5 Financial assistance for Member States
| (a)
(31313)
6243/10
COM(10) 50
(b)
(31337)
6244/10
—
|
Draft Council Decision amending Decision 2009/459/EC of 6 May 2009 providing financial assistance to Romania
Council Decision amending Decision 2009/459/EC of 6 May 2009 providing financial assistance to Romania
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| Legal base | Article 143 TFEU; —; QMV
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| Documents originated | (a) 8 February 2010
(b) —
|
| Deposited in Parliament | (a) 11 February 2010
(b) 23 February 2010
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| Department | HM Treasury
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| Basis of consideration | EM and Minister's letter of 24 February 2010
|
| Previous Committee Report | None
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| Discussed in Council | 16 February 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
5.1 Article 143 TFEU (formerly Article 119 EC) allows the Commission
to investigate the situation of a Member State experiencing difficulties
with its balance of payments or movement of capital. It can then
make recommendations to the Member State to bring the situation
to an end. If the actions taken by the Member State or the Commission
are insufficient they may make recommendations to the Council
to grant mutual assistance. Such assistance may include:
· a
concerted approach to international organisations;
· measures
needed to avoid deflection of trade (where the Member State has
maintained or reintroduced quantitative restrictions against third
parties); and
· granting
of limited credits by other Member States (subject to their agreement).
5.2 Council Regulation (EC) No. 332/2002 established
a Community medium-term facility for balance of payments support
for Member States outside the eurozone. Pursuant to Article 143
TFEU this facility can be activated by the Commission, in agreement
with the Member State concerned, or at the direct request of the
Member State. The facility can be mobilised when a Member State
is "in
difficulties or seriously threatened with difficulties as regards
its balance of payments either as a result of an overall disequilibrium
in its balance of payments or as a result of the type of currency
at its disposal". When agreement has been reached, through
a Council Decision, to grant a loan to a Member State, the Commission,
through the European Central Bank, borrows the money on financial
markets and lends it on to the Member State, with accompanying
economic policy conditions, with a view to stabilising the balance
of payments.
5.3 Regulation (EC) No. 332/2002 replaced Regulation
(EEC) No. 1969/88, in which the total amount outstanding of the
facility was limited to €16 billion (£14.97 billion).
A lower ceiling of €12 billion (£11.20 billion) was
determined, on the one hand, in the light of the reduction, following
introduction of the euro, in the number of Member States that
could potentially access the facility and, on the other, taking
into account the then forthcoming enlargements of the Community.
This limit was raised to €25.00 billion (£23.30 billion)
in November 2008.[11]
The European Council of 19-20 March 2009 endorsed the Commission's
intention to propose a doubling of the limit to €50.00 billion
(£46.50 billion).[12]
5.4 Against the background of a deteriorating economic
and financial situation, Romania approached the International
Monetary Fund and the EU in March 2009 for financial assistance.
In May 2009 Romania received a support package of €20.00
billion (£17.23 billion) of which €5.00 billion (£4.30
billion) was contributed by the EU's balance of payments facility,
as provided for in Council Decisions 2009/458/EC and 2009/459/EC.[13]
The documents
5.5 The draft Council Decision, document (a), is
to amend Decision 2009/459/EC. Document (b) incorporates a minor
amendment to the first document suggested by the Economic and
Financial Committee. The purpose of amending Decision 2009/459/EC
is to ensure consistency between the policy conditions attached
to the balance of payments financial assistance and the recently
revised deadline for the correction of Romania's excessive deficit
under the excessive deficit procedure of the Stability and Growth
Pact, which was set in a Council Recommendation of July 2009.[14]
The scope and intensity of the economic recession and the larger-than-expected
contraction of real GDP in Romania have been cited as the main
reasons for both the revision of the excessive deficit procedure
deadline[15] and the
amendment of the Council Decision. The amendments made:
· replacing
the words
"adopting a clearly-set
medium-term fiscal programme designed to lower by 2011 the general
government deficit to not more than the Treaty reference level
of 3 % of GDP" with
"implementing a clearly-set
medium-term fiscal program so as to bring the general government
deficit below the Treaty reference value of 3% of GDP with a timeframe
and consolidation path consistent with the Council recommendations
to Romania adopted under the excessive deficit procedure";
and
· replacing
the words "adopting
and executing an amended budget for 2009 (by the second quarter
of 2009), targeting a general government deficit of no higher
than 5,1 % of GDP in ESA 95 terms" with
"adopting and implementing annual budgets
for 2010 and beyond, consistent with the consolidation path set
out in the Supplemental Memorandum of Understanding."
The Government's view
5.6 The Economic Secretary to the Treasury (Ian Pearson)
says that the Government:
· thinks
that in the current exceptional economic climate it is vital to
ensure that the Community is fully able to continue supporting
Member States in need, ensuring wider financial stability and
protecting the single market;
· thinks,
therefore, that it is appropriate to make the amendments suggested
in the documents; and
· supported
the proposal at the 16 February 2010 Council.
5.7 In both his Explanatory Memorandum and his letter
the Minister explains, and apologises for, the breach of the scrutiny
reserve resolution caused by the support for the proposals he
now reports, saying that:
· there
was a very tight timetable between consultations and the vote
in the Council;
· the
final version of the proposed Decision was not received until
11 February 2010, with the Commission seeking adoption at the
16 February 2010 ECOFIN Council;
· given
the severity of the recession in Romania and the risk of contagion
across the EU, economic policy conditions for the disbursement
of instalments of the assistance needed to be changed to ensure
consistency with the revised deadline for the correction of Romania's
excessive deficit; and
· the
Government believed that it was right to support this as it sends
a strong signal on the EU unity, ability and willingness to act
swiftly and decisively to support Member States facing difficulty.
Conclusion
5.8 Whilst we have no questions to ask on these
documents and clear them, we draw them to the attention of the
House for the new information they contain about EU support for
Romania.
5.9 As for the breach of the scrutiny reserve
resolution we accept the need for swift action and note the Minister's
relative promptness in reporting the circumstances. We urge the
Government to avoid, in so far as possible, such breaches arising
and, where they are unavoidable, to report them as soon as possible.
11 (30106) 15105/08: see HC 16-xxxvi (2007-08), chapter
24 (26 November 2008). Back
12
See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/106809.pdf. Back
13
(30614) -: see HC 19-xvi (2008-09), chapter 8 (6 May 2009). Back
14
(30764) 11401/09 (30765) 11402/09: see HC 19-xxvi (2008-09), chapter
23 (10 September 2009). Back
15
Adopted by the Council on 16 February 2010: see (31361) 6231/10
on which we expect to report shortly. Back
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