CELEX: 52014PC0182
Language: en
Date: 2014-03-19
Title: Proposal for a COUNCIL DECISION providing Macro-Financial Assistance to Ukraine

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		52014PC0182
		
			Proposal for a COUNCIL DECISION providing Macro-Financial Assistance to Ukraine /* COM/2014/0182 final - 2014/0104 (NLE) */
			
				
		
		
			
			   	EXPLANATORY MEMORANDUM
1.           CONTEXT OF THE PROPOSAL
·      Grounds for and objectives of the proposal 
The Ukrainian economy has been in recession
since the second half of 2012, with only one quarter of positive growth in the
end of 2013, which was quickly reversed in the first two months of 2014 as a
result of the deterioration of the political and security situation. 
The Ukrainian government lost access to
international financial markets during 2013 as confidence dropped in view of
the widening fiscal and current account and in the absence of much needed
reforms. The unwillingness of the authorities to commit to reforms also
prevented them from concluding a financing agreement with the IMF. 
As a result of large debt repayments in the
fourth quarter of 2013 and beginning of 2014 and of the central bank's
interventions to defend the currency peg against the dollar, reserves have
dropped dramatically to USD 15.5 billion at the end of February, leaving Ukraine with a very weak and rapidly
worsening balance-of-payments situation. The current political crisis has very damaging effects on Ukraine's already precarious economic and financial stability. The de
facto interruption of Russia's assistance under its USD 15 billion package
agreed last December, and the announced end to the reduced gas prices granted
by Gazprom from April 2014 onwards, will deteriorate the situation even further.
Under these circumstances Ukraine faces a serious risk of default in the near
future.
At the same time, during the month of
February and following mass protests on-going since end-November, the
government resigned. A new government was approved by the Verkhovna Rada on 27
February and there was a reversal to the 2004 Constitution. Despite these
changes, Ukraine has not been able to return to political stability since the
sovereignty and territorial integrity of Ukraine has recently been violated by
the Russian Federation. 
The new government has publicly committed
itself to begin implementing significant and comprehensive reforms before the
25 May presidential elections.. Although the political process at the moment is
volatile, so far it shows clear signs of a commitment to economic reforms.  
Against this background, the Ukrainian
authorities are seeking financial assistance from the multilateral and
bilateral creditors and donors to support a reform programme, currently under
preparation, that would reduce economic vulnerabilities, boost international
reserves and foster economic growth. The IMF sent a staff mission to Ukraine in the beginning of March, and is expected to play the key role in the preparation of this
programme and mobilisation of international financial assistance to Ukraine. In the next weeks, the IMF and the Ukrainian authorities are expected to come to
an agreement on an economic programme that will be supported by a financing
arrangement. 
It is expected that the external financing
needs of Ukraine will exceed the funding likely to be provided by the IMF. In
this context, the European Commission announced on 5 March 2014 a package of
financial support to Ukraine, that was welcomed by the EU Heads of State or
Government the day after. One of the elements of the package is a new
Macro-Financial Assistance (MFA) programme in the amount of up to EUR 1
billion. 
The European Commission submits to the
Council a proposal to grant MFA to Ukraine amounting to a maximum of EUR 1
billion. The assistance would take the form of medium-term loans, with no grant
component being envisaged given that Ukraine does not meet the eligibility criteria
for the use of grants in MFA operations. 
The proposed EU MFA is intended to help Ukraine cover part of its urgent  external financing needs in the context of the
stabilisation and reform programme currently under preparation, reducing in
this way the economy’s short-term balance of payments and fiscal
vulnerabilities. The proposed assistance would support the urgent fiscal
consolidation and external stabilisation and encourage the implementation by
the authorities of structural reforms aimed at improving the overall
macroeconomic management, strenghtening economic governance and transparency
and improving conditions for sutainable growth. 
The proposed MFA is in line with the aims
of the Eastern Partnership and the orientations of the new European Neighbourhood
Policy (ENP). It would signal to the other countries in the region that the EU
is ready to support countries embarking on political reforms, in moments of
economic difficulties. In this context, the Commission considers that the
political and economic pre-conditions for an MFA operation of the proposed
amount and nature are satisfied.
·      General context
After 5 quarters of consecutive decline,
real GDP grew by 3.3% y/y in 4Q2013, leading to flat growth for the year 2013.
