REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON BORROWING AND LENDING ACTIVITIES OF THE EUROPEAN UNION IN 2011
Date: 2012-07-27
Institutions: European Commission
Subjects: EIB loan, EU borrowing, Euratom loan, balance of payments, credit guarantee, economic stabilisation, financial aid

EUROPEAN COMMISSION 

Brussels, 27.7.2012  
COM(2012) 419 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

ON BORROWING AND LENDING ACTIVITIES OF THE EUROPEAN UNION IN 
2011 

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TABLE OF CONTENTS 

1. 

2. 

Introduction .................................................................................................................. 3 

Lending activities of the European Union ................................................................... 3 

2.1. 

BOP facility.................................................................................................................. 3 

2.1.1.  BoP operations in 2011 ................................................................................................ 4 

2.2. 

EFSM ........................................................................................................................... 5 

2.2.1.  EFSM operations in 2011............................................................................................. 5 

2.3. 

MFA facility................................................................................................................. 6 

2.3.1.  MFA operations in 2011 .............................................................................................. 6 

2.4. 

Euratom facility............................................................................................................ 6 

2.4.1.  Euratom operations in 2011 ......................................................................................... 6 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

4. 

4.1. 

4.2. 

5. 

5.1. 

5.2. 

5.3. 

Borrowing activities of the European Union ............................................................... 6 

BOP .............................................................................................................................. 6 

EFSM ........................................................................................................................... 6 

MFA ............................................................................................................................. 6 

Euratom ........................................................................................................................ 6 

European Investment Bank .......................................................................................... 6 

EIB lending activities................................................................................................... 6 

EIB borrowing activities .............................................................................................. 6 

Ensuring financial stability in the euro area................................................................. 6 

Greek Loan Facility (GLF) .......................................................................................... 6 

European Financial Stability Facility (EFSF) .............................................................. 6 

European Stability Mechanism (ESM) ........................................................................ 6 

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1. 

INTRODUCTION 

The  Council  Decisions  establishing  the  various  lending  instruments  of  the  European  Union 
require the Commission to inform every year the European Parliament and the Council on the 
use of these instruments. 

In order to meet these information requirements, this report describes the lending operations 
for each instrument as well as the respective borrowing activities.  

2. 

LENDING ACTIVITIES OF THE EUROPEAN UNION 

Financial support for third countries and Member States is provided by the Commission under 
various Council Decisions, depending on the geographical areas concerned and the objectives 
pursued. They usually take the form of bilateral loans financed from the capital markets with 
the guarantee of the EU budget.1 

2.1. 

BOP facility 

BOP assistance takes the form of medium-term loans provided by the Union and is generally 
granted  in  conjunction  with  financing  by  the  International  Monetary  Fund  (IMF)  and  other 
multilateral  lenders,  such  as  the  EIB,  the  EBRD  or  the  World  Bank,  or  bilateral  assistance 
from Member States. 

The  facility  is  exceptional  in  nature  and  is  mobilised  on  a  case-by-case  basis  by  Council 
Decision.  Potential  beneficiaries  are  Member  States  outside  the  euro  area  being  faced  with 
serious  balance-of-payments  difficulties.  It  aims  at  easing  the  recipient  Member  States’ 
external  financing  constraints  and  at  restoring  the  viability  of  a  country's  balance-of-
payments. It is released subject to the fulfilment of economic policy conditions agreed by the 
Commission  and  the  Member  State  -  in  consultation  with  the  Economic  and  Financial 
Committee (EFC) - and the signature of a Memorandum of Understanding (MoU) prior to the 
conclusion  of  the  loan  agreements.  The  verification  of  the  measures'  implementation  is  a 
condition for disbursements of further instalments. 

The  BOP  facility  was  re-activated  in  2008  in  response  to  the  international  economic  and 
financial  crisis  and  its  ceiling  was  increased  from  EUR 12 billion  to  EUR 25 billion  in 

1 

Detailed  presentation  of  the  borrowing  and  lending  activities  of  the  Commission  is  available  at 
http://ec.europa.eu/economy_finance/eu_borrower/index_en.htm. 

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December  20082  while  a  further  increase  to  EUR 50 billion  was  decided  in  May  20093  to 
enable the EU to respond quickly to any further demand for BOP assistance. By 31 December 
2011,  a  total  amount  of  EUR 14.6 billion  had  been  committed  to  Hungary4,  Latvia5  and 
Romania6 of which EUR 13.4 billion were disbursed by end-2011. 

