CELEX: 51982PC0601
Language: en
Date: 1982-10-15
Title: PROPOSAL FOR A COUNCIL DECISION empowering the Commission to contract loans under the New Community Instrument for the purpose of promoting investment within the Community (presented by the Commission to the Council)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (82) 601
Vol. 1982/0190
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                     COM ( 82 ) 601 final
                                                     Brussels ,         15 October 1982
                            PROPOSAL FOR A COUNCIL DECISION
                empowering the Commission to contract loans under the
                New Community Instrument for the purpose of promoting
                investment within the Community
                       ( presented by the Commission to the Council )
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 ---pagebreak---                       EXPLANATORY MEMORANDUM                             >1
                                                                  '•:< % u
       Investment was at the centre of the European Council 's deliberations
in Brussels on 29 and 30 March 1982 .      The European Council impugned the low
level of productive investment in Europe , re-affirmed the importance it
attached to the strengthening of the Community 's lending instruments and
requested the Commission to make any proposals it deemed useful .           In
emphasizing the need for a co-ordinated policy to promote investment and
combat unemployment , it endorsed the Commission 's analyses , which         had
revealed that a sustained improvement in the economic situation was con­
ditional on a substantial increase in the investment ratio in the Commu­
nity .
       The inadequate level of investment is attributable to a multiplicity of
factors that were examined in a recent communication from the Commission to
the Council*. Prominent among them is the inadequacy or unsuitabi lity of
the available forms of finance;      the Commission has long been considering
ways and means of rectifying this deficiency and as early as 1977 proposed
to the Council the establishment of a New Community Borrowing and Lending
Instrument ( NCI ) for promoting investment in the Community .     The idea
behind this proposal is the benefit to the Community of using its standing
in the international capital markets so as to collect funds , add these to
other funds, and finance investments in key areas of the economy .
The NCI was launched in October 1978 and since then borrowings totalling
1 000 million ECU have been raised in tranches and on-lent to help finance
investment projects serving the Community 's priority objectives in the
energy and infrastructure sectors . ^This new facility has proved its worth :
its financial impact and fol low-thro"ugh effect far exceed the volume of funds
raised .   After consulting Parliament*, the Council decided therefore to renew
it , authorizing the Commission in 'March and April 1982 to contract new loans
of up to 1 000 million ,EQU and. to^ o.ij-lend the proceeds to finance invest­
ment projects in the energy, infrastructure and siitall business sectors .
There is a vigorous demand for this 'type of financing , and the amount
authorized is being used, so fast that it is likely soon to run out .
* Commission Communic]citior>^o the Council on the problem of investment ,
  doc . C0M(82 ) 365 final - of 8 June 1982 .
 ---pagebreak---       In view of prevailing arid TOrea«eable economic -. circumstances,, the
Cowmission ^ in line with fche conclusions reached by the European Council
on 29 and 3Q March 1982 , considers it imperative that the facility should
be renewed and reinforced and that it should at the same time be adapted
in the light of experience and of present requirements .
      The proposed adjustments , which concern the NCI 's ceiling , scope ,
implementation and operational rules , would significantly enhance its effec
tiveness .
a ) Cei ling
      As announced in its Communication on the problem of investment , the
Commission proposes to pursue and expand the action taken under the NCI
to promote investment by seeking authorization to activate a further loan
tranche of 3 000 million ECU . This amount , which had been mentioned at the
European Council meeting in London in November 1981 , would be released in
the form of successive or simultaneous allocations that could be applied
in some or all of the fields covered by the NCI .
b ) Scope
      Council Decision 78 / 870 / EEC establishing the NCI provides that it is
to be applied to investment projects in the energy , industry and infrastruc
ture sectors . However , the subsequent implementing decisions failed to make
any mention of industry . When the NCI was extended on 15 March 1982 , the
Council again singled out industry as a possible area of intervention, and
the Decision of 26 April 1982,' by explicitly including productive invest­
ment projects of small and medium-sized undertakings among the projects
eligible for financing , in effect made the NCI accessible not only to
 ---pagebreak---                                                                               3.
 industry but also to any other sector such as the distributive trades ,
tourism and other services where small-scale investments are made .
