REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budgetSituation at 30 June 2011
Date: 2012-02-20
Institutions: European Commission
Subjects: EIB loan, budgetary reserve (EU), general budget (EU), investment protection, third country

EUROPEAN COMMISSION 

Brussels, 20.2.2012  
COM(2012) 66 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on guarantees covered by the general budget 
Situation at 30 June 2011 

{SWD(2012) 15 final} 

 
 
 
 
 
 
 
 
 
TABLE OF CONTENTS 

1. 

2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

4.1. 

4.2. 

4.3. 

Introduction .................................................................................................................. 1 

Types of operations covered by the Budget................................................................. 1 

Events since the last report at 31 December 2010 ....................................................... 1 

Balance of payments support to non-euro Member States........................................... 1 

Macro-financial assistance ........................................................................................... 1 

Euratom ........................................................................................................................ 1 

European Financial Stabilisation Mechanism.............................................................. 1 

Budget guarantee for EIB external financing............................................................... 1 

Data on risks covered by the Budget............................................................................ 1 

Definition of risk .......................................................................................................... 1 

Risk composition.......................................................................................................... 1 

Annual risk covered by the Budget.............................................................................. 1 

4.3.1.  Risk linked to Member States ...................................................................................... 1 

4.3.2.  Risk linked to third countries ....................................................................................... 1 

4.4. 

Evolution of risk........................................................................................................... 1 

5. 

5.1. 

5.2. 

5.3. 

6. 

6.1. 

6.2. 

6.3. 

7. 

7.1. 

7.2. 

Defaults, activation of Budget guarantees and arrears................................................. 1 

Payments from cash resources ..................................................................................... 1 

Payments from the Budget ........................................................................................... 1 

Activation of the Guarantee Fund for external actions ................................................ 1 

Guarantee Fund for external actions ............................................................................ 1 

Recoveries .................................................................................................................... 1 

Assets ........................................................................................................................... 1 

Target amount .............................................................................................................. 1 

Evaluation of risks: Economic and financial situation of third countries with the 
largest exposure............................................................................................................ 1 

Objectives..................................................................................................................... 1 

Risk assessment methods ............................................................................................. 1 

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1. 

INTRODUCTION 

The objective of this report is to monitor the credit risks borne by the budget of the European 
Union resulting from the guarantees given and the lending operations implemented directly by 
the European Union or indirectly through the EIB external mandates. 

This  report  is  submitted  pursuant  to  Article  130  of  the  Financial  Regulation  which  requires 
the  Commission  to  report  to  the  European  Parliament  and  to  the  Council  twice  a  year  on 
budgetary  guarantees  and  the  corresponding  risks1.  It  is  completed  by  a  Commission  Staff 
Working Document with a set of detailed tables and explanatory notes (the "SWD"). 

2. 

TYPES OF OPERATIONS COVERED BY THE BUDGET 

The risks covered by the budget of the European Union Budget (the "Budget") derive from a 
variety of lending and guarantee operations which can be divided into two categories: 

–  loans granted by the European Union with macroeconomic objectives, i.e. macro-financial 
assistance2  ("MFA")  loans  to  third  countries  in  conjunction  with  the  Bretton  Woods 
institutions,  balance-of-payments3  ("BoP")  loans  granting  support  to  non-euro  Member 
States  experiencing  balance-of-payments  difficulties,  loans  under  the  European  financial 
stabilisation  mechanism  (EFSM)4  granting  support  to  Member  States  experiencing 
difficulties beyond their control; and 

–  loans  with  microeconomic  objectives,  i.e.  Euratom  loans  and  most  importantly  European 
Investment  Bank  ("EIB")  financing  of  operations  in  non-Member  States  ("EIB  external 
financing")5 that are covered by EU guarantees6. 

The  guaranteed  EIB  external  financing,  the  Euratom  loans  and  the  MFA  loans  have  since 
1994 been covered by the Guarantee Fund for external actions ("the Fund"),7 while BoP and 
EFSM loans are directly covered by the Budget. 

