Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL providing further macro-financial assistance to Georgia
Date: 2011-01-13
Institutions: European Commission
Subjects: EU aid, Georgia, economic conditions, economic stabilisation, financial aid, financial cooperation

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EUROPEAN COMMISSION 

Brussels, 13.1.2011 
COM(2010) 804 final 

2010/0390 (COD) 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

providing further macro-financial assistance to Georgia 

SEC(2010) 1617 final 

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EXPLANATORY MEMORANDUM 

(1) 

Context of the proposal 

110 

•  Grounds for and objectives of the proposal  

The EU completed in early August 2010 the disbursement of a EUR 46 million macro-
financial  assistance  (MFA)  operation  to  Georgia  approved  by  the  Council  in 
November 2009. The assistance, which was provided in the form of grants, was part of 
a pledge of two possible MFA operations of the same amount made by the European 
Commission  at  the  International  Donors'  Conference  of  October  20081.  The  approval 
of  the  second  MFA  was  conditional  on  the  continued  existence  of  external  financing 
needs over and above those covered by the IMF arrangement.  

In  a  letter  from  10  May  2010,  the  Georgian  Minister  of  Finance  requested  the 
activation  of  the  second  part  of  the  Commission  pledge  of  EU  funds,  amounting  to 
EUR 46 million. In this context, a European Commission team visited Georgia in early 
September to assess the country's macroeconomic situation and prospects in 2010-11, 
focusing on the balance of payments and budgetary needs.  

The Commission considers that the activation of the second part of the MFA pledged 
in  2008  is  warranted.  Although  the  Georgian  economy  is  recovering  (following  the 
double shock caused by the military conflict with Russia of August 2008 and the global 
financial  crisis),  the  balance  of  payments  and  budgetary  position  remain  weak  and 
vulnerable. In particular, the lingering effects of the conflict with Russia, including the 
blockade  of  most  direct  trade  with  this  country  and  the  failure  of  foreign  direct 
investment (FDI) inflows to recover to their pre-crisis level, combined with a still very 
sizeable  current  account  deficit  and  substantial  debt  repayment  obligations  (with  a 
serious bunching expected for 2012-14), leave the balance of payments fragile.  

In  this  context,  the  Commission  proposes  a  further  MFA  to  Georgia,  amounting  to 
EUR  46  million.  The  EU  MFA  would  be  aimed  at  contributing  to  covering  the 
country's  external  financing  needs,  as  identified  in  cooperation  with  the  IMF  in  the 
context of the IMF Stand-By Arrangement (SBA) of USD 1.17 billion, in place since 
October  2008.  The  proposed  assistance  would  be  provided  half  in  grants  and  half  in 
loans. 

The new MFA would contribute to help Georgia to address the economic consequences 
of  the  conflict  with  Russia  and  the  global  crisis.  The  new  MFA  will  support  the 
economic  reform  agenda  of  the  government.  It  would  reduce  the  short-term  financial 
vulnerability  still  faced  by  the  economy,  while  supporting  reform  measures  aimed  at 
achieving  a  more  sustainable  balance  of  payments  and  budgetary  situation  over  the 
medium-term. The assistance would also promote policy measures to strengthen public 
finance  management  (building  on  those  of  the  previous  operation  and  of  the  EU's 
sectoral  budgetary  support  operation),  as  well  as  measures  to  foster  economic  and 
financial  integration  with  the  EU,  in  particular  by  exploiting  the  potential  offered  by 
the  future  Association  Agreement,  which  aims  at  concluding  a  Deep  and 

1 

The total assistance pledged at this Donors’ Conference by the EC amounted to up to EUR 500 million 
and was aimed at supporting the Georgian economy in the aftermath of the August 2008 armed conflict 
with Russia and in the context of the global financial crisis. 

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Comprehensive Free Trade Agreement between the two parties. 

The proposed new MFA would be exceptional and limited in time and is intended to 
run in parallel to the SBA. It will complement support from international and bilateral 
donors. 

120 

•  General context 

In  the  aftermath  of  the  double  shock  of  the  military  conflict  with  Russia  of  August 
2008  and  the  global  crisis,  the  Georgian  economy  is  showing  signs  of  recovery. 
Following two years of low or negative growth, 2010 is expected to see the revival of 
economic activity. While 2009 saw a contraction of real GDP by 3.9%, the first half of 
2010 recorded a strong growth of 6.6% (on an annual basis). Annual CPI inflation is 
expected to pick up and reach over 8% by end-2010, partly reflecting the increase in 
prices of imported cereals. On the back of the economic recovery, the government has 
decided  to  tighten  its  budgetary  and  monetary  policies.  Under  the  programme  agreed 
with the IMF, the fiscal deficit is to be reduced from 9.2% of GDP in 2009 to 6.3% in 
2010 and 4.8% of GDP in 2011. Monetary policy began to be tightened in the summer, 
with  the  key  policy  interest  rate  being  moderately  increased,  to  keep  inflation  under 
control. 

While the economic recovery seems to be taking hold, the economic situation remains 
vulnerable as the financing of the large current account deficit remains uncertain. By 
weakening domestic demand, the crisis contributed to a halving of the current account 
deficit in 2009. However, the deficit remains very large and is projected to reach 12.0% 
of  GDP  in  2010,  and  the  situation  is  not  expected  to  improve  in  2011.  Georgia's 
exports  continue  to  suffer  from  the  trade  embargo  imposed  by  Russia  in  2006  and 
extended in 2008.  

For 2010-11, the financing of the current account is still uncertain. FDI inflows were 
negatively  affected  by  the  crisis  and  are  projected  to  decline  even  further  in  2010, 
while  not  much  recovery  in  FDI  inflows  is  expected  in  2011.  This  disappointing 
performance  of  FDI  inflows  puts  at  risk  the  financing  of  the  current  account  and  the 
build up of international currency reserves and shows that foreign investor confidence, 
which  experienced  a  dramatic  blow  due  to  the  military  conflict  with  Russia  in  2008, 
has still not returned. It also reflects the loss of steam of the privatisation process, as 
many of the most attractive state assets have already been sold. 

Although gross international reserves have recovered from a trough of USD 1.5 billion 
trough reached during the crisis to USD 2.1 billion at the end of September 2010, they 
remain at a suboptimal level, particularly since this recovery has partly been achieved 
by  borrowing  from  the  IMF.  Net  international  reserves  have  actually  declined  from 
USD 850 million in September 2008 to USD 740 million in September 2010. A further 
vulnerability in the balance of payments relates to the high level of external public debt 
and a significant need for a debt roll-over in the coming years. 

