No C 335/8 Official Journal of the European Communities 30. 12. 88 
Proposal for a Council Decision empowering the Commission to borrow under the New 
Community Instrument to stabilize the level of debt outstanding for the purpose of promoting 
investment within the Community 
COM(88) 661 final 
(Submitted by the Commission on 2 December 1988) 
(88/C 335/05) 
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, 
Having regard to the opinion of the Economic and 
Social Committee 
Whereas the Community's investment financing facilities 
should continue to operate, with a view to correcting 
structural shortcomings in the production system so as to 
increase investment and thereby stabilize employment; 
Whereas loan applications already approved by the 
Commission account for over 87 % of the borrowing 
authorized by the Council in Decision 87/182/EEC (') 
and over 97 % of the cumulative total of all authoriz­
ations to date; 
Whereas the Commission should therefore be 
empowered to borrow amounts enabling it to maintain 
the level of debt outstanding under the New Community 
Instrument at its present level of ECU 5 865 million; 
Whereas action under the New Community Instrument, 
as last defined by Decision 87/182/EEC, should for the 
next three years continue to be concentrated in favour of 
small and medium-sized enterprises; 
Whereas such action will help to achieve the 
Community's objectives regarding the reversal of the 
exodus from rural areas and concerning the development 
of these areas; 
Whereas it is vital in order to strengthen the 
Community's technological base and industrial competi­
tiveness to encourage the innovative capacity of under­
takings; 
Whereas investment by small and medium-sized under­
takings involving the application of new technologies and 
innovation has features which raise special financing 
problems; 
(') OJ No L 71, 14. 3. 1987, p. 34. Whereas special financing arrangements should conse­
quently be provided for to deal with such problems, in 
particular by extending the financing base and by 
encouraging the supply of equity funding; 
Whereas the European Investment Bank (hereinafter 
referred to as the 'Bank') has stated that it is willing to 
contribute to the implementation of this measure, and to 
take responsibility for managing the cash holdings for 
carrying out the lending operations, it being understood 
that the discharge and audit procedures shall be those 
provided for in the Bank's Statute in respect of all its 
operations; 
Whereas the Treaty establishing the European Economic 
Community has not provided the necessary powers for a 
Community action in this field needed to attain, in the 
course of the operation of the common market, one of 
the objectives of the Community, 
HAS DECIDED AS FOLLOWS: 
Article 1 
The Commission shall be empowered to borrow, on 
behalf of the European Economic Community under the 
New Community Instrument, amounts enabling it to 
maintain the level of debt outstanding under this facility 
at ECU 5 865 million in principal, having regard to the 
flow of repayments of principal on existing borrowings. 
Article 2 
The proceeds of the borrowings referred to in Article 1 
shall be on-lent to finance investment projects that 
contribute to the structural adjustment and the competi­
tiveness of the Community; for a period of three years 
following the entry into force of the present decision, 
such projects shall be directed towards the application of 
new technologies and innovation or the stabilization of 
employment in rural areas; thereafter the Commission 
shall determine the priorities to be applied. 
These projects, to be carried out in Community territory, 
must, where appropriate, be such that they serve the 
Community's priority objectives relating to the financing 
of investment by small and medium-sized undertakings. 
30. 12. 88 Official Journal of the European Communities No C 335/9 
Article 3 
The Commission shall decide whether or not projects are 
eligible in accordance with the following priorities and 
guidelines: 
— the investment projects of small and medium-sized 
enterprises in industry and other productive sectors, 
in particular with a view to the application of new 
technologies and innovation (including renewable 
sources of energy) shall be eligible; the projects of 
small enterprises shall have priority; 
— the investment projects of small and medium-sized 
enterprises in rural areas, aimed at safeguarding the 
environment or stabilizing employment likely to be 
lost in agricultural activities, shall be eligible; 
— projects and their implementation shall comply with 
the provisions of the Treaty and of secondary legis­
lation, in particular provisions relating to compe­
tition, and with the rules and requirements of the 
relevant Community policies. 
Article 4 
Loans shall for the first three years generally be granted 
through the agency of financial intermediaries. In certain 
limited cases, however, they may be made directly to the 
recipients. 
Whatever the procedure for granting loans, capital and 
interest payments may be deferred. Loans may also be 
used to finance intangible assets such as patents, licences, 
know-how, and research and development expenditure 
directly linked to the investment concerned. 
Where they are granted through the agency of a 
financial intermediary, that intermediary may, with the 
agreement of the Bank, pass the loan on to undertakings 
either in the form of a loan or in the form of equity 
capital. In both cases, the intermediary shall be 
responsible for the service of the loan and associated 
risk. 
Article 5 
Lending terms as regards the reimbursements of the 
principal and the rate and payment of interest shall be 
those applied by the Bank, in accordance with its Statute 
in respect of loans from its own resources, and shall be 
fixed in such a way that, overall, they cover the costs 
and expenses incurred in concluding and performing 
both the borrowing and the lending side of the trans­
actions. Article 6 
The terms of borrowings shall be negociated by the 
Commission in the best interests of the Community, 
having regard to the conditions on capital markets and in 
accordance with the constraints imposed by the duration 
and other financial aspects of the loans to be granted. 
The borrowed funds shall be entrusted to the Bank, 
which shall manage them in the manner agreed with the 
Commission under the terms of the existing cooperation 
agreement. 
Borrowing and lending operations shall be expressed in 
the same monetary units, and to ensure adequate 
coverage the Commission may carry out 'swap' oper­
ations provided that there is no resultant exchange or 
interest rate risk for the Community. 
Where borrowings are expressed, payable or reim­
bursable in the currency of a Member State, they may be 
concluded only with the agreement of the competent 
authorities of that State. 
Article 7 
A mandate shall be given to the Bank to grant and 
administer loans in pursuance of this Decision. The Bank 
shall carry out transactions under this mandate on behalf 
of the Community, whilst exercising the same diligence 
as for the operations carried out with its own resources. 
The Commission shall decide, in accordance with Article 
3, whether projects are eligible. Where the Commission 
gives a favourable decision, the Bank shall decide 
whether and on what terms to grant the loans, in 
accordance with its usual criteria and with the 
procedures laid down in its Statute and in the 
cooperation agreement. 
Loan procedure as provided for in this Decision shall be 
as follows: 
— loan applications shall be transmitted simultaneously 
to the Commission and to the Bank by the primary 
borrower, 
— the Commission and the Bank shall sign the loan 
contracts with the primary borrower, viz the financial 
intermediary in the case of a global loan, or the 
beneficiary in the case of a direct loan, 
— the Bank shall inform the Commission of the allo­
cation of the loans. 
Article 8 
The Commission shall annually inform the European 
Parliament and the Council of capital receipts and 
payments resulting from borrowing and lending trans-
No C 335/10 Official Journal of the European Communities 30. 12. 88 
actions. To this end the Bank shall forward to the 
Commission any data required for the European 
Parliament and the Council to be fully informed. 
Article 9 
Three years after the entry into force of the present 
decision the Council shall examine, on the basis of a 
report by the Commission and after consulting the 
European Parliament, whether the objectives and 
priorities of the New Community Instrument should be 
changed. Article 10 
The financial control and audit of the Commission's 
accounts shall be carried out in accordance with the 
Financial Regulation applicable to the general budget of 
the European Communities and with Article 206 of the 
Treaty instituting the European Economic Community. 
The lending transactions and management of cash 
holdings shall be covered by the discharge and audit 
procedures provided for in the Bank's Statute in respect 
of all its operations.