Proposal for a Council Decision granting a Community guarantee to the European Investment Bank against losses under loans for projects in the former Yugoslav Republic of Macedonia and amending Council Decision 97/256/EC of 14 April 1997 granting a Community guarantee to the European Investment Bank against losses under loans for projects outside the Community (Central and Eastern Europe countries, Mediterranean countries, Latin American and Asian countries and South Africa)
Date: 1998-01-13
Institutions: European Commission
Subjects: EIB loan, European Investment Bank, Macedonia, credit guarantee, development aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  13.01.1998 
COM(1998) 2 final 

98/0006 (CNS) 

PROPOSAL FOR A COUNCIL DECISION 

granting a Community guarantee to the European Investment Bank against losses under loans 

for projects in the former Yugoslav Republic of Macedonia 

and amending Council Decision 97/256/EC of 14 April 1997 granting a Community 

guarantee to the European Investment Bank against losses under loans for projects outside the 

Community (Central and Eastern Europe countries, Mediterranean countries, Latin American 

and Asian countries and South Africa) 

(presented  by the Commission) 

EXPLANATORY  MEMORANDUM 

1. 

This  proposal  deals  with  the  granting  of  a  Community  guarantee  to  the  European 
Investment  Bank  (EIB) for  lending in the former  Yugoslav  Republic of Macedonia by 
amending Council Decision 97/256/EC of 14 April  1997. 

2.  On 27 November  1997 the Council  adopted  two Decisions  concerning  the  conclusion 
of,  respectively,  a cooperation  agreement  between  the  European  Community  and  the 
former  Yugoslav  Republic of Macedonia and a transport  agreement  between the same 
parties.  These agreements  will enter into force  on  1 January  1998. 

The cooperation  agreement  includes  a Protocol  on  financial  cooperation  in which  the 
Community  requests  the  EIB  to  grant  loans  from  the  Bank's  own  resources  up  to  a 
ceiling of ECU  150 million until  31 December 2000. 

3.  However,  in  order  to  make  the  loans  provided  for  in  the  Protocol  the  EIB  requires  a 
Community guarantee.  Furthermore, Bank lending in the former Yugoslav Republic of 
Macedonia is subject  to the arrangements set out in Council  Regulation (EC, Euratom) 
No  2728  of  31  October  1994  establishing  a  Guarantee  Fund  for  the  Community's 
external  lending activities.  In this connection, the Commission recalls that the required 
reserve  resources  were  earmarked  at  the  start  of  the  negotiations  with  the  country. 
Point  11  of  the  attached  Financial  Statement  shows  the  situation  of  the  reserve  at 
20 November 1997. 

4. 

In  view  of  the  above,  the  Commission  proposes  that  the  Council  amend  Council 
Decision 97/256/EC, which grants a Community  guarantee to the European Investment 
Bank, so as to extend the guarantee to cover an additional ECU  150 million for  lending 
in the former  Yugoslav Republic of Macedonia until 31 December 2000. 

The  attached  proposal  amending  Decision  97/256/EC  would,  when  adopted,  allow 
the  Bank  to  lend  in  that  country  under  the Protocol  on financial cooperation  included 
in the cooperation agreement adopted by the Council on 27 November  1997. 

Proposai for a 

COUNCIL DECISION 

granting a Community guarantee to the European Investment Bank against losses under loans 

for projects in the former  Yugoslav Republic of Macedonia 

and amending Council Decision 97/256/EC of 14 April  1997 granting a Community 

guarantee to the European Investment Bank against losses under loans for projects outside the 

Community (Central and Eastern Europe countries, Mediterranean countries, Latin American 

and Asian countries and  South  Africa) 

THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to the proposal of the Commission,1 

Having regard to the opinion of the European Parliament,2 

Having  regard  to  Council  Decisions  of  27 November  1997 concerning  the  conclusion  of  a 
cooperation  agreement  between  the  European  Community  and  the  former  Yugoslav 
Republic of Macedonia  and a transport agreement between the same parties; 

Whereas  the  cooperation  agreement  includes  a  Protocol  on  financial  cooperation  which 
provides for the European Investment Bank (EIB) to grant loans from  its own resources up to 
a ceiling of  ECU  150 million until 31 December 2000; 

Whereas Council Decision 97/256/EC of  14 April  1997 grants the EIB a budget guarantee  for 
lending  from  its  own  resources  in  specified  regions  outside  the  Community;  whereas  the 
budget  guarantee  should  be  extended  to  cover  the  Bank  loans  agreed  in  the  Protocol  on 
financial cooperation with the former Yugoslav Republic of Macedonia; 

Whereas the Council is calling on the Bank to finance projects according to the arrangements 
set  out  in the  Protocol  on financial cooperation  by offering  it the guarantee  provided  for  in 
this Decision; 

Whereas Decision 97/256/EC should therefore be amended; 

Whereas,  for  the  purpose  of  adopting  this  Decision,  the  only  powers  provided  for  by  the 
Treaty are those set out in Article 235, 

HAS DECIDED AS FOLLOWS: 

Article 1 

Council Decision 97/256/EC is hereby amended as follows: 

1. 

2. 

3. 

4. 