In  September  2008,  the  IMF  approved  an  18-month  Stand-By  Arrangement  for 
Georgia, worth USD 750 million. During the third programme review, approved by the 
IMF Executive Board in August 2009, the Stand-By Arrangement was extended until 
14  June  2011  and  the  financing  package  increased,  bringing  the  total  Stand-By 
Arrangement programme to USD 1.17 billion. The programme remains on-track: on 9 
July  2010,  the  IMF  Board  completed  the  sixth  review  of  the  IMF  Stand-By 

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n 

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Arrangement,  concluding  that  performance  under  the  programme  has  been  broadly 
satisfactory. The next IMF review, which combines the seventh and the eight reviews, 
is scheduled for November 2010.  

The  overall  support  package  for  2008-2010  pledged  by  the  international  donor 
community  at  the  2008  Donors'  Conference  amounted  to  USD  4.5  billion,  including 
USD 1 billion from the USA, USD 200 million from Japan, USD 173 million from the 
EU  Member  States  and  USD  2.4  billion  from  the  Multilateral  Financial  Institutions. 
The  total  public  sector  commitment  amounted  to  USD  2.6  billion  and  the 
disbursements related to this commitment have been largely frontloaded.  

•  Existing provisions in the area of the proposal 

None 

•  Consistency with the other policies and objectives of the Union 

Georgia  is  one  of  the  EU  partner  countries  in  the  framework  of  the  European 
Neighbourhood  Policy  (ENP).  The  EU-Georgia  ENP  Action  Plan  was  adopted  in 
November 2006 for a period of five years. The European Union has a vital interest in 
seeing  stability,  better  governance  and  economic  development  at  its  Eastern  borders. 
To  this  end,  the  Eastern  Partnership  initiative  was  officially  launched  by  the  EU  and 
the six partner countries during the Prague Summit on 7 May 2009. 

The European Commission pledged up to EUR 500 million of assistance to Georgia at 
the October 2008 International Donors' Conference. The sources of the funding include 
both  programmed  funds  under  the  envelope  of  the  European  Neighbourhood  and 
Partnership  Instrument  (ENPI)  and  crisis  instruments,  such  as  the  Instrument  for 
Stability, Humanitarian Aid and Macro-Financial Assistance. The package provides a 
direct response to the economic and social hardships the country endured as a result of 
the military conflict in August 2008 and the consequence of the global financial crisis. 
The  EU  MFA  complements  other  assistance  instruments  by  providing  short-term 
macroeconomic  support  to  Georgia  in  the  context  of  the  IMF-supported  Stand-By 
Arrangement.  It  also  complements  the  ENPI  budget  support,  which  contributes  to 
covering Georgia's financing needs and is linked to specific sectoral reforms.  

The proposal for the new MFA to Georgia is fully consistent with the guidelines for the 
MFA, as provided by the Council conclusions of 2002 on MFA and the accompanying 
letter  of  the  Council  President  to  the  Commission  President.  In  particular,  and  as 
explained  in  more  detail  in  the  Staff  Working  Document  accompanying  the 
Commission's  proposal,  the  proposal  is  consistent  with  the  following  guidelines: 
exceptional  character,  political  preconditions,  complementarity,  conditionality  and 
financial discipline. 

(2) 

Consultation of interested parties and impact assessment 

•  Consultation of interested parties 

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MFA  is  provided  as  an  integral  part  of  the  international  support  to  Georgia's  post-
conflict  economic  recovery.  The  Commission  services  cooperated  closely  with  the 
World  Bank  in  the  preparations  for  the  International  Donors'  Conference  and 

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229 

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consultations  on  the  implementation  of  the  pledged  package  have  been  held  with  the 
multilateral  and  bilateral  donors.  In  the  preparation  of  this  proposal  for  MFA,  the 
Commission  services  have  consulted  with  the  International  Monetary  Fund.  The 
Commission  consulted  the  EU  Member  States  in  the  Economic  and  Financial 
Committee before submitting its proposal for MFA. The Commission has also been in 
regular contact with the Georgian government. 

•  Collection and use of expertise 

An  Operational  Assessment  verifying  the  quality  and  reliability  of  Georgia's  public 
financial circuits and administrative procedures will be carried out by the Commission 
with the assistance of external experts. 

•  Impact assessment 

The MFA and the economic adjustment and reform programme attached to it will help 
alleviate Georgia's short-term financing needs while supporting policy measures aimed 
at  strengthening  medium-term  balance  of  payments  and  fiscal  sustainability,  raising 
sustainable  growth  and  promoting  economic  integration  and  regulatory  convergence 
with the EU. It will also help improve the efficiency and transparency of public finance 
management,  building  on  the  positive  impact  of  the  previous  MFA  operation  in  the 
country. MFA will also support the macroeconomic stabilisation and structural policies 
of the programme agreed with the IMF.  

(3) 

Legal elements of the proposal 

305 

•  Summary of the proposed action 

The  European  Union  shall  make  MFA  available  to  Georgia,  half  of  which  will  be 
provided as grants and half as loans, for a total maximum amount of EUR 46 million. 
The  assistance  will  contribute  to  cover  Georgia's  residual  external  financing  needs  in 
2009-2011, as identified by the Commission based on the estimates of the IMF.  

The  assistance  is  planned  to  be  disbursed  in  2011  in  two  equal  instalments,  each  of 
them consisting of a grant and a loan element. The assistance will be managed by the 
Commission.  Specific  provisions  on  the  prevention  of  fraud  and  other  irregularities, 
consistent with the Financial Regulation, will be taken into account. The disbursement 
of the first instalment is expected to take place in the first quarter of 2011. The second 
instalment, conditional on a number of policy measures, could be disbursed in the third 
quarter of 2011. 

As  usual  with  the  MFA  instrument,  the  disbursements  would  be  conditional  on 
successful programme reviews under the IMF's Stand-By Arrangement. In addition, the 
Commission  and  the  Georgian  authorities  would  agree  on  specific  structural  reform 
measures  in  a  Memorandum  of  Understanding.  In  the  context  of  the  previous  MFA 
operations, the Commission services have worked closely with the Georgian authorities 
on  public  finance  management  (PFM)  reforms  that  aim  at  establishing  a  more 
transparent,  coherent  and  accountable  PFM  system.  In  the  new  MFA  operation,  the 
scope  of  the  policy  conditionality  would  be  enlarged,  notably  to  measures  aimed  at 
fostering  the  economic  and  financial  integration  as  well  as  regulatory  harmonisation 
with the EU in selected areas, under the ENP Action Plan and taking into account the 

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new context created by the plan to conclude an Association Agreement between the EU 
and Georgia. Following the successful implementation of the last MFA, in which the 
Georgian  authorities  demonstrated  the  political  will  and  the  capacity  to  implement 
structural  reforms,  the  Commission  believes  that  also  this  second  MFA  operation 
would  contribute  to  the  implementation  of  the  government's  agenda  of  structural 
reforms. The conditions will be consistent with the priorities of the EU-Georgia ENP 
Action Plan. 

