CELEX: 51980DC0623
Language: en
Date: 1980-10-30
Title: AIDE-MEMOIRE ON THE FIXING OF THE ECSC LEVY RATE AND ON THE DRAWING UP OF THE ECSC OPERATING BUDGET FOR 1981

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (80) 623
Vol. 1980/0198
 ---pagebreak--- Disclaimer
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                             COM(80) 623 final
                                            Brussels . 30 october
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                              AIDE-MEMOIRE
      ON THE FIXING OP THE ECSC LEVY RATE AND ON THE DRAWING UP
                OP THE ECSC OPERATING BUDGET FOR 1981
 C0M(80) 623 final
 ---pagebreak---                                   - 2 -
                                                               Page
Preface
I,   GENERAL INTRODUCTION                                        5
     A.  ECONOMIC CONTEXT                                        5
         1.  The economic outlook for 1980 and 1981              5
         2.  Outlook    in the coal industry                     8
         3«  Prospects in the iron and steel industry           11
     B.  POLICY CONTEXT                                         12
         1.  Coal policy                                        13
         2.  Iron and steel policy                              15
         3*  Social policy                                      18
         4»  Financial activities         -                     20
     C.  FINANCIAL CONTEXT                                      22
II . ANALYSIS OF REQUIREMENTS REPORTED AND RESOURCES AVAILABLE  24
     FOR THE FINANCIAL YEAR 1981
     A.  REQUIREMENTS REPORTED FOR 1 981                        25
         1.  Ordinary requirements                              25 '
         2.  Requirements not entered in the budget :
             loans for financing subsidized housing             39
         3w  Summary of requirements reported                   41
 ---pagebreak---                                      - 3 -
                                  -                          Page
      B.  ORDINARY RESOURCES AVAILABLE                        41
          1.  Resources for the financial year                41
          2.  Covering of requirements not entered in the
              budget                                          45
          3.  Summary of possible ordinary resources
              available for 1981                              45
III . BRAFT OPERATING BUDGET FOR 1981                         46
      A.         COMMISSION APPROACH                          46 .
      B.       FINANCING PROPOSALS                            47
      C.         DRAFT BUDGET                                 49
                          .                    "        ■ i
ANNEXES        ^
A.   IMPLEMENTATION OF THE ECSC OPERATING BUDGET FOR 1979     50
B.   FORECAST OUTTURN OF THE ECSC OPERATING BUDGET FOR 1980.  51
C.   PROVISIONAL SITUATION OF THE ECSC AT 30 JUNE I98O        53
D.   DRAFT ECSC OPERATING BUDGET FOR 1981                     54
E,   CONTROL OF ECSC ACTIVITIES                               55
 ---pagebreak---                                       - 4 -
                                 AI DE-MEMDÏRE
               on "the fixing of "the ECSC levy rate and on the
          drawing up of the operating budget of the ECSC for 1981
             /
It is customary for the news of Parliament to be sought before the
Commission takes a decision, on the levy rate and the ECSC operating
budget for the financial year 1981 .
This aide-memoire forms the basis for the consultation of Parliament .
It is divided into the following chapters :                   v
    I*  General introductions                               '
   II . Analysis of requirements reported and resources available for
        the financial year 1981 ;
III .   Draft operating budget . .
Specific factors affecting the covering of budgetary requirements for
1981 are described in Chapter III .
At point 16 of its Resolution of 22 May 1980 (OJ No C 147 1 16 June 1980 )
on the Court of Auditor * s report on the ECSC 's financial and budgetary
activities for the financial year 1977 and on the discharge in respect
of that financial year , Parliament instructed the Commission/High
Authority to submit a report "on its ooncept of control and how it oould
be exercised ".
The Commission ^ thoughts on this are set out at Annex E to " this
aide-memoire •                                                     -
                                                                 1
                                        0
 1                    '      '                                       v
                               0                  0
The aide–m^moire is also being sent to the ECSC Consultative Committee
for information.                                          •
 ---pagebreak---                                    - 5 -
I.    GENERAL INTRODUCTION
This chapter summarizes the information necessary for setting the draft
ECSG operating budget for 1 98 ^ in its economic , political and financial
context .
A.   ECONOME G C0NTEXT
1.   The economic outlook for 1980 and 1981
Following a period of relatively good rates of growth ( an annual average
of 3®4% between 1976 and 1979 )? economic activity is now slackening in
the Community .    With the deflationary impact of the rise in oil prices
in 1979/80 ( estimated at around 150% from the end of 1978 to 1 July 1980 )
mainly to blame } the Community 's GDP in real terms can be expected to
decline as between the first and the second half of 1980 ; the growth
rate for the year as a whole could be as low as 1,25$*
As this slackening in economic growth is coinciding with a quite
substantial increase in the active population , partly due to demographic
factors , unemployment has been rising again since the beginning of the
year , even though the shortage of skilled labour persists in certain
industries *
The effect of rising oil and commodity prices is now being felt sharply
at the retail stage «    In some countries this has sparked off
compensatory wage rises , though in others the secondary effects have to
CvkV3 extent "besn contained ,  For the Community as a whole , the implicit
retail price irc.ex is expected to rise by approximately 12% in I98O ( though this
fig~-rs includes increases in rates of indirect taxation ), The gap between the
highest arc. lowest rt.ie of inflation has widened to about 15 percentage
points in 1980®
 ---pagebreak---                                   - 6 -
For the Community as a whole the balance of payments deficit is
expected to amount to 31 000 Billion ECU in 1900 ( largely on account of :
•the effect of the oil price increases decided on in June ). The
current-acooont deficit of the Federal Republic of Germany is expected
to account for roughly a third, of the Community * s overall deficit in
 1980.   Financing this should not pose major problems , whereas the
size of the deficits of some of the smaller Member States does give .
cause for concern .
                              \
Figures currently available suggest that growth could gradually pick up
again in 1981 . Private consumption , which is likely to remain stagnant
for most of 1980 , should be boosted by an improvement in real disposable
incomes as prices rise more slowly than nominal incomes .      In addition ,
 the process of inventory adjustment , which is having a considerable
deflationary effect in 1980 , is probably nearly complete and should be
followed in the second half of 1981 by a more normal pace of Btock–building.
Exports , particularly to OPEC countries , should be a moderate plus
factor both this year and next . All in all , Community GDP should begin
 to increase again next spring , even though the year-to–year rate of growth
will substantially fall short of the rate achieved in 1980.      It
 must be remembered that thes aggregate forecasts enoompass somewhat
different growth prospects for the various Member States individually .
 The following table shows the trend in Community GDP by volume between
 1978 and 1980 .                . .
 ---pagebreak---                             GROSS DOMESTIC PRODUCT IN VOLUME TERMS
                                  change over the previous year )
                                                      1978        1979      1980 1
                                                              I
                                                              I
  Denmark                                              1,0         3,5      -  1
I Federal Republic of Germany                          3,2 •       4,6        2
  Prance                                               3.8   J    >2          13/4
  Ireland                                       j      6,0    j!   1 -9 > ■ ' 1      •
  Italy                                                2,6    !    5,0        3 3/4    !
  Netherlands                                          2,5         2,2        1
  Belgium                                              2,4         2,4        11 / 4
  Luxembourg                                      |    4,3         2 '7          3/4
  United Kingdom                                       3,1         0,9      - 2 1/2
  Community                                            3,0         3,4        1 1 /4
  1
    Rounded *
  Source :    EURO STAT and Commission départment s .
 ---pagebreak--- 2.  Outlook for the Coal industry
During the first six months of 1980 the consumption picture of the
Community 8 s coal market was strongly coloured "by the economic situation
in the United Kingdom and , in particular , "by the steel strike in that
country* The shift in output to other Member States during that period
was even more marked for pig iron , as electric furnace steel production
in the United Kingdom is largely in the hands of private companies
and was not seriously affected ."by the strike at the nationalized
British Steel Corporation Taking account of these factors and the
general recession during the second half of 1980 , coke consumption during
the year is likely to be around 45 Mt .
In the field of electricity generation , 1980 is likely to witness only
marginal growth.    In fact , a substantial drop in the United Kingdom and,
probably, a slight drop in Germany may more than counterbalance modest
growth in other Member States and lead to lower gross electricity >
production in the Community in 1980 than in the previous year. The
principal reasons are the depressed level of economic activity, the
after-effects of strikes in the United Kingdom , a mild winter and , probably
energy saving measures .                ,
The share of conventional thermal in total electricity generation was
substantially lower due to an extra 7®1 TWh of nuclear generation ,
mainly in Prance , and to an extra 3.3 TWh of hydraulic generation ,
resulting from exceptionally high snow and rainfall . However , these
factors will probably be reflected in a drop in oil–burn , and the level
of coal consumption will have been maintained at around If6 Mt , the same
as the previous year.
Except for a slight rise in ooal consumption by the cement industry,
1980 will have witnessed litile change from the previous year in the
 ---pagebreak---                                        - 9 ~
quantities a - to . "bed "by markets other than those of the iron and steel
and the electricity g-^ aerating industries .
On th „ other hand y co?.l production in 1980 is likely to have exceeded
that of th 3 year before "by several million tonnes and to he of the order
of 241-243 Ht ,;    The principal reason has "been rising productivity in
the Unit 2d Kingdom against a "background of unchanged output in Belgium
and Germany and a reduction of 1 Mt in Prance .
Coal imports in 1980 vri.ll prove to have "been substantially higher than
in the previous year and are likely to have exceeded 65 Mt .        The largest
increase will have originated from the USA .
Coal and coke stocks have shown a rising trend .       However , they were at
an unusually low level at the beginning of 1980 «        The shaky performance
of the steel industry during the second half of the year and the general
economic recession throughout the Community led to rises in producers'
coal and coke stocks , "but coal consumption for electricity generation
is expected to keep the growth of producers * stocks to moderate
proportions .
There has "been little in the way of changes in list prices of Community
coals since early in 1980.        On the other hand , world–wide rises in fob
prices of steam coal and higher freight , aggravated by high demurrage
charges due to port congestion in certain areas , particularly on the US
east coast , have fuelled a continuing upward movement in cif prices of
steam coal imported into the Community from third countries .        Whereas
towards the end of 1979 cif &&&■ prices for steam coal were still on
average slightly below US $40 , prices in 1980 reached between about
US $45 and US $55 * while the Commission 's indicative price for coking
coal was in the region of US ^70.
 ---pagebreak---                                        - 10 -
                                  ■»
  Against the •unpredictable economic prospects for 1981 , one development
  la 'owtalAi vli the «v*x gtwwtng Impos-Hana -a to tfc® oaal mas'ks't ef
  consumption for electricity generation. While as late as 1975 coke ovens
  used more coal than power stations , by 1979 the latter required twice
  as much coal as the former.
