ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(80)474
Vol.1980/0162

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)474final
Brussels,1B*August1980
COMMISSION COMMUNICATION TOTHECOUNCIL
ONTHERENEWALOFCOMMUNITY FINANCIAL AID
TOTHEMEDITERRANEAN COUNTRIES(MAGHREB,
MASHREQ,ISRAEL.CYPRUSANDMALTA)
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A.•••-\
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C0M(80)474final

CO-OPERATION WITHTHEMEDITERRANEAN COUNTRIES :
RENEWALOFFINANCIAL AIDTOTHEMAGHREBANDMASHREQ
COUNTRIES ANDISRAEL-MALTAANDCYPRUS
INTRODUCTION
1.TheCommunityislinkedtotenMediterranean countriesby"agreements the
aimofwhichistopromotetheeconomicandsocialdevelopment ofthe
partnercountriesandtostrengthentheirrelationswiththeCommunity.
Thecountries ,inquestionaretheMaghrebcountries (Algeria,Morocco
andTunisia),theMashreqcountries(Egypt,Jordan,LebanonandSyria),
theStateofIsrael,MaltaandCyprus.
Thecooperation aspectoftheCommunity'srelationswithTurkeyandYugoslavia
hasrecentlybeenthesubjectofspecialagreements .RelationswithTurkeywere
.definedbytheAssociation Councildecisionof30June.TheCooperation Agreement
withYugoslavia wassignedinBeIgrade.on2Aprilandisnowbeingratified.No
provisionismadeinitforaidtofinancecooperation .Inordertoachievethe
objectives ofthisagreement,therefore,astudyshouldbemadeofpossible
waysoffinancingcertaincooperation measuresprovidedforintheAgreement .-
,2.Theagreementsreferredtointhisdocumentareofunspecified duration.
However,thearrangements fortechnical andfinancialco-operation are
laiddowninspecialprotocolsoffixedduration,whichlaydowntheamount
andtermsofthefinancialaidthatmaybecommittedoveraspecified .
period,expiring^in most,cases,on31October1981.
Thetotalvolumeofaidforthecountriesinquestionamountsto745million
EuropeanUnitsofAccount(1),madeupin-,varyingproportions accordingto
thecountry(seeannex)ofloansfromtheEuropeanInvestment Bank,andof
loansonspecialtermsandgrantsfinancedfromtheCommunitybudget.
.3.Thepurposeofthiscommunication istoestablishtheguidelines whichthe
Communityshouldfollow -infixingtheamountandtermsofitsfinancialaid
tothetenpartnercountriesforafurtherperiodandtoformulateappropri­
atenegotiating directivesfortheCommission.Itdoesnot,however,at
thisstageattempttoanswerthepointsofconcernbeingexpressedinthe
countriesinvolvedwith"regardtothetrendoftheirtermsoftredewiththe
~Communityorthepossiblerepercussions oftheCommunity'senlargement
southwards .' / •
Thisamountincludestheexceptional aidof20millionEUAprovidedtoLebanon
bytheEIBin1977.

