REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget Situation at 31 December 2016
Date: 2017-12-01
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EIB loan, EU Member State, Euratom loan, budgetary reserve (EU), credit guarantee, economic stabilisation, financial aid, general budget (EU), macroeconomics, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 1.12.2017  COM(2017) 721 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget Situation at 31 December 2016  {SWD(2017) 435 final}  
 
 
Table of Contents 

1. 

2. 

3. 

Introduction .................................................................................................................. 2 

Operations guaranteed by the EU budget and other crisis management mechanisms . 2 

Evolutions of guaranteed operations ............................................................................ 5 

3.1. 

Operations managed directly by the Commission ....................................................... 6 

3.1.1.  European Financial Stabilisation Mechanism (EFSM) ................................................ 6 

3.1.2.  Balance of Payments facility (BOP) ............................................................................ 6 

3.1.3.  Macro-Financial Assistance loans (MFA) ................................................................... 7 

3.1.4.  Euratom loans............................................................................................................... 8 

3.2. 

Evolution of the EIB external financing operations ..................................................... 8 

4. 

4.1. 

4.2. 

4.3. 

Risks covered by the EU budget .................................................................................. 9 

Definition of risk .......................................................................................................... 9 

Total risk composition.................................................................................................. 9 

Annual risk covered by the EU budget ........................................................................ 9 

4.3.1.  Member State exposure ................................................................................................ 9 

4.3.2.  Third country exposure .............................................................................................. 10 

5. 

The Guarantee Fund for external Actions .................................................................. 12 

5.1. 

Activation of guarantees ............................................................................................ 12 

5.1.1.  Payments from cash resources ................................................................................... 12 

5.1.2.  Payments from the EU budget ................................................................................... 12 

5.1.3.  Calls on the Guarantee Fund and recoveries .............................................................. 12 

5.2. 

Evolution of the Fund................................................................................................. 14 

6. 

The European Fund for Strategic Investments (EFSI) ............................................... 15 

1 

 
 
 
 
 
1. 

INTRODUCTION 

The  objective  of  this  report  is  to  monitor  the  credit  risks  borne  by  the  EU  budget  resulting 
from the guarantees given and the lending operations implemented directly by the European 
Union  or  indirectly  through  the  guarantee  granted  for  EIB  financing  projects  outside  the 
Union. 

This report is submitted pursuant to Article 149 of the Financial Regulation1 which requires 
the  Commission  to  report  annually  to  the  European  Parliament  and  to  the  Council  on  EU 
budget guarantees and the corresponding risks. 

The  report  is  structured  as  follows:  Section  2  recalls  the  key  features  of  the  operations 
guaranteed by the EU budget; several other additional crisis management mechanisms, which 
do not imply any risk for the EU budget, are also presented. Section 3 lays out the evolution 
of the guaranteed operations. Section 4 highlights the main risks covered by the EU budget. 
Section 5 outlines the activation of the guarantees and the evolution of the Guarantee Fund for 
external actions ("the Fund")2 while section 6 outlines the evolution of the European Fund for 
Strategic Investments (EFSI)3. 

A  Commission  Staff  Working  Document  (SWD)  complements  this  report  with  a  set  of 
detailed  tables  and  explanatory  notes.  It  also  provides  a  macroeconomic  analysis  of  the 
countries benefitting from EU loans and/or guarantees, representing the bulk of the exposure 
of the Fund. 

2. 

OPERATIONS  GUARANTEED  BY  THE EU  BUDGET  AND  OTHER  CRISIS  MANAGEMENT 
MECHANISMS 

The risks covered by the EU budget derive from a variety of lending and guarantee operations 
which can be divided into four categories:  

2.1 Loans granted by the European Union with macroeconomic objectives  

Such  loans  comprise  (1)  Macro-Financial  Assistance4  ("MFA")  loans  to  third  countries,  (2) 
Balance-of-Payments5  ("BOP") 
to  non-euro  Member  States 
loans  granting  support 
experiencing  balance-of-payments  difficulties  and  (3)  loans  under  the  European  Financial 
Stabilisation  Mechanism  ("EFSM")6  granting  support  to  all  Member  States  experiencing  or 

