Proposal for a COUNCIL DECISION extending a Community guarantee to the European Investment Bank in case of losses on loans in Estonia, Latvia and Lithuania
Date: 1992-10-23
Institutions: European Commission
Subjects: EIB loan, USSR, cooperation agreement, credit guarantee, republic

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0M(92) 401  final 

Brussels, , 23  October  1992 

COMMIS* InN  COMMIT|r,^T^M_ 

Extending  EIB  operations 

to  Estonia,  Latvia  and  Lithuania 

Proposal  for a 

COUNCIL  DECISION 

extending  a Community  guarantee 

to  the European  Investment  Bank 

in case  of  losses on  loans  in Estonia,  Latvia  and  Lithuania 

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KtSK&<&iP\l;X 

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-  2 -

The  Central  and  East  European  countries  are  in  the  process  of 
transition  from  centrally-planned  economies  to  ones  based  on 
market  forces.  In  addition,  this  is  being  accompanied  by 
political  reforms  tending  towards  the  creation  of  genuine 
pluraI ist  societ ies. 

In October  1989  the  Council  decided  that  the  European  Investment 
Bank  should  help  this  process  by  making  loans  in  Poland  and 
Hungary^1),  and  on  14  May  1991  the  Council  extended  these  loans 
to  the  Czech  and  Slovak  Federal  Republic,  Bulgaria  and 
Rumania^2). 

At  their  meeting  on  11  November  1991  Ministers  of  the  Group  of  24 
countries welcomed  the  fact  that  since  their  last  meeting,  Albania 
and  the  newly  independent  Baltic  countries,  Estonia,  Latvia  and 
Lithuania,  have  also  committed  themselves  to  respect  human  rights 
and  to  undertake  democratic  and  market-oriented  reform.  They 
confirmed  the extension  of  G-24  coordinated  economic  assistance  to 
these  countries  and  agreed  on  a  common  approach  to  supporting 
their  reform  programmes. 

Given  the  decisions  of  the  G-24  and  the  signature  on  11  May  1992 
by  the Community  of  cooperation  agreements  with  the Baltic  States, 
it  would  be  appropriate  for  the  Council  to  invite  the  Board  of 
Governors  of  the  EIB  to  extend  loans  to  Estonia,  Latvia  and 
L i thuania. 
These  countries  will  be  eligible  for  EIB  finance  on  a  similar 
basis  to other  Central  and  Eastern  European  countries.  The  loans 
should  benefit  from  Community  budget  guarantees.  Furthermore, 
these guarantees  should  be  treated  in accordance  with  what  will  be 
agreed  as  to  the  future  treatment  of  Community  guarantees.  The 
loans  should  be  destined,  in  particular,  for  infrastructure 
projects 
financial 
institutions.  Following  the  same  criteria  used  for  Central  and 
Eastern  European  countries,  loans of  up  to  200 MECU  provided  over 
a  three-year  period  seem  appropriate. 

be  coordinated 

and  will 

other 

with 

I. The Commission  therefore  requests  the Council  to : 

1. decide  that,  subject  to  the  approval  of  the  ElB's  Board  of 
Governors, EIB  loans of up  to 200 MECU  should  be made  available 
to  Estonia,  Latvia  and  Lithuania,  to  be  guaranteed  by  the 
Commun i ty budget ; 

2. adopt  the attached  Decision; 

3.  invite  the  EIB  to extend  its  lending  operations  to projects  in 

Estonia, Latvia  and  Lithuania; 

4. note  that  the  Commission  will,  within  the  framework  of  the 
budgetary  procedure,  propose  the appropriate  budgetary  cover. 

(1) Taken  on  3.10.1989  as  regards  an  invitation  to  the  EIB  to  make 
finance  available  for  projects  in  these  countries,  and  on 
12.2.1990  (90/62/EEC) regarding  a Community  budgetary  guarantee  for 
such  loans. 

(2) Council  Decision  91/252/EEC of  14 May  1991. 

