Legal provisions of COM(2018)387 - Establishment of a European Investment Stabilisation Function

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dossier COM(2018)387 - Establishment of a European Investment Stabilisation Function.
document COM(2018)387 EN
date May 31, 2018

Contents

PART I - INTRODUCTORY PROVISIONS



Article

Subject matter and scope

1. This Regulation establishes a European Investment Stabilisation Function (EISF).

2. The EISF shall provide financial assistance in the form of loans and interest rate subsidies for public investment to a Member State which is experiencing a large asymmetric shock.

3. EISF support shall be available for Member States whose currency is the euro and for other Member States that participate in the exchange rate mechanism referred to in Article 140(1) of the Treaty on the Functioning of the European Union.


Article

Definitions

For the purposes of this Regulation, the following definitions apply:

() agreement means the intergovernmental agreement concluded between all Member States whose currency is the euro and other Member States that participate in the exchange rate mechanism (ERM II) determining the calculation and the transfer of their financial contributions to the Stabilisation Support Fund;

() public investment means: general government gross fixed capital formation as defined in Annex A to Regulation (EU) No 549/2013 of the European Parliament and of the Council 15 ;

() eligible public investment means: (a) the public investment in support of policy objectives as defined in Regulation (EU) No [XX] of [XX] [insert reference to new Common Provisions Regulation] 16 and (b) any expenditure in areas of education and training as defined in Annex A to Regulation (EU) No 549/2013 and not covered in point (a);

() EISF support means Union financial assistance within the meaning of Article of the Financial Regulation in the form of loans and interest rate subsidies under the EISF in support of eligible public investment;

(5) public investment management systems and practices means the Member States' internal processes of planning, allocating and implementing public investment;

() Union strategy for smart, sustainable and inclusive growth means the targets and shared objectives guiding the action of Member States and the Union set out in the Conclusions adopted by the European Council of 17 June 2010 as Annex I (New European Strategy for Jobs and Growth, EU Headline Targets), Council Recommendation (EU) 2015/1184 17 on broad guidelines for the economic policies of the Member States and of the European Union of 14 July 2015 and in Council Decision (EU) 2016/1838 18 , and any revision of such targets and shared objectives.

PART II - CRITERIA



Article

Eligibility criteria

. A Member State shall be eligible for EISF support where it is not subject to:

() a decision of the Council establishing that no effective action has been taken to correct its excessive deficit under Article 126(8) or Article 126(11) of the Treaty on the Functioning of the European Union in the two years prior to requesting support from the EISF;

() a decision of the Council in accordance with Article 6(2) or Article 10 of Council Regulation (EU) No 1466/97 19 establishing that no effective action has been taken to address the observed significant deviation in the two years prior to requesting support from the EISF;

() two successive recommendations of the Council in the same imbalance procedure in accordance with Article 8(3) of Regulation (EU) No 1176/2011 of the European Parliament and of the Council 20 on grounds that the Member State concerned has submitted an insufficient corrective action plan in the two years prior to requesting support from the EISF;

() two successive decisions of the Council in the same imbalance procedure in accordance with Article 10(4) of Regulation (EU) No 1176/2011 of the European Parliament and of the Council having established non-compliance by the Member State concerned on grounds that it has not taken the recommended corrective action in the two years prior to requesting support from the EISF;

() a decision of the Council approving a macroeconomic adjustment programme within the meaning of Article 7(2) of Regulation (EU) No 472/2013;

(f) a decision of the Council implementing a medium-term financial assistance facility within the meaning of point (a) of Article 3(2) of Council Regulation (EC) No 332/2002 21 .

2. When the agreement has entered into force, a Member State shall only be eligible for receiving an interest rate subsidy if it complies with its obligations under the agreement.


Article

Activation criteria

. A Member State shall be considered to experience a large asymmetric shock if the following activation criteria are simultaneously fulfilled:

) the quarterly national unemployment rate exceeded the average unemployment rate in the Member State concerned over a period of 60 quarters preceding the quarter during which the request is made;

) the quarterly national unemployment rate increased above one percentage point in comparison to the unemployment rate observed in same quarter of the previous year.

. The unemployment rate for the purposes of paragraph 1 shall be determined by reference to Regulation (EC) No 577/98 22

In particular, it refers to the unemployment rate for the total population, all age categories, in percentage of active population.

. The quarterly national unemployment rate used for the purposes of paragraph 1 of this Article and point (c) of Article 8(1) shall be adjusted for seasonality.


