REPORT on the proposal for a Council decision providing macro-financial assistance to Armenia

12.11.2009 - (COM(2009)0531 – C7-0268/2009 – 2009/0150(CNS)) - *

Committee on International Trade
Rapporteur: Vital Moreira
(Simplified procedure – Rule 46(1) of the Rules of Procedure)

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a Council decision providing macro-financial assistance to Armenia (COM(2009)0531 – C7-0268/2009 – 2009/0150(CNS))

(Consultation procedure)

The European Parliament,

–   having regard to the Commission proposal to the Council (COM(2009)0531),

–   having regard to Article 308 of the EC Treaty, pursuant to which the Council consulted Parliament (C7-0268/2009),

–   having regard to Rules 55 and 46(1) of its Rules of Procedure,

–   having regard to the report of the Committee on International Trade (A7-0059/2009),

1.  Approves the Commission proposal;

2.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

3.  Asks the Council to consult Parliament again if it intends to amend the Commission proposal substantially;

4.  Instructs its President to forward its position to the Council and the Commission.

EXPLANATORY STATEMENT

1. Objectives of the proposal

The Commission proposes to provide macro-financial assistance (MFA) to Armenia amounting up to EUR 100 million in the form of a loan (EUR 65 million) and a grant (EUR 35 million). Regarding the loan component the Commission shall be empowered to borrow up to EUR 65 million on the capital markets or from financial institutions. The assistance is planned to be made available in two instalments (tentatively over the year 2010). It aims at supporting Armenia's economic adjustment and financing its external balance-of-payments and budgetary needs as identified by the International Monetary Fund (IMF).

2. General context

The proposed assistance will support the authorities' economic programme with a view to ensure sustainable fiscal and external accounts and contributes also to helping Armenia to address the consequences of the global economic and financial crisis.

The global economic downturn and particularly the rapid deterioration of the Russian economy had a deep impact on the economic activity in Armenia which started to contract since the last quarter of 2008. Given the continuous deterioration in the economy in 2009, in March Armenian Dram was de facto devaluated of around 22% against the EUR and the USD. At the same time the IMF approved a Stand-By Arrangement (SBA) to help Armenia to deal with the worsening economic environment and to ensure the smooth transition to the floating exchange rate regime. Although, the negative effects of the devaluation were largely absorbed, the economic situation in the first six months of 2009 worsened dramatically. As a result, in June 2009 the IMF Board approved the augmentation of access of Armenia to IMF resources under the SBA. However, latest indications as of mid July suggest that that economic downturn is even more severe than foreseen in the revised June assumptions.

The proposed MFA is intended to complement support from the IMF foreseen under the SBA agreed by the IMF board in March 2009, as well as World Bank support due to take the form of budget support policy loans. Additional support will be provided from Asian Development Bank, bilateral donors (Russia and United Kingdom), and EU under the European Neighbourhood and Partnership Instrument (ENPI). The MFA under preparation would be an appropriate contribution of the EU to close the financing gap.

The Commission considers that there is a risk that the Government of Armenia will not comply with the IMF programme conditions, as the fiscal target may turn out more difficult to reach than assumed, in particular as the risks to the growth assumptions are clearly on the downside. While seriously taking into account these risks, the Commission services still consider that there are sufficiently strong grounds to proceed with MFA to Armenia. The large financing needs faced by Armenia in particular in 2009 and to a lesser extend in 2010 plead in favour of urgent action.

MFA is forecasted to have an immediate impact on Armenia's balance of payments and would in this way contribute to the alleviation of financial constraints on the implementation of the authorities' economic programme and to financing the budget deficit. MFA is further expected to support the general objectives of the stabilisation programme agreed with the IMF, which in particular aims at achieving external adjustment, bolstering foreign reserves, maintaining confidence in the domestic currency and banking system and protecting the poor.

3. Timing constraints

This MFA proposal (as all past MFA proposals) has been referred to the Parliament under Article 308 of the EC Treaty, i.e. under consultation procedure. Although there is no deadline foreseen for Parliament's opinion under that Article, the Parliament has always been very quick in responding to the needs to provide MFA.

The current proposal was adopted by the Commission on 14 October 2009 (and transferred to Parliament on the same day). However, as the first instalment is planned to be disbursed already in January 2010, the Council should therefore adopt its Decision before the end of 2009, and Parliament its opinion even earlier (informally the Commission has indicated that it should be adopted at plenary session of 23-26 November 2009). Thus, the Parliament has been effectively given less than a month and a half for adopting its position (whereas the Council has at the time of finalising this draft report by your rapporteur not even officially consulted Parliament yet) and that is simply not acceptable in a legislative procedure. For example, even for opposing Commission's draft implementing measures under the regulatory procedure with scrutiny the deadline for Parliament is not less than three months[1]. It shows complete lack of respect for Parliament's role as a legislator, as there can be no justifications for exceptions to institutional powers. Even if preparation of such proposals does not depend on the Commission alone, the Commission knew fully well that the first tranche should be disbursed already in early 2010 and thus that the respective Decision would have to be adopted in sufficient time before the year's end.

