27. 1. 90 Official Journal of the European Communities No C 20/9 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Council Decision providing medium-term financial assistance for Hungary 
COM(89) 627 final 
(Submitted by the Commission on 6 December 1989) 
(90/C 20/08) 
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 action plan adopted by the 
Commission on 25 September 1989, 
Having regard to the conclusions of the General Affairs 
Council of 3 October, reiterated in the agreements of the 
special meeting of the European Council on 18 
November, 
Whereas the people of Hungary have close historic links 
with the people of the Community, and whereas that 
country is undertaking fundamental political and 
economic reforms and has decided to adopt a market 
economy model; 
Whereas these reforms will strengthen mutual confidence 
and bring Hungary closer to the Community; 
Whereas the granting of the medium-term loan is an 
appropriate measure to facilitate the adjustment of the 
Hungarian economy in order to reap the full benefits of 
an economy based on market principles; whereas the 
conditions and terms of the loan should emphasize 
necessary structural adjustment as well as being 
consistent with the terms and conditions put forward by 
the IMF; whereas an agreement with the IMF on a 
stabilisation programme is necessary and should be 
concluded quickly; whereas assurances should be sought 
that Hungary has negotiated satisfactory terms with its 
private creditors to ensure their continued participation; Whereas the economic reforms will contribute to 
mutually beneficial economic and commercial relations 
between Hungary and the Community; and whereas 
these relations will promote throughout the Community 
a harmonious development of economic activities; 
Whereas examination by the Commission, in collab­
oration with the Monetary Committee, has shown a 
marked deterioration of the economic situation of 
Hungary; 
Whereas the Hungarian Government has applied to the 
Community for a medium-term loan; 
Whereas the Community should take the appropriate 
measures to cover itself against losses due to any failure 
on Hungary's part to fulfil the payments to the loan; 
Whereas the authority required to set up this loan is not 
embodied in the Treaty, 
HAS DECIDED AS FOLLOWS: 
Article 1 
The Commission is empowered to conclude, on behalf of 
the Community, a borrowing programme of a maximum 
of ECU 1 000 million with a duration of up to five years 
and to subscribe and execute all appropriate documents 
in that connection for the purpose indicated in Article 2. 
Article 2 
The Commission is authorized to lend the proceeds to 
Hungary in order to overcome structural adjustment 
problems. The Commission is empowered to negotiate 
and monitor implementation over time of a structural 
adjustment programme with the Hungarian authorities 
so as to facilitate the evolution of Hungary's economy 
towards a market orientated system in a stable macro-
economic environment. 
No C 20/10 Official Journal of the European Communities 27. 1. 90 
Article 3 
The loan shall be made available to the National Bank of 
Hungary in instalments released in the light of the exam­
ination by the Commission of the evolution of the 
economic situation and of the results obtained in the 
execution of the adjustment programme. 
Article 4 
The Commission shall verify at regular intervals, that the 
economic policy in Hungary accords with the adjustment 
programme. 
Article 5 
1. The borrowing and lending operations referred to 
in Articles 1 and 2 shall be carried out using the same 
value date and must not involve the Community in the 
transformation of maturities, in any exchange or 
interest-rate risk, or in any other commercial risk. 
The Commission shall take the necessary steps, if 
Hungary so decides, to include in the loan conditions, 
and also to exercise, an early repayment clause. 2. At the request of Hungary and where circum­
stances permit an improvement in the interest rate on the 
loans, the Commission may refinance all or part of its 
initial borrowings or restructure the corresponding 
financial conditions. 
3. All related costs incurred by the Community in 
concluding and carrying out the operation under this 
Decision shall be borne by Hungary. 
Article 6 
The Commission shall address a report at least once a 
year to the Council and to the European Parliament on 
implementation of this Decision. 
Article 7 
The Community provides for appropriate budgetary 
cover to guarantee its payments related to the borrowing 
operations under Article 1.