     The Commission considers that this avenue should be further explored,
and it proposes that the NCI 's coverage remain unchanged, in order , that
is , to permit the financing of projects in the infrastructure and energy
sectors and in all productive sectors;       however , the size of the investor
would no longer be a disqualifying factor .      It will also reserve the right
to propose that , within the coverage thus defined, a given allocation of
an appropriate amount should be applied solely to one particular field
or sector . The dissemination of new technologies and innovations without
which the essential adaptation and modernization of production structures
will be impossible, could be given special treatment .
c ) Implementation of the new tranche
     The Commission would stress the importance it attaches to the prin­
ciple - first stated in its proposal of 12 June 1978* - that borrowing
and lending operations should be included in the budget .       This proposal
was in fact reiterated for the fifth time in the Preliminary Draft General
Budget of the European Communities for 1983 .         It is still before the
Council .   The Commission is convinced that a detailed consideration of this
proposal is of the utmost urgency, and is anxious that the Council should
rapidly reach a favourable conclusion .      Meanwhile , the present consulta­
tion procedure continues to apply;       pending the introduction of new
arrangements , the Commission feels that , in order to associate Parliament
as closely as possible with the development and use of the New Community
Instrument , the amount and purpose of the allocations should be dealt with
in the framework of the procedure before the Council takes its first deci­
sion on the allocations .     Similarly , the Commission   will inform
Parliament at the same time as the Council of its intentions concerning
the amount and purpose of a subsequent allocation by the time the loans
signed under the current one account for two thirds of its total .
                                                                              ./.
* Proposal to amend the Financial Regulation of 21 December 1977 ,
   doc . COM (78 ) 263 final of 12 June 1978 .
 ---pagebreak--- d ) Operational rules
     Experience has brought to light certain inflexibilities of operation
in the system ;   some have been rectified under the co-operation agreement
between the Commission and the European Investment Bank       :  witness
the introduction of cash holdings .     However , the articulation of the
Commission 's responsibilities with those of its agent could be clarified
so as to make the NCI more effective and more flexible .     Without funda­
mentally changing the present division of responsibilities , under which
lending policy lies within its remit , the Commission proposes , in addi­
tion to its responsibility for deciding whether projects are eligible ,
that loan applications should be sent simultaneously to the Commission
and to the Bank , more frequent regular consultations should take place
between the two institutions , and the principle , already recognized, of
joint signing of loan contracts should be specified by regulation .
     Moreover , to strengthen the role of the ECU on the financial markets
while confirming its position as the Community 's monetary identity, the
Commission would like to develop its use in borrowing and lending opera­
tions .  It intends to set an example by encouraging the use of the ECU in
connection with the NCI to the utmost extent commensurate with its smooth
introduction on financial markets .
     The attached proposal respects the general economy of the existing
mechanism , while improving the efficiency and flexibility of the NCI in
the light of experience .   The Commission wants to associate the Council
and Parliament as closely as possible in the operation of the instrument ,
but it is determined to continue playing its own specific role in the
management and definition of the Community 's borrowing and lending policy .
 ---pagebreak---                               Proposal for a
                             COUNCIL DECISION
           empowering the Commission to contract Loans under the
           New Community Instrument for the purpose of promoting
                      investment within the Community
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 ( 1 ),
Having regard to the opinion of the European Parliament ( 2 ),
Having regard to the opinion of the Economic and Social Committee ( 3 ),
Whereas , given the vital role of investment in raising growth rates ,
adjusting production structures and ^providing a lasting solution to the unemploy­
ment problem , the Community 's lending instruments should be strengthened
to support      " investment , especially in the growth sectors of the
future ;
Whereas , in order to stimulate economic activity and support common poli­
cies , the financing facility established by Council /
Decisions 78 / 870 / EEC (4 ) and 82 / 169 / EEC ( 5 ) empowering the
Commission to contract loans for the purpose of promoting investment within
the Community should be renewed and strengthened alongside existing Commu­
nity financial institutions and bodies > whose scope should be widened;
Whereas this Community facility makes an additional contribution to invest­
ment promotion in the Community and has a real follow-through effect and
financial impact far beyond its apparent size, thus promoting the conver­
gence of Member States' economic trends ;
( 1 ) OJ No .
