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COM(82)17
Vol.1982/0010

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COM(82)17 final
COMMISSION Brussels,28January1982
OrTHE
EUROPEAN COMMUNITIES FOROFFICIAL USEONLY
GenerolSecretariat
NEGOTIATIONS FORTHEACCESSION OFPORTUGAL
Proposals
concerning theapplication ofcertainactsofCommunitysecondary
legislation relatingtotheeconomicandfinancialfields
(Commission Communication totheCouncil)
C0M(82)17final

INTRODUCTION
Theresults oftheexamination ofsecondary legislation inthechapter
oneconomic andfinancial affairs were "thesubject ofthefourth
Commission report totheCouncil ,theconclusions ofwhich were
presented intheformofaCommunity statement ^"attheeleventh
meeting oftheConference atDeputy level on19December I98O .
Asaresult ofthis report thesubstantive problems to "bediscussed
inthenegotiations were identified .
ThePortuguese Delegation presented itsinitial position oneconomic
andfinancial questions attheseventh meeting oftheConference at
Deputy level on20February 1980^.TheCommunity repli tothis
statement attheninth session oftheConference atDeputy level ,
which washeld inBrussels on6June I98O .
Following contacts attechnical level between thePortuguese Delegation
andtheCommission departments ,theCommission presents inthis
communication itsproposals forsettling thesubstantive problems
identified inthecourse ofexamining Community secondary legislation
oneconomic andfinancial questions andraised intheConference
inprevious statements bytheCommunity andPortugal .
Theproposals concern thefollowing problems :
(i)theapplication oftheDirective of18February 1974 ongrowth ,
stability andfull employment ;
(ii)Portugal 'sparticipation inguarantee obligations arising outof
loans granted bytheCommunity ;
(iii)Portugal 'sparticipation intheEuropean Monetary System ;
(iv)theinclusion oftheescudo intheECU ;
(v)Portugal 'sparticipation incredit facilities :medium-term financial
assistance andshort-term monetary support .
JCONF-P /45/80.
^C0NF-p /l2/80.
CONF–P/31/8O.

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1.Application oftheDirective of18February 1974 ongrowth ,stability
and full employment
TheCouncil Directive of18February 1974 (74/l2l/EEC)onstability ,growth
andfullemployment intheCommunity ^provides thateachMember State
must possess anadequate setofeconomic policy instruments .
Forthis purpose Article 9oftheDirective lays down that Member States
shall confer upon their monetary authorities theinstruments toenable
them tohave recourse toanopen market policy .
Inboth theexamination ofsecondary legislation andPcx-^ugal 'sprevious
statements thePortuguese authorities hadapplied for atemporary
derogation ,without specifying itsduration ,asthey considered that
they didnot "atthemoment have themeans which would allow them
tohave recourse where necessary toanopen market policy tothedegree
necessary toachieve these objectives using short -,medium -and
long-term securities ".
TheCommunity haddeclared itsintention tocome back tothis point
atalater stage ofthenegotiations when Portugal had supplied
more detailed information .
Since then ,however ,Decree LawNo391/80of9September 1980 has
filled thegapbycreating theright conditions fordeveloping the
appropriate monetary policy instrument inPortugal .Thedecree law
hasmade itpossible toissue treasury bills foraninterbank market .
Commission proposal
\
Inview ofthepublication ofDecree LawNo391/80of9September 1980 ,
theCommission considers that thePortuguese authorities' request
foraderogation isnolonger applicable .This being so,theaccession
instruments should notmake provision foratemporary derogation
regarding theestablishment ofanopen market policy andtheapplication
oftheDirective of18February 1974 .
OJNoL63,5.3.74 ,p.19.

