Documents considered by the Committee on 1 March 2017 Contents

18Macro-financial assistance

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny

Document details

Proposed Decision providing macro-financial assistance to the Republic of Moldova

Legal base

Article 212 TFEU, ordinary legislative procedure, QMV

Department

HM Treasury

Document Number

(38459), 5383/17 + ADD 1, COM(17) 14

Summary and Committee’s conclusions

18.1The Commission has proposed macro-financial assistance to Moldova. We have in the past cleared such proposals from scrutiny without a substantive report. Nevertheless, earlier this month we asked the Government what it envisaged the UK’s liability would be if Moldova were to default on a loan post-Brexit.

18.2Reminding us that the EU budget for 2019 and 2020 will be provisioned against the possibility of a default and that there has never been a default on a macro-financial assistance loan, the Government now says merely that the terms of Brexit will be a matter for the negotiations.

18.3While noting the Government’s unrevealing response, we clear the document from scrutiny.

Full details of the documents

Proposed Decision providing macro-financial assistance to the Republic of Moldova: (38459), 5383/17 + ADD 1, COM(17) 14.

Background

18.4The Commission has presented this proposed Decision as a positive response to a request from the Moldovan Government for financial assistance. Macro-financial assistance is granted to third countries close to the EU to help them address acute balance-of-payments difficulties. Such assistance complements financing provided by the International Monetary Fund in the context of an adjustment and reform programme.

18.5The Commission proposes providing up to €100 million (£86 million) of macro-financial assistance to Moldova in the form of loans up to €60 million (£51 million), with a maximum average maturity of 15 years, and grants up to €40 million (£34.2 million). On adoption of the proposed Decision, strict conditions would be attached to the disbursements. Each tranche would be conditional on good progress with both the International Monetary Fund programme and specific policy conditionality agreed with the EU.

18.6While telling us, in January 2017, that it welcomes the proposed macro-financial assistance for Moldova, the Government drew our attention to a Special Report of the European Court of Auditors criticising Commission management of earlier assistance to Moldova.103 However, it added that the Commission had since taken risk mitigating measures to address many points highlighted by the Court. The Government also stressed to us its commitment to providing macro-financial assistance primarily in the form of loans, rather than grants, which it believes offers greater value for money.

18.7In the past we have cleared standard operations of the macro-financial assistance programme from scrutiny without a substantive report. However, on this occasion we kept the document under scrutiny and asked to hear from the Government what it envisaged the UK’s liability would be if Moldova were to default on a loan post-Brexit. Meanwhile the document remained under scrutiny.

The Minister’s letter of 21 February 2017

18.8The Chief Secretary to the Treasury (Mr David Gauke) now responds by first reminding us that 9% of the loan amount will be provisioned in the EU budget in 2019 and 2020, in order to enable the Guarantee Fund for External Actions to meet the costs associated with any default and that no country has ever defaulted on its macro-financial assistance loans. Turning to our specific question on possible UK liabilities relating to the Moldovan loan post Brexit, the Minister says merely that the terms of the UK’s departure from the EU will be a matter for the negotiations.

Previous Committee Reports

Thirty-first Report HC 71-xxix (2016–17), chapter 11 (8 February 2017).


103 (38058): see Thirteenth Report HC 71–xi (2016–17), chapter 18 (12 October 2016).




3 March 2017