12 European Investment Bank projects
outside the EU
| (34964)
10272/13
+ ADDs 1-2 COM(13) 293
| Draft Council Decision granting an EU guarantee to the European Investment Bank (EIB) against losses under financing operations supporting investment projects outside the Union
|
| Legal base
| Articles 209 and 212 TFEU; co-decision; QMV
|
| Department
| International Development
|
| Basis of consideration
| Minister's letter of 16 January 2014
|
| Previous Committee Reports
| HC 83-xxv (2013-14), chapter 8 (18 December 2013), HC 83-xxii (2013-14), chapter 9 (6 November 2013) and HC 83-viii (2013-14), chapter 6 (3 July 2013)
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| Discussion in Council
| To be determined
|
| Committee's assessment
| Politically important
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| Committee's decision
| Cleared |
Background
12.1 The proposal is to update the current
EU budgetary guarantee to the EIB that covers risks of sovereign
and political nature when financing operations outside the EU.
This External Lending Mandate (ELM) allows the EIB to use its
Own Resources to operate in more challenging investment climates
outside the Union in support of the EU's external policy objectives;
provides both an overall ceiling to loans covered under the Guarantee
and an opportunity to determine the strategic direction of the
EIB in its external operations; and, more broadly, safeguards
its creditworthiness, so as not to compromise its principal task
of contributing to the development of EU Member States.
12.2 The regions covered are the Neighbourhood
and Partnership Countries (including the Mediterranean, Eastern
Europe, Southern Caucasus and Russia); Asia, Central Asia and
Latin America, South Africa as well as EU Pre-accession countries
(the African, Caribbean and Pacific (ACP) region is covered separately
under the Cotonou Agreement and funded through the European Development
Fund, or EDF).
12.3 This proposed new Decision sets
out the overall scope and general conditions of the ELM for the
period starting 1 January 2014 to 31 December 2020, in line with
the Multiannual Financial Framework (MFF). In drawing it up,
the Commission examined several options and objectives (see our
previous Report for details). They chose the option called FOCUS:
to focus on less credit-worthy beneficiaries while implementing
an overall signature target on climate change, which is judged
as having the most impact.
12.4 In her Explanatory Memorandum of
23 June 2013, the Parliamentary Under-Secretary of State at the
Department for International Development (Lynne Featherstone)
welcomed the overall proposal and strongly endorsed the EIB's
external role. She also endorsed the proposal to replace the
current separate Climate Change Mandate with an overall climate
change investment target, and welcomed the idea of developing
a method to establish the use of the EU budget guarantee where
it benefitted less creditworthy clients and served harder-to-reach
markets. She also supported the Mandate continuing to cover all
geographical areas, including harder-to-reach markets in Asia
(such as Burma, Bangladesh) which were key DFID priorities (see
paragraphs 6.8-6.9 of our first previous Report for greater detail).[48]
12.5 Looking ahead, the Minister said
that negotiations in the Financial Counsellors (FINCO) working
party in Brussels would now centre on the regional sub-ceilings
and broader strategic directions of the EIB in its external lending;
the draft proposal would then move to the European Parliament
in the autumn.
Our assessment
12.6 Given that the Minister
would be seeking at least some improvements to the draft mandate
— establishing a method to ensure that the guarantee was
used where it added most value and further clarification in terms
of success criteria with respect to the provision of a €3
billion "top up" after a midterm review — we retained
the Council Decision under scrutiny, and asked the Minister to
update the Committee when discussions in the working party had
been concluded.
12.7 We also drew this chapter of our
Report to the attention of the International Development Committee.[49]
12.8 The first two updates from the
Minister demonstrated very much what might be expected in this
type of negotiation: the Minister has not achieved all her objectives
— particularly with regard to Asia and Central Asia —
but notes that the proposal that has emerged from COREPER[50]
nonetheless contains a number of elements that should lead to
more effective spending (see paragraphs 9.8-9.12 of our November
2013 Report).[51]
12.9 We asked the Minister to write
to us again once the negotiations with the European Parliament
(EP) had made some progress, and in any event no later than 28
November. In her letter of that date, the Minister outlined an
EP Budget Committee first reading position that she described
as "in line with what we expected" and reflecting three
main EP priorities:
· allowing reflows from previous
EIB activities to increase the overall size of the ELM;
· increasing EIB reporting
requirements and EP oversight of the EIB; and
· changing the focus of the
EIB's work to include new priority sectors and an increased focus
on climate change.
Our further assessment
12.10 We again drew the Minister's
further update to the attention of the International Development
Committee.
12.11 The Minister had made her position
clear:
· no reflows from previous
EIB activities to increase the overall ceiling;
· no increase in the level
of EIB reporting, though no objection to the inclusion of the
the Results Measurement (REM) Framework, and thereby improvement
in the quality of existing EIB reporting ;
· some additional and strengthened
reference to climate change in the ELM, but nothing else that
would interfere with the EIB properly balancing this with the
other priorities — social and economic infrastructure, private
sector and financial development — or risk diluting the
impact of the EIB in these sectors by the addition of competing
priorities.
12.12 We asked the Minister
to provide a further update prior to any proposal to take a revised
text to the Council for adoption, and in good time for any questions
that might arise to be posed and answered beforehand.
12.13 In the meantime, we continued
to retain the Council Decision under scrutiny.[52]
The Minister's letter of 16 January 2014
12.14 The Minister says that:
· in informal trialogues in
December, the Council Presidency agreed a draft compromise text
with the European Parliament that they intend to be the basis
for a first reading agreement;
· subsequently, the draft compromise
was discussed in COREPER and the Presidency concluded that they
had support from the Council for this text;
· she explained that the Government
had a scrutiny reserve on this dossier;
· the next step is for the
EP to adopt the text in Plenary;
· she expects them to do so
in February;
· the text will then return
to the Council for adoption; and
· the ELM is "a strategically
important agreement for the UK and the agreed text reflects HMG
priorities and maintains improvements won in prior negotiations."
