Proposal for a COUNCIL DECISION granting a Community guarantee to the European Investment Bank against losses under loans for projects in Central and Eastern European countries (Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Latvia, Estonia, Lithuania and Albania)
Date: 1993-05-17
Institutions: European Commission
Subjects: Central and Eastern Europe, EIB loan, European Investment Bank, credit guarantee, financial loss, transport infrastructure

COMMISSION  OF  THE  EUROPEAN  CCRtolUNITIES 

COM(93) 212  final 

Brussels. 17 May  1993 

fflïMMIlKlirATION Fp™  ™g  COMMISSION 

concerning  the  Intervention of  the European  Investment Bank 

In Central  and Eastern  European  countries 

Proposal  for a 

fflWNT11 DECISION 

§*». /f 
is '*&  % ^ ' 

granting a Community  guarantee 
to the European  Investment Bank 
against  losses under  loans 
for  projects 
In Central  and Eastern European  countries 
(Poland. Hungary, the Czech Republic, the Slovak  Republic, 
Romania. Bulgaria. Latvia. Estonia. Lithuania and Albania) 

(presented  by  the Commission) 

IP-? • 

-  ï  -

COMMUNICATION  FROM THE COMMISSION 

LIST OF  CONTENTS 

A. 

Community  commitments  In  Central  and  Eastern  European  countries 
(CEEC): Decisions  regarding  the EIB. 

B. 

EIB activities  In the CEEC. 

C. 

Impact  of  the EIB activities  in the CEEC. 

D.  Obstacles encountered  and ways  to overcome  them. 

E.  Cooperation with other  Institutions. 

F. 

The new programme. 

G.  Cone Ius i ons. 

- 3-

<•"  COMMUNITY  COMMITMENTS  IN  CENTRAL  AND  EASTERN  EUROPEAN  COUNTRIES 

(CEEC):  DECISIONS REGARDING THE EIB 

1.  Since  the Arche summit  (July  1989).  the Commission  has coordinated  the 
financial  assistance  of  G-24  and  has established  progressively,  since 
1991,  a  series  of  bilateral  Agreements  with  the  CEEC.  These 
Agreements  Include  activities  of  different  types:  direct  aid, 
technical  assistance  and  balance  of  payments  loans  as  well  as  EIB 
loans guaranteed  by  the Community.  Regarding  the  latter,  it  is to be 
noted  that  these  countries  explicitly  requested  these  types  of  loans 
at  the time of  the Agreements. 

2.  In  October  1989  the  Council  Invited  the  Bank,  who  agreed,  to  make 
loans  to  Poland  and  Hungary.  On  12  February  1990,  C)  the  Council 
decided  to provide Community  budget  guarantees  for a three year period 
for  loans not exceeding  ECU  1 billion. 

3.  On  14 May  1991,  the  Council  extended  Its  invitation  to  the  Czech  and 
Slovak  Federal  Republics, Bulgaria  and  Romania.  The  Council  Decision 
(2) set  a celling of  ECU 700 million  for  a two year  period. 

The  two decisions mentioned  above will  shortly expire. 

4.  At  their  meeting  held  on  11  November  1991,  Ministers  from  the  G-24 
confirmed  the  extension  of  their  economic  assistance  to  Estonia, 
Latvia  and  Lithuania.  Accordingly,  an  ECOFIN  Council  Decision 
offering  a Community  guarantee  to  EIB  loans of  up  to  ECU  200 million 
In these countries was approved on  15 February  1993. 

5.  At  the Tirana Conference on 22 and  23 July  1992, the Community  and  its 
Member  States  agreed  to  mobilize  all  the  means  at  their  disposal  in 
order  to  help  the  economy  of  Albania,  by  far  Europe's  poorest 
country.  Therefore,  the  Commission  proposed  to  the  Council  that  it 
should  Invite  the EIB  to undertake  a programme  of  loans  totalling  ECU 
SO  million,  benefitting  from  Community  budget  guarantees  as  well  as 
interest  subsidies,  in this country. 

