2001/549/EC: Council Decision of 16 July 2001 providing macro-financial assistance to the Federal Republic of Yugoslavia
Date: 2001-07-16
Institutions: Council of the European Union
Subjects: EU aid, Yugoslavia, financial aid, macroeconomics

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Official Journal of the European Communities

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II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 16 July 2001

providing macro-financial assistance to the Federal Republic of Yugoslavia

(2001/549/EC)

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:

(1)

(2)

The Commission consulted the Economic and Financial
Committee before submitting its proposal.

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-func-
tioning market economy.

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

(4)

(5)

(6)

The Community provided an emergency assistance
package of approximately EUR 200 million comprising
food aid and medical and energy supplies to provide for
the basic needs of the population during the winter of
2000/01.

Financial assistance from the Community shall be instru-
mental in bringing the Federal Republic of Yugoslavia
closer to the Community.

The Federal Republic of Yugoslavia has reached an
understanding with the International Monetary Fund
(IMF) on a comprehensive set of economic stabilisation

(1) Opinion delivered on 5 July 2001 (not yet published in the Official

Journal).

(7)

(8)

(9)

(10)

(11)

and reform measures. The IMF approved a one-year
stand-by arrangement on 11 June 2001.

The Federal Republic of Yugoslavia has reached an
understanding with the World Bank on a set of struc-
tural adjustment measures to be backed by Structural
Adjustment Loans and Credits in the areas of public
finance reform, enterprise privatisation and banking
restructuring.

The authorities of the Federal Republic of Yugoslavia
have requested financial assistance from the inter-
national
the Community, and
other bilateral donors.

institutions,

financial

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 the
coming months in order to strengthen the country's
reserve position and to support the policy objectives
attached to that country's authorities' reform efforts.

committed themselves

The authorities of the Federal Republic of Yugoslavia
have
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 for those
obligations that are not yet due.

Community macro-financial assistance to the Federal
Republic of Yugoslavia in the form of a combination of
a long-term loan and a straight grant is an appropriate
measure to help, with other donors, ease the country's
external financial constraints, supporting the balance of
payments and strengthening the reserve position.

(12)

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

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(13)

(14)

The inclusion of a grant component in this assistance is
without prejudice to the powers of
the budgetary
authority.

This macro-financial 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:

Article 1

The Community shall make available to the Federal
1.
Republic of Yugoslavia 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.

2.
The loan component of this assistance shall amount to a
maximum principal of EUR 225 million with a maximum
maturity of 15 years to be released in the first instalment. 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 75 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.

The implementation of this assistance is conditional upon
5.
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 for those obligations that
are not yet due.

Article 2

1.
The Commission is empowered to agree with the authori-
ties 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 agree-
ments referred to in Article 1(4).

The Commission shall verify at

in
2.
collaboration 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 this macro-financial assistance and that its condi-
tions are being fulfilled.

intervals,

regular

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 towards the Community and the European Invest-
ment Bank and on the basis of an agreement between the
Federal Republic of Yugoslavia and the IMF on a macro-
economic programme that is supported by an upper credit
tranche arrangement.

2.
Subject to the provisions of Article 2, the second and any
further instalments shall be released on the basis of a satisfac-
tory track record in the Federal Republic of Yugoslavia's adjust-
ment and reform programme and not earlier
than three
months after the release of the previous instalment.

The funds shall be paid to the National Bank of the

3.
Federal Republic of Yugoslavia.

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.

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

3.
At the request of the Federal Republic of Yugoslavia, 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 corresponding financial
conditions. Refinancing or restructuring operations shall be
carried out in accordance with the conditions set out in para-
graph 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

4.
incurred by the Community in
concluding and carrying out the operation under this Decision
shall be borne by the Federal Republic of Yugoslavia, if appro-
priate.

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, and before September, 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 in the previous year.

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

It shall expire two years after the date of its publication.

Article 6

Done at Brussels, 16 July 2001.

For the Council

The President

L. MICHEL