REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON BORROWING AND LENDING ACTIVITIES OF THE EUROPEAN UNION IN 2012
Date: 2013-10-31
Institutions: European Commission
Subjects: Armenia, EIB loan, EU borrowing, Euratom loan, Hungary, Ireland, Latvia, Portugal, Romania, balance of payments, credit guarantee, economic stabilisation, financial aid

EUROPEAN 
COMMISSION 

Brussels, 31.10.2013  
COM(2013) 752 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

ON BORROWING AND LENDING ACTIVITIES OF THE EUROPEAN UNION IN 
2012 

EN 

   EN 

 
 
 
 
  
 
Table of Contents 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

4. 

4.1. 

4.2. 

5. 

5.1. 

5.2. 

5.3. 

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

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

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

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

MFA facility................................................................................................................. 7 

Euratom facility............................................................................................................ 8 

Borrowing activities of the European Union ............................................................... 9 

BOP .............................................................................................................................. 9 

EFSM ........................................................................................................................... 9 

MFA ........................................................................................................................... 10 

Euratom ...................................................................................................................... 10 

European Investment Bank ........................................................................................ 11 

EIB lending activities................................................................................................. 11 

EIB borrowing activities ............................................................................................ 11 

Ensuring financial stability in the euro-area .............................................................. 12 

Greek Loan Facility (GLF) ........................................................................................ 12 

European Financial Stability Facility (EFSF) ............................................................ 12 

European Stability Mechanism (ESM) ...................................................................... 13 

2 

 
 
 
1. 

INTRODUCTION 

The Commission is required to inform every year the European Parliament and the Council on 
the use of the various lending instruments of the European Union. 

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 in the form of bilateral loans financed 
from the capital markets with the guarantee of the EU budget is provided by the Commission 
under  various  legal  acts  of  the  Council  or  of  the  Council  and  the  European  Parliament, 
depending on the objectives pursued1. The consistency of financial support to third countries 
with the overall objectives of the EU external action is ensured by the Commission and the 
High Representative, assisted by the EEAS. 

2.1. 

BOP facility 

Balance-of-payments (BOP) assistance under Article 143 of the Treaty on the Functioning of 
the European Union (TFEU) and Council Regulation (EC) No 332/2002 of 18 February 2002 
establishing  a  facility  providing  medium  term  financial  assistance  for  Member  States' 
balances  of  payments2  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. 

BOP assistance is exceptional in nature and is granted on a case-by-case basis by the Council 
acting  by  qualified  majority.  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 
decided  by  the  Council  –  after  consultation  with  the  Economic  and  Financial  Committee 
(EFC) on a draft adjustment programme – and agreed by the Commission and the beneficiary 
Member State in a Memorandum of Understanding (MoU) prior to the conclusion of a loan 
agreement.  The  continued  compliance  with  measures  in  the  adjustment  programme  is 
reviewed  regularly  and  is  a  condition  for  the  disbursements  of  further  instalments.  The 
required  funds  are  raised  by  the  Commission  on  behalf  of  the  European  Union  in  capital 
markets. 

The  Commission  reports  regularly  to  the  Economic  and  Financial  Committee  (EFC)  and  to 
the Council on the implementation of the BOP Regulation. 

1 

2 

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. 
OJ L 53, 23.2.2002, p.1. 

3 

 
 
 
                                                            
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 
December  20083  while  a  further  increase  to  EUR 50 billion  was  decided  in  May  20094  to 
enable the EU to respond quickly to any further demand for BOP assistance. By 31 December 
2012,  a  total  amount  of  EUR 14.6 billion  had  been  committed  to  Hungary5,  Latvia6  and 
Romania7 of which EUR 13.4 billion were disbursed by end 2012.  

In addition to the EUR 5 billion of BOP assistance which expired on 6 May 2012, the Council 
decided  in  2011  to  provide  precautionary  financial  assistance  (PFA)  for  Romania  of  up  to 
EUR 1.4 billion8. However, no disbursements were made and the facility expired on 31 March 
2013. 

The  financial  assistance  granted  to  Hungary  and  Latvia  expired  in  November  2010  and  in 
January 2012, respectively. 

In 2012, no decisions/disbursements were made under the BOP facility. 

