Report from the Commission to the Council and to the European Parliament on the borrowing and lending activities of the Community in 2002
Date: 2003-12-19
Institutions: European Commission
Subjects: Community loan, EIB loan, EU borrowing, activity report, third country

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 19.12.2003
COM(2003) 803 final

REPORT FROM THE COMMISSION
TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT

ON THE BORROWING AND LENDING ACTIVITIES OF THE COMMUNITY IN
2002

EN

  EN

TABLE OF CONTENTS

INTRODUCTION...................................................................................................................... 3

1.

1.1.

1.2.

2.

2.1.

2.2.

2.3.

BORROWING ACTIVITIES IN 2002........................................................................ 4

Community issues ........................................................................................................ 4

Trends in borrowing..................................................................................................... 4

LENDING IN NON-MEMBER COUNTRIES ........................................................... 5

Overview ...................................................................................................................... 5

The Community's macrofinancial assistance ............................................................... 6

EIB lending in 2002 in Central and Eastern Europe, the Mediterranean, Asia & Latin
America and Republic of South Africa........................................................................ 8

2.3.1.

EIB Objectives and Priorities....................................................................................... 8

2.3.2.

Lending Activity ........................................................................................................ 11

2.3.3. Risk-sharing ............................................................................................................... 16

2.3.4. Cooperation with other institutions............................................................................ 18

2.4.

Signatories of the Lomé Convention-Lending Activity............................................. 26

3.

3.1.

3.2.

3.3.

4.

BUDGETARY IMPACT OF LENDING .................................................................. 27

Budget guarantees ...................................................................................................... 27

Interest subsidies ........................................................................................................ 28

Venture capital ........................................................................................................... 28

STATISTICAL ANNEX ........................................................................................... 29

2

 
INTRODUCTION

The  Council  decisions  establishing  the  various  Community  lending  instruments
1.
require the Commission to inform the Council and Parliament each year of the use made of
these instruments.

As  the  appropriations  allocated  by  the  Council  to  the  New  Community  Instrument  (NCI)
have been used up and the ECSC Treaty expired in 2002, the Commission understands that it
is no longer necessary to inform the Council and Parliament of Community lending activities
under  these  instruments  within  the  Community.  This  report  contains  only  information
concerning the repayment of loans (see the section on borrowings).

2.
As for lending activities outside the Community, the decisions adopted in 1997 and
20001 require  the  Commission  to inform the Council and  Parliament  on  an  annual  basis  of
the  situation  regarding  EIB  loans  guaranteed  by  the  Community  budget  in  Central  and
Eastern  Europe,  in  the  Mediterranean  countries,  in  Latin  America  and  Asia  and  in  South
Africa.  These  same  obligations  were  extended  in  1998  to  the  EIB’s  loans  to  the  former
Yugoslav  Republic  of  Macedonia  (Decision  98/348/EC)  and  Bosnia  and  Herzegovina
(Decision 98/729/EC), in 1999 to the loans to Turkey (Decision 99/786/EC), in 2000 to the
loans  to  Croatia  (Decision  2000/688/EC)  and  Turkey-SAP  (Decision  2000/788/EC)  and  in
2001 to the loans to the Baltic regions of Russia (Decision 2001/777/EC) and to the Federal
Republic of Yugoslavia (Decision 2001/778/EC).

In order to meet this requirement, this report describes these operations for each of the areas
concerned. To complete the picture of lending activities, it also gives a brief summary of the
macrofinancial assistance provided by the Community to the countries of Central and Eastern
Europe and of the interest subsidies and guarantees associated with Community loans.

1

Decision 97/256/EC for the first global mandate and 2000/24/EC for the second mandate.

3

 
                                                
1. 

BORROWING ACTIVITIES IN 2002

1.1. 

Community issues

In  order  to  finance  the  lending  activities  decided  by  the  Council,  the  Commission  is
empowered  to  borrow  funds  on  the  capital  market.  However,  given  that  the  NCI  ceilings
have been fully used up and the ECSC Treaty expired in 2002, no funds were raised on the
basis  of  these  instruments  in  2002.  The  only  borrowing  for  macrofinancial  assistance  last
year was for a western Balkan country. There was only one borrowing under the EURATOM
loans instrument to finance a loan to Bulgaria.

1.2. 

Trends in borrowing

Despite the above-mentioned factors, borrowings by the European institutions (see Table 4-1
in annex)  increased in 2002 by  17,2% to  €  38,1 billion,  against  €  32,5 billion the  previous
year.

Taking  into  account  repayments,  cancellations  and  exchange-rate  fluctuations,  the  total
amount of borrowings outstanding as at 31 December 2002 was € 183,3 billion, 2,3% up on
2001 (see Table 4-2 in annex).

The  breakdown  of  borrowings  by  currencies  (see  Table  4-3  in  annex)  shows  a  decrease  of
Euro borrowings in 2002 to 59% compared  to 67,3%  in  2001  of  all  issues,  while  issues  in
other  Community  currencies  fell  from  21,7%  to  17,7%.  The  decrease  in  all  Community
currencies  as  a  whole  was  in  favour  of  non-Community  currencies,  which  increased  from
11%  to  23,3  %  of  the  total.  Issues  in  US  dollars  were  up  from  7,6%  to  21,7%  on  strong
market demand and supported by very low interest rates and a falling currency.

Low  interest  rates  and  economic  and  financial  uncertainties  led  borrowers  to  continue  to
favour variable-rate loans. Such loans accounted for 85,5% in 2002 against just under 80% in
2001.

With regard to the special case of the NCI there were no new borrowings in 2002. The cor-
responding situation for outstanding borrowings is set out by currency in Table 4-4 in the
statistical annex.

4

 
2. 

LENDING IN NON-MEMBER COUNTRIES2

2.1. 

Overview

Financial  support  for  non-member  countries  that  have  concluded  cooperation  agreements
with the Community takes a variety of forms depending on the geographical areas concerned
and  the  objectives  pursued.  It  generally  takes  the  form  of  bilateral  loans  (macrofinancial
support  or  balance-of-payments  support),  where  the  Union  helps  to  re-establish  a  country's
macroeconomic balance. In other cases it may be ordinary loans in the form either of direct
financing  for  individual  projects  or  of  global  loans  to  banks,  which  then  allocate  funds  to
smaller-scale local projects.