Table 1: BoP assistance as of 31.12.2011 (in EUR billion)  

Country 

Hungary 

Latvia 

Romania 

Amount 
granted 

Amount 
disbursed 

Amount 
reimbursed 

Amount 
outstanding 

Average loan 
maturity (years) 

6.5 

3.1 

5.0 

5.5

2.9

5.0

2.0

0

0

2.0

3.5 

2.9 

5.0 

11.4 

6.1

6.6

7.0

Total 

14.6 

13.4

2.1.1.  BoP operations in 2011 

In 2011, a total amount of EUR 1.350 billion was disbursed in two tranches: 

Table 2: List of loan operations disbursed under BoP facility in 2011 (in EUR million) 

Country 

Decision 

Instalment 
date 

Maturity 

Coupon 

Amount 
disbursed 

Romania 

2009/459/EC 

24/03/2011

04/04/2018

22/06/2011

04/10/2018

Total 

3.25% 

3.13% 

1,200

150

1,350

The  financial  assistance  granted  to  Hungary  and  Latvia,  expired  in  November  2010  and  in 
January 2012, respectively. As a result the remaining EUR 1 billion allocated to Hungary and 
EUR 0.2 billion to Latvia will not be disbursed under the current BoP operations. 

2 

3 

4 
5 
6 

Council Regulation (EC) No 1360/2008 of 2 December 2008 amending Regulation (EC) No 332/2002 
establishing  a  facility  providing  medium-term  financial  assistance  to  Member  States’  balances  of 
payments. 
Council  Regulation  (EC)  No  431/2009  of  18  May  2009  amending  Regulation  (EC)  No  332/2002 
establishing  a  facility  providing  medium-term  financial  assistance  to  Member  States’  balances  of 
payments. 
Council Decision 2009/102/EC of 4 November 2008. 
Council Decision 2009/290/EC of 20 January 2009. 
Council Decision 2009/459/EC of 6 May 2009. 

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In addition to the EUR 5 billion of BOP assistance, already provided, the Council decided on 
12  May  2011  to  provide  precautionary  financial  assistance  for  Romania  of  up  to  EUR 
1.4 billion7 of which no disbursements has been made yet. 

2.2. 

EFSM 

Council  Regulation  (EU)  No  407/2010  of  11  May  2010  set  up  the  European  Financial 
Stabilisation Mechanism (EFSM) based on Art. 122(2)8 of the Treaty on the Functioning of 
the  European  Union  (TFEU).  The  EFSM  is  fully  backed  by  the  EU  budget  and  has  a  total 
lending capacity of up to EUR 60 billion. 

The  Commission  is  empowered  to  raise  funds  on  behalf  of  the  European  Union  in  capital 
markets  or  directly  from  financial  institutions.  The  use  of  the  EFSM  is  subject  to  policy 
conditionality  in  the  context  of  a  joint  EU/IMF  structural  adjustment  and  assistance 
programme. Financial assistance under EFSM is provided by a Council Decision taken by a 
qualified majority. 

The  Commission  and 
the  beneficiary  Member  State  conclude  a  Memorandum  of 
Understanding  (MoU)  detailing  the  general  economic  policy  conditions  laid  down  by  the 
Council. The Commission then communicates the MoU to the European Parliament and to the 
Council.  The  economic  policy  conditions  are  reviewed  regularly  and  may  be  adjusted  if 
required9. 

The Commission reports regularly to the EFC and to the Council on the implementation of the 
EFSM  Regulation  and  on  the  continuation  of  the  exceptional  occurrences  that  justified  its 
adoption10 . 

2.2.1.  EFSM operations in 2011 

The EFSM facility was activated in 2011 for Ireland and Portugal, commiting a loan amount 
of up to a EUR 22.5 billion and EUR 26 billion for these two beneficiary countries 
respectively. The total commitments, including also the EFSM, the IMF and other Member 
States amount to up to EUR 85 billion and EUR 78 billion respectively: 

7 

8 

9 

10 

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. 
The review is conducted by the Commission, in consultation with the ECB, at least every six months. 
Any  changes  that  may  be  needed  to  its  adjustment  programme  are  discussed  with  the  beneficiary 
Member State. The Council, acting by a qualified majority on a proposal from the Commission, shall 
decide  on  any  adjustments  to  be  made  to  the  initial  general  economic  policy  conditions  and  shall 
approve the revised adjustment programme as prepared by the beneficiary Member State. 
The  report  should  be  submitted  within  six  months  following  the  entry  into  force  of  the  Council 
Regulation  (EU)  No  407/2010  and  where  appropriate  every  six  months  thereafter  (article  9  of 
Regulation). 

