CELEX: 51984PC0696
Language: en
Date: 1984-12-11
Title: Proposal for a COUNCIL DECISION authorizing the Commission to negotiate a new protocol on financial cooperation between Yugoslavia and the European Economic Community (submitted to the Council by the Commission)

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COM (84) 696
Vol. 1984/0254
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 ---pagebreak---                                                                                 COM (84) 696 final
       COMMISSION                                                               Brussels, 11 December 1984
            OF THE
EUROPEAN COMMUNITIES                                                            FOR OFFICIAL USE ONLY
    G e n e r a l S e c r e ta ria t
                                                          Proposal for a
                                                         COUNCIL DECISION
                                    authorizing the Commission to negotiate a new protocol on
                                         financial cooperation between Yugoslavia and the
                                                   European Economic  Community
                                           (submitted to the Council by the Commission)
                COM (84) 696 final
 ---pagebreak---                                 - 1 -
The first EEC-YugosLavia finacial protocol
1.         The first financial protocol between the Community and Yugoslavia ( 1 )
was signed on 2 April 1980 and entered into force on 1 July that year to
run for five years.  It will thus expire on 30 June 1985.
           The Protocol accorded Yugoslavia a total of 200 m ECU in the
form of EIB loans from the Bank's own resources.
2.         The money was intended to finance projects of mutual interest;
loans have been approved for the following infrastructure schemes :
                                           date of signing       amount
a) modernisation of electricity grid         December 1982        67m Ecu
b) construction of 35 km of road forming
   part of the trans-Yugoslavia highway        June 1983          66m Ecu
c) modernisation of railway                  January 1984         67m Ecu
                                                                 200m Ecu
3.         In June this year the EIB approved an exceptional 60m Ecu own-
resource loan to Yugoslavia outside the financial protocol, as a contribution
to the financing of priority sections of the Trans-Yugoslavia highway and the
Karawanken tunnel which links up with the Austrian Tauern motorway.
(1) 0J No L 41, 14.2.83., p. 37
 ---pagebreak---                                  - 2 -
The shape of the second financial protocol
A·          At the second meeting of the EEC-Yugoslavia Cooperation Council
on 18 June this year, the Community delegation agreed in principle to
negotiations for a new financial protocol, and the Cooperation Council
adopted Decision N o 2/84 calling on the contracting parties to open negotiations
 for a second protocol before the current one expires.
5.       ( The Commission departments concerned have held exploratory talks
with the Yugoslav authorities to find out their desiderata.   Not only does
Yugoslavia want a larger sum overall, it appears that contrary to its wishes
in 1980, when the first financial protocol was concluded, it now wants
the Community to provide funds from its own budget as well as EIB loans at
market rates.   Yugoslavia says its present financial situation is such
that it cannot increase its level of indebtedness by borrowing as planned
at market rates.   It also points out that the development of its infrastructure,
particularly the trans-Yugoslavia highway, benefits the Community by providing
easier links between Community regions.   Yugoslavia therefore regards it
as only fair that the Community should be actively involved in financing the
projects.
                                                                     «
            The Yugoslav authorities would also like provision in the new
protocol for the financing by means of unsubsidesed EIB loans of economic
projects, since some of these projects would be designed to facilitate the
return to Yugoslavia of migrant workers currently in the Community.
            Lastly, Yugoslavia would like to see cooperation and technical
assistance activities expanded and a specific amount set aside for this
purpose under the new financial protocol.
 ---pagebreak---                                   - 3 -
          ■*»
6·            The Commission, for its part, believes the new financial protocol
should both give practical effect to the Community's political commitment to
Yugoslavia and help the country, as a number of Member States are doing, to
improve its economic and financial situation.
              Accordingly, the Commission considers that the new protocol should
be structured in the same way as most of the other protocols with Mediter­
ranean countries, offering not merely EIB own-resource loans but money from
the budget J n the form of special loans and grants to be used for interest
subsidies and cooperation activities.
              The Commission would also point out that Yugoslavia's desire
for support from budget funds is in accordance with the approach outlined
in its proposals on the future Mediterranean policy of the enlarged
Community C D .
7.   Special loans and interest rate subsidies would not only relieve 'lUgoslavia's
debt burden but enable the Community actively to back projects of mutual
interest, particularly road and rais infrastructure projects, where the
Community would benefit from greater ease of transit through Yugoslavia. :
C D COM (84) 107 and SEC (84) 1301, p. 15
 ---pagebreak---                                      - 4 -
     8.          Decision No 3/84 of the second EEC-Yugoslavia Cooperation Council
     meeting stressed the need to encourage cooperation activities. So far,
                           1
     the shortage of funds has prevented much work in this direction and it has
     been impossible to devise a preparatory programme of related technical
     assistance. The Commission consequently feels that the new financial
     protocol must provide for grants to fund cooperation and technical assistance
     operations.