The poor performance of the economy was due to a combination of a bad harvest,
decline in steel exports and delayed domestic reforms. According to the IMF, it is believed that growth was negative in January and February. Due
to the volatile situation forecasts for 2014 range from -5% to +3% depending on
assumptions. Macroeconomic adjustments, including fiscal consolidation and
exchange rate flexibility, will have contractionary effects, but on the other
hand, the foreseen IMF arrangement would increase confidence that could lead to
FDI inflows quite quickly. Still, Russia's policy towards Ukraine signifies a substantial downside risk to growth.   
Inflation has been very low in the last few
years, reaching 0.3% at end-2013; however, inflationary pressure has increased
in 2014. CPI was 0.5% in January and 1.2% in February and the National Bank of
Ukraine (NBU) expects it could reach 10% or more by end-2014, as a result of the
depreciation of the hryvnia (UAH) and the expected increase in energy tariffs
for households.
The fiscal deficit,
including the operational deficit of the main Ukrainian energy sector operator
Naftogaz, was estimated at 6.5%-7.5% of GDP in 2013, largely as a result of
continued energy subsidies, which amount to 7% of GDP, but also as a result of
the economic slowdown. Capital expenditure was cut by 40% in 2013, while VAT
revenues dropped by 7%. The 2014 budget was passed by the Rada in early
January, but was based on unrealistic assumptions of growth and inflation and
is currently being revised by the Ministry of Finance in close cooperation with
the IMF. Revenues in January-February 2014 amounted to 82% of what was planned
in the budget, suggesting that expenses need to be cut by around UAH 80
billion, or 15-17% in 2014. In addition, the gas import price from Russia will be increased on 1 April to at least 400 USD per 1000 cubic meters, putting
significant strain on the budget. However, the Minister of Finance has made
assurances that gas tariffs for households and district heating companies will
be increased before the 25 May elections, alleviating this pressure. An
additional issue is arrears, both of VAT refunds to corporates and overdue
subsidy payments to utility companies, amounting to UAH 12bn and UAH 8bn
respectively.
There has been strong pressure on the local
currency since the outbreak of the crisis. The NBU has allowed the hryvnia to
depreciate significantly (by about 25%) in February. Part of this was a
deliberate devaluation of the official exchange rate on 7 February from the
7.99 UAH/USD that had been kept since July 2012 to 8.708 UAH/USD. Later the
depreciation of the currency sped up as a result of the NBU's inability to
intervene due to very low foreign exchange reserves. In agreement with the IMF,
the NBU is now pursuing a policy of non-intervention, except in cases of
significant exchange rate movements. It is also maintaining a number of capital
controls, but says it will refrain from introducing new ones. The hryvnia
remains volatile, despite these measures. Further significant devaluation of
the currency would risk deterioration of credit portfolios and capital of banks
and would not necessarily rebalance the current account as much of exports are
dependent on imported inputs. In addition, the Ukrainian economy is
consumption-driven (75% of GDP) and devaluation with accompanying inflation
would likely have a contractionary effect on GDP. 
The current account deteriorated
significantly in 2013 to an estimated deficit of 10% of GDP reflecting mostly
decreased exports. The NBU expects a significant narrowing of the current
account deficit in 2014 as a result of adjustments connected to the foreseen
IMF arrangement, including fiscal consolidation. Yet, current account financing
needs will remain substantial in the short run – at least USD 4 billion before
the end of the second quarter of 2014. Net FDI is estimated to have dropped
further from 5.0% of GDP in 2012 to 2.6% of GDP in 2013 and was near 0% in
January 2014. 
External debt was estimated at 76.7% of GDP
at end-2013. Only about one-third of it is owed or guaranteed by the public
authorities (including debt of the National Bank to the IMF). In addition to
publicly guaranteed liabilities of some Ukraine's corporate borrowers, e.g.
State guaranteed Eurobonds issued by Naftogaz, other external liabilities of Ukraine's corporates may have a systemic importance for the country. In particular,
Naftogaz' debt (in arrears) for gas shipments from Russia's Gazprom has direct
implications for the country's current account as Gazprom sets its price
depending on Naftogaz' debt payment record. 
