Proposal for a Council Decision providing supplementary macro-financial assistance to the former Yugoslav Republic of Macedonia
Date: 1999-07-28
Institutions: European Commission
Subjects: North Macedonia, Yugoslavia, aid policy, financial aid, financial cooperation

26.10.1999

EN

Official Journal of the European Communities

C 307 E/43

Proposal for a Council Decision providing supplementary macro-financial assistance to the former
Yugoslav Republic of Macedonia

(1999/C 307 E/10)

COM(1999) 404 final (cid:151) 1999/0166(CNS)

(Submitted by the Commission on 29 July 1999)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 308 thereof,

Having regard to the proposal of the Commission,

Having regard to the opinion of the European Parliament,

(1) Whereas the Commission consulted the Economic and
Financial Committee before submitting its proposal;

(2) Whereas the former Yugoslav Republic of Macedonia is
undertaking
and is
making substantial efforts to establish a well-functioning
market economy;

fundamental

economic

reforms

(3) Whereas the former Yugoslav Republic of Macedonia has
suffered very large economic costs as a direct consequence
of the conflict in Kosovo and has made, despite severe
social and economic strains, exceptional efforts to host a
high number of refugees;

(4) Whereas the former Yugoslav Republic of Macedonia and
the European Community have signed on a Cooperation
Agreement which entered into force on 1 January 1998;

(7) Whereas the World Bank is preparing a new Financial and
Enterprise Structural Adjustment Loan, which envisages
substantial
financing in
support of the former Yugoslav Republic of Macedonia’s
reform efforts in the enterprise and financial sectors;

and investment

adjustment

financial

(8) Whereas the authorities of the former Yugoslav Republic
of Macedonia have requested financial assistance from the
the Community and
institutions,
international
other bilateral donors; whereas, over and above the
estimated financing which could be provided by the IMF
and the World Bank, an important residual financing gap
remains to be covered in 1999 and 2000 in order to
strengthen the country’s reserve position and support
the policy objectives
attached to the government’s
reform programme;

(9) Whereas financial assistance from the Community in the
form of a combination of a long-term loan and a straight
grant to the former Yugoslav Republic of Macedonia is an
appropriate measure to support the balance of payments
and help ease the country’s external financial constraints
in the current exceptionally difficult circumstances;

(10) Whereas the inclusion of a grant component

assistance is without prejudice to the powers of
budgetary authority;

in this
the

(11) Whereas

this assistance should be managed by the

Commission;

(12) Whereas the Treaty does not provide, for the adoption of
this Decision, powers other than those of Article 308,

(5) Whereas the Council, on 26 April 1999, has welcomed
the prospect of a feasibility study towards upgrading the
contractual relations between the European Community
and the former Yugoslav Republic of Macedonia;

HAS DECIDED AS FOLLOWS:

(6) Whereas the former Yugoslav Republic of Macedonia has
reached a preliminary agreement with the International
Monetary Fund (IMF) on an arrangement under
the
Compensatory and Contingency Financing Facility and
discussions are well advanced between the two parties
on a stand-by arrangement (SBA) in support of the auth-
orities’ adjustment and reform programme;

1.
The Community shall make available to the former
Yugoslav Republic of Macedonia financial assistance in the
form of a long-term loan facility and straight grants, with a
view to ensuring a sustainable balance of payments situation,
comforting the implementation of structural reforms and help
alleviating the social consequences of the economic disruptions
caused by the conflict in Kosovo.

Article 1

C 307 E/44

EN

Official Journal of the European Communities

26.10.1999

The loan component of this assistance shall amount to a
2.
maximum principal of EUR 50 million, with a grace period of
10 years and a maximum maturity of 15 years. To this end, the
Commission is empowered to borrow, on behalf of
the
the necessary resources that will be
European Community,
former Yugoslav Republic of
placed at
Macedonia in the form of a loan.

the disposal of

The grant component of this assistance shall amount to a

3.
maximum of EUR 30 million for the 1999-2000 period.

4.
The Community financial assistance shall be managed by
the Commission in close consultation with the Economic and
Financial Committee and in a manner consistent with any
agreement reached between the IMF and the former Yugoslav
Republic of Macedonia.

Article 2

1.
The Commission is empowered to agree with the auth-
orities of the former Yugoslav Republic of Macedonia, after
consultation of the Economic and Financial Committee, the
economic policy conditions attached to this assistance. These
conditions shall be consistent with the agreements referred to
in Article 1(4).

