Proposal for a COUNCIL REGULATION (EC) amending Regulation (EEC) No 3906/89 in order to extend economic aid to Croatia
Date: 1994-11-23
Institutions: European Commission
Subjects: Central and Eastern Europe, Croatia, aid system, economic aid, economic reform, national independence

COMMISSION OF THE EUROPEAN  COMMUNITIES 

COM(94) 526  final 

Brussels, 23.11.1994 

94/ 0271(CNS) 

Proposal for a 

COUNCIL REGULATION  (EC) 

amending  Regulation  (EEC)  No  3906/89 

in 

order to extend  economic  aid  to Croatia. 

(presented  by  t he  Commission) 

Explanatory  memorandum 

Phare is the EU's programme of  assistance for  the economic and  social reform  process 
in  Central  and  Eastern  Europe.  It  supports  the  transition  to  a  market  economy  and 
helps bolster the region's fledgling  democracies. 

In May  1992 the Commission  presented  a proposal  for  a  Regulation  to  the  Council  to 
include  Croatia  in  the  Phare  programme.  Parliament's  opinion  on  that  proposal  was 
negative on the grounds that human  rights in  Croatia were not yet secure. The Council 
endorsed that opinion. 

The situation has changed  markedly since then: 

Croatia  has  accepted  the  principles  of  the  European  Union's  action  plan  of 
November  1993, which among other things mooted the inclusion of that country 
in the Phare programme. 

Croatia  has played  an  active part  in  seeking  a  solution  in  Bosnia-Herzegovina, 
signing  the  agreement  on  a  Croat-Muslim  Federation  and  accepting  the  peace 
plan put forward by the Contact Group in July of this year. 

This  constructive  attitude  has  swayed  the  opinion  of  certain  Council  members  and  of 
Parliament.  At  the  Luxembourg  Council  meeting  on  4  October  it  was  agreed  that  the 
Commission's  intention  to  extend  Phare  to  Croatia  would  also  be  put  to  Parliament. 
For its part,  Parliament adopted a resolution on 21 July calling  for  an urgent review of 
the  use  of  existing  instruments  and  programmes,  among  them  the  Phare  programme, 
which should be open to both the new government in Sarajevo  and Croatia. 

The Commission  sent a fact-finding  mission  to Zagreb  on 24 and  25 October  to assess 
the political situation, particularly  as regards human rights and  minorities, and the state 
of play on economic  reforms. 

The mission established  that: 

a legal and constitutional  framework  guaranteeing  respect  for  human rights had 
been  set  up  but  there  was  still  room  for  improvement  in  terms  of  upholding 
them  in  practice.  What  is  more,  the  Croatian  authorities  were  giving  strong 
backing to a federation  between  Croats and Muslims but were exceedingly  wary 
about  Serbia  and  Montenegro.  They  were  also  keen  to  mend  fences  with  Italy 
and Slovenia. 

economic  reforms  were  under  way;  the  stabilization  programme  launched  in 
October  last  year  was  bearing  fruit,  as  was  the  tight  monetary  policy.  These 
efforts  were crowned  by  the  recent  signing  of  a  stand-by  arrangement  with  the 
IMF.  Croatia  had  now  embarked  on  a  privatization  and  restructuring  phase 
which  would  entail  fresh  difficulties.  The  Government  seemed  determined  to 
take the requisite  measures in a climate which was not conducive to the  inflow 
of  foreign  capital.  The  country's  financial  needs  would  increase  tenfold  when 
the reconstruction  phase got  off  the ground.  Estimates  put  war  damage  at  over 
20 billion  US  dollars  but  given  the  solvency  of  economy  these needs  could  be 
covered in part by loans. 

2 

Both government and opposition agree that participation in EU programmes like Phare 
will be a key factor in consolidating democracy. 

The Commission feels that the time has come to send a political signal to encourage the 
Croatian authorities and therefore proposes bringing Croatia into the Phare programme. 

Including Croatia in Phare would have distinct advantages, both in terms of its political 
impact  and  the boost  it would  give to  the reform  process.  Aside from  carrying  out 
operations to bolster democracy, Phare (by its very nature and with the means available 
to  it)  would  home  in  m  economic  restructuring.  It  can  do  no  more  than  act  as a 
catalyst  in  the process of  rebuilding;  most of  the  funding  for  this  will  come  from 
official outside sources, chiefly the international financial institutions. 

Proposal  for  a  Council  Regulation  (EC)  amending  Regulation  (EEC)  No  3906/89 
order to extend economic aid to Croatia. 

in 

THE COUNCIL OF THE EUROPEAN  COMMUNITIES, 

Having  regard  to  the Treaty  establishing  the European  Community,  and  in  particular 
Article 235 thereof, 

Having regard to the proposal from  the Commission, 1 

Having regard to the opinion of the European  Parliament,2 

Whereas  Council  Regulation  (EEC)  No  3906/89  provides  for  aid  operations  of  an 
economic  and  humanitarian  nature  in  support  of  the  process  of  economic  and  social 
reform  in certain countries of Central and Eastern Europe;^ 

Whereas the Annex to that Regulation  lists the countries which  may receive such aid; 

Whereas  at  present  the  following  countries  are  eligible:  Albania,  Bulgaria,  Hungary, 
Estonia,  Latvia,  Lithuania,  Poland,  Romania,  Slovakia,  Slovenia,  the  Czech  Republic 
and Yugoslavia; 

Whereas in  the light of  Croatia's  independence  that country  should  be added  to the list 
of recipients so that it can receive aid under Regulation (EEC) No 3906/89, 

Whereas  the  conditions  to  allow  for  Croatia  to  be  included  amongst  the  beneficiary 
countries now can be considered to have been  fulfilled. 

HAS ADOPTED THIS REGULATION: 

Article 1 

The following  country  shall be added  to the list in the Annex  to Regulation  (EEC)  No 
3906/89: 

"Croatia" 

Article 2 

This Regulation  shall  enter  into  force  on  the third  day  following  its publication  in  the 
Official  Journal of the European Communities. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly  applicable  in  all  Member 
States. 

i O J N o C . .. 
2  ..... 
3 OJ No L 375 of 23.12.1989, p.l 1, as last amended by Regulation (EEC) No  1764/93, 
OJNoL  162 of 30.6.1993, p.l. 

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