REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget Situation at 31 December 2011
Date: 2012-10-22
Institutions: European Commission
Subjects: EIB loan, budgetary reserve (EU), general budget (EU), investment protection, third country

EUROPEAN 
COMMISSION 

Brussels, 22.10.2012  
COM(2012) 609 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on guarantees covered by the general budget 
Situation at 31 December 2011 

{SWD(2012) 347 final} 

EN 

   EN 

 
 
 
 
  
 
 
TABLE OF CONTENTS 

1. 

2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

4.1. 

4.2. 

4.3. 

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

Types of operations covered by the Budget................................................................. 3 

Events since the last report at 30 june 2011................................................................. 4 

Balance of payments support to non-euro Member States........................................... 4 

Macro-financial assistance ........................................................................................... 4 

Euratom ........................................................................................................................ 4 

European Financial Stabilisation Mechanism.............................................................. 4 

Budget guarantee for EIB external financing............................................................... 5 

Data on risks covered by the Budget............................................................................ 5 

Definition of risk .......................................................................................................... 5 

Risk composition.......................................................................................................... 6 

Annual risk covered by the Budget.............................................................................. 8 

4.3.1.  Risk linked to Member States ...................................................................................... 8 

4.3.2.  Risk linked to third countries ....................................................................................... 9 

4.4. 

Evolution of risk......................................................................................................... 10 

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............................................... 13 

Payments from cash resources ................................................................................... 13 

Payments from the Budget ......................................................................................... 13 

Activation of the Guarantee Fund for external actions .............................................. 13 

Guarantee Fund for external actions .......................................................................... 14 

Recoveries .................................................................................................................. 14 

Assets ......................................................................................................................... 14 

Target amount ............................................................................................................ 14 

Evaluation of risks: economic and financial situation of third countries witgh the 
largest exposure.......................................................................................................... 14 

Objectives................................................................................................................... 14 

Risk assessment methods ........................................................................................... 15 

2 

 
 
 
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 (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,  or 
seriously threatened with a severe economical financial disturbance caused by exceptional 
occurrences 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(2012)66 and SEC(2012)15 make up the previous report on the guarantees covered by the Budget 
at 30 June 2011. 
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 2002 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 BOP 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. 
The current Decision N°1080/2011/EU of the European Parliament and of the Council of 25 October 
2011 (OJ L 280, 27.10.2011, p. 1) granting an EU guarantee to the European Investment Bank against 
losses  under  loans  and  loan  guarantees  for  projects  outside  the  Union  and  repealing  Decision  N° 
633/2009/EC covers the period 1.2.2007-31.12.2013. 
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). 

3 

 
 
                                                 
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 30 JUNE 2011 

3.1. 

Balance of payments support to non-euro Member States 

During the second semester 2011,  Hungary repaid EUR 2.0 billion. Since no disbursements 
were made, the outstanding amount of the BOP facility has decreased to EUR 11.4 billion. 

The  precautionary  EU  medium-term  financial  assistance  for  Romania  decided  on  12  May 
2011 by the Council to provide a maximum of EUR 1.4 billion9 is in place but has not been 
activated for drawdowns.  

3.2.  Macro-financial assistance 

During  the  second  semester  2011,  two  disbursements  under  MFA  took  place  :  EUR  100 
million  to  Serbia  and  EUR  26  million  to  Armenia,  whereas  Georgia  reimbursed  EUR  13.5 
million and Romania EUR 12.5 million.  

3.3. 

Euratom 

No  loan  disbursements  took  place  during  the  reported  period.  Repaid  amounts  consisted  of 
EUR 6.5 million from Bulgaria and EUR 3.8 million from Ukraine. 

3.4. 

European Financial Stabilisation Mechanism 

Disbursements to Ireland and Portugal amounted respectively to EUR 2.5 billion and EUR 7.6 
billion during the second semester 2011.  

8 

9 

Although external risks are covered in fine by 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, 19.05.2011, p.15). 

4 

 
 
                                                 
The  Council  decided  in  October  2011  to  extend  the  loan  maturities  and  to  eliminate 
retroactively the margin cost which was applied to the loans for Ireland10 and Portugal11.  

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  (EFSF12)  which  is  guarantee  by  participating 
Member States, on a pro-rata basis, and 

the  Greek  Loan  Facility13  which  is  financed  via  bilateral  loans  from  the  other  euro 
area Member States, centrally administered by the Commission. 