The decision to disburse half of the proposed assistance in grants and the other half in 
loans  is  justified  by  Georgia’s  level  of  development  (as  measured  by  its  per  capital 
income)  and  debt  indicators,  and  the  recent  improvement  in  the  country's  economic 
situation. The full use of grants in the previous operation had to be understood as an 
exceptional decision justified by the very difficult circumstances Georgia found itself 
in late 2008. The blend of grants and loans is also consistent with the fact that Georgia 
has  been  a  blend  country  for  the  World  Bank  since  January  2009.  For  the  upcoming 
World Bank operations, the country is expected to receive one third of the World Bank 
assistance  in  the  form  of  the  IDA  lending,  while  two  thirds  of  the  assistance  are 
expected to be provided on IBRD terms. 

•  Legal basis 

The legal basis for this proposal is Article 212 of the TFEU.  

•  Subsidiarity principle 

The proposal falls  under  the  mixed competence  of the EU. The subsidiarity principle 
applies to the extent that the objectives of restoring short-term macroeconomic stability 
in  Georgia  cannot  be  sufficiently  achieved  by  the  Member  States  alone  and  can 
therefore  be  better  achieved  by  the  European  Union.  The  main  reasons  are  the 
budgetary  constraints  met  at  the  national  level  and  the  need  for  strong  donor 
coordination in order to maximise the scale of assistance.  

•  Proportionality principle 

The  proposal  complies  with  the  proportionality  principle:  it  confines  itself  to  the 
minimum  required  in  order  to  achieve  the  objectives  of  short-term  macro  economic 
stability and does not go beyond what is necessary for that purpose.  

As identified by the Commission based on the estimates of the IMF in the context of 
the  Stand-By-Arrangement,  the  amount  of  the  assistance  corresponds  to  14%  of  the 
residual financing gap for the period 2009-2011. This is deemed an appropriate level of 
burden-sharing  for  the  EU,  given  the  assistance  pledged  to  Georgia  by  EU  Member 
States and other bilateral donors and multilateral creditors. 

•  Choice of instruments 

Proposed instruments: other. 

Other  instruments  would  not  be  adequate  because,  in  the  absence  of  a  framework 
regulation  for  the  Macro-Financial  Assistance  instrument,  ad  hoc  Council  decisions 
under  Article  212  of  the  TFEU  are  the  only  available  legal  instrument  for  this 

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assistance. 

Project  finance  or  technical  assistance  would  not  be  suitable  to  address  these 
macroeconomic  objectives.  The  key  value  added  of  the  MFA  in  comparison  to  other 
EU instruments would be to alleviate the external financial constraint and to help create 
a  stable  macroeconomic  framework,  including  by  promoting  a  sustainable  balance  of 
payments  and  budgetary  situation,  and  an  appropriate  framework  for  structural 
reforms.  By  helping  to  put  in  place  an  appropriate  overall  framework  for 
macroeconomic  and  structural  policies,  MFA  can  increase  the  effectiveness  of  the 
actions  financed  in  Georgia  under  other,  more  narrowly  focused  EU  financial 
instruments.  

(4) 

Budgetary implications 

401 

The  grant  element  of  the  assistance  of  EUR  23  million  would  be  financed  from 
commitment  appropriations  of  the  2011  budget,  under  the  budget  line  01  03  02 
(Macroeconomic assistance), with payments taking place in 2011. 

In line with the Guarantee Fund Regulation2, the provisioning of the Guarantee Fund is 
expected to take place in 2013 and to amount to a maximum of EUR 2.1 million. This 
corresponds to 9% of the EUR 23 million loan expected to be disbursed in 2011. 

(5) 

Additional information 

•  Review/revision/sunset clause 

533 

The proposal includes a sunset clause. The proposed MFA would be made available for 
2.5 years  starting from the first  day after  the entry into force of  the  Memorandum  of 
Understanding. 

2 

Article 5 of Council Regulation (EC, Euratom) No 480/2009 of 25 May 2009 establishing a Guarantee 
Fund for external action (codified version). The provisioning is appropriated from "the provisioning of 
the Guarantee Fund" (budget line 01 04 01 14). 

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2010/0390 (COD) 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

providing further macro-financial assistance to Georgia 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  functioning  of  the  European  Union,  and  in  particular 
Article 212 (2) thereof, 

Having regard to the proposal from the Commission3,  

After transmission of the draft legislative act to the National Parliaments, 

Acting in accordance with the ordinary legislative procedure4, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

Relations  between  Georgia  and  the  European  Union  are  developing  within  the 
framework  of  the  European  Neighbourhood  Policy.  In  2006,  the  EU  and  Georgia 
agreed  on  a  European  Neighbourhood  Policy  Action  Plan  identifying  medium-term 
priorities  in  EU-Georgia  relations.  In  2010,  the  EU  and  Georgia  launched  the 
negotiations  of  an  Association  Agreement  that  is  expected  to  replace  the  existing 
Partnership  and  Cooperation  Agreement.  The  framework  of  EU-Georgia  relations  is 
further enhanced by the newly launched Eastern Partnership. 

The  extraordinary  European  Council  on  1  September  2008  confirmed  the  EU's 
willingness to strengthen EU-Georgia relations in the aftermath of the armed conflict 
in August 2008 between Georgia and Russia.  

Georgian  economy  has  been  affected  by  the  international  financial  crisis  since  the 
third quarter of 2008, with declining output, falling fiscal revenues and rising external 
financing needs.  

At  the  International  Donors'  Conference  held  in  October  2008  the  international 
community  pledged  support  to  Georgia's  economic  recovery  in  line  with  the  Joint 
Needs Assessment carried out by the United Nations and the World Bank.  

(5) 

The European Union announced up to EUR 500 million of assistance to Georgia. 

3 
4 

OJ C […], […], p. […]. 
Position of the European Parliament of … 2010 and Decision of the Council of … 2010. 

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(6) 

(7) 

(8) 

(9) 

Georgian economic adjustment and recovery is supported by financial assistance of the 
International  Monetary  Fund  (IMF).  In  September  2008,  the  authorities  of  Georgia 
agreed  with  the  IMF  on  a  Stand-By  Arrangement  of  USD  750  million  to  support 
Georgian economy to achieve the necessary adjustment to the economic crisis.  

Following a further deterioration of the economic situation and a necessary revision of 
the  programme's  underlying  economic  assumptions  as  well  as  higher  external 
financing  needs,  an  agreement  was  reached  between  Georgia  and  the  IMF  for  an 
extension by USD 424 million of the Stand-By Arrangement, which was approved in 
August 2009 by the IMF Board. 

The  European  Union  intends  to  provide,  in  2010-2012,  under  the  European 
Neighbourhood and Partnership Instrument (ENPI), budget support grants of a total of 
EUR 37 million per year. 

Georgia  has  requested  European  Union  macro-financial  assistance  in  view  of  the 
worsening economic situation and outlook.  

