CELEX: 51989PC0627
Language: en
Date: 1990-01-05
Title: PROPOSAL FOR A COUNCIL DECISION PROVIDING MEDIUM-TERM FINANCIAL ASSISTANCE FOR HUNGARY

27. 1. 90                            Official Journal of the European Communities                              No C 20/9
                                                             II
                                                     (Preparatory Acts)
                                                COMMISSION
                 Proposal for a Council Decision providing medium-term financial assistance for Hungary
                                                    COM(89) 627 final
                                    (Submitted by the Commission on 6 December 1989)
                                                       (90/C 20/08)
 THE COUNCIL OF THE EUROPEAN COMMUNITIES,                        Whereas the economic reforms will contribute to
                                                                  mutually beneficial economic and commercial relations
                                                                 between Hungary and the Community; and whereas
 Having regard to the Treaty establishing the European           these relations will promote throughout the Community
 Economic Community, and in particular Article 235                a harmonious development of economic activities;
 thereof,
                                                                 Whereas examination by the Commission, in collab-
 Having regard to the proposal from the Commission,              oration with the Monetary Committee, has shown a
                                                                 marked deterioration of the economic situation of
                                                                 Hungary;
 Having regard      to  the  opinion   of   the  European
 Parliament,
                                                                 Whereas the Hungarian Government has applied to the
                                                                 Community for a medium-term loan;
 Having regard to the action plan adopted by the
 Commission on 25 September 1989,
                                                                 Whereas the Community should take the appropriate
                                                                 measures to cover itself against losses due to any failure
 Having regard to the conclusions of the General Affairs         on Hungary's part to fulfil the payments to the loan;
 Council of 3 October, reiterated in the agreements of the
 special meeting of the European Council on 18
 November,                                                       Whereas the authority required to set up this loan is not
                                                                 embodied in the Treaty,
Whereas the people of Hungary have close historic links
with the people of the Community, and whereas that               HAS DECIDED AS FOLLOWS:
country is undertaking fundamental political and
economic reforms and has decided to adopt a market
economy model;
                                                                                          Article 1
                                                                 The Commission is empowered to conclude, on behalf of
Whereas these reforms will strengthen mutual confidence          the Community, a borrowing programme of a maximum
and bring Hungary closer to the Community;                       of ECU 1 000 million with a duration of up to five years
                                                                 and to subscribe and execute all appropriate documents
                                                                 in that connection for the purpose indicated in Article 2.
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                                   Article 2
an economy based on market principles; whereas the
conditions and terms of the loan should emphasize               The Commission is authorized to lend the proceeds to
necessary structural adjustment as well as being                Hungary in order to overcome structural adjustment
consistent with the terms and conditions put forward by         problems. The Commission is empowered to negotiate
the IMF; whereas an agreement with the IMF on a                 and monitor implementation over time of a structural
stabilisation programme is necessary and should be              adjustment programme with the Hungarian authorities
concluded quickly; whereas assurances should be sought          so as to facilitate the evolution of Hungary's economy
that Hungary has negotiated satisfactory terms with its         towards a market orientated system in a stable macro-
private creditors to ensure their continued participation;      economic environment.
 ---pagebreak--- No C 20/10                            Official Journal of the European Communities                               27. 1. 90
                          Article 3                             2. At the request of Hungary and where circum-
                                                                stances permit an improvement in the interest rate on the
The loan shall be made available to the National Bank of        loans, the Commission may refinance all or part of its
Hungary in instalments released in the light of the exam-       initial borrowings or restructure the corresponding
ination by the Commission of the evolution of the               financial conditions.
economic situation and of the results obtained in the
execution of the adjustment programme.
                                                                3. All related costs incurred by the Community in
                          Article 4                             concluding and carrying out the operation under this
The Commission shall verify at regular intervals, that the      Decision shall be borne by Hungary.
economic policy in Hungary accords with the adjustment
programme.                                                                               Article 6
                          Article 5                             The Commission shall address a report at least once a
1. The borrowing and lending operations referred to             year to the Council and to the European Parliament on
in Articles 1 and 2 shall be carried out using the same         implementation of this Decision.
value date and must not involve the Community in the
transformation of maturities, in any exchange or
                                                                                         Article 7
interest-rate risk, or in any other commercial risk.
The Commission shall take the necessary steps, if               The Community provides for appropriate budgetary
Hungary so decides, to include in the loan conditions,          cover to guarantee its payments related to the borrowing
and also to exercise, an early repayment clause.                operations under Article 1.