3.5. 

Budget guarantee for EIB external financing 

Under  the  2007-2013  external  mandate,  the  loan  signatures  increased  by  10%  during  the 
second semester of 2011 and amounted to EUR 1,745 million. The amount of loans disbursed 
was  EUR  1,381  million  for  the  reported  period.  Thus,  the  cumulative  amount  of  loans 
disbursed under  the  mandate reached EUR  8,561  million  at  31  December  2011,  up  by  19% 
compared to 30 June 2011. 

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 interest14.  

–  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 
default15. 

10  
11  
12 
13 

14 
15 

Council Decision 2011/682/EU of 11 October 2011 (OJ L 269, 14.10.2011, p.31). 
Council Decision 2011/683/EU of 11 October 2011 (OJ L 269, 14.10.2011, p.32). 
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 
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). 

5 

 
 
                                                 
4.2. 

Risk composition 

Until  2010  the  maximum  risk  in  terms  of  total  outstanding  amounts  covered  was  mainly 
linked to loans granted to third countries. In 2011 the financial crisis has impacted heavily on 
the public finances of the 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. At 31 December 2011: 

• 

• 

67%  of  the  total  outstanding  amount  guaranteed  concerns  borrowing  operations 
linked to loans to Member States which are directly covered by the Budget (45% at 
31.12.2010). 

33%  of  the  total  outstanding  amount  guaranteed  relates  to  borrowing  and  loan 
operations  in  third  countries  which  are  covered  in  the  first  place  by  the  Guarantee 
Fund for external actions ("the Fund"), whereas they represented 55% at 31.12.2010.  

6 

 
 
The total risk covered by the Budget at 31 December 2011 is presented in the following table 
1. 

Table 1: Total outstanding amounts covered by the Budget at 31 December 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 

25

404

11,400

2,965

28,000

42,794

565

43

20,466

21,074

63,868

0

4

225

26

344

599

5

0

156

161

760

25 

<1%

408 

1%

11,625 

18%

2,991 

28,344 

43,393 

5%

44%

67%

570 

1%

43 

<1%

20,621 

21,234 

32%

33%

64,628 

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 82% 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. 

7 

 
 
 
 
 
 
 
 
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 64.63 billion up by 17.6% compared to 30.06.2011.  

This increase is mainly explained by: 

•  the  disbursements  of  EUR  10.1  billion  under  the  EFSM  (EUR  2.5  billion  to  Ireland 

and EUR 7.6 billion to Portugal); 

•   EIB  net  disbursements  to  third  countries  increased  by  EUR  2.45  million  during  the 

second semester 2011. 

4.3. 

Annual risk covered by the Budget 

For 2012, the Budget may cover (directly and via the Fund) EUR 3.782 billion16 representing 
the amounts (capital and interests) which fall due during this period out of the total amount 
outstanding  at  31  December  2011.  EUR  1.769  billion  of  this  amount  is  due  directly  from 
Member States (47%). Table A2 of the SWD provides details on the weight of each country in 
the total risk covered.  

4.3.1.  Risk linked to Member States 

The risk linked to Member States concerns: 

(a) EIB lending and/or MFA and/or 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. 

16 

Representing the amounts due in 2012 (out of the total outstanings at 31 December 2012) and assuming 
that defaulting loans are not accelerated (for details see Table A2 in SWD). 

8 

 
 
                                                 
Table 2: Ranking of the Member States according to the maximum risk borne by the Budget 
in 2012 (EUR million) 

Ranking 

Country 

Loans 

Maximum 
risk 

Weight of the 
country vis-à-vis 
total risk of 
Member States 
(MS) 

Weight of the 
country vis a 
vis total risk 
(MS and non-
MS) 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

Ireland 

Portugal 

Romania 

Hungary 

Latvia 

Bulgaria 

Poland 

Czech 
Republic  

Slovak 
Republic  

Slovenia  

Cyprus  

Lithuania  

Malta 

Estonia 

c) 

c) 

a)+b) 

a)+b) 

a)+b) 

a) 

a) 

a) 

a) 

a) 

a) 

a) 

a) 

a) 