1 

2 

3  

4 

5 

6 

Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 
2012  on  the  financial  rules  applicable  to  the  general  budget  of  the  Union  and  repealing  Council 
Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1). 
Council  Regulation  (EC,  Euratom)  No  480/2009  of  25 May 2009  establishing  a  Guarantee  Fund  for 
external actions (codified version), the "Guarantee Fund Regulation" (OJ L 145, 10.6.2009, p.10). 
Regulation  (EU)  2015/1017  of  the  European  Parliament  and  of  the  Council  of  25  June  2015  on  the 
European  Fund  for  Strategic  Investments,  the  European  Investment  Advisory  Hub  and  the  European 
Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013  — 
the European Fund for Strategic Investments  (the "EFSI Regulation"). OJ L 169, 1.7.2015, p. 1. 
MFA  may  also  take  the  form  of  grants  to  third  countries.  References  to  legal  bases  are  listed  in  the 
Annex of Table A2B of the SWD. 
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). 
Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation 
mechanism (OJ L 118, 12.5.2010, p.1).  

2 

 
                                                 
seriously  threatened  with  a  severe  economic  financial  disturbance  caused  by  exceptional 
occurrences beyond their control. They are activated in conjunction with financial support by 
the International Monetary Fund (IMF); 

2.2 Loans with microeconomic objectives  

This heading refers to Euratom loans. 

2.3 European Investment Bank ("EIB") financing of operations in non-Member States 
("EIB external financing") covered by EU guarantees7 

The guaranteed EIB external financing, MFA and Euratom loans to third countries have since 
1994  been  covered  by  the  Guarantee  Fund  for  external  Actions  ("the  Fund"),  while  BOP, 
EFSM and Euratom loans to Member States are directly covered by the EU budget. 

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 EU 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 EU and EIB loans to third 
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  EU  budget.  The  Fund  is 
provisioned  from  the  EU  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%9. If resources of the Fund are not sufficient, the EU 
budget will provide the necessary funds. 

2.4  European  Investment  Bank  ("EIB")  and  European  Investment  Fund  ("EIF") 
financing  of  operations  in  Member  States  covered  by  EU  guarantees  -  The  European 
Fund for Strategic Investments (EFSI) 

The  European  Fund  for  Strategic  Investments  (EFSI)  is  the  core  of  the  investment  plan  for 
Europe, aimed at boosting long-term economic growth and competitiveness in the European 
Union. 

The EU Guarantee covers part of the financing and investment operations signed by the EIB 
under  the  Infrastructure  and  Innovation  Window  ("IIW")  and  by  the  EIF  under  the  SME 
Window ("SMEW") while the  other part is carried out at the own risk of the EIB Group. 

7 
8 

9 

References to legal bases are listed in the Annex of Table A3 of the SWD. 
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 the latest annual report on the Fund 
and  its  management,  see  COM(2017)  488  final  of  14.09.2017  and  its  Staff  Working  Document 
(SWD(2017) 296  final of 14.09.2017). The report for 2017 is expected to be available by September 
2018 on http://eur-lex.europa.eu/homepage.html . 
For  a  comprehensive  report  on  the  functioning  of  the  Fund  and  the  provisioning  target  rate,  see  
COM(2014) 214 final of 8.4.2014 and its Staff Working Document (2014) 129 final 

3 

 
                                                 
The EIB and the EIF are responsible for assessing and monitoring the risk of the individual 
operations and report back to the Commission and the European Court of Auditors. 

Guarantee Fund of the European Fund for Strategic Investments (EFSI GF)10 

According  to  Article  12  of  the  EFSI  Regulation11,  the  EFSI  GF  shall  constitute  a  liquidity 
cushion  from  which  the  EIB  shall  be  paid  in  the  event  of  a  call  on  the  EU  guarantee.  In 
accordance with the EFSI Agreement between the EU and the EIB, calls are paid by the EFSI 
GF if their amount is in excess of the funds at the disposal of the EIB on the EFSI Account. 
The EFSI Account, managed by the EIB, has been established for the purposes of collecting 
the  EU  revenues  resulting  from  EFSI  operations  under  the  EU  guarantee  and  recovered 
amounts  and  to  the  extent  of  the  available  balance,  for  the  payment  of  calls  under  the  EU 
guarantee.  