(10)  Given  that  there  is  still  a  residual  financing  gap  in  the  balance  of  payments,  macro-
financial  assistance  is  considered  an  appropriate  response  to  Georgia's  request  under 
the current exceptional circumstances to support economic stabilisation in conjunction 
with the current IMF programme.  

(11)  The  European  Union  macro-financial  assistance  should  not  merely  supplement 
programmes and resources from the IMF and the World Bank, but should ensure the 
added value of Union involvement. 

(12)  The  Commission  should  ensure  that  the  Union  macro-financial  assistance  is  legally 
and substantially in line with the measures taken within the different areas of external 
action and other relevant Union policies. 

(13)  The  specific  objectives  of  the  Union  macro-financial  assistance  should  strengthen 
efficiency,  transparency  and  accountability.  These  objectives  should  be  regularly 
monitored by the Commission. 

(14)  The  conditions  underlying  the  provision  of  the  Union  macro-financial  assistance 
should reflect the key principles and objectives of the Union’s policy towards Georgia. 

(15) 

In  order  to  ensure  efficient  protection  of  the  European  Union’s  financial  interests 
linked  to  this  macro-financial  assistance,  it  is  necessary  that  Georgia  adopts 
appropriate  measures  relating  to  the  prevention  of,  and  the  fight  against,  fraud, 
corruption and any other irregularities linked to this assistance. It is also necessary that 
the  Commission  provides  for  appropriate  controls  and  that  the  Court  of  Auditors 
provides for appropriate audits. 

(16)  The  release  of  the  European  Union  financial  assistance  is  without  prejudice  to  the 

powers of the budgetary authority. 

(17)  This  assistance  should  be  managed  by  the  Commission.  In  order  to  ensure  that  the 
European  Parliament  and  the  Economic  and  Financial  Committee  are  able  to  follow 
the implementation of this Decision, the Commission should regularly inform them of 
developments relating to the assistance and provide them with relevant documents. 

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(18)  According  to  Article  291  of  the  Treaty  on  the  Functioning  of  the  European  Union, 
rules and general principles concerning mechanisms for the control by Member States 
of the Commission’s exercise of implementing powers shall be laid down in advance 
by a regulation adopted in accordance with the ordinary legislative procedure. Pending 
the adoption of that new regulation, Council Decision 1999/468/EC of 28 June 1999 
laying down the procedures for the exercise of implementing powers conferred on the 
Commission5 continues to apply, with the exception of the regulatory procedure with 
scrutiny, which is not applicable, 

HAS ADOPTED THIS DECISION: 

1. 

2. 

3. 

4. 

1. 

Article 1 

The  European  Union  shall  make  available  to  Georgia  macro-financial  assistance, 
with  a  maximum  amount  of  EUR  46  million,  with  a  view  to  supporting  Georgia's 
economic  stabilisation  and  covering  its  balance  of  payments  needs  as  identified  in 
the current IMF programme. Of this amount, up to EUR 23 million shall be provided 
in the form of grants and up to EUR 23 million in the form of loans. The release of 
the proposed macro-financial assistance is subject to the approval of Budget 2011 by 
the Budgetary Authority. 

To finance the loan component of the assistance, the Commission is empowered to 
borrow the necessary resources on behalf of the European Union. The loan shall have 
a maximum maturity of 15 years. 

The  release  of  the  European  Union  financial  assistance  shall  be  managed  by  the 
Commission in a manner consistent with the agreements or understandings reached 
between  the  IMF  and  Georgia  and  with  the  key  principles  and  objectives  of 
economic reform set out in the EU-Georgia Partnership and Cooperation Agreement. 
The Commission shall regularly inform the European Parliament and the Economic 
and Financial Committee, of developments in the management of the assistance and 
provide them with relevant documents. 

The European Union financial assistance shall be made available for two years and 
six months starting from the first day after the entry into force of the Memorandum 
of Understanding referred to in Article 2(1). 

Article 2 

The  Commission,  acting  in  accordance  with  the  advisory  procedure  referred  to  in 
Article  6(2),  shall  be  empowered  to  agree  with  the  authorities  of  Georgia  on  the 
economic  policy  and  financial  conditions  attached  to  the  European  Union  macro-
financial assistance, to be laid down in a Memorandum of Understanding which shall 
include  a 
'Memorandum  of 
Understanding').  The  conditions  shall  be  consistent  with  the  agreements  or 
understandings referred to in Article 1(3). These conditions will aim, in particular, at 
strengthening  the  efficiency,  transparency  and  accountability  of  the  assistance, 

their  fulfilment  (hereafter 

timeframe  for 

the 

5 

OJ L 184, 17.7.1999, p. 23. 

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including public finance management systems in Georgia. Progress in attaining these 
objectives  shall  be  regularly  monitored  by  the  Commission.  The  detailed  financial 
terms  of  the  assistance  shall  be  laid  down  in  the  Grant  Agreement  and  the  Loan 
Agreement to be agreed between the Commission and the authorities of Georgia.  

During  the  implementation  of  the  European  Union  financial  assistance,  the 
Commission  shall  monitor  the  soundness  of  Georgia's  financial  arrangements,  the 
administrative  procedures  and  the  internal  and  external  control  mechanisms  which 
are relevant to such assistance and the adherence to the agreed timeframe. 

The Commission shall verify at regular intervals that Georgia's economic policies are 
in accordance with the objectives of the European Union macro-financial assistance 
and  that  the  agreed  economic  policy  conditions  are  being  satisfactorily  fulfilled.  In 
doing  so,  the  Commission  shall  coordinate  closely  with  the  International  Monetary 
Fund  and  the  World  Bank,  and,  when  required,  with  the  Economic  and  Financial 
Committee. 

Article 3 

Subject  to  the  conditions  of  paragraph  2,  the  European  Union  financial  assistance 
shall  be  made  available  by  the  Commission  to  Georgia  in  two  instalments,  each  of 
them consisting of a grant and a loan element. The size of each instalment shall be 
laid down in the Memorandum of Understanding.  

The Commission shall decide on the release of the instalments subject to satisfactory 
implementation  of  the  economic  policy  conditions  agreed  in  the  Memorandum  of 
Understanding.  The  disbursement  of  the  second  instalment  shall  not  take  place 
earlier than three months after the release of the first instalment. 

The European Union funds shall be paid to the National Bank of Georgia. Subject to 
provisions  to  be  agreed  in  the  Memorandum  of  Understanding,  including  a 
confirmation  of  residual  budgetary  financing  needs,  the  Union  funds  may  be 
transferred to the Treasury of Georgia as the final beneficiary. 

Article 4 

The  borrowing  and  the  lending  operations  related  to  the  loan  component  of  the 
European Union assistance shall be carried out in euro using the same value date and 
shall  not  involve  the  European  Union  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 Georgia so requests, to ensure that 
an early repayment clause is included in the loan terms and conditions and that it is 
matched  by  a  corresponding  clause  in  the  terms  and  conditions  of  the  borrowing 
operations.  