Table 1: BoP assistance as of 31.12.2012 (in EUR billion)  

Country 

Hungary 

Latvia 

Romania (BOP) 

Romania (PFA) 

Amount 
granted 

Amount 
disbursed 

Amount 
reimbursed 

Amount 
outstanding 

Average loan 
maturity 
(years) 

6.5 

3.1 

5.0 

1.4 

5.5

2.9

5.0

0

2.0

0

0

0

3.5 

2.9 

5.0 

0.0 

6.1

6.6

7.0

0

Total 

16.0 

13.4

2.0

11.4 

3 

4 

5 
6 
7 
8 

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 (OJ L 352, 31.12.2008, p. 11). 
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 (OJ L 128, 27.5.2009, p.1). 
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. 
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). 

4 

 
 
 
 
                                                            
2.2. 

EFSM 

Council  Regulation  (EU)  No  407/2010  of  11  May  2010  set  up  the  European  Financial 
Stabilisation Mechanism (EFSM) based on Article 122(2)9 . The EFSM is fully backed by the 
EU budget and has a total lending capacity of up to EUR 60 billion.  

Potential beneficiaries for the EFSM assistance are the Member States in the euro-area faced 
with difficulties caused by a serious deterioration in the international economic and financial 
environment.  The  use  of  EFSM  is  subject  to  policy  conditionality  in  the  context  of  an 
economic  and  financial  adjustment  programme  as  agreed  under  a  Memorandum  of 
Understanding concluded between the Commission and the beneficiary Member State and it 
follows  a  similar  decision  making  process  as  for  the  BOP  assistance.  The  assesment  of  the 
financial  needs  and  regular  surveillance  in  the  programme  implementation  are  made  in 
consultation  with  ECB,  at  least  every  six  months  regarding  the  general  economic  policy 
conditions  of  the  adjustment  programme  and  every  three  months  for  the  verification  of 
fulfilment by the Member State of economic policy conditions attached to the assistance. Any 
changes that may be needed to the 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  Commission  reports  regularly  to  the  Economic  and  Financial  Committee  (EFC)  and  to 
the  Council  on  the  implementation  of  the  EFSM  Regulation  and  on  the  continuation  of  the 
exceptional occurrences that justified its adoption. 

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  EFSF,  the  IMF  and  other  Member 
States amount to up to EUR 85 billion and EUR 78 billion respectively: 

Table 2: 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. 

Furthermore, in line with the statement of the Heads of State or Government of the euro-area 
and  EU  institutions  of  21  July  2011,  an  extension  of  maturities10  and  a  reduction  in  the 
interest rate margin11 had been decidedand applied retroactively to all disbursed loan tranches.  

9 

Article 122(2) TFEU foresees financial support for Member States in difficulties caused by exceptional 
circumstances beyond their control. 

5 

 
 
 
                                                            
In  line  with  Council  Implementing  Decision  2011/77/EU12  and  Council  Implementing 
Decision  2011/344/EU,13  EUR  7,800  million  were  disbursed  to  Ireland  and  EUR  8,000 
million  to  Portugal  in  2012.  The  total  outstanding  amount  of  the  Facility  is  EUR  43,800 
million at the end of 2012. 

10  

11 

12 

13 

Council  Implementing  Decision  No  2013/313/EU  of  21  June  2013  amending  implementing  Decision 
2011/77/EU  (Ireland)  (OJ  L  173,  26.6.2013,  p.  40),  and  Council  Implementing  Decision  No 
2013/323/EU  of  21  June  2013  amending  implementing  Decision  2011/344/EU  (Portugal)  (OJ  L  175, 
27.6.10.2013, p.47). 
Council  Implementing  Decision  No  2011/682/EU  of  11  October  2011  amending  implementing 
Decision 2011/77/EU (Ireland) (OJ L 269, 14.10.2011, p. 31), and Council Implementing Decision No 
2011/683/EU of 11 October 2011 amending implementing Decision 2011/344/EU (Portugal) (OJ L 269, 
14.10.2011, p. 32).  
Council  Implementing  Decision  No  2011/77/EU  of  7  December  2010  on  granting  Union  financial 
assistance to Ireland (OJ L 30, 4.2.2011, p. 34). 
Council  Implementing  Decision  No  2011/344/EU  of  30  May  2011  on  granting  Union  financial 
assistance to Portugal (OJ L 159, 30.5.2011, p. 88). 