2.
The Commission shall verify at regular intervals, in colla-
boration with the Economic and Financial Committee and in
co-ordination with the IMF, that the economic policy in the
former Yugoslav Republic of Macedonia is in accordance with
the objectives of this assistance and that its conditions are
being fulfilled.

Article 3

1.
The loan and grant components of this assistance shall be
made available to the former Yugoslav Republic of Macedonia
in at least two instalments. Subject to the provisions of Article
2, the first instalment is to be released on the basis of an
agreement
of
Macedonia and the IMF on a macroeconomic programme
that is supported by an upper credit tranche arrangement.

former Yugoslav Republic

between

the

donia’s adjustment and reform programme and not before one
quarter after the release of the first instalment.

The funds shall be paid to the National Bank of

3.
former Yugoslav Republic of Macedonia.

the

Article 4

1.
The borrowing and lending operations referred to in
Article 1 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.

if the
2.
The Commission shall take the necessary steps,
former Yugoslav Republic of Macedonia so requests,
to
ensure that an early repayment clause is included in the loan
terms and conditions and that it may be exercised.

At

the request of

3.
the former Yugoslav Republic of
Macedonia, and where circumstances permit an improvement
in the interest rate of the loan, the Commission may refinance
all or part of its initial borrowings or restructure the corre-
sponding financial conditions. Refinancing or
restructuring
operations
in accordance with the
shall be carried out
in paragraph 1 and shall not have the
conditions set out
effect of extending the average maturity of
the borrowing
concerned or increasing the amount, expressed at the current
exchange rate, of capital outstanding at the date of the refi-
nancing or restructuring.

All

related costs

in
4.
concluding and carrying out
this
Decision shall be borne by the former Yugoslav Republic of
Macedonia.

the operation under

the Community

incurred by

The Economic and Financial Committee shall be kept
5.
informed of developments in the operations referred to in
paragraphs 2 and 3 at least once a year.

Article 5

2.
Subject to the provisions of Article 2, the second and any
further instalments shall be released on the basis of a satis-
factory track record in the former Yugoslav Republic of Mace-

At
least once a year the Commission shall address to the
European Parliament and to the Council a report, which will
include an evaluation of the implementation of this Decision.

26.10.1999

EN

Official Journal of the European Communities

C 307 E/45

BUDGETARY RESOURCES NECESSARY FOR THE PROVISIONING OF THE GUARANTEE FUND IN 1999
AND MARGIN UNDER THE RESERVE FOR LOANS AND LOAN GUARANTEES IN FAVOUR OF THIRD
COUNTRIES

ANNEX

(EUR million)

Operations

Basis of the calcu-
lation (1)

Provisioning of the
Fund (2)

Reserve Margin

Operations decided

EIB/New mandates (4)

(cid:151) CEEC

(cid:151) ALA

(cid:151) South Africa

(cid:151) MED

(cid:151) FYROM

(cid:151) Bosnia

EIB/Old protocols (4)

(cid:151) Syria

Macro-financial assistance

(cid:151) Albania III

(cid:151) Bosnia I

Operations proposed

(cid:151) EIB/Turkey (5)

(cid:151) EIB/Croatia (6)

Macro-financial assistance

(cid:151) Bulgaria IV (7)

(cid:151) Romania IV (7)

872,9

218,1

143,5

351,4

38,5

42,0

(cid:150) 30

20

20

105

35

100

200

122,2

30,5

20,1

49,2

5,4

5,9

(cid:150) 4,2

2,8

2,8

14,7

4,9

14,0

28,0

346,0 (3)

223,8

193,3

173,2

124,0

118,6

112,7

116,9

114,1

111,3

96,6

91,7

77,7

49,7

(1) The provisioning basis is calculated by applying the relevant guarantee cover rate, namely 70 % (EIB loans new mandates), 75 % (EIB

loans old protocols) or 100 % (macro-financial assistance loan).

(2) In accordance with the provisioning rules in Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994, the Fund having

reached its target amount on 31 December 1997, the provisioning rate has been reduced to 14 %.

(3) Amount of the Reserve for loans and loan guarantees in favour of third countries for 1999 under the financial perspective.
(4) Annual amounts of loans scheduled to be signed in 1999 and correction of amounts already provisioned in the Fund to take account

of actual signings at the end of 1998: Transfer 5/99 to the Guarantee Fund.

(5) Proposal for a Council Regulation on a special financial cooperation measure for Turkey (COM(95) 389/3).
(6) EC/Croatia cooperation agreement (SEC(95) 180/final).
(7) Commission proposal.