Annexes to COM(2023)692 - Establishing the Reform and Growth Facility for the Western Balkans - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)692 - Establishing the Reform and Growth Facility for the Western Balkans. |
|---|---|
| document | COM(2023)692 |
| date | November 8, 2023 |
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
Despite the Beneficiaries being at different stages of the the accession path to the EU, their economic output and competitiveness lag behind that of the EU. The reforms and investments supported by this Facility are supposed to accelerate achieving better convergence and alignment with EU standards, as well as closer economic integration within the region and with the EU single market.
Preconditions to obtain financing under the Facility, are that the Beneficiaries will uphold and respect effective democratic mechanisms, the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities. Another pre-condition shall be that Serbia and Kosovo engage constructively in the normalisation of their relations with a view to fully implementing all their respective obligations stemming from the Agreement on the Path to Normalisation and its Implementation Annex and all past Dialogue Agreements and engage in negotiations on the Comprehensive Agreement on normalisation of relations.
The Commission will also verify that general conditions are met (macro-financial stability, sound public financial management, transparency and oversight of the budget).
In order to obtain financing, the Beneficiaries will be required to design Reform Agendas, based on their growth strategies, Economic Reform Programmes, the revised enlargement methodology and enlargement reports, which will be adopted by the Commission through an implementing decision. The Agendas will contain a limited number of reforms and investment areas with payment conditions and amounts attached to them. Such conditions shall reflect progress on specific socio-economic reforms, including on fundamentals of the enlargement process and rule of law. Following the decision of approval of the Reform Agendas and the conclusion of appropriate Agreements, the Beneficiaries will be eligible to receive prefinancing.
Funds under the Facility will be released semi-annually upon presentation by the Beneficiaries of requests justifying the fulfilment of the payment conditions and confirming legality and regularity of any underlying transactions, accompanied by a report on the follow-up of cases of mismanagement of related funding. The Commission will make funds available based on its assessment of the requests. Funds may be released as whole amounts, reduced amounts, or completely withheld, depending on the level of fulfilment of payment conditions, by type. Witheld funds may be redistributed among the other Beneficiaries in the subsequent years.
The investments foreseen in the Reform Agendas will be supported via the WBIF. Related projects or programmes will only be submitted to the WBIF Operational Board for opinion following the Commission assessment of the fulfilment of the relevant payment conditions and subsequent release of funs and be subject to the rules of the relevant WBIF call.
Four annual cycles are expected in the period 2024-2027.
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.
Action at Union level is necessary to achieve accelerated economic convergence of the Western Balkans with the EU on their way to potential Union membership. The size of the necessary assistance is such that the region continues to require sustained external support that no Member State, or single donor, could provide alone. The Union is in a unique position to deliver multi-annual external assistance to the region in a timely, coordinated and predictable manner. The Union can also leverage its borrowing capacity to lend to the Beneficiaries in the region on advantageous terms as well as providing grants in a multi-annual perspective.
1.5.3. Lessons learned from similar experiences in the past
The Facility builds upon and complements assistance provided to the Western Balkans under the Instrument for Pre-accession Assistance (IPA III), as well as uses one of its successful mechanisms – the Western Balkans Investment Framework. Both of these instruments have proved that EU funding can offer considerable leverage when used together with funding from other donors in blending contexts. However, the format of this Facility is different in that it largely relies on concessional loans taken by the Union thanks to its excellent credit rating. The Facility will build on the lessons learned from the Recovery and Resilience Facility, which was established in 2020, as well as from a more recently proposed Ukraine Facility.
1.5.4. Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments
The proposed Facility aims at equipping the Union with a legal instrument which will allow it to support greater socio-economic convergence of the Western Balkans on their route towards Union membership. The Facility will be complementary to the assistance under the Instrument for Pre-accession Assistance, which focuses on the alignment of the Beneficiaries with EU acquis and preparation for taking up the obligations of membership.