412.7

400.8

395.1

142.4

96.8

92.8

81.0

70.8

51.1

11.4

7.7

5.3

0.7

0.5

23.3% 

22.7% 

22.3% 

8.0% 

5.5% 

5.2% 

4.6% 

4.0% 

10.9%

10.6%

10.4%

3.8%

2.6%

2.5%

2.1%

1.9%

2.9% 

1.4%

0.6% 

0.4% 

0.3% 

0.0% 

0.0% 

0.3%

0.2%

0.1%

0.0%

0.0%

Total 

1,796.3

100% 

46.8%

4.3.2.  Risk linked to third countries 

The Fund covers guaranteed loans concerning third countries with maturities extending up to 
2041.  In  2012,  the  Fund  will  bear  a  maximum  annual  risk  related  to  third  countries  of 
EUR 2,013 million (53.2% of the total annual risk). 

The  top  ten  (out  of  forty-seven)  countries  are  ranked  below  according  to  their  total 
outstanding. They account for EUR 1,580.4 million or 78.5% of the annual risk borne by the 

9 

 
 
 
 
Fund  related  to  third  countries.  The  economic  situation  of  these  countries  is  analysed  and 
commented in point 3 of the SWD. Creditworthiness as assessed by the rating agencies is also 
indicated in each country table.  

The risk linked to third countries concerns EIB lending and/or MFA and/or Euratom loans 
(details are included in table A3b and A4 of the SWD). 

Table 3: Ranking of the 10 most important third countries according to the maximum risk 
borne by the Fund during 2012 (EUR million). 

Ranking 

Country 

Maximum 
risk 

1 

2 

3 

4 

5 

6 

7 

8 

9 

Turkey 

Egypt 

Tunisia 

Morocco 

Serbia 

South Africa  

Lebanon  

Syria 

Bosnia and Herzegovina 

10 

Brazil 

458.8

207.9

185.8

179.4

154.2

122.3

84.6

81.3

54.8

51.2

Total of the 10 

1,580.4

4.4. 

Evolution of risk 

Weight of the 
country vis-à-
vis total risk 
of third 
countries 

Weight of the 
country vis-à-
vis total risk 
(MS and non-
MS)  

22,8%

10.32

9.2%

8.9%

7.7%

6.1%

4.2%

4.0%

2.7%

2.5%

78%

12.1%

5.5%

4.9%

4.7%

4.1%

3.2%

2.2%

2.1%

1.4%

1.4%

41.8%

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 
certain third countries. 

10 

 
 
 
 
•  Balance of payments facility 

The  EU  medium-term  financial  assistance  under  the  BOP  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 for a total commitment of EUR 14.6 billion. EUR 
1.2 billion will not be disbursed as the deadline for disbursement has expired. The first loan 
repayment of EUR 2 billion from Hungary was made in December 2011. 

In addition to the EUR 5 billion of BOP assistance for Romania already provided, the Council 
decided on 12 May 2011 to provide precautionary financial assistance for this country of up to 
EUR 1.4 billion17 of which no disbursements has been made yet.  

The  BOP  facility  with  its  overall  ceiling  of  EUR  50  billion  has  a  remaining  capacity  of 
EUR 37 billion EUR to provide further BOP assistance if required. 

•  European Financial Stabilisation Mechanism (EFSM) 

Tensions  in  the  sovereign  bond  markets  remained  high  during  the  second  semester  2011. 
Issuing  conditions  for  peripheral  euro-area  sovereigns  remain  stressed  despite  the  activation 
of the EFSM - supplemented by bilateral loans - and the EFSF. The successful fulfiment of 
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 

Following  the  Council  decisions  to  grant  Union  financial  assistance  to  Ireland20  and 
Portugal21, disbursements were made in 2011 for EUR 13.9 billion to Ireland and EUR 14.1 
billion to Portugal. 

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 required22 . 

17 

18 

19 

20 

21 

22 

Council  Decision  2011/288/EU  of  12  May  2011  providing  precautionary  EU  medium-term  financial 
assistance for Romania (OJ L 132, 19.5.2011, p.15). 
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  2011/77/EU  of  7  December  2011  on  granting  Union  financial 
assistance to Ireland (OJ L 30, 4.2.2011, p348). 
Council Implementing Decision 2011/344/EU of 30 May 2011 on granting Union financial assistance to 
Portugal (OJ L 159, 17.6.2011, p.88). 
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.  