(1) 
(2) 

Council  Decision 90/62/EEC of  12 February  1990. 
Council  Decision  91/252/EEC of  14 May  1991. 

-  M--

6.  In  December  1992.  the  European  Council  In  Edinburgh  Invited  the 
Council  and  the EIB.  In full  consultation with  the Commission, to give 
urgent  and  sympathetic  consideration  to  the  establishment  of  a  new, 
temporary  lending  facility  of  ECU  5  billion  within  the  EIB.  The 
purpose of  this new  facility.  Itself  an element  of  the economic  growth 
Initiative,  would  be  to  accelerate  the  financing  of  capital 
infrastructure  projects  in  the  Community,  notably  connected  with  the 
Trans-European  Networks.  This  new  facility  may  also  be  extended  to 
projects  Involving  the  countries of  Central  and  Eastern  Europe  to  the 
extent  that  they  are  of  mutual  interest  and  ensure  the  inter 
operability  of  networks with  the  Community. 

B. 

EIB ACTIVITIES  IN THE CEEC 

7.  At  the end of  1992. the EIB concluded  loan contracts  in the two groups 

In  Table  1  (Poland  and  Hungary;  ex-

of  countries  mentioned 
Czechoslovak la.  Romania  and  Bulgaria)  for  a  total  amount  of  ECU  820 
million.  Furthermore,  projects  under  formal  appraisal  and  in  an 
advanced  stage of  preparation  amount  to approximately  ECU 700 million. 
When  financing  operations  at  an  earlier  stage  of  processing  are 
included  (approximately  ECU  500  million),  the  total  amount  under 
consideration  (approximately  ECU  2000  million)  exceeds  the  guarantee 
granted. 
Therefore,  the  Bank  has  sufficient  leeway  to  choose  those 
projects  which  meet  the  Community's  objectives  and  to  exhaust  the 
authorised  ceiling  (see Table  1. column 1 ). 

As  regards  the  loan  time  profile,  a  comparison  of  the  time  lapse 
between  the  contracts  signed  and  projects  in  an  advanced  stage  of 
preparation  (Table  1.  lines  2  and  3) shows  that,  logically, the  early 
stages  of  this  action  were  slow;  first  of  all.  the  Bank  must  secure 
contacts  with  new  financial  partners  and  then  it must  ensure  that  the 
projects  submitted  are  sound;  when  these  preliminary  phases  are 
mastered,  the pace  accelerates. 

-  S  -

TaWel. 

EIB activities in the CEEC at the end of -1992 (mio ECU) 

• 

• 

Poland 

Hungary 

Czech and 
Slovak Rep 

Romania 

Bulgaria 

•i  T O T At 

Number of operations 

6 

7 

• 

1 

1 

y.,v,;v:.:-  ^ 

2 

:  Signed contracts 

;  Operations at advanced stage 

290 

105 

305 

100 

85 

25 

• 

303 

113 

115 

73 

820 

694 

TOTAL  • 

''"  - • • * * • * * * • * * ** 

- 

;  405 

- 

;  388. 

™'f*~ "^38: 

" - ' 1 5 14 

* 

t  Ah  ~  .V . **Js< .  .*  ... 

Guarantee 

1000 

700 

1700 

Source: EIB 

8.  The geographical  distribution  of  the  loans  is  indicated  in Table 1. 
This  table  shows  that  the  loans  already  signed  In Poland  and Hungary 
account for approximately two thirds of their  ceiling.  It can also be 
observed  that  the  ElB's  lending  activity  in  the  remaining  four 
countries, although more recent. Is proceeding  rapidly. 

The  relative  Importance  of  the  loans  signed  In  Poland  and  Hungary 
reflects,  on  the one  hand,  the  fact  that  economic  reforms  and the 
decision  to grant  EIB  loans  to these  countries  began  a  year  earlier 
than  In the remaining  countries  In the group-,  consequently, the Bank 
was  able  to  start  Its  loan  programme  earlier.  On  the  other  hand, 
these  two economies are at a  relatively  more  advanced  stage  in their 
development and,  therefore,  better  able to absorb and manage the EIB 
loans. 

