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DOCUMENTS "COM"
COM(80)672
Vol.1980/0216

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM (80)672 final
Brussels ,30th October 1980
PROPOSAL FOR ACOUNCIL REGULATION
ADJUSTING THE COMMUNITY LOAN MECHANISM DESIGNED TOSUPPORT
THE BALANCES OFPAYMENTS OFCOMMUNITY MEMBER STATES
(presented bytheCommission tothe Council )
(<'ΛΓ 1V- ; 7r -vi it ,-'J7
COM (80)672 final

EXPLANATORY MEMORANDUM
Subj ect :Proposal for aCouncil Regulation
Adjusting theCommunity loan mechanism designed tosupport the
balances ofpayments ofCommunity Member States . ; / ,
1. Aswasstressed bytheconclusions ofthePresidency oftheEuropean
Council of27and 28April 1980 ,thebalance ofpayments desequi Iibri a
consequent ontheheavyar.drepeated increases inprices ofpetroleum
products and thedangers inherent inthis situation forthestability of
theinternational economic andfinancial system ,mean that international
and Community action onrecycling must beintensified . .
2. TheCommission ,incooperation with theMonetary Committee ,has
devoted itself toexamining theinitiatives which could betaken bythe
Community tocontribute totheharmonious development ofthe recycling
process ,more particularly asfarasitsmembers areconcerned .From this
examination itemerges that theCommunity .must first andabove allmake
themost oftheexisting instruments ,adapting their size andtheir terms
when necessary toimprove their effectiveness .
3. Tothis end,theadjustment ofthe Community loan mechanism
instituted byRegulations (EEC)N°397/75and (EEC)N°398/75wasthe
subject on10October 1980 ofaMonetary Committee report totheCouncil
and the Commission .The Commission has endorsed the Committee 'sconclusions .
Itconsiders inparticular that thefunds which canbe .raised under this
instrument must beincreased ,that theimplementation procedures must besimpl
fied andthat themechanism must -bebrought into usefairly promptly inorder
toprevent ,£yanappropriate adjustment ,theoccurrence ofacute balance
ofpayments crises . :
Itwas considered -jssary torenew thespecific mechanism
forpossible refinancing by Member States ,earlier experience having
shown that thetoken budget entry of .the liabilities was asufficient
guarantee for lenders . '
4. Theborrowing and '.'Tiding operations inhand andcarried cut"rider
Regulations (EEC )N°397/75and (EEC )N°395/75would still begovernedb;the
provisions ofthe said Regulations .
5. Inaccordance with theCouncil 'srequest attheendofitsmeeting of
/
20October 19S0 ,theCommission submits theattached proposal for aRegulation
for the Counci I'sapproval ..

PROPOSAL FOR ACOUNCIL REGULATION ,
adjusting theCommunity' Loan mechanism designed tosupport
thebalances ofpayments ofCommunity Member States '
THE COUNCIL OFTHE EUROPEAN COMMUNITIES
Having regard ^totheTreaty establishing theEuropean Economic Community
and in-particular Article 235thereof ;
Having regard to .proposal from theCommission ,
Having regard totheopinion oftheEuropean Parliament ;
*whereas the Community loan mechanism instituted byRegulations (EEC)
N°397/75and (EEC)N°398/75still ,initsgeneral design ,meets the
needs ofthepresent situation which ismarked bybalance ofpayments
disequi libria intheCommunity ;
*whereas ,inthe light ofexperience and inaccordance with theconclusions
reached bytheMonetary Committee inits report of10October 1980 ,it
-isadvisable toadjust theoperating techniques ofCommunity loans in
order toincrease their effectiveness andsimplify theprocedures for
implementing them ;
♦whereas theoperation oflending toaMember State must take place fairly
promptly inorder toencourage that State toadopt measures likely to
prevent theoccurrence ofanacute balance ofpayments crisis ;whereas
theeconomic policy conditions linked tothegranting ofthe loan toa,
Member State must beadapted tothegravity ofthebalance ofpayments
situation inthat State and totheway inwhich itdevelops ;
*
*whereas itfollows from theforegoing that these operations are necessary
toattain theobjectives oftheCommunity ,asdefined intheTreaty
and inparticular theharmonious development ofeconomic activities
throughout the Community ; .
;*whereas theTreaty ,hasnotprovided for thepowers ofaction required for
this purpose .