6 

 
 
                                                                                                                                                                                          
Table 3: List of loan operations disbursed under EFSM facility in 2012 (in EUR million) 

Country  Decision 

Amount 
granted 

Instalment 
date 

Amount 
disbursed 

Coupon  Maturity 

Ireland 

2011/77/EU 

22,500  16/01/2012 

1,500 

3.75 % 

04/04/2042 

05/03/2012 

3,000 

3.375 % 

04/04/2032 

03/07/2012 

2,300 

2,875 % 

04/04/2028 

30/10/2012

1,000

2.50 %

04/11/2027 

Sub-total 

7,800

Portugal 

2011/344/EU 

26,000  16/01/2012 

1,500 

3.75 % 

04/04/2042 

24/04/2012 

1,800 

3.375 % 

05/04/2038 

04/05/2012 

2,700 

2.75 % 

04/04/2022 

30/10/2012

2,000

2.50 %

04/11/2027 

Sub-total 

Total 

48,500 

8,000

15,800

Average 
loan 
maturity 
(yrs) 

10.2 

11.8 

12.3 

12.4

12.4

10.9 

12.5 

12.2 

12.4

12.4

2.3.  MFA facility 

Macro-Financial  Assistance  (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 loans and/or non-reimbursable grants. 

Should a beneficiary country fail to honour its repayment obligations, the Commission may 
activate the Guarantee Fund for External Actions14 so that the repayment of the corresponding 
borrowing by the Commission is done from its funds15. 

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 countries16. 

14 

15 

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 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). 

7 

 
 
 
 
 
 
 
 
 
 
 
                                                            
In  2012,  the  MFA  operation  for  Armenia  adopted  in  200917  was  completed.  The  loan 
component of the second and last tranche amounting to EUR 39 million was disbursed to the 
Armenian  authorities  in  February  2012.  The  first  tranche  and  the  grant  part  of  the  second 
tranche  had  been  disbursed  in  2011.  This  closed  the  EUR  100  million  MFA  operation, 
comprised of EUR 65 million in loans and EUR 35 million in grants.  

With respect to the MFA to Moldova18, consisting of a EUR 90 million grant, the Commission 
released the third and last tranche (EUR 30 million) in April 2012.  

The  implementation  of  the  MFA  to  Ukraine,  approved  in  201019,  which,  together  with  the 
funds available from a previous operation approved in 2002, amounts to EUR 610 million in 
loans,  was  further  delayed  in  2012  due  to  the  need  to  agree  with  the  Ukrainian  authorities 
certain conditions of the Memorandum of Understanding (MoU) as well as the fact that the 
IMF programme had gone off-track and then expired in December 2012. An agreement on the 
MoU was reached in mid-2012 and the MoU was signed in the framework of a Ukraine-EU 
summit  in  February  2013.  However,  the  first  disbursement  of  this  MFA  operation  remains 
subject to the Ukrainian authorities and the IMF agreeing on a new financial aid programme. 

Regarding the MFA to Bosnia and Herzegovina20, approved in 2009 (amounting to a total of 
EUR 100 million in loans), the validity of the Memorandum of Understanding and the Loan 
Agreement  was  extended  by  one  year  until  November  2013.  The  first  tranche  of  this 
operation, amounting to EUR 50 million, was disbursed in February 2013. 

In 2012, the European Parliament and the Council discussed two legislative proposals for new 
MFA operations adopted by the Commission in 2011: the proposal to extend MFA to Georgia 
for  EUR  23  million  in  loans  and  EUR  23  million  in  grants;  and  the  proposal  to  extend  an 
exceptional21 MFA to the Kyrgyz Republic for EUR 15 million in loans and EUR 15 million 
in grants. The decision on Georgia was adopted in August 2013. 

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 to EUR 6 billion, but the Council postponed its decision until disbursements 
reach EUR.3.8 billion. 

Discusssions are on-going for a EUR 300 million loan to Ukraine, which will be dedicated to 
the upgrade of existing nuclear facilities. 

16 
17 
18 
19 
20 
21 

COM (2013)426 and SWD(2013)211. 
Council Decision 2009/890/EC of 30 November 2009. 
Council and European Parliament Decision No 938/2010/EU of 7 September 2010. 
Council and European Parliament Decision No 388/2010/EU of 7 July 2010. 
Council Decision 2009/891/EC of 30 November 2009. 
"Exceptional" in the sense that it is granted to a country outside the normal geographical scope of MFA, 
i.e.candidate/potential candidate and neighbourhood countries. 