Official reserves declined by 16% to USD
20.4 billion in the course of 2013, as a result of the large current account
deficit, pressure on the hryvnia and significant debt repayments in 2013. This
negative trend continued in January and February when reserves dropped a
further 13% per month to USD 15.5 billion at end-February (2 months of import
cover). This development clearly reflects an increased balance-of-payments
vulnerability.
At 41% of GDP (end-2013), public debt is below
the high-risk benchmark. At the same time, public debt servicing obligations,
in particular on external debt or on foreign currency denominated domestic
debt, weigh heavily on public finances and international reserves in the near
future. Total debt service of the government and the NBU for the rest of 2014
amount to about USD 10 billion. Debt payments peak between June and September.
In the period March-May debt service amounts to approximately USD 2 billion. In
addition, the outstanding Naftogaz' debt to Gazprom amounts to another USD 2
billion. Debt payment obligations in 2015 are about USD 10 billion.
According to the NBU, there is sufficient
liquidity in the banking sector, but no credits are extended to corporates
since February. Deposit erosion amounted to some 2% in January and about 8% in
February. Possible further currency devaluation would present problems for the
banking sector and asset quality has the potential to fall quickly. The banking
sector is in need of a thorough asset quality review. Beyond short-term risks,
the banking sector in Ukraine presents some structural weaknesses that are
likely to be a focus of a reform programme supported through the foreseen IMF
arrangement. There are clear weaknesses in bank supervision and corporate governance
in the banking sector and a lack of protection of creditor rights.
In addition to the need to restructure and
strengthen the banking system, other key structural reform challenges include
raising utility tariffs, currently a significant contributor to the fiscal
deficit, while strengthening the social safety net; combatting corruption, not
least in taxation and customs; strengthening private sector development; and
improving the business environment to boost investment including FDI.
Based on the indications provided above, in
2014 and 2015 Ukraine will be facing significant external financing needs
reflecting in particular a still substantial current account deficit, large
external debt payment obligations and the need to re-build a minimum buffer of
foreign exchange reserves. Also, private capital inflows, in the form of
foreign direct investments or private credits, will remain extremely low. It is
expected that preliminary projections of Ukraine's residual external financing needs will become available in the coming weeks, in
view of the results of the on-going technical discussions the Ukrainian
authorities are conducting with the IMF. But already now it is anticipated that
a wider international support will be required to cover these needs and create
conditions for a successful implementation of the reforms in Ukraine. The proposed EU MFA would contribute to cover part of the residual
financing gap for the 2014-2015 period.
·      Existing provisions in the area of the proposal
Council
Decision of 12 July 2002 providing supplementary macro-financial assistance to Ukraine (2002/639/EC)[1]
Decision
no 646/2010/EU of the European Parliamnt and of the Council of  July 2010
providing macro-financial assistance to Ukraine[2]
·      Consistency with the other policies and objectives of the Union
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 our cooperation in
all key areas of reform and continues to be the legal basis of our relations.
Relations were further enforced 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), and aims to
prepare for and facilitate the entry into force of the new Association
Agreement, which was negotiated in 2007-2011, initialled in 2012 and is
expected to be signed in the near future.
Economic ties with the EU are important. The
EU is among Ukraine's most important commercial partner and accounts for about
one third of its external trade. In 2012, the value of Ukrainian imports from
the EU was EUR 23.8 billion while the value of its exports was EUR 14.6
billion. Ukraine also has a high dependence on the EU in terms of FDI and other
financial flows. Within the framework of the Association Agreement, the EU
finalised negotiations with Ukraine on establishing a Deep and Comprehensive
Free Trade Area (DCFTA) in 2011 with the goal to allowing the full access of Ukraine to the EU’s single market. On 11 March 2014, the Commission adopted a proposal for an EU Council/Parliament Regulation temporarily removing customs
duties on Ukrainian exports to the EU (COM 2014/166). The proposed measures,
expected to be adopted by the co-legislators in the coming months, will be
applied immediately and will be discontinued in November 2014, when the
provisional application of the DCFTA will start.
The EU MFA would complement the total EUR
1.565 billion in grants 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. 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 overall intervention including through other
financial instruments.
Ukraine's immediate
transition will be very difficult and the risk of political and 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,
including the rule of law. The country is also envisaging an economic reform
programme aimed at laying the ground for a sustainable growth model. 
The proposed MFA is consistent with the
EU's commitment to support Ukraine's immediate economic and political
transition. Also, 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
current operation is taking place under very particular circumstances of
extreme urgency.
