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South Eastern Europe

European Commission proposes 200M euro loan to Serbia

Author: Clive Leviev-Sawyer Date: Thu, Oct 08 2009 2079 Views
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The European Commission on October 8 2009 proposed to the European Council to provide macro-financial assistance to Serbia, in the form of a loan of up to 200 million euro.

The assistance, the Commission said in a statement, will support the adjustment programme agreed by the Serbian government with the International Monetary Fund to help the country through the global crisis.

The proposed assistance comes on top of the EU budget support in the form of 100 million euro in grants agreed in August under the IPA – Instrument of Pre-Accession programme.

The Commission said that it had adopted a draft decision recommending to the Council to provide macro-financial assistance in the form of a loan of 200 million euro to Serbia.
The loan would be provided in two instalments, tentatively in the second and fourth quarter of 2010.
"The assistance supports, and is conditional on the respect of the adjustment programme agreed between Serbia and the IMF. It complements the latter's financial assistance to the country. The European Parliament is also consulted," the Commission said.
Earlier in 2009, the EU had already agreed to pay 100 million euro in budget support grants under pre-accession funding, which offers assistance to countries aspiring to join the EU. Such pre-accession funds are generally used to fund projects.
The global economic crisis started to affect Serbia in the second half of 2008.
As the country's external situation became more precarious and the budget came under increasing pressure, Serbia agreed a 3 billion euro stand-by arrangement programme with the IMF in May 2009.
Serbia's GDP is foreseen to decrease by four per cent in 2009, and the budget deficit to reach 4.5 per cent of GDP. A slow recovery is expected in 2010.

The European Investment Bank and European Bank for Reconstruction and Development have also enhanced their investment support in Serbia and the other Western Balkan countries.
The Commission said that it welcomes key support from private EU based parent-banks having a subsidiary in Serbia that have committed to maintain their financial exposure on the country.
The IMF capacity to help countries with financial difficulties is being considerably increased by EU member states and other IMF members.
The EU recently committed to provide 125 billion euro to the IMF, which is 35 per cent of the increase in the IMF's lending capacity from $250 billion to $750 billion.
Macro financial assistance loans are financed through EU borrowings on the market. The money is lent with similar financial terms.

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