  With two plants of a total capacity of 1278 MW and capable of "burning
  either coal or oil entering operation in 1930 and a farther 600 MW planJ:
  using coal or blast furnace gas due in 1981 , plus measures in Member states
  designed to promote the use of coal–fired generating capacities ^ coal
  consumption by pover stations may exceed 180 Mt in 1981 . Depending
  on demand by other coal consumers , this would represent between 53% and
  60$ of the entire coal market .
  No similar predictions are possible with regard to requirements by the
- steel industry. The full economic effects of the steep oil price rises
  in 1979 3-^3. early I98O and their duration are not yets clearly discernible ,
  but it is virtually certain that requirements by coke ovens in I98I will
  be below the recent peak of 87 . 1 Mt in 1979 * -
  The general industrial market can be expected to continue to grow slowly
  in 1981 , probably absorbing more than 20 Mt of coal and coka , without
  counting inhcuse electricity generation. However , the potential for
  large increases in coal consumption by this sector is unlikely to be
  evident until later in the deca<de .
  Demand for domestic heating must be expected to decline further , probably
  to below 18 Mt c . On the other hand , in the longer term , the space-heating
  market for factories .; offices and other ma.j or consumers is likely to
  witness a growing number of conversions from oil and , possibly , gas
  to coal-firing.
  Community coal production , which has been stable at aoout 240 Mt since
   1977s will probably remain around this level in 198-* Or              other hand ,
  no predictions CC-JS. be as,&e wi'th. r9g»»ro. to ^japortsj except that the
   rise of re-sent jeers is ^Klikelj' to psrsi.st nercfc yesro
 ---pagebreak---                                      - 11 -
3.  Prospects in the iron and steel industry .
T979 ended with total EG3G crude steel output of 140.2 million t , which was
exactly what had been forecast . As expected , the rise in production that
began in the second quarter of 1978 accelerated and then continued until the
end of 1979 .   For a production capacity then estimated at 203.5 million t ,
output in 1979 represented a capacity utilization rate of 68.8$, as against
65.5$ in 1978 .
                   \
Total ECSC crude steel production in 1980 is already certain to be well down.
In the first six months , when demand was still firm but output suffered from
the protracted strike in the British steel industry ,, output of crude steel
was 68,. 34 million t , 2% down on the first half of 1 97 9-
The economic outlook for the second half of 1980 presages a decline in
demand , particularly from the motor and construction industries , while
short-term indicators in most of the steel–using industries have been in ,
decline since mid-1979 * Demand from certain capital goods industries is
alone in offering the prospect of remaining firm in a few Community
countries .
Demand for steel , already declining in the Community in May and June , was
particularly low in the summer months , normally a very slack period . At
the moment all the signs are that the gloomy picture will persist until
the end of the year , even if the seasonal demand of the fourth quarter
turns out to be close to the normal . Shorter delivery times , the downward
trend of prices and exorbitant storage costs , mainly due to heavy financing
costs , constitute . so many reasons for believing that demand is unlikely to
pick up .
At the beginning of 1980 , after the CommisBion had raised guide prices by
3% for flat products and byv an average "]% for long products , some improvement
was noted in transaction prices for the first quarter . At    the same time , prices
for exports to non-member countries yielded extra earnings    as the US dollar
held up well over the first months of the ye ax , but in the  following months
conditions deteriorated somewhat as falling demand brought    depressed prices
and the dollar fell back to its starting value * Prices for flat products
 ---pagebreak---                                       - 12 -
 are once again inadequate while prices for .long products are still not
 fully BfttlaffcQtery for th« most Eodsrn firms , pM-tiaulwly mini-foun&riaB
 which for some time have enjoyed the benefit of an advantageous price for
 scrap metal# It is to be expected that most of the large and medium–sized
 firms are going to incur losses again this year , under the pressure of .
 rapidly rising production costs .
 Given the adverse trend on the Community and world steel markets , crude
 steel output for 1980 is expected to come out at around 130 million t , some
 6.5$ below the 197.9 level . Against a current production capacity of
 roughly 208.1 million t , this gives a "capacity utilization rate of less than 65% iu
 1980 compared with 68.8$ in 1 97 9 - This year should therefore come in below
 1978 in terms of both nominal output and the rate of utilization .
As regards the outlook for 1981 , the first six months will most certainly be
 no better than the second half of 1980 . Hot until the second half of 1980 is
 there any hope of industrial activity picking up . So as things stand and with
 a normal trend in Community and world consumption , Community production of
•crude steel should settle around 128 million t , which includes Greece 's
 output.
 B.' P0LICY C0NTEXT
 The general objectives of the ECSC are determined for all time by Articles .1
 to 5 of the Treaty of Paris .
 For both coal and steel , the Commission at intervals presents general
 objectives or guidelines bearing on the future development of the ECSC
 industries .  Coal is also one of the particular items covered by general
 papers put out by the Commission on the subject of Community energy policy .
 The medium-term guidelines for both coal and steel also cover manpower
 questions , thus indicating the context surrounding the various social policy
 activities in which the Commission/Sigh Authority engages pursuant to the
 Treaty .  In two annual reports – the Report on the Results of the Survey on
 ---pagebreak--- Investment in the Community Coal and Steel Industry and the Financial Report
on ECSC Financial Activity - the ECSC publisher faots and figures on the
recent and foreseeable trend of investments and what the Community is doing
to finance them .
The following remarks are not inte'nded to take the place of the data in
those reports , but are Simply concerned with certain key points or recent
developments which the Commission . wants to highlight in establishing its draft
ECSC operating budget for 1981 .      The industries themselves , the ECSC 's social
policy and financial activity in the budgetary year are dealt with in turn .
But there is one point that must be made at the outset - on 1 January 1981
Greece becomes a member and will automatically be sharing fully in ECSC
revenue and expenditure , contributing 3 million EUA to the ECSC reserves in
three equal annual payments .       ;
1.  Coal policy guidelines
Developments on the world energy market since 1979 have confirmed the
soundness of the Commission 's coal policy since 1974 »     The objective proposed
in 1979 - "to make more use of solid fuels in electricity generation , so that
by 1990 coal arid nuclear energy would represent a total of at least JO to 75%
of primary energy used - was approved by the Council in June 1980 .       Emphasizing
the Community 's efforts to make itself even less dependent on oil, the Council
also decided that by 198O oil should account for no more than about 40%
of gross energy consumption.       Last April the European Council stressed the
need to agree on a common energy strategy for 1990 » and laid the emphasis on
replacing oil 'by coal and nuclear energy .
Since the Council meetings of October and December 1979 both failed to reach
agreement on the Commission 's proposals to maintain pit production at its
1973 level , simply adapting and improving 1967 arrangements for coking coal
for the iron and steel industry , the Commission , in the wake of the massive
price increases decreed by" the OPEC countries , presented some new ideas for
energy policy • ( C0M(80)1 30 , 20 March 1980 ). In its new approach the
 ---pagebreak---                                           - 14 -
Commission proposes Community action on two major fronts - energy pricing
and. taxation ari investment in the energy industry .
As regards investments involving coal , the following sectors wpuld be
considered for Community financing :
( a) extraction, the objective being to boost productivity and cut
      long-term costs ;
( b ) gasification and liquefaction of coal ;
( c ) the building of coal-fired power stations and converting oil- and
      gas-fired stations to coal ;
(d ) converting industrial furnaces to coal ;
( e ) transport and transhipment facilities , notably in ports ;
( f) creating coal-extraction capacity outside Europe as a source of
      Community supply .
The Council should be continuing its deliberations on these ideas shortly.
Under Article 54 of the ECSC Treaty the Commission is still granting funds on
commercial terms for industrial investments - in Community coalfields . Under
the ECSC budget it plans , as in 1980 , to grant loans with interest subsidies
for projects whichlsatisfy the criteria defined in a notice to undertakings
( OJ No C 79 , 29 • 3-1 9^0 ) • It will also continue to encourage coal research
within the ECSC under Article 55 » and will maintain its efforts to increase
the appropriations set aside in the general '"budget for demonstration projects
involving goal gasification and liquefaction (Council Regulation EEC No 726/79 »
9 April 1919 ).
 ---pagebreak---                               - 15 -
 2.  Iron and gteel policy guidelines
 Coi™^s^i£n_s^e£l_market_ measTxre^s^
 The measure's adopted by tlie Comqaission ir* 1978 and - 1979 were
 extented for 198O , though some of the restrictions were
 eased somewhat , the general aim being to revert gradually to a free
market so as to speed up the process of restructuring the Community
 steel industry.
 With this in mind, the binding minimum basic prices for concrete
 reinforcing bars and merchant bars were waived for the first six months
and then for the rest of the year.       The minimum basic prices for hot
coils were also waived for the second half of I98O. The rules requiring
 dealers to abide by producers * prices and issue certificates of conformity
to minimum prices were withdrawn.
 In view of the worsening market situation the Commission was forced to
 introduce production programmes for crude steel as well as limiting supplies ,,
 In spite of this , the recession in demand by early October signalled a state
of crisis giving reason to believe that voluntary restraint measures are no
 longer enough to restore an element of balance to the market .
The Commission has therefore proposed the introduction of a compulsory system
        \
of quarterly production quotas under Article 58 of the ECSC -Treaty.
With these new arrangements the Commission hopes to restore market
stability and satisfactory price levels so that the
steel industry oan continue the' restructuring progress and workers
can be given the necessary assurances as to their employment prospects *
At the end of the year the Commission will make an appraisal of
the situation and will determine, if need be, the measures that will
apply in I98I in the light both of experience and of the results of the
efforts made in the second half of I98O. '
 ---pagebreak---                                  ■■ 16 ■"
                       ν    - .
Steel :__ Ejc^ernal_aspecxs_                        ■  ,
As in 1978 and.          measures relating to the Community steel market
were supplemented by arrangements for monitoring imports .       The Commission
made a number of changes here, too, in order to simplify things by
cutting the number of understandings with the major supplier countries
( 12 instead of 17 )» reducing the product coverage and making the
consultation clause on products for first processing more flexible .
There is no evidence that these changes have had any substantial
influence on trade flows with the countries concerned.
The Commission continued to publish basic reference prices for imports
and stepped up surveillance of quantities imported . and prices in close
cooperation with the Member States .
Exports to the United States , Iran and'other countries fell back
sharply, both because of the demand trend and because other exporters
are selling harder .
External policy in 1981 will , depend, as in past years, on the internal
measures and on the degree of cooperation with non–Community oountries
that is found to be expedient .
