Council Decision of 14 April 2014 providing macro-financial assistance to Ukraine (2014/215/EU)

Council Decision

of 14 April 2014

providing macro-financial assistance to Ukraine

(2014/215/EU)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 213 thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1) Relations between the European Union and Ukraine are developing within the framework of the European Neighbourhood Policy (ENP) and the Eastern Partnership. The Partnership and Cooperation Agreement between the Union and Ukraine entered into force on 1 March 1998. Bilateral political dialogue and economic cooperation have been further developed within the framework of the EU-Ukraine Association Agenda adopted on 23 November 2009. An Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (‘the Association Agreement’), including a Deep and Comprehensive Free Trade Area (DCFTA), was negotiated from 2007 to 2011 and was initialled in 2012. On 21 November 2013, the Cabinet of Ministers of Ukraine decided to suspend the signing of the Association Agreement. However, since the resignation of the Ukrainian government in February 2014, the current Ukrainian government has declared its willingness to sign the Association Agreement in the near future. On 6 March 2014, the European Council declared in its Statement on Ukraine its commitment to sign very shortly all political chapters of the Association Agreement, and to unilaterally adopt measures allowing Ukraine to benefit substantially from the DCFTA. The proposal for a Regulation of the European Parliament and of the Council to that effect was adopted by the Commission on 11 March 2014.

(2) The current political crisis has very damaging effects on Ukraine's already precarious economic and financial stability. Ukraine is facing a very weak and rapidly worsening balance-of-payments and fiscal situation, with the economy moving into recession again. The de facto interruption of Russia's assistance under its USD 15 billion package, and the announced end to the reduced gas prices previously granted by the company Gazprom from April 2014 will cause the situation to deteriorate even further. In such circumstances, Ukraine faces a serious risk of default in the near future.

(3) Following the resignation of the previous government, a new interim President and a new government were appointed by the Ukrainian Parliament on 22 and 27 February 2014 respectively. Even though the Ukrainian Constitution of 2004 was reinstated and presidential elections were announced for 25 May 2014, Ukraine could not return to political stability, since its sovereignty and territorial integrity have recently been violated by the Russian Federation.

(4) In this context, Ukraine requires urgent financial assistance by international creditors and donors. If the decision to provide such financial assistance was to be adopted by the European Parliament and by the Council in accordance with Article 212 of the Treaty on the Functioning of the European Union (TFEU) under the ordinary legislative procedure, the rapid disbursement of the Union's macro-financial assistance to Ukraine (‘the Union's macro-financial assistance’) in the first half of 2014 would not be possible, and would thus not address the urgent financial needs of Ukraine. It is, therefore, justified to provide the Union's macro-financial assistance on the basis of a Council Decision adopted pursuant to Article 213 TFEU.

(5) The urgency of the assistance is related to Ukraine's immediate need for funds, in addition to those which will be provided by other international financial institutions and other bilateral donors and to the macro-financial assistance provided for by Council Decision 2002/639/EC(1) and Decision No 646/2010/EU of the European Parliament and of the Council(2).

(6) The current crisis in Ukraine justifies the exceptional use of the urgent procedure under Article 213 TFEU. This Decision providing macro-financial assistance to Ukraine is without prejudice to other future macro-financial assistance operations.

(7) Since the resignation of the Ukrainian government, the Union has, on various occasions, declared its commitment to support the new Ukrainian government in its aims to stabilise the situation and pursue the course of reforms. The Union has also declared its readiness to fully support efforts of the international community and international financial institutions, especially the International Monetary Fund (IMF), with regard to an international assistance package designed to address the urgent needs of Ukraine, conditional on Ukraine's clear commitment to reforms. Financial support from the Union to Ukraine is consistent with the Union's policy as set out in the ENP and in the Eastern Partnership.

(8) The Union's macro-financial assistance should be an exceptional financial instrument of untied and undesignated balance-of-payments support, which aims at addressing the beneficiary's immediate external financing needs and should underpin the implementation of a policy programme containing strong immediate adjustment and structural reform measures designed to improve the balance-of-payments position in the short term.

(9) The Ukrainian authorities and the IMF are expected to agree shortly on an economic programme that will be supported by a financing arrangement with the IMF.