5. 

in the  title  of  Council  Decision  97/256/EC, "...  Asian  countries  and  South  Africa"  is 
replaced  by  "...  Asian  countries,  South  Africa  and  the  former  Yugoslav  Republic  of 
Macedonia" ; 

in  the  first  paragraph  of  Article  1(1),  "...  Asian  countries,  and  in  the  Republic  of 
South Africa."  is replaced  by  "... Asian countries, in the Republic of South Africa  and 
in the former  Yugoslav Republic of Macedonia." ; 

the  second  paragraph  of  Article  1(1), 

in 
"ECU 7 255 million,"; 

"ECU  7  105  million," 

is  replaced  by 

the following fifth indent is added to Article 1(1): 
"-  former  Yugoslav Republic of Macedonia ECU  150 million," 

in the second paragraph of Article  1(1),  "... Asian countries, and on  1  July  1997 for the 
Republic of  South Africa."  is replaced  by  "... Asian countries, on  1 July  1997 for  the 
Republic of South Africa,  and on  1 January  1998 for  the former  Yugoslav Republic of 
Macedonia." 

6. 

the following  sixth indent is added to Article 1(2): 
"-  former  Yugoslav Republic of Macedonia." 

Article 2 

The  corresponding  amendments  shall  be  made  to  the  agreement  concluded  between  the 
Commission and the EIB referred to in Article 5 of Council Decision 97/256/EC. 

Article 3 

This  Decision  shall  take  effect  on  the  day  of  its  publication  in  the  Official Journal  of the 
European Communities. 

Done at Brussels, 

For the Council 

The President 

FINANCIAL STATEMENT 

TITLE OF OPERATION 

Guarantee  of the  European  Community  in respect  of  European  Investment  Bank  loans 
in the former  Yugoslav Republic of Macedonia 

BUDGET HEADING INVOLVED 

Art.  BO-220:  European  Community  guarantee  for  loans  granted  by  the  European 
Investment Bank to third countries in the Mediterranean Basin. 

3. 

LEGAL BASIS 

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

4.  DESCRIPTION OF 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  of  up  to 
ECU  150 million  which  the  Bank  has  been  asked  to  finance  in  the  former  Yugoslav 
Republic  of  Macedonia  until  31 December 2000.  The  arrangements  for  the  Bank's 
intervention  are those  set  out  in the Protocol  on financial cooperation  included  in  the 
cooperation  agreement concluded on  27 November  1997 between that country  and the 
European Community. 

5.  CLASSIFICATION  OF EXPENDITURE 

Compulsory. 

6.  TYPE OF EXPENDITURE 

A guarantee to the European Investment Bank. 

7.  FINANCIAL IMPACT ON APPROPRIATIONS FOR OPERATIONS 

Only if the guarantee is called. 

7.1  Method of calculation 

A token entry  is proposed,  since the amount and timing  of any call on this  budget 
line cannot be calculated  in advance and it is hoped that this budget  guarantee will 
not be called. 

7.2  Itemised breakdown of cost 

Not applicable. 

7.3  Operational expenditure relating to studies, expert meetings, etc. 

Not applicable. 

8.  FINANCING OF EXPENDITURE FOR OPERATIONS 

In the event of a default, payments would be made direct from the Fund to the creditor. 

If  there  are  insufficient  resources  in  the  Fund  to  cover  a default,  additional  resources 
may be released by drawing on the budget: 

-  any margin remaining in the reserve would be the first resort; 

-  any margin available beneath the ceiling of heading 4 of the financial perspective or 

following redeployment therein would be the second resort; 

in  the  last  resort  the financial perspective  may  be  adjusted  in  accordance  with  the 
Interinstitutional  Agreement;  this  may  involve  redeployment  within  the  other 
headings. 

In order to honour its obligations, the Commission may draw on its cash resources to 
service the debt provisionally.  In this case, Article  12 of Council  Regulation (EEC, 
Euratom) No  1552/89 of 29 May  1989 will apply. 

9. COST-EFFECTIVENESS  ANALYSIS 

9.1 

(i) 

Quantifiable objectives:  See point 4 above. 

(ii) 

Population:  former  Yugoslav Republic of Macedonia. 

9.2  Grounds for the operation: 

To  support  the  economic  development  of  the  former  Yugoslav  Republic  of 
Macedonia, to reinforce the relationship between that country and the Community 
and to contribute to  regional cooperation. 

9.3  Monitoring and evaluation of the operation 

Not applicable. 

10.  FINANCIAL IMPACT ON STAFF COST AND OPERATIONS 

Not applicable. 

11.  IMPACT ON THE GUARANTEE RESERVE 

11.1  Estimated  schedule  of  loans  to  be  signed  while  the  Decision  is  in  force 

(ECU  million) 

1998 

60 

1999 

2000 

50 

40 

11.2  Estimated  use  of  the  guarantee  reserve  to  provision  the  Guarantee Fund:  rate  of 

provisioning:  15%;  guarantee size: 70%. 

1998 

1999 

2000 

6.3 

5.25 

4.2 

.3  Estimated  use  of  the  guarantee  reserve  including  the  loans  already  approved  by 

Council and the present proposal (ECU million). 

1998 

1999 

2000 

Amount in the reserve 
Margin within the reserve 

338 
60.55 

345 
50.82 

n.a.2 

Situation at  20 November  1997. 

2  To be decided in the financial  perspective 2000-2006 

ISSN 0254-1475 

COM(98)  2 final 

DOCUMENTS 

EN 

09  01  11 

Catalogue  number  :  CB-CO-98-002-EN-C 

ISBN  92-78-30015-2 

Office  for Official  Publications of the European Communities 

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