Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL providing macro-financial assistance to Ukraine
Date: 2015-01-08
Institutions: European Commission
Subjects: Community loan, EU aid, Ukraine, economic aid, financial aid, macroeconomics, territorial dispute













EUR-Lex - 52015PC0005 - EN











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52015PC0005

Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL providing macro-financial assistance to Ukraine /* COM/2015/05 final - 2015/0005 (COD) */









EXPLANATORY MEMORANDUM
1.  CONTEXT OF THE PROPOSAL
·                    
Grounds for and objectives of the proposal 
The EU is seeking an increasingly close
relationship with Ukraine that goes beyond mere bilateral cooperation,
encompassing gradual political association and economic integration. Ukraine is
an important country both within the European Neighbourhood Policy and the
Eastern Partnership. The EU signed a Partnership and Cooperation Agreement
(PCA) with Ukraine in 1998 that outlines the framework of cooperation in all
key areas of reform and continues to be the legal basis of EU-Ukraine
relations. Relations were further reinforced in November 2009 when the Cabinet
of Ministers of Ukraine adopted the EU-Ukraine Association Agenda, which was
updated in 2011 (endorsed by the EU-Ukraine Cooperation Council in June 2013).
On 21 March and 27 June 2014, the EU and Ukraine signed an Association
Agreement, which will establish a deep political association and economic
integration between the EU and Ukraine. It covers a wide range of areas such as
justice, trade and sectorial cooperation including energy, transport and
environment and sets out detailed commitments and timelines that are demanding
for both parties.
The Ukrainian economy is experiencing a
deep recession that is the result of long-standing macroeconomic imbalances and
structural problems. The situation was aggravated by the eruption of an armed
conflict in the East that had a heavy toll on the economy through sizable
losses of productive capacity and reduced confidence. Following mass public
protests, former President Viktor Yanukovych left power and a reform-minded
government was appointed in Ukraine in February 2014. It embarked on an
ambitious macroeconomic adjustment and structural reform programme that aimed
to change the country’s unviable economic model and pave the way for long-term,
sustainable growth. This programme was underpinned by a USD 17 billion
financial assistance programme by the IMF and significant support from other
international donors. 
Following the political change in February
2014, Ukraine held free and democratic presidential and parliamentary elections
(on 25 May and 26 October, respectively). Furthermore, important steps were
taken by Ukrainian authorities in 2014 to fight corruption and strengthen the
rule of law. In December 2014, the newly formed government presented an
ambitious Action Plan outlining the reform agenda of the coalition government. It
is envisaged to be followed up in early 2015 by a comprehensive National Reform
Strategy setting out economic, political, judicial and administrative reform
measures for 2015-17 that are necessary to ensure medium-term macroeconomic
stability, as well as the implementation of the EU-Ukraine Association
Agreement. 
The reform efforts of the authorities
have been seriously complicated, however, by the armed conflict in the East,
growing trade restrictions from Russia, and the escalation of a natural gas
dispute between the two countries. As a result, the economic recession in
Ukraine has become more severe than initially expected by international donors.
The crisis is expected to be a prolonged one, as Ukraine is heading for another
year of a contraction in 2015. The loss of export proceeds due to the conflict
in the East and the confidence crisis led to a sharp depreciation of the local
currency and a depletion of international reserves. In the current situation,
Ukraine does not have access to international debt markets and is not expected
to regain it in the short term. A significant additional external financing gap
has therefore emerged.
Against this background, additional
official financial assistance is required to address Ukraine’s short-term
balance of payments needs, including the replenishment of international
reserves, and to support the reform programme of the authorities, in particular
the restructuring of the energy and banking sectors. Last but not least, this
support is required to shore up investor confidence, which is essential for
bringing Ukraine’s economy eventually back to a sustainable growth path.
The Ukrainian authorities requested MFA
from the EU of EUR 2 billion on 9 September 2014. The request for MFA was
reiterated in a further letter on 15 December 2014. Taking into consideration
these requests and the economic situation in Ukraine, in particular the
emergence of significant additional external financing needs, the European
Commission is submitting to the European Parliament and the Council a proposal
to grant MFA to Ukraine of maximum EUR 1.8 billion in the form of medium-term
loans. 
The objective of the proposed MFA is to help
Ukraine cover part of its residual additional external financing needs in 2015
and early 2016 in the context of the on-going IMF programme. These additional needs are estimated by the IMF at USD 15 billion.
The EU’s assistance would also reduce the economy’s short-term balance of
payments and fiscal vulnerabilities, while supporting the government’s
adjustment and reform programmes through an appropriate package of accompanying
policy measures to be agreed with the Ukrainian authorities in a Memorandum of
Understanding (MoU).
In this context, the Commission considers
that the political and economic pre-conditions for a MFA operation of the
proposed amount and nature are satisfied.
·                    
General context
Ukraine is experiencing a deep recession
that is the result of long-standing economic and structural problems. The
situation is aggravated by the armed conflict in the eastern part of the
country that not only destroyed part of Ukraine’s productive capacity but also
had significant confidence impact for households and businesses. In recent
months, the implementation of much-needed stabilisation policies, aimed at
reducing imbalances and safeguarding fiscal and external sustainability, have
further weighed on short-term economic prospects. As a result, GDP is
expected to contract by around 7% in real terms in 2014.
Despite the sharp economic contraction and
the conservative central bank policies, inflationary pressures remain high,
reflecting the currency weakening and an adjustment of administered prices (in
particular of utility tariffs). CPI inflation accelerated to 21.8% year-on-year
in November and is expected to pick up further in the near future as the effect
of the currency depreciation fully kicks in. The hryvnia has lost close to
50% of its value against the USD since its floatation in February, well
above initial expectations. The weakening was particularly strong in August and
September, forcing the central bank to introduce a number of administrative
measures and currency controls, in addition to undertaking some foreign
exchange market interventions, which succeeded in bringing temporary stability
to the exchange rate ahead of the October parliamentary elections. At the same
time, these measures impacted negatively on business activity and led to a fast
depletion of the already low international reserves. Following a slight
relaxation of the administrative controls, the currency has depreciated
strongly as from November.
Weak economic activity, coupled with higher
interest outlays on foreign currency denominated debt in light of strong
currency depreciation, as well as and sizable losses in tax collection capacity
in the eastern parts of the country, led to widening of the budget deficit
in 2014 despite a number of austerity measures introduced by the authorities[1]. According to recent
forecasts of the Ministry of Finance, the government fiscal deficit will rise
to 5.3% of GDP for 2014 as a whole. 
A major additional drag on public finances
in 2014 came from the ailing oil and gas company Naftogaz. This company
traditionally runs sizable operational deficits due to the administrative cap
on natural gas prices for households and municipal utility companies, which
forces Naftogaz to sell at below-cost rates and general operational  inefficiency.
In 2014, the company’s activities were negatively affected by the strong
depreciation of the hryvnia and the need for coverage of gas arrears to Russia
(including ones accumulated in 2013). As a result, the state had to inject UAH
103bn into Naftogaz by November, an amount representing 6.8% of projected GDP.