In  the  first  case,  the  Commission  administers  the  financial  operations  under  the  Council
directives.  In  the  second  case,  it  is  chiefly  the  EIB,  which  manages  the  loans  on  its  usual
terms, mostly with the guarantee of the Commission budget.

The Euratom loans instrument is available for financings to Member States and certain non-
Member States (Armenia, Bulgaria, Czeck Republic, Hungary, Lithuania, Romania, Russia,
Slovakia, Slovenia and Ukraine are elegible).

The areas for which the Community conducts activities are listed in Table 2.1.

Table 2.1

Lending outside the Community in 2002 - Overview

EC

EIB (2)

€ million

 Budget and
EDF resources
(3)

Own
resources

TOTAL

 Macro-
financial
assistance
(1)

12

Euratom
(1)

40(4)

Balkans

PECO

Mediterranean basin

Latin America and Asia

South Africa

ACP-OCT countries

Total

(1)

(2)

(3)

(4)

40

12

175

175

Disbursements

Signatures

Granted and administered by the EIB out of the budgetary resources of the EC or the European
Development Fund (EDF).
Bulgaria

425

500

437

540

1.401

1.401

174

50

123

174

50

298

2.673

2.900

2

There were no lending activities to Member States for the ECSC and for EURATOM in 2002

5

 
                                                
2.2. 

The Community's macrofinancial assistance

Macrofinancial assistance in the form of loans is, by  its very nature, exceptional and forms
part of the efforts of the international community to provide, in conjunction with the Bretton
Woods  institutions,  balance-of-payments  support  to  certain  countries  grappling  with
transitional difficulties. The Community’s assistance focuses on neighbouring regions, such
as Central and Eastern Europe, the Western  Balkans, the NISs of Europe, Central Asia and
the Caucasus and the countries of the southern Mediterranean. Disbursements are themselves
linked  to  the  beneficiary  countries’  meeting  objectives  in  terms  of  macroeconomic
stabilisation and structural reforms. In these circumstances, the number of operations effected
each  year  is  limited,  and  it  is  difficult  to  make  valid  comparisons  for  the  assistance  given
from  one  year  to  the  next.  However,  as  the  candidate  countries  make  significant  progress
toward  macroeconomic  adjustment,  macrofinancial  assistance  in  this  region  has  been
progressively phased out. In contrast, the Western Balkans region has increasingly benefitted
over  the  past  years  from  Community  macrofinancial  assistance,  which  also  includes  a
significant grant component.

In the Western Balkans, the Council approved in 2002 macro-financial assistance in the form
of a loan totalling € 55 million to Serbia and Montenegro, accompanied by a grant of up to €
75 million. It also decided a loan of up to € 20 million and a grant of up to € 40 million for
Bosnia Herzegovina.

Regarding  the  NIS,  the  accent  was  put  on  reformating  undisbursed  amounts  of  previous
macro-financial assistance operations. First, the 1998 Decision of the Council granting a loan
of  up  to  €  150  million  to  Ukraine,  of  which  only  €  58  million  was  disbursed,  has  been
replaced by a new € 110 million loan package decided in July 2002 while the € 92 million
undisbursed part of the previous loan was cancelled. The new loan includes more favourable
terms, both in terms of maturity (15 years instead of 7) and in terms of grace period (10 years
instead of 7). In the same vein, the € 15 million balance of payments loan decided in 2000 for
Moldova was cancelled and replaced by a grant of the same amount approved by the Council
in December 2002.

Only one loan disbursement for an amount of € 12 million took place in early 2002 in favour
of FYROM on the basis of procedures intiated in 2001.

Assistance in the form of outright grants totalling € 141 million was also paid out in 2002, of
which  €  11  million  went  to  Armenia,  €  115  million  to  Serbia  and  Montenegro  and  €  15
million to Kosovo.

6

 
Table 2.2

Loan disbursements for macrofinancial assistance to
non-member countries 1996-2002

Bulgaria

Romania

Subtotal "Enlargement" countries

Bosnia-Herzegovina (2)

FYROM (3)

Serbia and Montenegro (4)

€ million

1996

1997

1998

1999

2000

2001

2002 Total

40

40

250

40

60

70

70

250

25

15

100

160

40

10

390

170

0

560

12

20

62

225

0

10

10

225

Subtotal  Other  CEECs 
Balkan (1)

-  Western

0

25

10

0

245

12

307

15

28

110

15

100

100

115

100

138

58

58

28

110

15

60

258

60

0

60

0

471

Armenia (5)

Georgia (5)

Moldova

Tajikistan (6)

Ukraine

Subtotal NIS

Grand Total

155

195

403

108

160

305

12

1.338

(1)  A  grant  of  €  20  million  was  disbursed  to  Albania  in  1996.  Grants  of  €  35  million  and  €  7  million  were
disbursed to Kosovo and Montenegro respectively in 2000
(2)  Disbursement  of  the  loan  was  accompanied  by  disbursements  of  grants  of  €  15  million  in  1999  and  €  10
million in 2000. A further grant of € 15 million was paid in 2001.
(3) Grants totalling € 20 million were disbursed in 2000 under a new operation, followed by a further grant of €
10 million in 2001.
(4) Disbursements accompanied by grants totaling € 35 million in addition to the € 35 million for Kosovo and the
€ 13 million for Montenegro granted in 2000 in the form of budgetary support. A further grant of € 15 million was
disbursed in 2001 to Kosovo.
(5) Exceptional financial assistance. These loan disbursements to Armenia and Georgia were supplemented by the
disbursement of grants totalling respectively, € 8 million and € 10 million in 1998 and € 4 million an d € 9 million
in 1999. A further grant of € 6 million was made to Georgia in 2001.
(6) This loan was accompanied by the disbursement of grants totalling € 14 million.

7

 
2.3. 