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2.Portugal 'sparticipation in "theguarantee obligations arising out
ofloans granted bytheCommunity
(a)Loans granted bytheCommunity prior toPortugal 'saccession
andguaranteed bytheMember States ^"
Initsstatement of20February 1980 ,thePortuguese Delegation said
that Portugal should notparticipate infinancing andguarantee
obligations arising outofloans granted prior toitsaccession .
Initsstatement of9June 1980 ,theCommunity said that itwould
beable ,inthecase ofCommunity loans issued prior toPortugal 's
accession andcovered bytheguarantee oftheCommunity Member States
atthetime ofissue ,togive favourable consideration toPortugal 's
notparticipating inthat guarantee .Thesame solution wasadopted
forGreece andSpain .
This problem has since been solved bythetransitional adjustments
contained inthetechnical conclusions totheexamination ofsecondary
legislation which were transmitted tothePortuguese Delegation
following theCommunity 'sstatement CONF-P(45 )atthemeeting at
Deputy level on19December I98O .
(b)Loans granted bytheCommunity after Portugal 'saccession
Pursuant toCouncil Regulation (EEC)No682/81of16March 1981 ,
Community loans arenolonger guaranteed bytheMember States but
bytheCommunity budget .Inview oftheentry into force ofthis new
Regulation thestatements previously made bythePortuguese Delegation
andtheCommunity ,laying down theconditions forPortugal 's
participation inguaranteeing anynewCommunity loans granted from
thedate ofPortugal 'saccession ,arenolonger applicable .
Commission proposal
TheCommission finds that this problem hasbeen solved forPortugal
nowthat theCommunity provides abudgetary guarantee forCommunity loans .
Council Regulations (EEC)Nos397/75and398/75of17February 1975 .

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3.Portugal 'sparticipation intheEuropean Monetary System
Initsinitial statement tkePortuguese Delegation hadexpressed the
opinion that adecision onPortugal 'sparticipation inallthe
mechanisms oftheEuropean Monetary System should betaken indue
course once thecountry 'sfinancial ^ability wasonafirm footing .
Itpointed outthat inview ofthestructural problems characterizing
thePortuguese balance ofpayments ,itwasimpossible toforesee
when allthenecessary conditions would bemettoenable this
decision tobetaken .
Attheninth meeting oftheConference atDeputy level on6June 1980
theCommunity also stated that itwastoosoon ,atpresent ,to
discuss Portugal 'sfull andeffective participation intheEMS
exchange rate andintervention arrangements .Moreover ,although
theEMSwaspart oftheacquis communautaire ,theCommunity pointed
outthat thedecision onfull andeffective participation inthe
EMSdidnot ,strictly speaking ,fall within the scope ofthe
accession negotiations .
(a)Exchange rate andintervention mechanisms
Inthelight oftheinformation nowavailable ,Portugal 'sp-^ticipation
intheexchange rate andintervention arrangements under theEMS
should notpose anyparticular technical problems astheescudo is
quoted onmost oftheCommunity foreign exchange markets .Even if
theescudo were notincluded intheECU ,thiB would nothinder the
smooth operation ofthedivergence indicator inrelation tothe
escudo ,which would retain itsfull fluctuation margin whereas the
margin forthecurrencies inthebasket isreduced inproportion
totheir weighting intheECU .
Nevertheless ,theLisbon foreign exchange market does notappear to
beaproper foreign exchange market inthetechnical sense ofthe
term .Itistosome extent administered bythecentral bank .Prior
toPortugal 'saccession theauthorities should replace this system
byagenuine foreign exchange market similar totheother Member States 1
markets .

-5-
Commission proposal
TheCommission finds that thequestion ofPortugal 'sparticipation
intheEM5 ,andintheexchange rate andintervention arrangements
inparticular ,does notfall within thescope ofthenegotiations .
(b)Measures tohelp theless prosperous Member States
Tostep uptheconvergence ofeconomic policies ,theEuropean Council
expressed thewish on5December 1978 that measures should "be
taken tohelp less prosperous Member States which participate
effectively andfully intheexchange rate andintervention arrangements .
Initsstatement of9June 1980 ,theCommunity pointed outthat ,
inaccordance with theEuropean Council 'sresolution ,
Council Regulation (EEC)No1736/79of3August 1979 introduced ,
forafive-year period ,special measures tohelp less prosperous
Member States –designated onacase-by-case basis bytheCouncil -
which participate effectively andfully intheEMS exchange rate and
intervention arrangements .
ForPortugal tobenefit under this financial instrument -should it
berenewed -itwill therefore have toparticipate fully andeffectively
intheexchange rate andintervention arrangements ;aCouncil decision
designating Portugal aless prosperous country will also be
1necessary .Such adecision canbetaken only after Portugal 'saccession
totheCommunity and istherefore not amatter for theaccession
negotiations .
Commission proposal
TheCommission finds that thequestion ofPortugal 'sdesignation as
aless prosperous Member State eligible forthespecial measures
provided forby ,Council Regulation (EEC)No1736/79of3August 1979
does not fall within the scope ofthenegotiations .
ForItaly andIreland ,seeCouncil Decision 79/691/EECof3August 1979 .

