EUROPEAN COMMISSION

Brussels, 28.5.2020

COM(2020) 407 final

2020/0107(COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending Regulation (EU) 2017/1601 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund

EXPLANATORY MEMORANDUM

CONTEXT OF THE PROPOSAL

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity and proportionality 

•Choice of the instrument

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Stakeholder consultations

•Evaluations and impact assessments

4.BUDGETARY IMPLICATIONS

5.OTHER ELEMENTS

•Detailed explanation of the specific provisions of the proposal

–Extending the geographic scope of the EFSD to the beneficiaries in the Western Balkans listed in Annex I of Regulation 231/2014 1 .

–Increasing the contribution to the European Fund for Sustainable Development from the Union budget in view of implementing operations in response of the impact of the COVID-19 pandemic.

–Prolonging the investment period during which the EFSD guarantee agreements for supporting financing and investment operations can be concluded with the eligible counterparts.

2020/0107 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending Regulation (EU) 2017/1601 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 209(1) and 212(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)The COVID-19 pandemic crisis is having a major impact on societies around the globe, starting with health systems, and moving to severe global social and economic consequences. The response strategy of the Union should be comprehensive, coherent and integrated, tackling both the public health and the socio-economic challenges both within the Union as well as in cooperation with its partner countries, notably in Africa, in the European Neighbourhood and with the beneficiaries in the Western Balkans listed in Annex I to Regulation (EU) No 231/2014 of the European Parliament and of the Council 2 . The COVID-19 pandemic will have a major impact on the economic and macroeconomic systems in partner countries. Governments will be challenged to sustain macro-economic stability and maintain fiscal space to protect the most vulnerable, their companies, their workers, and continue providing basic health care and social services. It is expected in particular that small and medium sized enterprises will run short of liquidity and working capital, putting millions of jobs at risk. Local currency financing is likely to become even more difficult to obtain, while depreciating currencies make hard currency financing even riskier. Similar issues will affect renewable energy and other infrastructure projects financed by fee income.

(2)In addition to the necessary measures and their consequences that third countries need to take to tackle the COVID-19 pandemic, the socio-economic situation in the Western Balkans will be further aggravated by the challenges the Union itself is facing due to the proximity and interdependency of those countries with the Union economy and their economic and social links with the Union. Therefore, the coverage of the European Fund for Sustainable Development should be extended to the Western Balkans with a view to assist them in a sustainable socio-economic recovery and resilience, re-establishing supply chains and sustaining macro-economic stability.

(3)The Commission has at its disposal a powerful tool for mitigating investment risks, the European Fund for Sustainable Development (‘EFSD’), the financing arm of the External Investment Plan launched in 2017. That instrument, currently covering the European Neighbourhood and Sub-Saharan Africa, is implemented in partnership with international financial institutions and development and finance institutions of the Member States. Globally, the EFSD is one of the largest public guarantee programmes in support of private sector investment for development.

(4)Article 137(2) of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community provides that the United Kingdom and projects located in the United Kingdom shall only be eligible in respect of financial operations guaranteed by the Union budget under the European Fund for Sustainable Development (EFSD) provided that those financial operations were approved by the entities and bodies, including the EIB and the European Investment Fund (‘EIF’), or by persons entrusted with the implementation of part of those actions before the date of entry into force of the Withdrawal Agreement. Furthermore, Article 143(1) of the Withdrawal Agreement limits the liability of the United Kingdom for its share of the contingent liabilities of the Union to those contingent liabilities, which arise from financial operations decided by the Union before the date of the entry into force of the Withdrawal Agreement. Any contingent liability of the Union under this Regulation is subsequent to the date of the withdrawal of the United Kingdom from the Union. Therefore, this Regulation should not apply to and in the United Kingdom.

(5)Regulation (EU) 2017/1601 of the European Parliament and of the Council 3 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EU) 2017/1601 is amended as follows:

(1)In Article 2, point 4 is replaced by the following:

“(4) ‘partner country’ means a country that is a signatory to the ACP-EU Partnership Agreement, a country that is listed in Annex I to Regulation (EU) No 232/2014, a country that is eligible for geographic cooperation under Regulation (EU) No 233/2014 of the European Parliament and of the Council, or a beneficiary in the Western Balkans listed in Annex I to Regulation (EU) No 231/2014*;

______________

*Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 March 2014 establishing an Instrument for Pre-accession Assistance (IPA II) (OJ L77, 15.3.2014, p.11).”;

(2)Article 3 is amended as follows:

(a) Paragraphs 1 and 2 are replaced by the following:

