COMMISSION STAFF WORKING PAPER Commission Staff Working Document accompanying the Proposal for a Framework Regulation for Macro-Financial Assistance
Date: 2011-07-04
Institutions: European Commission
Subjects: International Monetary Fund, aid for restructuring, balance-of-payments deficit, financial aid, financial cooperation, productivity, third country, transparency in decision-making

EUROPEAN COMMISSION 

Brussels, 4.7.2011 
SEC(2011) 865 final 

COMMISSION STAFF WORKING PAPER 

Commission Staff Working Document accompanying the Proposal for a Framework 
Regulation for Macro-Financial Assistance 

Accompanying the document 

Regulation of the European Parliament and of the Council 

Regulation of the European Parliament and of the Council laying down general 
provisions for Macro-Financial Assistance to third countries 

{COM(2011) 396 final} 

 
 
 
 
  
 
LIST OF ABBREVIATIONS 

DSA 
EC 
ECA 
ECOFIN Council 
EFC 
EIB 
ENP 
ENPI 
EU 
EUR 
EURATOM 
IBRD 
IDA 
IFIs 
IMF 
IPA 
MFA 
MoU 
NIS 
OECD 
PFM 
PRGT 
TFEU 

Debt Sustainability Analysis 
European Community 
European Court of Auditors 
Economic and Financial Affairs Council 
Economic and Financial Committee 
European Investment Bank 
European Neighbourhood Policy 
European Neighbourhood Partnership Instrument 
European Union 
Euro 
European Atomic Energy Community 
International Bank for Reconstruction and Development (World Bank) 
International Development Association (World Bank) 
International Financial Institutions 
International Monetary Fund 
Instrument for Pre-Accession 
Macro-Financial Assistance 
Memorandum of Understanding 
Newly Independent States 
Organisation for Economic Cooperation and Development 
Public Finance Management 
Poverty Reduction and Growth Trust Fund (IMF) 
Treaty on the Functioning of the European Union 

EN 

i

EN 

 
TABLE OF CONTENTS 

1. 

INTRODUCTION....................................................................................................... 1 

2.  CONTEXT, RATIONALE AND OBJECTIVES OF THE PROPOSAL ................... 1 

2.1.  MFA  has  proved  a  useful  stabilisation  instrument  but  could  still  gain  in 

efficiency and transparency............................................................................... 1 

2.2.  The  new  institutional  and  operational  context  calls  for  streamlining  of 

decision-making and formalising the principles guiding MFA ........................ 2 

2.3.  The  proposed  Framework  Regulation  has  a  two-fold  objective:  making 

MFA more efficient while providing a transparent legal basis......................... 3 

3.  THE EXPERIENCE WITH MFA............................................................................... 3 

3.1.  Definition and purpose of MFA ........................................................................ 3 

3.2.  A historical perspective..................................................................................... 4 

3.3.  The legal basis for MFA.................................................................................... 8 

3.4.  The Genval criteria.......................................................................................... 10 

3.5.  The experience with policy conditionality ...................................................... 13 

3.6.  The Operational Assessments ......................................................................... 16 

3.7.  Overall Assessment of Results ........................................................................ 17 

3.8.  A slow decision-making process..................................................................... 19 

4.  KEY FEATURES OF THE PROPOSED FRAMEWORK REGULATION............ 20 

4.1.  A  more  efficient  decision-making  process:  the  role  of  the  examination 

committee ........................................................................................................ 21 

4.2. 

Implementation of MFA.................................................................................. 21 

4.3.  Reaffirming and updating the Genval criteria................................................. 22 

5.  SUMMARY AND CONCLUSIONS........................................................................ 24 

EN 

ii

EN 

 
 
LIST OF CHARTS 

•  Chart 1: Annual commitments and disbursements, 1990-2010 (EUR million) 

•  Chart 2: Regional distribution of commitments, 1990-2010 

•  Chart 3: Percentage of loans and grants, 1990-2010 by volume and number of operations 

LIST OF TABLES 

•  Table 1: Summary of MFA approvals, 1990-2010 (EUR million) 

LIST OF ANNEXES 

1.  “Final Report of Meta-Evaluation of Macro-financial Assistance” – Executive Summary 

(2009) 

2.  Chronological list of MFA operations since 1990 

3.  Commission’s staff working document of 19 February 2010 on the legal basis of MFA 

4.  Council Conclusions of 2002 on Macro-Financial Assistance (Genval criteria) and letter 

from the President of the Council to the President of the Commission 

5.  Decision making time-lags for the MFA operations, 2000-2009 

6.  Resolution of the European Parliament on Macro-Financial Assistance, June 2003  

7.  Selected development and debt indicators of potential MFA beneficiaries 

EN 

iii

EN 

 
 
 
 
1. 

INTRODUCTION 

This Working Document prepared by the Staff of the European Commission accompanies the 
Commission’s proposal for a Framework Regulation for the European Union’s (EU) Macro-
Financial Assistance (MFA) operations in third countries. It provides background information 
and discusses the main motivations for, and key features of, the proposed Regulation. 

Section  2  introduces  the  context,  justification  and  main  aims  of  the  proposal.  Section  3 
explains the main purpose of the MFA instrument, its legal base and basic principles and the 
experience  gathered  since  the  instrument  was  introduced  in  the  early  1990s.  It  assesses  the 
main achievements of the MFA, as well as a number of shortcomings, drawing on the ex-post 
evaluations conducted on MFA operations, previous institutional reports and resolutions and 
analysis by the Commission staff on the average decision-making lags. It also discusses the 
implications  of  the  changes  in  the  legal  basis  for  MFA  introduced  by  the  Lisbon  Treaty, 
arguing that they strengthen the case for adopting a Framework Regulation and streamlining 
the  decision-making  process.  Section  4  describes  the  main  elements  of  the  proposed 
Regulation, distinguishing the changes in the decision-making process from the formalisation 
and,  in  some  cases,  updating  of  the  rules  governing  MFA  operations.  Finally,  Section  5 
summarises the main findings and conclusions of the Document. 

2.  CONTEXT, RATIONALE AND OBJECTIVES OF THE PROPOSAL  

2.1.  MFA has proved a useful stabilisation instrument but could still gain in 

efficiency and transparency 

MFA to non-EU countries is an important external financial instrument set up by the EU in 
1990 primarily to alleviate the external shocks experienced by transition countries, many of 
which were candidates for EU accession. The instrument, which is mobilised at the request of 
partner countries, is meant to address their exceptional external financing needs in the form of 
balance  of  payment  support  through  loans  and/or  grants.  It  was  subsequently  extended  to 
potential  candidate  and  neighbourhood  countries.  Since  1990,  48 MFA  decisions  have 
resulted in combined disbursement of some EUR 5.4 billion1 (see Section 3.2).  

This  instrument  has  contributed  to  strengthen  macroeconomic  and  financial  stability  in 
countries  neighbouring,  or  geographically  close  to,  the  EU,  while  encouraging  their 
implementation of appropriate structural reforms. Between 2004 and 2008, the Commission’s 
Directorate  General  for  Economic  and  Financial  Affairs  (DG  ECFIN)  conducted  ex-post 
evaluations  of  all  the  recent  MFA  operations.  The  findings  of  these  evaluations  were 
reviewed  and  assessed  in  a  meta-evaluation  completed  in  late  20092.  In  the  context  of  the 
meta-evaluation,  the  Commission  organised  a  high-level  workshop  in  May  2009,  gathering 
officials from the relevant Commission services, the IMF and the World Bank. By discussing 
the  key  findings  emerging  from  the  meta-evaluation  with  respect  to  issues  such  as  the 
relevance,  efficiency,  effectiveness  and  impact  of  MFA  operations,  this  workshop  provided 

1  Out of total commitments of assistance of EUR 7.4 billion.  
2 

“Meta-evaluation  of  Macro-Financial  Assistance  Operations,  2004-2008.  Final Report”, GHK Consulting, 
October 2009. The executive summary of this report is reproduced in Annex 1 of this document. The full 
report is available at: http://ec.europa.eu/economy_finance/evaluation/pdf/final_report_meta_annex_en.pdf. 

EN 

1

EN 

 
                                                 
input  for  the  design  and  implementation  of  future  MFA  operations.  The  final  evaluation 
report  underlined  the  usefulness  of  this  financial  instrument,  while  putting  forward  some 
recommendations aimed at strengthening its effectiveness (see Section 3.7.1). 

Although  MFA  has  made  a  valuable  contribution  to  macroeconomic  stability  in  the  EU’s 
neighbourhood, with positive spill-over effects on the EU economy, some of its features tend 
to reduce its effectiveness and transparency. In particular, MFA is currently subject to case-
by-case legislative decisions. Before the entry into force of the Lisbon Treaty, these decisions 
were  taken  by  the  Council,  following  a  non-binding  consultation  of  the  Parliament,  on  the 
basis of Article 308 of the EC Treaty (the predecessor of Article 352 TFEU) since no specific 
provisions  had  been  foreseen  by  the  Treaty.  Under  the  Lisbon  Treaty,  these  decisions  have 
been  taken  jointly  by  the  Parliament  and  the  Council  through  the  ordinary  legislative 
procedure  (co-decision)  under  Article  212  TFEU  governing  economic  and  financial 
cooperation with third countries, which now forms the regular legal basis for MFA. 

The  process  of  adoption  of  an  individual  legislative  decision  for  each  MFA  operation  has 
tended to result in significant delays, harming the effectiveness of an instrument meant to be 
used  in  the  context  of  critical  balance  of  payments  situations  that  normally  require  an 
expeditious  response.  Thus,  the  above-mentioned  meta-evaluation  described  the  delays 
encountered  in  the  decision-making  process  as  an  important  shortcoming  of  the  MFA 
instrument,  notably  when  compared  with  interventions  of  the  international  financial 
institutions  (IFIs).  This  is  further  evidenced  by  the  fact  that  the  decision-making  process 
between  the  Commission’s  proposal  and  its  adoption  by  the  Council  has  lasted  on  average 
about three months since 2000 (see Section 3.8). This contributes to produce a significant lag 
between the disbursement of funds under IMF financial arrangements and the disbursement of 
funds  under  related  MFA  operations,  which,  as  stressed  by  the  meta-evaluation,  lowers  the 
political  visibility  of  this  EU  assistance  and  reduces  the  EU’s  capacity  to  influence  the 
formulation of the conditionality in IMF programmes. 

