The European Commission extends the macro-financial assistance of €100m to Armenia and €46 m for Georgia, EU press release reads October 16.

The Commission proposed to the Council to provide macro-financial assistance (MFA) to Armenia in the form of a loan of up to €65 million and a grant of up to €35m. The assistance will be provided in two installments, tentatively in the first and fourth quarter of 2010. The assistance will support the adjustment program agreed between Armenia and the International Monetary Fund (IMF) to help the country through the global crisis.

The global economic crisis started affecting Armenia in the last quarter of 2008. As the country's economic activity and external situation deteriorated, Armenia agreed, in March 2009, a USD 540m Stand-By Arrangement program with the IMF. In the light of a substantial worsening of the economic conditions, the IMF decided in June 2009 to approve an increase of its resources by about USD 250m. Armenia's GDP is foreseen to decrease by 15.6% in 2009, the budget deficit to reach 7.5% of GDP and the current account deficit to reach 13.7% of GDP. A slow recovery is expected in 2010. Other international donors like the World Bank and the Asian Development Bank support Armenia's economic adjustment effort along with other bilateral donors, the paper says.

The Commission also proposed €46m in grants to Georgia, also under the European Union's MFA program. The grant would be provided in two installments, tentatively in the fourth quarter of 2009 and first half of 2010. In the case of Georgia, the assistance is part of an EU package of up to €500m to support Georgia's economic recovery in the aftermath of the conflict with Russia, and will support the adjustment program agreed with the IMF.

According to EU, the military conflict with Russia and the impact of the global crisis have severely affected the economic situation in Georgia, which had previously enjoyed a strong growth performance. The real GDP is expected to decline by 4% in 2009, about the same as the EU average.