^ommunrt^ £0£^ions to structural^ problems
The Code of- Practice for coordinating State aids to the steel industry
was adopted by the Council late in March I98O.        Specific aids .to the
steel industry financed by a Member State or by means of State resources
in any form whatsoever are considered compatible with the orderly
functioning of the common market provided they do not affect competition '
and trade between Member States to an extent contrary to the common
interest .    Such aids are permitted provided they comply with oriteria
laid down by the Commission.
Steel firms that have . embarked on a process of restructuring have been
able to ward off further deterioration of the financial situation.
 ---pagebreak---                                   « 17
Considerable progress was made in long products where net capacity
was reduoed by 2.3 million -tonnes from its 1976 level and efforts were
made to concentrate on the most modern works .
In the flat products sector, . restructuring measures concentrated on
cutting cost prices in the production of pig iron and steel , notably-
through more widespread use of continuous casting techniques .    Capacity
for the latter attained 66 million tonnes in 1980, compared with 55 million
tonnes in 1978 .   In contrast , reorganization of hot rolling capacity
did not keep pace with the economic downturn and some excess persists ;
the restructuring process will therefore have to continue .
At first sight it might seem that modernization and rationalization of
the Community steel industry proceeded at a slower pace in 1979 and '
I98O than in the two previous years .    But firms have at least consolidated
their position in branches where they enjoy more favourable conditions .
For instance , the share of total output accounted for by special
steels rose from 9*5$ in 1974 to 15«5       1979 *   •
Despite these advances , problems remain and it will only be possible
to define them accurately when a thorough study has been carried out
with the industry on actual production capacities at the works , product
by product .                                       >
Although restructuring appears to have come to a halt the fact is that
progress is still being made , but for social and political reasons it
tends to be somewhat sporadic .
Restructuring remains the main objective of the anti–crisis measures .
The Commission is pressing on with its endeavours to ensure that proper
attempts are made to attain the objective , despite the fact that some
                                              /
undertakings will again be faced with cash–flow problems .    Before the
end of the year the Commission is to send the Council a full report
on restructuring and the attainment of the General Objectives , supplemented
by a detailed survey of the application of the rules on aids to the
steel industry .
 ---pagebreak---                                          - 18 -
    Res wructuring aid. under the ECSC budget is granted in the form of interest
    subsidies both for investment projects and for. conversion in depressed
    areas .    "                                                ■  •
   3.      Social nolicy
   The main features of the Commissions social policy under the ECSC
  Treaty are :
                     "                            * -                 (
       ( i ) aid granted under Article 5° "to help redeploy workers ;
     ( ii ) the financing of research projects on occupational safety-
             under Article 55 ;             .
   ( iii ) the . granting of low-interest loans from own funds under Article 54
             to promote workers * housing.
   Actions planned for I98I in connection with redeployment , social research
   and housing will continue on the basis of the principles previously
   applied by the Commission and outlined in Chapter II .       Consequently
   the developments described below cover only the social aid envisaged
   to help alleviate the effects of the crisis .
  However , it must be stressed in this connection that the cost of the
  redeployment measures approved in I98O under Article 5^(2 ) (b ) for execution
  within the framework of bilateral agreements between the Member States and
                                              5
  the Community amounts to . 82 million EUA, or 15 million EUA more than the
   amount earmarked for this purpose in the I98O ECSC budget . The 15 million FJA
   shortfall will therefore have to be charged to the I98I budget , along with the
   appropriations needed for ( further)' redeployment . This sum is included in the
  figures proposed on page 27 ; the 75 million EUA entered in the I98I ECSC budget
  will only cover redeployment measures under existing 'agreements between
  Member States and the Commission .            -     •
  The above measures will be supplemented by those provided for iii the Commission'
   communication to the Council on the social aspects of restructuring in the
-■ steel industry .                    *
 ---pagebreak---                                                        - -;s «
• It will Vj iufciibercc thai; oz. 4 j£sy . 1979 the Cc-aniission sent a Ccaaunicatacn
  to -cho Co-cx.oil or/th ; sc-ci£-.l .sp:^:s of re-structuring in the steel industry ,
           •          fwv.? t^mv: sr^r-y1 sic ^r-' ver. to jwr.^irfc Bte©i worlseys :
     Ν
  – allowr-nces for - early retirement from the age of . 55 ? or even '"below for
  certain categories of workers ;                                         -        '■   ;
 – an aliowr^nc-© for reductions in -working hours ( short–time working) to alios:
  the lor.e' of- jobs to' 'be staggered ",                ■
 – allowances 'for changes in shift patterns :
 – allowances for reductions in overtime .                                            -
  In the light of its assessment of •the situation on the steal market , and in
 view of its proposal to invoke Article 58 ? "the Commission intends for the
  present to , limit its interventions tos
 – retirement allowances ; '                                  •        „ • ' • *
 – short–time working allowances.'
  The Cor, mission is currently considering applications for "both types of allowance .
  The Commission considers that 3CSC aid for early retirement schemes gad short-
 time working should "be granted under bilateral agreements with the Member
  States concerned . It would apply for three years . Allowances for short–time
 working , - however . should be limited to the period for which Article 58 of
  the D3S0 Treaty is applied ,                              .
  On the basis of these , considerations aid in view of the current applications ,
  it will c .-, necessary to enter an appropriation under Chapter 54 on th® basis
  of ^rtijle 235 and to make 'a transfer .from the general budget to the, ECSC
  budget in order to meet expenditure for ' 1 9$1 •
             .-•ores-   .0- are
                      ^."1
                 '-U. O     CUi current 2y under discussion in the Council in connection
              .:.i.akc.ge of s ?cial measures ? the Council is due to take a decision •
             ••sub *.**.             .             .
 ---pagebreak---                                      - 20 -
4*    Financial activities
ECSC Financial Report No 25 summarizes the Community 's "borrowing and lending
in 1979 and sets out statistics analysing and comparing activities since
1954 *    The Community 's balance sheet as at 31 December 1979 appears in
Annex C to this aide-memoire *
Borrowings contracted in 1979 totalled 837 million EUA , compared with
1 069 million EUA in 1978 , 729 million EUA in 1977 , 956 million EUA in 1976
and 731 million EUA in 1975 *     Loans paid out in the same periods
totalled 676 million EUA compared with 798 million EUA , 742 million EUA ,
1 064 million EUA and 805 million EUA * As in the previous year , some
sums "borrowed, notably in Swiss francs , were not for on-lending but to
repay previous sums borrowed at higher rates , the benefit being passed on
to the undertakings which had received loans from these borrowed funds *
For the first time the ECSC floated a dollar loan on the Tokyo market
for public subscription and also at the same time on the Euro-dollar
market •
Industrial loans ^ amounted to 595 million EUA compared with 667 million EUA
                                                        2 /
in 1978 and 713 million EUA in 1 977 * conversion loans to 59 million EUA
compared with 413 million and 16 million EUA , and subsidized housing
loans ^ to "22 million EUA compared with .18 million and 12 million EU^.*
Total borrowing and lending since the inception of the ECSC is thus        ■ _
brought up to 6 256 million EUA and 6 076 million EUA respectively
 ( including 227 million EUA in loans from own funds ).   The balance
outstanding at 31 December 1979 was 4 675 million EUA of which
2 512 million EUA fall due for redemption between 1980 and 1984 *
In 1979 ECSC financial activity continued to satisfy the strong demand
from undertakings wishing to modernize or restructure , not only in the
steel industry but also to a large extent in the coal industry , which
received loans totalling 238 million EUA in 1979 compared with
263 million EUA in 1978 , 217 million EUA. in 1977 and 180 million EUA in
1976 .
iArticle 54 ECSC .
   Article 56 ECSC .
   ECSC special reserve funds .
 ---pagebreak---                                           - 21 -
At 15 September 19°0 loans raised totalled 829 million EUA and loans paid
 oat 106 Exilian BUfc ,  The fca! •&••£<£    star ring at 39 Jun« 1980 was
5 000 million EUA .
The ECSC has continued to obtain favourable terms on the capital market and
has successfully developed a policy of private loams when conditions on
the open market were unfavourable ^         ECSC issues are also favourably
quoted on the secondary bond market .
It is clear from outstanding applications for conversion loans from the
coal industry that ECSC borrowing and lending activity is likely to
continue at a high level in the coming months .
It is difficult for the moment to give a precise estimate of the 1981
position since borrowing operations are carried out solely in response to
loan applications which are not always submitted very far ahead .          Also ,
certain applications sometimes await settlement for a long time on account
of particular conditions imposed by undertakings in respect of currencies
or rates .
At the end of August 1980 , total loan applications approved by the
Commission but awaiting settlement amounted to 2 051 million EUA for the
ECSC industries (Article 54 ) and 306 million EUA for conversion
'(Article 56 ).   Applications being processed amount to 1 973 million EUA
for the ECSC industries and 147 million EUA for conversion .          The
repayment period concerned by soiue of the applications received extends
■t
over several years .
However , a general estimate of the likely trend in loan applications may be
 inferred from the planned investments in the Community coal industry :        over
 1 500 million EUA in 1930 and in 1981 as against the 1 1 67 million EUA
invested in 1979 *
Investment in the steel industry , which dropped to 2 000 million EUA in
 1978 and 1979 » has been picking up again this year.
It can thus be envisaged that borrowings made by the ECSC could amount to
between 1 000 and 1 500 million EUA in 1981 if market conditions work to
the advantage of the undertakings concerned .
 ---pagebreak---                                     - 22 -
 C.  FINANCIAL C ONTEXT  '
All the "bud fat figures ffivnn in "Shit aid#»<B«noir« a? a •xjo'eased in Btarope&n
Units of Account .   Since 1976 the ECSC operational "budget has been drawn up
and implemented in SUA and , beginning this year , the claims and commitments
under the "budget and the relevant contracts are denominated and settled in
the same units of account .
However j the Commission feels that following the entry into force of the
European Monetary System based on the ECU , which is defined in terms of
the same basket- of Community currencies as the EUA , the unit of account •
used in the ECSC should be changed from the EUA to the ECU . A draft decision
to this effect has been transmitted to the bodies concerned and , assuming
that a decision is taken before the end of 1980 , the ECSC operational budget
and the scale of levies will henceforth be adopted in ECU .        As the two units
of account are defined ianterms of the seme basket of Community currencies ,
the changeover would not necessitate any changes to the figures in this
aide-memoire .
With regard to the assessment of the draft 1980 budget , the rise in prices
remains an essential factor in the final comparison between the financial
years 198O and . 1981 * I"t' may be assumed that the price rise between the two
years will be greater than 12$.