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4.Inclusion oftheescudo intheECU
Initsinitial statement thePortuguese Delegation expressed interest in
having theescudo included ,asfrom Portugal 'saccession ,inthebasket of
currencies which make uptheEuropean unit ofaccount asprovided for in
theresolution oftheEuropean Council of5December 1978 .
Itconsidered ,however ,that thedecision tobetaken could bepostponed
toapost-accession date inorder toavoid theproblems -especially the
technical ones -likely toarise from theinclusion atdifferent dates of
thecurrencies ofeach ofthenewCommunity Member States .
TheCommunity shared thePortuguese Delegation 'spoint ofview inthis
respect butreserved theright toreturn ,atalater stage innegotiations ,
tothearrangements forincluding theescudo intheECU .Itisnowable to
clarify itsposition onthefollowing points .
TheEuropean currency unit (ECU)isthekeystone oftheEuropean Monetary
System ,within which itacts asacurrency unit intheexchange rate mechanism ,
abasis forestablishing adivergence indicator ,adenominator forvery
short-term financing operations andameans ofsettlement between Community
monetary authorities .
Given therole oftheECUthere canbenoexcluding anewMember State 's
currency from thebasket ,andtheescudo will have tobebrought in.
Theonly point atissue ,therefore ,concerns thepractical arrangements for
including theescudo ,particularly asitisimportant that theECU's
composition should notbealtered toooften .
Theapproach adopted inthenegotiations forGreece 'saccession took this
consideration into account asfollows :"The effective inclusion ofthe
Council Regulation (EEC)No3180/78of18December 1978 .

-7-
drachmainthebasketwillberealizedbefore31December19°5if»before
thatdate,arevisionofthebasketshallhavebeenundertakenpursuant
totheproceduresandundertheconditionslaiddownintheresolutionof
theEuropeanCouncilof5December1978ontheEuropeanMonetarySystem#
Inanyeventtheinclusionofthedrachmainthebasketwillberealized
1atthelateston31December19o5«"
Asregardstheescudo,therefore,anapproachbasedontheprecedentof
Greececouldbeadopted,thusmakingitpossible,shouldcircumstances so
require,tobringthecurrenciesofthenewMemberStatesintotheECU
basketinasingleoperation.
TheresolutionoftheEuropeanCouncilontheestablishment ofthe
EuropeanMonetarySystemprovidesthattheweightsofcurrenciesinthe
ECUwillbere-examined andifnecessaryrevisedwithinsixmonthsofthe
entryintoforceofthesystemandthereaftereveryfiveyearsor,on
request,iftheweightofanycurrencyhaschangedby25^.
Inaccordancewiththisprovision,thematterwasexaminedinSeptember1979;
thenextexaminationshouldnormallytakeplaceinSeptember1984-
Commission proposal
•f'•.. ■•«■-' j•('r. •i-*'
Inviewoftheabove,theCommissionproposesrthdttheescudobe.includedas
soonastheweights^ofcurrenciesmakinguptheECUare-adjustedpursuanttothe
proceduresandundertheconditionslaiddownintheresolutionofthe
EuropeanCouncilof5December 1978ontheEuropeanMonetarySystem.
Inanycase,theescudoshouldbeincluded5yearfe;aftertheaccession
atthelatest.
1DocumentsconcerningtheaccessionoftheHellenicRepublictothe
EuropeanCommunities-AnnexVIII,paragraphIII,point3.

