Council Decision of 5 November 2002 providing further macro-financial assistance to the Federal Republic of Yugoslavia (2002/882/EC)

Council Decision

of 5 November 2002

providing further macro-financial assistance to the Federal Republic of Yugoslavia

(2002/882/EC)

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 from the Commission(1),

Having regard to the opinion of the European Parliament(2),

Having regard to the opinion of the Economic and Financial Committee(3),

Whereas:

(1) The Federal Republic of Yugoslavia (FRY) authorities re-established links with international organisations and in particular made progress towards normalising the country's financial relations with multilateral creditors, including the European Investment Bank, and with official bilateral creditors.

(2) Since October 2000, the FRY has achieved substantial progress in economic stabilisation and reform and has made important steps towards a well-functioning market economy.

(3) Within the Stabilisation and Association process, which is the framework for the European Union's (EU) relations with the region, it is desirable to support efforts to sustain political and economic stabilisation in the FRY, with a view to evolving towards the development of a full cooperation relationship with the Community.

(4) Financial assistance from the Community should be instrumental in bringing the FRY closer to the Community.

(5) The Community already provided in 2001 macro-financial assistance of EUR 345 million to the FRY(4). The International Monetary Fund (IMF) approved in May 2002 a three-year ‘Extended Arrangement’ for the FRY of about USD 829 million to support the authorities' economic programme in 2002 to 2005.

(6) The World Bank decided in May 2001 to make available to the FRY on a temporary basis a package of concessional loans of USD 540 million over a three year period. So far, two structural adjustment credits of USD 70 million and of USD 85 million have been approved in January and May 2002, respectively, to support reforms in public finance as well as in the energy and social sector and to foster private sector development.

(7) The Members of the Paris Club agreed in November 2001 on a substantial debt relief in favour of the FRY, already alleviating the balance of payments situation.

(8) The authorities of the FRY have requested financial assistance from the international financial institutions, the Community, and other bilateral donors.

(9) 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 to support the policy objectives attached to the authorities' reform efforts.

(10) Community macro-financial assistance to the FRY is an appropriate measure to help ease the country's external financial constraints, supporting the balance of payments and strengthening the reserve position.

(11) Financial assistance from the Community in the form of a combination of a long-term loan and a straight grant is an appropriate measure to support the sustainability of the FRY's external financial position, given its limited borrowing capacity. This Community financial assistance should be effective and properly implemented.

(12) The inclusion of a grant component in this assistance is without prejudice to the powers of the Community budgetary authority.

(13) A new Constitutional Charter is presently in the process of parliamentary discussion. Upon its entry into force, the FRY would continue to exist under a new name. The pending name change does not affect this Decision.

(14) Upon entry into force of the aforementioned Constitutional Charter, the National Bank of Yugoslavia may cease to exist. Therefore, after entry into force of the Constitutional Charter, the macro-financial assistance provided under this Decision will be paid to the institution or institutions designated to take on the responsibilities from the National Bank of Yugoslavia for receiving funds in the context of this Decision.

(15) This assistance should be managed by the Commission, in consultation with the Economic and Financial Committee.

(16) The Treaty does not provide, for the adoption of this Decision, powers other than those of Article 308,

HAS DECIDED AS FOLLOWS:

(1)

Proposal of 27 August 2002 (not yet published in the Official Journal).

(2)

Opinion delivered on 10 October 2002 (not yet published in the Official Journal).

(3)

Opinion delivered on 17 October 2002 (not yet published in the Official Journal).

(4)

Decision 2001/549/EC (OJ L 197, 21.7.2001, p. 38), Decision as amended by Decision 2001/901/EC (OJ L 334, 18.12.2001, p. 30).