1 

2 

3 

4 

5 

6 

7 

COM(2011)528  and  SEC(2011)1011  make  up  the  previous  report  on  the  guarantees  covered  by  the 
Budget at 31 December 2010. 
MFA  may  also  take  the  form  of  grants  to  third  countries.  For  more  information  on  MFA,  see 
Commission report COM(2011)408 and SEC(2011)874. 
Council  Regulation  (EC)  N°  332/2002  of  18  February  establishing  a  facility  providing  medium-term 
financial assistance for Member States' balances of payments (OJ L 53, 23.2.2002, p.1). 
The EFSM was set up on 11 May 2010 on the basis of Council Regulation (EU) No 407/2010 of 11 
May 2010 (OJ L 118, 12.5.2010, p.1). It functions in a similar way as the Balance of Payments facility 
but is available to all Member States, i.e. including Euro area Member States. 
The figures concerning the EIB mandates are displayed in Table A1 and references to legal bases are 
listed in Table A4 of the SWD. 
At  30.6.2011  the  guarantee  was  covering  the  period  1  February  2007—31  October  2011  in  line  with 
Decision No 633/2009/EC of the European Parliament and of the Council of 13 July 2009 (OJ L 190, 
22.7.2009,  p.  1)  (the  "External  Mandate  Decision"),  replacing  Council  Decision  2006/1016/EC  of  19 
December  2006.  In  the  meantime  the  period  has  been  extended  to  31.12.2013  by  Decision 
1080/2011/EU  of  the  European  Parliament  and  of  the  Council  of  25  October  2011  (OJ  L  280, 
27.10.2011, p. 1). 
Council  Regulation  (EC,  Euratom)  No  480/2009  of  25 May 2009  establishing  a  Guarantee  Fund  for 
external actions (codified version), the "Guarantee Fund Regulation" (OJ L 145, 10.6.2009, p.10). 

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The Fund covers defaults on loans and loan guarantees granted to non-Member States or for 
projects in non-Member States. It was established: 

–  to provide a 'liquidity cushion' in order to avoid calling on the Budget every time a default 

or late payment on a guaranteed loan arises; and 

–  to create an instrument of budgetary discipline by laying down a financial framework for 
the  development  of  the  EU  policy  on  guarantees  for  Commission  and  EIB  loans  to  non-
member countries8. 

If  third  countries  become  Member  States  loans  relating  to  such  countries  are  no  longer 
covered  by  the  Fund  and  the  risk  has  to  be  directly  borne  by  the  Budget.  The  Fund  is 
provisioned  from  the  Budget  and  has  to  be  maintained  at  a  certain  percentage  of  the 
outstanding amount of the loans and loan guarantees covered by the Fund. This percentage, 
known as the target rate, is currently 9%. If there are insufficient resources in the Fund, the 
Budget will have to provide the necessary funds. 

3. 

EVENTS SINCE THE LAST REPORT AT 31 DECEMBER 2010 

3.1. 

Balance of payments support to non-euro Member States 

During  the  first  semester  2011,  two  operations  took  place  for  a  total  amount  of 
EUR 1.35 billion.  The  fourth  instalment  of  EUR 1.2 billion  of  the  loan  granted  to  Romania 
was disbursed on 24 March 2011. On 22 June 2011 the fifth instalment of EUR 0.15 billion of 
the loan granted to Romania was disbursed.  

Furthermore, the Council decided on 12 May 2011 to provide precautionary EU medium-term 
financial assistance for Romania amounting to a maximum of EUR 1.4 billion9.  

3.2.  Macro-financial assistance 

During the first semester 2011, no loan disbursement took place.  

3.3. 

Euratom 

No loan disbursements took place during the reported period. 

3.4. 

European Financial Stabilisation Mechanism 

• 

Background 

Council  Regulation  (EU)  No  407/2010  of  11  May  2010  set  up  the  European  Financial 
Stabilisation  Mechanism  (hereafter  referred  to  as  the  EFSM)  based  on  Art.122(2)10  of  the 
Treaty on the Functioning of the European Union (TFEU). The maximum available amount 

8 

9 

10 

Although external risks are covered in fine by the guarantee of the EU budget, the Guarantee Fund acts 
as  an  instrument  to  protect  the  EU  budget  against  the  risk  of  payment  defaults.  For  a  comprehensive 
report  on  the  functioning  of  the  Fund,  see  COM(2010)418  and  the  accompanying  Staff  Working 
Document (SEC(2010)968). 
Council Decision (2011/288/EU) of 12 May 2011 providing precautionary EU medium-term financial 
assistance for Romania (OJ L 132 of 19.05.2011, p.15). 
Art.  122.2  of  the  TFEU  foresees  financial  support  for  Member  States  in  difficulties  caused  by 
exceptional circumstances beyond Member States' control. 