The EFSI GF is provisioned progressively taking into account the increase in exposure borne 
by the EU Guarantee. 

According  to  Article  12(4),  the  resources  of  the  EFSI  GF  are  directly  managed  by  the 
Commission  and  invested  in  accordance  with  the  principle  of  sound  financial  management 
following appropriate prudential rules. 

2.5 Crisis management mechanisms which are not covered by the EU budget 

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

- the Greek Loan Facility (GLF)12 which is financed via bilateral loans from other euro area 
Member States to Greece, centrally administered by the Commission. 

-  European  Financial  Stability  Facility  (EFSF)13:  The  EFSF  was  created  by  the  euro  area 
Member States as a temporary rescue mechanism in June 2010 to provide financial assistance 
to  euro  area  Member  States  within  the  framework  of  a  macroeconomic  adjustment 
programme.  The  Treaty  establishing  a  permanent  rescue  mechanism,  the  European  Stability 
Mechanism  (ESM),  entered  into  force  on  27  September  2012.  Since  1 July  2013, the  EFSF 
continues with its ongoing programmes to Greece (together with the IMF and some Member 
States) as  well as  to  Ireland and Portugal (together with  the IMF, some Member States  and 
EU/EFSM)14  but  is  no  longer  engaged  in  new  financing  programmes  or  loan  facility 
agreements.  

10  

11  

12 

13 
14 

For  more  information  on  the  management  of  the  EFSI  Guarantee  Fund,  see  COM(2017)326  final  of 
16.6.2017.  
Regulation  (EU)  2015/1017  of  the  European  Parliament  and  of  the  Council  of  25  June  2015  on  the 
European  Fund  for  Strategic  Investments,  the  European  Investment  Advisory  Hub  and  the  European 
Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013  — 
the  European  Fund  for  Strategic  Investments    (the  "EFSI  Regulation").  The  agreement  on  the 
management of the EFSI and on the granting of the EU guarantee (the "EFSI Agreement") was signed 
by  the  European  Commission  and  the  European  Investment  Bank  (the  "EIB")  on  22  July  2015.  An 
amendment to this Agreement was signed on 21 July 2016.  
About the GLF:  
http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm. 
About the EFSF: http://www.efsf.europa.eu. 
The loans granted under the EU/EFSM are guaranteed by the EU budget. 

4 

 
                                                 
-  European  Stability  Mechanism  (ESM)15:  The  ESM  is  an  important  component  of  the 
comprehensive EU strategy designed to safeguard financial stability within the euro area by 
providing  financial  assistance  to  euro  area  Member  States  experiencing  or  threatened  by 
financing difficulties. It is an intergovernmental organization under public international law, 
based in Luxembourg, with an effective lending capacity of EUR 500 000 million. 

3. 

EVOLUTIONS OF GUARANTEED OPERATIONS  

This  section  sets  out  the  evolution  of  the  guaranteed  operations;  firstly  of  those  managed 
directly by the Commission and secondly those managed by the EIB.  

Table 1: Total outstanding amounts covered by the EU budget at 31 December 2016 (in EUR million) 

Outstanding 
Capital 

Accrued 
Interest 

Total 

% 

Member States* 

Euratom 

 241.06  

 0.80  

 241.86  

0.29% 

BOP 

EIB 

EFSM 

Sub-total Member 
States** 

Third Countries*** 

MFA 

Euratom 

EIB**** 

 4 200.00  

 71.60  

 4 271.60  

5.13% 

 1 651.32  

 13.15  

 1 664.47  

2.00% 

 46 800.00  

 655.79  

 47 455.79  

57.01% 

 52 892.38  

 741.34  

 53 633.72  

64.43% 

 2 946.60  

 17.30  

 2 963.90  

3.56% 

 10.37  

 0.02  

 10.39  

0.01% 

 26 482.04  

 156.89  

 26 638.94  

32.00% 

Sub-total third countries 

 29 439.01  

 174.21  

 29 613.23  

35.57% 

Total 

 82 331.40  

 915.55  

 83 246.95   100.00% 

* 

This risk is directly covered by the EU budget. This also includes Euratom and EIB loans granted to 
Member State countries prior to their accession to the EU. 