Thus, the overall fiscal deficit run by Ukraine in 2014, which includes the
deficit of Naftogaz, is projected at nearly 12% of GDP, up from 6.7% in
2013 and compared to 8.5% forecast by the IMF in April 2014. 
The widening budget deficit and the sharp
depreciation of the local currency, coupled with a significant economic
contraction, led to a sharp deterioration of Ukraine’s public debt metrics.
At the end of October 2014, the general government public debt amounted to 63%
of the projected GDP for the year, an increase of almost 23 percentage points
from the year end-2013 debt of 40.2% of GDP. 
On the external side, the depreciation of
the hryvnia, coupled with weak domestic demand, has contributed to a significant
adjustment of the current account. The deficit is expected to narrow to
around 4% of the GDP in 2014 from 9.0% in 2013, although this is primarily due
to strong import compression[2].
However, this was accompanied by sizeable private-sector financial outflows
due to dwindling confidence in an environment of high geopolitical
uncertainty[3].
The official financing extended as from May 2014 was insufficient to offset the
capital flight. Overall, Ukraine received around USD 9 billion in gross
official financing in May-December, a large part of which was used to cover
maturing debt (see IMF support and other donor assistance up to 2014). 
In the context of a deepening economic
recession and a confidence crisis, the sizable official financial assistance
provided to Ukraine in 2014 was insufficient to stop the continuous drain on
reserves. In the first eleven months of the year, reserves halved from
their end-2013 level to only USD 10 billion. A further significant drop is
expected in December as a result of payments for gas (including arrears to
Russia). As a result, Ukraine’s gross international reserves are now expected
to drop to USD 7 billion at the end of 2014, or around one month of projected
2015 imports of goods and services.
On 30 April 2014, the IMF approved a
two-year Stand-By Arrangement (SBA) for Ukraine amounting to SDR 10.976
(USD 17 billion, or 800% of the country’s quota). The IMF’s financial
assistance has been complemented by significant support from other official and
bilateral assistance (EU, US, Japan, Canada). Other international financial institutions such as the World Bank,
the EBRD and the EIB have also significantly scaled up their activity to
support Ukraine’s economic transition.
However, in view of the
deeper-than-expected economic recession and the strong capital outflows due to
the confidence crises, Ukraine is facing significant additional external
financing needs in 2015 and in early 2016. These needs arise mainly from the
need to replenish the very low level of international reserves and sizable
private capital outflows. These additional financing needs are estimated at USD
15 billion. The proposed MFA would cover 16.7% of the total additional
financing gap.  
·                    
Existing provisions in the area of the
proposal
MFA has been provided to Ukraine under
three separate decisions:
·      Council Decision of 12 July 2002 providing supplementary
macro-financial assistance to Ukraine (2002/639/EC)[4]
·      Decision No 388 /2010/EU of the European Parliament and of the
Council of 7 July 2010 providing macro-financial assistance to Ukraine[5] 
·      Council Decision of 14 April 2014 providing macro-financial
assistance to Ukraine (2014/215/EU)[6]
·                    
Consistency with the other policies and
objectives of the Union
The proposed MFA is consistent with the
EU’s commitment to support Ukraine’s immediate economic and political
transition. It is consistent with the principles governing the use of the
instrument of MFA, including its exceptional character, political
preconditions, complementarity, conditionality and financial discipline.
The proposed MFA is in line with the
objectives of the European Neighbourhood Policy (ENP). It contributes to
support the European Union’s objectives of economic stability and economic
development in Ukraine and, more broadly, in the eastern European
neighbourhood. By helping the authorities’ efforts to establish a stable
macroeconomic framework and implement an ambitious structural reform programme,
the proposed assistance helps improve the effectiveness of other EU financial
assistance to the country, including budgetary support operations The proposed
MFA also complements the assistance provided by other multilateral and
bilateral donors in the context of the IMF-sponsored economic programme.
The EU MFA would complement the total EUR
1.565 billion in grants that can be mobilised under the European Neighbourhood
Instrument, the Neighbourhood Investment Facility, the Instrument contributing
to Stability and Peace and the EU budget line for the Common Foreign and
Security Policy over 2014-2020, whereby EUR 370 million have already been
committed in 2014. By supporting the adoption by the Ukrainian authorities of
an appropriate framework for short-term macroeconomic policy and structural
reforms, the EU’s MFA would enhance the added value of the overall EU
involvement increasing the effectiveness of the EU’s intervention including
through other financial instruments, such as the State
Building Contract and other budget support operations. 
Ukraine has important economic ties to the
EU. The EU is among Ukraine’s most important commercial partners and accounts
for about one third of its external trade. In 2013, the value of Ukrainian
imports from the EU was EUR 23.9 billion while the value of its exports was EUR
18.8 billion. Ukraine also has a high dependence on the EU in terms of FDI and
other financial flows. On 27 June 2014, Ukraine and the EU agreed to the future
establishment of a Deep and Comprehensive Free Trade Area (DCFTA). This will
support a further increase in bilateral trade in goods and services and
gradually bring Ukraine's trade-related rules and standards in line with those
of the EU.
Ukraine’s transition is very difficult and
the risk of economic collapse remains. At the same time, the new government has
publicly committed to taking significant steps towards political and economic
reforms, with the aim of tackling corruption and strengthening institutions and
mechanisms, based on the rule of law. The country is also developing an
economic reform programme aimed at laying the ground for a sustainable growth
model. Progress in respect of these objectives and the reform programme will be
of the utmost importance to underpin a successful transition.
2.  RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS
·                    
Consultation of interested parties
MFA is provided as an integral part of the
international support for the economic stabilisation of Ukraine. In the
preparation of this proposal for MFA, the Commission services have consulted
with the International Monetary Fund and other international partners, which
are putting in place sizeable financing programmes. The Commission has also
been in regular contact with the Ukrainian authorities.
·                    
Collection and use of expertise
An Operational Assessment verifying the
quality and reliability of Ukraine's public financial circuits and
administrative procedures was carried out by the Commission with the assistance
of external experts, with the final report prepared in August 2014.
·                    
Impact assessment
The MFA and the economic adjustment and
reform programme attached to it will help alleviate Ukraine’s short-term
financing needs while supporting policy measures aimed at strengthening
medium-term balance of payments and fiscal sustainability and raising sustainable
growth. It will notably support reform efforts in the following areas: public
finance management and anti-corruption; tax administration; reforms in the
energy sector, including strengthening the social safety net to ensure targeted
cushioning of the ongoing withdrawal of retail energy price subsidies;
financial sector reforms; and measures to improve the business environment.
3.  LEGAL ELEMENTS OF THE PROPOSAL
·                    
Summary of the proposed action
The European Union shall make MFA available
to Ukraine for a total maximum amount of EUR 1.8 billion, provided in the form
of medium term loans. The assistance will contribute to cover Ukraine’s
residual external financing needs in 2015-16, as identified by the Commission
based on the estimates of the IMF. 
The assistance is planned to be disbursed
in three loan instalments. The disbursement of the first instalment is expected
to take place in the middle of 2015. The second instalment could be disbursed
in the fourth quarter of 2015. The third and last instalment could be made
available towards the end of the first quarter of 2016. The assistance will be
managed by the Commission. Specific provisions on the prevention of fraud and
other irregularities, consistent with the Financial Regulation, are applicable.