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Table 3: Breakdown of commitments (in EUR billion) 

Country 

Ireland 

Portugal 

Total 

EFSM 

EFSF 

IMF 

Others 

Total 

22.5 

26.0 

48.5 

17.7

26.0

43.7

22.5

26.0

48.5

22.3* 

22.3 

85

78

163

* EUR 4.8 billion from other Member States (United Kingdom, Sweden, Denmark) and EUR 
17.5 billion from the Irish State. 

In  line  with  Council  Decision  2011/77/EU11  and  Council  Decision  2011/344/EU12  EUR 
13,900 million were disbursed to Ireland and EUR 14,100 million to Portugal in 2011  . 

Table 4: List of loan operations disbursed under EFSM facility in 2011 (in EUR million) 

Country 

Decision 

Amount 
granted 

Instalment 
date 

Amount 
disbursed 

Coupon  Maturity 

Ireland 

2011/77/EU 

22,500  12/01/2011

5,000

2.50 %  04/12/2015 

  24/03/2011

3,400

3.25 %  04/04/2018 

  31/05/2011

3,000

3.50 %  04/06/2021 

  29/09/2011

2,000

3.00 %  04/09/2026 

  06/10/2011

500

2.375%  04/10/2018 

Sub-total 

13,900

Average 
loan 
maturity 
(yrs) 

4.9

5.8

6.9

8.1

8.0

8.0

Portugal 

2011/344/EU 

26,000  31/05/2011

1,750

3.50%  04/06/2021 

10.0

  01/06/2011

4,750

2.75%  03/06/2016 

  21/09/2011

5,000

2.75%  21/09/2021 

  29/09/2011

2,000

3.00%  04/09/2026 

6.4

7.9

9.0

11 

12 

Council  implementing  Decision  n°2011/77/EU  of  7  December  2010  on  granting  Union  financial 
assistance to Ireland (OJ L 30 of 4.02.2011, p.34). 
Council implementing Decision n°2011/344/EU of 30 May 2011 on granting Union financial assistance 
to Portugal (OJ L 159 of 30.05.2011, p.88). 

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  06/10/2011

600

2.375%  04/10/2018 

Sub-total 

Total 

48,500 

14,100

28,000

Additional disbursements were carried out in 2012: 

8.9

8.9

- on 16 January: EUR 1,500 million to Ireland and EUR 1,500 million to Portugal and 
- on 5 March: EUR 3,000 million to Ireland,  
- on 24 April: EUR 1,800 million to Portugal, 
- on 4 May: EUR 2,700 million to Portugal. 

This has increased the total outstanding amount of the Facility to EUR 38,500 million. 

Furthermore,  in  line  with  the  conclusions  of  the  Heads  of  State  or  Government  of  the  euro 
area  and  EU  institutions  of  21  July  2011  regarding  the  European  Financial  Stabilisation 
Mechanism  lending,  an  extension  of  maturities  -  and  a  reduction  in  the  interest  rate  margin 
has been decided13. The maximum average maturity has been increased from 7.5 to 12.5 years 
and the maturity of individual loan tranches may be extended to up to 30 years. In addition, 
the  margin  on  the  loans  to  the  beneficiary  country  has  been  eliminated.  As  a  result,  a 
beneficiary country will only pay the total cost of funding of the EU. These Decisions will be 
applied retroactively to all disbursed loan tranches. 

2.3.  MFA facility 

Macro-Financial  Assisstance  (MFA)  is  being  provided  to  support  EU  candidate,  potential 
candidate and neighbourhood countries to resolve short-term balance-of-payments problems, 
to  stabilise  public  finances  and  to  encourage  structural  reform  implementation.  MFA  is 
provided  on  an  exceptional  and  temporary  basis  and  is  based  on  strict  economic  policy 
conditionality. MFA operations typically complement IMF adjustment programmes. MFA can 
be provided in the form of grants and/or loans. 

