Council Regulation (EC) No 332/2002 of 18 February 2002 establishing a facility providing medium-term financial assistance for Member States' balances of payments
Date: 2002-02-18
Institutions: Council of the European Union
Subjects: Community loan, EU aid, balance-of-payments deficit, financial aid, non-participating country (euro area), reflation

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(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 332/2002

of 18 February 2002

establishing a facility providing medium-term financial assistance for Member States' balances of
payments

THE COUNCIL OF THE EUROPEAN UNION,

(5)

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

Having regard to the proposal from the Commission, presented
following consultation with the Economic and Financial
Committee (1),

Having regard to the opinion of the European Parliament (2),

Having regard to the opinion of the European Central Bank (3),

Whereas:

(1)

(2)

(3)

(4)

The second subparagraph of Article 119(1) and Article
119(2) of the Treaty provide that, acting on a recom-
mendation from the Commission made after consulting
the Economic and Financial Committee, the Council will
grant mutual assistance where a Member State is in
difficulties or is seriously threatened with difficulties as
regards its balance of payments. Article 119 does not
define the instrument to be used for granting the mutual
assistance envisaged.

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
prevail,
economic policy measures likely to prevent the occur-
rence of an acute balance of payments crisis and to
support its efforts towards convergence.

conditions

exchange

orderly

rate

Each loan to a Member State should 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 it to the
gravity of the balance of payments situation in that State
and to the way in which it develops.

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

if required,

(1) OJ C 180 E, 26.6.2001, p. 199.
(2) Opinion delivered on 6 September 2001 (not yet published in the

Official Journal).

In order to finance assistance that has been granted, the
Community needs to be able to use its creditworthiness
to borrow resources that will be placed at the disposal of
loans.
the Member States concerned in the form of
Operations of this kind are necessary to the achievement
of the objectives of the Community as defined in the
Treaty,
especially the harmonious development of
economic activities in the Community as a whole.

To this end, a single facility providing medium-term
financial assistance for Member States' balances of
payments was established by Council Regulation (EEC)
No 1969/88 (4).

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 should be retained in order to meet not only the
potential needs of the present Member States which have
not adopted the euro but also the needs of new Member
States until such time as they adopt the euro.

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 should, 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
this need and also to take account of
forthcoming enlargements of the European Union.

to meet

The glaring imbalance between the number of potential
beneficiaries of
the loans during the third stage of
economic and monetary union and the number of coun-
tries 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
these having now
markets and financial
attained a stage of development and maturity which
should enable them to undertake such financing.

institutions,

(6)

(7)

(8)

(9)

(3) OJ C 151, 22.5.2001, p. 18.

of Accession.

(4) OJ L 178, 8.7.1988, p. 1. Regulation as amended by the 1994 Act

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

it shall first consult the Commission and the other Member
States in order to examine, among other things, the possibilities
available under the Community medium-term financial assis-
tance facility. Such consultations shall be held within the
Economic and Financial Committee, in accordance with Article
119 of the Treaty.

(10)

(11)

(12)

(13)

(14)

its average duration,

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

institutions,

In order to finance loans granted under this Regulation,
the Commission should be authorised to contract on
behalf of
the European Community borrowings on
capital markets or from financial

institutions.

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

For the adoption of this 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 provides no powers
other than those of Article 308,

Article 3

The medium-term financial assistance facility may be

1.
implemented by the Council on the initiative of:

(a) the Commission, acting pursuant to Article 119 of the
Treaty in agreement with the Member State seeking
Community financing;

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

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

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

amount and its average duration;

(b) the economic policy conditions attaching to the medium-
term financial assistance with a view to re-establishing or
ensuring a sustainable balance of payments situation;

(c) 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 to verification of the results achieved in imple-
menting the programme in terms of the objectives set.

HAS ADOPTED THIS REGULATION:

Article 1

Article 4

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, diffi-
culties in their balance of current payments or capital move-
ments shall be established. Only Member States which have not
adopted the euro may benefit from this Community facility.

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
borrowings on the capital markets or with financial
institu-
tions.

Article 2

In cases where restrictions on capital movements are intro-
duced or reintroduced pursuant to Article 120 of the Treaty
during the period of the financial assistance, its conditions and
arrangements shall be re-examined pursuant to Article 119 of
the Treaty.

Article 5

The Commission shall take the necessary measures to verify at
regular intervals,
in collaboration with the Economic and
Financial Committee, that the economic policy of the Member
State in receipt of a Community loan accords with the adjust-
ment 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.

Where a Member State which has not adopted the euro
proposes
financing outside the
Community which are subject to economic policy conditions,

to call upon sources of

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

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Article 6

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 in euro. They shall use the same
value date and shall not involve the Community in the trans-
formation of maturities,
in any interest rate risk, or in any
other commercial risk.

The characteristics of the successive instalments released by the
Community under the financial assistance facility shall be nego-
tiated 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
the
Community as a borrower on those same markets, it has the
right to withhold its agreement and propose an alternative
solution.

is such as to tarnish the reputation of

Where a Member State receives a loan carrying an early repay-
ment clause and decides to exercise this option, the Commis-
sion shall take the necessary steps.

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

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 of capital
outstanding at the date of the refinancing or restructuring.

The costs incurred by the Community in concluding and
3.
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 the
first subparagraph of paragraph 2.

Article 8

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

Article 9

The European Central Bank shall make the necessary arrange-
ments for the administration of the loans.

The funds shall be paid only for the purposes indicated in
Article 1.

Article 10

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
facility established still meets, in its principle, arrangements and
ceiling, the need which led to its creation.

Article 11

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

Article 12

This Regulation shall enter into force on the day following that
of its publication in the Official Journal of the European Communi-
ties.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 18 February 2002.

For the Council

The President

J. PIQUÉ I CAMPS