2006/880/EC: Council Decision of 30 November 2006 providing exceptional Community financial assistance to Kosovo
Date: 2006-11-30
Institutions: Council of the European Union
Subjects: EU aid, Kosovo, economic aid, economic development, economic reconstruction, financial aid

L 339/36

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Official Journal of the European Union

6.12.2006

II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 30 November 2006

providing exceptional Community financial assistance to Kosovo

(2006/880/EC)

THE COUNCIL OF THE EUROPEAN UNION,

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

establishing the European

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament (1),

Whereas:

(1)

(2)

The United Nations Security Council adopted Resolution
1244 (1999) (UNSCR 1244 (1999)) on 10 June 1999
aiming at promoting the establishment, pending a final
settlement, of substantial autonomy and self-government
in Kosovo within the former Federal Republic of Yugo-
slavia.

set up an international

The International Community, basing itself upon UNSCR
1244 (1999), has
security
presence (KFOR) and an interim civil administration —
the United Nations Interim Mission in Kosovo (UNMIK).
UNMIK consists of
four components (pillars) and the
European Union is funding the fourth pillar responsible
for economic reconstruction and development. UNMIK,
and particularly Pillar IV thereof, has achieved substantial
legal and policy
progress in setting up an institutional,

(1) Opinion delivered on 12 October 2006 (not yet published in the

Official Journal).

framework conducive
economy based on market principles.

to the

creation of a sound

(3)

(4)

(5)

Since its establishment, UNMIK has transferred significant
areas of competence to the Provisional Institutions of Self
Government (PISG). In particular, responsibility for the
budget has been transferred from UNMIK to the Ministry
of Economy and Finance within the PISG, with the
Special Representative of
the UN Secretary-General
retaining the ultimate power of approving the budget.

On 24 October 2005, the UN Security Council approved
the UN Secretary-General’s proposal
to launch the
political process
to determine the future status of
Kosovo.

The authorities of Kosovo entitled to receive Community
assistance and responsible for agreeing to and fulfilling
the financial and economic conditions attached to this
assistance are therefore UNMIK and the PISG or, when
the future status of Kosovo will have been determined,
the institution or institutions designated to take on these
tasks and responsibilities.

(6) Within the stabilisation and association process, which is
it is
the framework for EU relations with the region,
desirable to support efforts
to sustain political and
economic
stabilisation in Kosovo, with a view to
evolving towards the development of a full cooperation
relationship with the Community making the European
future of Kosovo more tangible.

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(7)

(8)

(9)

exceptional

The Community has already found it an appropriate
measure to help ease Kosovo’s financial constraints in
exceptionally difficult circumstances and, pursuant
to
Council Decision 2000/140/EC of 14 February 2000
to
providing
Kosovo (1) and Council Decision 2001/511/EC of 27
June 2001 on further exceptional financial assistance to
Kosovo (2), provided exceptional
financial assistance in
the form of
straight grants amounting to EUR 35
million and EUR 30 million in 2000 and 2001 respec-
tively. The last payment under
such assistance was
released in December 2002.

Community

assistance

This exceptional financial assistance complements other
Community assistance programmes
the western
Balkans.

for

framework for 2006,

In November 2005 the authorities of Kosovo agreed with
the International Monetary Fund (IMF) a Letter of Intent
and a Memorandum of Economic and Financial Policies
including
laying out a fiscal
medium-term orientations. They
completed in the
beginning of March 2006 a medium-term expenditure
framework. The framework identifies budget and off-
budget financing needs in 2006 to 2008. Accordingly,
it is estimated that budget external financial assistance of
some EUR 81 million (EUR 14 million in 2006 and
EUR 67 million in 2007, respectively) would be needed
until the end of 2007.

(10) Although economic activity resumed after the conflict,
Kosovo is at a low level of economic development.
Kosovo is not in a position to borrow either domestically
or on the international financial market and under its
current status it is not eligible for membership in the
international financial
institutions. It may therefore not
from lending assistance associated with their
benefit
programmes.

(11)

(12)

In view of current arrangements under UNSCR 1244
(1999), given Kosovo’s relatively low level of economic
development and its precarious public finance and
external
from the
in liaison
Community in the form of straight grants,
with other donors, continues to be the appropriate
form of support.

assistance

accounts,

financial

Such assistance will provide crucial bridge support
pending a settlement of Kosovo’s status.
It would be
unrelated to new status arrangements under negotiation
and not pre empt further Community and international
support
likely to be required upon status resolution
beyond 2007.