The  distribution of the signed  loans  across  sectors  (Table  2 ), shows 
that  global  loans  to  SMEs  form  by  far  the  most  important  group, 
followed  by  the  telecommunications  and  energy  sectors.  These  are 
areas  In which  the EIB has a  long experience  and have  been  selected, 
by common agreement, as priority objectives. 

-  G  -

Table 2r  v Distributiorvbf signed projects by sectors (mio ECU) 

Sector 

Poland 

Hungary 

Czechoslovj  Romania i  Bulgaria 

TOTAI-

T 

1. Transport (road and rail) 

2. Air traffic 

3. Energy 

4. Telecommunications 

20 

50 

50 

70 

50 

20 

50 

80 

5. Global loans (SME) 

100 

105 

85 

25 

45 

70 

170 

220 

290 

•v$&i 

~r 'ï'T&frVi&Hî*.^ 

Source: EIB 

K >*.  *4***j*.T / y/  «et. •y 

ââ$ 

25 :"-.".'fS^!t'*i>r-''-5?" 

«820 

C. 

IMPACT OF THE  EIB ACTIVITIES  IN THE CEEC 

It  is  difficult  to  evaluate  quantitatively  the  impact  of  the 
activities  of  the  EIB  as  yet,  given  that  most  of  the  projects 
supported  by the Bank  are still  In progress.  Furthermore, EIB  loans 
should  be regarded  as part  of the overall  effort  by the Community to 
assist  the economic development of the CEEC (an indication of which is 
given  in Table  3) and  consequently,  their  economic  impact  cannot  be 
estimated  separately. 

This  said,  It  should  be  noted  that  the  share  of  EIB  loans  in the 
financing  of  the projects  in the CEEC  stands  at 38% (see Table 4 ). 
This  figure  underlines  the  Important  leverage  effect  of  the EIB 
interventions  in the Investment  efforts of those countries. 

There  is no doubt  that  these projects will  have a very  positive effect 
on  the economies of  those  countries: the direct  creation of new Jobs, 
in  particular  through  global 
loans  to  SMEs,  the  improvement  of the 
Investment  environment, etc. 
This  Is particularly  true  thanks  to the 
role  played  by the EIB  loans 
In the financing  of  investment  in basic 
infrastructure  (see Table 2 ), 
which  is essential  for the development 
of the private sector. 

Table 3. : C^ 

Budgetary funds (PHARE) 

Balance of payments loans (signed) 

EIB loans (signed) 

T O T AL 

-> 

-

1991 

759 

695 

285 

1992 

1445 

785 

320 

1739 

2550 

Moreover,  there  are  also  important  indirect  effects  produced  by  the 
activities  of  the  Bank  in  the  CEEC.  The  Bank's  operations  in  the 
region  give  foreign  Investors  a  clear  signal  of  the  political 
commitment  of  the  Community  to  help  the  CEEC  to  succeed  in  this 
challenging  period.  This  commitment  inspires  confidence  and  draws 
additional  private  foreign  Investment  to the region. 

D.  OBSTACLES ENCOUNTERED AND WAYS TO OVERCOME THEM 

10. The  EIB  has encountered  a number  of  obstacles  in the execution of  its 
These  obstacles  are  in general  the  result  of  the  particular 
tasks. 
circumstances 
facing  and  the 
difficulties  they  are going  through  in this  transitional  stage.  They 
could be grouped  as obstacles arising  from: 

these  countries  are  currently 

the  general 
procedures; 

economic  situation  and  the  heavy  bureaucratic 

the  lack  of  adequate  Institutions  and/or  human  resources. 
This 
is  particularly  serious  in  the  Identification  of  projects  and 
reflects  the  relevant  country's  restricted  capacity  in  the 
preparation of proposals.  It also compels the Bank  to participate 
much  more  In  the  preparation  of  studies  and  other  necessary 
activities prior  to the  investment; 

