AMENDED PROPOSAL FOR A COUNCIL DECISION PROVIDING MEDIUM-TERM FINANCIAL ASSISTANCE FOR HUNGARY
Date: 1990-02-01
Institutions: European Commission
Subjects: Hungary, International Monetary Fund, economic situation, financial aid, loan, market economy

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0M(90) 57 final 

Brussels, 1 February 1990 

Amended  proposal  for a 

COUNCIL  DECISION 

providing medium-term  financial  assistance for HUNGARY 

(presented by the Commission  pursuant  to Article  149(3) 
of  the EEC-Treaty) 

DRAFT  COUNCIL  DECISION 

PROVIDING  MEDIUM-TERM  FINANCIAL  ASSISTANCE  FOR  HUNGARY 

AMENDED  PROPOSAL 
presented  by  the  Commission 
pursuant  to  Article  149 (3) o 
the  EEC  Treaty 

v 

The proposal  as it 
last  stood 

Amended  text 

Visas 

Having  regard  to  the  proposal 
from  the 
Commission,  and  the  opinion  of  the  European 
Pari lament 

Having  regard  to  the  proposal  from  the  Commission 
submitted  following  consultations  with  the  Monetar 
Committee 

3rd  recital 

...whereas  the conditions  and  terms of  the  loan 
should 
structural 
adjustment  as well  as being  consistent  with  the 
terms  and  conditions  put  forward  by  the  IMF; 

necessary 

emphasise 

A r t i c le  2 

Having  regard  to  the  opinion  of  the  Europeai 
Pari lament 

...whereas  the  conditions  and  terms  of  the  loan 
should  emphasise  necessary  structural  adjustment, 
with  due  regard  for  social  stability,  as  well  as 
being  consistent  with  the  terms  and  conditions  put 
forward  by  the  IMF; 

adjustment 

...  The  Commission  is  empowered  to  negotiate 
and  monitor  implementation  over  time  of  a 
structural 
the 
Hungarian  authorities  so  as  to  facilitate  the 
evolution  of Hungary's  economy  towards  a market 
oriented  system  in  a  stable  macroeconomic 
environment. 

programme 

with 

-  Article  4 

...  The  Commission  is  empowered  to  negotiate  an< 
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  oriented  system  in  a  stable 
environment. 
macroeconomic 

social 

and 

The  Commission 
regular 
intervals  that  the  economic  policy  in  Hungary 
programme. 
accords 

adjustment 

verify 

shall 

with 

the 

at 

The  Commission  shall  verify  at  regular  intervals  in 
collaboration  with  the  Monetary  Committee  that  the 
the 
economic  policy 
adjustment  programme.  The  Commission,  after  the 
Monetary  Committee  has  delivered  an  opinion,  shall 
decide on  the  release of  the  instalment. 

fn  Hungary 

accords 

with 

.  Article  7 

provides 

Community 

appropriate 
The 
budgetary  cover  to  guarantee  its  payments 
related  to  the  borrowing  operations  under 
Article  i. 

for 

The  Community  provides  for  appropriate  budgetary 
cover  to  guarantee  its  payments  related  to  the 
borrowing  operations  under  Article  1 up  to a  limit  to 
be determined  by  the budgetary  authority. 

In  the  event  of  the  guarantee  having  to  be  invoked, 
the necessary  financial  means  snail  &3 provided  by an 
amending  or  supplementary  budget. 

Amended proposal  for a 

COUNCIL DECISION 

of 

providing medium-term financial assistance for HUNGARY 

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, submitted  following 
consultation with the Monetary Committee 

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  3  October  General  Affairs 
Council,  reiterated  In  the  agreements  of  the  special  meeting  of  the 
European Council on 18 November. 

Whereas  the  people  of  Hungary  have  close  historic  relationships 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 emphasise necessary  structural 
adjustment,  with  due  regard  for  social  stability,  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  relationships  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  collaboration  with  the 
Monetary  Committee,  has  shown  a marked  deterioration  of  the  economic 
situation of Hungary; 

Whereas the Hungarian Government  has applied  for a medium-term  loan to 
the Community; 

-  2  -

Whereas  the  Community  should  take  the  appropriate  measures  to  cover 
Itself  against  losses  due  to  any  failure  on  Hungary's  part  to  fulfill 
the payments  to the  loan; 

Whereas  the  authority  required  to  set  up  this  loan  is not  embodied  In 
the  treaty; 

HAS ADOPTED  THIS DECISION : 

È » 

Article 1 

The  Commission  is empowered  to conclude, on  behalf  of  the  Community, a 
borrowing  programme  of  a  maximum  of  ecu  one  thousand  million  with  a 
duration of  up  to 5 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  oriented  system  In 
a  stable macroeconomic and  social  environment. 

Article  3 

The  loan  shall  be  made  available  to  the  National  Bank  of  Hungary  in 
instalments  released  in the  light  of  the  examination  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  in collaboration  with 
the  Monetary  Committee,  that  the  economic  policy  In  Hungary  accords 
with  the  adjustment  programme.  The  Commission,  after  the  Monetary 
Committee  has delivered  an opinion, shall  decide  on  the  release  of  the 
Instalments. 

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. 

-  3 -

2.  At  the  request  of  Hungary  and  where  circumstances  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  up  to  a 
limit  to be determined  by  the budgetary  authority. 

In  the  event  of  the  guarantee  having  to  be  invoked,  the  necessary 
financial  means  shall  be  provided  by  an  amending  or  supplementary 
budget. 

Done  In Brussels, 

1989 

For  the Councl 
The  President 

ISSN 0254-14 

COM (90) 57 fin; 

DOCUMENT! 

EN 

19 i 

? 

ST 

Catalogue number : CB-CO-90-067-EN-

ISBN 92-77-57423 

Office for Official  Publications of the European Communities 

L-2985 Luxembourg