8 

 
 
                                                                                                                                                                                          
In 2012, no loan decisions were  taken or disbursements carried out  under the  Euratom loan 
facility. 

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 back to back operations, which ensures that 
the  EU  budget  does  not  take  any  interest  rate  or  foreign  exchange  risk22.  Outstanding 
borrowings are matched by outstanding loans. 

Table 4: Evolution of total borrowing of the European Union (outstanding amounts of 
capital(1) in EUR million) 

ECSC 
i.l.(1) (2) 

Euratom 
(1) 

BOP 

MFA 

EFSM 

Total  

2008 

2009 

2010 

2011 

2012 

266 

214 

219 

225 

183 

484 

481 

466 

447 

423 

2,000

9,200

12,050

11,400

11,400

654

584

500

590

545

3,404

10,479

13,235

28,000 

40,662

43,800 

56,351

(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 2012, under the BOP facility, no loans were raised in the market. 

3.2. 

EFSM 

During  2012,  EUR  15.8  billion  were  raised,  funded  by  six  EU  benchmark  bonds 
("benchmark"  referring  to  bonds  with  an  outstanding  nominal  amount  of  EUR  1  billion  or 
more for each bond series). 

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 bonds.  

22 

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." However, any resultant cost of carry is borne by the borrower. 

9 

 
 
 
 
 
 
                                                            
The secondary market performance of these EU bonds was positive and confirmed the EU’s 
standing  as  a  strong  benchmark  bond  issuer.  According  to  our  calculations  and  using  input 
from  22  banks  secondary  market  turnover  in  EU  benchmark  bonds  was  EUR  50  billion  in 
2012 (which compares to EUR 40 billion in 2011). 

Table 5: Overview on EFSM funding and loan disbursements (in EUR billion) 

Country 

Raised on 

Maturity date 

Size 

Ireland (1.5), Portugal (1.5) 

16/01/2012

04/04/2042 

Ireland 

Portugal 

Portugal 

Ireland 

05/03/2012

04/04/2032 

24/04/2012

05/04/2038 

04/05/2012

04/04/2022 

03/07/2012

04/04/2028 

Ireland (1), Portugal (2) 

30/10/2012

04/11/2027 

Total  

3.00

3.00

1.80

2.70

2.30

3.00

15.80

The total amount raised for EFSM is EUR 43.8 billion in the end of 2012. 

3.3.  MFA 

In 2012, one borrowing operation was executed successfully (EUR 39 million to Armenia). 

Table 6: EU private placement during 2012 (in EUR million) 

Country 

Description 

Issue date 

Maturity Date 

Size 

Armenia 

SSD EU 3.137/2026 

09/02/2012

04/12/2026

Total 

39

39

3.4. 

Euratom 

In 2012, there was no borrowing operation under Euratom. 

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 

10 

 
 
 
 
 
 
 
 
and  municipalities.  The  EIB  also  provides  loan  guarantees,  technical  assistance  and  venture 
capital. 

In  2012,  EIB  signed  a  total  financing  volume  of  EUR  52.2  billion  (compared  to  EUR  61 
billion in 2011).  

Financing in EU Member States represented EUR 44.8 billion. This amount is not covered by 
the EU guarantee. EUR 7.4 billion was signed outside the EU, of which EUR 4 billion under 
the External Mandate covered by the EU guarantee.  

Following the entry into force at the end of 2012 of the Member States' decision to increase 
the  EIB's  paid-in  capital  by  EUR  10  billion,  the  EIB  is  expected  to  increase  its  volume  of 
lending by EUR 60 billion over the years 2013-2015. 

EIB financing activities have an impact on the EU budget when they are accompanied by EU 
guarantees. This is the case for: 

-  EIB  loans  carried  out  under  the  External  Mandate  (covering  Pre-Accession  countries, 
Neighbourhood and Partnership countries, Asia and Latin America, South Africa as well as a 
Climate Change mandate) benefit from an EU budget guarantee covering risks of sovereign or 
political nature. A separate report on the 2012 EIB external lending activity will be issued by 
the Commission during the second semester of 2013. 

- 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  the  Project 
Bond Initiative). 

4.2. 

