PURPOSE: to provide financial assistance to Kosovo

LEGISLATIVE ACT: Council Decision providing exceptional Community financial assistance to Kosovo.

BACKGROUND: in 1999 a United National Security Council Resolution awarded Kosovo, within the former Federal Republic of Yugoslavia, a substantial amount of autonomy and self-government. This has been backed up by the presence of KFOR and an interim civil administration: the United National Interim Mission in Kosovo (UNMIK). UNMIK consist of four components (pillars) with the European Union funding the fourth pillar. This fourth pillar is responsible for economic reconstruction and development. Since its establishment UNMIK has transferred significant areas of its responsibility to the “Provisional Institutions of Self Government” (PISG) in Kosovo, including responsibility for the budget. The Special Representative of the UN Secretary General, nevertheless, retains ultimate power of approval over the budget.

The purpose of this Council Decision is to offer Kosovo exceptional financial assistance in the form of a grant of up to EUR 50 million as part of the EU’s stabilisation and association process.

CONTENT: the Community will make EUR 50 million available to Kosovo in the form of a grant. The main aim of this funding will be:

- to alleviate the financial situation in Kosovo;

- to support the development of a sound economic and fiscal framework;

- to facilitate the continuation and strengthening of essential administrative functions; and

- to address public investment needs.

The financial assistance will be managed by the Commission in consultation with the Economic and Financial Committee. It will be made available for two years beginning on the day following the entry into force of the Memorandum of Understanding. Assistance will be made available by the Commission in two or, if appropriate, three instalments. The first instalment will be released after the entry into force of the Memorandum of Understanding. The second and any further instalments will only be released depending on the satisfactory implementation of sound economic policy. Funds will be transferred to the Ministry of Economy and Finance of the PISG – or when the future status of Kosovo is determined, to the institution designated to take on its tasks and responsibilities.

The Commission will submit a report, including an evaluation on the implementation of this Decision in the previous years, at least once a year and before 15 September.

ENTRY INTO FORCE: the Decision will take effect on 6 December 2006.

Decision 2006/880
OJ L 339 06.12.2006, p. 0036-0038

SP(2006)5316/2

Results of vote in Parliament

The European Parliament adopted the resolution drafted by Erika MANN (PES, DE) and several amendments to the proposal, the principal ones being the following:

-this exceptional financial assistance in the form of a grant is intended to meet Kosovo's projected external financing requirements in 2006 and 2007, in line with Kosovo's Medium-Term Expenditure Framework for 2006-2008;

- in order to facilitate dialogue with the European Parliament, the Commission shall regularly inform the European Parliament of the Economic and financial Committee's proceedings and provide it with the relevant documents;

-the conditions attached to the assistance will include specific targets to be achieved in the following areas: improved transparency and increased sustainability of public finances, primarily concerning the consistency of the Kosovo Consolidated Budget with the Medium-Term Expenditure Framework and the Kosovo Development Strategy and Plan; the application of macro-economic and budgetary priorities on the basis of the Memorandum of Economic and Financial Policies agreed with the IMF on 2 November 2005; enhanced fiscal discipline and control of public expenditure, with a particular view to the detection, treatment and follow-up of suspected fraud and other irregularities concerning national and international funds, and full compliance with international democratic and human rights standards, including respect for minorities and the fundamental principles of the rule of law;

- the second and any further instalments will be released on the basis of a satisfactory compliance with the above conditions;

-independent auditors must be able to carry out audits on the spot;

- at least once a year, and before 15 September, the Commission shall submit to the relevant committees in the European Parliament and to the Council a report, including an evaluation of the implementation of the Decision in the previous year. This report shall specify the linkage between the targets set out, Kosovo's ongoing economic and fiscal performance and the Commission's decision to release tranches of the assistance.

T6-0412/2006

A6-0291/2006

A6-0291/2006

PE376.630

PE374.463

The committee adopted the report by Erika MANN (PES, DE) amending - under the consultation procedure - the proposed Council decision on providing exceptional Community assistance to Kosovo. MEPs stressed that this exceptional financial assistance must be considered to be be complementary to other Community assistance programmes for the Western Balkans. They also altered the wording of Article 1(1) to make it clear that the core purpose of the exceptional grant was to meet Kosovo's projected budget gap in 2006 and 2007. A number of other amendments sought to ensure that Parliament was properly informed of the implementation of this aid instrument, that it would be consulted on the continuation of the exceptional assistance beyond 2007, that external auditors would be engaged to carry out an independent external evaluation, and that the disbursement of funds would be subject to human rights conditionality and economic and financial conditionality.