At the same time, if the Decision is not adopted by the beginning of 2010, it would mean that EC funds would not be transferred to Armenia in January 2010. Considering the factual circumstances and Armenia's strategic importance to the EU in the context of the European Neighbourhood Policy and the newly established Eastern Partnership, your rapporteur could therefore do his utmost to accommodate Commission's request regarding timing. Stressing, however, that this does not mean accepting the timing imposed by Commission's late proposal, but only tolerating it in these exceptional circumstances.

4. Reasons for not proposing any amendments

Your rapporteur has not proposed any amendments to the draft proposal for the time being. Not because the proposal for the Decision would be perfect, but because your rapporteur finds himself in a very difficult position.

Firstly, from procedural point of view, adoption of a report with amendments might turn out to be impossible under the current timetable and could thus mean no transfer of funds to Armenia in January 2010.

Secondly, this "procedural reality" does not mean that your rapporteur would fully agree with the proposal. For example, your rapporteur cannot agree with the statement that "the Treaty does not provide, for the adoption of this Decision, powers other than those of Article 308" (recital 11). The reason for using Article 308 and not Article 181a is not in the Treaty, but in Declaration No. 10 attached to the Treaty of Nice, setting out that "balance‑of‑payments aid to third countries falls outside the scope of Article 181a". The Parliament has already back in 2003[2] referred to Article 308 as inadequate and expressed its regrets over the decision to include such a Declaration in the Treaty of Nice.

It must be also said that the proposal is very general and most of the specific details are to be agreed in the Memorandum of Understanding. At the same time your rapporteur is of the opinion that several amendments might be necessary in order to improve the clarity, transparency and accountability of the proposal (in terms of conditionality, use of external auditors for independent assessment, specific requests to Armenian government etc).

And thirdly, it must be repeated once more that your rapporteur simply had very limited time to reflect on the actual proposal.

Therefore, while entirely in agreement with the need to provide Armenia with exceptional MFA, your rapporteur had a difficult choice to make. Either to propose adopting the Parliament's opinion as soon as possible, in the interest of the needs of the recipient country. Or to defend Parliament's institutional prerogatives and refuse the unacceptable timetable for adopting a legislative proposal, thereby effectively depriving Armenia of the assistance it needs and has been looking for.

Considering the above, your rapporteur suggests accepting the proposal unamended. However, your rapporteur reserves the right to propose his amendments following the consideration of the proposal in the Committee, and exchange of views with the Council and Commission.

5. Parliament's role in providing MFA

The rapporteur would also like to stress, in line with previous Parliament resolutions, that such a substantial instrument as MFA cannot be simply regarded as "exceptional". It is therefore unjustifiable that such an instrument lacks a regular legal basis and continues to be based on ad hoc Council decisions for each operation. A co-decided framework regulation on MFA is necessary in order to enhance transparency, accountability, monitoring and reporting systems. In this respect it must be stressed that after the entry into force of the Treaty of Lisbon, the appropriate legal basis for a Decision granting MFA will be Article 209(1) and 212(2) of the Treaty on the Functioning of the European Union (TFEU), depending on whether the beneficiary country is classified as developing country or not by the Union institutions. In both cases, the ordinary legislative procedure applies. Article 213 TFEU should not apply to Decisions granting MFA.

Moreover, the role of the Parliament should be enhanced. In particular, the Commission should improve its reporting to Parliament as concerns the actual implementation of this aid instrument and provide Parliament with an ex post evaluation report (in addition to the annual reporting foreseen in Article 6 of the proposal).

6. Commitments by the Council and the Commission

Even if the proposal for MFA would be accepted by the Committee without amendments, your rapporteur requests the Council and Commission to address the above concerns in statements to Parliament.

• [1]  Article 5a(3)(c) of Council Decision 1999/468/EC.
• [2]  P5_TA(2003)0233.

PROCEDURE

Title	Macrofinancial assistance for Armenia
References	COM(2009)0531 – C7-0268/2009 – 2009/0150(CNS)
Date of consulting Parliament	30.10.2009
Committee responsible        Date announced in plenary	INTA
Committee(s) asked for opinion(s)        Date announced in plenary	AFET	BUDG
Not delivering opinions        Date of decision	AFET 21.10.2009	BUDG 21.10.2009
Rapporteur(s)        Date appointed	Vital Moreira 29.9.2009
Simplified procedure - date of decision	10.11.2009
Discussed in committee	10.11.2009
Date adopted	10.11.2009