Explanatory Memorandum to COM(2011)655 - Amendment of Council Regulation (EC) No 1083/2006 as regards certain provisions relating to risk sharing instruments for Member States experiencing or threatened with serious difficulties with respect to their financial stability - Main contents
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| dossier | COM(2011)655 - Amendment of Council Regulation (EC) No 1083/2006 as regards certain provisions relating to risk sharing instruments for ... |
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| source | COM(2011)655  |
| date | 12-10-2011 |
- Reasons and objectives for the proposal
The sustained financial and economic crisis is increasing the pressure on national financial resources as Member States are reducing their budgets. In this context ensuring a smooth implementation of cohesion policy programmes is of particular importance as a tool for injecting funds into the economy.
Nonetheless, the implementation of the programmes requires significant amounts of funding from public and private stakeholders, who, due to the the liquidity problems faced by financial institutions are not able to provide such funding. This is particularly the case for those Member States which have been most affected by the crisis and have received financial assistance under a programme from the European Financial Stabilisation Mechanism (EFSM) for the EURO countries or from the Balance of Payments (BoP) mechanism for non EURO countries. To date, six countries - including Greece which has received financial assistance outside the EFSM - have requested financial assistance under these mechanisms and have agreed with the Commission a macro-economic adjustment programme. These countries are Hungary, Romania, Latvia, Portugal, Greece and Ireland, hereafter called 'programme countries'. Hungary which has entrered the BoP mechanism in 2008 has already exited in 2010.
In order to ensure that these Member States (or any other Member State which maybe concerned by such assistance programmes in the future) continue the implementation of the Structural Funds and Cohesion Fund programmes on the ground and disburse funds to projects, the current proposal contains provisions that would allow the creation of a risk sharing instrument. In order to implement this instrument the transfer of part of the financial allocations available to these Member States back to the Commission would be allowed. The objective would be to provide capital contributions to cover expected and unexpected losses of loans and guarantees to be extended under a risk-sharing partnership with the European Investment Bank and/or other financial institutions with a public policy mission who are willing to continue to lend to project sponsors and banks with a view to provide private match funding for projects implemented with Structural Funds and Cohesion Fund contributions. The overall allocation under cohesion policy for the period 2007-2013 would therefore not be modified. This will provide additional liquidity to implement infrastructure and productive investments in the Member States at a critical juncture and will facilitate the continuation of the implementation of the programmes on the ground. When the financial allocations made available for the risk sharing instrument has not been used to cover losses, it will stay at the disposal of the Member State to continue the risk sharing facility or as part of the enveloppe available for operational programmes. Finally, the financial allocations to the risk-sharing instrument would be strictly capped and not create contingent liabiities for the Union or the Member State concerned.
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- General context
The deepening of the financial crisis in some of the Member States is undoubtedly affecting substantially the real economy due to the amount of debt and the difficulties encountered by the Governments to borrow money from the market.
The Commission has put forward proposals in response to the current financial crisis and to its socio-economic consequences. In the framework of its recovery package, the Commission proposed in December 2008 a number of regulatory changes aiming to simplify the implementation rules for cohesion policy and to provide additional pre-financing through advance payments to ERDF and ESF programmes. The additional advance payments paid out to the Member States in 2009 have provided an immediate cash injection of EUR 6.25 billion, within the financial envelope agreed for each Member State for the 2007-2013 period. This amendment brought the total of advance payments to EUR 29.38 billion. A proposal presented by the Commission in July 2009, provided for additional measures of simplification of the implementation of the Structural Funds and the Cohesion Fund. The adoption of these measures in June 2010 has contributed significantly towards the simplification of the implementation of the programmes and boosted the absorption of the funds, while reducing administrative burdens on beneficiaries. The Commission has also adopted in August 2011 a proposal for an amendment to Regulation (EC) No 1083/2006 with a view to increase the amount of community contribution reimbursed through interim payments and payments of the final balance by up to 10 percentage points above the current limits (COM(2011)482 final of 01/08/2011). When adopted by the Council and Parliament this proposal will allow additional liquidity to the Member States concerned to co-finance the part of the projects and programmes which is not eligible for contributions by the Structural Funds and the Cohesion Fund. In addition, infrastructure projects relevant in the context of the economic recovery of the Member States concerned can also be be supported if considered appropriate.
- Provisions in force in the policy sphere of the proposal
Article 36 of Council Regulation (EC) No 1083/2006 (hereinafter the General Regulation) provides that the EIB may, at the request of Member States, participate in activities relating to the preparation of projects, in particular major projects, the arrangement of finance, and public-private partnerships. It provides further that the Member State, in agreement with the EIB, may concentrate the loans granted on one or more priorities of an operational programme. The current proposal will facilitate the approval of such loans by the EIB, or by other international financial institutions as may be the case, at a moment when due to the downgrading of the public and private debt of the State and financial institutions of the Member States such loans would not be available.