**  This figures does not include EFSI operations, where EUR 4 392 million have been disbursed at the 

reporting date... 

***  The risk covered by the Fund is limited to 20.03 billion. 

**** Loans 

subrogated 

included 
(amount: EUR 247.20 million). These loans have been fully impaired in the EU Financial Statements 
of 2015 and 2016.  

following  Syria  defaults  on  EIB 

loans  are 

the  EU 

to 

15 

About the ESM: http://esm.europa.eu. 

5 

 
 
 
 
 
 
 
 
 
 
                                                 
Tables  A1,  A2a,  A2b  and  A3  of  the  SWD  provide  more  detailed  information  on  these 
outstanding amounts, in particular in terms of ceiling, disbursed amounts or guarantee rates. 

3.1. 

Operations managed directly by the Commission  

3.1.1.  European Financial Stabilisation Mechanism (EFSM) 

In its conclusions of 9/10 May 2010, the Ecofin Council foresaw a volume of the mechanism 
of  EUR 60  000 million16.  In  addition,  euro-area  Member  States  stood  ready  to  complement 
such  resources  if  necessary.  Article  2(2)  of  Council  Regulation  No  407/201017  limits  the 
outstanding  amount  of  loans  or  credit  lines  to  be  granted  to  Member  States  to  the  margin 
available under the own resources ceiling for payment appropriations. 

Following the Council decisions to grant Union financial assistance to Ireland18 (up to EUR 
22  500  million)  and  Portugal19  (up  to  EUR  26  000  million),  disbursements  reached           
EUR  22  500  million  to  Ireland  and  EUR  24  300  million  to  Portugal  (the  remaining           
EUR  1  700  million  were  not  requested  by  the  Portuguese  government).  Accordingly,  the 
EFSM  has  a  remaining  capacity  of  EUR 13,200 million  to  provide  further  assistance,  if 
required20. 

In  April  2013  the  Eurogroup/ECOFIN  decided  to  increase  the  maximum  weighted  average 
maturity  of  EFSM  loans  from  12.5  to  19.5  years,  thus  offering  an  option  to  the  beneficiary 
countries to request a lengthening of loan maturities up to 2026 (tranche by tranche). 

Developments during 2016 

A  request  to  lengthen  the  EFSM  loan  of  EUR  4.75  billion  disbursed  to  Portugal  in  2011  - 
which was due on 3 June 2016 - was received from Portugal on 11 January 2016. The loan 
was  refinanced  in  three  transactions  with  maturities  in  2023  (EUR  1.5  billion),  2031  (EUR 
2.25  billion)  and  2036  (EUR  1  billion).  Following  this  maturity  extension,  the  weighted 
average maturity of the EFSM loans to Portugal is now 14.9 years. 

3.1.2.  Balance of Payments facility (BOP) 

The EU medium-term financial assistance under the BOP facility was re-activated at the end 
of  2008  to  support  Hungary  and  subsequently  Latvia  and  Romania  to  restore  market 
confidence  for  a  total  commitment  of  EUR  14  600  million,  of  which  EUR  13  400  million 
were disbursed.  

16 

17  

18 

19 

20 

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, p. 348). 
Council Implementing Decision 2011/344/EU of 17 May 2011 on granting Union financial assistance to 
Portugal (OJ L 159, 17.6.2011, p. 88); see also corrigendum (OJ L 178, 10.7.2012, p.15). 
For further information on EFSM, see also the report from the Commission on borrowing and lending 
activities of the European Union in 2016 (COM(2016)387 final). The report for 2016 is expected to be 
available by October 2017 on http://eur-lex.europa.eu/homepage.html. 

6 

 
 
                                                 
Developments during 2016 

Hungary repaid its final  loan tranche of EUR  1 500  million in  April 2016.  The outstanding 
amount of BOP loans  has thus decreased from EUR 5,700  million to EUR 4,200  million in 
2016. 