EIB borrowing activities 

In a volatile market context, execution risk remained high throughout the year, especially for 
large benchmark transactions. The solid demand for EIB bonds first supported a tightening of 
shorter dated spreads, especially in EUR. Rating agencies preserved the Bank's AAA rating, 
supported by the plans on a capital increase, whereas certain European supranational peers did 
not benefit from such an outcome. 

By flexibly navigating such market conditions, the Bank was able to complete the originally 
foreseen funding programme of EUR 60 billion already in September, and continued to seize 
opportunities for issuance at attractive levels until markets became less liquid near year end. 
In 2012, EIB borrowing activity amounts to EUR 71.3 billion with an average maturity of 8.4 
years. 

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 outlined below and are not guaranted by the EU Budget. 

11 

 
 
Greek Loan Facility (GLF) 

5.1. 
Following the unanimous agreement of the euro-area Finance Ministers on 2 May 201023 to 
support Greece, a three-year joint programme with the IMF involving a financial package of 
up  to  EUR 110 billion  to  help  Greece  was  set-up,  accompanied  with  strong  policy 
conditionality24  negotiated  with  the  Greek  authorities  by  the  Commission  and  the  IMF,  in 
liaison with the ECB. The euro-area Member States initial financial package (EUR 80 billion) 
– IMF committed EUR 30 billion - was in the end reduced by 2.7 billion given that Slovakia 
decided  not  to  participate  and  that  Ireland  and  Portugal  stepped  down  from  the  GLF  when 
asking  for  financial  assistance  for  themselves.  The  loans  granted  by  the  euro-area  Member 
States under this first programme amount to EUR 52.9 billion and to EUR 20.1 billion from 
the IMF.  

The  financial  terms  of  the  facility  were  re-adjusted  in  December  2012.  The  final  maturity 
being extended to 30 years while maintaining a 10-year grace period. In addition, the margin 
was reduced to 0.5%. The margin equal to 1.5% will however continue to apply in relation to 
amounts  due  to  the  euro-area  Member  States  that  are  under  a  full  financial  assistance 
programme funded by the EFSF or EFSM.   

On 14 March 2012, a Second Economic Adjustment Programme was approved by the euro-
area  finance  ministers  and  the  IMF,  adding  EUR  130  billion  to  the  undisbursed  amounts  of 
the first programme. This second programme foresees therefore a total financial assistance of 
EUR  164.5  billion,  the  IMF  contribution  amounting  to  EUR  19.8  billion.  While  the  first 
programme  was  set  up  as  an  Inter-creditor  Agreement  of  pooled  bilateral  loans  from  the 
supporting  euro-area  Member  States,  with  the  Commission  providing  coordination  and 
management, the second one is financed via the EFSF.  

At 31 December 2012, total disbursements for Greece amount to EUR 182.9 billion.25  

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. 

It was designed as a temporary rescue mechanism for on-lending to euro-area Member States 
in  difficulty  by  issuing  bonds  guaranteed  by  euro-area  Member  States.  In  October  2010,  it 
was  decided  to  create  a  permanent  rescue  mechanism,  the  European  Stability  Mechanism 
(ESM). 

23 

24 

25 

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. 
the 
Additional 
http://ec.europa.eu/economy_finance/assistance_eu_ms//greek_loan_facility. 

available 

Facility 

details 

Greek 

Loan 

on 

at 

is 

12 

 
 
                                                            
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 and inaugurated on 8 October 2012. The mechanism 
should assume the tasks currently fulfilled by the EFSF in providing, where needed, financial 
assistance to euro-area Member States with a maximum lending capacity of EUR 500 billion, 
while  the  combined  lending  ceiling  of  the  EFSF/ESM  is  set  at  EUR  700  billion.  The 
authorised  capital  is  EUR  700  billion  of  which  EUR  80  billion  paid-in  capital  by  euro-area 
Member States. Subscription to the paid-in capital is planned to be made in five installments 
to  be  completed  by  the  first  half  of  2014.  Authorized  unpaid  capital  may  be  called  in  to 
restore  the  level  of  paid-in  capital  if  the  latter  is  reduced  by  the  absorption  of  losses. 
Minimum 15% ratio between paid-in capital and outstanding amount of ESM issuance will be 
maintained during the capital phase-in period; paid-in capital is not available for lending - it is 
invested in high quality liquid assets.  

From October 2012, the ESM26 should be the main instrument to finance new programmes. 

26 

Additional details on the ESM are available at http://esm.europa.eu. 

13