Proposal for a Council Regulation establishing a facility providing medium-term financial assistance for Member States' balances of payments (COM(2001) 113 final — 2001/0062(CNS))
Date: 2001-03-09
Institutions: European Commission
Subjects: balance of payments, balance of payments assistance, borrowing, capital movement

26.6.2001

EN

Official Journal of the European Communities

C 180 E/199

Proposal

for a Council Regulation establishing a facility providing medium-term financial

assistance for Member States’ balances of payments

(2001/C 180 E/17)

COM(2001) 113 final (cid:151) 2001/0062(CNS)

(Submitted by the Commission on 9 March 2001)

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 Commission proposal,
submitted
following consultation with the Economic and Financial
Committee,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the European Central Bank,

Whereas:

(1) The second subparagraph of Article 119(1) of the Treaty
provides that, acting on a recommendation from the
Commission made after consulting the Economic and
the Council will grant mutual
Financial Committee,
assistance where a Member State is in difficulties or is
seriously threatened with difficulties
its
balance of payments. Article 119 does not define the
instrument to be used for granting the mutual assistance
envisaged.

regards

as

(2) It should be possible for the operation of lending to a
Member State to take place soon enough to encourage
that Member State to adopt, in good time in a situation
where orderly exchange-rate conditions prevail, economic
policy measures likely to prevent the occurrence of an
acute balance-of-payments crisis and to support
its
efforts towards convergence.

(3) Each loan to a Member State must be linked to the
adoption by that Member State of economic policy
measures designed to re-establish or ensure a sustainable
balance-of-payments situation and to adapt
to the
gravity of the balance-of-payments situation in that State
and to the way in which it develops.

it

(4) Appropriate procedures

and instruments

should be
provided for in advance to enable the Community and
Member States
financial
medium-term assistance is provided quickly, especially
where circumstances call for immediate action.

to ensure that,

required,

if

States

borrow resources that will be placed at the disposal of the
Member
loans.
concerned in the
Operations of this kind are necessary to the achievement
of the objectives of the Community as defined in the
Treaty,
of
the harmonious
economic activities in the Community as a whole.

development

especially

form of

(6) To this end, a single facility providing medium-term
financial
for Member States’ balances of
payments was established by Council Regulation (EEC)
No 1969/88 (1).

assistance

(7) Since 1 January 1999 the Member States participating in
the single currency no longer qualify for medium-term
financial assistance. However,
the financial assistance
facility must be retained in order to meet not only the
potential needs of the present Member States with a dero-
gation as regards participation in the third stage of
economic and monetary union but also the needs of
new Member States until such time as they adopt the
single currency.

(8) The introduction of

the single currency has led to a
substantial reduction in the number of Member States
eligible for the instrument. A downwards revision of the
present ceiling of EUR 16 billion is therefore justified. The
loan ceiling must, though, be kept at a sufficiently high
level in order to satisfy properly the simultaneous needs
of several Member States. A reduction in the loan ceiling
from EUR 16 billion to EUR 12 billion seems apt to meet
this need.

(9) The glaring imbalance between the number of potential
the loans during the third stage of
beneficiaries of
economic and monetary union and the number of
countries capable of financing them makes it difficult to
maintain direct financing of loans granted by all the other
Member States. These loans should therefore be financed
exclusively by way of recourse to capital markets and
financial
institutions, these having now attained a stage
of development and maturity which should enable them
to undertake such financing.

(10) The arrangements for using the facility must also be
clarified in the light of experience gained and account
should be taken of
international
financial markets and of the technical possibilities and
constraints
in recourse to these sources of
financing.

the development of

inherent

(5) In order to finance assistance that has been granted, the
Community needs to be able to use its creditworthiness to

(1) OJ L 178, 8.7.1988.

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Official Journal of the European Communities

26.6.2001

the

the

instalments,

(11) It is for the Council to decide whether to grant a loan or
appropriate financing facility, its average duration, its total
amount and the amounts of the successive instalments.
in
However,
characteristics of
interest
particular the currency, duration and type of
rate, should be fixed by common agreement between
the beneficiary Member State and the Commission.
If
the Commission takes the view that
the loan charac-
teristics desired by that Member State result in financing
constraints
incompatible with the
that
it
imposed by capital markets or financial
must
financing
to
arrangements.

institutions,

alternative

technical

propose

able

be

is

loans on the capital markets or with financial institutions and
debt and/or interest-rate swaps designed to transform these
loans.

Article 2

Where a Member State with a derogation proposes to call upon
sources of financing outside the Community which are subject
the
to economic policy conditions,
Commission and the other Member States
to
examine, among other things, the possibilities available under
the Community medium-term financial assistance facility. Such
consultations shall be held within the Economic and Financial
Committee.

first consult
in order

shall

it

(12) In order to finance loans granted under the present Regu-
lation, the Commission must be authorised to contract on
behalf of
the European Community loans on capital
markets or from financial institutions. The development
of the financing techniques used on these markets or by
these institutions has prompted widespread recourse to
derivatives, and in particular debt and/or
interest-rate
loans granted using the facility are to benefit
swaps. If
the
financing,
from a more
Commission must also be able to avail
itself of such
financial products.

advantageous

cost of

Article 3

The medium-term financial assistance facility may be

1.
implemented by the Council on the initiative of:

(a) the Commission, acting pursuant

the
Treaty in agreement with the Member State seeking
Community financing;

to Article 119 of

(13) The financial assistance facility established by Regulation
(EEC) No 1969/88 must be adapted accordingly. In the
interests of clarity, that Regulation should be replaced.