The main financial problem involved in drawing up the ECSC budget for 1981
remains the problem of balancing the budget at a time when industry , notably
the Community iron and steel industry , is encountering serious difficulties .
The approach adopted for 1 980 envisaged using special resources to cover two
interventions specifically linked to structural reform in the iron                f ? -1.
industry :  v
– aid in the form of interest rebates for conversion loans would be met by
   an ad hoc contribution from the Member States :
  COM(79)723 final , 10 December 1979 * Opinion of Parliament dated 23 May 1980 ,
  OJ No C 147 » 16 June 198O, pp. 135-6 -     ~
 ---pagebreak---                                            - 23 »
- the proposed new -temporary social measures for steel workers would be
    covered "by the general "budget ( Chapter 54 )*
The remaining financing requirements under the 1$80 operational "budget will
"be met fjpon ordinary resources ? the Coaivnission having aecided ? with the
approval of Parliament , to increase the rate of levy from 0.2$$ to 0.31$*
 After lengthy negotiations the Mem'ber States agreed on an ad hoc contribution
 of 28 million EuA towards interest rebates for conversion loaas , as against
 the 43 million ELLA request ed « The Commission "believes that it can limit
 coHEEitments for 1$80 to 28.5 million EUA ( of which 0*5 million EUA will be
 met by ordinary resources ) by strictly applying the relevant criteria and _
 rejecting applications totalling about 10 million SJA and by carrying over
 to the 1981 financial year admissible applxcat ions ajaoTua .td.zxg to & » leas v
 3,5 million SUA 3 As the financing requirements originally estimated, for
  1980 amounted to 52 million EUA , there is no avoiding the conclusion that
 the general slowdown in economic activity has "been reflected by a drop in
 the sxc^otsd raT. e of 3 c'b-'-g? netr&'s     r-xcvest'iien *-.
 Under these circumstances the OorsE.is-sicn he, s not requested any additional
  contribution for 19 80®
  The wsssjees situation as regards temporary social measures ha,8 been described
  earlier' fl*B.-3 ).   On the financial side - the C omission is upholding its
  'oroocsal that expandittsre should bs met from the general budget ° It h?.s 9
  however , raised its proposal for a decision to xnis effect (C0M^80)134 final ,
  25 Karch 1$SC), particularly in the light of & number of suggestions made in
  Parliament « As regards the possibility of otlasr ~;esxs of finance , the
  CcJD&i£3i<#ti notes with regret that , despite Parlxanien's ? s support , i'.e proposal
 that 3CSC customs duties should go to the ConsB'oaity is still blocked by the
  objections on legal and "budgetary grounds of a msaber of Member- States .
  The Commission 's proposals with rege:c& to the balance of ths 1581 operating
  budget are set cut in Chapter III of this aide-ia«Boir® «
 ---pagebreak---                                       - 24 -
                                         !
II .  A77ALYSIS OF -REQUIRBnlOTS REPORTED ArH) RESOURCES AVAILABLE FOR THE
      FINANCIAL YEAR 19 6 1                              .
This chapter first of all gives a detailed account of the two factors
traditionally *^aken into account "by the Commission in determining the
levy rate on which to "base the Draft Budget for the next financial ye?.r,
namely expected requirements and the estimated yield from resources#
Article 49 of the ECSG Treaty empowers tfc.e Commission to procure the
funds needed to pursue the activities set out in that Treaty "by imposing
levies on the production of coal and steel®      Thes® levies are assessed -
annually on the various products according to their average value, "but ,
pursuant to Article 50* the rate thereof may not exceed \% unless
previously authorized by the Council .
To fix this rate it is first of all necessary to estimate reqrdrements ,
then to consider how far these may "be covered from "budgetary rescrur-oes
other than the levies , namely the interest on investments and on loans
financed out of own funds and cancellations of provisions » The amount .
which will have to "be covered lay the levies can then "be determined.
                                       1
Next , the likely yield from the levies is calculated on the basis of a .
preliminary – and thus sometimes unavoidably inaccurate – estimate of
the average values of the various products , and in the light of the
estimates ( also somewhat' tentative ) of the volume of output during the
year. The probable levy yield is first expressed as the estimated yield
from a rate of 0.01^.
These are the two main elements described in this chapter.
 ---pagebreak---                                       - 25 -
  The next stage is -to determine the extent to which the Community nvuct
  forgo   satisfying the requirements which exceed the resources
  provided "by the present rate,   or , conversely , how far the rate must
 "be either raised er Idwerede This quoetioa is dieeussed in Chapter III .
 The following presentation of requirements reported and foreseeable
 resources is modelled on the systematic analysis of the data for the
 various "budget headings in the General Budget , set out in Part II of
 the General Introduction to the Preliminary Draft Budget . As with the
 General Budget , this presentation lists separately the main features of
  each heading (legal "basis and description of the operation, type and
"breakdown of expenditure , explanation ). Three categories of expenditure
 are unavoidable , in that they derive from decisions already taken            \
 ( administrative expenditure , add to coking coal and coke for the steel
 industry ) or from framework agreements with the Member States ( on aids
 to resettlement ). To give a clear picture , the explanation: for
 expenditure which is not unavoidable ( research and interest relief grants )
is more detailed than for -the other- chapters e      '
A.    REQUIREMENTS REPORTED FOR 1981
1.    Ordinary requirements     •         ,    '
CHAPTER B 1 ;   ADMINISTRATIVE EXPENDITURE
1.    Legal basis and description of operation
Legal basis :
– Article" 50 of "the BCSC Treaty } ,   '    •
– Article 20 of the Merger Treaty ;
– Council Deoision of 21 November 1977 (OJ No L 306 , 30 November 1977 » P* 28)j
– ECSC contribution to the Commission 's administrative expenditure.
2 . Type and breakdown of expenditure
                                                 /
Annual Imp-sum payment in four equal quarterly instalments .
3 . Explanation
The Council has set the annual amount of the lump-sum payment at 5 m 'EUA.
 ---pagebreak---                                    - 26-
 CHAPTER 5       AIDS TO RESETTLEMENT
  1.    Legal basis and description of operation      . -
  Legal "basis :
  – Articles 50 and 56 of "the ECSC Treaty;
  - Bilateral agreements concluded between the Hi$i Authority/
     Commission and the Governments of the Member States .
  The High Authority/Commission provides non-repayable aid towards :
     (i ) the payment of tideover allowances to workers ;
   (ii ) the payment of resettlement allowances to workers ;
  (iii ) the financing of vocational retraining for workers having
          to change their employment .
  In some cases , the tideover allowance is replaced by a contribution
  corresponding to the cost of a bridging–pension scheme .
  The grant of the aid is conditional upon payment by the State concerned
                                                                  concerne
  of -a special contribution of not less than the amount of that' aid ,
  unless an exception is authorized by the Council , acting by a two-thirds
                                                                  two-thir
  majority. .
  2.     Type and breakdown of expenditure
  Creation of a provision to subsidize , by means of a 50% reimbursement ,
  expenditure incurred by the Governments within the scope of the
! agreements signed .
 ---pagebreak---                                                       27 -
            7h« "breakdown >7- iflfluatry and. "by oountry of th« r»quir«o«nt» as « Btimated
            from the data provided by the Governments is as follows :
                                                                                                m Eu A
               Country                     Coal
                                                                  Steel and
                                                                  iron-ore mines
                                                                                         Total per country 1
    Germany                                 2.5                        . 10.0 .                 / 12.5
    Belgium                                 5.0            |  •            5.0                    10.0
                                       .
                                                     . -   j
    Denmark
                                                            I       *
    Prance                                 12.0 .  "
                                                         ψ
                                                                ;        ' 6.0             '' •' 18.0
                                                                                                         *
    Ireland
    Italy                                                                  3.0                     3.°
I
1            .         (
    Luxembourg                                                      •      5.0             •       5.û
    Netherlands                                                            3 '5                    3.5
    United Kingdom                          6.5                       . 16.5'                     23.0
                                         0
 ^ ~£7%
     •4 .
    Total per industry                    26.0                            49.0                    75.0
                               1
        «
    yi The social repercussions of the present situation remain difficult to
     T predict , of course , and the forward figures , which are in principle
            based on the policy now in force , 'are therefore no more than tentative .
                                                                                                       /
          _ 3»    Explanation
            The coal industry 's requirements are more or less on a par with those estimated for
            1980 , mainly as a result of the progress being made in reorganizing
            the industry.     On the other hand , requirements in the iron and steel
            industry continue to be at a high level , owing to the gradual
            rationalizing and restructuring of the industry.                 The reduction in
            employment in the iron and steel industry is estimated at several
            tens of thousands of workers .
 ---pagebreak---                                                        - 28 -
    CHAPTER 3 3 s   AID TO RSS5APCH
                                                                                        ,                                       •
     • • Legal basis and description of operation
     Legal basis : Articles 50 and 55 of the ECSC Treaty.
     The High Authority/Commission is required to encourage technical and
     economic research into the production and increased use of coal and
     steel and occupational safety in the coal and steel industries . To
     this end it grants aid to finance research after receiving the Council 's
     assent .                                                                  • •                                        •     -
   ■ 2.    Type and "breakdown of expenditure .
     Creation of provisions to cover part-subsidies which take - the form of
     the repayment of a proportion of the actual costs of research projects
     approved by the High Authority/Commission in accordance with the
     procedures provided for in the Treaty; these cover , in particular , the
     consultation of the ECSC Consultative Committee and the receipt of the
     Council 's assent . In most cases, the aid granted amounts to 60% of
     the estimated and substantiated costs .
     The applications can be broken down as follows :                                                  -
                                                                                                                        m HJA ,
                                        ' -*■       _.                       *        *                      j
    Heading                                         Sector                                * - .                   Aid requested
                         " .        '   °         .    '~                                  •     '
                             •                                                                       •
.Β     3.1                     Steel
                                                          *
                                                             ' ,
                                                                   •
                                                                           *                       •
                                                                                                         ' •
                                                                                                                 ' ■        54 .
 Β     3.2                     Coal           ...           .              •    .            •                      V ■ 33-.
                                                                ..   .   • »
 Β     3.3 ,     *     •       Social and medicai
                                                                                  • •          •
                                                                                                                  ■   .     12       .
                      .*              . .           ' ■ ' -                               . ' TOTAL            ! * . '99*'.'             '
                                                              -        -
                                                                                                                ■   ■         ■  ■ ■   (•
 ---pagebreak---                                       - 29-
3.   Explanation
Steel research
The eoonomio reoeeBion which set in around 1975 i® at the root of the erieie
currently racking the Community steel industry , a crisis which has revealed
major structural weaknesses arising from serious overcapacity . The situation
has been further aggravated by the fact that a number of developing countries
are industrializing rapidly and have given top priority to the establishment of
their own steel industry .
