Proposal for a Council Decision providing macro-financial assistance to the Federal Republic of Yugoslavia
Date: 2001-05-23
Institutions: European Commission
Subjects: Community loan, International Monetary Fund, Serbia and Montenegro, cooperation agreement (EU), non-refundable aid

C 240 E/130

EN

Official Journal of the European Communities

28.8.2001

Proposal for a Council Decision providing macro-financial assistance to the Federal Republic of
Yugoslavia

(2001/C 240 E/20)

COM(2001) 277 final (cid:151) 2001/0112(CNS)

(Submitted by the Commission on 23 May 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 proposal of the Commission,

Having regard to the opinion of the European Parliament,

Whereas:

(1) The Commission consulted the Economic and Financial

Committee before submitting its proposal.

(2) Political changes in the Federal Republic of Yugoslavia and
the Republic of Serbia have taken place leading to new
democratic governments and the Federal Republic of
Yugoslavia is making efforts to establish a well-functioning
market economy.

the
(3) Within the Stabilisation and Association process,
framework for EU relations with the region,
is
desirable to support efforts made to ensure a stable
political and economic
in the Federal
Republic of Yugoslavia, with a view to evolving towards
the development of a full co-operation relationship with
the Community.

environment

it

(4) Financial assistance from the Community shall be instru-
in bringing the Federal Republic of Yugoslavia

mental
closer to the Community.

(5) The Federal Republic of Yugoslavia has reached an under-
standing with the International Monetary Fund (IMF) on a
comprehensive set of economic stabilisation and reform
measures to be supported by a 12-month upper credit
tranche stand-by arrangement (SBA).

(6) The Federal Republic of Yugoslavia has reached an under-
standing with the World Bank on a set of structural
adjustment measures
Structural
to be
Adjustment Loans and Credits in the areas of public
reform, enterprise privatisation and banking
finance
restructuring.

backed

by

residual
coming months in order
reserve position and to support
attached to the authorities’ reform efforts.

financing gap remains to be covered in the
to strengthen the country’s
the policy objectives

(9) The authorities of the Federal Republic of Yugoslavia have
committed themselves to fully discharge all outstanding
financial obligations of all public entities of the Federal
Republic of Yugoslavia towards the European Community
and the European Investment Bank, and to accept the
responsibility by way of guarantee of those obligations
that are not yet due.

(10) A Community macro-financial assistance to the Federal
Republic of Yugoslavia is an appropriate measure to
help ease the country’s external
financial constraints,
supporting the balance of payments and strengthening
the reserve position.

(11) The Federal Republic of Yugoslavia is temporarily eligible
for highly concessional loans and facilities from the World
Bank.

(12) Financial assistance from the Community in the form of a
combination of a long-term loan and a straight grant 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.

(13) The inclusion of a grant component in this assistance is
the budgetary

to the powers of

without prejudice
authority.

(14) This assistance should be managed by the Commission in
consultation with the Economic and Financial Committee.

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

HAS DECIDED AS FOLLOWS:

(7) The authorities of the Federal Republic of Yugoslavia have
requested financial assistance
international
financial institutions, the Community, and other bilateral
donors.

from the

(8) Over and above the estimated financing which could be
provided by the IMF and the World Bank, an important

Article 1

1.
The Community shall make available to the Federal
Republic of Yugoslavia a macro-financial assistance in the
form of a long-term loan and a straight grant with a view to
ensuring a sustainable balance-of-payments
situation and
strengthening the country’s reserve position.

28.8.2001

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Official Journal of the European Communities

C 240 E/131

The loan component of this assistance shall amount to a
2.
maximum principal of EUR 180 million with a maximum
maturity of 15 years. To this end,
the Commission is
empowered to borrow, on behalf of the European Community,
the necessary resources that will be placed at the disposal of
the Federal Republic of Yugoslavia in the form of a loan.

The grant component of this assistance shall amount to a

3.
maximum of EUR 120 million.

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 Federal Republic
of Yugoslavia.

5.
The implementation of this assistance is conditional upon
clearance in full by the Federal Republic of Yugoslavia of the
outstanding due financial obligations of all public entities
towards the Community and the European Investment Bank
and upon the acceptance by the Federal Republic of Yugoslavia
of responsibility by way of guarantee of those obligations that
are not yet due.

Article 2

1.
The Commission is empowered to agree with the auth-
orities of the Federal Republic of Yugoslavia, after consultation
with the Economic and Financial Committee, the economic
policy conditions attached to the Community macro-financial
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 economic policies in the
Federal Republic of Yugoslavia are in accordance with the
objectives of
its
conditions are being fulfilled.

this macro-financial assistance and that

Article 3

1.
The loan and grant components of this assistance shall be
made available to the Federal Republic of Yugoslavia in at least
two instalments. Subject to the provisions of Article 2, the first
instalment is to be released after the full settlement of the
outstanding financial obligations of the Federal Republic of
Yugoslavia
and the European
the Community
Investment Bank and on the basis of an agreement between
the FRY and the IMF on a macro-economic programme that is
supported by an upper credit tranche arrangement.

towards

Subject to the provisions of Article 2, the second and any
2.
further instalments shall be released on the basis of a satis-
factory track record in the FRY’s adjustment and reform
programme and not earlier
the
release of the first instalment.

than three months after

The funds shall be paid to the National Bank of

3.
Federal Republic of Yugoslavia.

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 risks, or in any
other commercial risk.

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

its initial borrowings or

At the request of the Federal Republic of Yugoslavia, and
3.
where circumstances permit an improvement in the interest
rate of the loan, the Commission may refinance all or part
of
restructure the corresponding
financial conditions. Refinancing or restructuring operations
in accordance with the conditions set
shall be carried out
out in paragraph 1 and shall not have the 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 refinancing or restructuring.

All

related costs

in
4.
concluding and carrying out
this
Decision shall be borne by the Federal Republic of Yugoslavia,
if appropriate.

the operation under

the Community

incurred by

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

Article 5

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

Article 6

This decision expires on 30 June 2003.

C 240 E/132

EN

Official Journal of the European Communities

28.8.2001

BUDGETARY RESOURCES NECESSARY FOR THE PROVISIONING OF THE GUARANTEE FUND IN 2001
AND MARGIN UNDER THE RESERVE FOR LOANS AND LOAN GUARANTEES IN FAVOUR OF THIRD
COUNTRIES

ANNEX

Operations

Basis of the
Calculation (1)

Provisioning of the
Fund (2)

Reserve margin

Residual lending
capacity (4)

(in euro million)

208,0 (3)

2 311

Decided operations

Project-related assistance

EIB

Mediterranean Basin, 4 Syrian Protocol

1997-2000 general lending mandate

11,3 (a)

10,5 (b)

1,01

0,95

2000-2007 general lending mandate

1 857,7 (c)

167,19

Provisional estimates

EIB

Extension of the general lending mandate
to FRY

Baltic Sea/Russia special action

Macro-financial assistance

Possible FRY operation

45,5 (c)

65,0 (c)

4,10

5,85

180,0 (d)

16,20

12,7

321

141

(1) The basis of calculation represents 75 % (a), 70 % (b), or 65 % (c) of the nominal amount of the EIB loans and 100 % (d) of the

macro-financial assistance loans.

(2) According to the provisioning rules provided in the Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994. Since 2000,
the provisioning rate has been fixed to 9 %. Operations which were decided before 2000 have been deprovisioned at a rate of 14 %
and reprovisioned at a rate of 9 %.

(3) Reserve amount in 2001 under the financial perspective.
(4) For 100 % guarantee loans.

207,0

206,0

38,8

34,8

28,9