11 

 
 
 
                                                 
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 was reduced retroactively for lending operations for Portugal and Ireland 
and  

b) the maturities of future disbursements were extended. 

These measures entered into force with two Council Decisions taken in October 201123. 

•  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, decisions by the European Parliament and the 
Council. A new legislative proposal for a MFA Framework Regulation has been adopted by 
the Commission 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. The Parliament and 
the Council are continuing discussions on the proposed Regulation in 2012, including on the 
procedure for the MFA decision-making. 

In  July  2011,  two  MFA  loans  operations  for  a  total  amount  of  EUR 126 million  were 
disbursed in July 2011: EUR 26 million to Armenia and EUR 100 million to Serbia. 

•  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 rouhgly EUR 600 million could be used for financing new 
projects.  

•  EIB loans 

Under the EIB general mandate covering the period 2007-2013 a total amount of EUR 19,436 
million  had  been  signed  at  31  December  2011,  of  which  EUR 8,561  million  had  been 
disbursed at that date (see Table A6 of the SWD). 

23  

24 

25 

Council Implementing Decision 2011/682/EU for Ireland and 2011/683/EU for Portugal of 11 October 
2011 (OJ L 269, 14.10.2011, p.31 and p.32). 
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. 

12 

 
 
                                                 
Following the mid-term review of the EIB external mandate, the European Parliament and the 
Council  adopted  on  25  October  2011  a  new  Decision  (No  1080/2011/EU)  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 million26. 
The  EU  guarantee  is  restricted  to  65%  of  the  aggregate  amount  of  credits  disbursed  and 
guarantees provided under EIB Financing Operations.  

The  EIB  experienced  defaults  on  certain  interests  payments  and  loan  repayments  from  the 
Syrian Government (see paragraph 5.3 below).  However, the Fund was only called in 2012. 

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 EU27. 

5.2. 

Payments from the Budget 

As no default was recorded during the second 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 actions28 

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 due29. 

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

However,  the  EIB  experienced  defaults  on  certain  interest  payments  and  loan  repayments 
from the Syrian Government. Since official payment requests have remained unsuccessful, the 
EIB requested the payment of the EU Guarantee via the Guarantee Fund on 10 May 2012 for 

26 

27 

28 
29 

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,p.1). 
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. 

13 

 
 
                                                 
an  approximate  amount  of  EUR  15.5  million30.  If  the  situation  does  not  improve  in  the 
country, other payment requests via the Fund may be called (the total capital outstanding of 
Syria amounts to EUR 551 million, with the last loan maturity in 2030). In conformity with 
the  Guarantee  Agreements,  when  the  EU  has  made  a  payment  under  the  EU  Guarantee,  it 
subrogates  into  the  right  and  remedies  of  the  Bank.  Recovery  proceedings  are  to  be 
undertaken by the Bank in respect of the subrogated sums. 

6. 

GUARANTEE FUND FOR EXTERNAL ACTIONS 

6.1. 

Recoveries31 

At 31 December 2011, the Fund had no arrears to recover. 

6.2. 

Assets 

At 31 December 2011, the net assets32 of the Fund amounted to EUR 1,755,434,096.22. 

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 
Fund's resources (EUR 1,755.43 million) and outstanding capital liabilities33 (EUR 21,234.34 
million) within the meaning of the Fund Regulation has decreased from 8.8% at 30 June 2011 
to 8.3% at 31 December 2011. Since the Fund resources were lower than the target amount, a 
provisioning of EUR 155,66 million was inserted in the preliminary Budget of 2013. 

In  February  2012,  the  Budget  paid  EUR 260,17  million  to  the  Fund  as  provisionned  in  the 
preliminary draft Budget of 2012 and in accordance with the rules of the Fund Regulation (the 
9% target amount). 

7. 

EVALUATION  OF  RISKS:  ECONOMIC  AND  FINANCIAL  SITUATION  OF  THIRD 
COUNTRIES WITGH 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.  Section  3  of  the  SWD,  provides  a 
macroeconomic  analysis  of  the  third  countries  having  the  largest  exposure  to  the  Budget  or 
which benefit from the EU lending facilities (MFA and Euratom loans). 

30  
31 

32 
33 

Depending on exchange rate movements of other international currencies. 
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. 

14 

 
 
                                                 
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  31 
December 2011. 

15