The Commission and the Ukrainian
authorities would agree on a Memorandum of Understanding setting out the structural
reform measures associated with the proposed MFA operation, including aspects
of timing and sequencing. These measures will support the authorities’ reform
agenda, including relevant elements of the aforementioned forthcoming National
Reform Strategy for 2015-17, and the implementation of the EU-Ukraine
Association Agreement, as well as complementing the programmes agreed with the
IMF, the World Bank and other multilateral and bilateral donors. As is normally
the case with MFA, the disbursements would inter alia be conditional on
satisfactory reviews under the IMF programme and the continued drawing by
Ukraine on IMF funds.
The European Commission will seek consensus
with the Ukrainian authorities on the expected National Reform Strategy, so as
to facilitate smooth implementation also of the conditionality to be agreed in
the Memorandum of Understanding for the proposed MFA operation. These policy
conditions should address some of the fundamental weaknesses accumulated over
the years by the Ukrainian economy. Possible areas of conditionality could in
principle include: public finance management and anti-corruption; tax
administration; reforms in the energy sector; financial sector reforms; and
measures to improve the business environment.
The decision to disburse the full MFA in
the form of loans is justified by Ukraine's level of development (as measured
by its per-capita income). It is also consistent with the treatment given to
Ukraine by the World Bank and the IMF. 
·                    
Legal basis
The legal basis for this proposal is
Article 212 of the TFEU. 
·                    
Subsidiarity principle
The subsidiarity principle is respected as the
objectives of restoring short-term macroeconomic stability in Ukraine 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
faced at the national level and the need for strong donor coordination in order
to maximise the scale and effectivenes of the 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 around 16.7% of the estimated additional financing
gap for the period 2015–Q1 2016. This significant commitment is justified by:
the political importance of Ukraine for the stability in the European
Neighbourhood; the political integration of the country with the EU as reflected
by the Association Agreement between the two sides that provisionally entered
into force on 1 November 2014; as well as the exceptionally challenging
situation and correspondingly large financing needs that this EU neighbour is
currently facing.
·                    
Choice of instruments
Project finance or technical assistance
would not be suitable or sufficient to addressmacroeconomic objectives. The key
value added of the MFA in comparison to other EU instruments would be to
alleviate the external financial constraint in a swift manner 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 Ukraine under other, more narrowly focused EU
financial instruments. 
4.  BUDGETARY IMPLICATION
The planned assistance would be provided in
the form of a loan and should be financed through a borrowing operation that
the Commission will conduct on behalf of the EU. The budgetary costs of the
assistance will correspond to the provisioning, at a rate of 9%, of the amounts
disbursed into the guarantee fund for external lending of the EU, from budget
line 01 03 06 (“Provisioning of the Guarantee Fund”). Assuming that the first
and second loan disbursements will be made in 2015 for a total amount of EUR 1,200
million and the third loan disbursement in 2016 for the amount of EUR 600
million, and according to the rules governing the guarantee fund mechanism, the
provisioning will take place in the budgets for 2017 (for EUR 108 million) and
2018 (EUR 54 million). On the basis of the currently available information on
the expected overall provisioning needs of the Guarantee Fund, this additional
budgetary impact will be partly financed by a reallocation in the indicative
financial programming for 2017 and 2018 from macro-financial assistance grants
(budget line 01 03 02) and partly by using the unallocated margin for
commitments under Heading 4 in the Multi-Annual Financial Framework. The
indicative breakdown of this financing is as follows:
EUR
million
   || 2017 || 2018 
 Additional expenditure: ||   ||   
 Provisioning of the Guarantee Fund as a result of the proposal (see the legislative financial statement) || 108 || 54 
 Sources of financing: ||   ||   
 Macro-financial assistance (grants) 01.0302 Margin under Heading 4 || -50 -58 || -40 -14 
5.  OPTIONAL ELEMENTS
·                    
Review/revision/sunset clause
The proposal includes a sunset clause. The
proposed MFA would be made available for two and a half years, starting from
the first day after the entry into force of the Memorandum of Understanding.
2015/0005 (COD)
Proposal for a
DECISION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL
providing macro-financial assistance to
Ukraine
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 thereof,
Having regard to
the proposal from the European Commission[7],

After transmission
of the draft legislative act to the national parliaments,
Acting in
accordance with the ordinary legislative procedure[8],
Whereas:
(1)       Relations between the
European Union and Ukraine are developing within the framework of the European
Neighbourhood Policy (ENP) and the Eastern Partnership. An Association
Agreement between the European Union and the European Atomic Energy Community
and their Member States, on the one part, and Ukraine, on the other part (‘the
Association Agreement’), including a Deep and Comprehensive Free Trade Area
(DCFTA), was negotiated from 2007 to 2011 and was initialled in 2012. The
Association Agreement was signed by Ukraine and the Union on 21 March and 27 June
2014. Since 1 November 2014 important parts of the Association Agreement have
been provisionally applied in the areas of the respect for
human rights, fundamental freedoms and rule of law, political dialogue and
reform, justice, freedom and security, economic and financial cooperation. 
(2)       Following the
reinstatement of the Ukrainian constitution of 2004, presidential as well as
parliamentary elections were successfully held on 25 May 2014 and 26 October
2014, respectively. Following the formation on 2 December 2014 of a new
government reflecting the outcome of the parliamentary elections, Ukraine has
reconfirmed its commitment to political and economic reforms in line with the
framework provided by the Association Agreement and presented an Action Plan outlining
the intended reforms. 
(3)       The violation of Ukraine's
sovereignty and territorial integrity and the resulting military conflict have
had damaging effects on Ukraine's already precarious economic and financial
stability. Ukraine is facing a difficult balance of
payments and liquidity position linked to receding confidence and concomitant
capital flight, as well as a worsening
fiscal situation as a result of the direct budgetary cost of the conflict, a
deeper than expected recession and the loss of fiscal revenues from the areas
controlled by the separatists. At the same time,
pre-existing structural weaknesses and budgetary and external-financial
vulnerabilities have also contributed to the deterioration of the economic
situation.
(4)       In this context, Ukraine’s
external financing needs are substantially larger than initially identified,
requiring additional financial assistance by international creditors and
donors. In its most recent programme review mission, the International Monetary
Fund (IMF) has identified a significant financing need over and above the
funding committed so far by the international community, which includes Union
macro-financial assistance under Council Decision 2002/639/EC[9], Decision No 388/2010/EU
of the European Parliament and of the Council[10]
and Council Decision 2014/215/EU[11].
(5)       The Union has, on various
occasions, declared its commitment to support the new Ukrainian authorities in
their aims to stabilise the situation and pursue the course of reforms. The
Union has also declared its readiness fully to support efforts of the
international community and international financial institutions, especially
the IMF, with regard to an international assistance package designed to address
the urgent needs of Ukraine, conditional on Ukraine's clear commitment to
reforms. Financial support from the Union to Ukraine is consistent with the
Union’s policy as set out in the ENP and in the Eastern Partnership. In its conclusions
of 18 December 2014, the European Council states that, following the Commission’s
second disbursement in December 2014 of EUR 500 million in macro-financial
assistance, the Union and its Member States stand ready to further facilitate
and support Ukraine’s reform process, together with other donors and in line
with IMF conditionality.
