Commission raises overall ceiling...

The present ceiling was increased by EU finance ministers already in December to €25 billion, but the scope and intensity of the international financial crisis calls for another pre-emptive increase and to show solidarity with countries that do not yet benefit from the protective umbrella of the euro.
This shows that the EU solidarity mechanisms exist and can be made ever more powerful at short notice to the benefit of its most vulnerable members. Thanks to the balance-of-payments assistance facility that is already being used for three countries, the considerable transfers under the powerful EU structural funds and other financial instruments and institutions, our Member States should be able to withstand the pressures brought about by the economic crisis provided they contribute with stable and sound macro-economic policies, said Joaqun Almunia, European Economic and Monetary Affairs Commissioner.
In order to be able to react quickly to potential demand for financial assistance from EU countries outside the euro area, the Commission proposes to increase to 50 billion euro the ceiling set in Regulation 332/2002 establishing a facility providing medium-term financial assistance for Member States quo; balances of payments. The present ceiling, revised in early December 2008, is 25 billion euro.
The proposal follows the call by EU heads of government at the March Summit for a doubling of the ceiling. The revised regulation needs to be adopted by EU finance ministers, which is expected to happen at their May 4th meeting, following consultation with the European Parliament and the European Central Bank.
Two countries presently benefit of medium-term balance-of-payment loans: Hungary with up to 6.5 billion euro and Latvia with up to euro 3.1 billion (see IP/08/1612, IP/08/2045 and IP/09/323). Following a request by Romania, the Commission also recently announced, after consulting with the Economic and Financial Committee, its intention to provide up to 5 billion euro to the Romanian authorities up to the first quarter of 2011 (see IP/09/475). A formal proposal to the Council is expected later this month.
This leaves a total of 10.4 billion euro available under the present ceiling. There are no other requests at present.
Drawing on the recent experience with the medium-term financial assistance, the Commission also proposes some amendments with a view to clarifying the respective tasks and responsibilities of the Commission and of the Member State concerned, and to spell out some technical details. These cover for instance the conclusion of a MoU between the Commission and the Member State concerned detailing the conditions approved by the Council or the possibility for the Court of Auditors to carry out audits.
The adopted Commission proposal is available at the website of the Commission's Directorate-General for Economic and Financial Affairs at:

An instrument to grant mutual assistance to an EU country in difficulty or threatened with difficulties as regards its balance of payments was first created in 1988 (Regulation 1969/88, Official Journal L 178) The EU countries that have already adopted the euro do not qualify for medium-term financial assistance. But the regulation was kept and modified in 2002 (Regulation 332/2002, OJ L53) to meet the potential needs of other EU countries until they too adopt the euro. The ceiling was then set at 12 billion euro.
The assistance is financed through the recourse to the capital markets, using the creditworthiness of the European Community (EC), the EU's legal entity. The EC benefits from the unconditional support of all the Member States. The money is lent under the same conditions under which it was borrowed (so-callled back-to-back loans).
The assistance is granted in several instalments, according to a Loan Agreement that also sets the maturity, interest, modalities of disbursement and repayment...etc). The release of the instalments is conditional on terms agreed with the beneficiary country in a Memorandum of Understanding. See following website for MoUs with Hungary and Latvia and other documents related with the economic and financial crisis:
The EC has carried out three euro bond issues since last year to finance a first instalment of 2 billion euro for Hungary (disbursed early December 2008), a second instalment also to Hungary and also of 2 billion euro (disbursed late March) as well as a first instalment of 1 billion euro to Latvia (paid in February). The last issue, placed on 17 March and due on 7 November 2014 (5-year maturity), was priced 3.25%.
The balance-of-payments assistance is generally granted in conjunction with the International Monetary Fund and the budgetary and macro-economic conditions are also coordinated with the IMF and other international institutions.