The Japanese response to the recession was to introduce cost-saving schemes and
new technologies as rapidly as possible , while the United States closed down
plant as a way of "balancing supply and demand . Not only has the reaction in
Europe been slower than elsewhere , but also , over the last few decades , the '
decisions of the vast majority of the Community 's iron and steel producers has
been conditioned by financial considerations and an expanding market . As a
result insufficient attention has been paid to technological development in
the Community steel industry .
The three main input parameters entering into steel production costs are raw
materials , labour and energy , each of which accounts for approximately 30% of
the total . Although there are only slight differences in input costs from one
industrialized country to another , production costs for one tonne of European
steel are 32$ higher than those for one tonne of Japanese steel . Some 75$
of the difference between European and Japanese pig-iron production costs can
be attributed to higher energy consumption in Europe , 17$ to higher prices
for , raw materials and "]% to higher labour costs . Japan 's lead is clearly
due not so much to lower input costs , although this does play a role , but more
to higher productivity per manpower unit ( as opposed to lower labour costs )
and to more efficient utilization of energy ( rather than to lower energy
costs ) .
The Community steel industry must be able to compete technologically if it
is to remain viable . Over the next ten years emphasis must be placed on
putting right past mistakes . This calls for technological improvements to
ensure that the Community iron and steel industry can remain competitive
and keep pace with concurrent advances made by its competitors abroad .
 ---pagebreak---                                    - 30 -
One of the prime objectives will be to supplement the reorganization and
modernization programmes currently in operation with research and development
work on improved production methods . These efforts should foous on making;
optimum use of energy and developing more advanced production methods and
technology in which labour costs will account for a smaller proportion of
the total .
But the R&D work cannot be confined to production methods alone .   Pressure
from dynamic industries has led to increasing use of steel substitutes . The
Community steel industry must not forget that quality , sophistication,
efficiency and marketing should play a key role in its efforts to stop the
rot and in its plans to corner the new markets opened up by the development
of new technologies in certain industries .
R&D will therefore have to operate on two fronts if it is to provide adequate
support for the rationalization and reorganization programmes currently
under way .       . -                 .  "         .                •
The ECSC steel programme can make a major contribution to the attainment of
the joint research objectives by providing further , support for a number of
 joint programmes in key areas . Past projects in such fields as continuous
 casting, alternative forms of energy , and the complex problems attaching
 to maritime structures have showed that this type -of Community action is
 not only along the right lines but is also effective and of general benefit .
 Concentration of effort is an essential prerequisite for efficient use of
 the available financial resources with a view to meeting the technological .
 needs of the steel industry throughout the Community .
 ---pagebreak--- Coal research
Prices for petroleum products have been rising steadily and there are no
immediate prospects of this stopping .
Accordingly , both the European Council meeting in Venice and the summit
meeting of the industrialized countries recommended cuts in oil imports ,
the introduction of energy-saving schemes and the development of alternative
sources of energy coupled with intensified use of coal for power
generation and in industry .
The Commission too has frequently made its viewpoint clear , most recently
in its new medium-term guidelines for technical coal research*. It feels
that research is one way of improving the position of the Community coal
industry . But despite the progress made , the industry continues to
encounter many. grave difficulties due to labour problems , the diversification
and exhaustion of coal seams , the increasing depth of the workings and so
on .
Today mining engineering research is concentrating on the winning of coal ,
roadway drivage , outbye operations underground , measures to combat firedamp
and , finally , rock pressure . Progress is also being made in the application
of modern management techniques aimed at more rational organization of
the mines which, in turn, will help increase yield .
*0J No C 94 , 17 April 1980 .
 ---pagebreak---                                    - 32 -
Research and. development work has also "been Btepped up in the field of
product treatment in preparation plants , where the rapid spread of
modern methods and automation has assumed major importance for the
industry .  ,
Since coking plants are among the coal industry*s main customers much
research has "been devoted to increasing the yield and capacity of coking
plants , to improving the quality of steel plant coke and to tackling the
associated environmental problems .
Finally , product upgrading and research into new methods of converting
solid fuels into hydrocarbons are highly relevant in the present energy
situation .
The 1981 ECSC coal research programme will cover the following topics :
Mining engineering
–   Development work
–   Firedamp , ventilation and rock pressure
 -  Winning and working
 -  Out"bye operations underground
 –  Modem management techniques .                             ^
 Coal "beneficiation
 –  Preparation of coal
 –  Coking
 –  Physical and chemical upgrading and underwater methods .
 ---pagebreak--- Social research
The broad lines of soeial research in 1981 aire set out below .
Two new research programmes will be launched during the year ,             1
  ( i ) the fourth programme on ergonomics , which was approved on
        3 September 198O .  A total of 13 million EUA has been earmarked
        for this programme , which will run for five years . It follows
        on from earlier programmes on ergonomics and will concentrate
        on developing ways of putting previous findings to practical use .
( ii ) the programme on the control of air pollution in ECSC plants ,
        which has been in preparation throughout 1980 .
The mining safety programme will enter its final year in 1 981 .     Since
further research is urgently 'needed in this sector , in 1980 the Commission
decided to prepare a second programme to take over from the first one at
the end of 1981 .
So far there is no social research department specializing in safety in
the steel industry .     This research is concerned more with accident
prevention than with medical or ergonomic research , which is covered by the
above programmes .
Steel producers in the Community have asked that appropriations
be made available in 1981 to make good this shortcoming and provide for
appropriate research into ways of improving accident prevention in steelworks
There are plans to make a start on this work in 1981 .
 ---pagebreak---                                     34 ~
This research would, also be a logical extension of the work of the
General Commission on Safety and Health in the Iron and Steel Industry ,
which , until now , has aimed at providing a forum in which experts can
discuss their experiences wiih a view to furthering occupational safety .
                       «ι
To sum up , the ECSC social research programme for 1981 will cover the
following topics :
–   air pollution in ECSC plants
–   ergonomics
–   mine safety           '
–   industrial health in coal mines
–   pollution control in the steel industry
–   safety in the steel industry .
 ---pagebreak---                                   - 35 -
 CHAPTER B 4'   AIDS IN THE FORK OF I MEREST RELIEF GRAMS
 1o  Legal "basis ax?d description of the operation
Legal basis ; Articles 54 ( investment ) and $6 ( redevelopment ) of the ECSC
                Treaty ? and Decisions of the High Authority/Commission .
The ECSC may use its own resources to provide interest relief on certain
types of loan .   The relief is calculated in EUA at a rate and for a term
fixed by the Commission. It currently stands at 3% over five years .
2.   Type and breakdown of requirements
Provision for offsetting part of the interest due on loans disbursed by the
ECSC , in accordance with the contracts drawn up between the Commission and
the beneficiaries .
The estimates as regards applications break down as follows :
                                                        m EUA
                                    Sector
                                                   Aids applied
                  Heading                              for
                  B.4.1         Investment             19
                  B.4.2         Conversion             45
                                        TOTAL          64
ECSC loans with interest relief are the principal financial instruments
for promoting priority investments , particularly those connected with
creating jobs for former ECSC workers and with meeting the requirements
of the coal and steel industries .
 ---pagebreak---                                       - 36  -
Investments
      -_–-s___i                  »                 «
In the investment field , the chief aim of loans with interest relief is
the structural improvement and rationalization of the EC5C industries .
The criteria for granting relief are as follows :                           *
     (i)    environments    interest relief only for exceptionally heavy
            capital expenditure on existing plant , and for pilot schemes
            in new plant ( OJ No C 146 , 25 November 1974 )?
   ( ii ) research and training centres , and the elimination of
           "bottlenecks :   relief in the latter sector has "been limited .
           to investment to remedy the shortage of coking coal .
            ( OJ No C 73 , 18 June 1970);
 ( iii )    stabilization of coal production:    relief is limited
           to investment in shafts , underground workings and
           haulage and winding equipment ( OJ No C 79 » 29 March 1980 );
   ( iv) restructuring:       interest relief may "be granted for those
            investments that are of greatest value for restructuring the
            Community iron and steel industry and re-establishing its
         ' long-term competitiveness ( OJ No C 174 , 22 July 1977 )*
However, the requirements recorded for 1981 relate solely to the oriteria
published in 1970 ( 13 million EUA ) and 198O (6 million EUA.) •      In an
attempt to cut back spending to an absolute minimum the Commission has
decided not to grant interest relief for restructuring the iron and steel
industry in 1981 for the reasons set out in Chapter III .
 ---pagebreak---                                          - 37 -
  Redevelopment
                                      «
  Rea#vü3,ö£man-6 lêcuna mar* jgr»*»*«»A $6 firra» «ar jntë^ie boéies wMeh «noöurago
  investments creating new jobs in regions hit by declining employment in the
  coal and steel industries .                          -                             v
  The guidelines drawn up by the Commission for granting these loans are
  published in OJ No C 178 » 27 July 1977 * They have since been changed
  slightly ( OJT Bo C 82 , 29 March 1979 » P * 8 )         tighten up the rules for
  global loans , which have proved a very effective job creation instrument .
  The maximum loan eligible for interest relief at the moment is 20 000 EUA
  per new job .   When recruiting, the recipients give priority to former ECS.C
  workers •
  This programme is designed to help provide jobs for workers formerly                -
  engaged in the Community 's iron and steel or coal industries and thereby to
  meet one of the Commission's basic obligations under Article. 56(2a). of the
  ECSC Treaty .                                           \
  In 1981 - as in previous years - priority will have to be given to the
  redevelopment still needed in the steel industry .
  The Commission is working along the same lines as the central and regional
< authorities in the Member States .         It has stepped up the number of
  redevelopment loans granted from nine ( eight direct and one global ) in
  1977 to 25 ( nineteen direct and six global ) in 1979 * A total of 23 loans
  ( fifteen direct and eight global ) were approved during the first seven months
  of 1980 .
  But despite these efforts there is a long way to go . The number of jobs
  lost in the Community is still high . Present estimates suggest that some
  150 000 jobs will be lost in 1980 as a result of redevelopment in the steel
  industry , about a third of them being in the United Kingdom .                v
 ---pagebreak---                                          - 38 -
                           •                              *
>                                                                            .
  Consequently , while it is appreciated that there are limits to what
  the Commission can do in the way of redevelopment , it should- in pf&otio®
  be possible , given the magnitude 'of the problem, for the Community to
  grant loans to provide 15 000 replacement jobs in 1981 .         In order to
  reach this modest target loans would have to total 300 m EUA , with
  interest relief grants amounting to 45 m ECJA.