The Commission will continue to monitor and
assess during the life of the MFA operation satisfaction of these criteria,
including the assessment, in close liaison with the European External Action
Service, of the political preconditions.
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 to the economic stabilisation of Ukraine. In the preparation of this proposal for MFA, the Commission services have consulted with
the International Monetary Fund, which is in the process of putting in place a
sizeable financing programme, and other multilateral and bilateral creditors
and donors. The Commission has also been in regular contact with the Ukrainian
authorities.
·      Collection and use of expertise
Due to the need for an urgent approval
process, an Operational Assessment verifying the quality and reliability of Ukraine's public financial circuits and administrative procedures will only be carried out
by the Commission, with the assistance of external experts, during the months
of April and May 2014.
·      Impact assessment
The MFA and the economic adjustment
attached to it will help alleviate the risk of imminent default and economic
collapse by addressing Ukraine's short-term external financing needs while
supporting policy measures aimed at strengthening the balance-of-payments and
fiscal positions and raising sustainable growth. It is planned that the
conditionality attached to the programme will notably help improve the
efficiency and transparency of public finance management; promote fiscal
reforms to reduce utility subsidies and other expenditure; support existing
efforts to strengthen the social safety net; strengthen the financial sector
governance and supervision; strengthen anti-corruption measures that will
increase revenue; and facilitate the adoption of measures to improve the
regulatory framework for trade and investment.
3.           LEGAL ELEMENTS OF THE PROPOSAL
·     
Summary of the proposed action
The European Union shall make available to Ukraine
MFA for a total maximum amount of EUR 1 billion, provided in the form of a medium-term
loan. The assistance will contribute to cover Ukraine's residual external
financing needs in 2014. 
The assistance will be provided in one or
two instalments and will be conditional on an IMF arrangement being in place
and on the implementation by Ukraine of specific structural reform measures
that will be agreed by the Commission on behalf of the EU and Ukraine in a Memorandum of Understanding. The preparation of the Memorandum of Understanding will be
made in coordination with the IMF and the World Bank. In view of the critical
need for Ukraine to implement strong macroeconomic policies and ambitious
reforms, it is not deemed appropriate to disburse the new programme without
specific conditionality. In this context, the preferred option is to disburse
the assistance in two tranches, with the first tranche being conditional to the
IMF arrangement being in place, and the second tranche being also conditional
to the implementation of the agreed conditions. There will be a delay of at
least three months between the two tranches. The disbursement of the first
instalment (possibly EUR 500 million) is expected to take place in June 2014,
and the disbursement of the second instalment – in autumn of the current year.
In case, however, it is decided by the Commission that in view of the extreme
urgency of the financing needs the disbursement of the assistance should be
made in one tranche, the Commission would still condition it to the completion
of some critical prior actions. 
In the preparation of the list of conditions
or prior actions for the release of the assistance, the Commission will target
structural reforms aimed at improving the overall macroeconomic management and
the conditions for sustainable growth (e.g. targeting the transparency and
efficiency of public finance management; fiscal reforms; governance and
supervision of the financial sector; reforms to strengthen the social safety
net; and reforms to improve the regulatory framework for trade and investment).

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 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) and debt indicators. It is also consistent with the treatment given to Ukraine by the World Bank and the IMF. Indeed, Ukraine is not eligible for concessional financing from
either the IDA or the IMF.
·      Legal basis
The legal basis for this proposal is
Article 213 of the TFEU. Given that the beginning of the disbursement of the
proposed assistance in the first half of 2014 would not be possible and would
thus not address the urgent financial needs of Ukraine, if the decision was adopted
by the Parliament and the Council in accordance with Article 212 TFEU under the
ordinary legislative procedure, it is justified to use Article 213 TFEU providing for the adoption of the decision by
the Council.  
·      Subsidiarity principle
The proposal does not fall under an
exclusive competence of the EU. The subsidiarity principle applies to the
extent that 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 macroeconomic stability by alleviating
the risk of a possible default and does not go beyond what is necessary for
that purpose. 
In view of the size of Ukraine's external financing needs in 2014 and 2015, the amount of the assistance will correspond to
a relatively limited part of these needs. Given the assistance pledged to Ukraine by other bilateral and multilateral donors and creditors, it is deemed an
appropriate level of burden-sharing for the EU.