( 2 ) OJ No .
( 3 ) OJ No .
( 4 ) OJ No . L 298 , 25.10.1978, p. 9
 ( 5 ) OJ No . L 78 , 24.03.1982 , p. 19
 ---pagebreak--- Whereas plentiful finance can be found on the capital markets which
could be tapped to finance investments within the Community;
Whereas the Community has    creditworthiness in its own right which must
be used to best advantage to reinforce European support for the said
investments and to support policies decided on at Community level ;
Whereas the European Investment Bank has stated that it is willing to
contribute to the implementation of the facility ,
HAS DECIDED AS FOLLOWS  :
                            Article 1
The Commission is hereby empowered to contract on behalf of the European
Economic Community a new tranche of loans under the New Community Instru­
ment which shall not exceed the equivalent of 3 000 million ECU in prin­
cipal .
The proceeds of these loans shall be lent to finance investment projects
that contribute to greater convergence and integration of the economic
policies of the Member States and, through the dissemination of technology
and innovation or by other means , to reinforcing the competitiveness of
the Community economy .
These projects shall be such that they serve the Community 's priority objec­
tives in the energy and infrastructure sectors , and in the productive sec­
tor , taking account inter alia of their regional impact and the need to
combat unemployment .
This facility may be used on its own or in conjunction with other Community
financing instruments .
 ---pagebreak---                                                                             3.
                         Article 2
The loan tranche shall be released by way of allocations .
After consulting the European Parliament about the amount and purpose of each alloca­
tion for which loans may be contracted, the Council , acting on a proposal
from the Commission, shall by qualified majority authorize each alloca­
tion and lay down guidelines for the eligibility of projects .
The Commission shall decide whether or not projects are eligible in accor­
dance with the guidelines thus laid down .
The Commission shall borrow on the capital markets within the limits of
the amounts authorized .
                         Article 3
Associated borrowing and lending operations shall be expressed in the same
currency units .
Lending terms as regards the reimbursement of the principal and the rate
and payment of interest shall be fixed in such a way that , overall , they
cover the costs and expenses incurred in concluding and performing both the
borrowing and the lending sides of the operations .
                         Article 4
The terms of the borrowings shall be negotiated by the Commission in the
best interests of the Community, having regard to the conditions on capi­
tal markets and in accordance with the constraints imposed by the duration
and other financial aspects of the associated loans to be granted .     Funds
borrowed shall be deposited with the European Investment Bank , which shall
invest them on a temporary basis if necessary .
Whereas the funds borrowed are expressed, payable or reimbursable in the
currency of a Member State, they may be contracted only with the agreement
of the competent authorities of that State .
                                                                            ./.
 ---pagebreak---                         Article 5
A mandate shall be given to the Bank to grant and administer loans
in pursuance of this Decision . To this end , a co-operation agreement
shall be drawn up between the Bank and the Commission . The Bank shall
carry out operations under this mandate in the name of , for the account
of and at the risk of the Community .
The Commission shall decide , in accordance with the provisions of
 Article 2 ,       whether projects are eligible . Where the Commission
gives a favourable decision, the Bank shall decide whether and on what
terms to grant the loans , in accordance with its usual criteria and with
the procedures laid down in its Statute .
Loan   procedure shall be as follows :
             . Loan applications shall be transmitted simultaneously to
               the Commission and to the Bank either direct or through
                a Member State .
             . The Commission and the Bank shall sign the loan contracts .
                        Article 6
The Commission shall inform the Council and Parliament at regular inter­
vals of the rate of utilization of the allocations    and notify them, no
later than the date on which total loans signed amount to two thirds of
the current allocation , of the purpose and amount it is intending to
propose for the next allocation .
                        Article 7
The Commission shall inform the Council and Parliament annually of re­
venue and expenditure arising from borrowing and lending operations .
 ---pagebreak---                                                                        5.
                       Article 8
Financial control and the audit of the Commission 's accounts shall be
carried out in accordance with the Financial Regulation applicable to
the General Budget of the European Communities .
Done at Brussels ,
                                                For the Council
                                                 The President