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under the mechanism is EUR 60 billion with the full backing of the Budget which guarantees 
the repayment of the borrowings in case of default of the Member State concerned. 

Union financial assistance under EFSM takes the form of a loan, or of a credit line, granted to 
the  Member  State  concerned.  To  this  end,  the  Commission  is  empowered,  on  behalf  of  the 
European Union, to contract borrowings on the capital markets. 

• 

New operation since 31.12.2010 

On  30  May  2011,  the  Council  decided  to  grant  Union  financial  assistance  to  Portugal  for  a 
maximum amount of EUR 26 billion under EFSM in the context of a three-year joint EU/IMF 
programme  amounting  to  EUR 78 billion.  This  decision  comes  in  addition  to  the  Decision 
taken  by  the  Council  in  December  2010  to  grant  Union  financial  assistance  to  Ireland  for  a 
maximum amount of EUR 22.5 billion under the EFSM. 

In total EUR 48.5 billion were granted under the EFSM programme (for addititional details on 
these operations see paragraph 4.4 Evolution of risk). 

As  part  of  the  response  to  the  crisis,  two  other  mechanisms  have  been  established  which, 
however, do not imply any risk to the Budget: 

– 

– 

European  Financial  Stability  Facility  (EFSF11)  which  is  guaranted  by  participating 
Member States, on a pro-rata basis, and 

the  Greek  Loan  Facility12  which  is  financed  via  bilateral  loans  from  the  other  euro 
area Member States, centrally pooled by the Commission. 

3.5. 

Budget guarantee for EIB external financing 

Under  the  2007-2013  external  mandate,  the  loan  signature  increased  by  7%  during  the  first 
semester  of  2011  and  amounted  to  EUR  1,090  million.  The  amount  of  loans  disbursed  was 
EUR 1,050 million for the reported period. Thus, the cumulative amount of loans disbursed 
under  the  mandate  reached  the  amount  of  EUR  7,028  million  at  30  June  2011,  up  by  17% 
compared to 31 December 2010. 

4. 

DATA ON RISKS COVERED BY THE BUDGET 

4.1. 

Definition of risk 

The risk borne by the Budget derives from the outstanding amount of capital and interest in 
respect of guaranteed operations. 

For  the  purpose  of  this  report,  two  methods  are  used  for  evaluating  the  risks  borne  by  the 
Budget (either directly or indirectly via the Fund): 

–  "The total risk covered" is based on the sum of the total amount of capital outstanding for 

the operations concerned on a given date including accrued interest13.  

11 
12 

About EFSF: http://www.efsf.europa.eu/about/index.htm 
The Greek Loan Facility - ECFIN - European Commission: 
http://ec.europa.eu/economy_finance/eu_borrower/greek_loan_facility/index_en.htm 

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–  The budgetary approach defined as "the annual risk borne by the Budget" is based on the 
calculation of the maximum amount of annual payments due which the EU would have to 
pay  out  in  a  financial  year  assuming  that  all  payments  of  the  guaranteed  loans  are  in 
default14. 

4.2. 

Risk composition 

Until  2010  the  maximum  risk  in  terms  of  total  outstanding  amounts  covered  was  mainly 
linked to the operations granted to third countries. In 2011 the financial crisis has impacted 
heavily on the public finances of Member States leading to an increase in the lending activity 
of the EU to support higher government financing needs. 

As a consequence the composition of risk has changed as of 30 June 2011: 

• 

• 

64%  of  the  total  outstanding  amount  guaranteed  concerned  borrowing  operations 
linked to loans to Member States which are directly covered by the Budget. 

36%  of  the  total  outstanding  amount  guaranteed  relates  to  borrowings  and  loans  in 
third  countries  which  are  covered  by  the  Guarantee  Fund  for  external  actions  ("the 
Fund").  

13 
14 

See Table 1 of the Report. 
For  the  purpose  of  this  calculation,  it  is  assumed  that  defaulting  loans  are  not  accelerated,  i.e.  only 
payments due are taken into account (see also Tables 2 and 3 of the Report and Table A2 of the SWD). 

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The total risk covered by the Budget at 30 June 2011 is presented in the following table 1. 

