Proposal for a Council Decision providing supplementary macro-financial assistance to the former Yugoslav Republic of Macedonia
26. 10. 1999 EN Official Journal of the European Communities C 307 E/43 Proposal for a Council Decision providing supplementary macro-financial assistance to the former Yugoslav Republic of Macedonia (1999/C 307 E/10) COM(1999) 404 final - 1999/0166(CNS) (Submitted by the Commission on 29 July 1999) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 308 thereof, Having regard to the proposal of the Commission, Having regard to the opinion of the European Parliament, (1) Whereas the Commission consulted the Economic and Financial Committee before submitting its proposal; (2) Whereas the former Yugoslav Republic of Macedonia is undertaking and is making substantial efforts to establish a well-functioning market economy; fundamental economic reforms (3) Whereas the former Yugoslav Republic of Macedonia has suffered very large economic costs as a direct consequence of the conflict in Kosovo and has made, despite severe social and economic strains, exceptional efforts to host a high number of refugees; (4) Whereas the former Yugoslav Republic of Macedonia and the European Community have signed on a Cooperation Agreement which entered into force on 1 January 1998; (7) Whereas the World Bank is preparing a new Financial and Enterprise Structural Adjustment Loan, which envisages substantial financing in support of the former Yugoslav Republic of Macedonia’s reform efforts in the enterprise and financial sectors; and investment adjustment financial (8) Whereas the authorities of the former Yugoslav Republic of Macedonia have requested financial assistance from the the Community and institutions, international other bilateral donors; whereas, over and above the estimated financing which could be provided by the IMF and the World Bank, an important residual financing gap remains to be covered in 1999 and 2000 in order to strengthen the country’s reserve position and support the policy objectives attached to the government’s reform programme; (9) Whereas financial assistance from the Community in the form of a combination of a long-term loan and a straight grant to the former Yugoslav Republic of Macedonia is an appropriate measure to support the balance of payments and help ease the country’s external financial constraints in the current exceptionally difficult circumstances; (10) Whereas the inclusion of a grant component assistance is without prejudice to the powers of budgetary authority; in this the (11) Whereas this assistance should be managed by the Commission; (12) Whereas the Treaty does not provide, for the adoption of this Decision, powers other than those of Article 308, (5) Whereas the Council, on 26 April 1999, has welcomed the prospect of a feasibility study towards upgrading the contractual relations between the European Community and the former Yugoslav Republic of Macedonia; HAS DECIDED AS FOLLOWS: (6) Whereas the former Yugoslav Republic of Macedonia has reached a preliminary agreement with the International Monetary Fund (IMF) on an arrangement under the Compensatory and Contingency Financing Facility and discussions are well advanced between the two parties on a stand-by arrangement (SBA) in support of the auth- orities’ adjustment and reform programme; 1. The Community shall make available to the former Yugoslav Republic of Macedonia financial assistance in the form of a long-term loan facility and straight grants, with a view to ensuring a sustainable balance of payments situation, comforting the implementation of structural reforms and help alleviating the social consequences of the economic disruptions caused by the conflict in Kosovo. Article 1 C 307 E/44 EN Official Journal of the European Communities 26. 10. 1999 The loan component of this assistance shall amount to a 2. maximum principal of EUR 50 million, with a grace period of 10 years and a maximum maturity of 15 years. To this end, the Commission is empowered to borrow, on behalf of the the necessary resources that will be European Community, former Yugoslav Republic of placed at Macedonia in the form of a loan. the disposal of The grant component of this assistance shall amount to a 3. maximum of EUR 30 million for the 1999-2000 period. 4. The Community financial assistance shall be managed by the Commission in close consultation with the Economic and Financial Committee and in a manner consistent with any agreement reached between the IMF and the former Yugoslav Republic of Macedonia. Article 2 1. The Commission is empowered to agree with the auth- orities of the former Yugoslav Republic of Macedonia, after consultation of the Economic and Financial Committee, the economic policy conditions attached to this assistance. These conditions shall be consistent with the agreements referred to in Article 1(4). 