(6)       The Union’s
macro-financial assistance should be an exceptional financial instrument of
untied and undesignated balance-of-payments support, which aims at addressing
the beneficiary’s immediate external financing needs and should underpin the
implementation of a policy programme containing strong immediate adjustment and
structural reform measures designed to improve the balance-of-payments position
in the short term.
(7)       On 30 April 2014, the
Ukrainian authorities and the IMF agreed on a two-year Stand-By-Arrangement of
Special Drawing Rights (SDR) 10.976 billion (about USD 17.01 billion, 800
percent of quota) in support of Ukraine’s economic adjustment and reform
programme. 
(8)       On 5 March 2014, in view
of the drastically worsening balance-of-payments situation in Ukraine, the
Commission announced a support package, which was endorsed by the extraordinary
European Council on 6 March 2014. That package includes financial assistance in
the amount of EUR 11 billion for the period 2014-2020, including up to EUR
1.565 billion in grants for the same period mobilised under the European
Neighbourhood Instrument, the Neighbourhood Investment Facility, the Instrument
contributing to Stability and Peace and the budget of the Common Foreign and
Security Policy, as well as Union macro-financial assistance of up to EUR 1.61
billion for 2014-15.
(9)       On 9 September 2014, in
view of the worsening economic situation and outlook, Ukraine requested further
macro-financial assistance from the Union. This request was reiterated in
another letter on 15 December 2014.
(10)     Given that Ukraine is a country
covered by the ENP, it should be considered to be eligible to receive the
Union's macro-financial assistance.
(11)     Given that there is still a
significant residual external financing gap in Ukraine's balance of payments
over and above the resources provided by IMF and other multilateral
institutions, the Union macro-financial assistance to be provided to Ukraine
("the Union's macro-financial assistance") is, under the current
exceptional circumstances, considered to be an appropriate response to
Ukraine's request to support economic stabilisation in conjunction with the IMF
programme. The Union's macro-financial assistance would support the economic
stabilisation and the structural reform agenda of Ukraine, supplementing
resources made available under the IMF's financial arrangement.
(12)     The Union's macro-financial
assistance should aim to support the restoration of a sustainable external
financing situation for Ukraine, thereby supporting its economic and social
development in line with the Association Agreement.
(13)     The determination of the
amount of the Union's macro-financial assistance is based on a complete
quantitative assessment of Ukraine's residual external financing needs, and
takes into account its capacity to finance itself with its own resources, in
particular the international reserves at its disposal. The Union's
macro-financial assistance should complement the programmes and resources
provided by the IMF and the World Bank. The determination of the amount of the
assistance also takes into account expected financial contributions from
multilateral donors and the need to ensure fair burden sharing between the
Union and other donors, as well as the pre-existing deployment of the Union's
other external financing instruments in Ukraine and the added value of the
overall Union involvement. 
(14)     The Commission should
ensure that the Union's macro-financial assistance is legally and substantially
in line with the key principles, objectives and measures taken within the
different areas of external action and other relevant Union policies.
(15)     The Union's macro-financial
assistance should support the Union's external policy towards Ukraine.
Commission services and the European External Action Service should work
closely together throughout the macro-financial assistance operation in order
to coordinate, and to ensure the consistency of, Union external policy.
(16)     The Union's macro-financial
assistance should support Ukraine's commitment to values shared with the Union,
including democracy, the rule of law, good governance, respect for human
rights, sustainable development and poverty reduction, as well as its
commitment to the principles of open, rule-based and fair trade.
(17)     A pre-condition for
granting the Union's macro-financial assistance should be that Ukraine respects
effective democratic mechanisms – including a multi-party parliamentary system –
and the rule of law, and guarantees respect for human rights. In addition, the
specific objectives of the Union's macro-financial assistance should strengthen
the efficiency, transparency and accountability of the public finance
management systems in Ukraine and to promote structural reforms aimed at
supporting sustainable and inclusive growth, employment creation and fiscal
consolidation. Both fulfilment of the preconditions and the achievement of
those objectives should be regularly monitored by the Commission and the
European External Action Service.
(18)     In order to ensure that the
Union’s financial interests linked to the Union’s macro-financial assistance
are protected efficiently, Ukraine should take appropriate measures relating to
the prevention of, and fight against, fraud, corruption and any other irregularities
linked to the assistance. In addition, provision should be made for the
Commission to carry out checks and for the Court of Auditors to carry out
audits.
(19)     Release of the Union's
macro-financial assistance is without prejudice to the powers of the European
Parliament and the Council (as budgetary authority). 
(20)     The amounts of the
provision required for macro-financial assistance should be consistent with the
budgetary appropriations provided for in the multi-annual financial framework.
(21)     The Union's macro-financial
assistance should be managed by the Commission. In order to ensure that the
European Parliament and the Council 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.
(22)     In order to ensure uniform
conditions for the implementation of this Decision, implementing powers should
be conferred on the Commission. Those powers should be exercised in accordance
with Regulation (EU) No 182/2011 of the European Parliament and of the
Council[12].
(23)     The Union's macro-financial
assistance should be subject to economic policy conditions, to be laid down in
a Memorandum of Understanding. In order to ensure uniform conditions of
implementation and for reasons of efficiency, the Commission should be
empowered to negotiate such conditions with the Ukrainian authorities under the
supervision of the committee of representatives of the Member States in
accordance with Regulation (EU) No 182/2011. Under that Regulation, the
advisory procedure should, as a general rule, apply in all cases other than as
provided for in that Regulation. Considering the potentially important impact
of assistance of more than EUR 90 million, it is appropriate that the
examination procedure be used for operations above that threshold. Considering
the amount of the Union's macro-financial assistance to Ukraine, the
examination procedure should apply to the adoption of the Memorandum of
Understanding, and to any reduction, suspension or cancellation of the
assistance,
HAVE ADOPTED THIS DECISION:
Article 1
1.           The Union shall make macro-financial
assistance available to Ukraine ("the Union's macro-financial
assistance") of a maximum amount of EUR 1.8 billion, with a view to
supporting Ukraine's economic stabilisation and a substantive reform agenda.
The assistance shall contribute to covering Ukraine's balance of payments needs
as identified in the IMF programme. 
2.           The full amount of the
Union's macro-financial assistance shall be provided to Ukraine in the form of
loans. The Commission shall be empowered on behalf of the Union to borrow the
necessary funds on the capital markets or from financial institutions and to
on-lend them to Ukraine. The loans shall have a maximum maturity of
15 years.
3.           The release of the Union's
macro-financial assistance shall be managed by the Commission in a manner
consistent with the agreements or understandings reached between the International
Monetary Fund (IMF) and Ukraine, and with the key principles and objectives of
economic reforms set out in the EU-Ukraine Association Agreement and the EU-Ukraine
Association Agenda agreed under the European Neighbourhood Policy (ENP). The
Commission shall regularly inform the European Parliament and the Council of
developments regarding the Union's macro-financial assistance, including
disbursements thereof, and shall provide those institutions with the relevant
documents in due time.