(1) OJ L 47, 19.2.2000, p. 28.
(2) OJ L 183, 6.7.2001, p. 42.

(13)

The release of this grant assistance is without prejudice to
the powers of the budgetary authority.

(14)

(15)

This financial support should be provided after verifying
whether the financial and economic conditions to be
agreed with the authorities of Kosovo upon approval of
this Decision can be satisfactorily fulfilled.

of

to

order

efficient

the
protection
In
ensure
Community’s financial
interests linked to the present
financial assistance, it is necessary to provide for appro-
priate measures by Kosovo in relation to the prevention
of and fight against fraud and other irregularities linked
to this assistance, as well as
for controls by the
Commission and audits by the Court of Auditors.

(16)

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

(17)

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 Kosovo an excep-
1.
financial assistance in the form of a grant of up to
tional
EUR 50 million with a view to alleviating the financial
situation in Kosovo, supporting the development of a sound
economic and fiscal
facilitating the continuation
and strengthening of essential administrative functions and
addressing public investment needs.

framework,

This Community financial assistance shall be managed by
2.
the Commission in consultation with the Economic and
Financial Committee and in a manner consistent with the
agreements or understandings reached between the IMF and
the authorities of Kosovo.

assistance

The Community financial

3.
shall be made
available for two years starting from the first day after the
the Memorandum of Understanding
entry into force of
referred to in Article 2(1). However,
so
require, the Commission, after consultation of the Economic
and Financial Committee, may decide to extend the availability
period by a maximum of one year.

if circumstances

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Article 2

1.
The Commission is empowered to agree with the autho-
rities of Kosovo, after consultation with the Economic and
Financial Committee,
economic policy and financial
conditions attached to this assistance, to be laid down in a
Memorandum of Understanding. These conditions shall be
consistent with the agreements or understandings referred to
in Article 1(2).

the

Before proceeding with the actual implementation of the
the
administrative
the internal and external control
to this Community macro-

2.
Community assistance,
soundness
of Kosovo's
procedures, as well as
mechanisms which are relevant
financial assistance.

the Commission shall monitor

financial

circuits,

3.
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 Kosovo
are in accordance with the objectives of this assistance and that
the agreed economic policy and financial conditions are being
satisfactorily fulfilled.

Article 3

1.
The assistance shall be made available by the Commission
to Kosovo in two or, if appropriate, three instalments. The first
instalment shall be released after the entry into force of the
Memorandum of Understanding referred to in Article 2(1),
and on the basis of a satisfactory assessment of the monitoring
referred to in Article 2(2).

The second and any further instalments shall be released
2.
on the basis of a satisfactory compliance with the economic
policy and financial conditions referred to in Article 2(1), satis-
factory progress towards fulfilling the conditions set out in the
Memorandum of Understanding provided for in Article 2(1),
and not before three months have elapsed since the release of
the previous instalment.

The funds shall be paid to the Ministry of Economy and
3.
Finance of the PISG, or when the future status of Kosovo will
have been determined, to the institution designated to take on
its tasks and responsibilities, exclusively in support of Kosovo's
budgetary financing needs.

Article 4

this assistance shall

take place in
The implementation of
accordance with the provisions of Council Regulation (EC,
Euratom) No 1605/2002 of 25 June 2002 on the Financial
Regulation applicable to the General Budget of the European
Communities (1) and its implementing rules. In particular, the
Memorandum of Understanding referred to in Article 2(1) shall
provide for appropriate measures by Kosovo related to the
fraud, corruption and
prevention of and the fight against
It
linked to this assistance.
other
shall also
provide
including the
controls by the Commission,
European Anti-Fraud Office (OLAF), with the right to perform
on the spot checks and inspections, and for audits by the Court
of Auditors and independent auditors, where appropriate, to be
carried out on the spot.

irregularities

for

Article 5

At least once a year, and before 15 September, the Commission
shall submit to the European Parliament and to the Council a
report, including an evaluation on the implementation of this
Decision in the previous year.

Article 6

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

Done at Brussels, 30 November 2006.

For the Council
The President

L. HYSSÄLÄ

(1) OJ L 248, 16.9.2002, p. 1.