At  the  request  of  Georgia  and  where  circumstances  permit  an  improvement  of  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 

2. 

3. 

1. 

2. 

3. 

1. 

2. 

3. 

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11 

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in paragraph 1 and shall not have the effect of extending the average maturity of the 
borrowing concerned or increasing the amount  of capital outstanding at the  date of 
the refinancing or restructuring. 

All  costs  incurred  by  the  European  Union  which  are  related  to  the  borrowing  and 
lending operations under this Decision shall be borne by Georgia.  

The European Parliament and the Economic and Financial Committee shall be kept 
informed of developments in the operations referred to in paragraphs 2 and 3. 

4. 

5. 

Article 5 

The  European  Union  financial  assistance  shall  be  implemented  in  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 Communities6 and its 
implementing  rules.  In  particular,  the  Memorandum  of  Understanding,  the  Loan  Agreement 
and  the  Grant  Agreement  to  be  agreed  with  the  authorities  of  Georgia  shall  provide  for 
appropriate measures in relation to the prevention of, and the fight against, fraud, corruption 
and other irregularities affecting the assistance. In order to ensure greater transparency in the 
management  and  disbursement  of  funds,  the  Memorandum  of  Understanding,  the  Loan 
Agreement  and  the  Grant  Agreement  shall  also  provide  for  controls,  including  on-the-spot 
checks  and  inspections,  to  be  carried  out  by  the  Commission,  including  the  European  Anti-
Fraud Office. They shall in addition provide for audits, including where appropriate on-the-
spot audits, by the Court of Auditors. 

The Commission shall be assisted by a committee. 

Article 6 

Where  reference  is  made  to  this  paragraph,  Articles  3  and  7  of  Decision 
1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. 

Article 7 

By  30  June  of  each  year,  the  Commission  shall submit to the European Parliament 
and to the Council a report on the implementation of this Decision in the preceding 
year,  including  an  evaluation  thereof.  The  report  shall  indicate  the  connection 
between the policy conditions as laid down  in  the  Memorandum  of  Understanding, 
Georgia’s  on-going  economic  and  fiscal  performance  and  the  Commission’s 
decisions to release the instalments of the assistance.  

No  later  than  two  years  after  the  expiry  of  the  availability  period  referred  to  in 
Article  1(4),  the  Commission  shall  submit  to  the  European  Parliament  and  to  the 
Council an ex post evaluation report. 

OJ L 248, 16.9.2002, p. 1. Regulation as amended by Regulation (EC, Euratom) No: 1995/2006 (OJ L 
390, 30.12.2006, p. 1) 

1. 

2. 

1. 

2. 

6 

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12 

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Article 8 

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

Done at Brussels, […] 

For the European Parliament 
The President 
[…] 

For the Council 
The President 
[…] 

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Annex 3: LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative  

Macro-financial assistance to Georgia 

1.2. 

Policy area(s) concerned in the ABM/ABB structure7  

Policy area: Title 01 – Economic and Financial Affairs 

Activity: 03 – International economic and financial affairs 

1.3. 

Nature of the proposal/initiative  

X The proposal/initiative relates to a new action  

(cid:133) The proposal/initiative relates to a new action following a pilot project/preparatory action8  

(cid:133) The proposal/initiative relates to the extension of an existing action  

(cid:133) The proposal/initiative relates to an action redirected towards a new action  

1.4. 

Objectives 

1.4.1.  The Commission's multiannual strategic objective(s) targeted by the proposal/initiative: 

"To promote prosperity beyond the EU" 

The major areas of DG ECFIN related activity pertain to: 

Fostering  the  implementation  of  the  European  Neighbourhood  Policy  by  deepening 
1. 
economic analysis and strengthening policy dialogue and advice on the economic aspects of 
the Action Plans. 

2.  Developing,  monitoring  and  implementing  macro-financial  assistance  for  partner  third 
countries, in co-operation with the relevant international financial institutions. 

1.4.2. 

Specific objective(s) and ABM/ABB activity(ies) concerned  

Specific objective No 3: "Providing macro-financial assistance to third countries in resolving 
their balance of payment crises and restoring external debt sustainability" 

ABM/ABB  activity  concerned:  International  Economic  and  Financial  Relations,  global 
governance. 

7 
8 

ABM: Activity-Based Management – ABB: Activity-Based Budgeting. 
As referred to in Article 49(6)(a) or (b) of the Financial Regulation. 

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1.4.3.  Expected result(s) and impact 

The proposed assistance consists of an EU loan of EUR 23 million and a grant of up to EUR 
23  million  to  Georgia  (the  grant  to  be  financed  from  the  General  Budget),  with  a  view  to 
contributing to a more sustainable balance of payments situation. The assistance will help the 
country  overcome  the  economic  and  social  hardships  endured  as  a  result  of  the  military 
conflict  in  August  2008  and  the  consequences  of  the  global  financial  crisis.  It  will  also 
promote  structural  reforms  aimed  at  raising  sustainable  economic  growth,  improving  public 
finance  management  and  strengthening  economic  integration  and  regulatory  approximation 
with the EU. 

An  ex-ante  evaluation  (see  the  Staff  Working  Document  accompanying  the  Commission 
proposal) was carried out by Commission services in September-October 2010 (by Unit D2 of 
the  Economic  and  Financial  Affairs  Directorate-General).  It  concluded  that  the  EU  macro-
financial assistance was warranted. 

1.4.4. 

Indicators of results and impact 

The  authorities,  notably  the  Ministry  of  Finance,  will  be  required  to  report  on  a  set  of 
indicators  to  the  Commission  services  on  a  regular  basis.  They  will  also  provide  a 
comprehensive  report  on  the  compliance  with  the  agreed  policy  conditions  ahead  of  the 
disbursement of the second instalment of the assistance. 

The Commission services will continue to monitor public finance management, following the 
operational  assessment  of  the  financial  circuits  and  administrative  procedures  that  is  being 
carried out in Georgia in preparation of this operation. The Delegation of the European Union 
to Georgia will also provide regular reporting on issues that are relevant for the monitoring of 
the  assistance.  The  Commission  services  will  remain  in  close  contact  with  the  IMF  and  the 
World Bank to benefit from their insights from their on-going activities in Georgia.  

An independent ex-post evaluation of the EU macro-financial assistance provided to Georgia 
2006-2008 was finalised in January 2010. The MFA operation implemented between late 2009 
and  mid-2010  will  be  subject  to  ex-post  evaluation  in  2011.  The  present  operation  will  be 
subject to ex-post evaluation within two years after the expiry of its implementation period.  