“1. The purpose of the EFSD as an integrated financial package, supplying financing capacity in the form of grants, guarantees and other financial instruments to eligible counterparts, shall be to support investments and increased access to financing, primarily in Africa, the European Neighbourhood and the Western Balkans, in order to foster sustainable and inclusive economic and social development and promote the socio-economic resilience of partner countries, including, where appropriate, in the context of the European Neighbourhood Policy, EU policy towards the Western Balkans in particular in the context of the EU enlargement policy, and the Partnership Framework with third countries under the European Agenda on Migration, with a particular focus on sustainable and inclusive growth, on the creation of decent jobs, on eliminating inequalities and promoting gender equality and the empowerment of women and young people, on ensuring accessibility in line with Article 9 of the UN Convention on the Rights of Persons with Disabilities and on socioeconomic sectors and micro, small and medium-sized enterprises, while maximising additionality, delivering innovative products and crowding in private sector funds.

2. The EFSD shall be guided by the objectives of the Union’s external action as set out in Article 21 TEU and of Union policy in the field of development cooperation as set out in Article 208 TFEU and the internationally agreed development effectiveness principles. The EFSD shall contribute to the achievement of the Sustainable Development Goals of the 2030 Agenda, in particular poverty eradication, and, where appropriate, to the implementation of the European Neighbourhood Policy and EU policy towards the Western Balkans in particular in the context of the EU enlargement policy, thus addressing both the COVID-19 pandemic and the specific socioeconomic root causes of migration and fostering sustainable reintegration of migrants returning to their countries of origin, and strengthening transit and host communities.”;

(b) Paragraph 4 is replaced by the following:

“4.The EFSD shall be consistent with the objectives set out in the external financing instruments established by Regulations (EU) No 231/2014, (EU) No 232/2014, (EU) No 233/2014 and (EU) 2015/323 and with the priorities contained in national or regional programmes and strategy papers, where available.”;

(3)In Article 5, paragraphs 2 and 3 are replaced by the following:

“2. The strategic board shall advise the Commission on the strategic orientation and priorities of EFSD Guarantee investments and contribute to their alignment with the guiding principles and objectives of the Union’s external action, development policy, the European Neighbourhood Policy and EU policy towards the Western Balkans in particular in the context of the EU enlargement policy , as well as with the purpose of the EFSD as set out in Article 3. It shall also support the Commission in setting overall investment goals as regards the use of the EFSD Guarantee and monitor an appropriate and diversified geographical and thematic coverage for investment windows, while giving special attention to countries identified as experiencing fragility or conflict, Least Developed Countries (LDCs) and heavily indebted poor countries.

3. The strategic board shall also support overall coordination, complementarity and coherence between the regional investment platforms, between the three pillars of the EIP, between the EIP and the Union’s other efforts on migration, on the COVID-19 pandemic and on the implementation of the 2030 Agenda, as well as with the relevant Union external financing instruments and trust funds, and with the external lending mandate operations managed by the EIB, including the EIB’s Economic Resilience Initiative, and the ACP Investment Facility, without prejudice to the EIB’s internal governance rules.”;

(4)In Article 7, paragraph 2 is replaced by the following:

“2. The EFSD Guarantee shall support financing and investment operations in partner countries in Africa, the European Neighbourhood and in the beneficiaries in the Western Balkans listed in Annex I to Regulation (EU) No 231/2014.”;

(5)Paragraph 2 of Article 8 is replaced by the following:

“2.The investment period during which the EFSD guarantee agreements for supporting financing and investment operations can be concluded with the eligible counterparts shall last until 31 December 2021.”;

______________

(6)In Article 9(1) , the introductory sentence and point (a) are replaced by the following:

“1. The financing and investment operations eligible for support through the EFSD Guarantee in accordance with the purpose of the EFSD set out in Article 3 shall be consistent and aligned with Union policies, in particular the Union’s development policy, the European Neighbourhood Policy and EU policy towards the Western Balkans in particular in the context of the EU enlargement policy, as well as with Union and international support to ensure complementarity with other initiatives and shall support the following objectives:

(a) contributing to sustainable development in its economic, social and environmental dimensions, and to the implementation of the 2030 Agenda and, where appropriate, the European Neighbourhood Policy and EU policy towards the Western Balkans in particular in the context of the EU enlargement policy, with a particular focus on the eradication of poverty, the creation of decent jobs, economic opportunities, skills and entrepreneurship, promoting in particular gender equality and the empowerment of women and young people, while pursuing and strengthening the rule of law, good governance and human rights;”;

(7)Article 12 is amended as follows:

(a) Paragraph 1 is replaced by the following:

“1. Without prejudice to paragraph 2, the EFSD Guarantee shall not, at any time, exceed EUR 3 578 000 000.”;

(b) In paragraph 2, the fourth subparagraph is replaced by the following:

“Aggregate net payments from the general budget of the Union under the EFSD Guarantee shall not exceed EUR 3 578 000 000. Without prejudice to paragraph 4, payments for guarantee calls shall be made, where necessary, by the contributing Member States or other contributors on pari passu basis with the Union.”;

_____________________

(8)Article 15 is amended as follows:

“Article 15

Funding of the EFSD from the general budget of the Union

A contribution of EUR 1 390 000 000 shall be provided by the general budget of the Union.”