EIB lending in 2002 in Central and Eastern Europe, the Mediterranean, Asia &
Latin America and Republic of South Africa3

Section 2.3 constitutes the annual report for 2002 to be submitted to the European Parliament
and the Council in accordance with Article 2 of Council Decision 2000/24/EC.

2.3.1.  EIB Objectives and Priorities

In  Central  and  Eastern  Europe,  the  Bank  has  been  increasingly  active  in  the  Accession
countries,  helping  them  to  progress  with  their  preparations  for  accession  and  European
integration  (the  Bank  also  assists  the  other  applicant  countries).4  In  addition,  the  Bank  has
developed  a  significant  level  of  activity  in  the  countries  of  the  Western  Balkans  by
supporting investment projects in Albania, Croatia, the Republic of Serbia and Montenegro
and Bosnia-Herzegovina.

The  EIB  gives  priority  to  upgrading,  modernising  and  developing  the  communications  and
energy sectors, with particular emphasis on Trans-European Networks (TENs) on the basis of
the road and rail corridors defined by the Pan-European Conference of Transport Ministers as
development priorities for the medium term.

Furthermore, the Bank has progressively widened the range of its activities in preparing for
enlargement. Environmental issues related to EIB projects, as well as environmental projects
per se, are given priority in the framework of the gradual adaptation of the legislation of the
countries  concerned  to  that  of  the  EU.  The  EIB  also  supports  SMEs  and  other  industrial
initiatives, either directly or through its global loan instrument, in particular when involving
EU partners.

In the Mediterranean region, the Bank’s lending under mandate takes place mainly within
the  framework  of  the  Euro-Mediterranean  Partnership,  in  support  of  the  economic
development of the countries concerned. EIB lending supports individual investment projects
and, through the global loan mechanism, smaller projects and SMEs, while at the same time
strengthening  the  financial  sector  in  the  various  countries.  The  Bank  also  lends  under  the
TERRA Programme (Turkey Earthquake Reconstruction and Rehabilitation Action (Council
decision  99/786/EC))  and  under  the  Turkey  Special  Action  Programme  (Council  decision
2000/788/EC).

Under  the  terms  of  the  Euro-Mediterranean  Partnership,  EIB  own  resources  lending  is
complemented by interest subsidies (for loans in the environmental sector) and by risk capital
from EU budgetary sources, managed by the Bank.

In  addition  to  its  lending  under  Mandate  and  at  the  request  of  the  Council,  the  Bank  has
launched  a  programme  of  lending  from  its  own  resources,  without  budgetary  guarantee,
under its Mediterranean Partnership Facility. A first project was approved during 2002.

3

4

Legal  base:  Council  decisions  97/256/EC,  98/348/EC,  98/729/EC,  99/786/EC,  2000/24/EC,
2000/688/EC, 2000/788/EC, 2001/777/EC and 2001/778/EC
In  addition  to  its  activities  under  mandate  in  the  framework  of  the  Council  Decisions,  the  Bank  has
renewed  its  substantial  Pre-Accession  Facility  for  lending  from  its  own  resources  without  budgetary
guarantee, to help the countries that have applied for EU membership.

8

 
                                                
In  Asia  and  Latin  America,  the  Bank  finances  projects  that  are  of  interest  to  both  the
Community  and  the  countries  concerned  –  cofinancing  with  EU  promoters,  transfer  of
technology, cooperation in the fields of energy and environmental protection. Details of the
mutual interest of the projects concerned are included in Table 2.3.6.

In  the  Republic  of  South  Africa,  the  Bank’s  objective  is  to  contribute  to  the  successful
implementation of the country’s reconstruction and development programme.

In  this  framework,  the  summary  of  the  activity  developed  by  the  EIB  since  1998  is  as
follows:

9

 
Table 2.3.1

Signatures on Own Resources in non EU countries
(excluding any signatures from Pre-Accession facilities)

1998

1999

2000

2001

€ million

1st half
2002

2nd half
2002

Total
1998-2002

CEEC (1997-2000)

997

906

77

CEEC (2000-2007)

ARYM

Bosnia-Herzegovina

0

70

0

0

60

0

MED 
1997-2000)

(Partenariat

677

719

MED 
2000-2007

(Partenariat

MED (protocols 3-4)

Turkey Terra

Turkey 
Action

– 

Special

ALA (1996-1997)

ALA (1997-2000)

ALA (2000-2007)

RSA (1997-2000)

RSA (2000-2007)

ACP (1990-1995)

ACP (1996-2000)

PTOM (1996-2000)

0

153

0

0

70

292

0

135

0

44

245

0

0

26

0

0

0

310

0

150

0

0

183

14

1.347

0

60

0

700

120

375

0

0

136

397

90

50

0

179

7

0

633

20

40

0

0

545

0

0

0

0

1.980

380

2.905

0

0

0

150

100

1.396

1.205

305

966

3.177

115

75

0

0

0

543

0

152

0

188

0

0

0

90

0

0

55

0

0

0

0

0

0

0

40

0

0

414

450

130

70

738

119

1.114

0

50

0

123

0

375

252

44

918

21

TOTAL

2.683

2.368

3.444

3.065

995

1.678

14.233

10

 
2.3.2.  Lending Activity

In  2002,  the  Bank  signed  11  loan  contracts  in  Central  and  Eastern  Europe  in  the
framework of the Council Decisions for an aggregate amount of € 500 million in 3 countries.
The majority (77%) went to Romania, with 17% to Bulgaria and the remainder to Slovakia.

– 

– 

– 

– 

Bank  activity  continues  to  support  the  economic  development  of  the  countries
concerned, principally by financing strategic infrastructure. Out of a total of € 500
million,  59%  or  €  295  million,  was  directed  towards  the  communications  sector,
including  road  construction  and  canal  bank  protection 
in  Romania  and
modernisation of port infrastructure in the Danube delta in Bulgaria.

€ 55 million(11%) was lent for improvement of water management infrastructure in
Romania and € 30 million (6%) went towards environment protection in Slovakia.