- 

* 

-

the  lack of  domestic partners.  As mentioned  before,  the EIB  loans 
represent  only  a  fraction  of  the  projects'  total  cost,  the  rest 
having  to  be  financed  by  other  international 
institutions 
(particularly  EBRD  and  IBRD,  etc.),  and  by  the  States  concerned, 
It 
regional  and  local  authorities  and  other  private  investors. 
Is  not,  however,  always  easy  to  find  the  adequate  national 
partners to complete  the  financing of  a project. 

More  specifically,  the  lack  of  the  financial  Intermediaries 
through  which  to  channel  the  EIB  loans  has  represented  a 
particular  hurdle  In the Bank's activities  regarding  SMEs. 

budget  limitations  and  constraints.  These  countries  apply,  with 
the  support  of  the  IMF,  very  strict  budgetary  policies  and  this 
limits  their  ability  to  embark  on  much  needed  but  costly 
investments. 

11. Much  needs  to be done  to  improve  the  "structure  d'accueil"  for  the EIB 
loans. As  an  example,  one  could  mention  the  need  for  these  countries 
to  foresee  In  their  budgets  enough  room  for  the  guarantees  required 
for  the EIB  loans. 

There  Is  no  doubt,  however,  that  the  efforts  already  made  by  these 
countries,  with  the  support  of  the  Community's  aid  through  the  PHARE 
programme,  have  already  contributed  to  the  easing  of  some  of  the 
difficulties encountered  by  the Bank. 

More  generally,  the  ever  closer  cooperation  with  the  other 
Institutions  active  In the  region  will  render  the  Community's  actions 
In general, and  the ElB's  in particular, more dynamic  and  efficient. 

-  <=1  -

OWITK 

In  general  terms,  the  EIB operates 
Cormunlty.  The Bank issues  commercial  paper  and makes loans,  passing  on  to 
the  borrower,  following  the  customary rules, 
Bank. These  are  long-term fixed-rate 
determined  by  the  characteristics  of  the  project. 

the  conditions  obtained  by  the 
from  a  grace  period 

in  these  countries  as  it  does  in  the 

loans,  benefitting 

1.  Currencies: 

the  customer's 
requirements  and  the  Bank*s resources.  In  all  cases,  operations  are 
labelled 

in  one  or  several  currencies, 

following 

in BJJ. 

2.  Duration: 

this  is  a  function  of  the  type  of  project  and  the  nature  of 

the  borrowing.  In  general: 
industrial  projects 
infrastructure  projects 

10  to  12  years; 

:  12  to  15 years 
20  years). 

(exceptionally 

3- 

Interest 
0.13%  to  cover  administrative  expenses. 

rate: 

the  rate  of  borrowing from  the  market  incremented by 

This  is  regardless  of  the  nationality  of  the  customer,  the  project's 
location  or  the  customer's  risk. 

The  interest 
normally fixed  for  the  duration  of  the  contract; 
be  considered. 

is  conditioned  by  the  currency  requested  and  is 
other  formulae could 

rate 

4.  Payment  : 

in 

the  same  currency  as 

in  6-month 
the 
(following  a  grace  period  of  ±.  3  years  determined 

loan;  usually 

Instalments 
according  to  the  project 

characteristics). 

5.  Call  for 

tender: 
competition  apply;  usually, 
requested,  although  other  first-class 

the  guarantee  of  the  State  concerned  is 

guarantees  could  be  envisaged. 

the  Community  regulations 

regarding 

international 

6. 