(b) a Member State experiencing, or seriously threatened with,
difficulties as regards its balance of current payments or
capital movements.

(14) For

the adoption of

the present Regulation, which
provides for the granting of Community loans financed
exclusively with funds raised on the capital markets and
not by the other Member States, the Treaty offers no
powers other than those of Article 308,

seeking medium-term financial

The Council, after examining the situation in the Member
2.
State
and the
adjustment or back-up programme presented in support of
its application, shall decide, as a rule during the same meeting:

assistance

HAS ADOPTED THIS REGULATION:

(a) whether to grant a loan or appropriate financing facility, its

amount and its average duration;

Article 1

A Community medium-term financial assistance facility
1.
enabling loans to be granted to one or more Member States
which are experiencing, or are seriously threatened with,
difficulties in their balance of current payments or capital
movements shall be established. Only Member States with a
regards participation in the third stage of
derogation as
economic and monetary union, as defined in Article 122 of
the Treaty, may benefit from this Community facility.

(c)

The outstanding amount of
loans to be granted to Member
States under this facility shall be limited to EUR 12 billion
in principal.

To this end, in accordance with a decision adopted by the
2.
Council pursuant
to Article 3 and after consulting the
Economic and Financial Committee, the Commission shall be
empowered on behalf of the European Community to contract

(b) the

policy

economic

the
medium-term financial assistance with a view to re-estab-
lishing or ensuring a sustainable balance-of-payments
situation;

conditions

attaching

to

the techniques for disbursing the loan or financing facility,
the release or drawing-down of which shall, as a rule, be by
successive instalments, the release of each instalment being
subject
in
implementing the programme in terms of the objectives
set.

to verification of

achieved

results

the

Article 4

restrictions on capital movements

In cases where
are
introduced or re-introduced pursuant to Article 120 of the
Treaty during the period of
its
conditions and arrangements shall be re-examined pursuant
to Article 119 of the Treaty.

the financial assistance,

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Official Journal of the European Communities

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Article 5

that

intervals,

economic policy of

The Commission shall take the necessary measures to verify at
in collaboration with the Economic and
regular
Financial Committee,
the
the
Member State in receipt of a Community loan accords with
the adjustment or back-up programme and with any other
conditions laid down by the Council pursuant to Article 3.
To this end, the Member State shall place all the necessary
information at the disposal of the Commission. On the basis
of the findings of such verification, the Commission, after the
Economic and Financial Committee has delivered an opinion,
shall decide on the release of further instalments.

The Council shall decide on any adjustments to be made to the
initial economic policy conditions.

Refinancing or restructuring operations shall be carried out in
accordance with the conditions set out in paragraph 1 and
shall not have the effect of extending the average duration of
the borrowing concerned or increasing the amount, expressed
at the current exchange rate, of capital outstanding at the date
of the refinancing or restructuring.

3.
The costs incurred by the Community in concluding and
carrying out each operation shall be borne by the beneficiary
Member State.

4.
The Economic and Financial Committee shall be kept
informed of developments in the operations referred to in
first
third subparagraph of paragraph 1 and the
the
subparagraph of paragraph 2.

Article 6

Article 8

Loans granted as medium-term financial assistance may be
granted as consolidation of support made available by the
European Central Bank under the very short-term financing
facility.

Article 7

1.
The borrowing and lending operations referred to in
Article 1 shall be carried out using the same value date and
involve the Community in the transformation of
shall not
maturities,
in any exchange or interest-rate risk, or in any
other commercial risk.

When the borrowings contracted by the Community are the
subject of a debt or interest-rate swap, the commercial risk
inherent in a transaction of that kind shall be minimised by
recourse to a counterparty with a high-quality credit rating.

When the borrowings are expressed, payable or repayable in
the currency of a Member State with a derogation, they may be
concluded only after consultation with the competent auth-
orities of that State.

The characteristics of the successive instalments released by the
Community under
the financial assistance facility shall be
negotiated between the Member State and the Commission.
Where the Commission takes the view that the characteristics
desired by the Member State will lead to Community financing
that runs counter to the technical constraints imposed by
financial markets or is such as to tarnish the reputation of
it
the Community as a borrower on those same markets,
reserves the right to withhold its agreement and propose an
alternative solution.

Where a Member State receives a loan carrying an early
the
repayment clause and decides to exercise this option,
Commission shall take the necessary steps.

2.
At the request of the debtor Member State and where
circumstances permit an improvement in the interest rate on
the loan, the Commission may refinance all or part of its initial
borrowings
financial
conditions.

corresponding

restructure

the

or

For the application of the ceiling laid down in the second
the loan operation shall be
subparagraph of Article 1(1),
recorded at
is
the day on which it
concluded. The repayment operation shall be recorded at the
exchange rate of the day on which the corresponding loan was
concluded.

the exchange rate of

Article 9

The Council shall adopt the decisions referred to in Articles 3
and 5, acting by qualified majority on a proposal from the
Commission made
and
Financial Committee.

the Economic

consulting

after

Article 10

The Commission shall make the necessary arrangements for
the administration of the loans.

Article 11

Every three years the Council shall examine, on the basis of a
report
from the Commission and after the Economic and
Financial Committee has delivered an opinion, whether the
in its principle, arrangements
facility established still meets,
and ceiling, the need which led to its creation.

Article 12

Regulation (EEC) No 1969/88 is hereby repealed.

Article 13

This Regulation shall enter into force on the [. . .] day following
that of 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.