In  the  energy  sector,  €  60  million  (12%  of  total  financing)  was  allocated  to  the
upgrading of power transmission and distribution networks in Bulgaria.

Finally, global loans totalling € 60 million (12 % of total financing) were made in
support of SMEs in Bulgaria and Romania.

Table 2.3.2

Breakdown by country and sector of EIB lending in 2002 in the Central and Eastern
European countries

Country

Number of
loans

Total loan
signatures

Energy/
Environment

Communi-
cations

Monetary amounts in € million

Water
Manage-
ment&
Miscellaneous

Industry
& Services

Gobal and
Investment
loans

Bulgaria

Slovak Rep.

Romania

60

69%

30

100%

3

1

7

87

100%

30

100%

383

100%

Total

11

500

90

17

19%

278

73%

295

100%

18%

59%

55

14%

55

11%

10

12%

50

13%

60

12%

11

 
In 2002, the Bank signed 8 loan contracts in  the  Balkans in the  framework  of the Council
Decisions for an aggregate amount of € 425 million in 3 countries. The majority (64%) went
to the Republic of Serbia and Montenegro, with 31% to Croatia and the remainder to Bosnia
Herzegovina.

– 

– 

– 

Bank activity was directed principally towards the communications sector, including
road  and  railway  construction  in  Serbia  and  Montenegro  and  Croatia.  This  sector
absorbed € 310 million (73%) of total lending.

The  energy/industry  sectors  accounted  for  €  95  million  (22%  of  total  financing),
which  was  allocated  to  the  modernisation  of  power  transmission  infrastructure  in
Serbia and Montenegro and a cement factory in Bosnia Herzegovina.

Finally, a global loan of € 20 million (5 % of total financing) was made in support of
SMEs in Serbia and Montenegro.

Table 2.3.
(bis)

Breakdown by country and sector of EIB lending in 2002 in the Balkans

Monetary amounts in € million

Country Number
of loans

Total loan
signatures

Energy/Industry

Communications

Global loans

Croatia

Serbia and
Montenegro

Bosnia
Herzegovina

Total

3

4

1

8

130

100%

270

100%

25

100%

425

100%

130

100%

180

67%

310

73%

20

7%

20

5%

70

26%

25

100%

95

22%

12

 
In  the  Mediterranean  region,  loans  amounting  to  €  1  401  million  were  signed  for  17
operations in 7 countries in 2002.

Loans  for  projects  in  Turkey  accounted  for  some  29%  of  overall  lending,  while  Tunisia,
Algeria, and Egypt together absorbed a further 50%.

– 

– 

– 

– 

Some 43% of total financing (€ 605 million) was allocated to the Communications
sector.  Projects  covered  road  development  in  Algeria,  Tunisia  and  Turkey,
underground rail development in Egypt and extension of a port in Lebanon as well
as reconstruction of damaged infrastructure following floods in Algeria.

In the Energy sector, € 510 million (37% of total financing) went towards upgrading
the power transmission and supply networks in Egypt, Morocco and Tunisia as well
as gas storage in Turkey.

Water  Management  projects  in  Morocco  and  Turkey  accounted  for  4%  of  total
financing in the region (€ 60 million).

Construction  and  extension  of  cement  factories  in  Algeria  and  Tunisia  as  well  as
hospital construction in Syria represented 16% of total financing (€ 226 million) for
the Industry and Services sector.

13

 
Table 2.3.(bis)

Breakdown by country and sector of EIB lending in 2002 in the Mediterranean
countries

Monetary amounts in € million

Country Number
of loans

Total loan
signatures

Energy

Communi-
cations

Water Management
& Miscellaneous

Industry & Services

Turkey

Tunisia

Algeria

Egypt

Morocco

Syria

Lebanon

4

3

4

2

2

1

1

405

100%

290

100%

221

100%

200

100%

140

100%

100

100%

45

100%

Total

17

1.401

100%

90

22%

150

52%

150

75%

120

86%

510

37%

225

56%

120

41%

165

75%

50

25%

45

100%

605

43%

40

9%

20

14%

60

4%

50

13%

20

7%

56

25%

100

100%

226

16%

The Bank signed 3 loans for an amount of € 145 million in 3 countries of Asia and  Latin
America. In addition a loan of € 30m went to Regional Central America.

– 

– 

A loan in favour of the Energy sector in Brazil accounted for 31% of total financing
(€  55  million),  while  a  loan  of  €  50  million  (29%)  was  directed  towards  the
Communications sector in Indonesia.

Global loans to Sri Lanka and the Central American Region represented the remai-
ning 40% of lending (€ 70 million).

14

 
Table 2.3. (bis)

Breakdown by country and sector of EIB lending in 2002 in the ALA Countries

Monetary amounts in € million

Country Number
of loans

Total loan
signatures

Energy

Communications

Industries&
Services

Global loans

Brazil

Regional
Central
America

Indonesia

Sri Lanka

Total

1

1

1

1

4

55

55

100%

100%

30

100%

50

100%

40

100%

175

100%

50

100%

50

29%

55

31%

30

100%

40

100%

70

40%

In 2002, the Bank signed one loan contract in the Republic of South Africa for an amount
of € 50 million for a global loan to finance small and medium scale ventures.

15

 
 
 
 
2.3.3.  Risk Sharing

Council Decision 2000/24/EC5, as amended, provides Community guarantee global coverage
for  65%  of  the  overall  amount  of  loans  signed.  Under  the  risk-sharing  arrangements,  EIB
loans  with  non-sovereign  project  guarantees  are  covered  only  for  political  risk  by  the
Community  guarantee, whereas loans with  sovereign  project  guarantees  are  covered  for  all
risks  by  the  Community  guarantee.  The  Bank  would  call  the  Community  guarantee  for  an
individual loan only if the project guarantee for that loan failed to reimburse the Bank, in the
case of a non-sovereign project guarantee for political reasons only, but for any reason in the
case  of  a  sovereign  project  guarantee.  Such  a  call  would  be  for  the  full  loan  amount
outstanding.