(9) The following Article 15a is inserted:

“Article 15a

Support measures

The amount referred to in Article 15 may be used for technical and administrative assistance, such as preparatory, monitoring, control, audit and evaluation activities including corporate information technology systems.”.

Article 2

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

This Regulation shall be binding in its entirety and directly applicable in the Member States in accordance with the Treaties.

Done at Brussels,

LEGISLATIVE FINANCIAL STATEMENT

CONTEXT OF THE PROPOSAL

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity and proportionality

•Choice of the instrument

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Stakeholder consultations

•Evaluations and impact assessments

4.BUDGETARY IMPLICATIONS

5.OTHER ELEMENTS

•Detailed explanation of the specific provisions of the proposal

1.FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.Title of the proposal/initiative

1.2.Policy area(s) concerned

1.3.ABB Activity: International economic and financial affairs The proposal/initiative relates to:

1.4.Objective(s)

1.4.1.General objective(s)

1.4.2.Specific objective(s)

1.4.3.Expected result(s) and impact

1.4.4.Indicators of performance

1.5.Grounds for the proposal/initiative

1.5.1.Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of the implementation of the initiative

1.5.2.Added value of Union involvement (it may result from different factors, e.g. coordination gains, legal certainty, greater effectiveness or complementarities). For the purposes of this point ‘added value of Union involvement’ is the value resulting from Union intervention which is additional to the value that would have been otherwise created by Member States alone.

1.5.3.Lessons learned from similar experiences in the past

1.5.4.Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments

1.5.5.Assessment of the different available financing options, including scope for redeployment

1.6.Duration and financial impact of the proposal/initiative

1.7.Management mode(s) planned

2.MANAGEMENT MEASURES

3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected

3.2.Estimated financial impact of the proposal on appropriations

3.2.1.Summary of estimated impact on operational appropriations

3.2.2.Summary of estimated impact on administrative appropriations

3.2.3.Compatibility with the current multiannual financial framework

3.2.4.Third-party contributions

3.3.Estimated impact on revenue

LEGISLATIVE FINANCIAL STATEMENT

1.FRAMEWORK OF THE PROPOSAL/INITIATIVE 

1.1.Title of the proposal/initiative

1.2.Policy area(s) concerned 

1.3.ABB Activity: International economic and financial affairs The proposal/initiative relates to: 

◻ a new action 

◻ a new action following a pilot project/preparatory action 4  

X the extension of an existing action 

X a merger or redirection of one or more actions towards another/a new action 

1.4.Objective(s)

1.4.1.General objective(s)

1.4.2.Specific objective(s)

1.4.3.Expected result(s) and impact

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted.

1.4.4.Indicators of performance

Specify the indicators for monitoring progress and achievements.

1.5.Grounds for the proposal/initiative 

1.5.1.Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of the implementation of the initiative

1.5.2.Added value of Union involvement (it may result from different factors, e.g. coordination gains, legal certainty, greater effectiveness or complementarities). For the purposes of this point ‘added value of Union involvement’ is the value resulting from Union intervention which is additional to the value that would have been otherwise created by Member States alone.

1.5.3.Lessons learned from similar experiences in the past

The entire amount of the initial EFSD guarantee envelope (EUR 1.54 bn including contributions from third parties) has been allocated to 28 guarantees. These are expected to leverage EUR 17.5 bn in investments. The existing pipeline and discussions with partner financial institutions confirm that the EFSD has the potential to more than double its signed guarantee operations until the end of 2021.

1.5.4.Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments

1.5.5.Assessment of the different available financing options, including scope for redeployment

1.6.Duration and financial impact of the proposal/initiative

X limited duration

–◻    in effect until 31/12/2020

X Financial impact until 2021 included, with reference to the period during which guarantee agreements can be concluded with the eligible counterparts.

◻ unlimited duration

–Implementation with a start-up period from YYYY to YYYY,

–followed by full-scale operation.

1.7.Management mode(s) planned 5  

X Direct management by the Commission for the management of the EFSD guarantee fund.