2. The Commission shall verify at regular intervals, in colla- boration with the Economic and Financial Committee and in co-ordination with the IMF, that the economic policy in the former Yugoslav Republic of Macedonia is in accordance with the objectives of this assistance and that its conditions are being fulfilled. Article 3 1. The loan and grant components of this assistance shall be made available to the former Yugoslav Republic of Macedonia in at least two instalments. Subject to the provisions of Article 2, the first instalment is to be released on the basis of an agreement of Macedonia and the IMF on a macroeconomic programme that is supported by an upper credit tranche arrangement. former Yugoslav Republic between the donia’s adjustment and reform programme and not before one quarter after the release of the first instalment. The funds shall be paid to the National Bank of 3. former Yugoslav Republic of Macedonia. the Article 4 1. The borrowing and lending operations referred to in Article 1 shall be carried out using the same value date and must not involve the Community in the transformation of maturities, in any exchange or interest rate risk, or in any other commercial risk. if the 2. The Commission shall take the necessary steps, former Yugoslav Republic of Macedonia so requests, to ensure that an early repayment clause is included in the loan terms and conditions and that it may be exercised. At the request of 3. the former Yugoslav Republic of Macedonia, and where circumstances permit an improvement in the interest rate of the loan, the Commission may refinance all or part of its initial borrowings or restructure the corre- sponding financial conditions. Refinancing or restructuring operations in accordance with the shall be carried out in paragraph 1 and shall not have the conditions set out effect of extending the average maturity of the borrowing concerned or increasing the amount, expressed at the current exchange rate, of capital outstanding at the date of the refi- nancing or restructuring. All related costs in 4. concluding and carrying out this Decision shall be borne by the former Yugoslav Republic of Macedonia. the operation under the Community incurred by The Economic and Financial Committee shall be kept 5. informed of developments in the operations referred to in paragraphs 2 and 3 at least once a year. Article 5 2. Subject to the provisions of Article 2, the second and any further instalments shall be released on the basis of a satis- factory track record in the former Yugoslav Republic of Mace- At least once a year the Commission shall address to the European Parliament and to the Council a report, which will include an evaluation of the implementation of this Decision. 26. 10. 1999 EN Official Journal of the European Communities C 307 E/45 BUDGETARY RESOURCES NECESSARY FOR THE PROVISIONING OF THE GUARANTEE FUND IN 1999 AND MARGIN UNDER THE RESERVE FOR LOANS AND LOAN GUARANTEES IN FAVOUR OF THIRD COUNTRIES ANNEX (EUR million) Operations Basis of the calcu- lation (1) Provisioning of the Fund (2) Reserve Margin Operations decided EIB/New mandates (4) - CEEC - ALA - South Africa - MED - FYROM - Bosnia EIB/Old protocols (4) - Syria Macro-financial assistance - Albania III - Bosnia I Operations proposed - EIB/Turkey (5) - EIB/Croatia (6) Macro-financial assistance - Bulgaria IV (7) - Romania IV (7) 872,9 218,1 143,5 351,4 38,5 42,0 - 30 20 20 105 35 100 200 122,2 30,5 20,1 49,2 5,4 5,9 - 4,2 2,8 2,8 14,7 4,9 14,0 28,0 346,0 (3) 223,8 193,3 173,2 124,0 118,6 112,7 116,9 114,1 111,3 96,6 91,7 77,7 49,7 (1) The provisioning basis is calculated by applying the relevant guarantee cover rate, namely 70 % (EIB loans new mandates), 75 % (EIB loans old protocols) or 100 % (macro-financial assistance loan). (2) In accordance with the provisioning rules in Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994, the Fund having reached its target amount on 31 December 1997, the provisioning rate has been reduced to 14 %. (3) Amount of the Reserve for loans and loan guarantees in favour of third countries for 1999 under the financial perspective. (4) Annual amounts of loans scheduled to be signed in 1999 and correction of amounts already provisioned in the Fund to take account of actual signings at the end of 1998: Transfer 5/99 to the Guarantee Fund. (5) Proposal for a Council Regulation on a special financial cooperation measure for Turkey (COM(95) 389/3). (6) EC/Croatia cooperation agreement (SEC(95) 180/final). (7) Commission proposal