In  the  case  of 
question  are  often  public  firms  or  financial 
by  the  State. 

large  projects, 

the  borrowers  in  the  countries 

institutions 

in 
controlled 

-  10 -

COOPERATION WITH OTHER  INTERNATIONAL  INSTITUTIONS 

Investment 

of  Central 

12. The EIB  in  Its report  "The  countries 

and  Eastern  Europe  and 
Bank",  analyses  In  detail  the  collaboration 
the  European 
with other  international  Institutions active  in the area. 
The report 
underlines  especially  the  close  collaboration  among  them  all,  each 
In almost  every  large 
offering  the CEEC  their  particular  expertise. 
1  project  for  which  much  finance  Is  required,  there  are  two,  and 
sometimes  three,  Institutions working  Jointly;  it  is evident  however, 
that  in a more  general  context,  the  complementary  role  played  by  the 
different  Institutions  manifests  Itself, not  only  through  the  shared 
financing, but  also through  their  specific  responsibilities. 

The World  Bank  acts mainly  In the elaboration of  appropriate  sectoral 
policies,  defining  in  this manner  the  environment  and  the  priorities 
required  for  the transition of  the CEEC  to a market  based  economy. 

The  EBRD, active  both  as  a  development  bank  and  a commercial  one,  is 
in particular  engaged  in the reforms of  the banking  and  the  financial 
sector  and  In the development  of  the private sector. To  this end, the 
EBRD has a number of specialised  instruments. 

The  EIB  remains  a  financing  institution  specialising  in  investment 
projects.  It  has  long  experience  In  Community  policies,  both  within 
and  outside  the  Community.  In  agreement  with  these  policies,  the 
Bank's  financing  operations  in  the  CEEC,  although  mainly  oriented 
towards  Infrastructure  projects,  benefit  also  the  industrial  sector 
and  In particular  the SMEs. 

Finally,  cooperation  with  the  Commission  has  taken  place  mainly 
through  the  PHARE  programme.  A  number  of  feasibility  studies  have 
been  financed  by  the programme  at  the  request  of  the  Bank,  and  under 
the  latter's supervision, to help  in the preparation of projects. 

The  table  below  (Table  4)  gives  a  picture  of  collaboration  between 
international  Institutions  In the CEEC countries. 

V^:fi"- "5 

EIB 

EBRD 

IBRD 

Other (1) 

TOTAL (2) 

14.5 

11.4 

36.1 

100 

38.0 

_1_ 

(1 ) States, public bodies or other domestic financial sources 
(2) The total represents the cost of projects for all sectors in 

which  the EIB has intervened. 

-  11 

-

<•••  •^•:'-;"'?c'-i-1. 

''••  J*. 

Project Finance 

Loans 

Equity 

Large Fast 
Disbursing 
Policy-Based 
loans 

Host 
Government 
guarantees 

Private 
Sector 

Public 
Sector 

WORLD BANK 

Yes 

IFC 

EIB 

t 

Yes 

Yes 

No 

Yes 

No 

EBRD 

Yes 

Yes 

Yes 

Required 

Yes 

No 

No 

No 

Excluded 

Yes 

Required 

Yes, espe 
cially SMEs 

According to 
circumstances! 

Yes 

Yes 

No 

Yes 

Yes 

- 1Z -

F.  THE NEW PROGRAMME 

13. The  present  proposal  has  a  dual  aim.  Firstly,  to  provide  Community 
budget  guarantees  for  an  indicative  three-year  period  for  loans  not 
exceeding  ECU  3,000 million  so as  to allow  EIB operations  in the CEEC 
to  continue  and  secondly,  to  incorporate  all  EIB  operations  in this 
region  In a single  framework. 

14. The  renewal  of  the  Community  guarantees  to  EIB  loans  in  the  CEEC 
countries stems from  the fact  that  the potential  demand  for  credit, as 
shown  by  the  above  analysis of  the existing  programme,  will  continue 
to  be  large  In the  near  future  as  the  process of  economic  and  social 
development  of  these countries  is still  far  from  complete.  Likewise, 
the  need  for  external  financing  In these  countries  remains  very  high. 
Given, then,  the  Important  role played by  the EIB  in the  financing of 
projects  In  the  area,  especially  In  Infrastructure,  the  continuation 
of  the  Bank's  operations  would  seem  to  be  essential.  It  should  also 
be noted  that  the EIB  loans fall  within  the  framework  of  the  European 
Cooperation Agreements which were  signed  for  an unlimited  period with 
these countries at  the end of 1991. 