Thestjquestionswillbedealtwithattheappropriate timeinaseparate
Commissioncommunication followingupthecommunication ofMarch(COM(80)
55final)./
1.*».IndecidingtogivefinancialsupporttotheMediterranean countries,the
Communityhasshownitswillingnesstodeepenexistingrelationswiththose
countries,therebyaddinganewdimensiontorelationshithertobasedon
simplecommercialarrangements .Therpermanentnatureoftheagreements
(i.e.thefactthattheyareofunlimitedduration)isareflectionofthat:
w"Llingness. , ■' ,'
Inthisway,theCommunityhasconfirmeditsdetermination toconductan
1■ .
actp'eMediterraneanpolicy-adetermination ithasdemonstrated onmany'
otheroccasions,forexampleintheEuro-ArabDialogue,intheformulation
ofthe"overall approach",withregardtothesouthwardenlargement,and
throughtheconclusionoftheco-operation agreementwithYugoslavia.
1.5.Withintheagreements,thetradearrangements,theprovisionsrelatingto
economic,financialandtechnicalco-operation andthosegoverning .the'
institutions formanindissoluble wholewithinwhicheachelementisneces­
saryfortheoverallbalance.
Thiseconomic/financialandtechnicalco-operation hasmanypositivead­
vantagesforthepartnercountries :
-itisintendedtocontribute tothemobilisation ofotherofficialexternal
assistance,notablyfortheco-financing ofmajor^developmentprojects.
TherecentmeetinginBrusselsbetweentheCommission andthetenArab
fundsandbanksoffersencouraging prospects .inthismatter;V
-itoffersanappropriate frameworkforfruitfultransfersofknowhowto
thebenefitofthepartnercountries;
-lastly,financialaid,whichisthemediumofthisco-operation,involves
-exceptinthecaseofIsrael-aquiteconsiderable grantelement.:
Theseadvantageshavenotexcapedtheattention "ofthepartnercountries who
haveexpressedonvariousoccasions-notablyatmeetingsoftheco-operation
bodies-theirdesiretoseethiseconomic,financialandtechnicalco-oper­
ationmaintained anddeveloped.
| •/••••

3.
'2.TIMETABLE . ,-
2.1.Inmostofthefinancialprotocols,itisstipulatedthattheCommunityaid
maybecommittedoveraperiodexpiringon31October1981andthatany
remainingfundsnotcommitted bythatdatewillbeuseduntiltheyare-'
exhaustedonthebasisofthesameconditions aspreviously.
2.2.Inthelightofthefinancingdecisionsalreadyadoptedandthevolumeof
projectsatanadvancedstageofpreparation,asubstantial proportionof
'thefundsavailable,possiblyeventhetotalamountcanbeexpectedtobe
committedby31October198,1.Themainreasonforthedelaysrecordedis
theshortperiodduringwhichtheprotocols haveactuallybeeninapplication
giventheamountoftimetakenbytheMemberStatesoftheCommunityto'-"'
ratifytheagreements-whichisinnoway.thefaultofthepartnercountries
Ontheotherhand,'theconsiderable paceofcommitments in1979and1980--
showsthattheabsorptive capacityissufficienttoenableanyoutstanding
amountstobetakenupandat.thesametimetoguaranteethatanyfuture
allocation isusedatanormalrate." ''
Inanyevent,theCommissionfeelsthateverything shouldbedonetotry,to
avoidanyhiatusbetween31October1981andthedateonwhich'afurther
instalment •ofCommunityaidwillbecomeavailable . ■
2.3.Itseemsappropriate todiscusstheamountofCommunityaidforaperiodof-
vapproximately 'fiveyearsexpiringon31October1986.
3.AMOUNTANDGEOGRAPHICAL DISTRIBUTION OFTHEFINANCIAL AID'•
3.1.ThetrendoftheCommunity'seconomicandbudgetsituation makesitdifficult
toenvisage anincreaseinCommunityfinancialaidbeyondwhatisnecessary
tomaintainthe.levelinrealterms.However,anupdatingoftheamountof
budgetaid.inordertocompensatefortheincreaseinthecostsofimplement­
>hgdevelopment prbgramrrtes *■andinlinewiththemethodusedinthenegoti­
ations -forthesecondLomeConvention-certainlyrepresents theminimum
thatisreasonableifCommunityactioninthissphereistoremaincredible.
- "'., Λ
<
TheCommissionfeelsthatitwouldbepremature anddangerousatthisstage
toformulatequantifiedproposaCsoreventoproposeaprecisecalculation