At 31 December 2016, the BOP facility had a remaining capacity of EUR 45 800 million out 
of an overall ceiling of EUR 50 000 million to provide further assistance if required.  

3.1.3.  Macro-Financial Assistance loans (MFA) 

As  a  general  rule,  MFA  decisions  are  taken  by  the  European  Parliament  and  the  Council 
(Article 212 of the TFEU). However, the Council may adopt the decision on a proposal from 
the  Commission  when  the  situation  in  a  third  country  requires  urgent  financial  assistance 
(Article  213  of  the  TFEU)  and  that  procedure  was  used  in  the  second  MFA  package  for 
Ukraine in 2014. 

Developments during 2016 

The second tranche (EUR 10 million out of the EUR 15 million decision) of the loan granted 
to the Kyrgyz Republic21 was disbursed in April 2016. 

On 6 July 2016, the European Parliament and the Council decided to provide further macro-
financial  assistance  to  Tunisia22  of  a  maximum  amount  of  EUR  500  milion  in  the  form  of 
loans (three loan instalments of EUR 200, 150 and 150 million).  

On 14 December 2016, the European Parliament and the Council decided to provide further 
macro-financial assistance to the Hashemite Kingdom of Jordan 23 of a maximum amount of 
EUR 200 milion in the form of loans (two loan instalments of EUR 100 million). 

Regarding repayments, EUR 70 million were repaid by the beneficiary countries (Bosnia and 
Herzegovina  EUR  4  million,  former  Yugoslav  Republic  of  Macedonia  EUR  10  million, 
Montenegro EUR 1.34 million and Serbia EUR 54.66 million).  

The  outstanding  amount  of  MFA  loans  has  decreased  from  EUR  3  006.6  million  to  
EUR 2 946.6 million between 31 December 2015 and 31 December 2016. Loans to Ukraine 
represent 75% of the total MFA exposure. 

Developments subsequent to 31 December 2016 (until 30 June 2017) 

The  second  tranche  of  the  loan  granted  to  Ukraine  under  the  third  programme  MFA-III24 
(EUR 600 milion) was disbursed in April 2017. 

21  

22 

23 

24 

Decision 1025/2013/EU of the European Parliament and of the Council of 22 October 2013 providing 
macro-financial assistance to the Kyrgyz Republic (OJ L 283, 25.10.2013, p. 1). 
Decision  (EU)  2016/1112  of  the  European  Parliament  and  of  the  Council  of  6  July  2016  providing 
further macro-financial assistance to Tunisia (OJ L 186, 09.07.2016, p. 1). 
Decision  (EU)  2016/2371  of  the  European  Parliament  and  of  the  Council  of  14  December  2016 
providing  further  macro-financial  assistance  to  the  Hashemite  Kingdom  of  Jordan  (OJ  L  352, 
23.12.2016, p. 18). 
Decision  (EU)  2015/601  of  the  European  Parliament  and  of  the  Council  of  17  April  2015  providing 
further macro-financial assistance to Ukraine (OJ L 100/1, 17.04.2015). 

7 

 
                                                 
The second tranche of the loan granted to Georgia under MFA (13 milion) was disbursed in 
May 2017. 

3.1.4.  Euratom loans 

The Euratom lending to Member States or in certain eligible non-member countries (currently 
Russian Federation, Armenia, Ukraine) has a ceiling of EUR 4 000 million of which around 
92%  has  already  been  disbursed.  EUR  326  million  remain  under  the  EUR  4  000  million 
Decision. 

A  loan  of  EUR  300  million  to  Ukraine  dedicated  to  the  safety  upgrade  of  existing  nuclear 
facilities  was  signed  on  7  August  2013  and  the  Guarantee  Agreement  was  ratified  by  the 
Ukrainian Parliament on 15 May 2014. The loan will be provided in close cooperation with 
the EBRD, which provides another EUR 300 million loan in parallel.  

On  27  May  2015  the  Commission  authorised  disbursements  under  the  Euratom  loan  to 
Energoatom  in  the  amount  of  up  to  EUR  100  million,  subject  to  Energoatom  having  drawn 
the  loan  amount  granted  by  the  EBRD  in  an  amount  not  less  than  EUR  50  million.  Due  to 
delays  in  the  implementation  of  the  project,  as  of  31  December  2016  no  Euratom 
disbursements had taken place. 