PE376.569

PE376.342

PURPOSE: to provide exceptional Community financial assistance to Kosovo.

PROPOSED ACT: Council Decision.

CONTENT: the proposed Council Decision seeks to provide exceptional financial assistance to Kosovo in the form of a grant . The proposed macro-financial assistance will be limited in time, complement World Bank activities (through the IDA funds) and other bi-lateral donors and will be conditional upon various public spending requirements.

The proposed macro-financial assistance will be limited in time, complement support from the World Bank (through IDA funds) and other bilateral donors, and will be conditional on progress in the implementation of a number of measures, in particular in area of public finance, to be defined in close consultation with the IMF and the World Bank. This assistance would provide crucial bridge support before a settlement of Kosovo’s status. It would be unrelated to new status arrangements and not pre-empt further EC and international support likely to be required upon status resolution beyond 2007.

The Community has already found it an appropriate measure to help ease Kosovo's financial constraints in exceptionally difficult circumstances and, under Council Decisions 2000/140/EC and 2001/511/EC, provided exceptional financial assistance in the form of straight grants amounting to EUR 35 million and EUR 30 million in 2000 and 2001 respectively. The last payment under such assistance was released in December 2002.

The assistance being proposed, therefore, consists of a Community grant of up to EUR 50 million to Kosovo to be financed from the General Budget. Such a grant should help alleviate the financial situation in Kosovo, support the development of a sound economic framework and facilitate the continuation of essential administrative functions. The grant will be released in two, or if appropriate, three instalments. The first instalment will be released on the basis of a Memorandum of Understanding. The following two trenches will be released depending on the satisfactory completion of the economic policy conditions and not before one quarter after the release of the previous instalment. Prior to the release of each instalment, the Commission together with the authorities in Kosovo and the IMF, will verify that the performance criteria have been respected or new understandings have been reached.

The assistance will be managed by the Commission, which together with the authorities in Kosovo, will agree on the specific economic policy and financial conditions attached to the payment of the grant instalments. Specific provisions on the prevention of fraud and other irregularities consistent with the Financial Regulation will be taken into account.

For further information concerning the financial implications of this measure, please refer to the financial statement.

COM(2006)0207
EUR-Lex

PURPOSE: to provide exceptional Community financial assistance to Kosovo.

PROPOSED ACT: Council Decision.

CONTENT: the proposed Council Decision seeks to provide exceptional financial assistance to Kosovo in the form of a grant . The proposed macro-financial assistance will be limited in time, complement World Bank activities (through the IDA funds) and other bi-lateral donors and will be conditional upon various public spending requirements.

The proposed macro-financial assistance will be limited in time, complement support from the World Bank (through IDA funds) and other bilateral donors, and will be conditional on progress in the implementation of a number of measures, in particular in area of public finance, to be defined in close consultation with the IMF and the World Bank. This assistance would provide crucial bridge support before a settlement of Kosovo’s status. It would be unrelated to new status arrangements and not pre-empt further EC and international support likely to be required upon status resolution beyond 2007.

The Community has already found it an appropriate measure to help ease Kosovo's financial constraints in exceptionally difficult circumstances and, under Council Decisions 2000/140/EC and 2001/511/EC, provided exceptional financial assistance in the form of straight grants amounting to EUR 35 million and EUR 30 million in 2000 and 2001 respectively. The last payment under such assistance was released in December 2002.

The assistance being proposed, therefore, consists of a Community grant of up to EUR 50 million to Kosovo to be financed from the General Budget. Such a grant should help alleviate the financial situation in Kosovo, support the development of a sound economic framework and facilitate the continuation of essential administrative functions. The grant will be released in two, or if appropriate, three instalments. The first instalment will be released on the basis of a Memorandum of Understanding. The following two trenches will be released depending on the satisfactory completion of the economic policy conditions and not before one quarter after the release of the previous instalment. Prior to the release of each instalment, the Commission together with the authorities in Kosovo and the IMF, will verify that the performance criteria have been respected or new understandings have been reached.

The assistance will be managed by the Commission, which together with the authorities in Kosovo, will agree on the specific economic policy and financial conditions attached to the payment of the grant instalments. Specific provisions on the prevention of fraud and other irregularities consistent with the Financial Regulation will be taken into account.

For further information concerning the financial implications of this measure, please refer to the financial statement.

COM(2006)0207
EUR-Lex