Table  1:  Total  outstanding  amounts  covered  by  the  Budget  at  30  June  2011  in  EUR 
million 

Outstanding 
Capital 

Accrued 
Interest 

Total 

% 

Member States* 

MFA 

Euratom 

BoP 

EIB*** 

EFSM 

Sub-total 
States 

Member 

Third Countries** 

MFA 

Euratom 

EIB*** 

Sub-total third countries 

Total 

38

410

13,400

3,061

17,900

34,808

460

45

19,191

19,695

54,503

0

2

177

28

113

320

3

0

151

154

474

38 

<1%

412 

1%

13,577 

25%

3,088 

18,013 

35,129 

6%

33%

64%

462 

1%

45 

<1%

19,342 

19,849 

35%

36%

54,978 

100%

*  This risk is directly covered by the Budget. This also includes MFA, Euratom and EIB loans granted 

prior to EU accession. 

** This risk is covered by the Fund. 

***About 83% of EIB lending operations (sovereign and sub-sovereign lending operations) are covered by 
a  comprehensive  guarantee  while  on  the  remaining  operations  the  EIB  benefits  from  a  political  risk 
coverage only (as of 31 December 2010). 

Tables  A1,  A2,  A3  and  A4  of  the  SWD  provide  more  detailed  information  on  these 
outstanding amounts, in particular in terms of ceiling, disbursed amounts or guarantee rates. 

The  total  outstanding  amount  of  capital  and  interest  covered  by  the  budget  significantly 
increased  to  EUR 54.98  billion  up  by  55%  compared  to  31.12.2010.  This  increase  is 
explained  by  the  disbursements  of  EUR  17.9  billion  under  the  EFSM  (EUR  11.4  billion  to 
Ireland and EUR 6.5 billion to Portugal). Furthermore, EUR 1.35 billion was disbursed under 
the BoP facility to Romania as final instalments of Council Decision 2009/459/EC of 6 May 

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2009. EIB net disbursements to third countries increased by EUR 486 million during the first 
semester 2011. 

4.3. 

Annual risk covered by the Budget 

For  the  second  semester  2011,  the  Budget  will  cover  (directly  and  via  the  Fund) 
EUR 3.6 billion15 representing the amounts which fall due during this period out of the total 
amount outstanding at 30 June 2011.  

Of  this,  EUR  2.6  billion  -  approximately  73%  -  is  due  from  Member  States  while  the 
remaining balance is due from third countries. 

15 

Representing the amounts due during the second semester 2011 (out of the total outstanings at 30 June 
2011) and assuming that defaulting loans are not accelerated. For details see Table A2 in SWD 

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4.3.1.  Risk linked to Member States 

The risk linked to Member States concerns (a) EIB lending as well as MFA and Euratom 
loans granted before the accession to the EU (b) the loans granted under the BoP facility and 
(c) the loans granted under the EFSM scheme. 

Table 2 shows that Hungary and Romania are ranked first and second among Member States 
in terms of repayments falling due in the second semester 2011. 

Table 2: Ranking of the Member States according to the maximum risk borne by the Budget 
during the second semester 2011 (EUR million) 

Ranking 

Country 

Maximum risk  

% of the total 
maximum risk 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

Hungary 

Romania 

Ireland 

Poland 

Bulgaria 

Czech Republic 

Slovak Republic 

Latvia 

Slovenia 

Cyprus 

Lithuania 

Estonia 

Malta 

Total 

2,145.6

197.0

111.7

40.1

37.5

36.7

26.7

9.1

5.9

4.6

2.7

0.5

0.3

81.9%

7.5%

4.3%

1.5%

1.4%

1.4%

1.0%

0.3%

0.2%

0.2%

0.1%

0.0%

0.0%

2,618.4

100.0%

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4.3.2.  Risk linked to third countries 

The Fund covers guaranteed loans concerning third countries with maturities extending up to 
2040. In the second semester 2011, in particular, the Fund will bear a maximum annual risk 
related to third countries of EUR 961 million16 (27% of the total annual risk). 

The  top  ten  (out  of  fourty-four)  countries  are  ranked  below  according  to  their  total 
outstanding.  They  account  for  EUR  754.2  million  or  78%  of  the  annual  risk  borne  by  the 
Fund  related  to  third  countries.  The  economic  situation  of  these  countries  is  analysed  and 
commented in the SWD. 

