestructuring andthe attainment ofthe General Objectives ,supplemented
byadetailed survey ofthe application ofthe rules onaids tothe
steel industry .

-18-
Reswructuring aid.under the ECSC budget isgranted inthe form ofinterest
subsidies both forinvestment projects andfor .conversion indepressed
areas . " ■ •
3.Social nolicy
The main features ofthe Commissions social policy under the ECSC
Treaty are :
" * - (
(i)aidgranted under Article 5° "tohelp redeploy workers ;
 
(ii)thefinancing ofresearch projects onoccupational safety -
under Article 55; .
(iii)the .granting oflow-interest loans from ownfunds under Article 54
topromote workers *housing .
Actions planned for I98I inconnection with redeployment ,social research
and housing will continue onthebasis ofthe principles previously
applied bythe Commission and outlined inChapter II. Consequently
the developments described below cover only the social aid envisaged
tohelp alleviate the effects ofthecrisis .
However ,itmust bestressed inthis connection that the cost ofthe
redeployment measures approved inI98O under Article 5^(2 )(b)forexecution
within the framework ofbilateral agreements between the Member States and
5the Community amounts to .82million EUA,or15million EUA more than the
amount earmarked forthis purpose inthe I98O ECSC budget .The 15million FJA
shortfall will therefore have tobecharged tothe I98I budget ,along with the
appropriations needed for (further)' redeployment .This sumisincluded inthe
figures proposed onpage 27;the 75million EUA entered inthe I98I ECSC budget
will only cover redeployment measures under existing 'agreements between
Member States and the Commission . - •
The above measures will besupplemented bythose provided for iiithe Commission'
communication tothe Council onthe social aspects ofrestructuring inthe
-■steel industry . *

--;s«
•Itwill Vj iufciibercc thai ;oz .4j£sy .1979 theCc-aniission sent aCcaaunicatacn
to -choCo-cx.oil or/th;sc -ci£ -.l .sp:^:s ofre-structuring inthesteel industry ,
• fwv.?t^mv :sr^r -y1sic^r-'ver .tojwr.^irfc Bte©i worlseys :
Ν
–allowr-nces for -early retirement from theageof .55?oreven '"below for
certain categories ofworkers ; - '■ ;
–analio wr^nc-© forreductions in -working hours (short –time working )toalios :
the lor.e' of -jobs to''bestaggered ", ■
–allowances 'forchanges inshift patterns :
–allowances forreductions inovertime . -
Inthelight ofitsassessment of •thesituation onthesteal market ,andin
view ofitsproposal toinvoke Article 58?"theCommission intends forthe
present to ,limit itsinterventions tos
–retirement allowances ;' • „• '•*
–short –time working allowances.'
TheCor ,mission iscurrently considering applications for "both types ofallowance .
The Commission considers that 3CSC aid for early retirement schemes gad short -
time working should "begranted under bilateral agreements with theMember
States concerned .Itwould apply forthree years .Allowances for short –time
working ,-however ..should belimited totheperiod forwhich Article 58of
theD3S0 Treaty isapplied , .
Onthebasis ofthese ,considerations aidinview ofthecurrent applications ,
itwill c.-,necessary toenter anappropriation under Chapter 54onth®basis
of^rtijle 235andtomake 'atransfer .from thegeneral budget tothe ,ECSC
budget inorder tomeet expenditure for '19$1•
^."1 '-U.O .0-CUi .-•ores -arecurrent 2yunder discussion intheCouncil inconnection
.:.i.akc.ge ofs?cial measures ?the Council isduetotake adecision •
••sub *.**. . .

-20-
4*Financial activities
ECSC Financial Report No25summarizes the Community 's "borrowing and lending
in1979 and sets outstatistics analysing and comparing activities since
1954 * The Community 'sbalance sheet asat31December 1979 appears in
Annex Ctothis aide-memoire *
Borrowings contracted in1979 totalled 837million EUA,compared with
1069million EUAin1978 ,729million EUA in1977 ,956million EUA in1976
and 731million EUA in1975 * Loans paid out inthe same periods
totalled 676million EUA compared with 798million EUA,742million EUA,
1064million EUA and 805million EUA *Asintheprevious year ,some
sums "borrowed ,notably inSwiss francs ,were notfor on-lending butto
repay previous sums borrowed athigher rates ,thebenefit being passed on
tothe undertakings which had received loans from these borrowed funds *
For thefirst time the ECSC floated adollar loan onthe Tokyo market
for public subscription and also atthe same time ontheEuro-dollar
market •
Industrial loans ^amounted to595million EUAcompared with 667million EUA
2/in1978 and 713million EUAin 1977 *conversion loans to59million EUA
compared with 413million and 16million EUA,andsubsidized housing
loans ^to"22million EUAcompared with .18million and12million EU^.*
Total borrowing and lending since the inception ofthe ECSC isthus ■_
brought upto6256million EUA and 6076million EUA respectively
(including 227million EUA inloans from ownfunds ). Thebalance
outstanding at31December 1979 was 4675million EUA ofwhich
2512million EUAfall duefor redemption between 1980 and 1984 *
In1979 ECSC financial activity continued tosatisfy the strong demand
from undertakings wishing tomodernize orrestructure ,not only inthe
steel industry but also toalarge extent inthe coal industry ,which
received loans totalling 238million EUA in1979 compared with
263million EUA in1978 ,217million EUA .in1977 and 180million EUA in
1976 .
iArticle 54ECSC.
Article 56ECSC .
ECSC special reserve funds .

-21-
At15September 19°0 loans raised totalled 829million EUA andloans paid
oat 106 Exilian BUfc, The fca!•&••£<£ star ring at39Jun«1980 was
5000 million EUA.
The ECSC has continued toobtain favourable terms onthe capital market and
has successfully developed apolicy ofprivate loams when conditions on
the open market were unfavourable ^ ECSC issues are also favourably
quoted onthe secondary bond market .
Itisclear from outstanding applications for conversion loans from the
coal industry that ECSC borrowing and lending activity islikely to
continue atahigh level inthe coming months .
Itisdifficult for the moment togive aprecise estimate ofthe 1981
position since borrowing operations are carried out solely inresponse to
loan applications which are not always submitted very far ahead . Also ,
certain applications sometimes await settlement for along time onaccount
ofparticular conditions imposed byundertakings inrespect ofcurrencies
orrates .
Atthe endofAugust 1980 ,total loan applications approved bythe
Commission but awaiting settlement amounted to 2051 million EUA for the
ECSC industries (Article 54)and 306million EUAforconversion
'(Article 56). Applications being processed amount to 1973million EUA
for the ECSC industries and 147 million EUA for conversion . The
repayment period concerned bysoiue ofthe applications received extends
■tover several years .
However ,ageneral estimate ofthelikely trend inloan applications may be
inferred from the planned investments inthe Community coal industry :over
1500million EUA in1930 and in1981 asagainst the 1167million EUA
invested in1979 *
Investment inthesteel industry ,which dropped to2000million EUA in
1978 and 1979 »has been picking upagain this year .
Itcan thus beenvisaged that borrowings made bythe ECSC could amount to
between 1000 and 1500million EUA in1981 ifmarket conditions work to
the advantage ofthe undertakings concerned .