Article

Supported investment

. A Member State benefitting from EISF support shall, in any given year in which it receives an EISF loan do the following:

() invest in eligible public investment an amount corresponding to at least the amount of the EISF loan,

() maintain the same level of its public investment compared to the average level of its public investment in the five previous years.

The Commission may nevertheless conclude when adopting the decision in accordance with Article (2) that such level of public investment is unsustainable, in which case it shall determine the level of public investment to be maintained.

. The year following the disbursement of the EISF loan, the Commission shall examine whether the Member State concerned has respected the criteria referred to in paragraph 1. In particular, the Commission shall also verify the extent to which the Member State concerned has maintained eligible public investment in programmes supported by the Union under the European Regional Development Fund, the Cohesion fund, the European Social Fund, the European Maritime and Fisheries Fund and the European Agricultural Fund for Rural Development.

If the Commission, after having heard the Member State concerned, concludes that the conditions referred to in paragraph 1 have not been complied with, it shall adopt a decision:

() requesting the early repayment of whole or part of the EISF loan, as appropriate; and

() deciding that upon repayment of EISF loan the Member State concerned shall not be entitled to receive the interest rate subsidy.

The Commission shall adopt its decision without undue delay and shall make it public.

PART III - PROCEDURE AND FORM OF EISF SUPPORT



Article

Procedure for granting EISF support

. Where a Member State fulfils the eligibility criteria referred to in Article and is experiencing the large asymmetric shock referred to in Article 4, it may request the Commission once a year to receive EISF support. The Member State shall indicate its needs for support.

The Commission shall assess and answer the requests in the order it receives them. It shall act without undue delay.

. The Commission shall decide the terms of the EISF support. The decision shall contain the amount, the average maturity, the pricing formula, and the availability period of EISF loan and the amount of the interest rate subsidy, and the other detailed rules needed for the implementation of the support. When deciding on the terms of the EISF support, the Commission shall take into account the amount deemed to be sustainable within the meaning of Article [210(3)] of Regulation (EU, Euratom) No XX (the ‘Financial Regulation’) under the own resources ceiling for payment appropriations.

PART IV - AMOUNT OF EISF SUPPORT



Article

Maximum amount of loans

The outstanding amount of loans granted to Member States under this Regulation shall be limited to EUR 30 billion in principal.

Article

Amount of EISF loan

. Without prejudice to paragraph 3, the amount of an EISF loan (shall be determined in accordance with the following formula:


For the purpose of this formula, the following definitions apply:

() is 0.66;

() means the maximum level of eligible public investment that the EISF may support in the Member State concerned referred to in paragraph 2;

(c)' means the increase in the quarterly national unemployment rate referred to in point (b) of Article (1) expressed in percentage points;

(d) threshold level means the threshold defined in point (b) of Article (1) expressed in percentage points.

The Commission may nevertheless increase the amount of an EISF loan up to the amount of in case of particular severity of the large asymmetric shock experienced by the Member State concerned.

2. The maximum level of eligible public investment that the EISF may support in a Member State ( shall be determined in accordance with the following formula:


For the purposes of this formula the following definitions apply:

() 'α' is 11.5;

(b) means the ratio of eligible public investment to GDP in the Union, in current prices and on average over a period of five full years before the request for EISF support in accordance with Article (1);

(c)' means the GDP of the Member State concerned in current prices and on average over a period of five full years before the request for support in accordance with Article (1);

. An EISF loan shall not exceed 30 percent of the available amount referred to in Article after deduction of the total amount of outstanding loans awarded under EISF.

Article

Amount of EISF interest rate subsidies

. An interest rate subsidy (IRS) shall contribute to the interest costs of the EISF loan incurred by the Member State. The amount of an EISF interest rate subsidy shall be determined in accordance with the following formula:


For the purpose of this provision, interest rate cost means the amount of interest based on the pricing formula determined in the decision of the Commission referred to in Article (2) taking into account any refinancing in accordance with Article 12(4);

. The Commission shall be empowered to adopt delegated acts in accordance with the procedure laid down in Article 21, to amend this Regulation by determining the percentage referred to in paragraph 1 if this appears necessary in view of the implementation of the agreement or the eventual deferral of payments under Article 18(2).