Table 3: Ranking of the 10 most important third countries according to the maximum risk 
borne by the Fund during the second semester 2011 (EUR million). 

Ranking 

Country 

Maximum 
risk 

% of the total 
maximum risk 

Euromoney credit risk 
ranking17 

09/2010 

03/2011 

50/185 

54/100

64/185 

88/100

62/185 

67/100

69/185 

81/100

70/185 

86/100

76/185 

91/100

44/185 

48/100

128/185 

113/185 

NA

NA

29.3%

12.2%

11.6%

11.5%

10.1%

7.2%

6.4%

5.2%

3.6%

3.1%

41/185 

42/100

754.2

100.0%

1 

2 

3 

4 

5 

6 

7 

8 

9 

Turkey 

Egypt 

Morocco 

Tunisia 

Serbia 

Lebanon 

South Africa 

Syria 

Bosnia and 
Herzegovina 

10 

Brazil 

Total of the 
10 

 220.7

 91.7

 87.8

 86.6

 75.8

 54.0

 47.9

 39.3

 27.0

 23.2

16 

17 

Representing the amounts due during the second semester 2011 (out of the total outstanding at 30 June 
2011) and assuming that defaulting loans are not accelerated. For details see Table A2 in SWD. 
The higher the ranking number, the lower the creditworthiness of the country. Countries are rated on a 
scale of zero to 185 or to 100 (the number of countries has been reduced from 185 to 100 from January 
2011).  185,  respectively  100,  represents  the  highest  risk of default.  A given  country  may  improve  its 
rating and still fall in the ranking if the average global rating for all rated countries improves. 

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4.4. 

Evolution of risk 

The level of uncertainty remains high as the global economic and financial crisis continues to 
affect the economic recovery in the EU and the global growth. Geopolitical tensions affecting 
some Southern Mediterranean countries added also uncertainty on the economic recovery in 
some third countries. 

•  Balance of payments facility 

The  EU  medium-term  financial  assistance  under  the  balance  of  payments  facility  was  re-
activated in November 2008 to help Hungary and subsequently in January and May 2009 to 
help  Latvia  and  Romania  to  restore  market  confidence.  The  first  loan  repayment  of  EUR  2 
billion from Hungary will take place in December 2011. 

The  BoP  facility  with  its  overall  ceiling  of  EUR  50  billion  has  a  remaining  capacity  of 
EUR 35 billion EUR to provide further BoP assistance if required. 

•  European Financial Stabilisation Mechanism (EFSM) 

Tensions in the sovereign-bond markets remained high during the first semester 2011. Issuing 
conditions  for  peripheral  euro-area  sovereigns  remain  stressed  despite  the  activation  of  the 
EFSM  and  the  EFSF  supplemented  by  bilateral  loans.  The  increased  refinancing  needs  of 
Member States governments in the coming months and years will remain challenging. 

The  Ecofin  Council  conclusions  set 
to 
EUR 60 billion18,  but  the  legal  limit  is  provided  in  Article  2.2  of  the  Council  Regulation, 
which  limits  the  outstanding  amount  to  the  margin  available  under  the  own  resources 
ceiling19. 

the  maximum  volume  of 

the  mechanism 

In early 2011 Portugal came under pressure on the financial markets increasing pressure on 
the  government  debt  and  its  servicing  costs.  On  7  April  2011  Portugal  officially  requested 
financial assistance from the European Union and the International Monetary Fund ('IMF')20. 

Following this request the  terms and conditions  of  a three-year  financial  assistance  package 
were agreed by the Eurogroup and the Council on 17 May 2011. The financial package will 
cover  Portugal’s  financing  needs  for  up  to  EUR  78  billion  and  will  be  shared  equally 
amongst: 

– 

– 

18 

19 

20 

21 

The EFSM for an amount up to EUR 26 billion21 (which is directly covered by the 
Budget);  

The EFSF for an amount up to EUR 26 billion;  

Cf. Press release on extraordinary Ecofin Council meeting 9/10 May 2010 
(http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/114324.pdf) 
Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation 
mechanism (OJ L 118, 12.5.2010, p.1). 
Council Implementing Decision n°344/2011/EU of 30 May 2011 on granting Union financial assistance 
to Portugal (OJ L 159 of 17.06.2011, p.88). 
On 31 May 2011, the first instalment of EUR 1.75 billion was disbursed to Portugal. Until June 2011, 
EUR 6.5 billion was disbursed. 