1st Mandate: (Council Decision covering period 31.1.1997 to 31.01.2000)

No  further  loans  were  signed  under  the  1st  Mandate  in  2002  so  the  levels  of  risk-sharing
achieved under the 1st Mandate have not changed. In terms of lending compared to the total
ceiling, these levels were 81% for ALA, 26% for CEEC and 3% for the Mediterranean.

2nd Mandate: (Council Decision covering period 1.02.2000 to 31.01.2007)

The  cumulative  total  for  risk-sharing  projects  since  the  start  of  lending  activity  in  the
framework  of  the  Council  Decisions  relative  to  the  period  starting  1.02.2000,  was  €  1.453
million at the end of 2002, i.e. 7,5% of the overall lending ceiling and 19,2% of lending to
date.

In  Central  and  Eastern  Europe  and  the  Balkans,  EIB  lending  based  on  risk  sharing
reached a total of € 456 million, or 5% of the lending ceiling for those countries and 15,7%
of lending in the region to date.

In  the  Mediterranean  region,  3  loans  were  signed  under  the  risk-sharing  arrangement  in
2002,  bringing  the  total  to  around  1.6%  of  the  mandate  ceiling  and  3,3%  of  total  amounts
signed.  As  expected,  projects  are  often  signed  with  governments  or  public  bodies  (in
accordance  with  the  programming  procedures  inherent  in  the  Euro-Mediterranean
Partnership),  and  thus  the  risk-sharing  total  for  the  Mediterranean  countries  still  remains
relatively low.

In Asia and Latin America (ALA), risk sharing in respect of EIB lending reached a total of
€ 891 million representing 36% of the mandate ceiling and 80% of lending in the region to
date.

To date, no risk-sharing loans have been signed in the Republic of South Africa (RSA).

5

Council  Decision  2000/24/EC  invites  the  Bank  “to  aim  to  cover  the  commercial  risk  on  30%  of  its
lending under this Decision from non-sovereign guarantees as far as possible on an individual regional
mandate  basis.  This  percentage  shall  be  expanded  upon  whenever  possible  insofar  as  the  market
permits”. During 2002, the Bank continued to work towards the risk-sharing objective with, however,
the target increased to 30% instead of 25% as under the first mandate.

16

 
                                                
Risk-sharing at 31.12.2002 is shown in the tables below - separately for each mandate (risk-
sharing percentage unchanged since end-2001 for the 1st Mandate).

Table 2.3.3

Risk-sharing 1st Mandate

Mandate
Ceilings
1st
Mandate

Total
amounts of
loans
signed at
31.12.2002

No. of
loans
signed
with risk-
sharing

Amount of
loans signed
with risk-
sharing

Monetary amounts in € million

Percentage
of risk-
sharing
achieved
(relative to
mandate
ceiling)

Percentage
of risk-
sharing
achieved
(relative to
loan
signature)

CEEC

Mediterranean

ALA

RSA

ARYM

3.520

2.310

900

375

150

TOTAL

7.255

3.446

2.310

900

374.6

150

7.180

21

5

17

0

0

43

896

71

730

0

0

1.697

26%

3%

81%

0%

0%

24%

26%

3%

81%

0%

0%

24%

Table 2.3.3 (bis)

Risk-sharing 2nd Mandate

Monetary amounts in € million

Mandate
Ceilings
2nd
Mandate

Total
amounts of
loans signed
at
31.12.2002

No. of
loans
signed
with
risk-
sharing

Amount of
loans
signed
with risk-
sharing

Percentage of
risk-sharing
achieved to-
date (relative
to mandate
ceiling)

Percentage of
risk-sharing
achieved to-
date (relative
to loan
signatures)

CEEC 
Balkans

&

9.280

2.905

Mediterranean

ALA

RSA

Turkey SAP

6.425

2.480

825

450

3.177

1.113

252

130

TOTAL

19.460

7.577

15

4

19

0

0

38

456

106

891

0

0

5%

2%

36%

0%

0%

16%

3%

80%

0%

0%

1.453

7,5%

19,2%

The regional tables at the end of section 2.3 (Tables 2.3.8 to 2.3.11) identify the risk-sharing
loans.

17

 
2.3.4.  Cooperation with Other Institutions

In the countries that are candidates for EU membership, the Bank’s activities are conducted
within  the  framework  of  the  EU  programme  to  help  the  candidate  countries  to  prepare  for
accession, in particular by financing investment aimed at integrating their infrastructure with
that of the EU and by assisting SMEs. Whenever possible, projects are cofinanced with other
institutions. The Bank’s activities thus form part of a concerted  approach that is pursued in
close cooperation with the Commission and, as appropriate,  with  the  international financial
institutions working in the countries concerned.

The  Bank  cooperates  closely  with  the  PHARE/ISPA  Programme,  with  which  it  has
developed  a  productive  relationship,  much  appreciated  by  the  beneficiary  countries.  In
addition  to  frequent  PHARE  assistance  during  the  pre-investment  phase  to  ensure  that  the
necessary  studies  and  technical  assistance  are  implemented  in  support  of  EIB  projects,  the
Bank also cooperates with PHARE in cofinancing infrastructure projects.

The contributions of PHARE/ISPA and the IFIs to projects financed by the EIB in 2002 are
shown  in  the  table  below.  Additional  projects  were  cofinanced  in  the  framework  of  the
Bank’s Pre-Accession Facility, which is outside the scope of this report.

For South-Eastern Europe, the Bank participates with the Commission in an Infrastructure
Steering Group which prepares projects.

Table 2.3.4

Cofinancing in 2002 in Central and Eastern Europe

Country

Project

Cost

EIB

PHARE/

ISPA*

480,0

240,9

25,0

253,1

55,0

163,1

€ million

Other6

Multi-
lateral
institutions

0

0

215,0

35,0

153,0

60,0

41,0

52,0

120,0

30,0

60,0

30,0

Romania

Reinforcement 
and
upgrading  of  745  km  of
national roads

Upgrading of water supply
and  sewage  networks  in
five municipalities

Rehabilitation 
electricity 
sector

of
distribution

Construction 
rehabilitation 
supply 
infrastructure

and 

and/or
of  water
sewage

Bulgaria

Slovak
Republic

Total

1.006,1

385,0

248,1

41,0

332,0

6

Including funds of states, promoters and commercial banks.