These loans benefit from State guarantees which cover 100% of the amounts outstanding at 
year end. 

Developments during 2016 

No disbursements took place in 2016. Repaid amounts consisted of EUR 22.62 million from 
Bulgaria, EUR 19 million from Romania and EUR equivalent of 7.1 million from Ukraine.  

Developments subsequent to 31 December 2016 

The first Euratom tranche of EUR 50 million has been disbursed in May 2017. 

3.2. 

Evolution of the EIB external financing operations 

Developments during 2016 

Under  the  EIB  general  mandate  covering  the  period  2014-2020,  a  total  amount  of  
EUR 10 741 million had been signed at 31 December 2016, of which only EUR 1 882 million 
was disbursed at that date, leaving the outstanding capital at EUR 1 893 million (see Table A3 
of the SWD). For more information on the countries covered by the EIB mandates, see Tables 
A1, A3 and A4 of the SWD. 

For previous EIB external mandates, see Table A3 of the SWD. 

Defaults on interests payments and loan repayments from the Syrian Government continued 
in  2016.  The  EIB  has  called  on  the  Guarantee  Fund  to  cover  those  defaults  (see  paragraph 
5.1.3 below). 

Outstanding amounts at 31 December 2016 for the various facilities referred to in this section 
are presented in section 3 above (Table 1). 

8 

 
 
4. 

RISKS COVERED BY THE EU BUDGET 

4.1. 

Definition of risk 

The risk borne by the EU 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 EU 
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 interest25.  

–  The budgetary approach defined as "the annual risk borne by the EU 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 
default26. 

4.2. 

Total risk composition 

Until  2010  the  maximum  risk  in  terms  of  total  outstanding  amounts  covered  was  mainly 
linked to loans granted to third countries. Since 2011, the financial crisis has heavily affected 
the public finances of the Member States leading to an increase in the lending activity of the 
EU to support sovereign financing needs in Member States. 

As  a  consequence  the  composition  of  risk  has  changed.  At  31  December  2016,  64%  of  the 
total  outstanding  amount27  concerns borrowing operations linked to  loans to  Member  States 
which are directly covered by the EU budget (compared to 45% at 31.12.2010). 

4.3. 

Annual risk covered by the EU budget 

With reference to outstanding loans at 31 December 2016 (see Table 1 above) the maximum 
amount which the EU would have to pay out during the year 2017 (directly and via the Fund) 
- assuming that all guaranteed loans would be in default - is EUR 5 777 million. That amount 
represents  the  capital  and  interest  payments  from  guaranteed  loans  falling  due  during  2017, 
assuming that defaulting loans are not accelerated (for details see Table A4 in SWD).  

4.3.1.  Member State exposure 

In 2017, the EU will bear a maximum annual risk related to operations with Member States 
(MS) of EUR 2 858 million (49.5% of the total annual risk). That risk concerns: 

(a) EIB lending and/or Euratom loans granted before Member States' accession to the EU; 

(b) the loans granted under the BOP facility, and  

(c) the loans granted under the EFSM scheme.  

25 
26 

27  

See Table 1 of the Report. 
For  the  purpose  of  that  calculation,  it  is  assumed  that  defaulting  loans  are  not  accelerated,  i.e.  only 
payments due are taken into account (see Tables 2 and 3 of the report and Table A4 of the SWD). 
See Table 1. 

9 

 
                                                 
Table 2: Ranking of the Member States according to the annual risk borne by the EU budget in 2017 (EUR million) 

Ranking 

Country 

Loans 

Max annual risk  Weight of the 
country vis-à-
vis annual risk 
of MS 

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

Romania 

a+b) 

1 453.75 

1 

2 

3 

4 

5 

6 

7 

8 

9 

Ireland  

Portugal 

Bulgaria 

Croatia 

Latvia 

Czech Republic 

Poland 

Slovak Republic 

10 

11 

Lithuania 

Hungary 

c) 

c) 

a) 

a) 

a+b) 

a) 

a) 

a) 

a) 

a) 