Moreover, MFA operations have de facto been based on a number of principles and criteria 
defined  by  the  Council,  the  so-called  Genval  criteria,  which  have  not  been  sufficiently 
formalised.  These  criteria  were  last  stated  in  the  conclusions  of  the  ECOFIN  Council  of 
8 October 2002 and an informal letter from the Council to the Commission (see Section 3.4). 
There is therefore a need to clarify and formalise these criteria in a legislative act, in order to 
strengthen the legal force, transparency and predictability of the rules applicable to MFA. 

2.2. 

The new institutional and operational context calls for streamlining of decision-
making and formalising the principles guiding MFA 

The entry into force of the Lisbon Treaty has underlined the need to address the shortcomings 
above. First, some features of the co-decision procedure, combined with the need to allow for 
at  least  eight  weeks  for  the  national  parliaments  to  use  their  right  of  scrutiny  of  new 
legislation,  could  result  in  a  lengthening  of  the  decision-making  process.  Second,  with  the 
Parliament now sharing with the Council the capacity to legislate on the MFA instrument, this 
instrument can no longer be based only on a set of Council conclusions. The Genval criteria 
must be transformed into a formal legal act endorsed by both co-legislators. Third, the Lisbon 
Treaty  (Article  212  TFEU)  aligns  MFA  with  other  external  cooperation  instruments  and 
extends the implementing powers of the Commission (Article 291 TFEU). This underlines the 
anomaly  of  the  lack  of  a  Framework  Regulation  for  MFA.  Since  the  EU  overhauled  and 
streamlined  its  external  assistance  framework  in  2006,  framework  regulations  were  adopted 

EN 

2

EN 

 
for  all  key  external  financial  instruments  (the  Instrument  for  Pre-Accession,  the  European 
Neighbourhood  and  Partnership  Instrument,  the  Development  Cooperation  Instrument,  the 
Instrument  for  Stability,  the  Instrument  for  Nuclear  Safety  Cooperation  and  Humanitarian 
Aid).  These  cover  the  period  of  the  2007-13  financial  perspectives  and  grant  strong 
implementation powers to the Commission.  

These  shortcomings  can  be  overcome  through  the  adoption  of  an  appropriate  Framework 
Regulation  streamlining  the  decision-making  process  and  formalising  the  applicable  rules. 
Moreover,  the  global  crisis  of  2008-09  has  further  highlighted  the  need  for  the  EU  of 
endowing  itself  with  solid  crisis  prevention  and  crisis  management  systems,  including 
appropriate financial facilities. MFA can contribute to economic and financial stability in the 
countries  in  the  EU  neighbourhood.  In  order  for  MFA  to  play  this  role  effectively,  it  is 
essential to make its decision-making process more efficient and timely.  

2.3. 

The proposed Framework Regulation has a two-fold objective: making MFA 
more efficient while providing a transparent legal basis 

The main objectives of the proposed Framework Regulation are: 

•  Making MFA more efficient by streamlining its decision-making process 

As highlighted by the global financial crisis, dealing effectively with emergency situations 
requires  an  expeditious  decision-making  process  avoiding  long  procedures  and  delays. 
This  ensures  that  the  response  instrument  can  better  help  to  shield  beneficiary  countries 
from short-term financial pressures – which can entail sudden, disorderly adjustments with 
high economic and social costs – thereby giving them the breathing space to adopt policy 
measures designed to restore a sustainable balance-of-payments position. A swift reaction 
can  therefore  clearly  increase  the  effectiveness  of  an  instrument  such  as  MFA.  It  should 
also increase its complementarity with the relatively quick disbursement financial facilities 
of the IMF and the policy-based facilities of the World Bank. 

•  Clarity, certainty and stability of the legal basis 

The  proposed  Framework  Regulation  will  not  change  the  substance  of  the  MFA 
instrument,  which  will  remain  based  on  existing  principles  formulated  in  conclusions  of 
the  Council  and  broadly  shared  by  the  Parliament  (the  Genval  criteria).  However,  the 
Framework  Regulation  provides  the  opportunity  to  the  legislators  to  consolidate,  clarify 
and  update,  where  necessary,  the  instrument’s  key  principles.  This  should  reinforce  its 
transparency  and  predictability,  as  all  the  criteria  will  be  established  clearly  and  more 
formally  in  advance.  Finally,  it  will  provide  a  permanent  legal  basis  to  the  instrument 
instead of case-by-case legislative decisions. 

3. 

THE EXPERIENCE WITH MFA 

3.1. 

Definition and purpose of MFA 

MFA  is  exceptional  financial  assistance  of  a  macroeconomic  nature  designed  to  help 
countries  in  dealing  with  serious,  but  short-term,  balance  of  payments  difficulties.  It 
complements financing provided in the context of an IMF-supported adjustment and reform 
programme.  This  is  in  recognition  of  the  fact  that,  within  the  global  economic  architecture, 

EN 

3

EN 

 
the  provision  of  balance-of-payments  support  is  primarily  the  role  of  the  IMF,  which  is 
endowed by its members, including EU Member States, with the resources needed to do so. 
EU MFA is provided only to countries with a residual external financing gap after taking into 
account any programmed IMF assistance; it is to be discontinued once the country’s balance-
of-payments situation has been brought back onto a sustainable path and its external financing 
needs can be met through other sources.  

MFA,  which  can  take  the  form  of  grants  or  medium-  to  long-term  loans,  underpins  the 
implementation of strong adjustment and structural reform measures designed to help remedy 
the  country’s  balance-of-payments  problems.  It  is  therefore  released  only  if  economic  and 
financial  policy  measures,  to  be  agreed  between  the  EU  and  the  beneficiary  country  in  a 
Memorandum of Understanding, are being implemented.  

3.2. 

A historical perspective 

Since  1990,  55  MFA  decisions  have  been  approved,  with  total  commitments  amounting  to 
EUR 7.4 billion and effective disbursements to EUR 5.4 billion (see Chart 1 and Table 1), in 
the form of grants and loans. Twenty-three countries have benefited from this assistance. The 
size of individual MFA operations has ranged from EUR 15 million (Moldova, 1996, 2000, 
2002) to EUR 870 million (Hungary, 1990) (see Annex 2 for more details)3. 

Initially,  MFA  operations  focused  on  supporting  macroeconomic  stabilisation and structural 
reforms  in  countries  of  Central  and  Eastern  Europe.  Between  1990  and  1999,  the  MFA 
disbursed  to  these  countries  amounted  to  EUR  2.6  billion,  or  about  two  thirds  of  the  total 
MFA  support  provided  during  this  period.  These operations  generally took place  within the 
G-24  donor  coordination  framework,  which  reflected  a  strong  consensus  within  the 
international  community  to  help  Central  and  Eastern  European  countries  overcome  the 
difficult  economic  and  political  challenges  they  were  confronted  with  at  the  start  of  the 
transition process.  

3 

For  more  information  on  the  implementation  of  past  MFA  operations,  see  the  Commission’s  Annual 
Reports on the Implementation of Macro-Financial Assistance to Third Countries, which can be consulted 
at: http://ec.europa.eu/economy_finance/financial_operations/market/third_countries/index_en.htm. 

EN 

4

EN 

 
                                                 
Table 1: Summary of MFA approvals, 1990-2010 (EUR million) 

Country

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total

290
375

870

180

375

400
187.5

110

40

80
100
80

70

125
130

200

45

85

35

s
e
t
a
t

S
r
e
b
m
e
M
w
e
N

d
e
M

I

S
N

s
n
a
k
l
a
B
n
r
e
t
s
e
W

Bulgaria
Czech & Slovak Fed. Rep.
Estonia
Hungary
Latvia
Lithuania
Romania
Slovakia

Algeria
Israel
Lebanon

Armenia+
Belarus
Georgia+
Moldova
Tajikistan+
Ukraine

Albania
Bosnia & Herzegovina
Kosovo (UNSCR 1244)+
Macedonia (FYR)
Montenegro+
Serbia
Serbia & Montenegro

250

100

200

58

175

55

15

200

150

20
60

80

40

15
95

35

20

15

110

60

30
18

345 130

Amount approved
No. of operations approved

870
1

1808
6

480
6

0
0

620 255

6

2

15
1

555* 150 460 180* 393 315

4

1

5

4

3

4

Source: European Commission, Annual Reports on Macro-Financial Assistance 

70

70
1

750
375
40
1050
80
100
780
130

600
188
80

158
55
254.5
225
95
1045

150
220
115
138
20
200
545

90

500

100

46

100

200

80

45

33.5

50

25

Number of 
operations
4
1
1
2
1
1
4
1

2
1
1

2
1
3
6
1
5

4
3
3
3
1
1
3

25
1

0
0

83.5 125

2

2

0
0

446 590

7440

4

2

55

* Decision 97/787/EC of 17.11.1997 made available an overall amount of MFA of EUR 265 million to Armenia and Georgia. This Decision was modified by Decision 00/244/EC of 28.03.2000, 
which added Tajikistan to the list of beneficiary countries and increased the total combined amount to EUR 375 million. EUR 47 million of this combined amount was never allocated to any of 
the three eligible countries and therefore does not appear in the country rows. However, it is included in the column totals.  

+ The figures for Armenia, Georgia, Tajikistan, Kosovo (under UNSCR 1244) and Montenegro include exceptional financial assistance. 