·      Complementarity
The proposed MFA would complement the
assistance being envisaged by other multilateral and bilateral donors in the
context of the IMF-sponsored economic programme. The EU MFA would also
complement the EU grants and loans mobilised under the regular EU cooperation
instruments (notably the European Neighbourhood Instrument) and extended by the
European  Investment Bank
·      Choice of instruments
Project finance or technical assistance
would not be suitable or sufficient to address these macroeconomic objectives.
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 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 impact of the assistance will correspond to the
provisioning, at a rate of 9%, of the amounts disbursed in the Guarantee Fund
for External Actions of the EU, from budget line 01 03 06 ("Provisioning
of the Guarantee Fund"). Assuming that the loan will be disbursed in 2014,
and according to the rules governing the guarantee fund mechanism, the
provisioning will take place in the 2016 budget.
5.           OPTIONAL ELEMENTS 
·      Review/revision/sunset clause
The proposal includes a sunset clause. The
proposed MFA would be made available for one year, starting from the first day
after the entry into force of the Memorandum of Understanding, with a
possibility to extend it if necessary.
2014/0104 (NLE)
Proposal for a
COUNCIL DECISION
providing Macro-Financial Assistance to Ukraine
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 213 thereof,
Having regard to the proposal from the
European Commission[3],
Whereas:
(1)       Relations between the European Union ('the Union') and Ukraine are developing within the framework
of the European Neighbourhood
Policy (ENP) and the Eastern Partnership. The Partnership and Cooperation
Agreement between the Union and Ukraine entered
into force
on 1 March 1998. Bilateral
political dialogue and economic cooperation have been further developed
within the framework of
the EU-Ukraine Association Agenda adopted on 23 November 2009. A new Association Agreement, including a Deep and Comprehensive Free
Trade Area (DCFTA), was negotiated in 2007-2011 and initialed in 2012. On 21
November 2013, the Cabinet of Ministers of Ukraine took a decision to suspend
preparations to sign the Association Agreement. Following the resignation of the government in February 2014,
the new Ukrainian government has declared its willingness to sign the
Association Agreement in the near future. On 6 March 2014, the European Council
declared in its Statement on Ukraine its commitment to sign very shortly all
the political chapters of the Association Agreement and to unilaterally adopt
measures allowing Ukraine to benefit substantially from the DCFTA. The proposal
for a Regulation of the European Parliament and Council to this effect was
adopted by the Commission on 11 March 2014.
(2)       The current political
crisis has very damaging effects on Ukraine's already precarious economic and
financial stability. Ukraine is
currently facing a very weak and rapidly worsening balance-of-payments and fiscal situation, with the economy moving
into recession again. The de facto interruption of Russia's assistance under
its USD 15 billion package, and the announced end to the reduced gas prices granted
by Gazprom from April 2014 onwards, will deteriorate the situation even further.
Under these circumstances Ukraine faces a serious risk of default in the near
future.
(3)       Following the resignation
of the government, a new interim President and a new government were appointed
by the Parliament on 22 and 27 February 2014 respectively. Even though the
constitution of 2004 was reinstated and presidential elections were announced
for 25 May 2014, Ukraine could not return to political stability, since the
sovereignty and territorial integrity of Ukraine has recently been violated by
the Russian Federation.
(4)       In
this context, Ukraine requires urgent financial assistance by international
creditors and donors. Given that the first rapid disbursement
of the Union's macro-financial assistance to Ukraine ("the Union's macro-financial assistance")
in the first half of 2014 would not be possible and would thus not address the
urgent financial needs of Ukraine, if the decision was adopted by the Parliament
and the Council in accordance with Article 212 TFEU under the ordinary
legislative procedure, it is justified to provide the Union's macro-financial
assistance based on a Council decision
pursuant to Article 213 TFEU.  
(5)       The urgency of the assistance
is related to the immediate need of Ukraine for funds, in addition to those
which will be provided by other international financial institutions and other
bilateral donors and to the Union's macro-financial assistance foreseen by
Council Decision of 12 July 2002 providing supplementary macro-financial
assistance to Ukraine (2002/639/EC)[4]
and Decision no 646/2010/EU of the European Parliamnt and of the Council of 
July 2010 providing macro-financial assistance to Ukraine[5]. 