An annual report to the Council and European Parliament is foreseen in the proposed decision 
of the European Parliament and the Council, comprising an assessment of the implementation 
of this assistance operation. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term  

The disbursement of the assistance will be conditional upon a satisfactory track record in the 
implementation  of  the  present  three-year  arrangement  agreed  between  Georgia  and  the  IMF 
under  the  Stand-By  Arrangement  (SBA).  In  addition,  the  Commission  shall  agree  with  the 
Georgian authorities on a number of specific policy conditions which have to be met before 
the  second  instalment  is  released  by  the  Commission.  These  policy  measures  shall  be 
consistent with agreements reached by Georgia with the IMF. Before the release of the second 

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instalment  of  the  assistance,  the  Commission  services,  in  co-operation  with  the  national 
authorities, shall verify that the policy conditions have been fulfilled. 

1.5.2.  Added value of EU involvement 

By helping the country overcome the economic shock caused by the conflict with Russia and 
the  global  crisis,  the  proposed  EU  MFA  will  contribute  to  promote  macroeconomic  and 
political  stability  in  the  Eastern  neighbourhood  /  Eastern  Partnership  region  and  closer 
economic  and  political  ties  between  Georgia  and  the  EU.  By  complementing  the  resources 
made available by the international financial institutions and other donors, it contributes to the 
overall  effectiveness  of  the  package  of  financial  support  agreed  by  the  international  donor 
community in the aftermath of the crisis.  

In addition to the financial impact of the MFA, the proposed programme will strengthen the 
government's reform commitment and its aspiration towards closer relations with the EU. In a 
wider context, the proposed action fits well into the EU’s general approach towards Georgia, 
which  is  one  of  a  stronger  engagement,  as  reflected  in  the  opening  of  negotiations  on  an 
Association  Agreement,  a  key  component  of  which  will  be  the  conclusion  of  the  Deep  and 
Comprehensive Free Trade Area.  

The MFA  operation  adds  value to the EU involvement  in  Georgia  as  it  is  mobilized  to  help 
Georgia in dealing with serious short-term balance-of-payments difficulties. It is expected to 
help create a stable macroeconomic framework, including by promoting a sustainable balance 
of  payments  and  budgetary  situation.  The  assistance  underpins  the  implementation  of  strong 
adjustment  and  structural  reform  measures  to  remedy  these  difficulties.  The  general  budget 
support  assistance,  as  provided  under  the  ENPI,  has  more  long-term  oriented  development 
objectives  and  would  not  be  appropriate  as  a  short-term  balance  of  payments  support 
instrument.  

1.5.3.  Lessons learned from similar experiences in the past 

A recent external evaluation of a similar assistance provided to Georgia in the past indicates 
that  the practice  of selecting a limited number  of key structural reforms has  been successful 
and  suggests  continuing  this  practice  with  adequate  monitoring  and  close  policy  dialogue 
being maintained throughout the implementation period of the assistance. Furthermore, good 
results  in  the  overall  reform  agenda  during  the  previous  MFA  operation  allows  the 
Commission to follow the same orientation for the proposed operation. 

1.5.4.  Coherence and possible synergy with other relevant instruments 

Regarding the coherence and possible synergy with other EU instruments, the EU package of 
assistance  to  Georgia  includes  programmed  funds  under  the  ENPI  envelope  and  crisis 
instruments (the Instrument for Stability, Humanitarian Aid and the MFA). The package also 
includes  the  costs  for  the  EU  Civilian  Monitoring  Mission  in  Georgia.  Through  the 
programmed sectoral budget support, the ENPI envelope has so far supported reforms in the 
area of public finance management, criminal justice sector, vocational education and training 
and  regional  development.  For  the  period  of  2011-2013  a  new  ENPI  package  of  EUR  180 
million  has  been  allocated.  The  key  value  added  of  the  MFA  in  comparison  to  other  EU 
instruments  would  be  to  help  create  a  stable  macroeconomic  framework,  including  by 

EN 

16 

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promoting  a  sustainable  balance  of  payments  and  budgetary  situation,  and  an  appropriate 
framework for structural reforms.  

MFA does not provide a regular financial support nor is meant to support the economic and 
social development of the recipient countries. The MFA is to be discontinued as soon as the 
country's  external  financial  situation  has  been  brought  back  into  a  sustainable  path. 
Afterwards, regular EU cooperation assistance instruments are meant to take over, notably the 
direct budget support provided under the ENPI Regulation. 

MFA  is  also  meant  to  be  complementary  to  interventions  by  the  international  financial 
institutions;  in  particular  the  IMF  supported  adjustment  and  reform  programmes.  The 
assistance  of  macroeconomic  nature  is  released  only  if  economic  and  financial  policy 
conditions are fulfilled.  

1.6. 

Duration and financial impact  

X Proposal/initiative of limited duration  

–  X  Proposal/initiative in effect: for 2.5 years from the entry into force of the Memorandum 

of Understanding, as stated in the Art 2(1) of the proposed Decision. 

–  (cid:133) Financial impact from YYYY to YYYY  

(cid:133) Proposal/initiative of unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) envisaged9  

X Centralised direct management by the Commission  

(cid:133) Centralised indirect management with the delegation of implementation tasks to: 

–  (cid:133) executive agencies  

–  (cid:133) bodies set up by the Union10  

–  (cid:133) national public-sector bodies/bodies with public-service mission  

–  (cid:133) persons entrusted with the implementation of specific actions pursuant to Title V of the 
Treaty  on  European  Union  and  identified  in  the  relevant  basic  act  within  the  meaning  of 
Article 49 of the Financial Regulation  

(cid:133) Shared management with the Member States  

9 

10 

Details  of  management  modes  and  references  to  the  Financial  Regulation  may  be  found  on  the  BudgWeb  site: 
http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html 
As referred to in Article 185 of the Financial Regulation. 

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(cid:133) Decentralised management with third countries  

(cid:133) Joint management with international organisations 

If more than one management mode is indicated, please provide details in the "Comments" section. 

Comments : 

Active cooperation will be sought from the EU Delegations in the monitoring of the assistance. 

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

This  assistance  is  of  macroeconomic  nature  and  its  design  is  consistent  with  the  IMF-
supported  economic  programme.  The  monitoring  of  the  action  by  the  Commission  services 
will  take  place  on  the  basis  of  progress  in  the  implementation  of  the  SBA  arrangement  and 
specific  reform  measures  to  be  agreed  with  the  Georgian  authorities  in  a  Memorandum  of 
Understanding. The authorities, notably the Ministry of Finance, will be required to report on 
a  set  of  indicators  to  the  Commission  services  on  a  quarterly  basis  and  will  provide  a 
comprehensive compliance report ahead of the disbursement of  the second instalment of the 
operation.  

The Commission services will continue to monitor public finance management, following the 
operational  assessment  of  the  financial  circuits  and  administrative  procedures  that  will  be 
carried out in Georgia in December 2010 in preparation of this operation. The Delegation of 
the European Union to Georgia will also provide regular reporting on issues that are relevant 
for  the  monitoring  of  the  assistance.  The  Commission  services  will  remain  in  close  contact 
with the IMF and the World Bank to benefit from their on-going activities in Georgia.  