EN 

5

EN 

 
 
 
 
 
Chart 1: Annual commitments and disbursements, 1990-2010 (EUR million) 

2000

1800

1600

1400

1200

1000

800

600

400

200

0

Commitments

Disbursements

0
9
9
1

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Source: European Commission, Annual Reports on Macro-Financial Assistance 

During  the  first  five  years  of  existence  of  the  MFA  instrument,  the  Council  also  approved 
three operations for the Mediterranean countries, namely Algeria (1991 and 1994) and Israel 
(1991), as well as Albania. 

Over the years, the number of countries to which the Community extended MFA expanded, as 
a  growing  number  of  countries  neighbouring  the  EU  faced  balance  of  payments  difficulties 
and  committed  themselves  to  programmes  of  economic  reform.  This  led  to  a  change  in  the 
geographic balance of MFA compared to its early years.  

Thus, starting in the middle of the 1990s, a number of MFA operations were approved for the 
European countries of the former Soviet Union (Belarus, Moldova and Ukraine). Then, at the 
end  of  the  1990s,  the  focus  of  MFA  operations  spread  to  the  Western  Balkans  (the  Former 
Yugoslav  Republic  of  Macedonia,  Bosnia  and  Herzegovina,  Albania,  Kosovo,  Serbia  and 
Montenegro) in response to the regional economic instability resulting from the conflict and 
political  realignment  in  the  former  Yugoslavia.  Since  2000,  13  MFA  decisions  have  been 
approved for the Western Balkan countries (excluding three decisions that only extended the 
maximum  duration  of  existing  operations),  committing  a  total  of  EUR  1,083  million.  This 
represents 49% of total MFA commitments during the period (see Chart 2). 

In  1997,  the  Council  decided  to  provide  MFA  to  Armenia  and  Georgia  in  the  form  of  a 
combination  of  loans  and  grants,  in  the  context  of  the  difficulties  these  countries  were 
experiencing in servicing the debt to the Community stemming from the EUR 1,250 million 
credit  facility  made  available  to  the  new  independent  states  of  the  former  Soviet  Union  in 

EN 

6

EN 

 
 
 
1992 to help them import food and medical products. This Council decision was amended in 
2000 to extend it to Tajikistan. 

Following the establishment of the European Neighbourhood Policy (ENP) in 2004, support 
for  the  Eastern  ENP  economies  has  risen,  accounting  for  around  two-thirds  of  new  MFA 
committed  since  then.  By  contrast,  new  operations  in  the  Mediterranean  neighbours  were 
limited to the one for Lebanon approved in 2007. This partly reflected the relative resilience 
of the Mediterranean region to the global crisis of 2008-09 and the fact that these countries 
did not in general have recourse to financial support from the IMF. 

Chart 2: Regional distribution of commitments, 1990-2010 

1990-1999 

2000-2010 

Western 
Balkans
6%

NIS
16%

Med
4%

New 
Member 
States
63%

Med
15%

NIS
48%

Western 
Balkans
48%

Source: European Commission, Annual Reports on Macro-financial assistance 

While only a modest amount of MFA assistance was approved between 2004 and 2008 (EUR 
234  million),  reflecting  a  relatively  benign  global  economic  climate,  the  global  crisis  has 
resulted  in  a  resurgence  of  assistance  to  Eastern  neighbours  and  Western  Balkan  countries, 
which  have  been  particularly  hard  hit  by  the  crisis.  As  countries  have  run  into  balance  of 
payments difficulties, the amount of new MFA committed rose to EUR 446 million in 2009 
and  EUR  590  million  in  2010,  underlining  its  continued  importance  as  a  crisis  instrument. 
The operations approved in 2010 include a EUR 500 million loan for the Ukraine, the largest 
operation  since  1990,  to  help  the  country  overcome  the  impact  of  the  crisis  and  bolster 
structural reform efforts.  

In terms of its financial composition, during the 1990s, around 95% of MFA support was in 
the form of loans, while between 2000 and 2004 nearly half of all support was in grants (see 
Chart 3). This shift reflected in part the increased number of operations in the Balkans, where 
many countries  had a very weak repayment capacity. During the recent resurgence in MFA 
support, resulting from the global economic crisis and its aftermath, loan financing has risen 
again, in particular as a proportion of all MFA commitments.4 This includes substantial loans 
to  Balkan  countries  (Serbia  and  Bosnia-Herzegovina),  whose  debt  servicing  capacity  has 
strengthened significantly since the initial MFA operations in the region. 

4  The recovery in loan financing is less pronounced when measured as a percentage of the number of MFA 

operations, reflecting the fact that grant operations have tended to be smaller in volume. 

EN 

7

EN 

 
 
                                                 
Chart 3: Percentage of loans and grants, 1990-2010 
by volume and number of operations (commitments) 

100%

90%

80%

70%

60%
50%

40%

30%

20%

10%

0%

100%

90%

80%

70%

60%
50%

40%

30%

20%

10%

0%

1990-1994 1995-1999

2000-2004 2005-2010

1990-1994 1995-1999

2000-2004 2005-2010

Grants

Loans

Grants

Blend

Loans

Source: European Commission, Annual Reports on Macro-Financial Assistance 

3.3. 

The legal basis for MFA 

3.3.1.  Before the entry into force of the Lisbon Treaty 

Before the entry into force of the Lisbon Treaty, MFA was granted on a case-by-case basis 
through  individual  decisions  of  the  Council  on  proposals  by  the  Commission,  after  a  non-
binding  consultation  of  the  European  Parliament.  While  Article 181a,  introduced  to  the  EC 
Treaty by the Treaty of Nice, gave competence to the Council – through qualified majority on 
a  proposal  by  the  Commission  and  after  consulting  the  European  Parliament  –  to  adopt 
decisions necessary for carrying out “economic, financial and technical cooperation measures 
with  third  countries”,  balance-of-payments  assistance  such  as  MFA  was  explicitly  excluded 
from the scope of this article by Declaration No. 10 of Member States’ governments annexed 
to the treaty.  

Instead,  Article 308  of  the  EC  Treaty  served  as  a  legal  basis  for  the  Community’s  MFA 
decisions prior to the Lisbon Treaty. This article enabled the EU institutions to act in all those 
areas for which the treaties did not confer specific powers on them, but in which there was a 
need  to  act  in  order  to  attain  one  of  the  objectives  of  the  Community.  The  main  practical 
difference between the use of Article 308 as opposed to Article 181a was the requirement of 
unanimity  in  the  Council  under  Article 308  (both  articles  conferred  only  a  consultative 
function on the European Parliament). 

Prior  to  the  entry  into  force  of  the  Lisbon  Treaty,  the  Economic  and  Financial  Committee 
(EFC), which reports to the Ecofin Council, played an advisory role to the Commission in the 
preparation  of  MFA  operations,  as  well  as  in  their  implementation.  In  particular,  it  was 
consulted  by  the  Commission  on  the  draft  Memorandum  of  Understanding  including  the 
policy conditionality of operations and on their disbursements. 

3.3.2.  Changes introduced by the Lisbon Treaty 

Since  the  entry  into  force  of  the  Treaty  on  the  Functioning  of  the  European  Union  (Lisbon 
Treaty; TFEU) on 1 December 2009, the legal basis for MFA has changed. In particular, the 
use  of  Article 352  TFEU  (which  replaces  the  old  Article 308)  is  no  longer  necessary  or 

EN 

8

EN 

 
 
 
possible, as the Lisbon Treaty amended the preceding treaties in such a way that MFA is now 
specifically covered. The following articles are of relevance in this context: 

•  Article 212  TFEU  foresees  that  economic,  financial  and  technical  cooperation  measures 
are  adopted  by  the  Council  and  the  Parliament  on  a  proposal  from  the  Commission,  in 
accordance with the ordinary legislative procedure (co-decision, as per Article 294 TFEU). 
More specifically, this Article 212 TFEU (which is the successor to the old Article 181a) 
includes  an  explicit  reference  to  financial  assistance  to  third  countries  other  than 
developing countries5. 

•  Article 213  TFEU  states  that  “When  the  situation  in  a  third  country  requires  urgent 
financial assistance from the Union, the Council shall adopt the necessary decisions on a 
proposal from the Commission.” Council decisions on the basis of Article 213 TFEU are 
adopted  by  qualified  majority  (Article 293  TFEU),  except  where  the  Council  decides  to 
amend  the  Commission’s  original  proposal,  in  which  case  unanimity  is  required.  The 
procedure does not involve the Parliament in co-decision. However, the legal services of 
both the Council and the Commission6 concur in their view that Article 213 TFEU should 
not  be  used  as  the  regular  legal  basis  for  MFA,  even  though  MFA  is  by  its  nature  an 
instrument  of  urgency.  Its  use  must  be  exceptional  and  fully  justified  in  an  objective 
manner with reference to the situation in the beneficiary country concerned.  

Once approved by the co-legislators, MFA decisions belong to the category of legally binding 
acts that need to be implemented uniformly and hence centrally since they use financing from 
the EU budget. In accordance with Article 291 TFEU, Paragraph 2, the power to implement 
MFA  operations  should  therefore  be  conferred  on  the  Commission,  albeit  with  the  co-
legislators  laying  down  in  advance  the  mechanisms  for  control  by  Member  States  of  the 
Commission’s implementation. A regulation setting the general principles for conferring such 
implementing  powers  on  the  Commission  under  Article 291  TFEU  was  adopted  by  the 
European Parliament and the Council on 14 February 2011 and entered into force on 1 March 
2011.7  Prior  to  this  date,  the  comitology  rules  as  per  Council  Decision  1999/468/EC  of  28 
June  19998,  laying  down  the  procedures  for  the  exercise  of  implementing  powers  conferred 
on  the  Commission,  governed  the  oversight  of  the  Commission’s  implementation  of  MFA 
decisions.  

Since the entry into force of the Lisbon Treaty, two MFA decisions have been approved (for 
Ukraine and Moldova) – both of them before the entry into force of the new comitology rules. 

5  The basis for the Union’s development cooperation is laid down in Articles 208-211 TFEU. Thus, Article 
209 may serve as the legal basis for MFA when a developing country is the beneficiary. However, it should 
be  noted  that  the  treaty  does  not  provide  a  definition  as  to  which  countries  should  count  as  developing 
countries. 