4.           The Union's macro-financial
assistance shall be made available for a period of two and a half years,
starting from the first day after the entry into force of the Memorandum of
Understanding referred to in Article 3(1).
5.           Where the financing needs
of Ukraine decrease fundamentally during the period of the disbursement of the
Union's macro-financial assistance compared to the initial projections, the
Commission, acting in accordance with the examination procedure referred to in
Article 7(2), shall reduce the amount of the assistance or suspend or
cancel it.
Article 2
1.           A pre-condition for
granting the Union's macro financial assistance shall be that Ukraine respects
effective democratic mechanisms – including a multi-party parliamentary system –
and the rule of law, and guarantees respect for human rights.
2.           The Commission and the
European External Action Service shall monitor the fulfilment of this
pre-condition throughout the life-cycle of the Union's macro-financial
assistance. 
3.           Paragraphs 1 and 2 of his
Article shall be applied in accordance with Council Decision 2010/427/EU[13].
Article 3
1.           The Commission, in
accordance with the examination procedure referred to in Article 7(2),
shall agree with the Ukrainian authorities on clearly defined economic policy
and financial conditions, focusing on structural reforms and sound public
finances, to which the Union's macro-financial assistance is to be subject, to
be laid down in a Memorandum of Understanding ("the Memorandum of
Understanding") which shall include a timeframe for the fulfilment of
those conditions. The economic policy and financial conditions set out in the
Memorandum of Understanding shall be consistent with the agreements or
understandings referred to in Article 1(3), including the macroeconomic
adjustment and structural reform programmes implemented by Ukraine, with the
support of the IMF. 
2.           The conditions referred to
in Paragraph 1 shall aim, in particular, to enhance the efficiency,
transparency and accountability of the public finance management systems in
Ukraine, including for the use of the Union's macro-financial assistance.
Progress in mutual market opening, the development of rules-based and fair
trade and other priorities in the context of the Union's external policy shall
also be duly taken into account when designing the policy measures. Progress in
attaining those objectives shall be regularly monitored by the Commission.
3.           The detailed financial
terms of the Union's macro-financial assistance shall be laid down in a Loan
Agreement to be agreed between the Commission and the Ukrainian authorities. 
4.           The Commission shall
verify at regular intervals that the conditions in Article 4(3) continue
to be met, including whether the economic policies of Ukraine are in accordance
with the objectives of the Union's macro-financial assistance. In so doing, the
Commission shall coordinate closely with the IMF and the World Bank, and, where
necessary, with the European Parliament and the Council.
Article 4
1.           Subject to the conditions in
paragraph 3, the Union's macro-financial assistance shall be made
available by the Commission in three loan instalments. The size of each
instalment shall be laid down in the Memorandum of Understanding referred to in
Article 3. 
2.           The amounts of the Union's
macro-financial assistance shall be provisioned, where required, in accordance
with Council Regulation (EC, Euratom) No 480/2009[14]. 
3.           The Commission shall
decide on the release of the instalments subject to the fulfilment of all of
the following conditions:
(a)         
the pre-condition set out in Article 2;
(b)         
a continuous satisfactory track record of
implementing a policy programme that contains strong adjustment and structural
reform measures supported by a non-precautionary IMF credit arrangement; and
(c)         
the implementation, within a specific time-frame,
of the economic policy and financial 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 disbursement of the third instalment shall not take place
earlier than three months after the release of the second instalment.
4.           Where the conditions in
paragraph 3 are not met, the Commission shall temporarily suspend or
cancel the disbursement of the Union's macro-financial assistance. In such
cases, it shall inform the European Parliament and the Council of the reasons
for that suspension or cancellation. 
5.           The Union's
macro-financial assistance shall be disbursed to the National Bank of Ukraine.
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 Ukrainian Ministry of Finance as the final
beneficiary.
Article 5
1.           The borrowing and lending
operations related to the Union's macro-financial assistance shall be carried
out in euro using the same value date and shall not involve the Union in the
transformation of maturities, or expose it to any exchange or interest rate
risk, or to any other commercial risk.
2.           Where the circumstances
permit, and if Ukraine so requests, the Commission may take the steps necessary
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. 
3.           Where circumstances permit
an improvement of the interest rate of the loan and if Ukraine so requests, the
Commission may decide to refinance all or part of its initial borrowings or may
restructure the corresponding financial conditions. Refinancing or
restructuring operations shall be carried out in accordance with paragraphs 1
and 4 and shall not have the effect of extending the maturity of the borrowings
concerned or of increasing the amount of capital outstanding at the date of the
refinancing or restructuring.
4.           All costs incurred by the
Union which relate to the borrowing and lending operations under this Decision
shall be borne by Ukraine. 
5.           The Commission shall
inform the European Parliament and the Council of developments in the
operations referred to in paragraphs 2 and 3.
Article 6
1.           The Union's
macro-financial assistance shall be implemented in accordance with Regulation
(EU, Euratom) No 966/2012 of the European Parliament and of the Council[15] and Commission Delegated Regulation (EU) No 1268/2012[16].
2.           The implementation of the
Union's macro-financial assistance shall be under direct management. 
3.           The Memorandum of
Understanding and the Loan Agreement to be agreed with the Ukrainian
authorities shall contain provisions: 
(a)         
ensuring that Ukraine regularly checks that
financing provided from the budget of the Union has been properly used, takes
appropriate measures to prevent irregularities and fraud, and, if necessary,
takes legal action to recover any funds provided under this Decision that have
been misappropriated;
(b)         
ensuring the protection of the Union's financial
interests, in particular providing for specific measures in relation to the
prevention of, and fight against, fraud, corruption and any other irregularities
affecting the Union's macro-financial assistance, in accordance with Council
Regulation (EC,Euratom) No 2988/95[17],
Council Regulation (EC, Euratom) No 2185/96[18] and Regulation (EU,
Euratom) No 883/2013 of the
European Parliament and of the Council[19]; 
(c)         
expressly authorising the Commission, including
the European Anti-Fraud Office, or its representatives to carry out checks,
including on-the-spot checks and inspections; 
(d)        
expressly authorising the Commission and the
Court of Auditors to perform audits during and after the availability period of
the Union's macro-financial assistance, including document audits and
on-the-spot audits, such as operational assessments;
(e)         
ensuring that the Union is entitled to early
repayment of the loan where it has been established that, in relation to the
management of the Union's macro-financial assistance, Ukraine has engaged in
any act of fraud or corruption or any other illegal activity detrimental to the
financial interests of the Union.
4.           During the implementation
of the Union's macro-financial assistance, the Commission shall monitor, by
means of operational assessments, the soundness of Ukraine's financial
arrangements, the administrative procedures, and the internal and external
control mechanisms which are relevant to the assistance.
Article 7
1.           The Commission shall be
assisted by a committee. That committee shall be a committee within the meaning
of Regulation (EU) No 182/2011.
2.           Where reference is made to
this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.
Article 8
1.           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 of that implementation. The report shall:
(a)         
examine the progress made in implementing the
Union's macro-financial assistance;
(b)         
assess the economic situation and prospects of
Ukraine, as well as progress made in implementing the policy measures referred
to in Article 3(1);
(c)         
indicate the connection between the economic
policy conditions laid down in the Memorandum of Understanding, Ukraine’s
on-going economic and fiscal performance and the Commission’s decisions to
release the instalments of the Union's macro-financial assistance.