- Consistency with other policies and objectives of the Union
The proposal is consistent with other proposals and initiatives adopted by the European Commission as a response to the financial crisis.
- Consultation of interested parties
There was no consultation of external stakeholders.
- Procurement and use of expertise
Use of external expertise has not been necessary.
- Impact analysis
The proposal would allow the Commission to implement under indirect centralised management risk sharing instrument to cover risks related to loans and guarantees to be given to project promotors and other public or private partners. The objective is to facilitate the rapid implementation of cohesion policy programmes through investments in infrastructure and other productive investments which will have an immediate and real impact on the economy and contribute to the creation of employment.
This will not impose additional financial requirements to the overall budget since the total financial allocation for the period from the Funds to the Member States in question will not change.
Contents
- Summary of the proposed measures
It is proposed to modify Article 14 i of Regulation (EC) No 1083/2006 with a view to allow for risk sharing instrument to be managed under indirect centralised manangement. It is proposed furthermore to amend Article 36 i of Regulation (EC) No 1083/2006 with a view to allow Member States experiencing or threatened with serious difficulties with respect to their financial stability, to contribute part of their allocations under the 'Convergence' and 'Regional competitiveness and employment' objectives of cohesion policy to the provisioning and capital allocations to loans or guarantees issued to project promotors and other public or private partners directly or indirectly by the EIB or other international financial institutions.
The terms and conditions applicable to such risk sharing instrument should be decided by the Commission, upon request from the Member State concerned. The Commission upon request of the Member States concerned should adopt ad hoc decisions to set the terms and conditions applicable to such instrument, on the basis of allocations to be transferred from the Structural Funds and Cohesion Fund allocations from the Member State concerned.
- Legal basis
Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999 defines the common rules applicable to the three Funds. Based on the principle of shared management between the Commission and the Member States, this Regulation includes provisions for the programming process as well as arrangements for programme (including financial) management, monitoring, financial control and evaluation of projects.
- Subsidiarity principle
The proposal complies within the subsidiarity principle to the extent that it seeks to facilitate support through Structural Funds and Cohesion Fund for certain Member States which experience serious difficulties, notably with problems in their economic growth and financial stability and with a deterioration in their deficit and debt position, also due to the international economic and financial environment. In this context, it is necessary to establish at the European Union level a mechanism which allows the European Commission to set up risk sharing instruments which facilitate the provision of loans or guarantees aiming at co-financing private contributions to projects implemented with public support under Structural Funds and the Cohesion Fund.
- Proportionality principle
The proposal conforms to the proportionality principle:
The current proposal is indeed proportionate since it provides increased support from the Structural Funds and the Cohesion Fund to the Member States in difficulties or threatened with severe difficulties caused by exceptional occurrences going beyond their control and falling under the conditions of Council Regulation (EU) No 407/2010 (establishing the European financial stabilization mechanism), or in difficulties or seriously threatened with difficulties as regards their balance of payments and falling under the conditions of Council Regulation (EC) No 332/2002, as well as to Greece, which received financial assistance outside the EFSM under the Intercreditor Agreement and the Euro Area Loan Facility Act.
- Choice of instruments
Proposed instrument: regulation.
Other instruments would not be appropriate for the following reasons:
The Commission has explored the scope for manoeuvre provided by the legal framework and considers necessary, in the light of the experience up to now, to propose modifications to the General Regulation. The objective of this revision is to further facilitate the co-financing of projects thereby accelerating both their implementation and the impact of such investments on the real economy.
THERE IS NO IMPACT ON COMMITMENT APPROPRIATIONS SINCE NO MODIFICATION IS PROPOSED TO THE MAXIMUM AMOUNTS OF STRUCTURAL FUNDS AND COHESION FUND FINANCING PROVIDED FOR IN THE OPERATIONAL PROGRAMMES FOR THE PROGRAMMING PERIOD 2007-2013.
This proposal could result in an acceleration of payments which will be compensated by the end of the programming period. Therefore, the total payment appropriations for the whole programming period remains unchanged.
In the light of Member State's request to benefit from the action and taking into account the evolution in regard to the submission of interim payments, the Commission will in 2012 review the need for additional payment credits and if necessary propose the necessary actions to the Budgetary Authority.
The proposal shows the willingness on the part of the Commission to assist the efforts of the Member States to deal with the financial crisis. The amendment will provide the Member States concerned with the funds necessary to support projects and the recovery of the economy.