6  

“Macro-Financial  Assistance  to  Third  Countries  –  Legal  Basis”,  Opinion  of  the  Legal  Service  of  the 
Council of the European Union to the Financial Counsellors Working Party, 5703/10, 3 February 2010; and 
"Analysis  of  the  legal  basis  of  macro-financial  assistance  following  the  entry  into  force  of  the  Lisbon 
Treaty", Commission’s staff working document  of 19 February 2010 (see Annex 3).  

7   Regulation (EU) 182/2011 of the European Parliament and of the Council laying down the rules and general 
principles  concerning  mechanisms  for  control  by  Member  States  of  the  Commission’s  exercise  of 
implementing powers (OJ L 55, 28.2.2011, p. 13), which replaces Council Decision 1999/468/EC. 

8   As amended by Council Decision 2006/512/EC. 

EN 

9

EN 

 
                                                 
In  both  cases,  co-legislators  agreed  to  use  the  advisory  procedure9  for  the  adoption  of  the 
Memorandum of Understanding (MoU) laying down the policy measures to be taken by the 
beneficiary country. However, the Council declared that, in the context of the general review 
of comitology rules, its acceptance of the advisory procedure for MoU should not be seen as 
setting a precedent for future legislative proposals on MFA. 

3.4. 

The Genval criteria 

The  “Genval  criteria”  originate  from  the  conclusions  of  the  informal  ECOFIN  Council  of 
9 October  1993  regarding  the  principles  that  should  govern  EU  balance-of-payments 
assistance to third countries. They were revised on 6 April 1995 and on 8 October 2002, when 
they were adopted as formal ECOFIN Council conclusions, accompanied by a letter from the 
President  of  the  Council  to  the  President  of  the  Commission  concerning  notably  MFA’s 
geographical delimitation. They were last reviewed in March 2006, when the EFC prepared a 
report to EU Finance Ministers, which re-affirmed the Genval criteria while clarifying some 
aspects of them. 

The Genval criteria have provided the political framework that has guided MFA proposals by 
the Commission and the corresponding ECOFIN deliberations. However, they are not legally 
binding  rules  formally  constraining  the  Commission’s  right  of  initiative  or  the  Budgetary 
Authority with regard to individual MFA decisions.  

The Genval criteria, as contained in the Council conclusions and the aforementioned letter of 
the Presidency of 2002, are described below.10  

Exceptionality  

MFA  is  exceptional  in  nature.  It  is  mobilised  on  a  case-by-case  basis  to  help  the  recipient 
country  deal  with  serious  short-term  balance-of-payments  or  budget  difficulties  in 
conjunction with, and as a complement to, financial support for the country from the IFIs. The 
assistance underpins the implementation of strong adjustment and structural reform measures 
in  the  recipient  country  designed  to  remedy  these  short-term  difficulties.  It  is  to  be 
discontinued once the external financial situation of the country has returned to a sustainable 
path to the extent that the beneficiary can rely solely on capital inflows from the IFIs and/or 
private sources. At this point, regular EU cooperation and assistance instruments are meant to 
take over. 

Thus,  unlike  other  EU  financial  instruments  with  macroeconomic  objectives  (notably  the 
direct  budget  support  provided  under  the  Instrument  for  Pre-Accession,  the  European 
Neighbourhood  and  Partnership  Instrument  and  the  Development  Cooperation  Instrument), 
MFA  neither  provides  regular  financial  support,  nor  has  as  its  primary  aim  to  support  the 
economic and social development of the recipient countries. For this reason, MFA does not 
feature among the regular instruments of EU financial cooperation with third countries, but it 
is  one  of  three  crisis  instruments  (alongside  Humanitarian  Aid  and  the  Instrument  for 
Stability). 

9  

In practice, Member States have tended to appoint as representatives for the advisory committee their EFC 
Alternates, who have expertise in MFA operations. 

10   Both documents are shown in full in Annex 4. 

EN 

10

EN 

 
                                                 
Geographical delimitation  

MFA is in principle reserved for third countries with close political and economic links to the 
EU,  taking  into  account  especially  their  geographical  proximity  and  the  EU’s  economic, 
commercial and political interests. 

According to the letter from the President of the Council to the President of the Commission 
dated 8 October 2002, this is meant to cover two groups of countries: 

• 

• 

The first group includes both candidate countries11 and potential candidate countries12 
(countries  with  which  an  EU  Stabilisation  and  Association  Agreement  is  in  force  or 
expected to come into force). 

The  second  group  includes  the  European  countries  of  the  CIS13  and  the  countries 
concerned by the Barcelona process (i.e. countries that have signed, or are expected to 
sign, Euro-Mediterranean Association Agreements)14. 

Other third countries not covered by this second group may in exceptional and duly justified 
circumstances  also  become  eligible  on  comparable  terms.  This  has  happened  already  a 
number  of  operations  have  been  approved  in  favour  of  countries  in  the  Southern  Caucasus 
and Central Asia.  

Political pre-conditions 

In  addition  to  being  geographically  close  to  the  EU,  a  potential  recipient  country  must,  in 
order  to  be  eligible  for  MFA,  fulfil  certain  political  pre-conditions  in  line  with  the  EU’s 
fundamental values. In particular, it must have in place effective democratic institutions and 
mechanisms, including multi-party parliamentary systems, and respect human rights and the 
rule of law.  

Complementarity and burden sharing  

MFA  operations  are  contingent  on  the  existence  of  an  IMF-supported  programme  in  the 
the  satisfactory 
recipient  country  entailing 
implementation  of  the  IMF  programme  is  a  prerequisite  for  each  MFA  disbursement.  This 
recognises the role assigned to the IMF as the main provider of macroeconomic assistance to 
countries undergoing serious balance-of-payments difficulties.  

the  use  of  IMF  funds.  Furthermore, 

Complementarity  is  also  included  in  the  Genval  criteria  with  a  view  to  ensuring  an 
appropriate financial burden sharing between the EU and other donors. In the letter of 2002 to 
the  Commission,  the  Council  defined  a  ceiling  for  the  EU’s  contribution  of  60%  of  the 

11   Currently: Croatia, Iceland, the Former Yugoslav Republic of Macedonia, Montenegro and Turkey. 

12   Currently:  Albania,  Bosnia  and  Herzegovina,  Kosovo  (under  United  Nations  Security  Council  Resolution 

No. 1244) and Serbia. 

13   Belarus, Moldova and Ukraine. 

14   The  Barcelona  process,  launched  by  the  EU  in  1995,  included  11  non-EU  countries  (Algeria,  Cyprus, 
Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia and Turkey, some of which were at the time 
also eligible for MFA by virtue of being EU candidate countries) and the Occupied Palestinian Territories. 
In 2008, the Barcelona process was replaced by the Union for the Mediterranean initiative. 

EN 

11

EN 

 
                                                 
country’s  residual  external  financing  gap  (i.e.  after  the  support  expected  from  the  IFIs)  for 
candidate and potential candidate countries and of one-third of the residual external financing 
gap for other countries. 

Finally,  complementarity  helps  to  ensure  the  consistency  of  approach  towards  the  recipient 
country by the international community. The IMF programme, along with any programmes of 
other IFIs (notably those of the World Bank’s policy-based loans), provides a framework for 
the  adjustment  path  that  is  being  supported  by  external  financing  from  official  donors  or 
creditors, including the EU.  

Conditionality  

As  noted,  the  launch  of  any  MFA  operation  is  conditional  on  the  country  having  an  IMF-
supported programme in place that entails the use of IMF funds. In addition, the Commission, 
on behalf of the EU, agrees with the recipient country on a separate set of conditions. These 
conditions  are  laid  down  in  a  Memorandum  of  Understanding  (MoU).  In  this  context, 
coordination  between  the  EU  and  the  IFIs  on  their  respective  conditions  helps  to  avoid 
overlaps (or outright contradictions) between the performance criteria of the different donors 
or  creditors;  instead,  the  conditions  of  the  different  donors  are  designed  to  reinforce  each 
other.  By  avoiding  overlaps,  coordination  also  contributes  to  reducing  the  administrative 
burden  on  the  recipient’s  authorities  in  implementing  their  adjustment  programme  and 
drawing on the available external support.  

Compliance by the beneficiary country with the conditions laid down in its MoU with the EU 
is verified by the Commission ahead of the release of each tranche of the assistance. In case 
of failure to comply, the disbursement can be suspended until the conditions are met. 

Financial discipline  

When  MFA  takes  the  form  of  a  grant,  the  funds  come  from  the  EU  budget.  The  amounts 
provided as MFA have to be consistent with the ceilings established for the relevant budget 
appropriations in the EU’s multi-annual Financial Perspectives. 

When it takes the form of a loan, the Commission, on behalf of the EU, issues a bond in the 
capital markets that matches the financial terms agreed with the beneficiary country and on-
lends  the  proceeds  immediately.  In  order  to  cover  the  EU  budget  against  risks  related  to 
default or payment delays on MFA loans by beneficiary countries, the EU bond is guaranteed 
by  the  Guarantee  Fund  established  in  1994  (Council  Regulation  2728/94  of  31  October 
199415). The level of provisioning currently in force stands at 9% of the outstanding amount, 
reflecting the likelihood of default across the whole portfolio of loans covered by the Fund. 

The Fund is provisioned from the corresponding EU budget line. The amounts provided in the 
form  of  MFA  loans  therefore  have  to  be  consistent  with  the  ceilings  established  within  the 
multi-annual  Financial  Perspectives  (Category 4)  for  the  reserve  for  guarantees  for  external 

15   This  regulation  was  subsequently  amended  several  times.  Its  amendments  were  eventually  codified  in 

Regulation 480/2009, which repealed Council Regulation 2728/94.  

EN 

12

EN 

 
                                                 
actions16.  In  the  Financial  Perspective  2007-2013,  an  annual  amount  of  up  to  EUR  200 
million has been foreseen for the provisioning of the Fund. 