18

 
                                                
Table 2.3.4 (bis)

Cofinancing in 2002 in the Balkan Countries

Country

Project

Cost

EIB

Multilateral
institutions

Bilateral
institutions

Serbia and
Montenegro

Croatia

Bosnia-

Herzegovina

Rehabilitation  of
860  km  of  roads
and motorways

Rehabilitation  of
principal 
railway
axes.

Rehabilitation  and
modernisation  of
electricity
infrastructure

of
Construction 
two  stretches  of
motorway

Rehabilitation  of
motorways

Modernisation  of
air traffic control

Modernisation of a
cement factory and
construction  of  a
production
new 
line

190,0

95,0

75,0

170,0

85,0

60,8

1,5

7,5

140,0

70,0

53,0

177,0

60,0

60,0

112,0

50,0

46,9

20,0

75,0

25,0

47,0

20,0

25,0

€ million

Other6

18,5

16,7

17,0

57,0

15,0

6,9

25,0

Total

910,9

405,0

340,8

9,0

156,1

19

 
In the Mediterranean region, the Bank’s operations are conducted within the framework of
EU policy and form part of a concerted approach that is pursued in close cooperation with the
Commission and, as appropriate, with other  IFIs, including through cofinancing operations.
The  contributions  of  these  institutions  to  projects  financed  by  EIB  are  shown  in  the  table
below.

Table 2.3.5

Cofinancing in 2002 in the Mediterranean countries

Country

Project

Cost

EIB Multilateral
institutions

Bilateral
institutions

€ million

Other6

Turkey

Upgrading  and  doubling  of
some 500km of roads along two
priority corridors

Improvement  of  water  and
sewage  services 
in  medium-
sized towns

927,0

225,0

315,0

387,0

96,0

40,0

51,0

5,0

Subtotal

1.023,0

265,0

366,0

392,0

Tunisia

Construction of a toll motorway

310,0

120,0

Egypt

Construction  of  a  natural  gas
fired  combined  cycle  power
plant

530,7

150,0

110,0

80,0

189,0

191,7

Extension  of  the  Cairo  metro-
line

133,4

50,0

28,9

54,5

Morocco

in 

the 

electricity
Increase 
interconnection 
capacity
between Morocco and two of its
neighbours (Spain and Algeria)

362,2

120,0

82,0

50,0

110,2

Algeria

Construction  and  operation  of  a
cement plant

263,7

45,6

35,5

0

182,6

Syria

Total

Construction  and  equiping  of
regional hospitals

333,0

100,0

24,0

209,0

2.956,0

850,6

48,5

401,9

1.220,0

20

 
In  Asia  and  Latin  America,  the  Bank  continues  to  finance  projects  that  are  of  interest  to
both  the  Community  and  the  country  concerned  and  to  the  EU.  The  mutual  interest  of  the
loans  signed  in  2002  is  described  in  the  table  below.  Although,  the  Bank  cooperates  with
other IFIs in Asia and Latin America whenever possible

Table 2.3.6 Mutual interest of projects in the countries of Asia and Latin America

Country

Project

Mutual interest

Brazil

Expansion and
modernisation of
electricity network

The  borrower  is  a  company  owned  and  operated  by  an  EU  company.  The
project will extend and improve infrastructure in a very poor area.

Indonesia

Expansion of mobile
communications
network

The borrower is a wholly owned subsidiary of a European bank. In addition,
the project will involve the transfer of European know-how and technology
in the telecom sector.

Sri-Lanka

Financing of small
and medium-scale
ventures

The project is of mutual interest in that (i) one of the shareholders is an EU
development  finance  institution  and  (ii)  the  allocations  will  be  targeted  to
investments  undertaken  by  EU  companies  or  including  other  forms  of  EU
interest.

Regional
Central
America

Financing of small
and medium-scale
ventures

The  project  is  of  mutual  interest  in  that  the  allocations  will  be  targeted  to
investments  undertaken  by  subsidiaries  of  EU  companies  or  EU-Central
American joint-ventures or including other type of EU interest.

21

 
Table 2.3.7

Country

Loans signed in 2002 in Central and Eastern Europe

Description

Loan
(€ million)

Risk
sharing

Romania

Reinforcement and upgrading of 745 km of national roads

Upgrading of water supply and sewage networks in five municipalities

Improvement of navigation conditions in the Danube delta

Financing  of  small  and  medium-scale  ventures  and  contribution  to
modernisation of Bank (3 loans)

Total

Bulgaria

Reconstruction and modernisation of port infrastructure and equipment

Rehabilitation of electricity distribution sector

Financing for small and medium-scale ventures

Total

Slovak Rep. Construction  and/or  rehabilitation  of  water  supply  and  sewage

infrastructure

Grand
Total

No

No

No

Yes

No

No

Yes

No

240,0

55,0

38,0

50,0

383,0

17,0

60,0

10,0

87,0

30,0

500,0

22

 
Table 2.3.7(bis)

Loans signed in 2002 in Balkans

Country

Description

Loan
(€ million)

Risk
sharing

Serbia and
Montenegro

Rehabilitation of 860 km of roads and motorways

95,0

No

Rehabilitation of principal railway axes

Rehabilitation and modernisation of electricity infrastructure

Financing of small and medium-scale ventures

Total

Croatia

Construction of two stretches of motorway

Rehabilitation of motorways

Modernisation of air traffic control

Total

No

No

No

No

No

No

85,0

70,0

20,0

270,0

60,0

50,0

20,0

130,0

Bosnia-
Herzegovina

Modernisation  of  a  cement  factory  and  construction  of  a  new
production line

25,0

Yes

Grand Total

425,0

23

 
Table 2.3.8

Country

Loans signed in 2002 in the Mediterranean countries

Description

Loan
(€ million)