-22-
C. FINANCIAL CONT EXT '
Allthe "budfatfigures ffivnn in "Shit aid#»<B«noir «a?a•xjo'eased inBtaro pe&n
Units ofAccount .Since 1976 the ECSC operational "budget has been drawn up
and implemented inSUA and,beginning this year ,the claims and commitments
under the "budget and the relevant contracts are denominated and settled in
the same units ofaccount .
However jthe Commission feels that following the entry into force ofthe
European Monetary System based onthe ECU,which isdefined interms of
the same basket -ofCommunity currencies asthe EUA,theunit ofaccount •
used inthe ECSC should bechanged from the EUAtothe ECU.Adraft decision
tothis effect has been transmitted tothe bodies concerned and,assuming
that adecision istaken before the endof1980 ,the ECSC operational budget
and the scale oflevies will henceforth beadopted inECU.Asthe twounits
ofaccount are defined ianterms ofthe seme basket ofCommunity currencies ,
the changeover would notnecessitate any changes tothefigures inthis
aide-memoire .
With regard tothe assessment ofthedraft 1980 budget ,therise inprices
remains anessential factor inthefinal comparison between the financial
years 198O and .1981 *I"t'may beassumed that theprice rise between the two
years will begreater than 12$.
The main financial problem involved indrawing upthe ECSC budget for 1981
remains the problem ofbalancing the budget atatime when industry ,notably
the Community iron andsteel industry ,isencountering serious difficulties .
The approach adopted for 1980envisaged using special resources tocover two
interventions specifically linked tostructural reform intheiron f?-1.
industry :v
–aid inthe form ofinterest rebates for conversion loans would bemet by
anadhoc contribution from the Member States :
COM(79)723 final ,10December 1979 *Opinion ofParliament dated 23May 1980 ,
OJNoC147 »16June 198O ,pp.135-6 - ~

-23»
-theproposed new -temporary social measures forsteel workers would be
covered "bythegeneral "budget (Chapter 54)*
Theremaining financing requirements under the1$80 operational "budget will
"bemet fjpon ordinary resources ?the Coaivnission having aecided ?with the
approval ofParliament ,toincrease therate oflevy from 0.2$$ to0.31$ *
After lengthy negotiations the Mem'ber States agreed onanadhoccontribution
of28million EuAtowards interest rebates forconversion loaas ,asagainst
the43million ELLArequest ed«TheCommission "believes thatitcanlimit
coHEEitments for 1$80 to28.5 million EUA (ofwhich 0*5million EUAwill be
metbyordinary resources )bystrictly applying therelevant criteria and _
rejecting applications totalling about 10million SJAandbycarrying over
tothe 1981 financial year admissible applxcat ions ajaoTua .td.zxg to&»leas v
3,5million SUA 3Asthefinancing requirements originally estimated ,for
1980 amounted to52million EUA,there isnoavoiding theconclusion that
thegeneral slowdown ineconomic activity has "been reflected byadrop in
the sxc^otsd raT .eof3c'b-'-g?netr& 's r-xcve st'iien *-.
Under these circumstances the OorsE.is-sicn he,snotrequested anyadditional
contribution for 1980®
The wsssjees situation asregards temporary social measures ha,8been described
earlier' fl*B.-3 ). Onthefinancial side -the Comission isupholding its
'oroocsal that expandittsre should bsmet from thegeneral budget °Ith?.s 9
however ,raised itsproposal foradecision toxnis effect (C0M^80)134 final ,
25Karch 1$SC),particularly inthelight of&number ofsuggestions made in
Parliament «Asregards thepossibility ofotlasr ~;esxs offinance ,the
CcJD&i£3i<#ti notes with regret that ,despite Parlxanien 's?ssupport ,i'.eproposal
that 3CSC customs duties should gotothe ConsB'oaity isstill blocked bythe
objections onlegal and "budgetary grounds ofamsaber ofMember -States .
The Commission 'sproposals with rege:c& tothebalance ofths 1581 operating
budget are set cutinChapter IIIofthis aide-ia«Boir® «

-24-
!
II.A77ALYSIS OF -REQUIRBnlOTS REPORTED ArH)RESOURCES AVAILABLE FOR THE
FINANCIAL YEAR 1961 .
This chapter first ofallgives adetailed account ofthetwofactors
traditionally *^aken into account "bytheCommission indetermining the
levy rate onwhich to "base theDraft Budget forthenext financial ye?.r ,
namely expected requirements andtheestimated yield from resources#
Article 49oftheECSG Treaty empowers tfc.eCommission toprocure the
funds needed topursue theactivities setoutinthat Treaty "byimposing
levies ontheproduction ofcoal and steel® Thes® levies areassessed -
annually onthevarious products according totheir average value ,"but,
pursuant toArticle 50*therate thereof maynotexceed \%unless
previously authorized bytheCouncil .
Tofixthis rate itisfirst ofallnecessary toestimate reqrdrements ,
then toconsider howfarthese may "becovered from "budgetary rescrur-oes
other than thelevies ,namely theinterest oninvestments andonloans
financed outofownfunds andcancellations ofprovisions »Theamount .
which will have to "becovered laythelevies canthen "bedetermined .
1
Next ,thelikely yield from thelevies iscalculated onthebasis ofa .
preliminary –andthus sometimes unavoidably inaccurate –estimate of
theaverage values ofthevarious products ,andinthelight ofthe
estimates (also somewhat' tentative )ofthevolume ofoutput during the
year .Theprobable levy yield isfirst expressed astheestimated yield
from arate of0.01^.
These arethetwomain elements described inthis chapter .

-25-
Thenext stage is -todetermine theextent towhich theCommunity nvuct
forgo satisfying therequirements which exceed theresources
provided "bythepresent rate ,or,conversely ,howfartherate must
"beeither raised erIdwerede This quoetioa isdieeussed inChapter III.
Thefollowing presentation ofrequirements reported andforeseeable
resources ismodelled onthesystematic analysis ofthedata forthe
various "budget headings intheGeneral Budget ,setoutinPart IIof
theGeneral Introduction tothePreliminary Draft Budget .Aswith the
General Budget ,this presentation lists separately themain features of
each heading (legal "basis anddescription oftheoperation ,type and
"breakdown ofexpenditure ,explanation ).Three categories ofexpenditure
areunavoidable ,inthat they derive from decisions already taken
\
(administrative expenditure ,addtocoking coal andcoke forthesteel
industry )orfrom framework agreements with theMember States (onaids
toresettlement ).Togive aclear picture ,theexplanation :for
expenditure which isnotunavoidable (research andinterest relief grants )
ismore detailed than for -theother -chapters e '
A. REQUIREMENTS REPORTED FOR 1981
1.Ordinary requirements • , '
CHAPTER B1;ADMINISTRATIVE EXPENDITURE
1.Legal basis anddescription ofoperation
Legal basis :
–Article "50of "theBCSC Treaty } , ' •
–Article 20oftheMerger Treaty ;
–Council Deoision of21November 1977 (OJNoL306,30November 1977 »P*28)j
–ECSC contribution totheCommission 'sadministrative expenditure .
2.Type andbreakdown ofexpenditure
/
Annual Imp-sum payment infour equal quarterly instalments .
3.Explanation
TheCouncil hassettheannual amount ofthelump-sum payment at5m'EUA.