A comprehensive note clarifying the criteria for deciding between the use of loans and grants 
was  submitted  by  the  Commission  to  the  Economic  and  Financial  Committee  in  January 
2011, which endorsed it. The criteria fall in two broad categories: the recipient country’s level 
of  economic  and  social  development14  as  well  as  its  debt  sustainability  and  repayment 
capacity.  Criteria  applied  by  the  World  Bank  and  IMF  for  granting  financial  assistance  are 
also  taken  into  consideration.  The  methodology  and  the  selection  of  indicators  used  by  the 

13 

14 

Council  implementing  Decisions  n°  2011/682/EU  of  11  October  2011  amending  implementing 
Decision  2011/77/EU  (Ireland)  and  n°  2011/683/EU  of  11  October  2011  amending  implementing 
Decision 2011/344/EU (Portugal), (OJ L 269 of 14.10.2011, resp. page 31 and 32).  
Gross national income per capita is proposed as the primary indicator. 

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Commission  are  detailed  in  the  Staff  Working  Document15  accompanying  the  2010  MFA 
annual report. 

The Commission has also made a proposal for a Regulation of the European Parliament and 
of the Council laying down general provisions for MFA to third countries16. This Framework 
Regulation  will  make  the  decision  process  more  efficient  while  aligning  it  with  other  EU 
financial assistance intruments. Moreover, following the entry into force of the Lisbon Treaty, 
MFA  decisions  are  to  be  taken  in  accordance  with  the  ordinary  legislative  procedure  (co-
decision). 

Should a beneficiary country fail to honour its repayment obligations, the Commission may 
activate the Guarantee Fund for External Actions17 so that the repayment of the corresponding 
borrowing by the Commission is secured18. 

Detailed information on MFA operations can be found in the annual Commission Report to 
the European Parliament and the Council on the implementation of MFA to third countries19. 

2.3.1.  MFA operations in 2011 

In 2011, the Commission proposed to provide MFA to Georgia and the Kyrgyz Republic but 
no decisions were taken yet. An outcome is expected during 2012.  

In February 2012, Egypt requested MFA in the amount of a EUR 500 million, which could be 
partly  disbursed  as  a  grant  and  would  complement  funds  provided  by  the  IMF  and  other 
donors.  The  Commission  and  the  IMF  are  currently  analysing  residual  external  financing 
needs in preparation of a reply to Egypt's request. 

In July 2011, two loan disbursements were carried out: 

- EUR 100 million to Serbia as the first tranche of a Decision adopted in 200920: 

- EUR 26 million to Armenia as the first tranche of a Decision adopted in 200921. 

15 
16 
17 

18 

19 
20 

SEC(2011)874 final. 
COM(2011)396 final.  
See  Council  Regulation  (EC,  Euratom)  No  480/2009.  No  default  has  been  registered  so  far  for  MFA 
loans. 
Although  the  repayment  of  the  borrowing  is  covered  in  fine  by  the  guarantee  of  the  EU  budget,  the 
Guarantee Fund acts as liquidity buffer protecting the EU budget against the risk of calls resulting from 
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). 
Not yet published for 2011. For 2010, see COM(2011)408 final. 
Council Decision 2009/892/EC of 30 November 2009. 

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In February 2012, the second and last instalment of MFA to Armenia has been disbursed in an 
amount of EUR 39 million. 

Furthermore,  a  total  of  EUR  55  million  in  grants  have  been  disbursed  in  2011  (EUR 
35 million to Armenia and EUR 20 million to Moldova22). 

2.4. 

Euratom facility 

The  Euratom  loan  facility  may  be  used  to  finance  projects  within  Member  States  (Council 
Decision 77/270/Euratom) or in certain third countries (Ukraine, Russia or Armenia) (Council 
Decision 94/179/Euratom).  

In 1990, the Council fixed a borrowing limit of EUR 4 billion, of which some EUR 3.4 billion 
have  been  decided  and  disbursed.  In  2002,  the  Commission  proposed  an  increase  in  the 
borrowing limit from EUR 4 billion to EUR 6 billion, for which a Council agreement has not 
yet been reached. 

2.4.1.  Euratom operations in 2011 

In 2011, neither loan decisions were taken nor disbursements were carried out. 

3. 

