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MEPs approve €500m in fresh EU loans to Tunisia

A plan to lend Tunisia €500 million on favourable terms to help it reduce its external debt and consolidate its democratic mechanisms was backed by MEPs on Wednesday.

MEPs backed the plan by 561 votes to 76, with 42 abstentions.

“The major challenges in Tunisia are the economic downturn, soaring unemployment, and terrorist attacks that frightened away tourists.  At the same time, Tunisia has received more than 1.8 million refugees from Libya, a number equivalent to almost 20% of its population. Tunisia’s transition towards democracy still remains absolutely remarkable. Europe really needs to stand by its side now, and I ask the Commission to make this money available as quickly as possible, before the summer”, said rapporteur Marielle de Sarnez (ALDE,FR) in the debate before the vote.

She added that “this macro-financial assistance is not a grant, it is only a loan which Tunisia will have to repay, even though its debt continues to rise.” She invited the EU Commission to “start thinking” along the lines of France and Germany which have decided to convert part of Tunisia’s debt into investment in Tunisia.”

To access the money, Tunisia must sign a memorandum of understanding with the EU Commission pledging structural reforms and sound management of public finances. Tunisia will also have to ensure effective democratic mechanisms, rule of law and respect for human rights, all of which are to be monitored by the EU.

When this is done, Tunisia will have the opportunity to take up the loans within a period of two and a half years.

On 1 June 2016, the Council also endorsed the decision to provide a maximum of €500 million in macro-financial assistance to Tunisia.

The EU aid to Tunisia will supplement $2.9 billion in International Monetary Fund aid to Tunisia.

Tunisia’s economy has been in serious difficulty since the 2011 Arab Spring revolution. In 2015, it was hit by terrorist attacks that disrupted tourist flows and exacerbated its already weak fiscal and balance of payments position. The growth forecast for 2016 is 0.5%, down from 3% in 2015. Unemployment rates are 20% for women, 28.6% for young university graduates and an overall average of 15%.

The EU granted Tunisia €300 million financial aid in 2014. In August 2015, the Tunisian Government asked the EU to contribute €500 million to a second assistance programme, supplementing loans from the International Monetary Fund (IMF).

Following a European Parliament vote in 2016, the EU also granted Tunisia a temporary additional quota for duty-free olive oil imports.