To  strengthen  the  Initiatives'  coherence  and  to  Increase  the 
flexibility  and  efficiency  of  the  Bank's  operations,  the  Commission 
estimates  that  in  future  all  EIB  activities  in  the  CEEC,  so  far 
decided  on  a  broadly  bilateral  basis,  should  be  incorporated  in a 
single  framework.  This  framework  should  also  include  the  initiatives 
already  approved  In favour  of  Estonia, Latvia  and  Lithuania  and  those 
proposed  for  Albania.  The  proposed  framework  would  be  suitable  as 
these countries share common  characteristics and  face similar  problems 
as well  as  being  In  line with  the usual  EIB  practice  of  making  loans 
by  geographical  areas or  by group of  countries when operating  outside 
the Community  (e.g. Lomé, Mediterranean countries). 

This  framework would  Imply: 

I)  a single ceiling of ECU 3000 million  for  the whole  region, without 
specifying  limits  per  country,  set  for  an  Indicative  three-year 
per iod. 

The  estimation  of  the  proposed  celling  is based  on  the  evolution 
of  the  EIB  loans  to  the CEEC  which  at  present  stands  at  ECU 800-
900 million  a year,  it  includes  the  ceiling  already  agreed  to for 
loans  to  Estonia,  Latvia  and  Lithuania  as  well  as  the  ceiling 
proposed  for  Albania  and  takes  into  consideration  the  "new, 
temporary  lending  facility"  within  the  EIB  decided  by  the 
European Council  in Edinburgh. 

-  13 -

II)  that  EIB  loans  should  have  the  same  financial  conditions 

regardless of  the country  concerned. 

ill) that  priorities  continue  to  be  the  areas  defined  in  the 

Commun 11 y guI de I Ines: 

-  the 

rehabilitation 

and 

development 

of 

the 

basic 

Infrastructure,  particularly  those  connected  with  Trans-
European  networks; 

-  areas  such  as  energy,  research,  telecommunications,  the 

envIronment; 

-  support  for  the private sector, notably  SMEs, and promotion 

of  private  Investment. 

It  should  be  added  further  that  the  Commission  has  proposed  the 
setting  up  of  a  Fund  for  an  appropriate  cover  for  loan  guarantees 
within  the  framework  of  the  budgetary  procedures. 
In  this  regard, 
the  above  arrangements  will  then  be governed,  unequivocally, by  these 
budgetary  guarantee  rules. 

The  Commission  Intends  to  conduct,  In  close  collaboration  with  the 
EIB,  a  detailed  examination  of  all  the  arrangements  governing  the 
granting of Community  budget  guarantees  supporting  EIB  loan operations 
to third  countries  as well  as  the outlook  for  the development  of  these 
operations over  the coming  years. 

;.  CONCLUSIONS 

15.  Accordingly,  the Commission  requests  the Council: 

1.  to  Invite  the EIB  to continue with  its  loan operations  to projects 
In  Poland,  Hungary,  the  Czech  and  Slovak  Republics,  Romania, 
Bulgaria, Estonia, Latvia, Lithuania  and Albania; 

2.  to  decide  that,  subject  to  the  approval  of  the  EIB  Board  of 
Governors, EIB  loans for  a maximum  sum of  ECU 3,000 million  for an 
indicative  three-year  period  should  be  made  available  to  these 
countries.  These  loans  will  be  covered  by  the  Community's 
budgetary  guarantee; 

3.  to  Include  In this maximum  the ceilings  already  decided  In favour 
of  Estonia, Latvia  and Lithuania,  as well  as the ceiling  proposed 
for Albania; 

4.  to adopt  the attached  decision. 