  CHAPTER- B 5 ;- AIDS UNDER ARTICLE 95 OF THE BCSC TREATY ( COKING COAL
  AND COKE FOR THE STEEL INDUSTRY ) '
                                                *
  1 ) Legal basis and description of the operation
  Legal basis.:           .-           .                       *               '
    ( i ) .Article 95 of "tbe ECSC Treaty ;                 _
  ( ii ) High Authority/Commission Decision 73/287/ECSC of 15 July 1973
           (OJ No L 259 » 15 September 1973 ) » as last amended by
           Decision 3058/79/ECSC of 19 December 1979 (OJ No L 344 ,
           31 December 1979 )*
  The ECSC makes a lump-sum contribution to a special fund , administered
  by the Commission , for subsidizing intra-Community sales of Community
  coking coal intended for the iron and steel industry.          The fund is
  financed by the Community , the Member States and the steel industry.
  2 ) Type and breakdown of requirements
  Precision for a lump–sum contribution of 6 m EUA to the fund ( the ECSC
  annual contribution).           "
   Community aid may be granted in respect of a maximum amount of
  47 ® EUA, corresponding to' 15 million tonnes of coking coal per annum.
   If trade drops below the 15 million tonne limit , the subsidies required .
  will be reduced and will be drawn first from the Community 's contribution
   and the 23 m EUA contributed by the steel industry and then from the
   24 m EUA paid in by the Member States .
 ---pagebreak---                                  - 39 -
3 ) Explanation
The aim ef the epeeial system ef aid -fee eeki-ng seal and eeke , set up
pursuant to Decision 73/287/ECSC of 15 July 1973 , is to help maintain
production of blast–furnace coal for the Community 's iron and steel
industry , and also to enable the coal and the coke derived therefrom
to be sold at prices reflecting world market prices .
The Commission feels that certain production capacities should be
maintained in this sector , as well as the requisite labour force to
work them as efficiently as possible , and that it is therefore necessary
to have an aid system which takes account of the fact that the question
of Community coking coal production concerns, all the Member States .
Under the aid system , aids to production and sales in the producer
country are financed by that country ; aids to intra–Community sales
are financed at Community level , the cost being shared by the steel
industry , the Member States and the ECSC .
2.  Requirements not entered in the budget :    loans for financing
    subsidized housing
In addition to the requirements to be financed by non–repayable grants
from the year 's resources , there is the ECSC housing subsidy scheme ,
which has been in operation since 1955 »
Forecasts for this programme are included in this aide-memoire to complete
the picture of all ECSC interventions for Parliament and the Consultative
Committee . For ease of understanding , the presentation follows the
same analytical format as for the requirements already described .
1 ) Legal basis and description of the operation
Legal basis : Article 54 and Decisions of the High Authority/Commission
assigning to the housing programmes the funds from the " special
reserve " constituted by interest from investments and from loans
against own funds .
ECSC intervention takes the form of reduced-interest loans , and
eases the . cost of financing housing by adding the funds lent by the
Community to resources provided nationally .
 ---pagebreak--- 2/      Tyoe ar.d "bre;i-kdov,,n of requirements
Grant of long-term 1^. interest–rate loans to the responsible national
"bodies .
The' Commission Decision of 29 June 5979 on the ninth subsidized,
housing programme ( 1979-83 ) allocates the sum of 30 m EUA for
 the* first phase of the programme ( 1 979–81 ) » which averages out at
 10 m EUA a year .          An addi-tional one million EUA has , however , been
allocated, for 1981 to cover any additional requirements such as those
which might arise as a result of Greek accession to the Community on
 1 January 1981 •
 3 ) Explanation
This scheme is intended to subsidize the following projects :
     ( i ) housing, linked with industrial "reorganization in the traditional
           steel centres and in those coalfields where production is
           to be increased ;
   ( ii ) housing for labour transferred to the new coastal steelworks ;
 ( iii )   specific solutions for migrant workers , employees with special
           skills and persons employed in arduous tasks ;         -
   (iv) housing to be modernized as part of urban renewal in steel
           and mining districts .
The scheme is both in the interest of workers , since it alleviates
the effects of price increases and high interest rates , and of
benefit to the industry , since -it facilitates reorganization.            .
 The number of dwellings subsidized by means of ECS C loans at
  1 January 1980 stood at 1 65 511 •
 ---pagebreak---                                         - 41 "
3»    Sunsary of re arui re merits reported
Total requirements reported therefore amount to 249 m EUA to "be financed
tinder the operational budget , plus 11m EUA in the form of below-the–line
loans at low interest rates for the "building of subsidized housing. The
figures for requirements reported are summarized in Annex D , in the
"applications'* column*                          ' .  ,
                                         3E
                                   Ζ           X
                                                               I
B.    ORDINARY RESOURCES AVAILABLE
1.    Resources for the financial year
CHAPTER R 1 :- GENERAL RESOURCES
TITLE R 1.1 :    Levy
la    Legal "basis and description
Legal "basis :
– Articles 49 «*d 50 of the ECSC Treaty
– Decisions 2/52 and 3/52 of 23 December 1952# -
The levies are calculated on the "basis of a fixed scale per tonne which is
decided each financial year "by the High Authority/Commission and published
in the Official Journal ,
                                          %             •
    Ψ
2,    Type and "breakdown                                  v                 -
Levy resources are the sums owing , and duly established , in the form of
levies payable on output in the 1981 financial year and calculated on the
basis of the production declarations made by the undertakings ,
3,    Explanation
The latest estimates of the average values which serve as the basis for
calculating the levies suggest that the figures for the 1981 financial year,
which relate to the reference period from 1 July 1979 "to 30 June 1980, will
be some 15$ hi^ier in the case of coal and roughly %% for steel than the
figures for 19 80,
It should be noted that there is an appreciable margin of uncertainty in
these figures }    this is because the departments concerned are not yet in
possession of all the requisite data , and forecasting production in ,
present economic conditions is very uncertain.
 ---pagebreak---                                       - 42-
Tonnage subject -to the levy, and yield from a rate of levy of 0.01%
       Fa'oàuôt                         Production for® casts     One levy
                                        on which the levy is      "point '•
                                        calculated
                                                                  in m EUA
                                        million tonnes
Brown ooal briquettes and
semi–coke derived from "brown                                             -
coal                                             6.6               0.02
Hard coal of all categories                    199.6                1.04    J
                Coal – total                                        1 o06
Pig iron other than that used
for making ingots                                4.4               0.05
Steel in ingots                              - 128.0                2.09
finished products                               99.0               0.70
                Steel total                                         2.84
                                    I
                GRAND TOTAL                                         3.90
TITLE R 1.2 ;    Interest :  other headings
1,   Legal basis and description
Resources deriving from income on investments and on loans against
non–borrowed funds will be determined when the Commission adopts the
balance sheet at 31 December 1980,       Under its Decision of 30 April 1975 ? '
the Commission enters in the budget the interest available from the previous
financial year#
2«   Type and breakdown
A breakdown of forecast resources based on the latest estimates is
given below; '
 ---pagebreak---                                               - 43-
 | Titles                           *
                                             Heading
                                                    »
                                                                   m EUA
     R 1*2           Interest on investments and loans
                     against non-'borrowed funds                     40
   R 1®3             Fines and la,te payment surcharges         tokea entzy
   R 1®4             Mi s c ell an e eras revenue -             ioken entry
   3©     Explanation                 ,
   The figure for interest revenue is "based on an estimate of th®
   yescoarcep which the Commission will "be in a position to release When
   it adopts the "balance sheet at 31 December 1930®
                                       •'             i
    CHAPTER R 2i- OMCELLMT ONS OF COMMITMSNTS WHICH WILL PROBABLY HOT
   BE IMPLEMENTED '                     -                 ' . .  ;
    1 0 . Legal "basis and description
    The provisions created in response i© Coramission aid decisions must "be ,
     given tangible form within a reasonable period of time "by the contracting
   . of legal commitments®
  . The Commission's Internal Rules for the drawing up and implementation _ '
     of the EG'SO operational "budget therefore provide that in the exceptional .
     event of un&a© delay at this stags tlxe provisions will "ba cancelledo
                                          <             '
     The Roles also provide that once all parties have discharged their .
     obligations under the legal commitment , eay remaining part of the prevision
• will likewise "be cancelled®
 ---pagebreak--- The amounts thus released "bscerae available again as resources for the
co^Tent financial year.
2®   Nature and "breakdown
Save in the exceptional cases where decisions on the earmarkbig © J? fVads
are not followed up within a reasonahl© period ©f time "by legal
commitment 83 , any cancellation of earmarked fynoa normally indicates
complete discharge of the contract ,     agreed with the contracting par
concerned#         -
The estimate of- 2 m KJA shown in this chapter relates , in essence , to .
cancellations of allocations for resettlement aid®      Only a tokesa entry ,
would he needed for the other items which might he involved ( cancellation
of "balances remaining in respect of -. contracts which have >» een performed ii-
full , delayed legal commitments , etc# )®                ■
                   »
3.   Explanation     .
                       ^           /
It is difficult to estimate the rate of cancellation in respect of
resettlement programmes , as it depends on the negotiations to he held
with the governments concerned*      The estimated figure of 2 m EUA is - "based,
on an average rate for 1931 .
CHAPTER R 3 :- RUVALTJATI ON OP ASSETS AM) LIABILITIES
This chapter , showing a "token entry", is provided to record the net
effect of changes in rates of conversion during the financial year.
CHAPTER R 4' – UNUSED RESOURCES FRCH THB FINANCIAL YEAR 1980 .
This chapter , showing s, "token entry" 3 provides for any "balance
remaining from the funds of %he previous " financial year to "be entered as
resouroes for the currant financial year*
 ---pagebreak---                                               - 45 -
 2»   Covering: of r ecru i rata sat s not entered in the budget -
 S^rovitt&on isa* "b«@» sa®49 fox' tho following resources       cover
 requirements for the constraction of subsidized housings
 – repayments on earlier loans. (8 m SUA ):                    '
                                  /
=• a part of tha spscial reserve and of the former ECSC pension fund
    (3 m EUA ).
 The allocation to the special reserve of the additional resources
 required will "be confirmed when the Commission adopts the, balance
 sheet at 31 December 1980 .
