Type of assistance
The EU offers BoP assistance to EU countries outside the euro area that are experiencing or threatened by difficulties regarding their balance of payments. BoP assistance takes the form of medium-term loans that are conditional on the implementation of policies designed to address underlying economic problems. Typically, balance of payments assistance from the EU is offered in cooperation with the International Monetary Fund (IMF) and other international institutions or countries.
How does it work?
A country that would like to make use of the EU’s BoP assistance must submit a request to the European Commission and the Council and put forward a plan outlining the policies they intend to pursue to address their balance of payments problems.
The Commission and Council examine the request and then decide whether or not to grant financial assistance, and if so, the amount, duration and terms of the assistance.
The country seeking assistance and the Commission then sign a memorandum of understanding (MoU) that outlines the economic policy conditions that must be met before funds are released, and a loan agreement, detailing the borrowing process and financial conditions of the loan.
This MoU contains economic policy conditions which usually involve measures to ensure the strength of public finances and the stability of the financial sector, structural reforms to improve economic competitiveness and growth, and safeguards against fraud.
Financial assistance is released in stages after compliance with the conditions of the MoU has been verified.