Introductory text

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 308 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

After consulting the Economic and Financial Committee,

Whereas:

On 4 January 2007 the authorities of Lebanon adopted a comprehensive programme of socio-economic reforms, which simultaneously embraces fiscal, structural and social measures, setting medium-term priorities for government action.

Lebanon, on the one hand, and the European Community and its Member States on the other hand, have signed an Association Agreement^f1, which entered into force on 1 April 2006.

The authorities of Lebanon are committed to economic stabilisation and structural reforms, supported by the International Monetary Fund (IMF) through a programme under the Emergency Post-Conflict Arrangement (EPCA) which was approved on 9 April 2007.

Relations between Lebanon and the European Union are developing within the framework of the European Neighbourhood Policy, which is expected to lead to deeper economic integration. The EU and Lebanon have agreed on a European Neighbourhood Policy Action Plan identifying medium-term priorities in EU-Lebanon relations and related policies.

Lebanon faces substantial financing needs arising from the mounting financial constraints of the public sector, including a high level of public debt, aggravated by the July-August 2006 military conflict and a projected deterioration of the balance of payments in 2007.

The Lebanese authorities have requested financial assistance on a concessional basis from the International Financial Institutions, the Community and other bilateral donors. Over and above the financing from the IMF and the World Bank, a substantial residual financing gap remains to be covered to relieve the country’s balance of payments, public finances and public debt and support the policy objectives attached to the authorities’ reform efforts.

Lebanon is one of the most indebted countries in the world facing a heavy debt overhang. In these circumstances, the Community assistance to Lebanon should be made available in the form of a combination of a grant and loan, as an appropriate measure to help the beneficiary country at this critical juncture.

In order to ensure efficient protection of the Community’s financial interests linked to the present financial assistance, it is necessary to provide for appropriate measures by Lebanon related to the prevention of, and to the fight against, fraud, corruption and any other irregularities linked to this assistance, as well as for controls by the Commission and audits by the Court of Auditors.

The release of the Community financial assistance is without prejudice to the powers of the budgetary authority.

This assistance should be managed by the Commission in consultation with the Economic and Financial Committee,

HAS DECIDED AS FOLLOWS: