CELEX: 51990PC0057
Language: en
Date: 1990-02-01
Title: AMENDED PROPOSAL FOR A COUNCIL DECISION PROVIDING MEDIUM-TERM FINANCIAL ASSISTANCE FOR HUNGARY

COMMISSION OF THE EUROPEAN COMMUNITIES
                                       C0M(90) 57 final
                                       Brussels, 1 February 1990
                        Amended proposal for a
                           COUNCIL DECISION
        providing medium-term financial assistance for HUNGARY
      (presented by the Commission pursuant to Article 149(3)
                          of the EEC-Treaty)
 ---pagebreak---                                                                                                                v
                                                                                    AMENDED PROPOSAL
                                                                           presented by the Commission
                                                                         pursuant to Article 149 (3) o
                                                                                     the EEC Treaty
                                      DRAFT COUNCIL DECISION
                PROVIDING MEDIUM-TERM            FINANCIAL ASSISTANCE FOR HUNGARY
               The proposal as it                                          Amended text
                   last stood
  Visas
 Having regard to the proposal              from the     Having regard to the proposal from the Commission
 Commission, and the opinion of the European             submitted following consultations with the Monetar
 Pari lament                                             Committee
                                                         Having regard    to    the  opinion   of   the   Europeai
                                                         Pari lament
   3rd recital
  ...whereas the conditions and terms of the loan        ...whereas the conditions and terms of the loan
 should      emphasise     necessary       structural    should emphasise necessary structural adjustment,
 adjustment as well as being consistent with the        with due regard for social stability, as well as
 terms and conditions put forward by the IMF;           being consistent with the terms and conditions put
                                                         forward by the IMF;
   Article 2
   ... The Commission is empowered to negotiate           ... The Commission is empowered to negotiate an<
  and monitor implementation over time of a               monitor implementation over time of a structural
  structural    adjustment    programme     with    the   adjustment programme with the Hungarian authorities
  Hungarian authorities so as to facilitate the           so as to facilitate the evolution of Hungary's
  evolution of Hungary's economy towards a market         economy towards a market oriented system in a stable
  oriented system in a stable macroeconomic              macroeconomic        and       social        environment.
  environment.
- Article 4
 The Commission      shall    verify    at    regular   The Commission shall verify at regular intervals in
 intervals that the economic policy in Hungary          collaboration with the Monetary Committee that the
 accords    with    the    adjustment      programme.   economic policy      fn Hungary      accords    with   the
                                                        adjustment programme. The Commission, after the
                                                        Monetary Committee has delivered an opinion, shall
                                                        decide on the release of the instalment.
. Article 7
 The    Community    provides     for     appropriate    The Community provides for appropriate budgetary
 budgetary cover      to guarantee its payments          cover to guarantee its payments related to the
  related to the      borrowing operations under         borrowing operations under Article 1 up to a limit to
 Article i.                                              be determined by the budgetary authority.
                                                         In the event of the guarantee having to be invoked,
                                                         the necessary financial means snail &3 provided by an
                                                         amending or supplementary budget.
 ---pagebreak---                           Amended proposal for a
                             COUNCIL DECISION
                            of
         providing medium-term financial assistance for HUNGARY
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, submitted following
consultation with the Monetary Committee
Having regard to the opinion of the European Parliament,
Having regard to the Action Plan adopted by the Commission on 25
September 1989,
Having regard to the conclusions of the 3 October General Affairs
Council, reiterated In the agreements of the special meeting of the
European Council on 18 November.
Whereas the people of Hungary have close historic relationships with
the people of the Community, and whereas that country is undertaking
fundamental political and economic reforms and has decided to adopt a
market economy model;
Whereas these reforms will strengthen mutual      confidence   and bring
Hungary closer to the Community;
Whereas the granting of the medium term loan is an appropriate measure
to facilitate the adjustment of the Hungarian economy In order to reap
the full benefits of an economy based on market principles; whereas the
conditions and terms of the loan should emphasise necessary structural
adjustment, with due regard for social stability, as well as being
consistent with the terms and conditions put forward by the IMF;
whereas an agreement with the IMF on a stabilisation programme is
necessary and should be concluded quickly; whereas assurances should be
sought that Hungary has negotiated satisfactory terms with Its private
creditors to ensure their continued participation;
Whereas the economic reforms will contribute to mutually beneficial
economic and commercial      relationships between Hungary and the
Community; and whereas these relations will promote throughout the
Community a harmonious development of economic activities;
Whereas examination by the Commission, In collaboration with the
Monetary Committee, has shown a marked deterioration of the economic
situation of Hungary;
Whereas the Hungarian Government has applied for a medium-term loan to
the Community;
 ---pagebreak---                                       - 2 -
   Whereas the Community should take the appropriate measures to cover
    Itself against losses due to any failure on Hungary's part to fulfill
   the payments to the loan;
   Whereas the authority required to set up this loan is not embodied In
   the treaty;
   HAS ADOPTED THIS DECISION :
È»                                  Article 1
   The Commission is empowered to conclude, on behalf of the Community, a
   borrowing programme of a maximum of ecu one thousand million with a
   duration of up to 5 years and to subscribe and execute all appropriate
   documents In that connection for the purpose Indicated in article 2.
                                    Article 2
   The Commission is authorized to lend the proceeds to Hungary In order
   to overcome structural adjustment problems. The Commission is empowered
   to negotiate and monitor Implementation over time of a structural
   adjustment programme with the Hungarian authorities so as to facilitate
   the evolution of Hungary's economy towards a market oriented system In
   a stable macroeconomic and social environment.
                                    Article 3
   The loan shall be made    available to the National Bank of Hungary in
   instalments released in  the light of the examination by the Commission
   of the evolution of the   economic situation and of the results obtained
   in the execution of the  adjustment programme.
                                    Article 4
   The Commission shall verify at regular intervals in collaboration with
   the Monetary Committee, that the economic policy In Hungary accords
   with the adjustment programme. The Commission, after the Monetary
   Committee has delivered an opinion, shall decide on the release of the
   Instalments.
                                    Article 5
   1.   The borrowing and lending operations referred to In Articles 1 and
        2 shall be carried out using the same value date and must not
        Involve the Community in the transformation of maturities, in any
        exchange or Interest-rate risk, or In any other commercial risk.
        The Commission shall take the necessary steps, If Hungary so
        decides, to include In the loan conditions, and also to exercise,
        an early repayment clause.
 ---pagebreak---                                   - 3 -
2.  At the request of Hungary and where circumstances permit an
     improvement in the interest rate on the loans, the Commission may
    refinance all or part of Its initial borrowings or restructure the
    corresponding financial conditions.
3.  All related costs incurred by the Community in concluding and
    carrying out the operation under this decision shall be borne by
    Hungary.
                                Article 6
The Commission shall address a report at least once a year to the
Council and to the European Parliament on implementation of this
Decision.
                               Article 7
The Community provides for appropriate budgetary cover to guarantee its
payments related to the borrowing operations under article 1 up to a
limit to be determined by the budgetary authority.
In the event of the guarantee having to be invoked, the necessary
financial means shall be provided by an amending or supplementary
budget.
Done In Brussels,                       1989
                                        For the Councl
                                        The President
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                                                                  COM (90) 57 fin
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