This new legislative proposal for the Reform and Growth Facility supplements the proposal for a Council Regulation COM(2023)337, amending Regulation 2020/2093 laying down the multiannual financial framework (MFF) for the years 2021 to 2027 (see sections 1.5.5 and 3.2.4).
The overall amount of the Facility is to be provided through loans and non-repayable support. The loan component will amount to a maximum of EUR 4 billion for all Beneficiaries over the entire period 2024-2027. The loans will be guaranteed through the Common Provisioning Fund at the provisioning rate of 9%. The additional amount of grants in the form of non-repayable support foreseen in the proposal for a revised MFF is EUR 2 billion, including provisioning and administrative expenditure.
1.5.5. Assessment of the different available financing options, including scope for redeployment
The Union budget is already providing support to the preparation for possible EU accession through the Instrument of Pre-Accession Assistance (IPA III), which covers the Western Balkans and Türkiye, and is based on grants, blending and budgetary guarantees. This funding is fully assigned to necessary activities related to enlargement-related alignment and preparations, and to the implementation of the Economic and Investment Plan.
The proposed Facility targets accelerated socio-economic convergence of Western Balkans only, and is based on a different approach, establishing a strong link between fulfilment of reform commitments and access to funding. It is also based on a different financing scheme, where 2/3 of the funding come from loans taken by the Union and transferred to the beneficiaries.
To ensure smooth and transparent implementation of any investments identified under the Reform Agendas of the beneficiaries, the Commission intends to use the tested methodology of the Western Balkans Investment Framework, while maintaining the conditionalities mentioned above.
Given that this is a completely different mechanism of assistance, targeting a specific set of priorities in the region, and that the objectives of IPA require the entire funding provided for it in the budget, using the existing instrument (IPA III) would not be practical, while redeployment of funds within this instrument would not be feasible.
1.6. Duration and financial impact of the proposal/initiative
limited duration
- in effect from [DD/MM]YYYY to [DD/MM]YYYY
- Financial impact from 2024 to 2027 for commitment appropriations and from 2024 for payment appropriations.
unlimited duration
- Implementation with a start-up period from YYYY to YYYY,
- followed by full-scale operation.
1.7. Method(s) of budget implementation planned20
Direct management by the Commission
- by its departments, including by its staff in the Union delegations;
- by the executive agencies
Shared management with the Member States
Indirect management by entrusting budget implementation tasks to:
- third countries or the bodies they have designated;
- international organisations and their agencies (to be specified);
- the EIB and the European Investment Fund;
- bodies referred to in Articles 70 and 71 of the Financial Regulation;
- public law bodies;
- bodies governed by private law with a public service mission to the extent that they are provided with adequate financial guarantees;
- bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that are provided with adequate financial guarantees;
- bodies or persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU, and identified in the relevant basic act.
- If more than one management mode is indicated, please provide details in the ‘Comments’ section.
Comments
Article 8 details the forms of implementation of the Facility, i.e. direct and indirect management in accordance with the Financial Regulation.
2. MANAGEMENT MEASURES
2.1. Monitoring and reporting rules
Specify frequency and conditions.
Specific quantitative and qualitative steps will be defined in the Reform Agendas (approved by the Commission in an implementing decision), so that the fulfilment of the payment conditions can be monitored. The Beneficiary will submit a semi-annual duly justified request for the release of the non-repayable financial support and of the loan, setting out how the satisfactory fulfilment of those conditions has been achieved, based on indicators identified in the implementing decision.
In addition, the Reform Agendas will set out monitoring indicators that should allow monitoring and reporting progress of Beneficiaries on the general and specific objectives of the Facility more widely.
The Commission will report annually to the European Parliament, the Council, and the Committee referred to in Article 27 on the implementation of funds provided under the Facility as well as the progress towards objectives.
The Commission will also carry out an ex-post evaluation of the Regulation.
2.2. Management and control system(s)
2.2.1. Justification of the management mode(s), the funding implementation mechanism(s), the payment modalities and the control strategy proposed
The Facility will be implemented under direct and indirect management. Part will be direct management with direct transfer of funds to the Beneficiary’s state budget, while specific investments will be channelled through the WBIF, i.e. indirect management with IFIs.