                                                                            «
 3.   Summary of possible ordinary resources' available for 1981
 The estimates of traditional resources other than levies amount to
 42 m EUA (interest available = 40 m EUAj cancellations a 2 m ECA ) 0
As the yield from a levy rate of 0 . 01$> has teen estimated at 3®9 ni HSA ?
 the yield obtained from levies can "be estimated at 120 mHIA on'the
"basis of the current rate of                  The total ordinary resources
 available for 198% assuming that the levy rate remains unchanged ,
 is estimated at 162 m EUA® - The estimated resources are summarized in
 Annex D in the section on "resources "* >               ,
 ---pagebreak---                                         - 46 -
    III .   DEÀFT 1961 OPEPJITPTG BUDGET
    A.    COMMISSION APPROACH
                                                                                  m
    The thinking "behind the , Commission ^ approach is described "below .
    Apart from a special arrangement for using the general "budget to finance
    exceptional social requirements' generated tor restructuring in the iron
    and steel industry , the Commission has no intention of using special
    financing arrangements under the 1981 ECSC Budget , ir> particular , it does
    not intend to ask the Member • States for special contributions .         'This is
    not because an increase in ECSC funds is not desirable or necessary , but
    because the increase so far obtained by this means ( 28 million EUA per
    year ) has not been adequate to justify continued recourse to what is
    in       last analysis art/ unprthoctex and h.aza.rdous-pr&cedure .
    This being so , and since applications for assistance from the 1981 Budget
 , are more than 54% in excess of the funds available ( assuming an unchanged
    0.31$ rate of levy ), the Commission does not feel that it can propose a
    reduced rate , even though it is aware that those contributing would like
    it to do so in view of the present circumstances .          However , while the
    levy in question is an additional burden on firms at a time when many of
  ■ them are experiencing serious financial difficulties , the fact remains
    that this tax of quite marginal volume provides            the ECSC with the
    means to finance a whole range of essential , operational aid schemes
    which all benefit firms and . workers in the coal and steel industries .
    What is more , the Institution 's financial activities , and particularly •
    its credit rating on the money markets , depend inter alia on its continued
    power to raise taxes .
    Although the Commission regards any reduction in the rate of levy as
    irreconcilable with its proven financial requirements , nevertheless it
    agrees, that there is no justification for increasing it .
    Consequently , allocations for operational assistance in 1981 will be
- kept within the bounds of the amount available on the basis of the present
    rate , i.e. 162 million EIIA ( see II. B. 3 above ).
 ---pagebreak---                                        - 47 -
B.     FINANCING PROPOSALS
A "breakdown of "Bhe commission 's proposals concerning the 1981 ep abating
"budget is given in Annex D and has "been arrived at as follows :
 ( a ) total resources amount to 162 million EUA |
 ("b ) irreduci"ble requirements total 86 million EUA , viz :
       • 5 million EUA to cover administrative expenses , fixed at this
          level pursuant to the Merger Treaty ;
       • 75 million EUA "by way of resettlement aid under the current
          "bilateral agreements "between the Community and the Member States ;
       o 6 million EDA "by way of aid for coking coal and steel plant coke ,
          pursuant to a decision taken under Article 95 of "the EX3SC Treaty ;
 ( c ) a minimum allocation to the same value as in 1980 - 44 million EUA –
       should "be set aside for aid for research , which is a traditional aid
       measure provided for in the Treaty and favourably regarded on all
       sides .
 It follows that the "balance      available for financing interest subsidies
 totals 32 million EUA .     The Commission is aware of the need , in the
 present circumstances , to give priority to resettlement aid designed to
 create jo"bs in areas in which the ECSC industries are declining and has
 therefore geared its aid policy towards restructuring investments
  (Article 54 of the BCSC Treaty ),,     Considerable progress now appears to
 have been made with restructuring measures , and this has pushed up the
  estimated "budgetary expenditure for I98O ( Annex B ) 0   Now that this stage
 has "been completed , it is no longer possible to provide assistaxi.ee on a
 large scale from the inevitably slender cash resources available for the
 purpose without running the risk of "becoming frankly discriminatory in
 the selection of recipients ^
 ---pagebreak---                                    - 48 -
This "being so , the Commission has decided to forgo this type of aid
 la 1983. pyefarring tc conf-ine.. .interest- sutesi-dtes on inv-(9#tw«n* «'
"by EG SO imdartakings to cases involving the stabilization of cos.1
 production and oases covered "by the criteria drawn up in 1970 and
 1974 (notably to encourage investments designed to remedy the shortage
 of coking' coal ), and then only as far as funds allowo
 The Commission therefore proposes to allocate 25-willioa Wk to
 conversion aid and 7 million H'/A to aid to investments®
                                       0
                                Q            O
  To concludej the Commission proposes to adopted the I.98I ECSC operating
  "budget tot-ailing 162 million EUA , 'broken down as shown in Annex D„
   Consequently , it proposes to maintain the 0*3.1% rate of levy«
 ---pagebreak---                                    - 49 -
C.  DRAFT BUDGET
The Commission 's draft "budget of 162 million EUA is set out in Annex D,
 ---pagebreak---                                                                                                                                                                                    ΙΝ '.' Χ Α
                                                irPLET'CflTATIO.'l OF THE ECSC OPfRATIOflAL 8lD£T FC® 1979                                                                        (Tn n CUAJ
 I                                –          1I       ftinr,f r      II        rïïïÂT–i                                                     I     BUDGET            II    FINAL
                                                                                                              RESOURCES
                      REQUIREMENTS              FIGURES 1 Il FIGURES I                                                                            FIGURES'          l    FIGURES
   OPERATIONS TO BE FINANCED- FROfi     \  '                                                RESOURCES OF THE FINANCIAL YEAR       '                                 I
I CURRENT RESOURCES ( NON-REPAYABLE) '                                                                      ■    -      ■-              ■
I 1 . Adnlnlstratlve expenditure                    5                        5              1 , Current resources                               '         ■   ■   ■
                                                                                                 1.1 Levy yield Cat                           • 103                      103.2
     '    *                •
                                                                                                 1.2 Interest on Investments and on
                                                                                                      loans fron nen-borrowed funds .              18                      18
                         s                                                                       1.3 Fines and surcharges for delayed                   token
                                                                                                      payment                                           entry               0.8
                                                                                                 1.4 Miscellaneous                                token entry
I 2. Aid to resettleaent                                                         :          2 , Cancellation of cooni bents which will
        ( Article 56)                            67              ■        67        -            not now be Implemented                               8.7                  10.1
I 3. Aid to research                                                                                                                                                       token  I
                                                                   '
                                                                                            3. Revaluation of assets and llablll ties-                  token
I       ( Article 55)                            46.5 .        '          46.7                                                  .   .     :             entry              entry  |
I       3.1 steel      ,                           '      ( 20                  , ( 20                    •        .       -
I       3.2 coal                                          f 17'           '           I?                             ■'
I       3.3 social                                        ( 9.5                    ( 9.7
I 4. Interest relief grants                                               47.2              4. Unused resources carried over fro «
I       4.1 Article 54 - Investment                       ( 20                     ( 21.7        the financial year 1978                              5.8                   5.8
I * 4.2 Article 56 - Redevelopment °                      ( 27                     ( 25.5
] 5. Aid to coking coal and metallurgical             -
                                                                                            5. Drawing on contingency reserve
I       coke ( Article 95)                           6                      .6          ;                                                          ..
                                                                                                                                                                       ■
I 6. Effect In EUA of the changes In                                                         6. Spécial contribution                                '
I       currency exchange rates on legal                      :                                  (Declslorv of the Kenber States of
I , cooni tments to be carried out In                                                            9 Aprll 1979)                                     28                      28
                                                  -
I       çurrçncles                                                    [■ 0.2                 7. Déficit                               v                               [ IX        |
                                                171.5                   172.1 ' ί         ·                                                    '171.5                    172 '1 ■
      OPERATIONS FINANCED WITH LOANS                                  r                       ORIGIN OF NON-BORROWED FUNDS                  r               :
      FROM NON-BORROVED FUfOS      ;                 ,        .         .
   7 . Social houslng                            "17.5                    17.8                8, Repayments on loans for social housing               7.5       •           7.8
                                                                                              9 . Special reserve and part of the
                                                                                                   former ECSC Pension Fund                       10                      10
     Commission 's budget estimates at 24 October 1979 .
   2
     Covered from Interest revenue In 1979.
 ---pagebreak---                                                         FORECAST OUTTURN OF THE
                                                       ECSC OPERATIONAL BUDGET FOR 198O                                            ANNEX B
                                                                                                                                   ( in m EUA)
                                                  Esti mated                                                                          Estima ted
                REQUIREMENTS
                                        Budget    rate of                                   RESOURCES
                                                                                                                           Budget     rate of
                                        figura                                                                             ft gure
                                                  impl orientation                                                                    implementatii
OPERATIONS TO BE FINANCED FROM CURRENT                                RESOURCES FOR THE FINANCIAL YEAR
RESOURCES ( NON-REPAYABLE)
1 , Administrative expendi ture            5           5             1 . Current resources
2. Aid to resettlement ( Article 55}      67          67                  1.1 Levy yield at 0,31$                          117             116.5
3. Ai d to research
    ( Article 55)                         44           44                 1.2 Interest on investments and on loans
    3.T steel                                 (19          ( 19               from non-borrowed fynds                       23              23
    3.2 coal                                  (16          ( 16           1.3 Fines and surcharges for delayed payment token entr >          0.9
    3.3 social                                O            ( 9            1.4 Miscellaneous                            Itoken entr >         0.1
                                                                      2. Cancellation of commitments which will
4. Interest relief grants                 66\          61.5
    4.1 investment ( Article 54)              (23          ( 33           probably not be Implemented
                                                                      3. Revaluation of assets and liabilities         token entrv
    4.2 redevelopment ( Article 56)           (43          ( 28.5
                                                                      4. Unused resources carri ed over from the
5. Aid tp coking coal and metallurgical
    coke ( Article 95)                                                     1979 financial year                         token entry
                                                                     5. Special contribution under the Decision of
                                                                          the Member States of 18 March 1980                43              28
                                                                      6. Drawing on contingency reserve                                     10
                                        188          183.5                                                                 188            183.5
OPERATIONS FINANCED WITH LOANS FROM                                  ORIGIN OF NON-BORROWED FUNDS
NON-BORROWED FUNDS
6. Social houslng                  . .   10          10
                                                                      1 . Repayments on loans for social housing                             7.5
                                                                     8 . Special reserve and part of the former
                                                                          FCSC Pension Fund                                                  2.5
 ---pagebreak---   Information relating "bo levies
 The latest available information on production and the levy yield, for
  th« cru*>?afv«            y«ar itt given talowt
  Levy yield for the period from January to June 1980 ( provisional estimated
                                                                                 \
                                               Production serving
                                               as a "basis for the
                                                                       Levy yield .