BORROWING ACTIVITIES OF THE EUROPEAN UNION 

In  order  to  finance  the  lending  activities  decided  by  the  Council,  the  Commission  is 
empowered to borrow funds on the capital markets on behalf of both the European Union and 
Euratom. Borrowing and lending is conducted as a back to back operation, which ensures that 
the  EU  budget  does  not  take  any  interest  rate  or  foreign  exchange  risk23.  Outstanding 
borrowings are matched by outstanding loans. 

Table 5: Total borrowing of the European Union — outstanding amounts of capital  (1) (EUR 
million) 

ECSC 
i.l.(1) (2) 

Euratom 
(1) 

BOP 

MFA 

EFSM 

Total 
European 
Union 

21 
22 
23 

Council Decision 2009/890/EC of 30 November 2009. 
Council and European Parliament Decision 2010/0162(COD) of 7 September 2010 
The EFSM Regulation allows resorting to pre-funding as it authorises the Commission "to borrow on 
the  capital  markets  or  from  financial  institutions  at  the  most  appropriate  time  in  between  planned 
disbursements so as to optimise the cost of funding and preserve its reputation as the Union's issuer in 
the markets." 

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2008 

2009 

2010 

2011 

266 

214 

219 

225 

484 

481 

466 

447 

2,000

9,200

12,050

11,400

654

584

500

590

3,404

10,479

13,235

28,000 

40,662

(1)The conversion rates used are those of 31 December of each year. 

(2)The  European  Coal  &  Steel  Community  is  in  liquidation  since  2002.  The  last 
bond issued by ECSC matures in 2019.  

3.1. 

BOP 

In  March  2011,  under  the  BOP  facility  one  loan  of  EUR  1.2  billion  had  to  be  raised  in  the 
market.  In  order  to  ensure  a  smooth  and  efficient  execution,  it  was  decided  to  raise  these 
funds  jointly  with  funds  needed  for  a  loan  to  Ireland  under  the  EFSM  programme  (EUR 
3.4 billion). An additional 0.15 billion were raised for Romania in June. 

Table 6: EU bond issued during 2011 (in EUR billion) 

Country 

Description 

Issue date 

Maturity 
Date 

Size (EUR) 

Romania 

EU 
3.25%/2018 

4.6bn 

24/03/2011

04/04/2018

Romania  

EU 
3.125%/2018 

0.15bn 

22/06/2011

04/10/2018

Total 

3.2. 

EFSM 

1.20 
(+ 3.4 for EFSM 
Ireland)

0.15 

1.350 

The Commission, on behalf of the European Union, had very substantial funding needs under 
the  EFSM  programme  in  order  to  finance  support  for  Ireland  and  Portugal.  The  EU  share 
(complemented  by  the  IMF  and  the  EFSF)  was  deployed  relatively  fast,  as  the  EU  was  an 
already established issuer compared to the EFSF. This front-loading of the EFSM programme 
lead  to  a  record  issuance  on  behalf  of  the  EU  and  amounted  to  EUR  28  billion  for  EFSM, 
funded by six EU benchmark bonds (with an outstanding nominal amount of EUR 3 billion or 
more for each bond series) and one smaller transaction. 

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These  EU  bonds  met  high  demand  in  the  market  resulting  in  largely  oversubscribed  order 
books.  All  important  groups  of  investors  and  in  particular  long-term  investors  (investment 
funds, asset managers, insurance and pension funds) as well as official institutions purchased 
these EU bonds24.  

The secondary market performance of these EU bonds was positive and confirmed the EU’s 
standing as a strong benchmark bond issuer. For the bond with a maturity of 15-years, the EU 
received  an  award  as  "  Sovereign  Supranational  Agency  Sector  deal  of  the  year"  from 
International Financing Review and the "deal of the year"-award from Euromoney. 

Table 7: Overview on EFSM funding and loan disbursements (in EUR billion) 

Country 

Ireland 

Raised on 

Maturity date 

Size 

05/01/2011

04/12/2015 

(plus  1.2 
Ireland 
Romania, see above) 

for  BOP 

17/03/2011

04/04/2018 

Ireland (3), Portugal (1.75)  

24/05/2011

04/06/2021 

Portugal 

Portugal 

25/05/2011

03/06/2016 

14/09/2011

21/09/2021 

Ireland (2);Portugal (2)  

22/09/2011

04/09/2026 

Ireland (0.5), Portugal 0.6 

29/09/2011

04/10/2018 

Total  

Additional bond issues were carried out in 2012: 

5.00

3.40

4.75

4.75

5.00

4.00

1.10

28.00

- in January: EUR 3 billion (EUR 1.5 billion to Ireland and EUR 1.5 billion to Portugal), and 
- in March: EUR 3 billion to Ireland,  
- in April: EUR 1.8 billion to Portugal, 
- in May: EUR 2.7 billion to Portugal. 

increasing the total raised for EFSM to EUR 38.5 billion. 

