CELEX: 51991PC0061
Language: en
Date: 1991-02-28
Title: PROPOSAL FOR A COUNCIL REGULATION ON FINANCIAL AID TO ISRAEL AND THE OCCUPIED TERRITORIES

COMMISSION OF THE EUROPEAN COMMUNITIES
                                      C0M(91) 61   final
                                      Brussels, 28  February 1991
              AMitlorvil flrannlal aid for countries
             in the Midkile East and the Mediterranean
X                     affected by the Gulf war
          Communication from the Commission to the Council
 ---pagebreak---                    ASkJitional financial add for countries
                  in the Middle East and the Mediterranean
                          affected by the Gulf war
              Communication from the Commission to the Council
1. Introduction
The Gulf war has had a severe impact on the economies of the countries as a
whole in the Mediterranean and Middle East area. Many of these countries
have fragile economies; most have structural balance-of-payments deficits
and are heavily indebted.
To a greater or lesser extent these economies are experiencing sharp falls
in revenue (tourism, exports, investment, remittances from expatriate
workers and so on) and increased costs (budgetary expenditure relating to
returning migrant workers, increased insurance costs, reconstruction).
In the context of an international campaign launched as long ago as August
1990, the Gammunity and its Member States have provided financial aid
totalling ECU 1 500 million to the "front-line" states. This support for
their balances of payments is in addition to the increased finances
provided by the New Mediterranean Policy - which will be implemented from
late i99i.
However, two of the economies severely affected by the conflict have only
very limited access to the budgetary resources of the New Mediterranean
Policy and have not been included in the exceptional measures so far
adopted. The economies in question are those of Israel and the Occupied
Territories.
On 4 February the Council adopted the principle that financial aid should
be granted both to Israel and to the Occupied Territories, combining
Community budgetary resources with bilateral add from the Member States.
2
  - Assessment of the needs
The Commission has evaluated the financial impact of the Gulf War on both
economies. The Commission based its assessment on the available objective
data, independent evaluations carried out by non-Community countries or
organizations and the requests received from the parties concerned.
Where Israel is concerned, the main financial implications of the Gulf War
were calculated for a limited period of four months from the outbreak of
hostilities (mid-nJanuary), excluding any military expenditure and working
on the assumption that, since this is a developed economy, it would soon
recover from these effects once the war was over.
 ---pagebreak---                                      -2-
In this connection, the main financial effects of the war on the Israeli
economy are production losses caused by the disruption of normal activity
in urban areas (chiefly in the first two weeks), loss of revenue from
tourism, the additional costs of civil defence and reconstruction, loss of
earnings from the export of goods and services and losses in various other
fields such as transport and foreign investment.
These losses amount to an estimated total of USD 3 - 3.5 billion (ECU 2.2 -
2.5 billion.
In the case of the Occupied Territories, the maiji financial losses
concerned are the earnings lost by individuals affected by the curfew and
banned from working in Israel (chiefly during the first 30 days), the loss
of remittances from Palestinian workers in the Gulf states, the loss of
official financial transfers from the Gulf states, the reduction in exports
to Jordan and the Gulf states, and losses in various other fields such as
transport.
The loss of individual earnings was calculated for a four-month period on
the assumption that the restrictions would be lifted at the end of that
period, while the other factors were estimated for the whole of 1991 so as
to take account of the difficulty which the Occupied Territories will
experience in staging an economic recovery. The total is USD 700-800
million (ECU 500-580 million).
The cumulated total financial losses for both economies is thus put at USD
3.7 - 4.3 billion, or ECU 2.7 - 5.15 billion.
3
  - Action by the Community and the Member States
Israel and the Occupied Territories, unlike the front-line states, are not
receiving international aid. Moreover, the traditional sources of
financial aid to Israel are very different from those of the aid to the
Occupied Territories.
Consequently, Community add proper must take account of the undertakings
already made, or being made, to Israel and to the Occupied Territories
respectively.
In this connection, the Commission wishes to point out Germany's
undertaking to provide Israel with EM 1 500 million of aid (including EM
250 of economic aid) and the requests made by the Israeli government for
sped a! assistance from the United States - by far the most important
traditional donor of aid to Israel. The Commission also wishes to point
out that there has been a marked slow-down in official aid flows from the
Gulf States to the Occupied Territories.
In view of the foregoing and, in particular, the bilateral aid from the
Member States, the Commission considers that the proportion of the
financial aid to be charged to the Community budget should be less than 10%
of the estimated total financial losses. Accordingly, the Commission
proposes that the Council decide to grant exceptional financial aid
totalling ECU 250 million to be divided between Israel and the Occupied
Territories.
 ---pagebreak---                                     -3-
In a separate Communication the Commission has proposed a revision of the
financial perspective (SEC(91)338 final), so as to include the above ECU
250 million. It also proposes the attached draft Council Regulation on
financial add to Israel and the Occupied Territories.
 ---pagebreak---                                              Annex 1
           PROPOSAL FOR A COUNCIL RBOTATICN
CN FINANCIAL AID TO ISRAEL AND THE OCCUPIED TERRITORIES
 ---pagebreak---                                  - s•
                                              Annex 1
                              EXPIANATORf MEMORANDUM
1. On 4 February 1991 the Council agreed on two schemes to provide
   financial add to T C T ^ I and the Occupied Territories, which are
   suffering in different degrees the adverse effects of hostilities in the
   Gulf.
        In the case of Israel, economio activity in    general is suffering.