–◻ by its departments, including by its staff in the Union delegations;

–◻ by the executive agencies

◻ Shared management with the Member States

X Indirect management by entrusting budget implementation tasks to (for the Facilities and guarantees backed by the EFSD guarantee):

–◻ third countries or the bodies they have designated;

–X international organisations and their agencies

–X the EIB and the European Investment Fund;

–◻ bodies referred to in Articles 70 and 71 of the Financial Regulation;

–X public law bodies;

–X bodies governed by the private law of a Member State that provide adequate financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) No 966/2012;

–X bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that provide adequate financial guarantees;

–X bodies governed by the private law of a partner country that provide adequate financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) No 966/2012;

– X bodies governed by private law with a public service mission to the extent that they provide adequate financial guarantees;

–If more than one management mode is indicated, please provide details in the ‘Comments’ section.

Comments

The provisioning of and management of the EFSD Guarantee Fund will be implemented directly by the Commission, whereas the instruments covered by the Guarantee will be implemented in indirect management.    

2.MANAGEMENT MEASURES 

The measures indicated in the Legislative financial statement accompanying the Commission’s 2017 proposal for the EFSD Regulation apply (COM(2016) 586 final), mutatis mutandis.

3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected 

·Existing budget lines

In order of multiannual financial framework headings and budget lines.

·New budget lines requested

In order of multiannual financial framework headings and budget lines.

3.2.Estimated financial impact of the proposal on appropriations 

3.2.1.Summary of estimated impact on operational appropriations 

–◻    The proposal/initiative does not require the use of operational appropriations

–X The proposal/initiative requires the use of operational appropriations, as explained below:

EUR million (to three decimal places)

EUR million (to three decimal places)

EUR million (to three decimal places)

3.2.2.Summary of estimated impact on administrative appropriations 

–◻    The proposal/initiative does not require the use of appropriations of an administrative nature

–X    The proposal/initiative requires the use of appropriations of an administrative nature, as explained below:

–EUR million (to three decimal places)

–

The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

3.2.2.1.Estimated requirements of human resources

– The proposal/initiative does not require the use of human resources.

–X    The proposal/initiative requires the use of human resources, as explained below:

–Estimate to be expressed in full time equivalent units

XX is the policy area or budget title concerned.

The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

Description of tasks to be carried out:

3.2.3.Compatibility with the current multiannual financial framework 

The proposal/initiative:

–◻    can be fully financed within the relevant heading of the Multiannual Financial Framework (MFF).

–◻    requires use of the unallocated margin under the relevant heading of the MFF and/or use of the special instruments as defined in the MFF Regulation.

–X    requires a revision of the MFF.

3.2.4.Third-party contributions 

The proposal/initiative:

–X    does not provide for co-financing by third parties

–◻    provides for the co-financing by third parties estimated below:

Appropriations in EUR million (to three decimal places)

3.3.Estimated impact on revenue 

–X    The proposal/initiative has no financial impact on revenue.

–◻    The proposal/initiative has the following financial impact:

–◻    on own resources

–◻    on other revenue

–please indicate, if the revenue is assigned to expenditure lines ◻    

EUR million (to three decimal places)

For assigned revenue, specify the budget expenditure line(s) affected.

Other remarks (e.g. method/formula used for calculating the impact on revenue or any other information).

(1)    Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 March 2014 establishing an Instrument for Pre-accession Assistance (IPA II) (OJ L77, 15.3.2014, p.11).

(2)    Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 mars 2014 establishing an Instrument for Pre-Accession assistance (IPA II) (OJ L 77, 15.3.2014, p. 11).

(3)    Regulation (EU) 2017/1601 of the European Parliament and of the Council of 26 September 2017 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund (OJ L 249, 27.9.2017, p. 1).

(4)    As referred to in Article 58(2)(a) or (b) of the Financial Regulation.

(5)    Details of management modes and references to the Financial Regulation may be found on the BudgWeb site: https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

(6)    Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations.

(7)    EFTA: European Free Trade Association.

(8)    Candidate countries and, where applicable, potential candidates from the Western Balkans.

(9)    Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.

(10)       It is estimated that EUR 1,5 million will be needed as administrative appropriations in 2021, which will be financed from and committed under the successor administrative budget lines – normally under the Neighbourhood, Development and International Cooperation Instrument as well as the Instrument for Pre-accession Assistance III, as currently proposed.

(11)  It is estimated that 0,8 million will be needed in 2021, to be financed under the 2021 budget.

(12)    Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.

(13)    AC = Contract Staff; AL = Local Staff; END = Seconded National Expert; INT = agency staff; JPD = Junior Professionals in Delegations.

(14)      It is estimated that 10 contract agents in headquarters will be financed under the global envelope in 2021.

(15)    Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). It is estimated that 10 contract agents in delegations will be financed in 2021 under the successor administrative budget lines – normally under the Neighbourhood, Development and International Cooperation Instrument as well as the Instrument for Pre-accession Assistance III, as currently proposed.

(16)    Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.

(17)    As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e. gross amounts after deduction of 20 % for collection costs.