Article

Financial support by the ESM or its legal successor

. In case the ESM or its legal successor provides financial assistance to Member States in support of eligible public investment under modalities and conditions consistent with this Regulation, the Commission shall be empowered to adopt delegated acts in accordance with the procedure laid down in Article 21 in order to:

() supplement this Regulation by specifying the exchange of information between the Commission and the ESM or its legal successor as regards the elements referred to in Article 6(2);

(b) supplement this Regulation by determining rules of complementarity between the financial assistance from the ESM or its legal successor and amounts of EISF support calculated in accordance with Articles 8 and 9;

(c) amend or supplement Articles 9 and 18 to allow for granting an interest rate subsidy by the Stabilisation Support Fund to Member States for interest costs incurred on financial assistance granted by the ESM or its legal successor to Member States in support of eligible public investment.

PART V - PROCEDURES FOR DISBURSMENT AND IMPLEMENTATION


Title I - Loans


Article

Disbursement of the loan

. The EISF loan shall, in principle, be disbursed in one instalment.


Article

Borrowing and lending operations

. The borrowing and lending operations shall be carried out in euro.

. After the Commission has adopted a decision in accordance with Article (2), the Commission is authorised to borrow on the capital markets or from financial institutions at the most appropriate time in between planned disbursements so as to optimise the cost of funding and preserve its reputation as issuer in the markets. Funds raised but not yet disbursed shall be kept at all times on a dedicated cash or securities account which are handled in accordance with the rules applying to off-budget operations and cannot be used for any other goal than to provide financial support to Member States under the present mechanism.

. Where a Member State receives an EISF loan carrying an early repayment clause and decides to exercise this option, the Commission shall take the necessary steps.

. At the request of the Member State or at the initiative of the Commission and where circumstances permit an improvement in the interest rate on the EISF loan, the Commission may refinance all or part of its initial borrowing or restructure the corresponding financial conditions.


Article

Costs

Without prejudice to Article 9, the costs incurred by the Union in concluding and carrying out each operation shall be borne by the Member State receiving the EISF loan.


Article

Administration of loans

. The Commission shall establish the necessary arrangements for the administration of the loans with the ECB.

. The Member State concerned shall open a special account with its national central bank for the management of EISF support received. It shall also transfer the principal and interest due under the EISF loan to an account with the ECB fourteen TARGET2 business days prior to the corresponding due date.

Title II - Interest rate subsidy


Article

Disbursement of the interest rate subsidy

Without prejudice to Article 5(2) and Article 16, the interest rate subsidy shall be paid to the Member State concerned at the moment when the Member State repays the EISF loan or interest due.

Title III - Control


Article

Control and audits

1. Without prejudice to Article 27 of the Statute of the System of European Central Banks and of the European Central Bank, the European Court of Auditors shall have the right to carry out in the Member State concerned any financial controls or audits that it considers necessary in relation to the management of the EISF support.

2. The Commission, including the European Anti-Fraud Office, shall in particular have the right to send its officials or duly authorised representatives to carry out in the Member State concerned any technical or financial controls or audits that it considers necessary in relation to EISF support.

3. Audits on the use of the Union contribution carried out by persons or entities, including by others than those mandated by the Union institutions or bodies, shall form the basis of the overall assurance pursuant to Article of the Financial Regulation.

PART VI - THE STABILISATION SUPPORT FUND



Article

Constitution of the Stabilisation Support Fund

. The Stabilisation Support Fund is hereby established.

. The Stabilisation Support Fund shall be endowed with the following:

(a) contributions from Member States in accordance with the agreement;

(b) returns on invested resources of the Stabilisation Support Fund;

(c) repayments of interest rate subsidies by Member States in accordance with point (b) of Article 5(2).

. Revenues of the Stabilisation Support Fund as provided for in point (a) of paragraph 2 shall constitute external assigned revenue, and revenues as provided for in point (c) of paragraph 2 shall constitute internal assigned revenue in accordance with Article [21(4)] of the Financial Regulation.

. For the purpose of calculating the contributions referred to in point (a) of paragraph 2, the ECB shall, by 30 April at the latest in any given year, communicate to the Commission the amount of monetary income allocated to the national central banks of the Eurosystem pursuant to Article 32 of Protocol No 4 on the Statute of the European System of Central Banks and the European Central Bank.


Article

Use of the Stabilisation Support Fund

. The resources of the Stabilisation Support Fund may only be used for the purpose of payment of interest rate subsidies to Member States referred to in Article 9.

. Payment of an interest rate subsidy shall not exceed 30 percent of the available means in the Stabilisation Support Fund at the moment when such payment to the Member State concerned is due. Any further payment shall be deferred. Any new contributions to the Stabilisation Support Fund referred to in Article 17(2) shall be firstly used for honouring deferred payments to the Member States concerned. In case of more than one deferred payment, the order in which such payments shall be honoured shall be determined by the length of time of the deferral starting with the longest time.