3.5. 

The experience with policy conditionality 

Design of MFA conditionality 

MFA  conditionality  consists  of  a  set  of  economic  policy  measures  agreed  between  the 
Commission, on behalf of the EU, and the beneficiary country, laid down in a MoU. These 
policy measures aim at contributing to one or several of the following overarching objectives:  

•  restoring balance of payments and fiscal sustainability;  

•  raising the rate of potential growth over the medium term;  

•  fostering  economic  and  financial  integration  and  regulatory  convergence  with  the  EU, 
notably  by  supporting  the  economic  priorities  of  the  pre-accession  agreements  and  the 
ENP Action Plans; and 

•  improving  economic  governance, 

in  particular  by  strengthening  public  finance 

management (PFM). 

The policy measures contained in the MoU complement those included in the IMF and World 
Bank  policy-based  operations.  In  particular,  the  existence  of  an  IMF-supported  reform 
programme  enables  the  EU  to  focus  its  conditions  on  areas  relevant  to  EU  priorities,  rather 
than having to cover the whole range of macroeconomic performance criteria. In practice, the 
EU  has  thus  tended  to  focus  on  structural  reform  measures  aimed  at  increasing  sustainable 
growth, restoring a sound balance of payments position and improving economic governance, 
as well as on developing a closer economic and financial integration between the beneficiary 
country and the EU, in line with ENP Action Plans, existing bilateral trade and partnership or 
association agreements, and relevant EU cooperation activities in the country. 

By contributing to create an appropriate overall framework for macroeconomic stability and 
structural  reform,  MFA  conditionality  can  improve  the  effectiveness  of  the  programmes 
supported by other EU external financial instruments, in particular projects financed under the 
IPA and the ENPI. At the same time, some of the policy measures included in the Memoranda 
of Understanding of MFA operations are often supported by technical assistance provided by 
the  EU  through  its  regular  cooperation  assistance  instruments,  as  well  as  by  the  sectoral 
actions identified under direct budgetary support operations. It should also be noted that the 
policy conditions in the area of PFM draw on the recommendations made in the context of the 
Operational  Assessments  of  financial  and  administrative  circuits  conducted  by  the 
Commission prior to each MFA operation (see next section).  

16   The  ceilings  apply  to  all  the  operations  guaranteed  by  the  Guarantee  Fund,  which  also  include  the  loans 
granted by the EIB under its external lending mandate and the EURATOM loans outside the EU. Only part 
of the EU budget’s reserve for guarantees for external actions is therefore available for MFA loans. 

EN 

13

EN 

 
                                                 
Conditionality by type 

The  policy  conditions  agreed  between  the  Commission  and  beneficiary  countries  in  the 
context of MFA operations  have  tended to cover reforms in the fiscal area, including PFM, 
reforms  of  the  financial  sector  and  monetary  policy  framework;  privatisation  and  private 
sector  development.  Measures  in  the  area  of  trade  and  energy  sector  reform  have  also  been 
relatively  frequent,  though  less  so.  Chart  5  summarises  the  composition  of  policy 
conditionality by main area in the MFA operations implemented during the period 2000-09. 

Chart 5: Conditionality MFA operations by type, 2000-2009 

4% 5%

Public finance management/public administration 

13%

23%

Other fiscal reforms (including tax and pension reform)

39%

Privatisation, private sector development and business enviroment

Reforms of financial sector/monetary policy framework

16%

Energy sector reforms

Trade policy

Source: Commission staff estimates based on ex-post evaluation of the MFA operations 

Conditionality has tended to vary depending on the institutional ties of the recipient country 
with the EU. Candidate and potential candidate countries had a larger share of private sector 
development  related  measures.  They  have  also  tended  to  have  longer-term  oriented 
conditionality.  This  reflected  the  longer  horizon  of  the  EU  involvement  with  them  and  the 
perspective  of  their  potential  EU  membership,  which  should  provide  an  opportunity  to 
continue  the  implementation  of  structural  measures.  This  is  especially  true  for  certain  legal 
reforms  (which  cut  across  different  areas  of  conditionality)  in  the  Balkan  countries,  which 
have  to  be  completed  on  the  way  to  EU  membership  anyway.  By  contrast,  MFA 
conditionality  for  the  Newly  Independent  States  (NIS)  was  dominated  by  operational  PFM 
measures,  many  of  which  could  be  implemented  within  a  shorter  period  of  time.  This  also 
reflected the significant weaknesses in PFM detected in many of the NIS. 

Chart 6: Conditionality in MFA operations by region and type, 2000-2009 

NIS

3% 3%

9%

12%

21%

16%

52%

Balkans

7%

5%

Public finance management /public 
administration

26%

Other fiscal reforms (including tax and pension 
reform)

Privatisation, private sector development and 
business enviroment

Reforms of financial sector/monetary policy 
framework

15%

31%

Energy sector reforms

Trade policy

Source: Commission staff estimates based on ex-post evaluation of the MFA operations 

EN 

14

EN 

 
 
 
 
Evolution of MFA conditionality over the last decade 

Over the last decade, the number of policy conditions has been somewhat trimmed down in 
order to increase the focus on priority measures and reduce the implementation burden on the 
recipient  country.  Chart  7  shows  the  evolution  of  the  average  number  of  policy  conditions 
included in MFA operations since 1999, distinguishing the candidate and potential candidate 
countries  from  the  NIS  countries.  It  shows  that  the  average  number  of  conditions  has  been 
approximately halved and is now limited to about ten in new MFA operations. It also shows 
that  conditionality  has  tended  to  be  more  detailed  for  the  candidate  and  potential  candidate 
countries,  partly  reflecting  the  more  ambitious  approach  related  to  the  EU  accession 
perspective.  

This  trend  towards  streamlining  conditionality  has  also  been  evident  in  the  IMF  and  World 
Bank programmes. This process was reinforced by the global recession, because IFIs had to 
concentrate on helping countries to deal with the most pressing issues, rather than embarking 
on  complex  structural  reforms.  The  IMF  in  particular  has  tried  to  limit  its  involvement  in 
structural conditionality in an effort to go back to its traditional macroeconomic stabilisation 
focus.  

A  second  trend  observed  in  the  conditionality  of  MFA  is  an  increased  emphasis  on  PFM-
related conditions. This reflects the increased importance attached to economic governance in 
the  structural  reform  strategy  supported  by  the  EU,  as  well  as  the  need  to  ensure  adequate 
fiduciary  and  administrative  circuits  so  as  to  limit  the  risk  of  a  misuse  of  the  assistance,  as 
recommended  by  the  European  Court  of  Auditors  (ECA)  in  its  Special  Report  of  2002  on 
MFA  (see  Section  3.7.1).  It  also  reflects  the  increased  share  of  operations  in  countries 
(notably among the NIS countries) with significant weaknesses in PFM. Since 2004, the key 
recommendations  of  the Operational  Assessments of financial and administrative circuits of 
beneficiary countries conducted by the Commission (see Section 3.6) have been included in 
the conditionality of MFA operations. 

Effectiveness and implementation of MFA conditionality 

The  formal  implementation  of  conditionality  by  the  recipient  countries  has  been  relatively 
strong. Almost 80% of all conditions included in the MoU of the MFA operations for which 
ex-post  evaluations  were  conducted  between  2004  and  2008  were  formally  implemented17. 
Out of 186 policy conditions reviewed by these ex-post evaluations, only 15 were not fulfilled 
and  26  were  partially  fulfilled.  On  the  other  hand,  and  as  noted  in  the  meta-evaluation  of 
MFA  of  2009,  actual  progress  with  the  targeted  structural  reform  processes  has  not  always 
been as foreseen even when the policy conditions were formally satisfied.  

There is evidence that MFA conditionality linked to PFM, public administration reform and 
financial sector reform had led to the most tangible progress. This may in part reflect the fact 
that  these  reforms  tend  to  be  politically  easier  to  implement  than  other  reforms  that  have 
direct  effects  on  the  population  at  large  (such  as  tax  or  pension  reforms).  Also,  MFA 
implementation analysis showed that MFA conditionality tended to be more effective when: 
(i)  it  was  consistent  with  IMF  conditionality;  (ii)  secured  strong  ownership  of  the  recipient 

17   See “Meta-Evaluation of Macro-Financial Assistance Operations, 2004-2008, Final Report”, op. cit. 

EN 

15

EN 

 
                                                 
country; (iii) was aligned with the other EU programs implemented in the country; and (iv) 
was supported by technical assistance and advice18.  

Chart 7: Fulfilment of the MFA conditionality criteria (in numbers) 

Fulfiled

Partialy fulfiled

Not fulfiled 

60

50

40

30

20

10

0

Armenia 
1997-2005

FYRoM 
1999-2003

Tajikistan 
2001-06

Bosnia and 
Herzegovina 
2002-06

Serbia and 
Montenegro 
2002-06

Albania 
2004-06

Georgia 
2006-08

Moldova 
2007-08

Lebanon 
2007-09

Source: Commission staff estimates based on ex-post evaluation of the MFA operations 

3.6. 

The Operational Assessments 

Since  2004,  the  Commission  carries  out  so-called  Operational  Assessments  to  obtain 
reasonable  assurances  on  the  functioning  of  administrative  procedures and  financial  circuits 
of  the  recipient  countries  before  disbursing  EU  funds  in  the  context  of  MFA  operations.19 
Such assurances are required by the Financial Regulation related to the EU budget. They were 
also  emphasized  in  the  recommendations  issued  by  the  European  Court  of  Auditors  in  its 
Special  Report  of  2002  on  MFA  (see  Section  3.7.2).  In  addition,  the  Commission’s 
Operational  Assessments  play  a  supportive  role  in  the  area  of  PFM  reform  in  the  recipient 
country, notably in the fields of public internal financial control and external audit.  