The control strategy will be adapted to the implementation under each of these pillars with use of monitoring, evaluation and audits. Special attention will be paid to implementation by the Beneficiaries of the funds made available to them. Release of Funds will occur according to a fixed semi-annual schedule, based on requests submitted by the beneficiaries and following verification by the Commission of the fulfilment of the relevant payment conditions.
The multilayer structure of the control mechanisms in place (see also section 2.3) provides an integrated framework to ensure that all the appropriate measures to protect the financial interests of the Union are in place. It will guarantee that the principle of proportionality is taken into account and the specific conditions under which the Facility will operate.
2.2.2. Information concerning the risks identified and the internal control system(s) set up to mitigate them
The main risk identified in relation to the financing relates to the non-achievement of payment conditions associated to the disbursement of funding.
The measures that will be put in place to mitigate this risk are the following:
-assessment by the Commission of the fulfilment of the relevant payment conditions before the disbursement of funds, with possibility of withholding the funds;
-reduction or withholding of support provided, or recovery of any amount spent to achieve the objectives of the Facility, in cases of irregularities, fraud, corruption and conflicts of interests affecting the financial interests of the Union that have not been corrected by the Beneficiary, or of a serious breach of an obligation resulting from the agreements concluded with the Beneficiaries;
-suspension of funding in the event that the relevant Beneficiary fails to fulfil the preconditions set out in Article 5.
2.2.3. Estimation and justification of the cost-effectiveness of the controls (ratio of "control costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of error (at payment & at closure)
Financial contribution will be provided to the Beneficiaries in the form of financing not linked to cost referred to in point (a) of Article 125(1) of the Financial Regulation.
2.3. Measures to prevent fraud and irregularities
Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy.
The proposal contains specific provisions for the protection of the financial interests of the Union. The Facility will be equipped with a strong system of audit and controls set out in a multilayer mechanism: the reform of the audit and control systems of the Beneficiaries will be included as part of the reforms under the Reform Agendas; in addition, the Commission may carry out detailed systems reviews of the national budget implementation based on a risk-assessment and dialogue with National Audit Authorities, and issue recommendations for improvements in the systems. Moreover, in accordance with Regulation (EU, Euratom) 2018/1046, OLAF, the Court of Auditors and the European Public Prosecutor’s Office (EPPO), shall have the necessary rights and access to perform their respective roles.
The investment part of the Facility will be implemented through indirect management with international financial institutions based on the pillar assessments and framework agreements with them.
3. ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE
3.1. Multiannual financial framework- expenditure budget line(s) affected
- New budget lines requested
| Over and above MFF ceilings | Budget line | Type of expenditure | Contribution | |||
| Number | Diff./Non-diff. | from EFTA countries | from candidate countries and potential candidates | from other third countries | other assigned revenue | |
| Heading 6 | 15.0301 – Reform and Growth Facility for Western Balkans – Operational expenditure | DA | YES | p.m. | YES | YES |
| Heading 6 | 15.0302 – Reform and Growth Facility for Western Balkans – Provisioning of the Common Provisioning Fund | DA | YES | p.m. | YES | YES |
| Heading 6 | 15.010102 – Support expenditure for the Reform and Growth Facility for the Western Balkans | DA | YES | p.m. | YES | YES |
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
- The proposal/initiative requires the use of operational appropriations, as explained below:
