Explanatory Memorandum to COM(2012)336 - Facility for providing financial assistance for Member States whose currency is not the euro - Main contents
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| dossier | COM(2012)336 - Facility for providing financial assistance for Member States whose currency is not the euro. |
|---|---|
| source | COM(2012)336  |
| date | 22-06-2012 |
On 18 February 2002, Regulation (EC) No 332/2002 was adopted establishing a facility providing Union financial assistance. The Regulation aims at easing the external financing constraint of Member States that are experiencing or are seriously threatened by difficulties in their balance of payment. It applies only to Member States whose currency is not the euro. The unprecedented global crisis that has hit the world over the last years has seriously damaged economic growth and financial stability and provoked a deterioration in the government deficit, balance of payment and debt position of the Member States, leading a number of them to seek financial assistance.
In the context of the economic and financial crisis, new assistance tools have been created with the establishment of the European Financial Stability Facility (EFSF), the European Financial Stability Mechanism (EFSM) and in the near future also the European Stability Mechanism (ESM). However, the existing Regulation has not kept pace with these developments. In particular, these financial stability mechanisms have established new precautionary instruments to provide financial assistance to the euro area Member States. The revision of the existing regulation will allow non-euro Member States to have similar financial instruments at their disposal. Furthermore, it will allow updating the existing Regulation in the light of the recent reinforcement of economic governance and strengthening of economic and budgetary coordination with a view to ensuring a larger level playing field between euro area and non euro area Member States. Finally, it should also increase the efficiency of decision-making by simplifying the procedure for activating the regulation with only one procedural step instead of two.
This Regulation sets up a facility for Union financial assistance that may be granted to a non euro area Member State which is experiencing or is seriously threatened with difficulties in its balance of payments (Article 1).The financial assistance can take the form of a loan, or of a credit line with a total outstanding amount limited to EUR 50 billion in principle (Article 2). The credit line can take the form of a precautionary conditioned credit line (PCCL), which is a credit line based on eligibility conditions, or an enhanced conditions credit line (ECCL), which is a credit line based on the combination of eligibility conditions and new policy measures (Article 4).
The Council may decide to grant a loan on a recommendation from the Commission (Article 3). The granting of a loan is made conditional upon the Member State adopting a macro-economic adjustment programme aimed at re-establishing a sustainable balance of payments positions and at restoring its capacity to finance itself fully on the financial markets. The Commission, in liaison with the ECB and wherever relevant the IMF, shall monitor the progress made in the implementation of the macro-economic adjustment programme via regular review missions.
The revised regulation contains new provisions in order to enhance the dialogue on the implementation of financial assistance with the aim of ensuring greater transparency and accountability. More specifically, the relevant Committee of the European Parliament may offer the opportunity to the Member State concerned to participate to an exchange of views on the progress made in the implementation of the adjustment programme. Representatives of the Commission may be invited by the Parliament of the Member State concerned to participate in an exchange of views on the progress made in the implementation of the macro-economic adjustment programme.
The Council shall decide to grant a PCCL or an ECCL on a recommendation from the European Commission (Article 5). Access to a PCCL shall be limited to Member States whose economic and financial situation is still fundamentally sound and which fulfil an agreed set of eligibility criteria. Access to an ECCL shall be open to Member States which do not comply with some of the eligibility criteria required for accessing a PCCL but whose general economic and financial situation remains sound. In addition, the Member State concerned shall adopt corrective measures. They should aim at addressing the eligibility criteria that are considered as not met and at ensuring a sustainable balance of payments position while ensuring a continuous respect of the eligibility criteria which were considered met when the credit line was granted.
A Member State will be subject to enhanced surveillance when it is receiving a precautionary financial assistance, with a view to ensuring its swift return to a normal situation and to protecting the other Member States against possible negative spill over effects (Article 6). This enhanced surveillance should include a wider access for the Commission to the information needed for a close monitoring of the economic, fiscal and financial situation of the Member State concerned and a regular reporting by the Commission. A Member State under enhanced surveillance shall adopt measures aimed at addressing the sources of potential sources of economic difficulties.
An attempt is also undertaken in the new Regulation to align a number of important procedural steps with the new upcoming Article 136 Regulation aimed at Member States in a delicate financial situation. The aim is to ensure the largest possible level playing field between all the EU programme countries disregarding whether they belong to the euro area or not. The revised regulation provides for replacing a number of monitoring steps under the Excessive Deficit Procedure (EDP) and the European semester by the macro-economic adjustment programme and its monitoring (Articles 7 and 9). Because of the comprehensive nature of the macro-economic adjustment programme, it can replace some processes of economic and fiscal surveillance for the duration of the adjustment programme with a view to avoiding a duplication of reporting obligations. In the same way, the revised regulation also ensures the suspension of the Macro-economic Imbalances Procedure (MIP) when a Member State is subject to a macro-economic adjustment programme (Article 8) and requires the establishment of post-assistance surveillance for Member States having reimbursed less than 75% of the financial assistance received (Article15).
Finally, the borrowing and lending operations are made slightly more flexible for the European Commission so as to limit possible difficulties to raise funds in case of difficult financial market conditions (Article 12).