The  most  critical  recommendations  made  in  the  Operational  Assessments  are  considered  as 
prior  actions  that  have  to  be  fulfilled  before  disbursement  can  be  made.  Some  of  the  key 
weaknesses detected in Operational Assessments are reflected in the policy conditionality of 
MFA operations. Selective follow-up inspections are undertaken to assess the improvements 
implemented by the national administrations. Operational Assessment typically focus on the 
organisation  of  the  central  bank  and  more  specifically  on  the  management  of  accounts 
receiving EU funds. Also, the existing procedures of the ministries of finance are assessed in 
areas  such  as  budgetary  processes,  the  functioning  of  the  treasury  and  accounting 
departments, internal audit and financial control, human resources and IT units. In addition, 
Operational Assessments check whether the country has an independent and capable external 
audit office. In the most recent Operational Assessments, an analysis of existing procedures in 
the  public  procurement  agencies  was  also  undertaken.  The  conclusions  of  the  Operational 

18   “Meta-Evaluation of Macro-Financial Assistance Operations, 2004-2008, Final Report”, op. cit. 

19   Since 2004, a total of nine operational assessments were completed in countries benefiting from MFA and 

follow-up missions have been undertaken in most of them. 

EN 

16

EN 

 
 
                                                 
Assessments  are  communicated  to  the  national  authorities,  who  have  the  opportunity  to 
comment on the analysis and recommendations contained in the reports. 

The  complementary  fiduciary  information  available  in  reports  already  issued  by  the  IFIs  is 
also  taken  in  to  account.  These  include,  in  particular:  the  Public  Expenditure  and  Financial 
Accountability  (PEFA)  studies,  developed  by  the  World  Bank  in  cooperation  with  the 
Commission  and  bilateral  donors,  which  focus,  as 
the  Commission’s  Operational 
Assessments, on PFM issues.20 

3.7. 

Overall Assessment of Results 

3.7.1.  Findings of ex-post evaluations 

To assess the impact of MFA, the Commission conducts ex-post evaluations. Since 2004, ten 
evaluations have been carried out by external consultants. In addition to the country specific 
evaluations,  a  meta-evaluation  of  MFA  operations  was  also  carried  out  in  2009,  which 
reviewed the previous seven individual evaluations of individual MFA operations conducted 
between 2004 and 2008 and drew some general conclusions21. 

All country-specific evaluations use a methodology that describes the objectives of the MFA, 
identifies its overall effects on short-term macroeconomic stabilisation and structural reform, 
and compares the results with a counterfactual scenario that assumes the absence of the MFA 
in  question.  The  longer-term  effects  on  the  sustainability  of  the  recipient  country’s  external 
financial situation are also assessed. The evaluators base their work on a variety of methods, 
including  document  analysis,  interviews  with  key  officials  and  macroeconomic  and 
econometric analysis. 

Meta-evaluation  

The meta-evaluation carried out in 2009 found that in general MFA operations had a positive 
(though  not  uniform)  impact  on  the  implementation  of  structural  reforms  in  beneficiary 
countries, particularly for public finance and financial sector reforms. In addition to a positive 
operational  effect  on  the  reform  process,  a  political  reinforcing  effect  was  detected, 
particularly in the countries participating in the EU Stabilisation and Association Process, i.e. 
the Western Balkans. The structural reforms which were implemented in connection to MFA 
were also found to have had a positive impact on long-term potential growth. In addition to 
meeting  immediate  objectives,  MFA  operations  brought  certain  indirect  benefits.  For 
example,  fiscal  reforms  helped  raise  tax  revenue,  financial  sector  reforms  increased  the 
capitalisation  of  banking  institutions  and  market  reforms  contributed  to  greater  business 
activity. The meta-evaluation also found that, in some cases, MFA operations enabled social 
expenditure to be maintained by helping to reduce the cost of foreign debt servicing.  

On  the  other  hand,  it  was  found  that,  due  to  the  modest  scale  of  MFA  operations  (notably 
when  compared  with  those  of  the  Bretton  Woods  institutions),  relative  to  the  size  of  the 
economy  of  beneficiary  countries,  the  impact  of  all  MFA  operations  on  macroeconomic 

20   Other relevant assessments produced by the IFIs include Reports on the Observance of Standards and Codes 
(ROSCs)  produced  by  the  World  Bank  and  the  IMF,  and  the  World  Bank’s  Country  Financial 
Accountability Assessments (CFAA). 

21   “Meta-Evaluation of Macro-Financial Assistance Operations (2004-2008). Final Report”, op. cit.  

EN 

17

EN 

 
                                                 
stability was less significant. The fact that several beneficiary countries had to request again 
international support packages during the 2008-2009 global financial crisis suggested that the 
positive effect of MFA on balance of payments sustainability may have not been sufficiently 
durable. At the same time, the meta- evaluation argued that in the absence of MFA support 
the  impact  of  the  global  financial  crisis  on  beneficiary  countries  would  have  been  more 
severe.  Also,  it  found  that  a  significant  benefit  of  MFA  had  been  the  increased  political 
involvement of the EU.  

In sum, MFA has had a positive impact on the advance of reforms in beneficiary countries, 
but its macroeconomic impact has been less tangible, also because MFA is most of the time 
part of a wider assistance package including the multilateral finance institutions.  

Furthermore,  the  meta-evaluation  pointed  at  the  frequent  delays  in  the  decision-making 
process of MFA, which it described as an important shortcoming of the instrument, notably 
when compared with the interventions of the IFIs. It found that, on average, there is a time lag 
of  12  to  18  months  between  the  onset  of  a  crisis  and  the  first  MFA  disbursement.  IMF 
programmes, by contrast, can become operational just in a couple of months. The time lag of 
MFA  has  to  be  minimised  to  make  MFA  more  efficient  as  an  instrument  for  alleviating 
balance of payments distress. 

Therefore, the meta-evaluation recommended creating appropriate procedures and guidelines 
to  ensure  that  the  EU  provides  MFA  quickly,  especially  where  circumstances  call  for 
immediate  action.  In  this  respect,  the  adoption  of  a  Framework  Regulation  for  MFA  was 
identified as a key recommendation.  

3.7.2.  Reports or opinions from other institutions 

2002 Special Report of the European Court of Auditors on MFA 

In 2002, the ECA produced a special report on MFA and the Structural Adjustment Facilities 
(SAF) used at the time by the EU in the Mediterranean countries.22 The main conclusions of 
this report called on the Commission to provide a clearer definition of the value added of the 
EU contribution and additional conditionality vis-à-vis those of the IFIs. They also pointed at 
the  priority  that  should  be  given  to  carrying  out  ex-post  evaluations  of  MFA.  Finally,  they 
stressed the need to strengthen and closely monitor the financial management capacities of the 
beneficiary  countries.  In  response,  an  action  plan  was  formulated  by  the  Commission  that 
included the following elements: (i) systematic implementation of ex-ante evaluation for each 
MFA  operation  to  assess  the  residual  financial  needs  of  the  beneficiary  countries  and  the 
complementarity aspects with programmes of the Bretton Woods Institutions; (ii) systematic 
ex-post evaluation of MFA operations (carried out since 2004) in the context of a framework 
contract  with  external  consultants;  and  (iii)  completion  of  Operational  Assessments  of  the 
reliability of the relevant financial circuits and procedures in the beneficiary countries before 
any  MFA  disbursement23.  In  addition,  provisions  on  fraud  prevention  are  now  included  in 

22   Special Report No 1/2002 of 8 March 2002 concerning macro-financial assistance (MFA) to third countries 

and structural adjustment facilities (SAF) in the Mediterranean countries. 

23   The  main  features  of  the  Operational  Assessment  and  ex-post  evaluation  processes  have  already  been 

discussed above. 

EN 

18

EN 

 
                                                 
each  Commission  proposal  for  Council  decision  and  the  MoU  attached  to  each  MFA 
operation now contains an audit and recovery clause.  

2003 Resolution of the European Parliament on MFA  

In June 2003, the European Parliament adopted a resolution on MFA (Belder report).24 The 
resolution  stressed  as  the  main  shortcomings  of  the  MFA  instrument  its  lengthy  decision-
making  process  and  the  lack  of  a  transparent  legal  basis.  The  resolution  regretted  the 
decision-making procedure based on ad hoc decisions taken by the Council on a Commission 
proposal  after  consultation  of  the  Parliament,  noting  that  “from  the  date  of  the  inception  of 
MFA to the first disbursement it usually takes six months and final disbursement possibly two 
years”.  

At the same time, the resolution acknowledged that “macro-financial assistance has become 
an important emergency  instrument”, underlining that “lending operations to third countries 
can  be  an  effective  instrument  with  limited  cost  to  the  general  budget  of  the  Community” 
while  “the  amount  of  defaults  has  been  relative  low  in  comparison  to  the  overall  lending 
capacity”. 

The  Parliament  called  on  the  Commission  to  consider  submitting  a  proposal  for  an 
appropriate  legal  instrument  for  MFA.  While  it  considered  that  the  Council  conclusions  of 
8 October 2002 on MFA (the Genval criteria) were useful and proper and could be stated as 
key  criteria  for  granting  MFA  to  third  countries,  it  called  for  certain  modifications  or 
clarifications in the context of a framework regulation for MFA.  

Discussions at the Council  

As  noted  above,  the  EFC  has  reviewed  the  Genval  criteria  and  the  working  of  MFA  more 
generally on a number of occasions since the first version of the Genval criteria were adopted 
in 1993, without fundamentally changing the nature of the instrument. In its 2002 conclusions 
on MFA, the ECOFIN Council considered that the existing decision-making procedures were 
broadly  appropriate.  At  the  same  time,  it  acknowledged  that  the  procedures  for  MFA  “are 
relatively  lengthy  and  normally  several  months  elapse  from  the  Commission  proposal  until 
the final disbursement”.  

3.8. 