             %
     9.          The Commission also considers that the Community could agree to
     Yugoslavia's submitting projects offering a normal return as well as infra­
    structure projects for financing under the protocol. The term "mutual interest"
    in Article 1 of the present protocol should cover the funding of projects
    conducive to the establishment of synergy between the economies of the parties.
    Natural ly, such projects would qualify   only for unsubsidized EIB loans.
     10.         As regards the overall financial package, the Commission considers
     the amount on offer should be raised,:ifi-line with the increases applied in
     respect of the second generation of the existing Mediterranean financial
     protocols, and should also reflect the fact that soon after the entry into
     force of the new protocol, the Community wilt probably have twelve members.
(1)  It must be borne in mind that the relevant budget heading (Item 990) also has
     to finance cooperation activities carried out with a number of other non-
     Community countries as well as Yugoslavia (Pakistan, India, Bangladesh, Sri
     Lanka, Mexico, Brazil, the Andean Group, Canada, Romania, China and Israel).
 ---pagebreak---                              - 5 -
11.    The Commission therefore proposes that Yugoslavia be offered a new
financial protocol worth 480 mECU, broken down as follows :
       400m ECU of EIB loans from the Bank's own resources; up to 25% of
       this amount could be used for projects offering a normal return;
       80m ECU in aid from the Community budget, which could be broken
       down as follows:
       i)  20m ECU of special loans for infrastructure financing;
      ii)  60m ECU of grants to be used for interest rate subsidies
           (about 55m ECU), cooperation and related preparatory tech­
           nical assistance activities (about 5m ECU).
 ---pagebreak---                               Proposal fo r a Council D ecision
                    a u th o r iz in g th e Commission t o n e g o tia te a new
                    p r o to c o l on f in a n c ia l coop eration between Yugo­
                    s la v ia and th e European Economic Community
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard t o th e T reaty e s t a b lis h in g th e European Economic Community
Having regard t o th e proposal from th e Commission,
Whereas th e                       EEC-Yugoslavia f in a n c ia l p r o to c o l e x p ir e s on 30
June 1985 and              n e g o tia tio n s should commence fo r th e co n clu sio n o f
a new p r o to c o l,
HAS DECIDED AS FOLLOWS:
                                              Sole Article
  The Commission i s hereby a u th o rized t o n e g o tia te a new p ro to co l
on f in a n c ia l coop eration w ith Y ugoslavia in c o n su lta tio n w ith rep­
r e s e n ta t iv e s o f th e Member S ta te s and in accordance w ith th e d ir e c t iv e s
 annexed h ereto .
 Done at                                                                    For the Council
                                                                            The President
 ---pagebreak---                                                                             Annex
1 . The new p rotocol on f in a n c ia l coop eration w i l l run u n t i l 30 June
1990. It. will provide for ETB ow n-resource lo a n s and a p p rop riation s
from th e Community budget t o th e v a lu e ofs
                        Budget                    EIB                 T otal
                          8 Cta ECU               400m ECU              480m ECU
2 . The appropriations from the Community budget -             20m ECU in th e form o f
     lo a n s on s p e c ia l term s and 60m ECU in grant form               - will be
     u sed f o r th e fo llo w in g purposes:
      ( i ) s p e c ia l lo a n s: 40 y ear m a tu r itie s , 10-y e a r grace p erio d ,
            i n t e r e s t r a te o f 1$ ;
    ( i i ) 3^ in t e r e s t r a te su b sid y on the. share of EIB loans earmarked for
             infrastructure projects;
            g ran ts fo r coop eration a c t i v i t i e s and r e la te d preparatory
            te c h n ic a l a s s is t a n c e .
3. The t e x t o f th e p r o to c o l w i l l be based on th o se o f th e p r o to c o ls
      w ith th e oth er M editerranean c o u n tr ie s .
 ---pagebreak---                                                            FICHE FINANCIERE
            Les p r é s e n te s p r o p o s i t i o n s p r é v o ie n t l ' o c t r o i à La Y o u g o s la v ie d 'u n
concours f i n a n c i e r          q u in q u e n n a l de la Communauté d 'u n m ontant de 480 m i l l i o n s
d 'E c u s dans le " c a d r e - d 'u n second p r o t o c o l e f i n a n c i e r C E E/Yougoslavie p re n a n t · ·
cours le 1er j u i l l e t              1985.
            La r é p a r t i t i o n de c e t t e a id e se p r é s e n te r a de la manière s u iv a n t e :
 - 400 m i l l i o n s d 'E c u s sous forme de p r ê t s de la B E I, accordés su r ses
            re s s o u rc e s p ro p re s
 -    80 m i l l i o n s d 'E cu s sous forme               de concours accordés s u r le budget de la                       ,
            Communauté#
             L 'é c h é a n c ie r des engagements e t des paiem ents p o u r r a i t se p r é s e n t e r
 comme s u i t :
                                                        1986              1987              1988             1989         1990
            engagements                                  30                 25               15                10
            pa'i ements                                  05                15                20                20          20
          /