Proposal for a Council Decision providing macro-financial assistance to Ukraine - Letter to the European Parliament

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COUNCIL OF THE EUROPEAN UNION

Brussels, 10 May 2010

8885/10

Interinstitutional File: 2009/0162 (CNS)

ECOFIN 215 RELEX 337 COEST 105 NIS 33 CODEC 349

“I” ITEM NOTE

From:                 General Secretariat of the Council

To:                     COREPER

No. Cion prop.: 15249/09 ECOFIN 703 RELEX 1014 COEST 391 NIS 117 Subject:              Proposal for a Council Decision providing macro-financial assistance to Ukraine

  • - 
    Letter to the European Parliament
  • 1. 
    The Commission submitted the above-mentioned proposal to the Council on 30 October 2009.
  • 2. 
    The Financial Counsellors of the Permanent Representations Working Party has examined the proposal.
  • 3. 
    The European Parliament's Committee on INTA adopted its report on the Commission proposal on 18 March 2010. Following the discussions between the Presidency, Parliament and the Commission on the amendments adopted by the Committee, the Financial Counsellors Working Party examined the outcome of these discussions. It appeared that there was qualified majority in favour of the adoption of the text, as set out in Annex to the attached draft letter to the European Parliament.

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  • 4. 
    It is therefore suggested that the Permanent Representatives Committee:
  • - 
    confirms that the Presidency can indicate to the European Parliament that, should the European Parliament adopt the amendments to the Commission proposal, as set out in the Annex to the attached draft letter, the Commission proposal thus amended would be acceptable to the Council.

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ANNEX DRAFT

Brussels, 12 May 2010

Chair, European Parliament Committee on INTA BRUSSELS

Dear Mr Moreira,

Following the informal meetings between the representatives of the three institutions, a draft overall compromise package with regard to the above-mentioned Commission proposal was agreed today by the Permanent Representatives' Committee.

I am therefore now in a position to confirm that, should the European Parliament adopt the amendments to the Commission proposal in the exact form as set out in the compromise package contained in the Annex to this letter, the Council would, in accordance with Article 294 of the Treaty, adopt the proposed Regulation in the form of the text thus amended subject, if necessary, to revision by the legal linguists of both institutions.

On behalf of the Council I also wish to thank you for your close cooperation which should enable us to reach agreement on this dossier at first reading.

Yours sincerely,

Mr Carlos Bastarreche Sagües Chairman of the Permanent Representatives Committee (Part 2)

copy to: Commissioner

Member of the European Parliament

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ANNEX TO THE ANNEX

DECISION OF THE EUROPEAN PARLIAMENT AND THE COUNCIL providing macro-financial assistance to Ukraine

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 212 thereof,

Having regard to the proposal from the European Commission1,

Acting in accordance with the ordinary legislative procedure2, Whereas:

(1)       Relations between Ukraine and the European Union are developing within the framework of the European Neighbourhood Policy. In 2005, the Community -and Ukraine agreed on a European Neighbourhood Policy Action Plan identifying medium-term priorities in EU-Ukraine relations, replaced by the EU-Ukraine Association Agenda of November 2009. Since 2007, the Community - and Ukraine have been negotiating an Association Agreement that is expected to replace the existing Partnership and Cooperation Agreement. The framework of EU-Ukraine relations is further enhanced by the newly launched Eastern Partnership.

(2)       The Ukrainian economy has been increasingly hit by the international financial crisis with dramatically declining output, deteriorating fiscal position and rising external financing needs.

OJ C […], […], p. […]. OJ L

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(3)       Ukraine's economic stabilisation and recovery is supported by financial assistance of the International Monetary Fund (IMF). The IMF Stand-By Arrangement (SBA) for Ukraine was approved in November 2008.

(4)       Following a further deterioration of the fiscal position, a large part of the second tranche under the IMF's SBA and the full amount of the third tranche were channelled to the budget.

(5)       Ukraine has requested Union macro-financial assistance in view of the worsening economic situation and outlook.