-26-
CHAPTER 5 AIDS TORESETTLEMENT
1.Legal basis anddescription ofoperation .-
Legal "basis :
–Articles 50and56of "theECSC Treaty ;
-Bilateral agreements concluded between theHi$iAuthority /
Commission and the Governments ofthe Member States .
TheHigh Authority /Commission provides non-repayable aidtowards :
(i)thepayment oftideover allowances toworkers ;
(ii)thepayment ofresettlement allowances toworkers ;
(iii)thefinancing ofvocational retraining forworkers having
tochange their employment .
Insome cases ,thetideover allowance isreplaced byacontribution
corresponding tothecost ofabridging –pension scheme .
The grant oftheaid isconditional upon payment bythe State concerne
of-aspecial contribution ofnotless than theamount ofthat' aid ,
unless anexception isauthorized bytheCouncil ,acting byatwo-thir
majority . .
2.Type andbreakdown ofexpenditure
Creation ofaprovision tosubsidize ,bymeans ofa50%reimbursement ,
expenditure incurred bytheGovernments within thescope ofthe
!agreements signed .concerned
aid ,
two-thirds

27-
7h«"breakdown >7-iflfluatry and ."byoountry ofth«r»quir«o«nt »as«Btimated
from thedata provided bytheGovernments isasfollows :
mEuA
Country CoalSteel and
iron-ore minesTotal percountry 1
Germany 2.5 .10.0 . /12.5
Belgium 5.0 |
.• 5.0 10.0
Denmark. - j
I *
Prance 12.0 . "
ψ; '6.0 ''•'18.0
*
Ireland
Italy
I3.0 3.°
1 . (
Luxembourg•5.0 • 5.û
Netherlands3'5 3.5
United Kingdom 6.5
0.16.5' 23.0
^~£7%
•4.
Total perindustry26.0
149.0 75.0
«
yiThesocial repercussions ofthepresent situation remain difficult to
Tpredict ,ofcourse ,andtheforward figures ,which areinprinciple
based onthepolicy nowinforce ,'are therefore nomore than tentative .
/
_3»Explanation
The coal industry 'srequirements aremore orless onaparwith those estimated for
1980 ,mainly asaresult oftheprogress being made inreorganizing
theindustry .Ontheother hand ,requirements intheiron andsteel
industry continue tobeatahigh level ,owing tothegradual
rationalizing andrestructuring oftheindustry .Thereduction in
employment intheiron and steel industry isestimated atseveral
tens ofthousands ofworkers .

-28-
CHAPTER 33sAID TORSS5APCH
, •
••Legal basis anddescription ofoperation
Legal basis :Articles 50and55oftheECSC Treaty .
TheHigh Authority /Commission isrequired toencourage technical and
economic research into theproduction andincreased useofcoal and
steel andoccupational safety inthecoal andsteel industries .To
this enditgrants aidtofinance research after receiving theCouncil 's
assent . • • • -
■2.Type and "breakdown ofexpenditure .
Creation ofprovisions tocover part-subsidies which take -theform of
therepayment ofaproportion oftheactual costs ofresearch projects
approved bytheHigh Authority /Commission inaccordance with the
procedures provided forintheTreaty ;these cover ,inparticular ,the
consultation oftheECSC Consultative Committee andthereceipt ofthe
Council 'sassent .Inmost cases ,theaidgranted amounts to60%of
the estimated and substantiated costs .
Theapplications canbebroken down asfollows : -
mHJA ,
Heading'-*■ _. * * j
Sector *-.
". ' ° . '~ • 'Aidrequested
.Β3.1
Β 3.2
Β3.3 , *• •
Steel ',* •
* • '•
Coal ... . • . •
...•»
•Social and medicai
• • •' ■ 54 .
V ■33-.
■. 12 .
.* .. ' ■'- .'TOTAL
- -!*.'99*'.' '
■ ■ ■ ■ ■(•

-29-
3.Explanation
Steel research
The eoonomio reoeeBion which set inaround 1975 i®atthe root ofthe erieie
currently racking theCommunity steel industry ,acrisis which hasrevealed
major structural weaknesses arising from serious overcapacity .Thesituation
hasbeen further aggravated bythe fact that anumber ofdeveloping countries
areindustrializing rapidly andhave given toppriority totheestablishment of
their ownsteel industry .
TheJapanese response totherecession was tointroduce cost-saving schemes and
newtechnologies asrapidly aspossible ,while theUnited States closed down
plant asawayof "balancing supply anddemand .Not only has thereaction in
Europe been slower than elsewhere ,but also ,over the last fewdecades ,the '
decisions ofthevast majority oftheCommunity 'siron andsteel producers has
been conditioned byfinancial considerations and anexpanding market .Asa
result insufficient attention hasbeen paid totechnological development in
the Community steel industry .
The three main input parameters entering into steel production costs areraw
materials ,labour andenergy ,each ofwhich accounts forapproximately 30%of
thetotal .Although there areonly slight differences ininput costs from one
industrialized country toanother ,production costs foronetonne ofEuropean
steel are32$higher than those foronetonne ofJapanese steel .Some 75$
ofthedifference between European andJapanese pig-iron production costs can
beattributed tohigher energy consumption inEurope ,17$tohigher prices
for ,rawmaterials and "]%tohigher labour costs .Japan 'slead isclearly
duenot somuch tolower input costs ,although this does play arole ,butmore
tohigher productivity permanpower unit (asopposed tolower labour costs )
andtomore efficient utilization ofenergy (rather than tolower energy
costs ).
TheCommunity steel industry must beable tocompete technologically ifit
istoremain viable .Over thenext tenyears emphasis must beplaced on
putting right past mistakes .This calls fortechnological improvements to
ensure that theCommunity iron andsteel industry canremain competitive
andkeep pace with concurrent advances made byitscompetitors abroad .

-30-
Oneoftheprime objectives will betosupplement thereorganization and
modernization programmes currently inoperation with research anddevelopment
work onimproved production methods .These efforts should foous onmaking ;
optimum use ofenergy anddeveloping more advanced production methods and
technology inwhich labour costs will account forasmaller proportion of
the total .
ButtheR&Dwork cannot beconfined toproduction methods alone .Pressure
from dynamic industries hasledtoincreasing useofsteel substitutes .The
Community steel industry must notforget that quality ,sophistication ,
efficiency andmarketing should play akey role initsefforts tostop the
rotandinitsplans tocorner thenewmarkets opened upbythedevelopment
ofnewtechnologies incertain industries .
R&Dwill therefore have tooperate ontwofronts ifitistoprovide adequate
support fortherationalization andreorganization programmes currently
under way . .- . " . •
TheECSC steel programme canmake amajor contribution totheattainment of
thejoint research objectives byproviding further ,support foranumber of
joint programmes inkey areas .Past projects insuch fields ascontinuous
casting ,alternative forms ofenergy ,andthecomplex problems attaching
tomaritime structures have showed that this type -ofCommunity action is
notonly along theright lines but isalso effective andofgeneral benefit .
Concentration ofeffort isanessential prerequisite forefficient useof
theavailable financial resources with aview tomeeting thetechnological .
needs ofthesteel industry throughout theCommunity .