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– 

The IMF for an amount up to EUR 26 billion. 

The Decision to support Portugal under the EFSM came in addition to the Decision taken in 
December 2010 for Ireland22 for up to EUR 22.5 billion. 

Out  of  its  maximum  volume  of  EUR 60 billion,  the  EFSM  has  a  remaining  capacity  of 
EUR 11.5 billion to provide further assistance if required23 . 

On 21 July 2011 the Euro area summit decided several measures including the extension of 
maturities and the lowering of lending rates of  future EFSF loans to Greece to alleviate the 
Greek debt crisis and ensure the financial stability of the euro area as a whole. In line with the 
summit conclusions, the impact on the EFSM is twofold:  

a)  the  EFSM  margin  will  be  reduced  retroactively  for  lending  operations  for  Portugal  and 
Ireland and  

b) the maturities of future disbursements will be extended. 

•  Macro-financial assistance loans 

MFA  loans  to  third  countries  have  been  subject  to  individual  decisions  by  the  Council  and 
since the entry into force of the Lisbon Treaty by the European Parliament and the Council. A 
new legislative proposal for a MFA Framework Regulation has been prepared to improve the 
decision–making process under the Lisbon Treaty24.  

Under the proposed Framework Regulation, the procedure for MFA would become similar to 
that  of  other  external  financing  instruments,  whereby  the  Commission  would  have 
competence  for  adopting  decisions  granting  MFA  under  the  supervision  of  a  committee  of 
Member  States  representatives  in  accordance  with  the  examination  procedure  introduced  by 
the new comitology rules, which entered into force on 1 March 201125. 

No MFA loans operations were implemented during the first semester 2011. Two MFA loans 
operations for a total amount of EUR 126 million26 were disbursed in July 2011. 

•  Euratom loans 

The Euratom lending to Member States or in certain eligible non-member countries (Russian 
Federation,  Armenia,  Ukraine)  has  a  ceiling  of  EUR 4 billion  of  which  around  85%  has 
already  been  used.  The  remaining  amount  is  about  EUR 600 million  and  could  be  used  for 
financing new projects.  

22 
23 

24 

25 

26 

http://ec.europa.eu/economy_finance/eu_borrower/ireland/index_en.htm 
For further information on EFSM, see also the report from the Commission on borrowing and lending 
activities of the European Union in 2010, COM(2011)485.  
Following the entry into force of the Lisbon Treaty, MFA decisions are no longer taken by the Council 
alone, but in accordance with the ordinary legislative procedure (codecision). 
Regulation  (EU)  182/2011  of  the  European  Parliament  and  of  the  Council  laying  down  the  rules  and 
general principles concerning mechanisms for control by Member States of the Commission’s exercise 
of implementing powers (OJ L 55, 28.2.2011, p. 13), which replaces Council Decision 1999/468/EC. 
EUR 26 million to Armenia and EUR 100 million to Serbia. 

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•  EIB loans 

Under the EIB general mandate covering the period 2007-2013 a total amount of EUR 17,691 
million had been signed at 30 June 2011, of which EUR 7,180 million had been disbursed at 
that date (see Table A6 of the SWD). 

Following the mid-term review of the EIB external mandate, the European Parliament and the 
Council adopted on 13 October 2011 a new Decision (n° 1080/2011/EU of 25 October 2011) 
granting  an  EU  guarantee  to  the  EIB  against  losses  under  loans  and  loan  guarantees  for 
projects  outside  the  Union  and  repealing  Decision  No  633/2009/EC.  The  new  Decision 
entered  into  force  on  30  October  2011.  As  a  consequence  the  aggregate  amount  of  credits 
disbursed and guarantees provided under EIB Financing Operations, less amounts reimbursed 
plus all related sums, would be increased from EUR 25,800 million to a maximum ceiling of 
EUR 29,484 million27.  The  EU  guarantee  is  restricted  to  65%  of  the  aggregate  amount  of 
credits disbursed and guarantees provided under EIB Financing Operations. 

Regarding the ongoing geopolitical tensions affecting some Southern Mediterranean countries 
it can not be excluded that the Fund would be called to cover potential defaults on loans or 
loan  guarantees  benefitting  from  the  EU  guarantee  in  this  geographical  area  (for  more 
information  on  the  countries  covered  by  the  EU  guarantee  see  Tables  A1  and  A2  of  the 
SWD). 