2.~
HAS ADOPTED THIS R£3ULA *.ON: .
Artide 1
Tnaccordance with thedecision adopted bythe Council pursuant to
Article 2and qfter consulting theMonetary Committee ,theCommission '
shall beempowered tocontract loans ,onbehalf ofthe European Economic
Community ,either directly from third countries and financial institutions ,
oronthecapital markets ,wich thesole aimof •re-lending thefunds
raised toone ormore Member States inbalance ofpayments difficulties
directly orindirectly related toanincrease inprices ofpetroleum
products .
Article 2
Onthe initiative oftheMember State seeking aCommunity loan ,the
Council ,after examining thesituation ofthat State and theadjustment
programme which itundertakes toimplement ,shall decide ,asarule
during the same meeeting :
-whether togrant the loan ,
y
-theamount ofthe loan ,
-theeconomic policy conditions attaching tothe loan ,
-thetechniques fordisbursing the loan which may bepaid inoneamount
•orinseveral instalments ;inthe latter case ,thepayment ofsuccessive
instalments may besubject tocompliance with economic policy conditions .
Atthe request oftheMember State seeking the loan ,the loan may carry
theoption ofearly repayment atanytime ;this would imply theuseofthe
appropriate borrowing fr.rmni.3e .
./

3.-
Article3
WhereaMemberStatereceives aloan,theCommission,inconsultation
withtheMonetaryCommittee,shalltakethenecessarymeasurestoverify,
atregularintervals,thattheeconomicpolicyofthisStateaccordswiththe
conditionslaiddownbytheCouncilpursuanttoArticle2and,where
appropriate,shallpaythesuccessive instalments onthebasisofthedevel­
opmentoftheadjustment programme.Tothisend,theMemberStateshall
placeallthenecessaryinformation atthedisposaloftheCommission.The
Councilshalldecideontheadjustments tobemadetotheinitialeconomic
policyconditions .
■ \,• (
•WhereaMemberStatereceives aloancarryinganearlyrepaymentclause,
thatStateshallbeabletousethisoptiononlywiththeagreementofthe
/
Commission,whichshallconsulttheMonetaryCommitteeonthematter.
Article4
Theoperationsofborrowingandlending^referredtoinArticle 1,shall
beexpressedinthesamecurrencies andcarriedoutonthesametermswith
respecttorepaymentoftheprincipalandpaymentofinterest.Thecosts
incurredbytheCommunityinconcluding andcarryingout eachoperationshall
beborne,bythebeneficiary MemberState.
Whentheborrowingsareexpressed,payableorrepayableinthecurrency
ofaMemberState^theymaybeconcludedonlywiththeagreementofthe•
competentauthorities ofthatState.
Article 5
Thefundsshallbepaidonlyintocentralbanksandshallbeusedonly
forthepurposesindicatedinArticle 1.
. Article6
• ,
Theoutstanding amountoftheborrowingsauthorized bythisRegulation
shallbelimitedto7000millionECUsinprincipal.Fortheapplication of
this,veiling,theo;3tionsofborrowingandrepaymentshallberecorded,
whereappropriate,?.?.theexchange ,rateofthedayonwhich-theytakeplace.

Article7
NoLaterthanfiveyearsaftertheadoptionofthisRegulation,the
Councilshallexamine,onthebasisofa,reportfromtheCommission,whether
themechanismestablished initsprinciple,itsarrangements anditsceiling
stillmeetstheneedswhichledtoitscreation.
Article8
Articles 1,2and5ofRegulation (EEC)No397/75shallberepealed.
Article9
'TheCouncilshalladoptthedecisionsreferredtoinArticles2and3
byaqualifiedmajority,actingonaproposalfromtheCommissionwhichshall
consulttheMonetaryCommitteeonthematter.
Thisregulationshallbebindinginitsentirety,anddirectlyapplicable
inallMemberStates.