Risk
sharing

Turkey

Upgrading and doubling of some 500km of roads along two priority
corridors

225,0

No

Conversion of gas storage installations

Supply of IT teaching technology for primary schools

Improvement of water and sewage services in medium-sized towns

Total

Tunisia

Electricity transport

Construction of a toll motorway

90,0

50,0

40,0

405,0

150,0

120,0

No

No

No

No

No

Modernisation  of  a  cement  factory  and  extension  of  production
capacity

20,0

Yes

Total

Algeria

Construction of a motorway section

Construction and operation of a new cement factory (2 loans)

Improvement of the roadway network in the Algiers neighbourhood

Reconstruction following flood damage

Total

Egypt

Construction of a natural gas fired combined cycle power plant

Extension of the Cairo metro-line

Total

Morocco

Total

Syria

Construction and equiping of regional hospitals

Lebanon

Extension of port infrastructure

Grand Total

24

290,0

70,0

55,8

50,0

45,0

220,8

150,0

50,0

200,0

No

Yes

No

No

No

No

140,0

100,0

45,0

1.400,8

No

No

Increase in the electricity interconnection capacity between Morocco
and two of its neighbours (Spain and Algeria)

120,0

No

Environment protection

20,0

No

 
Table 2.3.9

Loans signed in 2002 in Asia and Latin America

Country

Description

Brazil

Expansion and modernisation of electricity network

Indonesia

Expansion of mobile communications network

Sri Lanka

Financing of small and medium-scale ventures

Financing of small and medium-scale ventures

Regional Central
America

Grand Total

Loan
(€ million)

Risk
sharing

Yes

Yes

No

No

54,6

49,6

40,0

30,0

174,2

Table 2.3.10

Loans signed in 2002 in the Republic of South Africa

Country

Description

Loan
(€ million)

Risk
sharing

RSA

Financing for small and medium-scale ventures

50,0

No

25

 
2.4. 

Signatories of the Lomé Convention-Lending Activity

Total EIB lending in the ACP/OCT amounted to  €  297.65  million  in  2002,  of  which  €  123
million from the Bank’s own resources and € 174.65 million from risk capital. The regional
and sectoral breakdown of this lending is as follows

Table 2.4.1 Breakdown by region and sector of EIB lending in 2002 in the ACP/OCT

Total

Own
Resources*

Risk
Capital

Energy Commu-
nications

Water
Management &
Agriculture

Industry
& Services

Global
Loans

€ million

87

87

20

34

33

38

23

20

3

15

30

30

18

4

8

106

36

21

15

70

298

213

50

48

42

40

33

85

ACP/OCT

Africa

Southern

West

Central &
Equatorial

East

Regional

Caribbean/

Pacific

123

83

30

20

0

0

33

40

175

130

20

28

42

40

45

OCT

0

0

0

*all subsidised

37

37

12

25

26

 
3. 

BUDGETARY IMPACT OF LENDING

Lending activities have an impact on the Community budget when they are accompanied by
Community  guarantees,  interest  subsidies  or  special  conditions  comparable  to  risk-bearing
operations for the lender.

3.1. 

Budget guarantees

On 22 December 1999 the Council decided on a general renewal of the Community guarantee
for  EIB  loans  outside  the  EU  for  a  period  of  seven  years  (Council  Decision  2000/24/EC;
OJ L 9  of  13 January 2000).  This  decision  was  amended  twice  in  2000  (2000/688/EC  and
2000/788/EC).

On 6 November 2001 the Council decided to extend this scheme to EIB loans concluded in
Yugoslavia by including this country in the group of central and eastern European countries
(Council Decision 2001/778/EC).

The new ceilings for each area are as follows (in €)

Turkey:

450 million

Central and Eastern Europe:

9.280 million

Mediterranean countries:

6.425 million

Latin America and Asia:

2.480 million

Republic of South Africa:

825 million

The  overall  ceiling  for  the  guarantee  is  therefore  €  19.460  million,  and  the  Commission
budget  covers  65%  of  that  amount  (compared  with  70%  under  the  previous  mandate).  The
new  decision  calls  on  the  EIB  to  seek  other  sources  of  (commercial)  guarantee  from  its
financial  intermediaries  where  possible  and  sets  a  target  rate  of  30%  of  the  ceiling  (as
opposed to 25% under the previous mandate).

This guarantee programme will expire on 31 January 2007; it may automatically be extended
by six months if the loan ceiling has not been reached.

The Commission budget covers furthermore 65 % of a maximum amount of € 600 million to
Turkey (TERRA) for which no risk-sharing was asked.

During  the  third  year  of  the  new  mandate  the  EIB  signed  loan  agreements  for  a  total  of
€ 2.550  million,  bringing  the  total  amount  in  the  new  mandate  to  €  7.577  million
corresponding to  38,9%  of the ceiling,  with  risk-sharing  already  equivalent  to  19,2%  of  the
loans signed.

On November 6, 2001 the Council decided to granting a 100% Community guarantee to the
European Investment Bank against losses under lending operations for environmental projects
in  the  Baltic  regions  of  Russia  for  a  total  amount  of  €  100  million  (Council  Decision
2001/777/EC).

27

 
The  detailed  situation  relating  to  guarantees  is  set  out  in  the  six-monthly  report  by  the
Commission on guarantees covered by the general budget.

3.2. 

Interest subsidies

Interest subsidies  were  granted under  a  number of Community programmes both inside and
outside the Union. At the Council's request, the Commission drew up an overall assessment
report on this subject (see COM(2000) 524 of 6 September 2000). Most of these programmes
have  been  completed  and  no  longer  have  any  impact  on  budgetary  expenditure.  The  table
below lists the programmes which are still under way and the amount of interest subsidy paid
during the year under review.

Table 3.2.1

Interest  subsidies  paid  under  the  various  Community  mechanisms
from 1995 to 2002

EC-subsidies

EIB-subsidies

ECU/€ million

Financial
year

Natural
disasters

Trans-European
Networks

EDF

MEDA

BOSNIA

FYROM

1995

1996

1997

1998

1999

2000

2001

2002

6,1

4,3

4,0

2,8

2,2

1,7

1,3

0,9

25,0

18,0

37,0

20,0

71,0

54,0

15,0

14,3

28,1

28,6

56,9

24,5

27,1

18,7

14,5

19,9

15,2

22,4

48,2

30,3

29,2

17,4

26,6

19,1

2,7

4,0

1,1

2,3

2,5

1,0

3.3. 