(6)       Given that a residual financing gap in 2009-2010 remains in the balance of payments, macro-financial assistance is considered an appropriate response to Ukraine's request to support economic stabilisation in conjunction with the current IMF programme. The present financial assistance is also expected to contribute to alleviate the external financing needs of the State budget.

(6a) Union macro-financial assistance can only contribute to economic stabilisation if the main political forces in Ukraine ensure political stability and establish a broad consensus on a rigorous implementation of the necessary structural reforms.

(7)       The macro-financial assistance is provided to Ukraine in addition to the loan facility based on Council Decision 2002/639/EC of 12 July 2002 providing supplementary macro-financial assistance to Ukraine1.

(7a) Union macro-financial assistance should not merely supplement programmes and resources from the IMF and the World Bank but should ensure the added value of EU involvement.

(7b) The Commission should ensure that Union macro-financial assistance is legally and substantially in line with the measures taken within the different areas of external action and other relevant Union policies.

(7c) Specific objectives of the assistance should strengthen efficiency, transparency and accountability. These objectives should be regularly monitored by the Commission.

(7d) The conditions underlying the provision of macro-financial assistance should reflect the key principles and objectives of EU policy towards Ukraine.

1 OJ L 209, 6.8. 2002, p. 22.

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(8)       In order to ensure efficient protection of the Union's financial interests linked to the present financial assistance, it is necessary to provide for appropriate measures by Ukraine related to the prevention of, and the fight against, fraud, corruption and any other irregularities linked to this assistance, as well as for controls by the Commission and audits by the Court of Auditors.

(9)       The release of the Union financial assistance is without prejudice to the powers of the budgetary authority.

(10)     The assistance should be managed by the Commission. In order to ensure that the European Parliament and the Economic and Financial Committee are able to follow the implementation of this Decision, the Commission should regularly inform them of developments in the assistance and provide them with the relevant documents.

(10a) According to Article 291 of the Treaty, rules and general principles concerning mechanisms for the control by Member States of the Commission's exercise of implementing powers shall be laid down in advance by a regulation adopted in accordance with the ordinary legislative procedure. Pending the adoption of that new regulation, Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission1 continues to apply, with the exception of the regulatory procedure with scrutiny, which is not applicable,

HAVE ADOPTED THIS DECISION:

Article 1

  • 1. 
    The Union shall make available to Ukraine macro-financial assistance in the form of a loan facility with a maximum principal amount of EUR 500 million and a maximum average maturity of 15 years with a view to supporting Ukraine's economic stabilisation and alleviating its balance of payments and budgetary needs as identified in the current IMF programme.

1

OJ L 184, 17.7.1999, p. 23.

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  • 2. 
    To this end, the Commission is empowered to borrow on behalf of the European Union the necessary resources.
  • 3. 
    The release of the Union financial assistance shall be managed by the Commission in a manner consistent with the agreements or understandings reached between the IMF and Ukraine and with the key principles and objectives of economic reform set out in the EU-Ukraine Association Agenda. The Commission shall regularly inform the European Parliament and the Economic and Financial Committee of the developments in the management of the assistance and provide them with the relevant documents.
  • 4. 
    The Union financial assistance shall be made available for two years and six months starting from the first day after the entry into force of the Memorandum of Understanding referred to in Article 2(1).

Article 2

  • 1. 
    The Commission is empowered to agree with the authorities of Ukraine, acting in accordance with the advisory procedure referred to in Article 5a(2), the economic policy conditions attached to the Union macro-financial assistance, to be laid down in a Memorandum of Understanding which includes a timeframe for their fulfilment. The conditions shall be consistent with the agreements or understandings reached between the IMF and Ukraine and with the key principles and objectives of economic reform set out in the EU-Ukraine Association Agenda. These principles and objectives aim at strengthening the efficiency, transparency and accountability of the assistance, including in particular public finance management systems in Ukraine. Progress in attaining these objectives will be regularly monitored by the Commission. The detailed financial terms of the assistance shall be laid down in a Loan Agreement to be agreed between the Commission and the authorities of Ukraine.
  • 2. 
    During the implementation of the Union financial assistance, the Commission shall monitor the soundness of Ukraine's financial arrangements, administrative procedures, the internal and external control mechanisms which are relevant to such assistance and the adherence to the timeframe agreed upon.