-  14 -

Proposal  for a 

COUNCIL DECISION 

granting a Community  guarantee 
to the European  Investment  Bank 
against  losses under  loans 
for  projects 
In Central  and  Eastern  European countries 
(Poland, Hungary,  the Czech Republic, the Slovak  Republic, 
Romania, Bulgaria, Latvia, Estonia, Lithuania  and  Albania) 

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,'1 

Having  regard  to the opinion  from  the European  Parliament,2 

Whereas  the  peoples  of  Central  and  Eastern  Europe  have  close  ties  and  a 
common  destiny with  the peoples  of  the Community;  whereas  these  ties have 
been  strengthened  by  the  trade  and  cooperation  agreements  signed  for  an 
uniImlted perlod; 

Whereas  these  countries  (Poland,  Hungary,  the  Czech  Republic,  the 
Slovak Republic, Romania, Bulgaria, Latvia, Estonia, Lithuania  and Albania, 
hereinafter  referred  to  as  "Central  and  Eastern  European  countries")  are 
undertaking  major  political  and  social  reforms  and  have  embarked  on  a 
fundamental  restructuring of  their  economies;  whereas  the Ministers of  the 
Group of  24 welcomed  this at  their  meeting  on  11 November  1991  and  decided 
to extend G-24 coordinated  economic  assistance  to them; 

Whereas  these  economic  reforms  will  make  a  decisive  contribution  to  the 
rapid  establishment  of  mutually  beneficial  economic  and  commercial  links 
between  these countries and  the  Community; 

Whereas,  in  particular,  there  Is  a  great  need  for  capital  investment  in 
these  countries;  whereas  this  Investment  requires  external  finance; 
whereas  the  European  Investment  Bank  (hereinafter  referred  to  as  "the 
Bank") could make an  important  contribution; 

1 
2 

OJ No C 
OJ  No C 

1b -

Whereas  the  Bank  is  completing  an  Initial  three-year  loan  programme  for 
Poland  and  Hungary3*  and  a  two-year  programme  for  the  Czech  and 
Slovak  Republics,  Bulgaria  and  Romania4*,  with  encouraging  results 
according  to  the  Bank's  report  on  this  first  phase-,  whereas,  under  the 
Europe Agreements  signed  on  16 December  1991,  these  programmes  should  be 
renewed; 

Whereas  similar  provisions  have  been  approved  for  the  Baltic  States  and 
proposed  within  the Council  for Albania-, 

Whereas  the Edinburgh  Council  of  12 December  1992 called  on  the Council  and 
the  Bank  to  create  a  new,  temporary  lending  facility  within  the  Bank  to 
finance  Infrastructure  projects,  notably  those  relating  to  trans-European 
networks;  whereas  these  networks  may  Include  projects  involving  Central 
and  Eastern  European  countries  In so  far  as such  projects  present  a  common 
Interest; 

Whereas,  In  future,  the  Bank's  activities  In  all  these  countries  must  be 
accorded  uniform  treatment  within an overall  framework; 

Whereas  the  Council  has  called  on  the  Bank,  and  the  Bank  has  agreed,  to 
continue  its operations  in  support  of  investment  projects  carried  out  In 
those countries by offering  it the guarantee provided  for  in this Decision-, 

Whereas  this  guarantee  Is  subject  to  the  conditions  set  out  in 
Regulation  5*0J  establishing  a  Guarantee  Fund  for  the  Community's 
external  lending  activities;  whereas  the  Bank  and  the  Commission  will 
adopt  the procedures  for granting  the guarantee, 

3)  Council  Decision 90/62/EEC of 2 February  1990. 
4)  Council  Decision 91/252/EEC of  14 May  1991. 
5)0J No 

HAS DECIDED AS  FOLLOWS: 

- 

1 É »-

Article 1 

1.  Subject  to  an  overall  ceiling  of  ECU 3 000 mi I I ion,  the  Community 

shall  guarantee  in  full  vis-à-vis  the  European  Investment  Bank  any 
payments  not  received  by  It but  due  under  loans  granted  for  a period 
of  some  three years  in  accordance  with  Its usual  criteria  to  Central 
and  Eastern  European  countries. 