24 

Further  information  on  the  EU  borrowing  operations  are  provided  in  the  investor  presentation: 
http://ec.europa.eu/economy_finance/eu_borrower/documents/eu_investor_presentation_en.pdf 

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3.3.  MFA 

In  2011,  two  borrowing  operations  have  been  executed  successfully  (EUR  100  million  to 
Serbia and of EUR 26 million to Armenia). Both were funded by private placements.  

Table 8: EU private placement during 2011 (in EUR million) 

Country 

Description 

Issue date 

Maturity Date 

Size 

Serbia 

EU 3.382%/2019 

05/07/2011

12/07/2019

Armenia 

EU 3.691%/2026 

20/07/2011

27/07/2026

Total 

3.4. 

Euratom 

In 2011, there was no borrowing operation under Euratom. 

100

26

126

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4. 

EUROPEAN INVESTMENT BANK  

4.1. 

EIB lending activities 

The  EIB  provides  financing  either  directly  to  individual  investment  projects  or  through 
financial intermediaries to smaller-scale projects undertaken by SMEs or by local authorities 
and  municipalities.  The  EIB  also  provides  loan  guarantees,  technical  assistance  and  venture 
capital. 

In 2011, EIB signed a total financing volume of EUR 61 billion (compared to EUR 72 billion 
in  2010),  reflecting  a  gradual  return  to  pre-2008  lending  levels  after  exceptional  additional 
lending efforts made in 2008, 2009 and 2010.  

Financing in EU Member States represented EUR 54 billion. This amount is not covered by 
the  EU  guarantee.  EUR  7.3  billion  was  signed  outside  the  EU,  of  which  EUR  3.1  billion 
under the External Mandate covered by the EU guarantee. 

EIB financing activities have an impact on the EU budget when they are accompanied by EU 
guarantees, EU/EIB risk-sharing provisions or other blending mechanisms. In particular, EIB 
loans carried out under the External Mandate (covering Pre-Accession, Southern and Eastern 
Neighbourhood, Asia, Latin America and South Africa) benefit from an EU budget guarantee 
covering  risks  of  sovereign  or  political  nature.  A  separate  report  on  the  2011  EIB  external 
lending activity will be issued by the Commission during the second semester of 2012.  

The EIB also manages risk sharing financing facilities involving the use of the EU budget to 
support EU policies (e.g. Risk Sharing Finance Facility for research and development projects 
and Loan Guarantee for TEN-Transport projects)25. 

4.2. 

EIB borrowing activities 

In 2011, markets proved more inhospitable as concerns about Europe mounted, but the EIB 
was  able  to  maintain  rather  stable  funding  levels  and  market  access  in  the  first  ten  months. 
The market then became especially challenging during November/December. At this time, a 
sharp  deterioration  in  market  perceptions  of  the  European  sovereign  context  caused 
substantial spread widening and curtailed demand, as was the case for most European issuers. 
Uncertainty peaked in December with Standard and Poor’s and Fitch putting EIB’s rating on 
watch.  

25 

The  Commission  reports  to  the  Council  and  Parliament  on  the  implementation  of  new  financial 
instruments  financed by  the EU  budget  on an  annual  basis  in  the  framework of  the  annual budgetary 
exercise, in accordance with point 49 of the Inter-institutional Agreement between the EC, the EP and 
the Council. 

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Under  these  circumstances,  EIB’s  endeavour  to  complete  its  funding  programme  relatively 
early, and achieving this by end October, proved vital. The EUR 76 billion issuance was the 
second largest ever (2010: EUR 67 billion). 

5. 

ENSURING FINANCIAL STABILITY IN THE EURO AREA 

In response to the global economic and financial crisis, the Council and the euro area Member 
States have decided on measures to preserve financial stability in the euro area and Europe at 
large. These measures are outined below. 

5.1. 

