CELEX: 51994PC0488(02)
Language: en
Date: 1994-11-15
Title: Proposal for a COUNCIL DECISION relating to exceptional Community aid for the reconstruction of the areas stricken by the cyclone that hit Madeira in October 1993

1 COMMISSION OF THE EUROPEAN COMMUNITIES
                                                                    COM(94) 488 final
                                                                    Brussels, 15.11.1994
             M                                                      94/0258 (CNS)
   • . • # '
                  COMMUNICATION FROM THE COMMISSION TO THE COUNCIL
                 concerning the intervention of the European Investment Bank in Madein
                                               Proposal for a
                                           COUNCIL DECISION
                   relating to exceptional Community aid for the reconstruction of the
                     areas stricken by the cyclone that hit Madeira in October 1993
                                      (presented by the Commission)
U&£; •
 ---pagebreak---            COMMUNICATION FROM THECOMMISSION TO THE COUNCIL
          concerning the intervention of m« European Investment Bank in Madeira
Introduction.
Following the cyclone that hit Madeira on 28 and 29 October 1993, the Commission
provided ECU 250,000 of exceptional humanitarian aid to the population most affected by
the catastrophe.
On 11 January 1994, the Portuguese authorities addressed to the Commission a
memorandum on the damage caused by the catastrophe to the infrastructures, housing and
productive sectors and requested a special Community aid The cost of projects directly
related to the cyclone damage (infrastructures, commerce, industry, agriculture and
fishing) are estimated by the authorities to amount to 6 361 127 thousand escudos
 [approx. ECU 31.7 million, June exchange rate].
Regarding thé fishing sector, the Commission adopted on 8 April 1994 the granting of
 approximately ECU 800,000 as special indemnity to compensate for the damages
 suffered.
 Having examined the Portuguese authorities request, the Commission considers that the
 most appropriate measure would be to subsidise loans made by the European Investment
 Bank on own resources with subsidies chargeable to the general budget
 The EIB agrees in principle to such an initiative in favour of Madeira, subject to the
 normal eligibility criteria.
 The Commission is therefore proposing a means of responding to the request of the
  Portuguese authorities for additional loan facilities on favourable terms. Similar actions
 were undertaken after the earthquakes of 1980 in Italy and 1981 and 1986 in Greece.
  Exceptional loans.
  The necessary investment required to reconstruct the economic and social infrastructure
  of the areas devastated by the cyclone justifies that the economy of Madeira should
  benefit, with the help of the Community, of an important volume of supplementary
  financial resources.
  The Commission considers that exceptional loans of up to a maximum of one half of the
  estimated outturn cost of eligible reconstruction operations on EIB resources
  accompanied by an interest subsidy to lighten the debt service would constitute a
  significant contribution to the repair of the damages occurred. The remainder is to be
  financedfromdomestic sources.
  Interest subsidies.
  The Commission proposes also to enlighten the debt service that Madeira would contract,
  by agreeing to charge interest subsidies to the general budget.
   To this end, it is proposed to grant a subsidy at a rate of 3 percentage points per annum
   for a maximum period of 12 years. Further, regarding the reimbursement of the principal,
   it is proposed that credits granted in the framework of this action should have a grace
   period of 5 years.
   The subsidy and grace period proposed are the same as those agreed in the framework of
   the reconstruction measures following the catastrophes that occurred in Italy and Greece.
 ---pagebreak--- Conclusion
The Commission proposes to the Council:
- to show the Community's solidarity by inviting the EIB to grant, out of its own
  resources, exceptional loans for a maximum of one half of the estimated outturn cost of
  eligible reconstruction operations in favour of Madeira.
- to decide on an interest subsidy at a rate of 3 percentage points per annum for up to 12
  years chargeable to the Community budget and to adopt to this effect the decision
  proposed in annex.