A slow decision-making process 

An  analysis  of  the  20  MFA  operations  approved  between  2000  and  2009  (see  Annex  5), 
shows that between the official request for MFA of a beneficiary country and the adoption of 
the  decision  of  the  Council  an  average  of  more  than  one  year  elapsed,  with  this  decision-
making gap having ranged between 118 days and about three years.25 

This decision-making gap can be divided into two components: 

24   OJ C 68 E/86, 18/03/2004. The Resolution is reproduced as Annex 6 of this document. 

25   The two operations adopted in 2010 under the co-decision procedure introduced by the Lisbon Treaty (for 
Ukraine  and  Moldova)  have  not  been  included  in  the  sample.  The  implications  of  the  introduction  of  the 
Lisbon Treaty for the decision making gap are discussed in the following section.  

EN 

19

EN 

 
                                                 
(i)   First, there is the time that elapses between the reception of the request for assistance 
from the beneficiary country and the adoption of the decision by the Commission. This 
entails, first of all, the technical assessment by the Commission of the request, including 
the  estimation,  in  cooperation  with  the  IMF,  of  the  residual  financing  gap,  and  the 
determination of other donors’ contributions. During this period, the Commission also 
consults  the  EFC  on  the  proposal.  The  period  can  further  be  influenced  by  the  time 
taken by the country’s government to reach agreement with the IMF on an adjustment 
programme or the organisation of international donors’ conferences. For the sample of 
operations examined, this preparatory phase, which concludes with the formal adoption 
of the proposal by Commission, lasted on average 294 days (just under 10 months). 

(ii)   Second,  there  is  the  time  required  by  the  legislative  decision-making  process,  i.e.  the 
time that elapses between the adoption of an MFA proposal by the Commission and its 
final adoption by the legislator. Annex 5 shows that this phase of MFA decisions lasted, 
for the operations examined, on average 106 days (about 3.5 months).  

This lengthy decision-making process has also contributed to lags between the approval of the 
IMF financial arrangement that the EU’s MFA was meant to complement and the approval of 
the  MFA  itself,  which has somewhat complicated coordination with the IMF, has tended to 
limit the EU’s influence in the design of IMF programmes and, overall, has been detrimental 
to the effectiveness of MFA operations.  

The  application  of  the  ordinary  legislative  process  under  the  TFEU  of  co-decision  by  the 
Parliament and the Council is likely to result in a further lengthening of the decision-making 
process because it involves the intervention of the two co-legislators – each with its specific 
procedures – for each individual MFA operation. For example, a decision to grant MFA to a 
country may require lengthy negotiations between the two co-legislators, e.g. two readings by 
Parliament and a conciliation procedure. There is a risk that the procedure under the Lisbon 
Treaty may further lengthen the decision-making process.  

A  factor  that  may  further  lengthen  the  decision-making  process  is  the  scrutiny  period  for 
national  parliaments  for  all  EU  draft  legislative  acts  as  stipulated  in  the  Lisbon  Treaty. 
Pursuant  to  Article 6  of  Protocol  No. 2  to  the  TFEU  (Application  of  the  Principles  of 
Subsidiarity  and  Proportionality),  any  national  parliament  or  any  chamber  of  a  national 
parliament  may,  within  eight  weeks  from  the  date  of  transmission  of  a  draft  legislative  act, 
send  to  the  Presidents  of  the  European  Parliament,  the  Council  and  the  Commission  a 
reasoned opinion stating why it considers that the draft in question does not comply with the 
principle of subsidiarity.  

4.  KEY FEATURES OF THE PROPOSED FRAMEWORK REGULATION 

Section  3  has  shown  that,  although  the  MFA  instrument  has  proved  useful  in  promoting 
macroeconomic  stability  and  reforms  in  the  EU’s  neighbourhood,  its  effectiveness  has  been 
hampered by its slow decision-making procedures. There is also a case for making its rules 
more  transparent  by  enshrining  them  in  a  legal  act,  while  updating  and  clarifying  some  of 
them.  This  section  describes  the  main  elements  of  the  proposed  Framework  Regulation  for 
MFA, which is aimed at addressing these shortcomings.  

EN 

20

EN 

 
4.1. 

A more efficient decision-making process: the role of the examination 
committee 

Under the proposed Framework Regulation for MFA, the Commission would be able to adopt 
country-specific MFA decisions under the supervision of a committee consisting of Member 
State  representatives  and  chaired  by  the  Commission  (“the  Committee”  hereafter).  MFA 
decisions would be implementing acts in the sense of Article 291 TFEU. As MFA decisions 
have  substantial  budgetary  implications,  the  Committee  would  act  in  accordance  with  the 
examination  procedure,  as  established  by  the  new  comitology  rules.26  The  procedure  for 
adopting MFA decisions would be as follows: 

The Commission would submit to the Committee draft Commission decisions granting MFA 
to  a  third  country.  In  case  of  a  positive  opinion  by  the  Committee  (adopted  by  a  qualified 
majority  of  the  representatives  of  the  Member  States27)  on  the  proposed  decisions,  the 
Commission  would  adopt  them.  In  case  of  a  negative  opinion  of  the  Committee,  the 
Commission would not adopt them, although it could refer them to the appeal committee or 
present amended drafts. Finally, if no opinion was delivered (e.g. because a qualified majority 
could  not  be  found  either  in  favour  or  against),  the  Commission  could  still  adopt  the  draft 
decisions, unless a simple majority of the Committee’s members opposed them.  

The  Parliament  and  the  Council  would  have  access  to  the  documents  concerning  the 
proceedings  of  the  Committee  through  the  register’s  procedure  and  would  have  the  right  to 
challenge draft implementing acts submitted by the Commission on the grounds that these go 
beyond the implementing powers provided for in the Framework Regulation. 

This  procedure  for  the  approval  of  decisions,  based  on  the  conferral  of  decision-making 
powers on the Commission under the control of an examination committee, would allow for a 
swifter decision-making process compared to the case-by-case approach applied in the past. It 
is  similar  to  the  procedure  already  existing  for  other  external  financing  instruments.  The 
proposed Framework Regulation would therefore align the decision-making process for MFA 
with that applicable to other external instruments. 

4.2. 

Implementation of MFA  

The decision to provide MFA, taken on the basis of the implementing powers stemming from 
Article  291  TFEU,  would  continue  to  mention  the  availability  period  and  the  general 
conditions  attached  to  the  EU’s  assistance,  including  the  existence  of  an  operational  IMF 
programme  involving  the  use  of  IMF  resources.  The  decision  would  also  specify  the 
maximum  amount  of  the  grant  or  loan  and  the  maximum  number  of  instalments  and,  for  a 
loan, its maximum maturity. 

Following the approval of the decision granting MFA, the Commission would implement the 
MFA  operation.  In  particular,  akin  to  the  existing  practice,  the  Commission  would  be 
authorised to negotiate with the beneficiary country a Memorandum of Understanding (MoU) 
laying  down  the  policy  measures  associated  with  the  assistance,  which  must  be  consistent 
with the beneficiary country’s existing EU partnership, cooperation or association agreements 

26   Regulation (EU) 182/2011, op. cit. 

27   The Commission (chair) does not have the right to vote. 

EN 

21

EN 

 
                                                 
and  with  its  IMF  programme.  Following  agreement  with  the  authorities  of  the  beneficiary 
country on a MoU, the Commission could adopt it subject to the opinion of a committee of 
Member State representatives. Unlike for the adoption of the decision to provide MFA, this 
committee  would  now  act  in  accordance  with  the  advisory  procedure  (rather  than  the 
examination  procedure),  since  the  Memorandum  of  Understanding  has  no  budgetary 
implications  for  the  EU  beyond  those  of  the  basic  act,  while  its  implications  for  the 
beneficiary  country  would  be  in  line  with  those  of  programmes  previously  agreed  with  the 
EU,  such  as  within  the  framework  of  the  European  Neighbourhood  Policy  and  the 
Stabilisation and Accession Process. Information and scrutiny rights of the Parliament and the 
Council  would  be  the  same  as  for  the  committee  proceedings  under  the  examination 
procedure. 

The  Commission  would  also  be  empowered  to  agree  with  the  beneficiary  country  on  the 
financial terms of the operation, to be specified in a Loan or Grant Agreement. Furthermore, 
it would inform the European Parliament and the Council of developments in country-specific 
assistance and provide them with the relevant documents. 

As  it  is  currently  the  case,  once  a  Memorandum  of  Understanding  has  been  adopted  and  – 
along  with  the  accompanying  Loan  or  Grant  Agreement  – entered into force, the assistance 
would  be  implemented  by  the  Commission  under  direct  centralised  management,  with  the 
support of the delegations of the EU. This would include verification of compliance with the 
policy conditions by the beneficiary country and the ensuing release of disbursements, as well 
as  appropriate  fraud  proofing  provisions  to  protect  the  EU’s  financial  interests.  Budget 
commitments  would  be  made  on  the  basis  of  decisions  taken  by  the  Commission.  In  cases 
when  these  extend  over  a  number  of  financial  years,  they  could  be  split  into  annual 
instalments.  

MFA  would  continue  to  be  disbursed  to  the  central  bank  of  the  beneficiary  country  in 
successive  instalments,  conditional  upon  the  fulfilment  of  the  conditions  referred  to  in  the 
Memorandum of Understanding and which the Commission would verify at regular intervals. 
The  European  Parliament  and  the  Council  would  be  kept  informed  of  any  developments 
related to the disbursement of the assistance. 

Consistent  with  the  current  practice,  operational  assessments  of  the  financial  circuits  and 
procedures  in  the  bodies  in  charge  of  managing  the  assistance  in  the  beneficiary  countries 
would  be  conducted  prior  to  the  first  disbursement.  Detailed  ex-post  evaluations  of  MFA 
operations  would  continue  to  be  provided  within  two  years  after  their  closing  date.  In 
addition,  the  Commission  would  continue  to  submit  to  the  Parliament  and  the  Council  an 
annual report on the implementation of all ongoing MFA operations, including an evaluation 
of the implementation of each decision in the previous year.  

4.3. 