Coal research
Prices forpetroleum products have been rising steadily andthere areno
immediate prospects ofthis stopping .
Accordingly ,both theEuropean Council meeting inVenice andthesummit
meeting oftheindustrialized countries recommended cuts inoilimports ,
the introduction ofenergy-saving schemes andthedevelopment ofalternative
sources ofenergy coupled with intensified use ofcoal forpower
generation andinindustry .
TheCommission toohasfrequently made itsviewpoint clear ,most recently
initsnewmedium-term guidelines fortechnical coal research *. Itfeels
that research isoneway ofimproving theposition oftheCommunity coal
industry .Butdespite theprogress made ,the industry continues to
encounter many .grave difficulties duetolabour problems ,thediversification
andexhaustion ofcoal seams ,theincreasing depth oftheworkings andso
on.
Today mining engineering research isconcentrating onthewinning ofcoal ,
roadway drivage ,outbyeoperations underground ,measures tocombat firedamp
and ,finally ,rock pressure .Progress isalso being made intheapplication
ofmodern management techniques aimed atmore rational organization of
themines which ,inturn ,will help increase yield .
*0JNoC94,17April 1980 .

-32-
Research and .development work has also "been Btepped upinthe field of
product treatment inpreparation plants ,where the rapid spread of
modern methods and automation has assumed major importance forthe
industry . ,
Since coking plants are among the coal industry*s main customers much
research has "been devoted toincreasing theyield and capacity ofcoking
plants ,toimproving the quality ofsteel plant coke andtotackling the
associated environmental problems .
Finally ,product upgrading andresearch into new methods ofconverting
solid fuels into hydrocarbons are highly relevant inthe present energy
situation .
The 1981 ECSC coal research programme will cover the following topics :
Mining engineering
–Development work
–Firedamp ,ventilation and rock pressure
-Winning and working
-Out "bye operations underground
–Modem management techniques . ^
Coal "beneficiation
–Preparation ofcoal
–Coking
–Physical and chemical upgrading and underwater methods .

Social research
The broad lines ofsoeial research in1981 aireset out below .
Two newresearch programmes will belaunched during theyear , 1
(i)thefourth programme onergonomics ,which was approved on
3September 198O .Atotal of13million EUA has been earmarked
forthis programme ,which will run for five years .Itfollows
onfrom earlier programmes onergonomics andwill concentrate
ondeveloping ways ofputting previous findings topractical use.
(ii)the programme onthecontrol ofairpollution inECSC plants ,
which has been inpreparation throughout 1980 .
The mining safety programme will enter itsfinal year in 1981.Since
further research isurgently 'needed inthis sector ,in1980 the Commission
decided toprepare asecond programme totake over from thefirst one at
the end of1981 .
Sofar there isnosocial research department specializing insafety in
thesteel industry .This research isconcerned more with accident
prevention than with medical orergonomic research ,which iscovered bythe
above programmes .
Steel producers inthe Community have asked that appropriations
bemade available in1981 tomake good this shortcoming and provide for
appropriate research into ways ofimproving accident prevention insteelworks
There are plans tomake astart onthis work in1981 .

34~
This research would ,also bealogical extension ofthe work ofthe
General Commission onSafety and Health inthe Iron and Steel Industry ,
which ,until now ,has aimed atproviding aforum inwhich experts can
discuss their experiences wiih aview tofurthering occupational safety .
«ι
Tosum up,the ECSC social research programme for 1981 will cover the
following topics :
–air pollution inECSC plants
–ergonomics
–mine safety '
–industrial health incoal mines
–pollution control inthesteel industry
–safety inthesteel industry .

-35-
CHAPTER B4' AIDS IN THE FORK OFIMEREST RELIEF GRAMS
1oLega l "basis ax?ddescription ofthe operation
Legal basis ;Articles 54(investment )and$6(redevelopment )oftheECSC
Treaty ?andDecisions oftheHigh Authority /Commission .
TheECSC mayuse itsownresources toprovide interest relief oncertain
types ofloan .Therelief iscalculated inEUA atarate and for aterm
fixed bytheCommission .Itcurrently stands at3%over five years .
2.Type and breakdown ofrequirements
Provision foroffsetting part oftheinterest dueonloans disbursed bythe
ECSC ,inaccordance with thecontracts drawn upbetween theCommission and
the beneficiaries .
Theestimates asregards applications break down asfollows :
mEUA
Heading SectorAids applied
for
B.4.1
B.4.2Investment
Conversion19
45
TOTAL 64
ECSC loans with interest relief are theprincipal financial instruments
forpromoting priority investments ,particularly those connected with
creating jobs forformer ECSC workers andwith meeting therequirements
ofthe coal and steel industries .

-36-
Investments-_–-s___ i » «
Inthe investment field ,thechief aim ofloans with interest relief is
the structural improvement andrationalization ofthe EC5C industries .
Thecriteria for granting relief are asfollows : *
(i)environments interest relief only forexceptionally heavy
capital expenditure onexisting plant ,andforpilot schemes
innewplant (OJNoC146,25November 1974 )?
(ii)research andtraining centres ,andtheelimination of
"bottlenecks :relief inthe latter sector has "been limited .
toinvestment toremedy the shortage ofcoking coal .
(OJNoC73,18June 1970);
(iii)stabilization ofcoal production :relief islimited
toinvestment inshafts ,underground workings and
haulage andwinding equipment (OJNo C79»29March 1980);
(iv)restructuring :interest relief may "begranted forthose
investments that are ofgreatest value forrestructuring the
Community iron andsteel industry andre-establishing its
'long-term competitiveness (OJNoC174,22July 1977 )*
However ,the requirements recorded for 1981 relate solely totheoriteria
published in1970 (13million EUA)and 198O (6million EUA.)•Inan
attempt tocut back spending toanabsolute minimum the Commission has
decided nottogrant interest relief forrestructuring the iron andsteel
industry in1981 forthe reasons set out inChapter III.

-37-
Redevelopment
«
Rea#vü3,ö£man-6 lêcuna mar*jgr»*»*«»A$6firra »«arjntë^ie boéies wMeh «noöurago
investments creating new jobs inregions hitbydeclining employment inthe
coal andsteel industries . - v
Theguidelines drawn upbytheCommission forgranting these loans are
published inOJNoC178 »27July 1977 *They have since been changed
slightly (OJTBoC82,29March 1979 »P*8) tighten uptherules for
global loans ,which have proved avery effective jobcreation instrument .
Themaximum loan eligible forinterest relief atthemoment is20000EUA
pernew job .When recruiting ,therecipients give priority toformer ECS.C
workers •
This programme isdesigned tohelp provide jobs forworkers formerly -
engaged intheCommunity 'siron andsteel orcoal industries andthereby to
meet oneoftheCommission 'sbasic obligations under Article .56(2a ).ofthe
ECSC Treaty . \
In1981 -asinprevious years -priority will have tobegiven tothe
redevelopment still needed inthesteel industry .
TheCommission isworking along thesame lines asthecentral andregional
<authorities intheMember States .Ithasstepped upthenumber of
redevelopment loans granted from nine (eight direct andoneglobal )in
1977 to25(nineteen direct andsixglobal )in1979 *Atotal of23loans
(fifteen direct andeight global )were approved during thefirst seven months
of1980 .
Butdespite these efforts there isalong waytogo.Thenumber ofjobs
lost intheCommunity isstill high .Present estimates suggest that some
150000 jobs will belost in1980 asaresult ofredevelopment inthesteel
industry ,about athird ofthem being intheUnited Kingdom . v

