1 COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(94) 488 final 
Brussels, 15.11.1994 
M 94/0258 (CNS) 
•.•#' 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
concerning the intervention of the European Investment Bank in Madein 
Proposal for a 
COUNCIL DECISION 
relating to exceptional Community aid for the reconstruction of the 
areas stricken by the cyclone that hit Madeira in October 1993 
(presented by the Commission) 
U&£; • 
COMMUNICATION FROM THECOMMISSION TO THE COUNCIL 
concerning the intervention of m« European Investment Bank in Madeira 
Introduction. 
Following the cyclone that hit Madeira on 28 and 29 October 1993, the Commission 
provided ECU 250,000 of exceptional humanitarian aid to the population most affected by 
the catastrophe. 
On 11 January 1994, the Portuguese authorities addressed to the Commission a 
memorandum on the damage caused by the catastrophe to the infrastructures, housing and 
productive sectors and requested a special Community aid The cost of projects directly 
related to the cyclone damage (infrastructures, commerce, industry, agriculture and 
fishing) are estimated by the authorities to amount to 6 361 127 thousand escudos 
[approx. ECU 31.7 million, June exchange rate]. 
Regarding thé fishing sector, the Commission adopted on 8 April 1994 the granting of 
approximately ECU 800,000 as special indemnity to compensate for the damages 
suffered. 
Having examined the Portuguese authorities request, the Commission considers that the 
most appropriate measure would be to subsidise loans made by the European Investment 
Bank on own resources with subsidies chargeable to the general budget 
The EIB agrees in principle to such an initiative in favour of Madeira, subject to the 
normal eligibility criteria. 
The Commission is therefore proposing a means of responding to the request of the 
Portuguese authorities for additional loan facilities on favourable terms. Similar actions 
were undertaken after the earthquakes of 1980 in Italy and 1981 and 1986 in Greece. 
Exceptional loans. 
The necessary investment required to reconstruct the economic and social infrastructure 
of the areas devastated by the cyclone justifies that the economy of Madeira should 
benefit, with the help of the Community, of an important volume of supplementary 
financial resources. 
The Commission considers that exceptional loans of up to a maximum of one half of the 
estimated outturn cost of eligible reconstruction operations on EIB resources 
accompanied by an interest subsidy to lighten the debt service would constitute a 
significant contribution to the repair of the damages occurred. The remainder is to be 
financed from domestic sources. 
Interest subsidies. 
The Commission proposes also to enlighten the debt service that Madeira would contract, 
by agreeing to charge interest subsidies to the general budget. 
To this end, it is proposed to grant a subsidy at a rate of 3 percentage points per annum 
for a maximum period of 12 years. Further, regarding the reimbursement of the principal, 
it is proposed that credits granted in the framework of this action should have a grace 
period of 5 years. 
The subsidy and grace period proposed are the same as those agreed in the framework of 
the reconstruction measures following the catastrophes that occurred in Italy and Greece. 
Conclusion 
The Commission proposes to the Council: 
- to show the Community's solidarity by inviting the EIB to grant, out of its own 
resources, exceptional loans for a maximum of one half of the estimated outturn cost of 
eligible reconstruction operations in favour of Madeira. 
- to decide on an interest subsidy at a rate of 3 percentage points per annum for up to 12 
years chargeable to the Community budget and to adopt to this effect the decision 
proposed in annex. 