 ---pagebreak---                                        Proposal for a
                                   COUNCIL DECISION
  relating to exceptional Community aid for the reconstruction of the areas stricken by the
                          cyclone that hit Madeira in October 1993
THE COUNCIL OF THE EUROPEAN UNION,
Having regard of the Treaty establishing the European Community, and in particular
Article 23 5 thereof,
Having regard to the proposal from the Commission, <l>
Having regard to the opinion from the European Parliament, &
Whereas those living in certain areas of Madeira have been seriously affected by the
cyclone of October 1993, with an ensuing need to help offset the effects of this disaster on
their economic and social well-being;
Whereas steps should be taken to deal quickly and efficiently with this quite exceptional
situation;
Whereas the European Investment Bank is able to grant loans out of its own resources to
help achieve this objective;
Whereas an interest subsidy chargeable to the general budget of the European
 Communities should be provided on these loans;
 Whereas3 similar measures4were adopted following the natural catastrophes that occurred
 in Italy <> and in Greece <>;
 Whereas the Treaty has not provided, for the adoption of the measures in question,
 powers other then those provided for in article 235,
 (1)     OJNo.C
 (2)     OJNo.C
 (3)    OJNo.L 37, 20.1 1981
 (4)    OJNo. L 367, 14 12,1981; OJ no. L 309, 7.11.1988
 ---pagebreak--- HAS DECIDED AS FOLLOWS:
                                         Article 1
The ultimate recipients of the loans, granted by the European Investment Bank out of its
own resources, for investment projects carried out in the areas devastated by the cyclone
of October 1993 in Madeira, shall be entitled to an interest subsidy chargeable to the
general budget of the European Communities, up to the equivalent of a capital value of
ECU 15.85 million in all.
On the basis of projects put forward by the authorities in Portugal, and approved by the
Bank, the Commission shall grant this subsidy at a rate of three percentage points per
annum for up to 12 years.
                                         Article 2
This Decision shall take effect from
                                                           Fm ike Council
                                                           The President
 ---pagebreak---                               FINANCIAL STATEMENT
1.  TITLE OF THE OPERATION
    Article B-5-203 : Interest subsidies in favour of loans made to Madeira following the
    cyclone of October 1993.
2.  BUDGET HEADING CONCERNED
    Article B-5-203.
3.  LEGALBASIS
    To be provided by the proposed decision, on the basis of Article 235 of the Treaty.
4.  DESCRIPTION OF THE OPERATION
    4.1    Objectives:
           To grant a subsidy of 3 points of annual interest rate, for a maximum period of
           12 years, to loans made by the European Investment Bank out or its own
           resources and not exceeding ECU 15.85 million in principal, in favour of
           investments made in the areas affected by the cyclone in October 1993 in
           Madeira.
    4.2    Period covered by the operation:
           Start:        1995-96
           End:          twelve years after the disbursement of the last loan.
 5. CLASSIFICATION OF EXPENDITURE
    DNO; CD.
 6   NATURE OF EXPENDITURE
     Interest subsidies.
 7.  FINANCIAL IMPACT
     7.1   Method of calculation:
           Interest subsidies of 3% calculated half-yearly on the outstanding amount. It
            should be noted that regarding the reimbursement of the principal, credits
           granted in the framework of this action have a grace period of 5 years.
           Therefore, during the first five years the amount of the rebate remains
           constant. In all, interest subsidies would amount to approximately a maximum
           of ECU 4.4 million (the calculation is based on the 12-year ECU interest rate
           of April 1994).
     7.2   Cost distribution by elements of the operation:
           Not applicable.
     7.3   Operational expenditure relating to studies, expert meetings, etc.
            Not applicable.
 ---pagebreak---    7.4   Schedule:
         For thefirstfiveyears of operations the subsidy would amount to a maximum
         of ECU 475,500 per year.
         Year           1995       1996    1997     1998     1999      2000      2000+
         Subsidy        475.5      475.5   475.5    475.5 475.5          pm       pm
         ('000 ECU)
8. ANTI-FRAUD DISPOSITIONS FORESEEN (AND RESULTS OF THEIR
   IMPLEMENTATION)
   Verification of subsidies and of the requested preliminary, feasibility and evaluation
   studies is made by the Commission services before payment, taking into account the
   contractual obligations, economic principles and soundfinancialmanagement. Anti-
   fraud dispositions (control, reports, etc.) are included in all the agreements or
   contracts concluded between the Commission and the beneficiaries.
9. COST-EFFECTIVENESS ANALYSIS
   9.1   i)     Quantifiable objectives: See point 4.1 above,
         ii)    Population: Madeira.
   9.2   Justification of operations:
         To help the realisation of investment in the areas affected by the cyclone.
   9.3   Follow-up and evaluation of the action:
         Not applicable.
 ---pagebreak---                                                                      ISSN 0254-1475
                                                              COM(94) 488 final
                                                      DOCUMENTS
EN                                                                         13 oi
                                Catalogue number : CB-CO-94-517-EN-C
                                                             ISBN 92-77-81984-7
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