(10) On 5 March 2014, in view of the drastically worsening balance-of-payments situation in Ukraine, the Commission announced a support package, which included the proposed Union's macro-financial assistance. That package was endorsed by the Extraordinary European Council on 6 March 2014. That package includes financial assistance in the amount of EUR 11 billion for the period 2014-2020, including a total amount of up to EUR 1,565 billion in grants for the same period mobilised under the European Neighbourhood Instrument, the Neighbourhood Investment Facility, the Instrument contributing to Stability and Peace and the budget of the Common Foreign and Security Policy. The disbursement of the macro-financial assistance provided for by Decision 2002/639/EC and Decision No 646/2010/EU can take place as soon as the IMF programme is in place.

(11) Given that Ukraine is a country covered by the ENP, it is eligible to receive the Union's macro-financial assistance.

(12) Given that the drastically worsening external financing needs of Ukraine are expected to be well above the resources that will be provided by the IMF and other multilateral institutions, the urgent Union's macro-financial assistance to be provided to Ukraine is, under the current exceptional circumstances, considered to be an appropriate response to Ukraine's request to support financial stabilisation. The Union's macro-financial assistance would support the economic stabilisation and the structural reform agenda of Ukraine, supplementing resources made available under the IMF financial arrangement.

(13) The Union's macro-financial assistance should aim to support the restoration of a sustainable external financing situation for Ukraine, thereby supporting its economic and social development.

(14) The amount of the Union's macro-financial assistance is based on a preliminary estimate of Ukraine's residual external financing needs and takes into account its capacity to finance itself with its own resources, in particular the international reserves at its disposal. The Union's macro-financial assistance should complement the programmes and resources provided by the IMF and the World Bank. The determination of the amount of the assistance also takes into account the need to ensure fair burden-sharing between the Union and other donors, as well as the pre-existing deployment of the Union's other external financing instruments in Ukraine and the added value of the overall Union involvement.

(15) The Commission should ensure that the Union's macro-financial assistance is legally and substantially in line with the key principles, objectives and measures taken in the different areas of external action and other relevant Union policies.

(16) The Union's macro-financial assistance should support the Union's external policy towards Ukraine. The Commission services and the European External Action Service should work closely together throughout the macro-financial assistance operation in order to coordinate, and to ensure the consistency of, Union external policy.

(17) The Union's macro-financial assistance should support Ukraine's commitment to values shared with the Union, including democracy, the rule of law, good governance, respect for human rights, sustainable development and poverty reduction, as well as its commitment to the principles of open, rule-based and fair trade.

(18) A pre-condition for granting the Union's macro-financial assistance should be that Ukraine respects effective democratic mechanisms, including a multi-party parliamentary system and the rule of law, and guarantees respect for human rights. In addition, the specific objectives of the Union's macro-financial assistance should strengthen the efficiency, transparency and accountability of the public finance management systems in Ukraine and promote structural reforms aimed at supporting sustainable growth and fiscal consolidation. Both fulfilment of the pre-condition and the achievement of those objectives should be regularly monitored by the Commission.

(19) In order to ensure that the Union's financial interests linked to the Union's macro-financial assistance are protected efficiently, Ukraine should take appropriate measures relating to the prevention of, and fight against, fraud, corruption and any other irregularities linked to the assistance. In addition, provision should be made for the Commission to carry out checks and for the Court of Auditors to carry out audits.

(20) Release of the Union's macro-financial assistance is without prejudice to the powers of the European Parliament and of the Council.

(21) The amounts of the provision required for macro-financial assistance should be consistent with the budgetary appropriations provided for in the multiannual financial framework.

(22) The Union macro-financial assistance should be managed by the Commission. In order to ensure that the European Parliament and the Council are able to follow the implementation of this Decision, the Commission should regularly inform them of developments relating to the assistance and provide them with relevant documents.

(23) In order to ensure uniform conditions for the implementation of this Decision, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council(3),

HAS ADOPTED THIS DECISION:

(1)

Council Decision 2002/639/EC of 12 July 2002 providing supplementary macro-financial assistance to Ukraine (OJ L 209, 6.8.2002, p. 22).

(2)

Decision No 646/2010/EU of the European Parliament and of the Council of 7 July 2010 providing macrofinancial assistance to Ukraine (OJ L 179, 14.7.2010, p. 1).

(3)

Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).