-38-
• *
> .
Consequently ,while itisappreciated that there arelimits towhat
theCommission candointheway ofredevelopment ,itshould -inpf&otio®
bepossible ,given themagnitude 'oftheproblem ,fortheCommunity to
grant loans toprovide 15000replacement jobs in1981 .Inorder to
reach this modest target loans would have tototal 300mEUA ,with
interest relief grants amounting to45mECJA .
CHAPTER -B5;-AIDS UNDER ARTICLE 95OFTHEBCSC TREATY (COKING COAL
ANDCOKE FORTHE STEEL INDUSTRY )'
*
1)Legal basis anddescription oftheoperation
Legal basis .: .- . * '
(i) .Article 95of "tbeECSC Treaty ; _
(ii)High Authority /Commission Decision 73/287/ECSC of15July 1973
(OJNoL259 »15September 1973 )»aslast amended by
Decision 3058/79/ECSC of19December 1979 (OJNoL344,
31December 1979 )*
TheECSC makes alump-sum contribution toaspecial fund ,administered
bytheCommission ,forsubsidizing intra-Community sales ofCommunity
coking coal intended fortheiron andsteel industry .Thefund is
financed bytheCommunity ,theMember States andthesteel industry .
2)Type andbreakdown ofrequirements
Precision foralump–sumcontribution of6mEUAtothefund (theECSC
annual contribution ). "
Community aidmaybegranted inrespect ofamaximum amount of
47®EUA ,corresponding to'15million tonnes ofcoking coal perannum .
Iftrade drops below the15million tonne limit ,thesubsidies required .
will bereduced andwill bedrawn first from theCommunity 'scontribution
andthe23mEUAcontributed bythesteel industry andthen from the
24mEUApaid inbytheMember States .

-39-
3)Explanation
Theaimeftheepeeial system efaid -feeeeki-ng seal andeeke ,setup
pursuant toDecision 73/287/ECSC of15July 1973 ,istohelp maintain
production ofblast –furnace coal fortheCommunity 'siron andsteel
industry ,andalso toenable thecoal andthecoke derived therefrom
tobesold atprices reflecting world market prices .
The Commission feels that certain production capacities should be
maintained inthis sector ,aswell astherequisite labour force to
work them asefficiently aspossible ,andthat itistherefore necessary
tohave anaidsystem which takes account ofthefact that thequestion
ofCommunity coking coal production concerns ,all theMember States .
Under theaid system ,aids toproduction and sales intheproducer
country arefinanced bythat country ;aids tointra –Community sales
arefinanced atCommunity level ,thecost being shared bythe steel
industry ,theMember States and theECSC .
2.Requirements not entered inthe budget :loans for financing
subsidized housing
Inaddition totherequirements tobefinanced bynon–repayable grants
from theyear 'sresources ,there istheECSC housing subsidy scheme ,
which hasbeen inoperation since 1955 »
Forecasts forthis programme areincluded inthis aide-memoire tocomplete
thepicture ofallECSC interventions forParliament and theConsultative
Committee .Forease ofunderstanding ,thepresentation follows the
same analytical format asfor therequirements already described .
1)Legal basis anddescription oftheoperation
Legal basis :Article 54andDecisions oftheHigh Authority /Commission
assigning tothehousing programmes thefunds from the "special
reserve "constituted byinterest from investments andfrom loans
against ownfunds .
ECSC intervention takes theform ofreduced-interest loans ,and
eases the .cost offinancing housing byadding thefunds lent bythe
Community toresources provided nationally .

2/Tyoe ar.d "bre;i-kdov ,,nofrequirements
Grant oflong-term 1^.interest –rate loans totheresponsible national
"bodies .
The' Commission Decision of29June 5979 onthe ninth subsidized ,
housing programme (1979-83 )allocates the sumof30mEUAfor
the *first phase oftheprogramme (1979–81)»which averages outat
10mEUA ayear . Anaddi-tional one million EUA has,however ,been
allocated ,for 1981 tocover anyadditional requirements such asthose
which might arise asaresult ofGreek accession tothe Community on
1January 1981 •
3)Explanation
This scheme isintended tosubsidize the following projects :
(i)housing ,linked with industrial "reorganization inthetraditional
steel centres and inthose coalfields where production is
tobeincreased ;
(ii)housing forlabour transferred tothe newcoastal steelworks ;
(iii)specific solutions formigrant workers ,employees with special
skills and persons employed inarduous tasks ; -
(iv)housing tobemodernized aspart ofurban renewal insteel
and mining districts .
The scheme isboth intheinterest ofworkers ,since italleviates
theeffects ofprice increases and high interest rates ,and of
benefit tothe industry ,since -itfacilitates reorganization . .
The number ofdwellings subsidized bymeans ofECS Cloans at
1January 1980 stood at 165511•

-41"
3»Sunsary ofrearuiremerits reported
Total requirements reported therefore amount to249 mEUA to "befinanced
tinder theoperational budget ,plus 11m EUAinthe form ofbelow-the –line
loans atlowinterest rates forthe "building ofsubsidized housing .The
figures forrequirements reported are summarized inAnnex D,inthe
"applications' *column * ' . ,
3E
Ζ X
I
B. ORDINARY RESOURCES A V AILABLE
1.Resources for the financial year
CHAPTER R1:-GENERAL RESOURCES
TITLE R1.1 :Levy
laLegal "basis and description
Legal "basis :
–Articles 49«*d 50ofthe ECSC Treaty
–Decisions 2/52and 3/52of23December 1952# -
The levies arecalculated onthe "basis ofafixed scale per tonne which is
decided each financial year "bytheHigh Authority /Commission andpublished
inthe Official Journal ,
% •
Ψ
2,Type and "breakdown v -
Levy resources arethe sums owing ,and duly established ,inthe form of
levies payable onoutput inthe 1981 financial year andcalculated onthe
basis ofthe production declarations made bytheundertakings ,
3,Explanation
Thelatest estimates ofthe average values which serve asthebasis for
calculating thelevies suggest that thefigures forthe 1981 financial year,
which relate tothereference period from 1July 1979 "to30June 1980 ,will
besome 15$hi^ier inthe case ofcoal androughly %%forsteel than the
figures for 1980,
Itshould benoted that there isanappreciable margin ofuncertainty in
these figures }this isbecause the departments concerned arenotyetin
possession ofalltherequisite data ,andforecasting production in,
present economic conditions isvery uncertain .

-42-
Tonnage subject -tothelevy ,andyield from arate oflevy of0.01%
Fa'oàuôtProduction for® casts
onwhich the levy is
calculated
million tonnesOne levy
"point '•
in mEUA
Brown ooal briquettes and
semi –coke derived from "brown
-
coal 6.6 0.02
Hard coal ofall categories 199.6 1.04J
Coal –total1o06
Pig iron other than that used
for making ingots 4.4 0.05
Steel iningots -128.0 2.09
finished products 99.0 0.70
Steel total 2.84
GRAND TOTALI
3.90
TITLE R1.2 ;Interest :other headings
1,Legal basis and description
Resources deriving from income oninvestments and onloans against
non–borrowed funds will bedetermined when the Commission adopts the
balance sheet at31December 1980,Under itsDecision of30April 1975 ?'
the Commission enters inthe budget theinterest available from the previous
financial year#
2«Type and breakdown
Abreakdown offorecast resources based onthelatest estimates is
given below ;'