method for this updati,n£ exercise .Itreserves the right todothis ata
later stage /and with theutmost discretion ,when thediscussion itproposes
t '•
toinitiate oftthe basis ofthis communication produces the general criteria
fortheamount andterms oftheCommunity aid. ' .
3.2 .The amount and grant element oftheaid tobeallocated tothevarious .
recipient countries will beestablished atalater stage ,particular
„account being takfen ofthefollowing :
-theoverall amount offunds available ,comprising both budgetary resources
aand EIB loans (asprovided for bytheBank 'sBoard .ofDirectors ); .*_
-the -trend ofthe economic and financial situation ineach country ;
-thedesirability ofcorrecting certain anomalies orcertain temporary
features ofthe initial allocation .
Overall ,the Community should ,however ,make aneffort tomaintain asfar
aspossible the average grant element ofits financial support .
4.AREAS OFUSE AND TERMS OFCOMMUNITY AID ,
4.1 ,Itshould beremembered that each form offinancing -EIB loans ^loans on
special terms and grants -has certain categories ofdevelopment project or
operation forwhich itisideally suited ,andthis isnotwithout importance
for the composition ofCommunity aid .
4.2 .Budget funds ,principally ingrant form,' areparticularly suited for the
financing ofoperations where profitability isdifficult toestablish and
involves along-time span andwhere ,inaddition ,theCommunity contribution
takes the specific form ofatransfer ofknowhow .This category includes :
a)scientific ,commercial and industrial co-operation and co-operation in
the fields ofenergy (particularly applied research into renewable sources
ofenergy ),information and.the envi ronment ,-inthe forms that have already
been tried outwith success under thepresent agreements ;
b)thestrengthening ofthe institutions that are responsible forframing
andapplying the overall and sectoral development policies ;

- • 5.
c)Uiocrefl.tIonofanotionalcop/idtyforthopreparation andimplement­
ationofmajordevelopmentprojectsanddirectassistancetwardsthe
preparation ofsuchprojects.Experiencehasshownthatthisformof
actioncanbevaluableinmobilisinginternational aid(catalysteffect).
Inthistypeofproject,trainingandtechnicalassistanceoperations
havetoplayaparticularly importantrole. '
4.3.Withoutneglecting more.traditional typesofaction,therecipientcountries
areshowinganincreasinginterestinthistypeofco-operation witha
partner,'which,becauseofitshighleveloftechnological andscientific
development,isinapositiontomakeaspecifichigh-quality contribution
inthesefields. '
Sinceloansonspecialtermsandgrantsaretheformsoffinancingthatare
bestsuitedforsupportingtheseoperations,thereisathresholdrelating
totheavailability/offundsofbudgetorigin-admittedlyvaryingfrom
countrytocountry-belowwhichonecannotgowithoutcompromising the
formsofco-operation withthegreatestpromiseforthefuture.Proofof
thiscanbe"seenintheEEC-Israelco-operation agreementinwhichithas
notbeenpossibletoexploitcertainpossibilities becauseofalackof
.budgetresources. '
4.4.Inaddition,aproportionofthegrantsandloansonspecialtermswillhave
tobeused,asispresentlythecase,to,makepossibletheprovisionofloans
rfromtheEuropeanInvestment Bank,eitherbymeansofinterestratesubsidies
(grants),or„asacompo'nentofmixedfinancingoperations (loansonspecial
terms). . .-.■
Theforeseeable increaseinEIBsupportshouldthereforelogicallybere­
flectedinanincreaseinthefundsofbudgetoriginthatarerequiredto
"soften"directlyorindirectlythetermsoftheloansmadeavailablebythe
Bankfortheimplementation ofproductionprojectsandprojectstoimprove
theeconomicinfrastructure ,
5.IMPLEMENTATION OFFINANCIAL AMDTECHNICALCO-OPERATION
Inthepresentsituation,theprotocolsrelatingtofinancialandtechnical
co-operation makenomention,withregardtothefundsadministered bythe
Commission,ofanyprovisionsettingoutthearrangements underwhichthe
./