12.15 The Minister continues as follows:
"The final text contains important
provisions previously secured by the UK within the Council's position
to ensure greater use of the Bank's Results Measurement (REM)
Framework. The REM Framework will be used by the Commission in
their annual reports to the EP and will also be used at the mid-term
review to help determine the potential release and allocation
of the €3bn (£2.5bn) "top up" in 2016. Greater
focus on the REM Framework will link EIB activities under the
ELM to their results and developmental impact. This will help
to ensure that the EU budgetary guarantee is used where it adds
most value.
"During trialogues the UK was
also successful in ensuring that EP oversight of the EIB remains
appropriate and that the EIB's mandate was not overly stretched.
"Regarding climate change,
some wording in the text relating to the EIB's focus on this topic
has been strengthened, but this is balanced against the Bank's
two other priorities: social and economic infrastructure; and
private and financial sector development. The agreed text ensures
a strong focus on climate change whilst giving the EIB the necessary
flexibility to manage its priorities."
12.16 The Minister then recalls the
proposed EP amendment that reflows from previous EIB activities
be used to increase the overall size of the ELM:
"The UK and other like-minded
Member States did not support this amendment, arguing instead
that reflows should return to the "general budget" of
the EU, where they can contribute to reducing Member State contributions.
As a result of this opposition, a compromise was reached whereby
the majority of the reflowable funds under discussion, estimated
to be around €136m[53]
(£113m), will be returned to the general EU budget. Approximately
€110m (£92m) will be used, as an exceptional measure,
to enable the EIB to increase lending volumes by €2bn (£1.7bn)
from €25bn (£20.8bn) to €27bn (£22.5bn). Language
has been agreed in Recital 8 which notes the exceptional nature
of this decision. Given the limited and exceptional nature of
the reflows, the UK is content with this outcome."
12.17 On the matter of the regional
ceilings, the Minister says:
"The agreement takes as its
base the allocations from the Council's position and adjusts these
to take into account the additional €2bn (£1.7bn) of
lending available as a result of the reflows compromise. All
allocations are increased, but proportionately more of the additional
reflows are allocated to the Neighbourhood. Final amounts allocated
are: Pre-accession €8.739bn (£7.3bn); Neighbourhood
and Partnership €14.437bn (£12bn) (broken down into
the Mediterranean Neighbourhood €9.606bn (£8bn) and
the Eastern Neighbourhood €4.831bn (£4bn)); Asia and
Latin America €3.407bn (£2.8bn) (broken down into Latin
America €2.289 (£1.9bn), Asia €0.936bn (£0.78bn)
and Central Asia €0.182bn (£0.15bn)); and South Africa
€0.416bn (£0.35bn).
"The UK did not support the
regional ceilings in the Council's position as the cuts to the
areas of greatest developmental need, namely Asia, Central Asia
and South Africa, were inconsistent with the global balance we
had sought. The compromise agreement increases all allocations,
including to Asia, Central Asia and South Africa. It also results
in an increase in the combined Asia allocation compared to the
last mandate. The UK's priority was to minimise any further cuts
to Asia, Central Asia and South Africa. The increase to these
areas in real terms therefore represents a satisfactory outcome."
12.18 The Minister concludes her letter
thus:
"The text is now agreed and
in its final stages of approval. We expect this to be brought
to the Council for adoption at the earliest opportunity. Overall,
I am content with the agreement reached and kindly request that
the Committee considers clearing this from scrutiny in order to
enable a timely adoption by the Council."
Conclusion
12.19 We thank the Minister for
this further timely and full update, which (together with its
predecessors) has enabled the House to be kept well-informed throughout
the negotiations concerning the next EIB External Lending Mandate.
It seems to us that: the Government has ensured that the essential
components of the ELM have been maintained; that the quality of
EIB reporting will be improved (without there being more of it),
and without any further, undue European Parliament involvement;
that the ELM's focus has not been diluted; that the EIB retains
proper managerial flexibility; and that the final compromises
outlined in her letter are acceptable.
12.20 We therefore now clear the
Council Decision.
12.21 We are also again drawing
this chapter of our Report to the attention of the International
Development Committee.
48 See HC 83-viii (2013-14), chapter 6 (3 July 2013). Back
49
See headnote: HC 83-viii (2013-14), chapter 6 (3 July 2013). Back
50
COREPER, from French Comité des représentants
permanents, is the Committee of Permanent Representatives
in the European Union, made up of the head or deputy head of mission
from the EU member states in Brussels. Its job is to prepare
the agenda for the ministerial Council meetings; it may also take
some procedural decisions. It oversees and coordinates the work
of some 250 committees and working parties made up of civil servants
from the member states who work on issues at the technical level
to be discussed later by COREPER and the Council. It is chaired
by the Presidency of the Council of the European Union. There
are in fact two committees: COREPER I consists of deputy heads
of mission and deals largely with social and economic issues;
COREPER II consists of heads of mission (Ambassador Extraordinary
and Plenipotentiary) and deals largely with political, financial
and foreign policy issues. Back
51
See headnote: HC 83-xxii (2013-14), chapter 9 (6 November 2013). Back
52
See headnote: HC 83-xxv (2013-14), chapter 8 (18 December 2013). Back
53
Minister's footnote: "This figure is subject to change based
on end 2013 outturns. EIB management fees will also be deducted". Back
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