2002/882/EC: Council Decision of 5 November 2002 providing further macro-financial assistance to the Federal Republic of Yugoslavia
Date: 2002-11-05
Institutions: Council of the European Union
Subjects: Community loan, EU aid, Serbia and Montenegro, donation, economic stabilisation, financial aid, macroeconomics

9.11.2002

EN

Official Journal of the European Communities

L 308/25

II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 5 November 2002

providing further macro-financial assistance to the Federal Republic of Yugoslavia

(2002/882/EC)

THE COUNCIL OF THE EUROPEAN UNION,

(5)

Having regard to the Treaty establishing the European Commu-
nity, and in particular Article 308 thereof,

Having regard to the proposal from the Commission (1),

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

Having regard to the opinion of the Economic and Financial
Committee (3),

(6)

Whereas:

(1)

(2)

The Federal Republic of Yugoslavia (FRY) authorities re-
established links with international organisations and in
particular made progress towards normalising the coun-
try's
creditors,
including the European Investment Bank, and with offi-
cial bilateral creditors.

relations with multilateral

financial

Since October 2000, the FRY has achieved substantial
progress in economic stabilisation and reform and has
made important steps towards a well-functioning market
economy.

(3) Within the Stabilisation and Association process, which
is the framework for the European Union's (EU) relations
with the region,
it is desirable to support efforts to
sustain political and economic stabilisation in the FRY,
with a view to evolving towards the development of a
full cooperation relationship with the Community.

(4)

Financial assistance from the Community should be
instrumental in bringing the FRY closer to the Commu-
nity.

(1) Proposal of 27 August 2002 (not yet published in the Official

Journal).

(2) Opinion delivered on 10 October 2002 (not yet published in the

Official Journal).

(3) Opinion delivered on 17 October 2002 (not yet published in the

Official Journal).

(7)

(8)

(9)

The Community already provided in 2001 macro-finan-
cial assistance of EUR 345 million to the FRY (4). The
International Monetary Fund (IMF) approved in May
2002 a three-year ‘Extended Arrangement’ for the FRY
of about USD 829 million to support the authorities'
economic programme in 2002 to 2005.

The World Bank decided in May 2001 to make available
to the FRY on a temporary basis a package of conces-
sional
loans of USD 540 million over a three year
period. So far, two structural adjustment credits of USD
70 million and of USD 85 million have been approved
in January and May 2002,
to support
reforms in public finance as well as in the energy and
social sector and to foster private sector development.

respectively,

The Members of the Paris Club agreed in November
2001 on a substantial debt relief in favour of the FRY,
already alleviating the balance of payments situation.

The authorities of the FRY have requested financial assis-
tance from the international financial
institutions, the
Community, and other bilateral donors.

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 to support
the policy objectives attached to the authorities' reform
efforts.

(4) Decision 2001/549/EC (OJ L 197, 21.7.2001, p. 38), Decision as
amended by Decision 2001/901/EC (OJ L 334, 18.12.2001, p. 30).

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Official Journal of the European Communities

9.11.2002

(10)

(11)

Community macro-financial assistance to the FRY is an
appropriate measure to help ease the country's external
financial constraints, supporting the balance of payments
and strengthening the reserve position.

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 sustainability
of the FRY's external financial position, given its limited
borrowing capacity. This Community financial assistance
should be effective and properly implemented.

(12)

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

(13) A new Constitutional Charter is presently in the process
of parliamentary discussion. Upon its entry into force,
the FRY would continue to exist under a new name. The
pending name change does not affect this Decision.

(14) Upon entry into force of the aforementioned Constitu-
the National Bank of Yugoslavia may
tional Charter,
cease to exist. Therefore, after entry into force of the
Constitutional Charter,
the macro-financial assistance
provided under this Decision will be paid to the institu-
tion or institutions designated to take on the responsibil-
ities from the National Bank of Yugoslavia for receiving
funds in the context of this Decision.

(15)

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

(16)

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 FRY further
1.
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 55 million with a maximum
maturity of 15 years. To this end, the Commission is empow-
ered to borrow, on behalf of the Community, the necessary
resources that will be placed at the disposal of the FRY in the
form of a loan.

The grant component of this assistance shall amount to a

3.
maximum of EUR 75 million.

4.
This Community financial assistance shall be managed by
the Commission in close consultation with the Economic and
Financial Committee and in a manner consistent with the
agreements reached between the IMF and the FRY.

Article 2

1.
The Commission is empowered to agree with the authori-
ties of the FRY, after consultation with the Economic and
Financial Committee, the economic policy conditions attached
to further Community macro-financial assistance. These condi-
tions 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
coordination with the IMF, that economic policies in the FRY
are in accordance with the objectives of this macro-financial
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 FRY in at least two instalments. Subject
to Article 2, the first instalment is to be released on the basis of
the adjustment and reform
satisfactory implementation of
programme of the FRY under the present Extended Arrange-
ment with the IMF.

Subject to Article 2, the second and any further instal-
2.
ments shall be released on the basis of a satisfactory track
record on the FRY's adjustment and reform programme, and
not before one quarter after the release of the previous instal-
ment.

3.
The funds shall be paid to the National Bank of the FRY,
and after the entry into force of a new Constitutional Charter,
to the institution or institutions designated to take on the
responsibilities of the National Bank of Yugoslavia for receiving
funds in the context of this Decision.

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.

The Commission shall take the necessary steps, if the FRY
2.
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 FRY, and where circumstances
permit an improvement in the loan's interest rate, the Commis-
sion 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 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 refinan-
cing or restructuring.

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Official Journal of the European Communities

L 308/27

All

related costs

the Community in
4.
concluding and carrying out the operation under this Decision
shall be borne by the FRY, if appropriate.

incurred by

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

Article 6

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

It shall apply until two years after that date.

Article 5

Done at Brussels, 5 November 2002.

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.

For the Council

The President

T. PEDERSEN