        In the Oooupied Territories, the arrival of    repatriated workers and
        a significant reduction in remittances from    the Gulf states simply
        aggravate an already seriously deteriorated    economic situation.
2. The costs involved - up to ECU 250 million - will be borne by the
   Community iudget (1991). Before the relevant appropriations can be
   entered in the 1991 budget by means of a supplementary and amending
   budget, the ceiling for heading No 4 ("Other policies") in the financial
   perspective for 1991 must be raised. The Commission will p\*t forward
   the necessary proposals in due course. This action should help
   alleviate the adverse effects of the Gulf war on the populations of
   Israel and the Occupied Territories.
3. It is intended that these finances be used to provide Israel with
   financial add in the form of a loan to support the country's balance of
   payments. Where the Occupied Territories are concerned, financial aid
   is to take the form of a grant, which should help to improve economic
   and social conditions there and to integrate Palestinians repatriated
   from Kuwait (by providing jobs, housing, hospitals, etc.).
4. Arrangements should be made to enable this financial add to be used in
   ways suited to the specific problems of Israel and the Occupied
   Territories. In the case of Israel, the operation will be carried out
   before the end of 1991; in the case of the Occupied Territories,
   institutional constraints may require implementation over a three-year
   period.
 ---pagebreak---                               - é-
                       PROPOSAL FOR A COUNCIL REGULATION
            on financial add to Israel and the Occupied Territories
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
and in particular Article 235 thereof,
Having regard to the proposal from the Commission,
Having regard to the opinion of the European Parliament,
Whereas the Community has decided to mount an operation to give financial
aid to Israel and the territories on the West Bank of the River Jordan and
the Gaza Strip occupied by Israel (referred to as the "Occupied
Territories") in order to help alleviate the adverse consequences of the
war in the Gulf;
     m
Whereas the Community must have the means to undertake the sadd operation;
Whereas the amount of Community financial resources needed to carry out
this operation in 1991 has to be estimated and whereas the definitive
amounts are adopted by the budgetary authority within the financial
perspective covering the period 1908 to 1992 annexed to the
Interinstitutional Agreement of 29 June 19881;
Whereas the breakdown of funds as between Israel and the Occupied
Territories will have to be based on an analysis of the socio-economic
effects of the war, the sections of the population affected and their
standard of living;
Whereas the economic and financial capacity of Israel and of the Occupied
Territories is such that financial aid to Israel should take the form of
loans and for the Occupied Territories could take the form of grants;
Whereas the undertaking of this operation is such as to contribute to the
achievement of Community objectives;
Whereas the Treaty does not provide, for the adoption of this Regulation,
for powers other than those of Article 235,
HAS ADOPTED TEES REGULATION:
l O J N o L 185, 15.7.1988, p.33.
 ---pagebreak---                                   Article 1
The Community shall provide financial aid for Israel and the Occupied
Territories.
                                  Article 2
The amount necessary for the implementation of the operation referred to in
Article 1 is estimated at ECU 250 million - principally in the form of
loans to Israel, the rest in the form of grants to the Occupied
Territories -to be committed under the 1991 budget.
                                  Article 5
The add to Israel shall be earmarked in particular to cover import costs,
while the aid to the Occupied Territories shall be earmarked to cover the
cost of alleviating the socio-economic problems (health, education, housing
and so on) faced by the population as a result of the Gulf war. It shall
be provided in instalments.
The general guidelines governing this aid and its breakdown as between
Israel and the Occupied Territories shall be adopted in accordance with the
procedure laid down in Article 5.
                                  Article 4
The Commission shall ensure that the funds are used in accordance with the
aims of ths Regulation by the beneficiaries, which shall be required to
provide a programme specifying the use to be made of the funds, and
afterwards a report on the actual use made thereof.
                                  Article 5
 1. The Commission shall be assisted by a Committee composed of
    representatives of the Member States and chaired by a representative of
    the Commission.
 2. The representative of the Commission shall submit to the Committee a
    draft of the measures to be taken. The Committee shall deliver its
    opinion on the draft within a time limit which the Chairman may lay down
    according to the urgency of the matter. The opinion shall be delivered
    by the majority laid down in Article 148(2) of the Treaty in the case of
    decisions which the Council is required to adopt on a proposal from the
    Commission. The votes of the representatives of the Member States
    within the Committee shall be weighted in the manner set out in that
    Article. The Chairman shall not vote.
 ---pagebreak---                                     - S-
   The Commission shall adopt measures which shall apply immediately.
   However, if these measures are not in accordance with the opinion of the
   Committee, they shall be communicated by the Commission to the Council
   forthwith.
        In that event, the Commission shall defer application of the
        measures which it has decided for a period of two months from the
        date of communication.
        The Council, acting by a qualified majority, may take a different
        decision within the time limit referred to in the previous
        subparagraph.
                                  Article 6
The Commission shall present to the European Parliament and the Council an
initial report on the implementation of the aid operation carried out under
this Regulation by 30 June 1992. A final report shall also be presented as
soon as the operation is completed.
                                  Article 7
This Regulation shall enter into force on the third day following that of
its publication in the Official Journal of th3 European Communities.
This Regulation shall be binding in its entirety and directly applicable in
all Member States.
Done at Brussels,              1991
                                                For the Council
                                                The President
 ---pagebreak---  ---pagebreak---                                                                               ISSN 0254-1475
                                                                  COM(91) 61 final
                                                      DOCUMENTS
EN                                                                                     44
                                Catalogue number : CB-CO-91-096-EN-C
                                                             ISBN 92-77-70061-0
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