-43-
|TitlesHeading
* »mEUA
R1*2
R1®3
R1®4Interest oninvestments andloans
against non-'b orrowed funds
Fines and la,te payment surcharges
Miscellaneeras revenue -40
tokea entzy
ioken entry
3©Explanation ,
Thefigure forinterest revenue is "based onanestimate ofth®
yescoarcep which theCommission will "beinaposition torelease When
itadopts the "balance sheet at31December 1930®
•' i
CHAPTER R2i-OMCELLMT ONS OFCOMMITMSNTS WHICH WILL PROBABLY HOT
BE IMPLEMENTED ' - ' .. ;
10.Legal "basis anddescription
Theprovisions created inresponse i©Coramission aiddecisions must "be ,
given tangible formwithin areasonable period oftime "bythecontracting
.oflegal commitments®
.TheCommission 'sInternal Rules forthedrawing upandimplementation _'
ofthe EG'SO operational "budget therefore provide that intheexceptional .
event ofun&a© delay atthis stags tlxeprovisions will "bacancelledo
< '
TheRoles also provide that onceallparties have discharged their .
obligations under thelegal commitment ,eayremaining part oftheprevision
•will likewise "becancelled®

The amounts thus released "bscerae available again asresources for the
co^Tent financial year .
2® Nature and "breakdown
Save inthe exceptional cases where decisions onthe earmarkbig ©J?fVads
arenot followed upwithin areasonahl© period ©ftime "bylegal
commitment 83,any cancellation ofearmarked fynoa normally indicates
complete discharge ofthe contract ,agreed with the contracting par
concerned# -
The estimate of -2mKJA shown inthis chapter relates ,inessence ,to .
cancellations ofallocations forresettlement aid® Only atokesa entry ,
would heneeded fortheother items which might heinvolved (cancellation
of "balances remaining inrespect of -.contracts which have >»een performed ii-
full ,delayed legal commitments ,etc# )® ■
»
3.Explanation .
^ /Itisdifficult toestimate therate ofcancellation inrespect of
resettlement programmes ,asitdepends onthenegotiations toheheld
with the governments concerned *The estimated figure of2mEUAis -"based ,
onanaverage rate for 1931.
CHAPTER R3:-RUV ALTJATI ONOPASSETS AM)LIABILITIES
This chapter ,showing a"token entry ",isprovided torecord thenet
effect ofchanges inrates ofconversion during thefinancial year.
CHAPTER R4'–UNUSED RESOURCES FRCH THB FINANCIAL YEAR 1980 .
This chapter ,showing s,"token entry "3provides forany "balance
remaining from the funds of%heprevious "financial year to "beentered as
resouroes for the currant financial year *

-45-
2»Covering :ofrecruiratasatsnot entered inthe budget -
S^rovitt&on isa*"b«@»sa®49 fox' tho following resources cover
requirements for the constract ion ofsubsidized housings
–repayments onearlier loans .(8mSUA): '
/
=•apart oftha spscial reserve and ofthe former ECSC pension fund
(3mEUA).
The allocation tothe special reserve ofthe additional resources
required will "beconfirmed when the Commission adopts the,balance
sheet at 31December 1980 .
«
3.Summary ofpossible ordinary resources' available for 1981
The estimates oftraditional resources other than levies amount to
42mEUA (interest available =40mEUAj cancellations a2mECA)0
Astheyield from alevy rate of0.01$ >hasteen estimated at3®9 niHSA ?
theyield obtained from levies can "beestimated at120 mHIA on'the
"basis ofthe current rate of Thetotal ordinary resources
available for 198% assuming that thelevy rate remains unchanged ,
isestimated at162 mEUA® -The estimated resources are summarized in
Annex Dinthe section on"resources "* > ,

-46-
III.DEÀFT 1961 OPEPJITPTG BUDGET
A. COMMISSION APPROACH
m
The thinking "behind the ,Commission ^approach isdescribed "below .
Apart from aspecial arrangement forusing thegeneral "budget tofinance
exceptional social requirements' generated torrestructuring intheiron
andsteel industry ,the Commission has nointention ofusing special
financing arrangements under the 1981 ECSC Budget ,ir>particular ,itdoes
not intend toaskthe Member •States for special contributions . 'This is
not because anincrease inECSC funds isnotdesirable ornecessary ,but
because theincrease sofarobtained bythis means (28million EUAper
year )hasnot been adequate tojustify continued recourse towhat is
in last analysis art/unprthoctex and h.aza.rdous-pr&cedure .
This being so,andsince applications forassistance from the 1981 Budget
,aremore than 54%inexcess ofthefunds available (assuming anunchanged
0.31$ rate oflevy),the Commission does notfeel that itcanpropose a
reduced rate ,even though itisaware that those contributing would like
ittodosoinview ofthe present circumstances . However ,while the
levy inquestion isanadditional burden onfirms atatime when many of
■them are experiencing serious financial difficulties ,thefact remains
that this tax ofquite marginal volume provides the ECSC with the
means tofinance awhole range ofessential ,operational aid schemes
which all benefit firms and .workers inthe coal and steel industries .
What ismore ,theInstitution 'sfinancial activities ,andparticularly •
itscredit rating onthe money markets ,depend inter alia onits continued
power toraise taxes .
Although the Commission regards anyreduction intherate oflevy as
irreconcilable with itsproven financial requirements ,nevertheless it
agrees ,that there isnojustification forincreasing it.
Consequently ,allocations foroperational assistance in1981 will be
-kept within the bounds ofthe amount available onthebasis ofthepresent
rate ,i.e. 162million EIIA (seeII.B.3above ).

-47-
B. FINANCING PROPOSALS
A"breakdown of "Bhe commission 'sproposals concerning the 1981 epabating
"budget isgiven inAnnex Dand has "been arrived atasfollows :
(a)total resources amount to162million EUA|
("b)irreduci"ble requirements total 86million EUA,viz :
•5million EUA tocover administrative expenses ,fixed atthis
level pursuant tothe Merger Treaty ;
•75million EUA "byway ofresettlement aid under the current
"bilateral agreements "between the Community and the Member States ;
o6million EDA "byway ofaidfor coking coal andsteel plant coke ,
pursuant toadecision taken under Article 95of "the EX3SC Treaty ;
(c)aminimum allocation tothe same value asin1980 -44million EUA–
should "besetaside foraid for research ,which isatraditional aid
measure provided for inthe Treaty and favourably regarded onall
sides .
Itfollows that the "balance available for financing interest subsidies
totals 32million EUA.The Commission isaware ofthe need ,inthe
present circumstances ,togive priority toresettlement aid designed to
create jo"bs inareas inwhich the ECSC industries are declining and has
therefore geared its aid policy towards restructuring investments
(Article 54ofthe BCSC Treaty ),,Considerable progress now appears to
have been made with restructuring measures ,andthis has pushed upthe
estimated "budgetary expenditure for I98O (Annex B)0Nowthat this stage
has "been completed ,itisnolonger possible toprovide assistaxi.ee ona
large scale from theinevitably slender cash resources available for the
purpose without running therisk of "becoming frankly discriminatory in
the selection ofrecipients ^

-48-
This "being so,the Commission has decided toforgo this type ofaid
la1983 .pyefarring tcconf-ine ...interest -sutesi-dtes oninv-(9#tw«n * «'
"byEGSOimdartakin gstocases involving thestabilization ofcos.1
production andoases covered "bythecriteria drawn upin1970 and
1974 (notably toencourage investments designed toremedy the shortage
ofcoking' coal),andthen only asfarasfunds allowo
The Commission therefore proposes toallocate 25-willioa Wk to
conversion aid and 7million H'/Atoaid toinvestments®
0
Q O
Toconcludej theCommission proposes toadopted the I.98I ECSC operating
"budget tot-ailing 162million EUA,'broken down asshown inAnnex D„
Consequently ,itproposes tomaintain the 0*3.1 %rate oflevy «