Venture capital

Under  the  agreements  with  the  Mediterranean  countries  and  the  Lomé  Convention,
concessionary loans are concluded by the EIB involving special conditions regarding duration
or debt consolidation, which enable them to be treated as capital investments. The operations
carried out in the Mediterranean region are financed by the general budget, and in the ACP by
the EDF budget. A breakdown of the operations is given in Table 2.4.1:

28

 
4. 

STATISTICAL ANNEX

Table 4.1

Trends in borrowing and lending in the Community

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

€ million

I. Borrowing

ECSC

European
Community (1)

Euratom

NCI

1.474

908

1.209

4.969

-

-

-

-

644

245

49

70

386

410

-

66

298

155

474

195

-

-

-

403

108

160

305

-

-

-

-

-

-

40

-

-

-

-

Total Commission

2.683

5.877

1.008

862

453

669

403

108

160

345

-

12

40

-

52

EIB (2)

12.974 14.224 14.148 12.395 17.553 23.026 30.098 28.355 29.038 32.172 38.016

Total Community

15.657 20.101 15.156 13.257 18.006 23.695 30.501 28.463 29.198 32.517 38.068

II. Lending

ECSC

Balance of
payments (1)

Euratom

NCI

1.486

918

1.209

4.969

-

9

-

30

674

245

49

-

409

410

280

155

541

195

21

-

-

403

108

160

305

-

-

-

-

-

-

-

-

40

-

-

-

-

Total Commission

2.704

5.917

968

813

435

736

424

108

160

345

-

12

40

-

52

EIB (3)

16.066 17.724 17.682 18.604 20.946 22.958 25.116 27.765 30.644 31.184 33.443

Total Community

18.770 23.641 18.650 19.417 21.381 23.694 25.540 27.873 30.804 31.529 33.495

Note:

The  differences  between  total  borrowing  and  lending  by  the  Commission  are  due  to  borrowing  operations
undertaken for refinancing purposes and to changes in the balance of loans not assigned by the end of the year.
The differences between borrowing and lending by the EIB are due to the fact that EIB lending operations are
financed both from borrowings and from the Bank's own resources.

(1)

(2)
(3)

Mechanism for providing financial support for Member States, financial assistance for non-member countries
and other forms of assistance.
Total resources raised.

Loans signed from own resources, no account being taken of the guarantees provided by the EIB to promoters
or operations financed out of NCI resources.

29

 
Table 4.2

Community borrowings outstanding at the end of each period (1)

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

(1)

EIB (2)

ECSC

NCI

Euratom

16.570

20.749

25.007

26.736

30.271

31.957

36.928

42.330

48.459

58.893

67.784

78.661

83.673

87.079

96.649

110.394

123.767

146.223

159.860

176.027

181.167

6.178

6.539

7.119

7.034

6.761

6.689

6.825

6.738

6.673

7.139

7.327

7.331

6.548

5.966

4.677

3.637

2.806

2.432

2.039

1.386

713

1.747

3.269

4.432

4.960

5.202

5.229

5.514

5.122

4.542

3.817

3.326

2.202

1.570

1.113

748

218

168

130

90

19

18

1.272

1.680

1.892

2.013

2.168

2.500

2.164

1.945

1.687

1.563

1.338

1.018

779

720

572

118

28

12

-

40

80

Sub-
total
25.767

European
Community
591

€ million
Total
borrowing
26.358

32.237

38.450

40.743

44.402

46.375

51.431

56.135

4.610

4.932

3.236

1.890

2.997

2.459

2.075

61.361

(3) 2.045

71.412

79.775

89.212

92.570

94.878

102.646

114.367

126.769

148.797

161.989

177.472

181.978

3.516

4.026

5.204

7.697

8.032

6.666

5.853

4.166

4.074

1 566

1.614

1.361

36.847

43.382

43.979

46.292

49.372

53.890

58.210

63.406

74.928

83.801

94.416

100.267

102.910

109.312

120.220

130.935

152.871

163.555

179.086

183.339

The conversion rates used are those obtaining on 31 December of each year. As the majority of
borrowings are denominated in national currency, the difference between two year-ends reflects on
the one hand changes in the valuation of existing stock and on the other the net volume of borrowings
during the year.
Original amount of borrowings, plus or minus repayments of the principal, cancellations, annulments
and exchange-rate adjustments.

(2)
(3)

As from 1989, including short term.
As from 1990, including financial assistance for non-member countries.

30

 
Table 4.3

Community borrowings in 2002, by currency

€ million

EIB

European
Community (1)

Total
borrowing

2002
%

 22.441 (2)

 52

 22.593

 59,0

 135

 6.227

 362

 6.724

 29.165

 8.231

 105

 -

 65

407

30

 13

 8.851

38.016

 5.525

 32.491

-

-

-

-

 135

0,4

 6.227

 16,4

 362

 1,0

 6.724

 17,7

 52

 29.217

 76,7

-

-

-

-

-

-

-

-

 52

-

 8.231

 21,6

 105

 0,3

 -

 -

 65

 0,2

 407

 1,1

 30

 13

 0,1

 0,0

 8.851

 23,3

38.068 100,0

 5.525

14,5

 52

 32.543

85,5

EUR

DKK

GBP

SEK

Total pre-ins

Total EU

USD

HUF

JPY

NOK

CZK

ZAR

PLN

Sub-total

TOTAL

Fixed-rate

Variable-rate

(1) Financial assistance to non-member countries and Euratom.

(2) From 1997 to 1998, issued in euros with payment in ecus.

31

 
Table 4.4

NCI borrowings by currency: debt outstanding at 31.12.2002

Currency

(million)

Equivalent in € million (1)

GBP
Total

11,5

(1) Exchange rate as at 31.12.2002

17,7
17,7

32