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5.Portugal'sparticipation increditfacilities :medium-termfinancial
1,,.. . .2assistance andshort–termmonetarysupport
InitsinitialstatementthePortugueseDelegationstressedtheimportance
forPortugalofparticipation ,assoonasthecountry'sfinancialposition
warrantedit,intheshort-tennmonetarysupportsystemsetupamongthe
centraltanksoftheMemberStatesandinthemachineryformedium-term
financialassistance .establishedundertheCouncilDecisionof22March1971*
TheCommunityrepliedthatPortugal'squotasinthesetwocreditfacilities
shouldbefixedatalaterstageintheaccessionnegotiations .
TheCommunityalsopointedoutthatPortugal'sparticipation inthesetwo
creditfacilitieswasindependentofPortugal'sparticipation intheEMS
itself,unlikethemechanismforveryshort-termfinancing,whichisan
integralpartoftheMS.
TheCommissionisnowabletostateitspositioninrespectofthetwo
creditfacilitysystems.
Commission proposal
(a)Medium-termfinancialassistance
Inestablishing Portugal'squota^heCommissiontookintoaccountvarious
indicators,mainlyofaneconomicnature:GDP,IMPquota,exportsandother
currenttransferstoOECDcountries,andpopulation.
CouncilDecision71/143/EECof22March1971settingupmachineryfor
medium-termfinancialassistance,takingintoaccounttheamendmentsmade
byArticle29oftheActofAccessionof22January1972,Article21oftheActofAccessionof28May1979andCouncilDecisions75/785/EECof18.12.75i
78/49/EECof19December1977and78/1041/EECof21December1978.
?Agreementof9February1970settingupasystemofshort-termmonetarysupport
amongthecentralbanksoftheMemberStatesoftheEuropeanEconomic
Community,takingintoaccounttheamendmentsmadeintheactsdated
8January1973,12March1974,13December1977,13March1979and
9December1980.

-9-
ThesefactorsjustifyallocatingtoPortugalaquotaamountingtoa
quarteroftheNetherlands *quotaorslightlylessthanGreece'squota,
thatis1.77%inaCommunityofElevenand.1.63%inaCommunityofTwelve;
thecreditceilingwouldbe260millionECU.
TheMonetaryCommitteewasconsultedbytheCommissionandagreedtothe
figuresgivenbelowon16November1981*
Inthelightoftheabove,theCommissionproposestha+thecreditceilings
fortheMemberStatesshouldbeasfollows:
(a)InaCommunityofEleven:
MillionECU %oftotal
Germany 3105 21.23
France 3105 21.23
UnitedKingdom 3105 21.23
Italy 2070 14.15
Belgium 1000 6.83
Luxembourg 35 0»24
Netherlands 1035 7«07
Denmark 465 3*18
Ireland 180 1.23
Greece 270 1.84
Portugal 260 1.77
Total 14630 100
(b)InaCommunityofTwelve:
MillionECU %oftotal
Germany 3*105 19*50
Prance 3105 19-50
UnitedKingdom 3105 19«50
Italy 2070 13.00
Belgium 1000 6.28
Luxembourg 35 0.22
Netherlands 1035 6.50

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Consequently ,theCommissionproposesthattheamountsofquotasunder
theshort-termmonetarysupportsystemshould "beasfollows:
(a)InaCommunityofEleven
COUNTRY AMOUNTS *
DebtorquotaCreditorquota
GERMANY 1740 3480 21.23
FRANCE 1740 3480 21.23
UNITEDKINGDOM 1740 348O 21.23
ITALY 1160 2320 14.16
BELGIUM)
LUXEMBOURGj
NETHERLANDS580 1160 7.O8
580 1160 7.O8
DENMARK 260 520 3.17
IRELAND 100 200 1.22
GREECE 150 300 1.83
PORTUGAL 145 290 1.77
TOTAL 8195 16390 100
(b)InaCommunityofTwelve
COUNTRY AMOUNTS 1°
DebtorquotaCreditorquota
GERMANY 1740 3480 19.51
PRANCE 1740 3480 19.51
UNITEDKINGDOM 1740 3480 19.51
ITALY 1160 2320 13.00
BELGIUM)
LUXEMBOURGI
NETHERLANDS58O 1160 6.50
58O 1160 6.50
DENMARK 260 520 2.91
IRELAND 100 200 1.12
GREECE 150 300 1.68
PORTUGAL 145 29O 1.63
SPAIN 725 1450 8.13
TOTAL 8920 17840 100