-49-
C. DRAFT BUDGET
The Commission 'sdraft "budget of162million EUAisset out inAnnex D,

ΙΝ'.'ΧΑ
irPLET'CflTATIO.'l OFTHEECSCOPfRATIOflAL8lD£TFC®1979 (TnnCUAJ
I – 1Iftinr,frIIrïïïÂT–i
RESOURCESIBUDGET IIFINAL
REQUIREMENTSFIGURES1IlFIGURES I FIGURES' lFIGURES
OPERATIONS TOBEFINANCED-FROfi\' RESOURCES OFTHEFINANCIALYEAR' I
ICURRENTRESOURCES(NON-REPAYABLE)'■-■- ■
I1.Adnlnlstratlve expenditure 5 5 1,Currentresources ' ■ ■ ■
'* •
s1.1LevyyieldCat
1.2InterestonInvestments andon
loansfronnen-borrowed funds.
1.3Finesandsurchargesfordelayed
payment
1.4Miscellaneous•103
18
token
entry
tokenentry103.2
18
0.8
I2.Aidtoresettleaent :2,Cancellationofcoonibentswhichwill
(Article56) 67 ■67-notnowbeImplemented 8.7 10.1
I3.Aidtoresearch'3.Revaluationofassetsandllablllties-token tokenI
I(Article55) 46.5.'46.7
. . :entryentry|
I3.1steel, '(20,(20 • .-
I3.2coal f17''I?■'
I3.3social (9.5(9.7
I4.Interestreliefgrants 47.2
(21.7
(25.54.Unusedresourcescarriedoverfro«
5.8 I4.1Article54-Investment (20 thefinancialyear1978 5.8
I*4.2Article56-Redevelopment ° (27
5.Drawingoncontingencyreserve ]5.Aidtocokingcoalandmetallurgical-
Icoke(Article95) 6 .6;..■
I6.EffectInEUAofthechangesIn 6.Spécialcontribution'
Icurrencyexchangeratesonlegal : (DeclslorvoftheKenberStatesof
28I,coonitmentstobecarriedoutIn- 9Aprll1979)28
Içurrçncles[■0.2 7.Déficit v [IX|
171.5 172.1'ί· '171.5 172'1■
OPERATIONS FINANCEDWITHLOANS r ORIGINOFNON-BORROWED FUNDSr:
FROMNON-BORROVED FUfOS ;, . .
7.Socialhouslng"17.517.8 8,Repaymentsonloansforsocialhousing
9.Specialreserveandpartofthe
formerECSCPensionFund7.5•
107.8
10
Commission'sbudgetestimatesat24October1979.
2CoveredfromInterestrevenueIn1979.

FORECAST OUTTURN OFTHE
ECSCOPERATIONAL BUDGETFOR198O ANNEXB
(inmEUA)
REQUIREMENTSBudget
figuraEstimated
rateof
implorientationRESOURCESBudget
ftgureEstimated
rateof
implementatii
OPERATIONS TOBEFINANCEDFROMCURRENT
RESOURCES(NON-REPAYABLE)
1,Administrative expenditure
2.Aidtoresettlement (Article55}
3.Aidtoresearch
(Article55)
3.Tsteel
3.2coal
3.3social
4.Interestreliefgrants
4.1investment(Article54)
4.2redevelopment (Article56)
5.Aidtpcokingcoalandmetallurgical
coke(Article95)5
67
44
66(19
(16
O
\
(23
(43
188
OPERATIONS FINANCEDWITHLOANSFROM
NON-BORROWED FUNDS
6.Socialhouslng ..105
67
44
(19
(16
(9
61.5
(33
(28.5
183.5
10RESOURCES FORTHEFINANCIAL YEAR
1.Currentresources
1.1Levyyieldat0,31$
1.2Interestoninvestments andonloans
fromnon-borrowed fynds
1.3Finesandsurchargesfordelayedpayment
1.4Miscellaneous
2.Cancellation ofcommitments whichwill
probablynotbeImplemented
3.Revaluationofassetsandliabilities
4.Unusedresourcescarriedoverfromthe
1979financialyear
5.Specialcontribution undertheDecisionof
theMemberStatesof18March1980
6.Drawingoncontingencyreserve
ORIGINOFNON-BORROWED FUNDS
1.Repaymentsonloansforsocialhousing
8.Specialreserveandpartoftheformer
FCSCPensionFund117
23
tokenentr>
Itokenentr>
tokenentrv
tokenentry
43
188116.5
23
0.9
0.1
28
10
183.5
7.5
2.5

Information relating "bolevies
Thelatest available information onproduction andthelevy yield ,for
th«cru*>?afv « y«ar ittgiven talowt
Levy yield for the period from January toJune 1980 (provisional estimated
'Plroduot
.nProduction serving
asa "basis for the
calculation ofthe
levy
inmillion tonnes\
Levy yield .
in mEUA
Brovm-coal "briquettes'
and semi –coke , 2.2 0.2
Ail types ofhard coal 98.6 ! 13.8
I Total forcoal14.0
Pig iron other than that required
for the manufacture ofingots 2.2 0.8
Steel ingots 66.0 . ..32.4
Finished products 51.0 . 11.2
Total for steel 44.4
.-* \ . ' ■
, GRAND TOTALj . •'
58.4

AÏWEX C
ECSC BALANCE SHEET AT 31 DECEMBER 1979
ASSETS LIABILITIES - (inmHSA)
1.
2.
3.Disbursed loans
Banks
Ordinary portfolio4793.7
448.9
169.41.Reserves
A. Guarantee fund
B. Special Reserve
C. Former pension fund230.0
140.0
41.5
4.
5.
6.Interest revenue
Recoverable issuing costs and
redemption premiums
Other assets113.1 I
70.9 I
47.52.
3.Allocation ofreserves
A. Financial aid
3.Others
Unallocated balance310.0
105.0
0.4
7.Bank deposits for bonds and coupons
due 40.44.
5.Borrowings
Interest payments tobemade4675.1
166.8
8.Repurchased bonds ^37.3 6.Bonds and coupons due 40.4
9.Real estate
^ ' ' ■'0.2 7.
8.
9.Credit institutions
Other creditors
Outstanding redemption premiums8.3
2.9
1.0
5721.4 5721.4

ANNEX O
DRAFT ECSC OPERATIONAL BUDGET FOR 1981
• ':I
(inmEm)
REQUIREMENTS - APPLICATIONS PROPOSALS..RESOURCES . PROPOSALS
OPERATIONS TOBEFINANCED FROM
RESOURCES FOR THEFINANCIAL YEAR
(NON-REPAYABLE )
1»Administrative expenditure
2»Aidtoresettlement (Article 56)
3.Aidtoresearch (Article 55)
3«1 steel
/
3*2coal
3*3 social .
4.Interest relief grants
4»1Investment (Article 54) -v
4*2Redevelopment (Article 56)
5»Aidtocoking coal and
"metallurgical coke (Article 95)
OPERATIONS FINANCED WITH LOANS
6*Social housing•5
75
99/
(54
(33
(12
64
<19
,<45
'v
65
75 '-
44-
(19
. (16
(.9'
32 ■
<7
, <25
6RESOURCES FOR THEFINANCIAL
YEAR
1«Current resources
1«1Levy yield at0.31 /&
1.2Interest oninvestments
and onloans from
non-borrowed funds
1«3Fines andlate payment
surcharges
1.4Miscellaneous
2»Cancellation ofcommitments
which will probably notbe
implemented
3«Revaluation ofassets and
liabilities
4*Unused resources carried
■over from 1980
5.Extraordinary receipts
6#Drawing oncontingency
.. .reserve
ORIGIN OFNON-BORROWED FUNDS
7.Repayments onloans for
social housing
8.Special reserve andpart
offormer ECSC Pension
Fund120
\
/
40 '
token entiy
token entiy
'2
token entiy
.
token entiy
249 162
11 11162 I
8
'■ 3