II/337/92-EN 

Proposal  for a 

COUNCIL DECISION 

granting a Community guarantee  to the European  Investment Bank 
against  losses under  loans for projects  in 
Estonia, Latvia and Lithuania 

TNE 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 CommunIty*1), 

Having  regard  to the opinion of  the European Parliament*2), 

Whereas  the  peoples  of  Estonia,  Latvia  and  Lithuania  (hereinafter 
referred  to as "the three countries") have close historic relationships 
with  the  peoples  of  the  Community;  whereas  these  relations  have  been 
strengthened  by  the  recent  trade  and  cooperation  agreements;  whereas 
these  three  countries  are  undertaking  major  political  and  social 
reforms; 

Whereas  the  three  countries  have  embarked  upon  a  fundamental  economic 
reform;  and  whereas  the ministers of  the Group  of  24 welcomed  this at 
their  meeting  of  11  November  1991  and  decided  to  extend  G-24 
coordinated  economic  assistance  to them; 

Whereas  these  economic  reforms  will  significantly  contribute  to  a 
strong  development  of  mutually  beneficial  economic  and  commercial 
relationships between  the three countries and  the Community; 

Whereas  there  is  a  great  need  for  capital  investment  in  the  three 
countries;  whereas  this  capital  investment  requires  external  finance-, 
whereas  the Community  has agreed  to cooperate with a view  to aiding  the 
three  countries-,  whereas  the  European  Investment  Bank  (hereinafter 
called  "the Bank") could make an  important  contribution; 

Whereas  the Council  has  invited  the Bank,  and  the Bank  has  agreed,  to 
make  loans  for  capital  investment  projects  carried  out  in  the  three 
countries under  the guarantee provided  in this Decision; 

Whereas  the Bank  and  the Commission  should  fix  the  terms on which  this 
guarantee  is to be given, 

(1) OJ No 
(2) OJ No 

HAS  DECIDED  AS  FOLLOWS 

Sole  Art icle 

The  Community  shall  fully  guarantee  the  European  Investment  Bank  in 
case  the  Bank  does  not  receive  the  payments  due  under  any  loan  granted 
in  accordance  with  its  usual  criteria  in  Estonia,  Latvia  and  Lithuania. 
An  overall  limit  of  ECU  200  million  shall  be  set  for  a  three-year 
per iod. 

To  this  end,  the  Bank  and  the  Commission  shall  fix  the  terms  on  which 
the  guarantee  shall  be  given. 

Done  at  Brussels, 

For  the  CounciI 

The  President 

FINANCIAL  RECORD 

1•  Budget  line  concerned 

Article  0-212: 

Guarantee  of  the  European  Economic  Comunity  to  the  European 
Investment  Bank  for  loans  In  third  countries  in Central  and  Eastern 
Europe. 

2.  Reference  (legal  base) 

To  be  extended  by  the  proposed  decision,  on  the  basis  of 
Article  235  of  the  Treaty. 

3.  Classification  of  the  expenditure 

Obi igator y 

4.  Description  and  justification  for  the  action 

The  budget  entry  is  intended  to  provide  a  budgetary  support  for 
guarantees  offered  by  the  European  Community  to  the  European 
Investment  Bank  to  cover  loans  which  the  Bank  has  been  asked  to 
extend  to  finance  projects  in Latvia,  Estonia  and  Lithuania. 

5.  Nature  of  the  expenditure  and  method  of  calculation 

a)  Nature  of  the  expenditure 

A  guarantee  to  the  European  Investment  Bank. 

b)  Method  of  calculât ion 

A  token  entry  is  proposed,  given  that  the  amount  and  timing  of 
any  call  on  this  budget  line  cannot  be  calculated  in  advance 
and  furthermore  it  is  to  be  hoped  that  this  entry  will  not  be 
caI led  on. 

6.  Effect  of  the  action  on  intervention  credits 

Only  in case  of  a  call  upon  the  guarantee 

7.  Financing  of  intervention  expenditure 

In  case  of  need  the  article  will  be  endowed  with  funds  by 
transfers,  by  réutilisation  of 
(under 
Article  27  para.  3  of  the  Financial  Regulation)  or  by  a 
supplementary  and/or  amending  budget. 

reimbursed 

amounts 

In  order  to  meet  its  obligations,  the  Commission  may  undertake 
debt  service  provisionally  by  drawing  on  its  liquid  assets.  In 
this  case  Article  12  of  Council  Regulation  (EEC,  Euratom) 
n"  1552/89  of  29.5.1989  is  applicable. 

8.  Financial  Impact  on  staff  cost  and  operations 

Not  appl icable. 

1-

ISSN 0254-1475 

COM(92) 401 final 

DOCUMENTS 

EN 

oi  il 

Catalogue number : CB-CO-92-421-EN-C 

ISBN 92-77-47681-8 

Office  for Official  Publications of the European Communities 

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