| Reform and Growth Facility for Western Balkans - financing* (EUR million) | |||||
| Type of support | 2024 | 2025 | 2026 | 2027 | Total |
| Non-repayable (Grants) | 500 | 500 | 500 | 500 | 2 000 |
| of which administrative expenditure | 7.5 | 7.5 | 7.5 | 7.5 | 30 |
| Loans | 1 000 | 1 000 | 1 000 | 1 000 | 4 000 |
| TOTAL** | 1 500 | 1 500 | 1 500 | 1 500 | 6 000 |
| * Annual and overall distribution of the non-repayable support and loans is purely indicative and for illustrative purposes only. The actual distribution will be subject to the annual decision making ** Table assumes commitment appropriations equal payment appropriations. This is purely for illustrative purposes. Actual calibration of the two will be assessed on an annual needs basis. |
3.2.2 Summary of estimated impact on operational appropriations (EUR million)
| Year 2024 21 | Year 2025 | Year 2026 | Year 2027 | TOTAL | |
| HEADING 6 of the multiannual financial framework | |||||
| 15.0301 – Reform and Growth Facility for Western Balkans – Operational expenditure | 402.55 | 402.55 | 402.55 | 402.55 | 1 610.2 |
| 15.0302 – Reform and Growth Facility for Western Balkans – Provisioning of the Common Provisioning Fund | 90 | 90 | 90 | 90 | 360 |
| Subtotal HEADING 6 of the multiannual financial framework | 492.55 | 492.55 | 492.55 | 492.55 | 1 970.2 |
3.2.3. Summary of estimated impact on administrative appropriations
- The proposal/initiative does not require the use of appropriations of an administrative nature
- The proposal/initiative requires the use of appropriations of an administrative nature, as explained below:
EUR million (to three decimal places)
| Year 2024 22 | Year 2025 | Year 2026 | Year 2027 | TOTAL |
| HEADING 7 of the multiannual financial framework | |||||
| Human resources | 1.026 | 1.026 | 1.026 | 1.026 | 4.104 |
| Other administrative expenditure | 0.030 | 0.030 | 0.030 | 0.030 | 0.120 |
| Subtotal HEADING 7 of the multiannual financial framework | 1.056 | 1.056 | 1.056 | 1.056 | 4.224 |
| Outside HEADING 723 of the multiannual financial framework | |||||
| Human resources | 2.529 | 2.529 | 2.529 | 2.529 | 10.116 |
| Other expenditure of an administrative nature | 4.920 | 4.920 | 4.920 | 4.920 | 19.680 |
| Subtotal outside HEADINGS 1-7 of the multiannual financial framework | 7.449 | 7.449 | 7.449 | 7.449 | 29.796 |
| TOTAL | 8.505 | 8.505 | 8.505 | 8.505 | 34.020 |
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.
3.2.3.1. Estimated requirements of human resources
- The proposal/initiative does not require the use of human resources.
- The proposal/initiative requires the use of human resources, as explained below:
Estimate to be expressed in full time equivalent units
| Year 2024 | Year 2025 | Year 2026 | Year 2027 | |||
| □ Establishment plan posts (officials and temporary staff) | ||||||
| 20 01 02 01 (Headquarters and Commission’s Representation Offices) | 6 | 6 | 6 | 6 | ||
| 20 01 02 03 (Delegations) | ||||||
| 01 01 01 01 (Indirect research) | ||||||
| 01 01 01 11 (Direct research) | ||||||
| Other budget lines (specify) | ||||||
| □ External staff (in Full Time Equivalent unit: FTE)24 | ||||||
| 20 02 01 (AC, END, INT from the ‘global envelope’) | ||||||
| 20 02 03 (AC, AL, END, INT and JPD in the delegations) | ||||||
| 15.010102 –Support expenditure for the Reform and Growth Facility for the Western Balkans | - at Headquarters | 9 | 9 | 9 | 9 | |
| - in Delegations | 9 | 9 | 9 | 9 | ||
| Other budget lines (specify) | ||||||
| TOTAL | 24 | 24 | 24 | 24 |
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.
Description of tasks to be carried out:
| Officials and temporary staff | The FTEs sought will work on the policy development, legal issues, with particular focus on procurement matters, financial management, contract management, audit, monitoring, reporting and evaluation. |
| External staff | The FTEs sought will work on the policy development, legal issues, with particular focus on procurement matters, financial management, contract management, audit, monitoring, reporting and evaluation. |
3.2.4. Compatibility with the current multiannual financial framework
The proposal/initiative:
- can be fully financed through redeployment within the relevant heading of the Multiannual Financial Framework (MFF).