(6)       The current crisis in Ukraine justifies the exceptional use of the urgent procedure under Article 213 TFEU. The
decision providing macro-financial assistance to Ukraine is without prejudice
to other future MFA operations.
(7)       Since the resignation of
the government, the Union has,
on various occasions,
declared its commitment to support the new Ukrainian
Government to stabilize the situation and pursue the course of reforms. The
Union has also declared its readiness to fully support efforts of the
international community and international financial institutions, especially
the IMF, with regard to an international assistance package to address the
urgent needs of Ukraine, based on 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.
(8)       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. 
(9)       The Ukrainian authorities and the International Monetary Fund (IMF) are expected to agree shortly on an
economic programme that will be supported by a financing arrangement with the
IMF.
(10)     On 5 March 2014, in view
of the drastically worsening balance-of-payments situation in Ukraine, the European Commission announced a support package, which included the proposed
MFA. This package was endorsed by the Extraordinary European Council on 6
March. This package includes financial assistance of EUR 11 billion in 2014-2020
including a total of 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. The disbursement of the
Union's macro-financial assistance foreseen by Council Decision of 12 July 2002
providing supplementary macro-financial assistance to Ukraine (2002/639/EC)[6] and Decision no 646/2010/EU
of the European Parliamnt and of the Council of  July 2010 providing
macro-financial assistance to Ukraine[7]
can take place as soon as the IMF programme is in place.
(11)     Given that Ukraine is a country covered by the ENP, it is eligible to receive the Union's macro-financial
assistance.
(12)     Given that the
drastically worsening external financing
needs of Ukraine are expected to be well above the resources that
will be provided by the IMF and other multilateral
institutions, the Union's
urgent macro-financial assistance to
be provided to Ukraine is, under the current
exceptional circumstances,
considered to be an
appropriate response to
  Ukraine's request to support financial
stabilisation.
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.
(13)     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.
(14)     The amount of the Union's
macro-financial assistance is based on a preliminary estimate 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 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. 
(15)     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.
(16)     The Union's macro-financial
assistance should support the Union's external policy towards Ukraine. The 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. 
(17)     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.
(18)     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 growth and fiscal consolidation. Both fulfilment of
the preconditions and the achievement of those objectives should be regularly
monitored by the Commission.
(19)     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.
(20)     Release of the Union's macro-financial assistance is without prejudice to the powers of budgetary
authority. 
(21)     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.
(22)     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.
(23)     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[8].
HAS 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 billion, with a view to supporting Ukraine's economic
stabilisation and reforms. The assistance shall contribute to covering Ukraine's urgent balance-of-payments needs as identified in the government's economic
programme supported by the IMF. 
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 IMF and Ukraine, and with the key
principles and objectives of economic reforms set out in the EU-Ukraine
Association Agenda agreed under the 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 one year from the first day after the entry into
force of the Memorandum of Understanding referred to in Article 3(1). The
availability period can be extended by a decision of the Council on a proposal
of the Commission.
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. The Commission shall monitor the
fulfilment of this pre-condition throughout the life-cycle of the Union's macro-financial assistance. This Article shall be applied in accordance with
Council Decision 2010/427/EU[9].
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 macro-economic adjustment and structural
reform programmes implemented by Ukraine, with the support of the IMF. 
2.         Those conditions 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 that 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 one or two
loan instalments. The size of each instalment shall be laid down in the
Memorandum of Understanding. 
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[10].

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 adjustment and structural reform measures
supported by a non-precautionary IMF credit arrangement. In fact, the
disbursement shall start immediately as soon as the IMF programme is in place.
 (c)       the implementation, within a specific time-frame, of the economic policy and financial conditions agreed in the
Memorandum of Understanding. 
In case a second instalment is foreseen, it shall
not take place earlier than three months after the release of the first
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. 
Article
5
1.         The borrowing and lending 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 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[11]
and Commission Delegated Regulation
(EU) No 1268/2012[12].