CONTROL OP ECSC ACTIVITIES Annex E
Inparagraph 16oftheResolution of22May 1980 onthe discharge tobe
given tothe Commission inrespect ofthe ECSC 'sfinancial and budgetary
activities forthefinancial year 1977 »Parliament asked the Commission
tosubmit areport on"its concept ofcontrol and howitcould beexercised "
inthe area covered bythe ECSC Treaty .This isthe Commission 'sreply to
that request }itsets outtothrow some light onthelegislation currently in
force inthis field .
(a)Concept ofcontrol
Since ECSC administrative expenditure was lumped together with the
administrative expenditure ofthe other Communities under Article 20of
the Merger Treaty ,ithas ofcourse been subject tothe same auditing
measures astherest ofthe general budget .There istherefore noneed
for anyspecial remarks here .
Asfor the ECSC 'sother activities ,the Treaty of22July 1975 amending
certain financial provisions ofthe Treaties establishing the European Communities
assigned the external audit functions provided for bythe Treaty ofParis to
the Court ofAuditors® Atthe same time the Treaty ofParis places the
responsibility forestablishing adequate internal auditing procedures onthe
shoulders ofthe High Authority /Commission .On2August 1976 the Commission
therefore adopted itsinternal rules forthe drawing upand implementation
ofthe operating budget ofthe ECSC ,consolidating and supplementing the
budgetary control procedures applied previously .
\
External audit
The Commission made its views onexternal auditing clear toParliament on
22May 1930 ,attheplenary debate onthedischarge forthe 1977 financial
year .Speaking for the Commission MrTugendhat said that therules and
practices which had been developed over the years ,within the general framework
ofthe Treaty ofParis andwith thefull support ofParliament ,proved an
effective means ofauditing® Any formal revision ofthe Treaty ofParis ,
seeking toremodel the external auditing procedures onthelines ofthe
EEC Treaty .,would beboth retrograde and amistake .

-56-
Heacknowledged that the powers enjoyed "bythe Court inthe ECSC domain
.were rather different from those accorded toitinother fields . Under
the ECSC Treaty the Court ofAuditors did not have the right tocarry out
autonomous insitu visits inMember States ,nor did Parliament have the
right togive adischarge for the implementation ofthe ECSC operating
budget .
MrTugendhat went ontosaythat practical arrangements had by1977
produced aform ofaudit which included insitu checks and,atthe time ,
wasfelt tobeentirely satisfactory . Herecalled that inthe debate
onthe 1976 discharge inDecember 1977 both Parliament ,through
MrBangemann ,and the Commission had expressed the hope that the
style ofwork and the practices developed bythe audit authority would
serve asamodel for the future .
.. . v
The important point was that the powers bestowed on.the Court bythe
Treaty ofJuly 1975 were virtually identical ^with those previously
enjoyed bythe ECSC Auditor . The practice followed bythe ECSC Auditor
atthat time wasthat h6participated inchecks organized insitu
bythe Commission . This practice had been completely ^abandoned bythe "
Court ofAuditors .
The Commission would beglad topick upthe threads and tofacilitate
theparticipation ofofficers ofthe Court inexternal audit visits
arranged byitsstaff . . V
Asfar asParliament 'sinvolvement was concerned ,the Commission had
accepted the claim ofParliament togrant its discharge for the
financial management efthe ECSC and Parliament had been exercising
this right since 1976.Asaresult ,the powers enjoyed byParliament in
this domain were identical with those exercised under the Treaty ofRome .
»

Internal audit
Asregards operating expenditure ,theParis Treaty did not endow the
EC3C with traditional "budgetary structures andprocedures intheclassical ,
i.e. standard ,universal and annual ,mould .
The ECSC 'sfinancial activities can "bedivided into two major sectors :
thefirst –the borrowing and lending service –£sadministered in
accordance with normal banking practice ,while the second –the granting .
offinancial aids –isdealt with "fcrythe administrative departments of
the Commission ,notably ,asregards financial matters ,byone ofthe
departments ofthe Directorate–General for Budgets . Asthetitle
"operating budget ofthe ECSC "suggests ,the Directorate-General for Budgets
has chosen tosubmit the figures asinternal estimates .
Prom the earliest days ofthe ECSC ,its budget ,which isconfined toaid
financed from revenue from levies andinterest payments ,has been drawn
upand implemented byanumber ofdifferent departments inaccordance
with adhoc decisions taken bythe High Authority . The decision of
2August 1976 consolidated and supplemented allprevious practices in
the "internal rules for the draining upand implementation ofthe operating
budget ofthe ECSC ". While maintaining the ECSC'sfinancial autonomy ,
these rules took over the essentials ofthe general budgetary principles
ofthe Financial Regulation which governs the general budget .
Needless tosay,inaddition tothe internal auditing carried out under
the "internal rules ",the limited staff ofthe Commission departments
responsible for implementation ofthe operating budget carry out as
many inspections (including insitu visits )asthey caninorder toensure
that their area iswell managed . Comments onthese checks ,including
those carried out 'bythe service responsible for inspecting the levies f
are recorded inthe reports inthe external auditor 'snotebooks .

-58-
ι
(b)Auditing methods
The present situation can besummarized a»follows *
The Financial Controller hastoauthorize inadvance all proposals for
commitment and subsequent payment from the ECSC operating budget .
Responsibility for external auditing ofthe granting ofaid andthe release
/ . . . . ..
ofresources accruing from levies lies with the Court ofAuditors .
This gives Parliament every guarantee that itinturn will beable to
exercise therights bestowed upon_.it and come toafully informed
judgment ofthe discharge tobegranted tothe High Authority .
v
There are twobasic methods ofcontrolling the ECSC'sfinancial activities ,
viz : '
(i)The Court ofAuditors keeps apermanent watch onfinancial operations .
Itreceives alltherequisite accounts and has permanent access
toallthe Commission 'sfiles .Ithas the right toacoompany the
Commission officials onany inspection visit itwishes .
The 0030*3 balance sheets and statements ofrevenue and expenditure
were subject toendorsement bythe ECSC Auditor (upto1976)andby "
the Court ofAuditors (financial years 1977 and 1978). What is
more ,comments and observations onthese documents have been
published every year ,inthe ECSC Audit or*sreport forthe years
upto1976 andinanAnnex tothe Annual Report onthe Overall
Financial Situation ofthe ECSC in1977 * Detailed accounts of
individual operations and general conclusions have also been
published .
(ii)The Commission thought itwould bewise if,from 1978 onwards ,a
firm ofaccountants ofinternational repute were toaudit its
accounts inthe waythat ,for example ,the European Investment Bank
■does now.Ithas every intention ofpursuing this policy inthe
financial years tocome .
The Commission feels ,that ,leaving aside the problems caused bystaff
shortages ,theforegoing measures provide anadequate means ofmonitoring
the ECSC'sbudgetary andfinancial activities . ^