EN Official Journal of the European Union C 225/1

Communication from the Commission amending the Annex 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

(2018/C 225/01)

I. INTRODUCTION

(1) 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 ) (the ‘Communication’) stipulates in paragraph 13 that State insurers ( 2 ) cannot provide short-term export-credit insurance for marketable risks. Marketable risks are defined in paragraph 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) However, in accordance with paragraph 36 of the Communication, the Commission started to review the situation several months before the end of Greece’s temporary removal in order to determine whether the current market conditions justify the expiry of Greece’s removal from the list of marketable risk countries as of 1 July 2018, or whether the market capacity is still insufficient to cover all economically justifiable risks, so that a prolongation is needed.

II. ASSESSMENT

(4) By virtue of Section 5.2 of the Communication, the Commission will conduct its assessment, based on the criteria laid down in recital (33): private credit insurance, sovereign rating, corporate sector performance (insolvencies).

(5) 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 15 March 2018, the Commission published an information request on the availability of short-term export-credit insurance for exports to Greece ( 9 ) . The deadline for replies expired on 16 April 2018. The Commission received 27 replies from Member States and private insurers.

(6) The information submitted to the Commission in the context of the public information request indicates that private 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, nine explicitly asked for a prolongation of the current exclusion of Greece from the list of marketable countries while no Member State requested that the exclusion must be terminated. 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 replies of parties that are normally involved in providing export credits, none asked for an end to the status quo with respect to Greece.

(7) The non-performing loans (‘NPLs’) figures remain at an elevated level even if they are gradually declining and provide an explanation why private short-term export-credit insurance has not recovered until now as these NPLs figures are a reflection of the risk that undertakings in Greece might be unable to pay their invoices. With NPLs at such a high level, private insurance is perceived as too risky. In Greece, private sector NPLs ( 10 ) represent effectively half of private sector gross loans. For the banking sector ( 11 ) , NPLs represent around 45 % of gross loans while this figure amounts to 4,4 % for the EU on average at the same period (at 2017-Q3). These statistics are gradually improving on the back of a strengthened NPL resolution framework, but a private market for short-term export-credit insurance to Greece does not yet exist.

(8) Greece’s sovereign credit ratings currently are B3 (Moody’s), B (Standard & Poor’s), and B- (Fitch). All of these put Greece in the non-investment grade category and point towards substantial risks for creditors. As of June 2016, the Greek government bonds are accepted by the European Central Bank (ECB) as collateral under its waiver for programme countries ( 12 ) , but with a significant discount to be applied on their nominal value. In addition, ECB does not include them in its bond purchase programme.

(9) The Greek 10-year government bond is currently ( 13 ) trading at a yield around 4,5 %. While this yield has come down substantially compared to one year ago, it is remaining nevertheless elevated compared to the other EU Member States ( 14 )

(10) The Greek economy returned to mild growth in 2017. The data released by the Hellenic Statistic authority in April 2018, revealed that real GDP has increased by 1,4 % in 2017 ( 15 ) . Real GDP growth is expected to accelerate further in 2018 and 2019, assuming the orderly completion of the 4th and final programme review and assuming the successful conclusion of the European Stability Mechanism (ESM) stability support programme along with the implementation of debt measures by August 2018. The constraints of the financial system to finance investment are expected to ease gradually.

(11) In these circumstances the Commission expects that private export-credit insurers will continue to be very cautious in providing insurance coverage for exports to Greece. Private insurers will likely resume increasing their exposure, only if there is more visibility and clarity regarding the economic policies in Greece and if a significant improvement of the economic situation is noticed.

(12) For those reasons, the Commission considers that there is a lack of sufficient private capacity to cover all economically justifiable risks and decided to prolong the removal of Greece from the list of marketable risks until 31 December 2018 ( 16 ) . The conditions of coverage set out in Section 4.3 of the Communication are applicable in this case.

III. AMENDMENT TO THE COMMUNICATION

(13) 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 July 2018 until 31 December 2018: — the Annex is replaced by the following: ANNEX List of marketable risk countries — All Member States with the exception of Greece — Australia — Canada — Iceland — Japan — New Zealand — Norway — Switzerland — United States of America

(1) 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) OJ C 398, 22.12.2012, p. 6.

(4) OJ C 372, 19.12.2013, p. 1.

(5) OJ C 28, 28.1.2015, p. 1.

(6) OJ C 215, 1.7.2015, p. 1.

(7) OJ C 244, 5.7.2016, p. 1.

(8) OJ C 206, 30.6.2017, p. 1.

(9) http://ec.europa.eu/competition/consultations/2017_export_greece/index_en.html

(10) Source: https://ec.europa.eu/info/publications/180314-non-performing-loans-progress-report_en

(11) Source: http://www.eba.europa.eu/documents/10180/2085616/EBA+Dashboard+-+Q3+2017.pdf

(12) https://www.ecb.europa.eu/ecb/legal/pdf/celex_32016d0018_en_txt.pdf

(13) Beginning of June 2018.

(14) This corresponds to a spread of more than 3 % to the yield of the 10-year German Bund.

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

(16) Which corresponds to the expiration date of the Communication.