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  • 3. 
    The Commission shall verify at regular intervals that Ukraine's economic policies are in

accordance with the objectives of the Union assistance and that the agreed economic policy conditions are being satisfactorily fulfilled. In doing so, the Commission shall coordinate closely with the IMF and the World Bank, and, when required, with the Economic and Financial Committee.

Article 3

  • 1. 
    The Union financial assistance shall be made available by the Commission to Ukraine in two loan instalments, subject to the conditions of paragraph 2. The size of each instalment will be laid down in the Memorandum of Understanding.
  • 2. 
    The Commission shall decide on the release of the instalments subject to satisfactory implementation of the economic policy conditions agreed in the Memorandum of Understanding. The disbursement of the second instalment shall not take place earlier than three months after the release of the first instalment.
  • 3. 
    The Union funds shall be paid to the National Bank of Ukraine. Subject to provisions to be agreed in the Memorandum of Understanding, including a confirmation of residual budgetary financing needs, the funds may be transferred to the Treasury of Ukraine as the final beneficiary.

Article 4

  • 1. 
    The borrowing and the lending operations referred to in this Decision shall be carried out in euro using the same value date and shall not involve the Union in the transformation of maturities, in any exchange or interest rate risks, or in any other commercial risk.
  • 2. 
    The Commission shall take the necessary steps, if Ukraine so requests, to ensure that an early repayment clause is included in the loan terms and conditions and that it is matched by a corresponding clause in the terms and conditions of the borrowing operations.

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  • 3. 
    At the request of Ukraine, and where circumstances permit an improvement of the interest rate of the loan, the Commission may refinance all or part of its initial borrowings or restructure the corresponding financial conditions. Refinancing or restructuring operations shall be carried out in accordance with the conditions set out in paragraph 1 and shall not have the effect of extending the average maturity of the borrowing concerned or increasing the amount of capital outstanding at the date of the refinancing or restructuring.
  • 4. 
    All costs incurred by the Union which are related to the borrowing and lending operations under this Decision shall be borne by Ukraine.
  • 5. 
    The European Parliament and the Economic and Financial Committee shall be kept informed of developments in the operations referred to in paragraphs 2 and 3.

Article 5

The Union financial assistance shall be implemented in accordance with the provisions of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities1 and its implementing rules2. In particular, the Memorandum of Understanding and the Loan Agreement to be agreed with the authorities of Ukraine shall provide for specific measures to be implemented by Ukraine in relation to the prevention of, and the fight against, fraud, corruption and other irregularities affecting the assistance. In order to ensure greater transparency in the management and disbursement of funds, they shall also provide for controls by the Commission, including the European Anti-Fraud Office, with the right to perform on-the-spot checks and inspections, and for audits by the Court of Auditors, where appropriate, to be carried out on the spot.

Article 5a

  • 1. 
    The Commission shall be assisted by a committee.

1       OJ L 248, 16.9.2002 p. 1.

2       Commission Regulation (EC, Euratom) No 2342/2002 (OJ L 357, 31.12.2002, p. 1).

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Article 6

By 31 August of each year the Commission shall submit to the European Parliament and to the Council a report, including an evaluation of the implementation of this Decision in the preceding year. The report shall indicate the connection between the policy conditions as laid down in a Memorandum of Understanding pursuant to Article 2(1), Ukraine's on-going economic and fiscal performance, and the Commission's decisions to release the instalments of the assistance.

No later than two years after the expiry of the availability period referred to in Article 1(4), the Commission shall submit to the European Parliament and to the Council an ex post evaluation report.

Article 7

This Decision shall enter into force on the day of its publication in the Official Journal of the European Union.

Done at,

For the European Parliament                                   For the Council

The President                                                         The President

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