5. 

DEFAULTS, ACTIVATION OF BUDGET GUARANTEES AND ARREARS 

5.1. 

Payments from cash resources 

The Commission draws on its cash resources in order to avoid delays and resulting costs in 
servicing its borrowing operations when a debtor is late in paying the EU28. 

5.2. 

Payments from the Budget 

As  no  default  was  recorded  during  the  first  half  of  2011,  no  appropriation  was  requested 
under the p.m. lines of Article 01 04 01 of the Budget "European Union guarantees for Union 
and Euratom borrowing operations and for EIB lending operations". 

5.3. 

Activation of the Guarantee Fund for external actions29 

In  the  event  of  late  payment  by  the  beneficiary  of  a  loan  to  third  countries  granted  or 
guaranteed by the EU, the Fund is called on to cover the default within three months of the 
date on which payment is due30. 

The Fund was not called during the first half of 2011.  

27 

28 

29 
30 

The increase by EUR 3,684 million is to be split between an additional mandate of EUR 2,000 million 
for financing climate change operations and EUR 1,684 million to enhance EIB risk-operations. 
See  Article  12  of  Council  Regulation  (EC, Euratom)  No  1150/2000  of  22  May  2000  implementing 
Decision  2007/436/EC,  Euratom,  on  the  system  of  the  European  Communities  own  resources  (OJ  L 
130, 31.5.2000, 1-12). 
Since its inception in 1994, the Fund has been called for a cumulative amount of EUR 478 million. 
For more details, see Section 1.4.3 of the SWD. 

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6. 

GUARANTEE FUND FOR EXTERNAL ACTIONS 

6.1. 

Recoveries31 

At 30 June 2011, the Fund had no arrears to recover. 

6.2. 

Assets 

At 30 June 2011, the net assets32 of the Fund amounted to EUR 1,487,416,919. 

6.3. 

Target amount 

The Fund has to reach an appropriate level (target amount) set at 9% of the total outstanding 
capital  liabilities  arising  from  each  operation,  plus  accrued  interest.  The  ratio  between  the 
liabilities33 
Fund's 
(EUR 19,848,481,968) within the meaning of the Fund Regulation has increased from 7.7% at 
31 December 2010 to 8.8% at 30 June 2011. 

(EUR 1,487,416,919) 

outstanding 

resources 

capital 

and 

At  year-end  2010,  the  Fund  resources  were  lower  than  the  target  amount.  According  to  the 
provisioning rules  of the Fund  Regulation,  a provisioning of  EUR 260,170,000 was inserted 
in the preliminary Budget of 2012. This amount will be paid from the Budget to the Fund in 
February 2012. 

7. 

EVALUATION  OF  RISKS:  ECONOMIC  AND  FINANCIAL  SITUATION  OF  THIRD 
COUNTRIES WITH THE LARGEST EXPOSURE 

7.1. 

Objectives 

The previous sections of this report provided information on quantitative aspects of the risk 
borne  by  the  Budget,  relating  to  third  countries.  This  section,  which  is  completed  by  the 
section  3  of  the  SWD,  provides  a  macroeconmic  analysis  of  the  third  countries  having  the 
largest  exposure  to  the  Budget  or  which  benefit  from  the  EU  lending  facilities  (MFA  and 
Euratom loans). 

7.2. 

Risk assessment methods 

The risk assessment presented in the SWD is based on the information on the economic and 
financial situation, ratings and other known facts of the countries having received guaranteed 
loans. This assessment does not include estimations of expected losses and recoveries which 
are inevitably highly uncertain. 

Country  risk  indicators  included  in  the  tables  in  the  SWD  indicate  the  evolution  of  risk  of 
defaults. This analysis is provided in the section 3 of the SWD for the countries having the 
highest credit risk and exposure to the Budget (MFA and Euratom loans included) at 30 June 
2011. 

31 

32 
33 

Since  its  inception  in  1994,  the  total  recoveries  by  the  Fund  have  amounted  to  EUR  576  million  (it 
includes  the  amount  of  capital  and  interest  repaid,  plus  penalties  interests  for  late  payments,  plus 
exchange rate gains and losses realized). 
Total assets of the Fund minus accrued payables (EIB fees and audit fees). 
Including accrued interests. 

EN 

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