Article

Administration of the Stabilisation Support Fund

. The Commission shall directly administer the Stabilisation Support Fund in accordance with this Regulation and delegated acts referred to under paragraph 3.

. The Commission shall have a prudent and safe investment strategy that is provided for in the delegated acts referred to in paragraph 3 in accordance with the principle of sound financial management following appropriate prudential rules, and shall invest the amounts held in the Stabilisation Support Fund in cash and cash equivalent money market instruments, debt and credit related securities, such as term deposits, bonds, notes, obligations or asset backed securities, including with floating or zero coupons as well as index-linked securities. Investments shall be sectorally, geographically and proportionally diversified sufficiently. The return on those investments shall benefit the Stabilisation Support Fund.

3. The Commission shall be empowered to adopt delegated acts supplementing this Regulation by setting the detailed rules for the administration of the Stabilisation Support Fund and general principles and criteria for its investment strategy, in accordance with the procedure laid down in Article 21.

PART VII - QUALITY OF PUBLIC INVESTMENT MANAGEMENT SYSTEMS AND PRACTICES



Article

Quality of public investment management systems and practices

. In order to increase the impact of public investment and potential EISF support, Member States shall take the necessary actions to achieve and maintain public investment management systems and practices of high quality.

. By [DATE two years after the entry into force of this Regulation] at the latest, and every five years after, the Commission shall examine the quality of the public investment management systems and practices in Member States. The Commission shall prepare a report containing a qualitative assessment and a score based on a set of indicators and, if necessary, recommendations to improve the quality of the public investment management systems and practices. The report shall be made public.

. The methodology for assessing the quality of public investment management systems and practices of Member States is set out in the Annex. The Commission shall assess on a regular basis the appropriateness of the methodology and criteria used, and it shall adjust or modify them where necessary. The Commission shall make changes in the underlying methodology and criteria public.

. The Commission shall be empowered to adopt delegated acts amending or supplementing this Regulation by updating the methodology and criteria referred to in paragraph 3, in accordance with the procedure laid down in Article 21.

PART VIII - FINAL PROVISIONS



Article

Exercise of delegation

. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

. The delegation of power referred to in Article 10, Article 19(3), and Article 20(5) shall be conferred on the Commission for an indeterminate period of time from [DATE/entry into force of this Regulation].

. The delegation of power referred to in Article 10, Article 19(3) and Article 20(5), may be revoked at any time by the European Parliament or the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016.

. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and the Council.

. A delegated act adopted pursuant to Article 10, Article 19(3) and Article 20(5) shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or the Council.


Article

Reporting and review

. Indicators to report on progress of the Regulation towards the achievement of the objectives set out in recital 36 and Article 1 are set in Annex 2.

2. To ensure effective assessment of progress of the Programme towards the achievement of its objectives, the Commission is empowered to adopt delegated acts in accordance with Article 21 to amend Annex II to review or complement the indicators where considered necessary and to supplement this Regulation with provisions on the establishment of a monitoring and evaluation framework.

3. The performance reporting system shall ensure that data for monitoring implementation and results are collected efficiently, effectively, and in a timely manner. To that end, proportionate reporting requirements shall be imposed on recipients of EISF support.

4. Evaluations shall be carried out in a timely manner to feed into the decision-making process.

5. An interim evaluation of the EISF shall be performed once there is sufficient information available about the implementation of the EISF. A final evaluation of the EISF shall be carried out by the Commission four years after the entry into force of this Regulation,

This evaluation shall assess, among other things,

() the effectiveness of this Regulation;

() the contribution by EISF to the conduct of the economic policies of Member States in such a way as to strengthen cohesion in the Union;

() the contribution of this Regulation to the achievement of the Union's strategy for growth and jobs;

(d) the appropriateness of developing a voluntary insurance mechanism serving the purpose of macroeconomic stabilisation.

Where appropriate, the evaluation shall be accompanied by a proposal for amendments to this Regulation.

6. The Commission shall communicate the conclusions of the evaluation accompanied by its observations, to the European Parliament, the Council, the Eurogroup, the European Economic and Social Committee and the Committee of the Regions.

Article

Entry into force

This Regulation shall enter into force on the [twentieth day following] that of its publication in the Official Journal of the European Union.

Paragraph (b) of Article 2(2) shall enter into force on [DATE].

This Regulation shall be binding in its entirety and directly applicable in all Member States.