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(Jul 11, 2011) On July 4, 2011, the European Commission adopted a proposal for a Framework Regulation for Macro-Financial Assistance (MFA) to third countries. According to a Commission press release, MFA is "a financing instrument under which exceptional financial assistance is granted to third countries close to the EU that are experiencing balance-of-payments difficulties." (Press Release, IP/11/828, European Commission, Commission Adopts Framework Regulation for Macro-Financial Assistance to Third Countries (July 4, 2011), EUROPA.)
The Framework Regulation would set forth in a formal legal document the key rules governing MFA, the "Genval criteria," a set of principles defined by the Council of the EU that were last stated in October 2002. Since the instrument was first applied in 1990, 55 MFA decisions have been approved, benefiting 23 countries through assistance commitments totaling €7.4 billion (about US$10.6 billion). MFA can be in "the form of grants, financed by the EU budget, or loans, for which the Commission borrows the necessary funds in capital markets and on-lends them to the beneficiary country," and is complementary to financing provided by the International Monetary Fund. (Id.)
The aim of the proposed Framework Regulation is to speed up decision-making for individual MFA operations and thereby make the MFA process both faster and more effective. The press release states, "[a]s highlighted by the global financial crisis, speed is of the essence when dealing with macroeconomic and financial crisis situations. This underlines the importance of developing instruments to respond that can be deployed quickly and efficiently." (Id.) Under the proposal, "MFA would be granted to an eligible third country through an implementing act of the Commission under the supervision of a committee of Member State representatives, as is the case in other external financial instruments of the EU," a swifter decision-making process that is expected to make the MFA "better able to help beneficiary countries withstand short-term external financial pressures." (Id.)
The proposed Framework Regulation is also part of the EU's effort to better adapt its set of externally oriented financial instruments to current budgetary challenges set forth in the Multiannual Financial Framework, the major revamping of the EU budget being planned for the seven-year period 2014-2020. (The Commission Has Proposed Today to Increase the Funding for European Neighbourhood Instrument, EUROPEAN MOVEMENT (July 1, 2011); see also Mikaela Gavas, Svea Koch, Oladiran Bello, Jeske van Seters, & Mark Furness, The EU's Multi-Annual Financial Framework Post-2013: Options for EU Development Cooperation (June 2011), Overseas Development Institute website; The Post 2013 Multiannual Financial Framework of the EU: Why It Is a Priority for CONCORD in 2011, APRODEV website (Jan. 2011).)
In addition, if adopted, the regulation would update and clarify some of the current MFA rules, particularly those governing its geographical scope. According to the proposal, MFA-eligible countries would be EU-candidate and potential candidate countries, as well as countries covered by the European Neighbourhood Policy, with other third countries continuing to be eligible "only under exceptional and duly justified circumstances, and provided they are geographically close to the EU and entertain close political and economic links with it." (Id.; The Policy: What Is the European Neighbourhood Policy?, European Neighbhourhood Policy website (Sept. 30, 2010).)
Before it can become law, the proposed Framework Regulation must be adopted by both the European Parliament and the Council of the EU. (Press Release, supra.)
|Author:||Wendy Zeldin More by this author|
|Topic:||Budget More on this topic|
|Jurisdiction:||European Union More about this jurisdiction|
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Last updated: 07/11/2011