2.           Not 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, assessing the results and efficiency of the completed
Union's macro-financial assistance and the extent to which it has contributed
to the aims of the assistance.
Article 9
This Decision shall enter into force on the
third day following that of its publication in the Official Journal of the
European Union.
Done at …, 
For the European Parliament                                                 For
the Council
The President                                                                          The
President
LEGISLATIVE FINANCIAL STATEMENT
1.           FRAMEWORK OF THE
PROPOSAL/INITIATIVE 
1.1.        Title of the proposal/initiative 
Macro-financial
assistance to the Republic of Ukraine
1.2.        Policy area(s) concerned in the ABM/ABB
structure[20]

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 
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 area
of DG ECFIN related activity pertains to: 
1. Fostering the
implementation of the European Neighbourhood Policy by deepening 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. 1: "Providing macro-financial
assistance to third countries in resolving their balance of payment crises and
restoring external debt sustainability"
ABM/ABB
activity(ies) concerned: International Economic and
Financial Relations, global governance.
1.4.3.     Expected result(s) and impact
The proposed
assistance consists of an EU loan of up to EUR 1.8 billion to Ukraine, 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 domestic and regional unrest. It will promote
structural reforms aimed at raising sustainable economic growth and improving
public finance management. 
1.4.4.     Indicators of results and impact 
The authorities
will be required to report on a set of indicators to the Commission services on
a regular basis and provide a comprehensive report on the compliance with the
agreed policy conditions ahead of the disbursement of the assistance. 
The Commission
services will continue to monitor public finance management, following the
operational assessment of the financial circuits and administrative procedures
in Ukraine that was carried out in 2014, in preparation of earlier MFA
operations. The EU Delegation in Ukraine will also provide regular reporting on
issues 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 Ukraine. 
An annual report
to the Council and European Parliament is foreseen in the proposed legislative
decision, comprising an assessment of the implementation of this operation. An
independent ex-post evaluation of the assistance will be carried out within two
years after the expiry of the implementation period.
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 future financing arrangement between Ukraine and the IMF. In addition, the Commission shall agree with the Ukrainian authorities
on specific policy conditions, listed in a Memorandum of Understanding.
1.5.2.     Added value of EU involvement
By helping the
country overcome the economic shock caused by the domestic and regional unrest,
the proposed MFA will contribute to promoting macroeconomic stability and
economic reforms in the country. By complementing the resources made available
by the international financial institutions, the EU and other donors, it will
contribute to the overall effectiveness of the package of financial support
agreed by the international donor community in the aftermath of the crisis. 
The proposed
programme will also contribute to strengthening the government's reform
commitment. This result will be achieved, inter alia, through appropriate
conditionality for the disbursement of the assistance. In a larger context, the
programme will signal to the other countries in the region that the EU is ready
to support countries embarking on a clear path towards political reforms in
times of economic difficulties.
1.5.3.     Lessons learned from similar experiences
in the past
Since 2004, a
total of fifteen ex-post evaluations have been carried out on macro-financial
assistance operations. These evaluations conclude that MFA operations do
contribute, albeit sometimes modestly and indirectly, to the improvement of the
external sustainability, the macroeconomic stability and the achievement of
structural reforms in the recipient country. In most cases, MFA operations had
a positive effect on the balance of payments of the beneficiary country and
helped to relax their budgetary constraints. They also led to a somewhat higher
economic growth.
1.5.4.     Coherence and possible synergy with other
relevant instruments
The EU is among
the major donors of Ukraine. The EU intends to make
available up to EUR 1.565 billion in grants for the period 2014-2020 under its
regular cooperation, in support of Ukraine's political and economic reforms.
The key value
added of the MFA in comparison to other EU instruments would be its rapid implementation
to alleviate Ukraine's immediate external financial constraints, but also help
create a stable macroeconomic framework, including by 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 onto a sustainable path. 
MFA would also
be complementary to interventions envisaged by the international financial
institutions, in particular the adjustment and reform programme supported by
the IMF and the Development Policy Loans of the World Bank.
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 Article (1.4) of the
Decision 
X  Financial impact from 2015 to 2018 
1.7.        Management mode(s) envisaged[21] 
X Centralised
direct management by the Commission 
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 IMF
arrangement and specific reform measures to be agreed with the Ukrainian
authorities in a Memorandum of Understanding (see also point 1.4.4).
2.2.        Management and control system 
2.2.1.     Risk(s) identified 
There are
fiduciary, policy and political risks related to the proposed MFA operation. 
There is a risk
that the macro-financial assistance, which is not dedicated to specific
expenses, could be used in a fraudulent way. In general terms, this risk is
related to factors such as the quality of management systems in the central
bank and the Ministry of Finance and the appropriateness of internal and
external audit capabilities. 
Another key risk
to the operation stems from the economic and political uncertainty, notably due
to the unprovoked Russian violation of Ukrainian sovereignty and territorial
integrity. On the domestic front, the main risk is instability related to
difficulties in the political and economic reform process. The full
implementation of the stabilisation and reform measures supported by the
international community, including the proposed MFA operation, might be
undermined by social dissatisfaction potentially leading to unrest.
Finally, there
are risks stemming from a possible weakening of the European and global
economic environment.
2.2.2.     Control method(s) 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.
2.2.3.     Costs and benefits of controls and
probable non-compliance rate
The basic costs
for the Commission related to the methods of verification and control as well
as the cost of the Operational Assessment of financial and administrative
circuits conducted prior to the operation, are described in Table 3.2.1. In
addition, there are costs for the European Court of Auditors and of possible
interventions of the OLAF. The Operational Assessment not only helps assess
risks of misuse of the funds but, as a collateral benefit, it provides useful
information on the necessary reforms in the area of public finance management. Regarding
the probable non-compliance rate, the risk of non-compliance (in the form of
non-repayment of the loan or misuse of the funds) is judged to be low, based on
the experience with the MFA instrument since its creation.
2.3.        Measures to prevent fraud and
irregularities 
To mitigate the
risks of fraudulent use several measures have been and will be taken: 
First, the
Commission services, with the support of duly mandated external experts,
carried out an Operational Assessment of the financial circuits and
administrative procedures at the Ministry of Finance and the National Bank of
Ukraine in April 2014, in order to fulfil the requirements of the Financial
Regulation applicable to the General Budget of the European Communities. This
review covered areas such as budget preparation and execution, public internal
financial control, internal and external audit, public procurement, cash and
public debt management, as well as the independence of the central bank. It determined that the framework for sound financial
management of macro-financial assistance is sufficiently effective in Ukraine
for the EU to provide this support. Also, the assistance will be paid to
a dedicated account at the National Bank of Ukraine.
Second, the
proposed legal basis for macro-financial assistance to Ukraine includes a
provision on fraud prevention measures. These measures will be elaborated
further in the Memorandum of Understanding and the Loan Agreement, envisaging a
set of provisions on inspection, fraud prevention, audits, and recovery of
funds in case of fraud or corruption. It is further envisaged that a number of
specific policy conditions will be attached to the assistance, including in the
area of public finance management, with a view to strengthening efficiency,
transparency and accountability. 