Reaffirming and updating the Genval criteria 

As presented in Section 3.4, the Genval criteria set by the ECOFIN Council in October 2002 
spell  out  five  principles  on  which  MFA  operations  should  be  based.  In  addition,  the  letter 
from  the  President  of  the  Council  to  the  President  of  the  Commission  accompanying  the 
Council  conclusions  provides  more  detailed  guidelines  regarding  certain  aspects  of  the 
instrument, notably its geographical scope. It is proposed to reaffirm and formalise the Genval 
criteria in the Framework Regulation. Where necessary, the proposed Regulation updates or 
clarifies  certain  criteria,  but  the  scope  of  these  changes  is  limited.  The  following  section 

EN 

22

EN 

 
presents the proposed amendments, which concern the criteria on geographical delimitation, 
complementarity  and  financial  discipline.  The  criteria  on  exceptionality,  political  pre-
conditions and conditionality would remain unchanged.  

Geographic delimitation 

Two  main  groups  of  countries  will  continue  to  be  eligible  for  MFA:  the  candidate  and 
potential candidate countries remain priority countries for the assistance, while the countries 
and territories covered by the ENP28 would also  be eligible. The latter would now formally 
include  Armenia,  Azerbaijan  and  Georgia,  two  of  which  have  already  benefited  from  EU 
MFA.  Making  these  countries  eligible  for  MFA  is  motivated  by  the  EU’s  overarching 
political,  economic  and  strategic  interests  in  stabilising  the  South  Caucasus,  which  is  also 
reflected  in  the  inclusion  of  the  region  in  the  ENP.  Other  third  countries  could  become 
eligible  in  exceptional  and  duly  justified  circumstances.  These  countries  should  be 
geographically close to the EU and entertain close political and economic links with it.  

Complementarity and burden sharing 

A prerequisite for the mobilisation of MFA will remain the existence of a significant residual 
external financing gap, identified in cooperation with the IMF and other multilateral financial 
institutions,  over  and  above  the  resources  provided  by  them  in  support  of  economic 
stabilisation and reform programmes. The amounts of the EU assistance will continue being 
decided, case-by-case, taking into account the estimated residual external financing gap, the 
intensity  of  EU  relations  with  the  beneficiary  country,  as  well  as  the  maximum  potential 
contributions available from the IFIs and contributions from other donors and creditors – with 
a view to fair burden sharing.  

However, it is proposed not to introduce explicit ceilings, as defined by the Council in 2002, 
for the share of the EU contribution to covering the residual financing gap. This reflects the 
Commission’s past experience with these ceilings, which have been in some cases difficult to 
apply for two main reasons: 

•  the  absence,  or  reduced  scale,  of  participation  of  the  main  non-EU  bilateral  donors 
(notably  the  US  and  Japan)  in  covering  the  residual  financing  gaps  in  countries 
increasingly seen as the EU’s “backyard”; 

•  the technical difficulties in calculating residual financing gaps in an unambiguous way, in 
particular when there are significant differences in the reference periods used by the IMF 
on the one hand and the Commission on the other, as may be the case when some time has 
elapsed between the approval of the IMF programme and hat of the EU’s MFA operation. 
There  is  also  a  considerable  margin  for  error  in  forecasting  balance-of-payments 
developments in general and private capital flows in particular, sometimes exacerbated by 
a lack of availability or reliability of recent and historical data. 

Complementarity and synergies between MFA and other EU instruments of external financial 
support operating in the beneficiary countries will continue to be emphasised. 

28   Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, 

Occupied Palestinian Territories, Syria, Tunisia and Ukraine. 

EN 

23

EN 

 
                                                 
Financial discipline 

As foreseen in the Genval criteria and in line with a discussion on the matter in the EFC in 
January 2011, it is proposed that MFA will, in principle, take the form of a medium/long-term 
loan, but can also take the form of a grant or a combination of loan and grant. In determining 
the appropriate form, the Commission will take into consideration various indicators covering 
the  same  two  main  areas  of  concern  that  the  World  Bank  and  the  IMF  emphasise  when 
determining eligibility to their concessional arms (IDA and PRGT, respectively), namely: 

•  The  level  of  economic  development  of  the  beneficiary  country.  In  line  with  international 
practice,  the  main  measure  for  this  will  be  per  capita  income.29  However,  poverty  ratios 
should also feature, as a way to take due account of the distribution of income in a country 
and its developmental and social challenges.30 

•  The beneficiary country’s debt burden and debt dynamics, as indicators also of its capacity 
for debt repayment. The Commission will use a number of debt and debt service indicators 
(for both external and public debt). It will also draw on the Debt Sustainability Analyses 
(DSA)  conducted  jointly  by  the  IMF  and  the  Wold  Bank,  which  are  available  on  a 
systematic basis for low-income countries.31 

When  proposing  a  choice  between  grants  and  loans,  or  a  combination  of  the  two,  the 
Commission  will  assess  the  beneficiary  country  against  the  different  criteria  presented 
above32.  It  will  also  take  into  account  the  treatment  of  the  country  by  the  IFIs,  notably  the 
classification of the country by the World Bank as IDA only, IBRD only or blend country and 
its eligibility or not for concessional IMF financing under the PRGT.  

5. 

SUMMARY AND CONCLUSIONS  

The  purpose  of  the  MFA  instrument  is  to  help  countries  resolve  short-term  balance  of 
payments  problems  and  stabilise  public  finances,  and  to  encourage  their  implementation  of 
structural  reforms.  MFA  is  provided  on  an  exceptional  and  temporary  basis,  and  based  on 
strict conditionality. It is tied to adjustment and reform efforts to ensure that the economies of 
recipient  countries  are  brought  back  to  a  sustainable  path  and  improve  their  resilience  to 
future  macroeconomic  shocks.  MFA  operations  complement  IMF  adjustment  programmes. 
These programmes must be on track, and the additional measures agreed between the EU and 
beneficiary countries must be implemented, for MFA funds to be disbursed. The assistance is 
ended as soon as a country’s economy has been stabilised and placed on a sustainable path. 

29   In  particular,  gross  national  income  expressed  in  purchasing  power  parities  or  converted  to  US  dollars 
through  the  World  Bank’s  Atlas  method,  which  is  also  used  by  the  IMF  and  the  OECD’s  Development 
Assistance Committee. 

30   For example, the countries of the South Caucasus (except oil-exporting Azerbaijan) feature a relatively high 
level  of  absolute  poverty,  even  though  they  are  lower  middle  income  countries  (rather  than  low  income 
countries). 

31   The  IMF  also  addresses  the  issue  of  debt  sustainability  in  its  reports  on  Article  IV  consultations  for 
countries with capital market access; in doing so, it follows a slightly different methodological framework 
than in its DSA for low income countries. 

32   Annex  7  summarises  how  the  countries  that  are  in  principle  eligible  for  MFA  are  positioned  in  terms  of 

some of these indicators.  

EN 

24

EN 

 
                                                 
Since  the  instrument  was  created  in  1990,  it  has  been  used  to  assist  23  countries  mainly 
bordering the EU. The experience with the instrument has been broadly positive. It has helped 
to bring stability to the recipient economies, proving also a useful instrument to foster their 
integration  and  regulatory  convergence  with  the  EU.  Evaluations  by  external  experts  have 
detected  a  particularly  positive  effect  in  promoting  public  finance  and  financial  sector 
reforms, although the impact on balance of payments and fiscal sustainability has been more 
modest.  

However,  the  effectiveness  of  the  instrument  is  constrained  by  its  slow  decision-making 
process.  In  contrast  with  other  external  financial  instruments  of  the  EU,  MFA  still  lacks  a 
Framework Regulation conferring implementing powers on the Commission. This has tended 
to  result  in  long  lags  between  the  requests  for  MFA  and  the  adoption  of  Decisions  by  the 
Council  and  between  the  approval  of  IMF  programmes  and  that  of  the  associated  MFA 
operations. Moreover, the rules guiding MFA operations (the so-called Genval criteria), while 
useful, lack transparency and a formal, legally-binding status. Also, some of them need to be 
updated  or  clarified.  The  entry  into  force  of  the  Lisbon  Treaty,  which  puts  MFA  decisions 
under the ordinary legislative procedure (co-decision), risks lengthening further the decision-
making lag. It also underlines the need to give to the Parliament, as co-legislator, ownership 
of the MFA rules by enshrining them in a basic legal instrument approved by both legislators.  

In  order  to  address  these  shortcomings,  and  following  repeated  requests  by  the  European 
Parliament,  as  well  as  the  results  of  the  recent  meta-evaluation  of  MFA  operations,  the 
European Commission is proposing the adoption of a Framework Regulation for MFA. The 
proposed Regulation involves an alternative, lighter, legislative procedure, which should help 
strengthen  the  responsiveness  of  the  MFA  instrument  while  ensuring  that  MFA  operations 
meet all legal requirements. It makes the decision-making procedure for MFA comparable to 
that  of  other  external  relations  instruments,  in  which  the  Commission  is  responsible  for 
adopting  individual  financing  decisions  under  the  supervision  of  a  committee  of  Member 
State  representatives.  This  approach  should  considerably  reduce  the  procedural  burden 
associated with MFA operations and enable a swifter response in support of eligible countries 
with serious balance of payments problems, consistent with the emergency nature of MFA. 

The proposed  Framework Regulation  also consolidates  the  Genval  criteria  in  a formal  legal 
instrument, while refining and updating some of them. This is consistent with the calls by the 
European Parliament to clarify these criteria and make them more transparent.  

Ultimately,  a  more  expeditious  MFA  instrument,  with  more  transparent  and  better  defined 
rules, should help increase its effectiveness. This should strengthen its contribution to creating 
a more stable EU neighbourhood and  promoting economic reforms and integration with the 
EU  in  those  countries.  By  improving  the  timeliness  of  MFA,  it  should  also  facilitate  its 
coordination  with,  and  the  EU’s  influence  on,  the  programmes  of  multilateral  financial 
institutions that it is meant to supplement. Finally, by supporting appropriate macroeconomic 
and reform frameworks, a more responsive and effective MFA instrument should contribute 
to the effectiveness of other EU financial instruments used in those countries. 

EN 

25

EN