financial andtechnicalco-operation istobeimplemented ;inparticular,
nothingisspecifiedwithregardtocompetition andtheroleofthevarious
implementing organs(nationalauthorisingofficer.Commission delegate,;
payingagent).ThislegalvacuumhasledtheCommissiontoincorporate'
appropriate provisions inthegeneralclausesofthefinancing agreements
concludedwithpartnercountries. '
Suchasituationishardlysatisfactory .Itmeansthattherecipient
Statescantaketheopportunity ofthesigningofeachfinancing agreement
tocallintoquestionanypartofthegeneralclausesthattheymightfeel
nolongersuitsthem.Thiscouldbethecase,forexamplewithregard,to
thepreciseframeworklaiddowninthegeneralclauseswithregardto
possibleexceptions fromtherulesofcompetition,or.theroleoftheCom­
missiondelegate,inthosecountries wheretheCommission isrepresented,in
following upthefinancial andtechnicalaspectsofprojects.Itisthere­
foreintheinterestsoftheCommunity,whichcannotbutbeinvolvedinthe
arrangements underwhichprojectsareimplemented,toseetheappropriate
provisions takeonacontractual naturethatisapplicableforthewhole
durationoftheprotocol.ThatiswhytheCommissionwillproposeintrod­
ucinginanannextotheprotocols onfinancial andtechnicalco-operation
provisions governing,atthelevelofgeneral ^principles,theexecutionof
suchco-operation .
SUMMARY ANDCONCLUSIONS
Incbhclusion,theCommission considersthat:
-provisions mustbeadoptedtoensuretherenewaloftheCommunity's
financialaidwithoutanymajorhiatusfollowingtheexpirydateswritten
intotheagreements,whichmeansthattheCommission mustreceivenegoti­
atingdirectives beforethe'endofthisyear;.
-thetotalamountwrittenintothe.agreements inforcemustbeupdated,
thisbeingjustified bytheincreaseincostofgoodsandservicessince
thetimewhenthevolumeoffinancialaidwasfirstestablished ;
-theallocation ofthetotalamountamongthecountries andthegrant
elementintheCommunityaidmustbere-examined foreachcountryinthe
lightofitseconomicsituation; .

-thenew amount ofaid must include asufficient proportion ofbudget
funds ,which areessential forthefunctioning oftheco-operation provided
for intheagreements and for theprovision ofthe EIBsupport .Asa
general rule ,itwill benecessary tomaintain asfar aspossible an
average grant element close tothecurrent level .
TheCommission proposes topresent tothe Council ,attheappropriate time
and intheappropriate forms ,asupplementary communication concerning the
amount andterms ofthe financial support tobeprovided for each ofthe
countries concerned .

CEILINGSONCOMMITMENTS iMEUA)UNDERASSOCIATION ORCOOPERATION AGREEMENTS WITH
MEDITERRANEAN COUNTRIES -
COUNTRY .PERIODCOVERED BYTHE
FINANCIAL PROTOCOL .EIBLOANSFROMITSOWN
RESOURCES (1).BUDGETFUNDS' |TOTALEIBLOANS
.ANDBUDGETFUNDSTOTAL LOANSONSPECIAL .
'TERMSGRANTS
(2)
Algeria
I1.11.1978
31.10.1981*
70 44 19 25
;.114
;
Morocco 1.11.1978
31.10.198156 74 58
x16 130
Tunisia 1.11.1978
31.10.198141 54 39 15•"95.
Egypt 1.11.1978
--31.10.1981 .
I93 77 14 63 -170
Jordan 1.11.1978
31.10.198118 22 4.18 40
Lebanon­
•1.11.1978
31.10.1981
v*.20
2010. 2"
••830)5020)*u
Syria 1-11.1978
31.10.1981
!.34 26 7 19 .60
Israe1
41.11.1978
31.10.198130
-'30-
Malta•1.11.1978'
(31.10.1983 )16
'10 5
t5 26 .
Cyprus
m–1.01.1979
31.12.198320 10 4 630 j
745' |
Guaranteed underthetermssetoutinthecontractofguaranteebetweentheCommission andtheBank.
oast -toorouideir\terest-rate subsidiesforEIBLoans.