Finally, the
assistance will be liable to verification, control and auditing procedures
under the responsibility of the Commission, including OLAF, and the European
Court of Auditors.
3.           ESTIMATED FINANCIAL
IMPACT OF THE PROPOSAL/INITIATIVE 
3.1.        Heading(s) of the multiannual financial
framework and expenditure budget line(s) affected 
Existing expenditure budget lines 
01 03 02
Macro-financial assistance
01 03 06 Provisioning
of the Guarantee Fund
In order of multiannual financial framework headings and budget lines.
 Heading of multiannual financial framework || Budget line || Type of expenditure || Contribution 
 Number [Description………………...……….] || Diff./non-diff. ([22])   || from EFTA countries[23]   || from candidate countries[24]   || from third countries || within the meaning of Article 18(1)(aa) of the Financial Regulation 
 4 || 01 03 02 Macro-financial assistance || Diff. || NO || NO || NO || NO 
 4 || 01 03 06 Provisioning of the Guarantee Fund || Non-diff. || NO || NO || NO || NO 
01 03 06 – European Union guarantee for EU
loans raised for macro-financial assistance to third countries: The Guarantee
Fund for external actions has to be provisioned according to the Council Regulation
(EC, Euratom) No 480/2009[25].
In line with this Regulation, the fund shall correspond to 9 % (the
‘target amount’) of the EU’s total outstanding capital liabilities arising from
each operation, increased by unpaid interest due. 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" draft budget and effectively paid in one
transaction at the beginning of the year "n+1" from the budget line "Provisioning
of the Guarantee Fund" (budget line 01 03 06). As a result, 9% of the
disbursed amount (maximum of EUR 162 million) will be considered in the target
amount at the end of the year "n-1" for the calculation of the
provisioning of the Fund.
The budget entry ("p.m.") on the
budgetary line reflecting the budget guarantee for the loan will be activated
only in the case of an effective call on the budget guarantee. It is not
expected that the guarantee be called.
New budget lines requested: not applicable.
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 ||   ||   || [Heading: The EU as a global partner] 
 || DG: <ECFIN> ||   ||   || Year 2015 || Year 2016 || Year 2017 || Year 2018 || TOTAL || 
 || Ÿ Operational appropriations ||   ||   ||   ||   ||   || 
 || Budget line 01 03 06 Provisioning of the Guarantee Fund || Commitments || (1a) ||   ||   || 108 || 54 || 162 || 
 || Payments || (2a) ||   ||   || 108 || 54 || 162 || 
 || Appropriations of an administrative nature financed from the envelope of specific programmes (operational assessment and ex-post evaluation) ||   ||   ||   ||   ||   || 
 || Budget line 01 03 02 || Commitments || (3) ||   || 0.2 ||   ||   || 0.20 || 
 ||   || Payments || (3a) ||   ||   || 0.2 ||   || 0.20 || 
 || TOTAL appropriations for DG ECFIN || Commitments || =1+1a +3 ||   || 0.2 || 108 || 54 || 162.2 || 
 || Payments || =2+2a +3 ||   ||   || 108.2 ||   54 || 162.2 || 
 || Ÿ TOTAL operational appropriations || Commitments || (4) ||   || 0.2 || 108 ||   54 || 162.2 || 
 ||   || Payments || (5) ||   ||   || 108.2 ||   54 || 162.2 || 
 Ÿ TOTAL operational appropriations, incl. ex-post evaluation || Commitments || (4) ||   || 0.2 || 108 || 54 || 162.2 || 
 Payments || (5) ||   ||   || 108.2 || 54 || 162.2 || 
 Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (6) ||   ||   ||   ||   ||   || 
 TOTAL appropriations under HEADING 4 of the multiannual financial framework || Commitments || =4+ 6 ||   || 0.2 || 108 ||   54 || 162.2 || 
 Payments || =5+ 6 ||   ||   || 108.2 ||   54 || 162.2 || 
If more than one heading is affected by the proposal /
initiative:
EUR million (to three decimal places)
 Heading of multiannual financial framework: || 5 || ‘Administrative expenditure’ 
   ||   ||   ||   ||   ||   || 
   || Year 2014 || Year 2015 || Year 2016 || Year 2017 || TOTAL 
 Ÿ Human resources ||   || 0.660 || 0.396 || 0.132 || 1.188 
 Ÿ Other administrative expenditure ||   || 0.022 || 0.016 || 0.016 || 0.054 
 TOTAL DG ECFIN || Appropriations ||   || 0.682 || 0.412 || 0.148 || 1.242 
 TOTAL appropriations for HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) ||   || 0.682 || 0.412 || 0.148 || 1.242 
EUR million (to three decimal places)
   ||   || Year 2014 || Year 2015 || Year 2016 || Year 2017 || TOTAL 
 TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments ||   || 0.682 || 0.412 || 0.148 || 1.242 
 Payments ||   || 0.682 || 0.412 || 0.148 || 1.242 
3.2.2.     Estimated impact on operational
appropriations 
¨ The
proposal/initiative does not require the use of operational appropriations 
X The proposal/initiative requires the use of operational
appropriations, as explained below:
Commitment appropriations in EUR million (to three
decimal places)
 Indicate objectives and outputs   ò ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 SPECIFIC OBJECTIVE NO 1[26] ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
   ||   || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 ||   ||   
   || Type || Number || Cost || Number || Cost || Number || Cost || Number || Cost || Number || Cost || Total number || Total Cost 
 - Output 1 || Ex-post evaluation ||   ||   ||   ||   || 1 || 0.2 ||   ||   ||   ||   || 1 || 0.2 
 - Output 2 || Provisioning of the Guarantee Fund ||   ||   ||   ||   || 1 || 108 || 1 || 54 ||   ||   || 2 || 162 
 Subtotal for specific objective No 1 ||   ||   ||   ||   || 2 || 108.2 || 1 || 54 ||   ||   || 3 || 162.2 
 TOTAL COST ||   ||   ||   ||   || 2 || 108.2 || 1 || 54 ||   ||   || 3 || 162.2 
3.2.3.     Estimated impact on appropriations of an
administrative nature
3.2.3.1.  Summary 
¨ The
proposal/initiative does not require the use of appropriations of an
administrative nature 
X The proposal/initiative requires the use of appropriations of an
administrative nature, as explained below:
EUR million (to
three decimal places)
   || [27]   || Year 2014 || Year 2015 || Year 2016 || Year 2017 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL 
 HEADING 5 of the multiannual financial framework ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Human resources ||   ||   || 0.660 || 0.396 || 0.132 ||   ||   ||   || 1.188 
 Other administrative expenditure  (missions) ||   ||   || 0.022 || 0.016 || 0.016 ||   ||   ||   || 0.054 
 Subtotal HEADING 5 of the multiannual financial framework ||   ||   || 0.682 || 0.412 || 0.148 ||   ||   ||   || 1.242 
 Outside HEADING 5[28] of the multiannual financial framework   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Human resources ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Other expenditure of an administrative nature ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Subtotal outside HEADING 5 of the multiannual financial framework ||   ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL ||   ||   || 0.682 || 0.412 || 0.148 ||   ||   ||   || 1.242 
The administrative
appropriations required will be met by the appropriations of the DG which are
already assigned to management of the action and/or which 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.