Proposal for a 
COUNCIL DECISION 
relating to exceptional Community aid for the reconstruction of the areas stricken by the 
cyclone that hit Madeira in October 1993 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard of the Treaty establishing the European Community, and in particular 
Article 23 5 thereof, 
Having regard to the proposal from the Commission, <l> 
Having regard to the opinion from the European Parliament, & 
Whereas those living in certain areas of Madeira have been seriously affected by the 
cyclone of October 1993, with an ensuing need to help offset the effects of this disaster on 
their economic and social well-being; 
Whereas steps should be taken to deal quickly and efficiently with this quite exceptional 
situation; 
Whereas the European Investment Bank is able to grant loans out of its own resources to 
help achieve this objective; 
Whereas an interest subsidy chargeable to the general budget of the European 
Communities should be provided on these loans; 
Whereas similar measures were adopted following the natural catastrophes that occurred 
in Italy <3> and in Greece <4>; 
Whereas the Treaty has not provided, for the adoption of the measures in question, 
powers other then those provided for in article 235, 
(1) OJNo.C 
(2) OJNo.C 
(3) OJNo.L 37, 20.1 1981 
(4) OJNo. L 367, 14 12,1981; OJ no. L 309, 7.11.1988 
HAS DECIDED AS FOLLOWS: 
Article 1 
The ultimate recipients of the loans, granted by the European Investment Bank out of its 
own resources, for investment projects carried out in the areas devastated by the cyclone 
of October 1993 in Madeira, shall be entitled to an interest subsidy chargeable to the 
general budget of the European Communities, up to the equivalent of a capital value of 
ECU 15.85 million in all. 
On the basis of projects put forward by the authorities in Portugal, and approved by the 
Bank, the Commission shall grant this subsidy at a rate of three percentage points per 
annum for up to 12 years. 
Article 2 
This Decision shall take effect from 
Fm ike Council 
The President 
FINANCIAL STATEMENT 
1. TITLE OF THE OPERATION 
Article B-5-203 : Interest subsidies in favour of loans made to Madeira following the 
cyclone of October 1993. 
2. BUDGET HEADING CONCERNED 
Article B-5-203. 
3. LEGALBASIS 
To be provided by the proposed decision, on the basis of Article 235 of the Treaty. 
4. DESCRIPTION OF THE OPERATION 
4.1 Objectives: 
To grant a subsidy of 3 points of annual interest rate, for a maximum period of 
12 years, to loans made by the European Investment Bank out or its own 
resources and not exceeding ECU 15.85 million in principal, in favour of 
investments made in the areas affected by the cyclone in October 1993 in 
Madeira. 
4.2 Period covered by the operation: 
Start: 1995-96 
End: twelve years after the disbursement of the last loan. 
5. CLASSIFICATION OF EXPENDITURE 
DNO; CD. 
6 NATURE OF EXPENDITURE 
Interest subsidies. 
7. FINANCIAL IMPACT 
7.1 Method of calculation: 
Interest subsidies of 3% calculated half-yearly on the outstanding amount. It 
should be noted that regarding the reimbursement of the principal, credits 
granted in the framework of this action have a grace period of 5 years. 
Therefore, during the first five years the amount of the rebate remains 
constant. In all, interest subsidies would amount to approximately a maximum 
of ECU 4.4 million (the calculation is based on the 12-year ECU interest rate 
of April 1994). 
7.2 Cost distribution by elements of the operation: 
Not applicable. 
7.3 Operational expenditure relating to studies, expert meetings, etc. 
Not applicable. 
7.4 Schedule: 
For the first five years of operations the subsidy would amount to a maximum 
of ECU 475,500 per year. 
Year 1995 1996 1997 1998 1999 2000 2000+ 
Subsidy 475.5 475.5 475.5 475.5 475.5 pm pm 
('000 ECU) 
8. ANTI-FRAUD DISPOSITIONS FORESEEN (AND RESULTS OF THEIR 
IMPLEMENTATION) 
Verification of subsidies and of the requested preliminary, feasibility and evaluation 
studies is made by the Commission services before payment, taking into account the 
contractual obligations, economic principles and sound financial management. Anti-
fraud dispositions (control, reports, etc.) are included in all the agreements or 
contracts concluded between the Commission and the beneficiaries. 
9. COST-EFFECTIVENESS ANALYSIS 
9.1 i) Quantifiable objectives: See point 4.1 above, 
ii) Population: Madeira. 
9.2 Justification of operations: 
To help the realisation of investment in the areas affected by the cyclone. 
9.3 Follow-up and evaluation of the action: 
Not applicable. 
ISSN 0254-1475 
COM(94) 488 final 
DOCUMENTS 
EN 13 oi 
Catalogue number : CB-CO-94-517-EN-C 
ISBN 92-77-81984-7 
Offîce for Official Publications of the European Communities 
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