An annual report to the Council and to the European Parliament is foreseen in the proposed 
decision  of  the  European  Parliament  and  the  Council  and,  comprising  an  assessment  of  the 
implementation  of  this  assistance  operation.  Furthermore,  an  independent  ex-post  evaluation 
of  the  assistance  is  planned  to  be  carried  out  by  the  Commission  or  its  duly  authorised 
representatives within two years after the expiry of the implementation period. 

2.2.  Management and control system  

2.2.1.  Risks identified  

There  are  fiduciary,  policy  and  political  risks  related  to  this  macro-financial  assistance 
operation.  

There is a risk that the macro-financial assistance, which is not dedicated to specific expenses 
(contrary  to  project  financing,  for  example),  could  be  used  in  a  fraudulent  way.  In  general 
terms, this risk is related to factors such as central bank independence, quality of management 
systems  and  administrative  procedures,  control  and  oversight  functions  in  the  financial 
circuits, security of IT systems, and adequate internal and external audit capabilities.  

EN 

18 

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As regards policy risks, the main assumption is that the Government of Georgia will remain 
committed to fiscal adjustment and compliance with its agreement with the IMF. This will be 
validated  on  the  basis  of  IMF’s  regular  monitoring  of  performance  indicators  and  structural 
benchmarks.  There  is  a  risk  that  the  Government  of  Georgia  will  not  comply  with  the  IMF 
programme  conditions,  as  the  programme  targets  may  turn  out  more  difficult  to  reach  than 
assumed and as political conditions in the country may change. However, the authorities have 
shown  strong  commitment  to  work  with  international  institutions  to  implement  the  reform 
agenda. 

Consolidation  of  the  democratic  reforms  and  institutions  is  at  the  core  of  the  EU’s  relations 
with Georgia. There are some shortcomings in the independence of the judiciary and there is a 
need to strengthen a pluralistic media landscape. The ongoing process of Constitutional reform 
is  encouraging  but  there  are  uncertainties  concerning  the  final  direction  that  it  will  take. 
National parliamentary elections are scheduled for 2012, while presidential elections are due 
in  2013.  Overall,  risks  of  political  instability  or  backtracking  of  democratic  reforms  remain 
manageable. 

Finally, a failure to find a peaceful resolution of the military conflict with Russia represents a 
significant political risk. 

2.2.2.  Control methods envisaged  

The macro-financial assistance will be liable to verification, control and auditing procedures 
under the responsibility of the Commission, including the European Antifraud Office (OLAF), 
and by the European Court of Auditors. 

2.3. 

Measures to prevent fraud and irregularities 

The  Commission  services  have  put  in  place  an  on-going  programme  of  Operational 
Assessments  of  the  financial  circuits  and  administrative  procedures  in  all  third  countries 
benefiting from the European Union macro-financial assistance in order to fulfil requirements 
implied  by  the  Financial  Regulation  applicable  to  the  General  Budget  of  the  European 
Communities. The conclusions of available IMF Safeguard Assessments and of other relevant 
reports of the IMF and the World Bank are also taken into consideration.  

In Georgia, the Commission services, with the support of duly mandated external experts, will 
carry  out  in  early  December  2010  an  operational  assessment  of  the  financial  circuits  and 
administrative procedures at the Ministry of Finance and the National Bank of Georgia. This 
review  will  cover  areas  such  as  management  structure  and  organisation,  management  and 
control  of  funds,  security  of  IT  systems,  internal  and  external  audit  capacity  as  well  as  the 
independence of the central bank. It will verify the validity of the last operational assessment 
conducted  in  2005  that  concluded  that  the  framework  for  sound  financial  management  is 
largely  effective.  In  particular,  it  concluded  that  the  Ministry  of  Finance  is  effective  with 
regard  to  budgetary  control,  but  needs  to  be  strengthened  and  developed  with  regard  to 
internal control within budget organisations and internal and external audit. It also concluded 
that the framework for sound financial management within the National Bank of Georgia was 
effective. 

The  proposed  legal  basis  for  macro-financial  assistance  to  Georgia  includes  a  provision  on 
fraud  prevention  measures.  These  measures  will  be  elaborated  further  in  a  Memorandum  of 

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Understanding. It is envisaged that a number of specific policy conditions will be attached to 
the assistance, mainly in the area of public finance management, with a view to strengthening 
efficiency, transparency and accountability. 

In addition, the Commission intends to emphasise public finance management reforms in the 
policy conditionality attached to this operation. 

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3. 

3.1. 

Heading of 
multiannual 
financial 
framework 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget  line(s) 
affected  

•  Existing expenditure budget lines:  

01 03 02: Macroeconomic assistance  

Budget line 

Type of  
expenditure

Contribution  

Number  
[Description………………………...……….] 

DA/NDA 
(11) 

from 
EFTA12 
countries 

From 
candidate 
countries13 

from third 
countries 

within the meaning 
of Article 18(1)(aa) 
of the Financial 
Regulation  

01 03 02 01 

4 

Macroeconomic assistance 

DA 

NO 

NO 

NO 

NO 

01 04 01 14 – Provisioning of the Guarantee Fund 

Budget line 

Type of 
expenditure

Contribution  

Number  
[Heading……………………………………..] 

Diff./non-
diff. 

from 
EFTA 
countries 

From 
candidate 
countries 

from third 
countries 

within the meaning 
of Article 18(1)(a) 
of the Financial 
Regulation  

Heading of 
multiannual 
financial 
framework 

01 04 01 14 

4 

Provisioning of the Guarantee Fund 

DA 

NO 

NO 

NO 

NO 

The  Guarantee  Fund  for  external  actions  has  to  be  provisioned  according  to  the  Fund 
Regulation,  as  amended.  In  line  with  this  Regulation,  loans  are  based  on  the  outstanding 
amount at the end of a year. The provisioning amount is calculated at the beginning of the year 
"n" as the difference between the target amount and the Fund's net assets at the end of the year 
"n-1". This provisioning amount is introduced in the year "n" to the "n+1" preliminary budget 
and  effectively  paid  in  one  transaction  at  the  beginning  of  the  year  "n+1"  from  "the 
provisioning of the Guarantee Fund" (budget line 01 04 01 14). As a result, 9% (maximum of 
EUR 2.1 million) of the effectively disbursed amount will be considered in the target amount 
at the end of the year "n-1" for the calculation of the provisioning of the Fund.  

11 
12 
13 

DA= Differentiated appropriations / DNA= Non-Differentiated Appropriations 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidate countries from the Western Balkans. 

EN 

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01 04 01 04 – European Union guarantee for EU loans raised for macro-financial assistance to 
third countries.  