Explain what reprogramming is required, specifying the budget lines concerned and the corresponding amounts. Please provide an excel table in the case of major reprogramming.
- 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.
Explain what is required, specifying the headings and budget lines concerned, the corresponding amounts, and the instruments proposed to be used.
- requires a revision of the MFF.
This new legislative proposal for the Reform and Growth Facility for Western Balkans comes in parallel with the proposal for a Council Regulation COM(2023)337, amending Regulation 2020/2093 laying down the multiannual financial framework (MFF) for the years 2021 to 2027. The amendment of that Regulation is necessary to increase Heading 6 for 2024-2027 to provide financing to this Facility as non-repayable support and provisioning for the support in the form of loans.
3.2.5. Third-party contributions
The proposal/initiative:
- 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
- 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)
| Budget revenue line: | Appropriations available for the current financial year | Impact of the proposal/initiative25 | ||||||
| Year N | Year N+1 | Year N+2 | Year N+3 | Enter as many years as necessary to show the duration of the impact (see point 1.6) | ||||
| Article …………. | p.m. | p.m. | p.m. | p.m. | p.m. | p.m. | p.m. |
1COM(2023) 337 final.
2Albania, Bosnia and Herzegovina, Kosovo*, Montenegro, North Macedonia and Serbia.
* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence
3COM(2021)118 final.
4‘Implementation of the 5G cybersecurity Toolbox’, COM(2023)4049 final.
5Regulation (EU) 2021/1529 of the European Parliament and of the Council of 15 September 2021 establishing the Instrument for Pre-Accession assistance (IPA III) (OJ L 330, 20.9.2021, p. 1, ELI: http://data.europa.eu/eli/reg/2021/1529/oj).
6COM (2022) 57 final.
7COM(2020) 641 final.
8SWD(2020)223 final, 6.10.2020.
9Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088, OJ L 198, 22.6.2020, p. 13.
10Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/20 (OJ L 193, 30.7.2018, p. 1, ELI: http://data.europa.eu/eli/reg/2018/1046/oj).
11Regulation (EU) 2021/947 of the European Parliament and of the Council of 9 June 2021 establishing the Neighbourhood, Development and International Cooperation Instrument – Global Europe, amending and repealing Decision No 466/2014/EU of the European Parliament and of the Council and repealing Regulation (EU) 2017/1601 of the European Parliament and of the Council and Council Regulation (EC, Euratom) No 480/2009 (OJ L 209, 14.6.2021, p. 1, ELI: http://data.europa.eu/eli/reg/2021/947/oj).
12Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13, ELI: http://data.europa.eu/eli/reg/2011/182/oj).
13OJ L123, 12.5.2016, p.1.
14Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1, ELI: http://data.europa.eu/eli/reg/2013/883/oj).
15Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ L 312, 23.12.1995, p. 1, ELI: http://data.europa.eu/eli/reg/1995/2988/oj).
16Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2, ELI: http://data.europa.eu/eli/reg/1996/2185/oj).
17Council Regulation (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (‘the EPPO’) (OJ L 283, 31.10.2017, p. 1, ELI: http://data.europa.eu/eli/reg/2017/1939/oj).
** This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence
18 Regulation (EU) 2021/1529 of the European Parliament and of the Council of 15 September 2021 establishing the Instrument for Pre-Accession assistance (IPA III), OJ L330, 20.09.2021.
19As referred to in Article 58(2)(a) or (b) of the Financial Regulation.
20Details of budget implementation methods and references to the Financial Regulation may be found on the BUDGpedia site: https://myintracomm.ec.europa.eu/corp/budget/financial-rules/budget-implementation/Pages/implementation-methods.aspx
21Year 2024 is the year in which implementation of the proposal/initiative starts.
22Year 2024 is the year in which implementation of the proposal/initiative starts.
23Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.
24AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.
25As 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.
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