Communication from the Commission concerning the prolongation of the Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance

(2018/C 457/04)

I. Introduction

Prolongation of the Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance

(1) According to its point 40, the Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance (the Communication) ( 1 ) is applicable until 31 December 2018.

Marketability of short-term export-credit risks towards Greece

(2) The Communication stipulates in point 13 that State insurers ( 2 ) cannot provide short-term export-credit insurance for marketable risks. Marketable risks are defined in point 9 as commercial and political risks with a maximum risk period of less than two years on public and non-public buyers in the countries listed in the Annex to that Communication.

(3) Because of the lack of insurance or reinsurance capacity to cover exports to Greece, the Commission amended the Communication by temporarily removing Greece from the list of marketable risk countries in 2013. This modification has been prolonged several times since ( 3 ) . The last prolongation is due to expire on 31 December 2018.

(4) Consequently, as from 1 January 2019, Greece would be considered as marketable risk country, since all EU Member States are included in the list of marketable risk countries in the Annex to the Communication.

(5) In accordance with point 36 of the Communication, the Commission started to review the insurance and reinsurance capacity to cover exports to Greece several months before the expiry of the last modification to determine whether the current market conditions justify Greece’s return to the list of marketable risk countries as of 1 January 2019, or whether the market capacity is still insufficient to cover all economically justifiable risks, so that a prolongation of the removal is needed.

II. Assessment

Prolongation of the Communication

(6) Having regard to the need for continuity and legal certainty in the treatment of State aid in the field of short-term export-credit insurance, it is considered appropriate to apply the current Communication until 31 December 2020. This will align its expiration date with those of the majority of State aid guidelines adopted pursuant to the State aid modernisation programme.

Marketability of short-term export-credit insurance towards Greece

(7) By virtue of section 5.2 of the Communication, the Commission conducted its assessment based on the criteria laid down in point 33: private credit insurance capacity, sovereign rating and corporate sector performance (in particular insolvencies).

(8) When determining whether the lack of sufficient private capacity to cover all economically justifiable risks justifies the prolongation of the temporary removal of Greece from the list of marketable risk countries, the Commission consulted and sought information from Member States, private credit insurers and other interested parties. On 11 October 2018, the Commission published an information request on the availability of short-term export-credit insurance for exports to Greece ( 4 ) . The deadline for replies expired on 9 November 2018. The Commission received 21 replies from Member States and two replies from other interested parties.

(9) The information submitted to the Commission in the context of the public information request indicates that private short-term export-credit insurers have remained restrictive to provide insurance coverage for exports to Greece in all trade sectors. At the same time, State insurers continued to register sizeable demand for credit insurance for exports to Greece, which corroborates the limited availability of private insurance. Among Member States, six explicitly asked for a prolongation of the current exclusion of Greece from the list of marketable countries, four indicated they did not object to a prolongation, while three Member States considered exports to be marketable due to the reestablishment of the economic situation in Greece. Many respondents noted the demand for public export credits and noted the reluctance of private insurance for export credits with respect to Greece. Among the other interested parties, one considered the situation in Greece as having improved, supporting that the short-term risk in Greece can be privately insured, while another supported the prolongation of Greece’s removal from the list of marketable risk countries.

(10) In Greece, the non-performing loans figures remain at an elevated level even if they are gradually declining. Those figures provide an explanation why private short-term export-credit insurance has not yet recovered, since they are a reflection of the risk that undertakings in Greece might be unable to pay their invoices. In Greece, private sector non-performing loans represent effectively half of private sector gross loans. For the banking sector, non-performing loans represent around 44,6 % of gross loans ( 5 ) while this figure amounts to 3,6 % for the EU on average at the same period (at 2018-Q2). With non-performing loans at such a high level, private insurance is perceived as too risky. While these statistics are gradually improving on the back of a strengthened non-performing loans resolution framework, a private market for short-term export-credit insurance to Greece does not yet exist.

(11) Greece’s sovereign credit ratings currently are B3 (Moody’s), B+ (Standard & Poor’s), and BB- (Fitch). All of these put Greece in the non-investment grade category and point towards substantial risks for creditors. As of August 2018, Greek government bonds are no longer accepted by the European Central Bank as collateral. In addition, the European Central Bank does not include them in its bond purchase programme.

(12) The Greek 10-year government bond is currently ( 6 ) trading at a yield around 4,4 %. While this yield has come down substantially compared to one year ago, it nevertheless remains elevated compared to the other EU Member States ( 7 )

(13) The Greek economy returned to mild growth in 2017. The data released by the Hellenic Statistic authority in October 2018 revealed that real GDP has increased by 1,5 % in 2017 ( 8 ) . Real GDP growth is expected to accelerate further in 2018 and 2019, assuming sustained reform commitment and implementation.

(14) In these circumstances, the Commission considers that there is a lack of sufficient private capacity to cover all economically justifiable risks and decides to prolong the removal of Greece from the list of marketable risk countries until 31 December 2019. The conditions of coverage set out in section 4.3 of the Communication are applicable in this case.

Amendment to the communication

(15) The Commission has decided to continue to apply the current Communication until 31 December 2020.

(16) The following amendment to the Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance will apply from 1 January 2019 until 31 December 2020: — the Annex is replaced by the following: ‘List of marketable risk countries: Belgium Cyprus Slovakia Bulgaria Latvia Finland Czechia Lithuania Sweden Denmark Luxembourg United Kingdom Germany Hungary Australia Estonia Malta Canada Ireland Netherlands Iceland Greece (9) Austria Japan Spain Poland New Zealand France Portugal Norway Croatia Romania Switzerland Italy Slovenia United States of America’

(1) Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance (OJ C 392, 19.12.2012, p. 1).

(2) A State insurer is defined by the Communication as a company or other organisation that provides export-credit insurance with the support of, or on behalf of, a Member State, or a Member State that provides export-credit insurance.

(3) In 2013 (OJ C 372, 19.12.2013, p. 1), in the beginning of 2015 (OJ C 28, 28.1.2015, p. 1), in June 2015 (OJ C 215, 1.7.2015, p. 1), in June 2016 (OJ C 244, 5.7.2016, p. 1), in June 2017 (OJ C 206, 30.6.2017, p. 1) and most recently in June 2018 (OJ C 225, 28.6.2018, p. 1).

(4) http://ec.europa.eu/competition/consultations/2018_stec_greece/index_en.html

(5) https://www.eba.europa.eu/documents/10180/2385362/EBA+Dashboard+-+Q2+2018.pdf

(6) October 2018.

(7) This corresponds to a spread of almost 4 % to the yield of the 10 year German Bond.

(8) http://www.statistics.gr/en/home/

(9) Greece is temporarily removed from the list of marketable risk countries until 31 December 2019.