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[13], Council Regulation (EC,
Euratom) No 2185/96[14]
and Regulation (EU, Euratom)
No 883/2013 of the
European Parliament and of the Council[15]; 
 (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 day after its publication in the Official
Journal of the European Union.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
LEGISLATIVE FINANCIAL STATEMENT
1.           FRAMEWORK OF THE
PROPOSAL/INITIATIVE 
              1.1.    Title of the proposal/initiative 
              1.2.    Policy
area(s) concerned in the ABM/ABB structure
              1.3.    Nature
of the proposal/initiative 
              1.4.    Objective(s)

              1.5.    Grounds
for the proposal/initiative 
              1.6.    Duration
and financial impact 
              1.7.    Management
method(s) envisaged 
2.           MANAGEMENT MEASURES 
              2.1.    Monitoring
and reporting rules 
              2.2.    Management
and control system 
              2.3.    Measures
to prevent fraud and irregularities 
3.           ESTIMATED FINANCIAL
IMPACT OF THE PROPOSAL/INITIATIVE 
              3.1.    Heading(s)
of the multiannual financial framework and expenditure budget line(s) affected 
              3.2.    Estimated
impact on expenditure 
              3.3.    Estimated impact on revenue
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[16] 
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 billion to Ukraine ('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 also 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 will be
carried out in preparation of this operation. 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 strengthen the
government's reform commitment and its aspiration towards closer relations with
the EU. 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 1 year from
the entry into force of the Memorandum of Understanding, as stated in Article
(1.4) of the Decision 
–     
X  Financial impact from 2014 to 2016 
1.7.        Management mode(s) envisaged[17] 
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 will be taken: 
First, 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, mainly in the area of public finance
management, with a view to strengthening efficiency, transparency and
accountability. 
Second, the Commission services, with the
support of duly mandated external experts, will carry out an Operational
Assessment of the financial circuits and administrative procedures at the
Ministry of Finance and the National Bank of Ukraine, in order to fulfil the
requirements of the Financial Regulation applicable to the General Budget of
the European Communities. This review will
determine whether the framework for sound financial management of
macro-financial assistance is sufficiently effective in Ukraine by
covering areas such as management structure and organisation, management and
control of funds, security of IT systems, internal and external audit capacity
as well as the independence of the central bank. In the light of this
assessment, specific mechanisms applying to the management of the funds by the
beneficiaries may be introduced in agreement with the national authorities.
Also, the assistance will be paid to a dedicated account at the National Bank
of Ukraine.
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. ([18])   || from EFTA countries[19]   || from candidate countries[20]   || 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 || 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 Fund Regulation, as
amended. In line with this Regulation, loans are based on the outstanding
amount at the end of a year. 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 provisioning of the
Guarantee Fund" (budget line 01 03 06). As a result, 9% (maximum of EUR 90
million) of the effectively disbursed amount 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 guarantee. It is not expected that
the budget 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 2014 || Year 2015 || Year 2016 || Year 2017 || TOTAL || 
 ||  Operational appropriations ||   ||   ||   ||   ||   || 
 || Budget line 01 03 06 Provisioning of the Guarantee Fund || Commitments || (1a) ||   ||   || 90 ||   || 90 || 
 || Payments || (2a) ||   ||   || 90 ||   || 90 || 
 || Appropriations of an administrative nature financed from the envelope of specific programmes[21] (operational assessment and ex-post evaluation) ||   ||   ||   ||   ||   || 
 || Budget line 01 03 02 || Commitments || (3) || 0.1 || 0.2 ||   ||   || 0.30 || 
 ||   || Payments || (3a) || 0.1 || 0.1 || 0.10 ||   || 0.30 || 
 || TOTAL appropriations for DG ECFIN || Commitments || =1+1a +3 || 0.1 || 0.2 || 90 ||   || 90.3 || 
 || Payments || =2+2a +3 || 0.1 || 0.1 || 90.1 ||   || 90.3 || 
 ||  TOTAL operational appropriations || Commitments || (4) || 0.1 || 0.2 || 90 ||   || 90.3 || 
 ||   || Payments || (5) || 0.1 || 0.1 || 90.1 ||   || 90.3 || 
  TOTAL operational appropriations || Commitments || (4) || 0.1 || 0.2 || 90 ||   || 90.3 || 
 Payments || (5) || 0.1 || 0.1 || 90.1 ||   || 90.3 || 