The budget entry ("p.m.") reflecting the budget guarantee for the loan (EUR 23 million) will 
be activated only in the case of an effective call on the guarantee. It is not expected that the 
budget guarantee be called. 

•  New budget lines requested: not applicable. 

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3.2. 

Estimated impact on expenditure  

3.2.1. 

Summary of estimated impact on expenditure  

EUR million (to 3 decimal places) 

Heading of multiannual financial 
framework:  

4 

01 03 02 Macro-economic assistance 

DG: ECFIN 

(cid:121) Operational appropriations  

Number of budget line: 01 03 02 

Year 
N14 

Year 
N+1 

Year 
N+2 

Year 
N+4 

Year 

N+5  

Commitments 

Payments 

(1) 

(2) 

23 
23 

(cid:121)Appropriations 
financed 
 from  the  envelop  of  specific  programs15  :  operational  assessment 
and ex-post evaluation  

administrative 

nature 

an 

of 

Number of budget line: 01 03 02 

TOTAL appropriations 
for DG ECFIN 

Commitments 

 Payments 

(3) 

(4) 

0.03 

0.03 

Commitments 

=1+3 

0.03 

23 

Payments 

=2+4 

23.03 

0.15 

0.05 

0.15 

0.05 

0.1 

0.1 

TOTAL 

23 
23 

0.18 

0.18 

23.18 

23.18 

14 
15 

EN 

Year N is the year in which the proposal is expected to be adopted (2010). 
Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former "BA" lines), indirect 
research, direct research. 

23 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Heading of multiannual financial 
framework:  

5 

" Administrative expenditure " 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

… enter as many years as 
necessary to show the duration 
of the impact (see point 1.6)  

TOTAL 

EUR 

DG: ECFIN 

(cid:121) Human resources  
(cid:121) Other administrative expenditure : missions 

36,600 

36,600 

36,600 

6,000 

15,000 

10,000 

TOTAL DG ECFIN 

Appropriations  

48,600 

46,600 

48,600 

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total 
= Total payments) 

commitments 

48,600 

46,600 

48,600 

Year 
N16 

Year 
N+1 

Year 
N+2 

Year 
N+3 

… enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR) 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

48,600 

46,600 

48,600 

Payments 

48,600 

46,600 

48,600 

16 

Year N is the year in which the proposal is expected to be adopted (2010). 

EN 

24 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

–  (cid:133) The proposal/initiative does not require the use of operational appropriations  

–  x  The proposal/initiative requires the use of operational appropriations, as explained below: 

Indicative 
objectives 
and outputs 

(cid:216) 

Commitment appropriations in EUR million (to 3 decimal places) 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Year 
N+4 

TOTAL 

Type of output17 

f
o
r
e
b
m
u
N

s
t
u
p
t
u
o

Cost 

f
o
r
e
b
m
u
N

s
t
u
p
t
u
o

Cost 

f
o
r
e
b
m
u
N

s
t
u
p
t
u
o

Cost 

f
o
r
e
b
m
u
N

s
t
u
p
t
u
o

Cost 

f
o
r
e
b
m
u
N

s
t
u
p
t
u
o

Cost 

f
o
r
e
b
m
u
N

s
t
u
p
t
u
o

Cost 

2 

23 

1 

0.03 

- Output 

- Output 

Providing assistance in 
the form of grants 
through a number of 
instalments 

Performing operational 
assessment of financial 
circuits and controls 

Completing ex-post 
evaluation of the 
assistance 

TOTAL COST 

2 

23 

1 

0.03 

1 

0.15 

1 

0.15 

23.18 

17 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 

EN 

25 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.1.  Estimated requirements of human resources  

–  (cid:133) The proposal/initiative does not require the use of human resources  

–  X  The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full amounts (or at most to one decimal place) 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

… enter as many years as 
necessary to show the 
duration of the impact 
(see point 1.6) 

(cid:121) Establishment plan posts (officials and temporary agents) 

Economic and Financial Affairs 01 01 01 
(Headquarters and Commission’s 
Representation Offices) 

XX 01 01 02 (Delegations) 

XX 01 05 01 (Indirect research) 

10 01 05 01 (Direct research) 

(cid:121) External personnel (in Full Time Equivalent unit: FTE)18 

XX 01 02 01 (CA, INT, SNE from the "global 
envelope") 

- 

0.33 

0.33 

0.33 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

XX 01 02 02 (CA, INT, JED, LA and SNE in 
the delegations) 

XX 01 04 yy 19 

- at Headquarters20 

- in delegations  

XX 01 05 02 (CA, INT, SNE – Indirect 
research) 

10 01 05 02 (CA, INT, SNE - Direct research) 

Other budget lines (specify) 

TOTAL 

0.33 

0.33 

0.33 

XX is the policy area or budget title concerned. 

The  human  resources  required  will  be  met  by  staff  from  the  DG  who  are  already 
assigned to management of the action and/or have been  redeployed within the DG, 
together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the 
managing  DG  under  the  annual  allocation  procedure  and  in  the  light  of  budgetary 
constraints. Cost of the staff needed is estimated on the basis of 30% of the annual 
expenditure for an AD5 – AD12 grade official 

Description of tasks to be carried out: 

18 

19 
20 

CA= Contract Agent; INT= agency staff ("Intérimaire"); JED= "Jeune Expert en Délégation" (Young 
Experts in Delegations); LA= Local Agent; SNE= Seconded National Expert. 
Under the ceiling for external personnel from operational appropriations (former "BA" lines). 
Essentially  for  Structural  Funds,  European  Agricultural  Fund  for  Rural  Development  (EAFRD)  and 
European Fisheries Fund (EFF). 

EN 

26 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Officials and temporary agents 

E.g. prepare memoranda of understanding and grant agreements, liaise  with the 
authorities  and  the  IFIs,  liaise  with  external  experts  for  the  operational 
assessments,  conduct  review  missions  and  prepare  Commission  staff  reports, 
prepare Commission pro0cedures related to the management of the assistance 

External personnel 

N.A. 

3.2.3.  Compatibility with the current multiannual financial framework  

–  X  Proposal/initiative is compatible the current multiannual financial framework. 

–  (cid:133) Proposal/initiative  will  entail  reprogramming  of  the  relevant  heading  in  the 

multiannual financial framework. 

–  (cid:133) Proposal/initiative requires application of the flexibility instrument or revision 

of the multiannual financial framework21. 

3.2.4.  Third-party contributions  

–  The proposal/initiative does not provide for co-financing by third parties  

3.3. 

Estimated impact on revenue  

–  X  Proposal/initiative has no financial impact on revenue. 

–  (cid:133) Proposal/initiative has the following financial impact: 

– 

– 

(cid:133) 

(cid:133) 

on own resources  

on miscellaneous revenue  

21 

See points 19 and 24 of the Interinstitutional Agreement. 

EN 

27 

   EN