               'Plroduot                       calculation of the
                                                      levy              in m EUA
                                               in million tonnes
                                       . n
      Brovm-coal "briquettes'
      and semi–coke                  ,                  2.2                  0.2
      Ail types of hard coal                           98.6 !              1 3.8
I                        Total for coal                                    14.0
      Pig iron other than that required
      for the manufacture of ingots                     2.2                  0.8
      Steel ingots                                     66.0 .        . . 32.4
      Finished products                                51.0   .             11.2
                         Total for steel                                   44.4
    .  -*            \ .                   ' ■
                                                                   j   . • '
                   ,     GRAND TOTAL                                       58.4
 ---pagebreak---                                                                                                  AÏWEX C
                                       ECSC BALANCE SHEET AT 31 DECEMBER 1979
                   ASSETS                                                   LIABILITIES        - (in m HSA)
1. Disbursed loans                             4 793.7      1. Reserves
                                                               A.  Guarantee fund                        230.0
2. Banks                                         448.9
                                                               B.  Special Reserve                       140.0
3. Ordinary portfolio                            169.4         C.  Former pension fund                    41.5
4. Interest revenue                              113.1    I 2. Allocation of reserves
                                                               A.  Financial aid                         310.0
5. Recoverable issuing costs and
                                                               3.  Others                                105.0
   redemption premiums                            70.9    I
6. Other assets                                             3. Unallocated balance                          0.4
                                                  47.5
7. Bank deposits for bonds and coupons
                                                            4. Borrowings                              4 675.1
   due                                            40.4      5. Interest payments to be made              166.8
8. Repurchased bonds                            ^ 37.3      6. Bonds and coupons due                      40.4
9. Real estate                                     0.2      7. Credit institutions                          8.3
                                                            8. Other creditors                              2.9
                     ^       '      '    ■'
                                                            9. Outstanding redemption premiums              1.0
                                               5 721.4                                                 5 721.4
 ---pagebreak---                                                                                                                         ANNEX O
                                          DRAFT ECSC OPERATIONAL BUDGET FOR 1981
                                                        •               '         :    I
                                                                                                                      ( in m Em )
             REQUIREMENTS      -         APPLICATIONS     PROPOSALS                       . RESOURCES .              PROPOSALS
OPERATIONS TO BE FINANCED FROM                                            RESOURCES FOR THE FINANCIAL
RESOURCES FOR THE FINANCIAL YEAR                                          YEAR
( NON-REPAYABLE )
1»    Administrative expenditure          • 5                 5            1«       Current resources
2 » Aid to resettlement (Article 56 )       75               75      '-   1«1 Levy yield at 0.31 /&                    120
                                                                                                                              \
3. Aid to research (Article 55 )            99 /             44-          1.2 Interest on investments                             /
3«1 steel                                          ( 54          ( 19               and on loans from
                             /                                                      non-borrowed funds                  40 '
3*2 coal                                           ( 33   .      ( 16     1«3 Fines and late payment
                                                                                    surcharges
                                                   ( 12                                                            token entiy
3*3 social      .                                                ( .9 '   1 .4 Miscellaneous                       token entiy
4.    Interest relief grants               64                32    ■      2»        Cancellation of commitments
4»1 Investment (Article 54 )          -v           < 19          < 7               which will probably not be
4*2 Redevelopment (Article 56)                  , < 45      ,    < 25               implemented                        ' 2
5 » Aid to coking coal and                    '  v                        3«        Revaluation of assets and
                                                                                    liabilities                    token entiy
    " metallurgical coke (Article 95 )       6                6
                                                                          4*        Unused resources carried                    .
                                                                                ■ over from 1980                   token entiy
                                                                          5 . Extraordinary receipts
                                          249             162             6# Drawing on contingency
                                                                            .. . reserve
OPERATIONS FINANCED WITH LOANS                                                                                        162           I
                                                                          ORIGIN OF NON-BORROWED FUNDS
6 * Social housing                         11               11            7 . Repayments on loans for
                                                                                    social housing                       8
                                                                          8 . Special reserve and part
                                                                                   of former ECSC Pension
                                                                                 Fund                           '■       3
 ---pagebreak---                       CONTROL OP ECSC ACTIVITIES                         Annex E
In paragraph 16 of the Resolution of 22 May 1980 on the discharge to be
given to the Commission in respect of the ECSC 's financial and budgetary
activities for the financial year 1977 » Parliament asked the Commission
to submit a report on "its concept of control and how it could be exercised"
in the area covered by the ECSC Treaty .   This is the Commission 's reply to
that request } it sets out to throw some light on the legislation currently in
force in this field .
( a)   Concept of control
Since ECSC administrative expenditure was lumped together with the
administrative expenditure of the other Communities under Article 20 of
the Merger Treaty , it has of course been subject to the same auditing
measures as the rest of the general budget .   There is therefore no need
for any special remarks here .
As for the ECSC 's other activities , the Treaty of 22 July 1975 amending
certain financial provisions of the Treaties establishing the European Communities
assigned the external audit functions provided for by the Treaty of Paris to
the Court of Auditors®    At the same time the Treaty of Paris places the
responsibility for establishing adequate internal auditing procedures on the
shoulders of the High Authority/Commission .   On 2 August 1976 the Commission
therefore adopted its internal rules for the drawing up and implementation
of the operating budget of the ECSC , consolidating and supplementing the
budgetary control procedures applied previously .
                                 \
     External audit
The Commission made its views on external auditing clear to Parliament on
22 May 1930 , at the plenary debate on the discharge for the 1977 financial
year .   Speaking for the Commission Mr Tugendhat said that the rules and
practices which had been developed over the years , within the general framework
of the Treaty of Paris and with the full support of Parliament , proved an
effective means of auditing® Any formal revision of the Treaty of Paris ,
seeking to remodel the external auditing procedures on the lines of the
EEC Treaty ., would be both retrograde and a mistake .
 ---pagebreak---                                     - 56 -
He acknowledged that the powers enjoyed "by the Court in the ECSC domain
.were rather different from those accorded to it in other fields .     Under
 the ECSC Treaty the Court of Auditors did not have the right to carry out
 autonomous in situ visits in Member States , nor did Parliament have the
 right to give a discharge for the implementation of the ECSC operating
 budget .
 Mr Tugendhat went on to say that practical arrangements had by 1977
 produced a form of audit which included in situ checks and , at the time ,
 was felt to be entirely satisfactory .      He recalled that in the debate
  on the 1976 discharge in December 1977 both Parliament , through
 Mr Bangemann , and the Commission had expressed the hope that the
  style of work and the practices developed by the audit authority would
  serve as a model for the future .
                        ..                 .                    v
 The important point was that the powers bestowed on . the Court by the
 Treaty of July 1975 were virtually identical^ with those previously
  enjoyed by the ECSC Auditor .   The practice followed by the ECSC Auditor
 at that time was that h6 participated in checks organized in situ
 by the Commission .   This practice had been completely^ abandoned by the"
  Court of Auditors .
 The Commission would be glad to pick up the threads and to facilitate
 the participation of officers of the Court in external audit visits
  arranged by its staff .  .                            V
 As far as Parliament 's involvement was concerned , the Commission had
  accepted the claim of Parliament to grant its discharge for the
  financial management ef the ECSC and Parliament had been exercising
 this right since 1976 .   As a result , the powers enjoyed by Parliament in
 this domain were identical with those exercised under the Treaty of Rome .
             »
 ---pagebreak---  Internal audit
As regards operating expenditure , the Paris Treaty did not endow the
EC3C with traditional "budgetary structures and procedures in the classical ,
i.e. standard , universal and annual , mould .
The ECSC 's financial activities can "be divided into two major sectors :
the first – the borrowing and lending service – £s administered in
accordance with normal banking practice , while the second – the granting .
of financial aids – is dealt with "fcry the administrative departments of
the Commission , notably , as regards financial matters , by one of the
departments of the Directorate–General for Budgets .     As the title
" operating budget of the ECSC " suggests , the Directorate-General for Budgets
has chosen to submit the figures as internal estimates .
Prom the earliest days of the ECSC , its budget , which is confined to aid
financed from revenue from levies and interest payments , has been drawn
up and implemented by a number of different departments in accordance
with ad hoc decisions taken by the High Authority .     The decision of
2 August 1976 consolidated and supplemented all previous practices in
the " internal rules for the draining up and implementation of the operating
budget of the ECSC ".   While maintaining the ECSC 's financial autonomy ,
these rules took over the essentials of the general budgetary principles
of the Financial Regulation which governs the general budget .
Needless to say , in addition to the internal auditing carried out under
the " internal rules", the limited staff of the Commission departments
responsible for implementation of the operating budget carry out as
many inspections ( including in situ visits ) as they can in order to ensure
that their area is well managed .    Comments on these checks , including
those carried out 'by the service responsible for inspecting the levies f
are recorded in the reports in the external auditor 's notebooks .
 ---pagebreak---                                  - 58 -
                                                                                ι
( b ) Auditing methods
The present situation can be summarized a» follows *
The Financial Controller has to authorize in advance all proposals for
commitment and subsequent payment from the ECSC operating budget .
Responsibility for external auditing of the granting of aid and the release
                                       /                   .        .  .  . . .
of resources accruing from levies lies with the Court of Auditors .
This gives Parliament every guarantee that it in turn will be able to
exercise the rights bestowed upon_.it and come to a fully informed
judgment of the discharge to be granted to the High Authority.
                                                       v
There are two basic methods of controlling the ECSC 's financial activities,
viz :                   '
  ( i ) The Court of Auditors keeps a permanent watch on financial operations .
          It receives all the requisite accounts and has permanent access
          to all the Commission's files .   It has the right to acoompany the
          Commission officials on any inspection visit it wishes .
          The 0030*3 balance sheets and statements of revenue and expenditure
          were subject to endorsement by the ECSC Auditor ( up to 197 6) and by "
          the Court of Auditors ( financial years 1977 and 1978 ).    What is
         more , comments and observations on these documents have been
          published every year, in the ECSC Audit or* s report for the years
          up to 1976 and in an Annex to the Annual Report on the Overall
          Financial Situation of the ECSC in 1977 *    Detailed accounts of
          individual operations and general conclusions have also been
          published.
( ii ) The Commission thought it would be wise if, from 1978 onwards, a
          firm of accountants of international repute were to audit its
          accounts in the way that , for example, the European Investment Bank
        ■ does now.   It has every intention of pursuing this policy in the
          financial years to come .
The Commission feels, that , leaving aside the problems caused by staff
shortages , the foregoing measures provide an adequate means of monitoring
the ECSC 's budgetary and financial activities .         ^