2. 

The  above  guarantee  ceiling  shall  include  the  provisions  adopted  in 
respect  of  Investment  In Estonia, Latvia and Lithuania  and proposed  in 
respect  of  Investment  in Albania. 

Article 2 

The  operations  referred  to  In  Article  1  shall  be  subject  to  the 
arrangements  laid  down  In the  Regulation  establishing  a Guarantee  Fund  for 
the Community's  external  lending  activities, and  in particular  the  payment 
procedures  spelt  out  in Article 2. 

Article 3 

The  Commission  shall  Inform  Parliament  and  the Council  every  six months of 
the  situation  regarding  the  loans  signed. 
To  that  end,  the  Bank  shall 
regularly  transmit  to the Commission  the appropriate  information. 

Article 4 

The  Commission  shall  Inform  Parliament  and  the  Council  each  year  of  the 
loan  operations  and  shall,  at  the  same  time,  submit  an  assessment  of  the 
operation  of  the  scheme  and  of  coordination  between  the  financial 
institutions operating  in that  area. 

Article 5 

The  Bank  and  the  Commission  shall  fix  the  terms  on  which  the  guarantee  is 
to be given. 

Done at Brussels, 

For  the CounclI 

The President 

- 1* -

FINANCIAL  STATEMENT 

1.  Budoet  heading  concerned 

Article B0-212 and Article B0-... of  the reserve  to be set  up: 
Guarantee  of  the  European  Economic  Community  to  the  European 
Investment  Bank  for  loans  In  third  countries  In  Central  and 
Eastern Europe. 

2. 

Legal  basis 

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

3.  Classification of expenditure 

Compulsory. 

4. 

Description of. and  Justification  for, the operation 

The  budget  entry  Is  intended  to  provide  budgetary  back-up  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 Central  and  Eastern European  countries. 

5. 

Nature of the expenditure  and method of calculation 

(a) Nature of the  expenditure 

A guarantee  to the European  Investment  Bank. 

(b) Method of calculation 

A token entry  Is proposed, given  that  the amount  and  timing of any 
call  on  this  budget  heading  cannot  be  calculated  in  advance  and, 
furthermore,  It  is to be  hoped  that  this entry  will  not  be called 
on. 

6. 

Financial  Impact  on appropriations for operations 

Only  in case of a call on  the guarantee. 

7. 

Financing of expenditure  for operations 

If need  be,  the article will  be endowed  with  funds  via  transfers, 
via  re-ut11IzatIon  of  amounts  repaid  (under  Article  27(3) of  the 
Financial  Regulation)  or  via  a  supplementary  and/or  amending 
budget. 
In  order  to  meet  its  obligations,  the  Commission  may  undertake 
In 
debt  service  provisionally  by  drawing  on  its  liquid  assets. 
this  case,  Article  12  of  Council  Regulation  (EEC,  Euratom) 
No 1552/89 of  29 May  1989  Is applicable. 

8. 

Financial  Impact on staff  cost  and  operations 

Not  applI cab le. 

« 

9. 

Forecast of thé schedule of loans to be signed whfle 11» decision is in force  0) 

2JB8£ 

1993 
1994 
1995 
1996 

Am°ynt fop?  E C > I) 

— 
765 
965 
1270 

TOTAL 

3000 

(1)  Forecast  is  subject  to  revision  according  to  the  date  of  the  decision's  approval, 

(Woildng hypothesis, September, 1993) 

it  - 

ISSN 0254-1475 

COM(93)212final 

DOCUMENTS 

EN 

11 

Catalogue number : CB-CO-93-243-EN-C 

ISBN 92-77-55836-9 

Office for Official Publications of the European Communities 
L-2985 Luxembourg