3.2.3.2.   Estimated requirements of human
resources 
¨ 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 time
equivalent units
   ||   || Year 2014 || Year 2015 || Year 2016 || Year 2017 || Enter as many years as necessary to show the duration of the impact (see point 1.6) 
 Ÿ Establishment plan posts (officials and temporary agents) || 
 01 01 01 01 (Headquarters and Commission’s Representation Offices) ||   ||   || 5 || 3 || 1 ||   ||   ||   
 XX 01 01 02 (Delegations) ||   ||   ||   ||   ||   ||   ||   ||   
 XX 01 05 01 (Indirect research) ||   ||   ||   ||   ||   ||   ||   ||   
 10 01 05 01 (Direct research) ||   ||   ||   ||   ||   ||   ||   ||   
 Ÿ External personnel (in Full Time Equivalent unit: FTE)[29]   
 XX 01 02 01 (CA, INT, SNE from the "global envelope") ||   ||   ||   ||   ||   ||   ||   ||   
 XX 01 02 02 (CA, INT, JED, LA and SNE in the delegations) ||   ||   ||   ||   ||   ||   ||   ||   
 XX 01 04 yy[30]   || - at Headquarters ||   ||   ||   ||   ||   ||   ||   ||   
 - in delegations ||   ||   ||   ||   ||   ||   ||   ||   
 XX 01 05 02 (CA, SNE, INT - Indirect research)   ||   ||   ||   ||   ||   ||   ||   ||   
 10 01 05 02 (CA, SNE, INT - Direct research) ||   ||   ||   ||   ||   ||   ||   ||   
 Other budget lines (specify) ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL ||   ||   || 5 || 3 || 1 ||   ||   ||   
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.
Description of tasks to be carried out:
 Officials and temporary staff || Director Dir. D: Supervise and manage the operation, liaise with Council and Parliament for the adoption of the Decision and the approval of the Memorandum of Understanding (MoU), negotiate with the Ukrainian authorities the MoU, review reports, lead missions and assess progress with conditionality compliance. HoU/DHoU Dir. D: Assist the Director in managing the operation, liaising with Council and Parliament for the adoption of the Decision and the approval of the MoU, negotiating with the Ukrainian authorities the MoU and Loan Facility Agreement (together with Dir. L), reviewing reports and assessing progress with conditionality compliance. Desk economists, MFA Sector (Dir. D): Prepare the Decision and MoU, liaise with the authorities and the IFIs, conduct review missions, prepare Commission staff reports and Commission procedures related to the management of the assistance, liaise with external experts for the operational assessment and the ex-post evaluation. Directorate L (Units L4, L5 and L6 under the supervision of the Director): Prepare the Loan Facility Agreement (LFA), negociate it with the Ukrainian authorities and have it approved by the responsible Commission services and signed by both parties. Follow up the entry into force of the LFA. Prepare the Commission decision(s) on the borrowing transaction(s), follow up the submission of the Request(s) for Funds, select the banks, prepare and execute the funding transaction(s) and disburse the funds to Ukraine. Carry out the back-office activities to follow up the reimbursement of the loan(s). Prepare the corresponding reports on these activities. 
 External staff || N/A 
3.2.4.     Compatibility with the current
multiannual financial framework 
X Proposal/initiative is compatible the current multiannual
financial framework.
3.2.5.     Third-party contributions 
X 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.
[1]               The authorities have twice revised the budget (in
March and in July) in an attempt to rein in the high fiscal deficit.
[2]               In January-October, imports of goods plummeted by
26.2% year-on-year, well outpacing the 10.8% decline of exports.
[3]               The net outflow from the financial account amounted
to USD 4.8 billion in January-October 2014. Withdrawals of bank deposits by
non-residents were the main factor behind the capital outflow. Both FDI and
portfolio investments also recorded outflows in the period, although of a
smaller size.
[4]               OJ L 209, 6.8.2002, p. 22-23.
[5]               OJ L 189, 22.7.2010, p. 28.
[6]               OJ L 111, 15.4.2014, p. 85.
[7]               OJ C […], […], p. […].
[8]               Position of the European Parliament of … 2012 and
Decision of the Council of … 2012.
[9]               OJ L 209, 6.8.2002, p. 22-23
[10]             OJ L 189, 22.7.2010, p. 28.
[11]             OJ L 111, 15.4.2014, p. 85.
[12]             Regulation (EU) No 182/2011 of the European
Parliament and of the Council of 16 February 2011 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).
[13]             Council Decision 2010/427/EU of
26 July 2010 establishing the organisation and functioning of the
European External Action Service (OJ L 201, 3.8.2010, p. 30).
[14]             Council Regulation (EC, Euratom) No 480/2009 of
25 May 2009 establishing a Guarantee Fund for external actions (OJ L 145, 10.6.2009, p. 10).
[15]             Regulation (EU, Euratom) No 966/2012 of the
European Parliament and of the Council of 25 October 2012 on the financial
rules applicable to the general budget of the Union and repealing Council
Regulation (EC, Euratom) No 1605/2002 (OJ L
298, 26.10.2012, p. 1).
[16]             Commission Delegated Regulation (EU) No 1268/2012
of 29 October 2012 on the rules of application of Regulation (EU, Euratom)
No 966/2012 on the financial rules applicable to the general budget of the
Union (OJ L 362, 31.12.2012, p. 1).
[17]             Council Regulation (EC, Euratom) No 2988/95 of
18 December 1995 on the protection of the European Communities financial
interests (OJ L 312, 23.12.1995,
p. 1).
[18]             Council Regulation (EC, Euratom) No 2185/96 of
11 November 1996 concerning on-the-spot checks and inspections carried out
by the Commission to protect the Communities' financial interests against fraud
and other irregularities (OJ L 292, 15.11.1996, p. 2).
[19]             Regulation (EU, Euratom)
No 883/2013 of the European Parliament and of the Council of
11 September 2013 concerning investigations conducted by the European
Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the
European Parliament and of the Council and Council Regulation (Euratom)
No 1074/1999 (OJ L 248, 18.9.2013, p. 1).
[20]             ABM: Activity-Based Management – ABB: Activity-Based
Budgeting.
[21]             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
[22]             Diff. = Differentiated
appropriations / Non-Diff. = Non-differentiated appropriations.
[23]             EFTA: European Free Trade
Association.
[24]             Candidate countries and, where
applicable, potential candidate countries from the Western Balkans.
[25]             Council Regulation (EC,
Euratom) No 480/2009 of 25 May 2009 establishing a Guarantee Fund for external
actions (OJ L 145, 10.6.2009, p. 10).
[26]             As described in point 1.4.2.
‘Specific objective(s)…’
[27]             Year N is the year in which
implementation of the proposal/initiative starts.
[28]             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.
[29]             CA= Contract Agent; LA = Local
Agent; SNE = Seconded National Expert; INT = agency staff (‘Intérimaire’); JED=
‘Jeune Expert en Délégation’ (Young Experts in Delegations).
[30]             Sub-ceiling for external staff
covered by operational appropriations (former "BA" lines).