Greek Loan Facility (GLF) 

Following the unanimous agreement of the euro area Finance Ministers on 2 May 201026 to 
support Greece, a three-year joint programme with the IMF involving a financial package of 
EUR 110 billion to help Greece was set-up, accompanied with strong policy conditionality27 
negotiated  with  the  Greek  authorities  by  the  Commission  and  the  IMF,  in  liaison  with  the 
ECB. 

Contributions  amount  to  EUR 80 billion  from  the  Euro  area  Member  States  and  to 
EUR 30 billion from the IMF. At 31 December 2011, total disbursements for Greece amount 
to EUR 73 billion (EUR 52.9 billion from the Euro area Member States and EUR 20.1 billion 
from the IMF28). 

The role of the Commission 

Under  the  GLF,  the  Commission  is  not  acting  as  a  lender  nor  as  a  borrower.  However,  the 
representatives of the Member States of the European Union have decided on 5 May 2010 to 
entrust  the  Commission  with  tasks  in  relation  to  the  coordination  and  management  of  the 
pooled bilateral loans as set out in an Intercreditor Agreement concluded on 8 May 2010 by 
the euro area Member States providing the support29. The role does not imply an increase in 

26 

27 

28 

29 

The support is provided via bilateral loans from the other euro area Member States, centrally pooled by 
the Commission, under the conditions set out in their statement of 11 April 2010. 
The  main  elements  of  policy  conditionality  were  enshrined  in  Council  Decision  of  10  May  2010 
addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to 
Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive 
deficit  (2010/320/EU).  The  conditionality  was  further  detailed  in  a  Memorandum  of  Understanding 
concluded between the Greek authorities and the Commission on behalf of euro area Member States. 
Additional 
http://ec.europa.eu/economy_finance/eu_borrower/greek_loan_facility/index_en.htm 
These  tasks  inter  alia  comprise,  on  behalf  and  under  the  instruction  of  the  euro  area  Member  States 
providing  the  support,  the  negotiating  and  signing  of  a  Loan  Facility  Agreement  with  Greece,  the 
opening  of  an  account  in  the  name  of  the  Lenders  with  the  ECB,  and  the  use  of  that  account  for 
processing of all  payments  on  behalf  of  the  Lenders  and  from  the  Borrower,  the  co-ordination  of  the 
process  for  disbursements,  certain  calculations,  distribution  amongst  Lenders  of  payments  and  the 
provision of information to Lenders regarding breaches of the Loan Facility Agreement or requests for 
waivers or amendments in respect thereof. 

available 

Facility 

details 

Greek 

Loan 

the 

on 

at 

is 

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the expenditure of the Commission or of any other item of expenditure under the EU budget30. 
Starting  from  28  March  2012,  the  remaining  undrawn  amounts  have  been  cancelled.  The 
financial terms of the facility have also been adjusted, the final maturity being extended up to 
15 years and the grace period up to 10 years. In addition, the margin was reduced to 1.5%.  

5.2. 

European Financial Stability Facility (EFSF) 

The European Financial Stability Facility (EFSF) was created by the euro area Member States 
as  a  Luxembourg-registered  company  owned  by  them,  following  the  decisions  taken  on 
9 May 2010 within the framework of the Ecofin Council. 

EFSF is able to issue bonds guaranteed by euro-area Member States for on-lending to euro-
area Member States in difficulty, subject to conditionality negotiated with the Commission in 
liaison with the European Central Bank and the IMF and to be approved by the Eurogroup. 
The lending by the EFSF is not covered by an EU budget guarantee. 

The Commission co-ordinates its own borrowing activities with the EFSF's for the financing 
of the programmes where both are involved in order to optimize their capital market activities 
in terms of timing. 

5.3. 

European Stability Mechanism (ESM)  

The  establishing  of  a  new  permanent  crisis  mechanism,  the  European  Stability  Mechanism 
(ESM), was agreed on 2 February 2012. The entry into force of the ESM Treaty is planned for 
mid-2012  after  ratification  by  the  17  euro  area  Member  States.  The  ESM  will  assume  the 
tasks  currently  fulfilled  by  the  EFSF  and  the  EFSM  in  providing,  where  needed,  financial 
assistance to euro area Member States. 

For this purpose, the ESM shall be entitled to raise funds by issuing financial instruments or 
by entering into financial or other agreements or arrangements with ESM Members, financial 
institutions or other third parties. The initial maximum lending volume of the ESM is set at 
EUR 500 billion, including the outstanding EFSF lending capacity. 

30 

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/genaff/114338.pdf 

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