  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 || 0.1 || 0.2 || 90 ||   || 90.3 || 
 Payments || =5+ 6 || 0.1 || 0.1 || 90.1 ||   || 90.3 || 
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 
  Human resources || 0.528 || 0.132 || 0.066 ||   || 0.726 
  Other administrative expenditure || 0.028 || 0.012 || 0.004 ||   || 0.044 
 TOTAL DG ECFIN || Appropriations || 0.556 || 0.144 || 0.070 ||   || 0.770 
 TOTAL appropriations for HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) || 0.556 || 0.144 || 0.070 ||   || 0.770 
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 || 0.556 || 0.144 || 0.070 ||   || 0.770 
 Payments || 0.556 || 0.144 || 0.70 ||   || 0.770 
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[22] ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
   ||   || Year 2013 || Year 2014 || Year 2015 || Year 2016 || Year 2017 ||   ||   
   || Type || Number || Cost || Number || Cost || Number || Cost || Number || Cost || Number || Cost || Total number || Total Cost 
 Output 1 || Operationnal assessment ||   ||   || 1 || 0.1 ||   ||   ||   ||   ||   ||   || 1 || 0.1 
 - Output 2 || Ex-post evaluation ||   ||   ||   ||   || 1 || 0.2 ||   ||   ||   ||   || 1 || 0.2 
 - Output 3 || Provisioning of the Guarantee Fund ||   ||   ||   ||   ||   ||   || 1 || 90 ||   ||   || 1 || 90 
 Subtotal for specific objective No 1 ||   ||   || 1 || 0.1 || 1 || 0.2 || 1 || 90 ||   ||   || 3 || 90.3 
 TOTAL COST ||   ||   || 1 || 0.1 || 1 || 0.2 || 1 || 90 ||   ||   || 3 || 90.3 
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)
   || [23]   || 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 ||   || 0.528 || 0.132 || 0.066 ||   ||   ||   ||   || 0.726 
 Other administrative expenditure ||   || 0.028 || 0.012 || 0.004 ||   ||   ||   ||   || 0.044 
 Subtotal HEADING 5 of the multiannual financial framework ||   || 0.556 || 0.144 || 0.070 ||   ||   ||   ||   || 0.770 
 Outside HEADING 5[24] of the multiannual financial framework   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Human resources ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Other expenditure of an administrative nature ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Subtotal outside HEADING 5 of the multiannual financial framework ||   ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL ||   || 0.556 || 0.144 || 0.070 ||   ||   ||   ||   || 0.770 
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) 
  Establishment plan posts (officials and temporary agents) || 
 01 01 01 01 (Headquarters and Commission’s Representation Offices) ||   || 4 || 1 || 0.5 ||   ||   ||   ||   
 XX 01 01 02 (Delegations) ||   ||   ||   ||   ||   ||   ||   ||   
 XX 01 05 01 (Indirect research) ||   ||   ||   ||   ||   ||   ||   ||   
 10 01 05 01 (Direct research) ||   ||   ||   ||   ||   ||   ||   ||   
  External personnel (in Full Time Equivalent unit: FTE)[25]   
 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[26]   || - 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 ||   || 4 || 1 || 0.5 ||   ||   ||   ||   
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]               OJ L 209, 6.8.2002, p. 22-23
[2]               OJ L 189, 22.7.2010, p. 28
[3]               OJ C […], […], p. […].
[4]               OJ L 209, 6.8.2002, p. 22-23
[5]               OJ L 189, 22.7.2010, p. 28
[6]               OJ L 209, 6.8.2002, p. 22-23
[7]               OJ L 189, 22.7.2010, p. 28
[8]              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).
[9]              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).
[10]             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).
[11]             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).
[12]             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).
[13]             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).
[14]             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).
[15]             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).
[16]             ABM: Activity-Based Management – ABB: Activity-Based
Budgeting.
[17]             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
[18]             Diff. = Differentiated appropriations / Non-Diff. =
Non-differentiated appropriations.
[19]             EFTA: European Free Trade Association. 
[20]             Candidate countries and, where applicable, potential
candidate countries from the Western Balkans.
[21]             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.
[22]             As described in point 1.4.2. ‘Specific objective(s)…’ 
[23]             Year N is the year in which implementation of the
proposal/initiative starts.
[24]             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.
[25]             CA= Contract Agent; LA = Local Agent; SNE = Seconded
National Expert; INT = agency staff (‘Intérimaire’); JED= ‘Jeune Expert en
Délégation’ (Young Experts in Delegations). 
[26]             Sub-ceiling for external staff covered by operational
appropriations (former "BA" lines).