607.25 

591.22 

73.39 

38.01 

26.34 

25.93 

21.53 

14.24 

4.42 

2.12 

50.9% 

21.2% 

20.7% 

2.6% 

1.3% 

0.9% 

0.9% 

0.8% 

0.5% 

0.2% 

0.1% 

Total 

2 858.20 

100% 

25.2% 

10.5% 

10.2% 

1.3% 

0.7% 

0.5% 

0.4% 

0.4% 

0.2% 

0.1% 

0.04% 

49.5% 

4.3.2.  Third country exposure 

In 2017, the Fund will bear a maximum annual risk related to the exposure to third countries 
of  EUR 2  918.8  million  (50.5%  of  the  total  annual  risk).  The  risk  linked  to  third  countries 
concerns  EIB  lending,  MFA  and  Euratom  loans  (details  are  included  in  Table  A2b  of  the 
SWD). The Fund covers guaranteed loans to third countries with maturities extending up to 
2042. 

The top ten countries (out of forty-eight) are ranked below according to the repayments due in 
2017. They account for EUR 2 415 million or 83% of the annual risk related to third countries 
borne by the Fund. The economic situation of those 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.  

10 

 
 
 
 
Table 3: Ranking of the 10 third countries with the highest exposure according to the annual risk borne by the EU budget in 
2017 (EUR million)  

Ranking 

Country 

Max annual 
risk 

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

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

1 

2 

3 

4 

5 

6 

7 

8 

9 

Turkey 

Tunisia 

Egypt 

Morocco 

Serbia 

South Africa 

Ukraine 

Lebanon 

Brazil 

10 

Bosnia and 
Herzegovina 

1 025.74 

35.1% 

17.8% 

283.98 

278.37 

221.09 

204.78 

99.73 

88.12 

85.15 

65.14 

62.94 

9.7% 

9.5% 

7.6% 

7.0% 

3.4% 

3.0% 

2.9% 

2.2% 

2.2% 

4.9% 

4.8% 

3.8% 

3.5% 

1.7% 

1.5% 

1.5% 

1.1% 

1.1% 

Total (top 10) 

2 415.03 

82.7% 

41.8% 

11 

 
 
5. 

THE GUARANTEE FUND FOR EXTERNAL ACTIONS 

5.1. 

Activation of guarantees 

5.1.1.  Payments from cash resources 

The  EU  budget  provisionally  covers  the  debt  service  at  due  dates  in  case  a  debtor  fails  to 
repay  its  loan  to  the  EU  on  time.  The  Commission  draws  on  its  cash  resources  in  order  to 
avoid delays and any resulting costs in servicing its borrowing operations28.  

Being  mindful  of  most  expenditures  taking  place  during  the  first  quarter  of  each  year,  debt 
redemption is structured for the months thereafter as well as for the beginning of each month 
when cash balances are highest. 

In  2016  cash  for  about  EUR  1  million  was  used  for  a  limited  period  of  16  days  due  to  a 
technical default for one payment of one debtor. 

5.1.2.  Payments from the EU budget  

In the event that one or more Member States do not meet their legal obligations and that the 
EU’s own resources are insufficient, the Commission can use available EU budget resources 
and prioritise debt repayment over other non-obligatory expenditures. According to the MFF, 
if this proves to  be  insufficient,  EU legislation obliges  Member States  to  provide additional 
contributions necessary to repay the debt and to balance the budget, up to a ceiling of 1.20% 
of  EU  GNI.  If  needed,  EU  legislation  allows  Member  States  to  contribute  independently  of 
their share to the EU budget. 

As  no  default  from  Member  States  occurred  during  the  year  2016,  no  appropriation  was 
requested. 

5.1.3.  Calls on the Guarantee Fund and recoveries 

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

The  amounts  called  by  the  EIB  are  withdrawn  from  the  Guarantee  Fund  account  after 
authorization  by  the  Commission  services.  When  the  EU  makes  a  payment  under  the  EU 
Guarantee, it is subrogated into the rights and remedies of the EIB 29.  

Recovery  proceedings  are  undertaken  by  the  EIB  on  behalf  of  the  EU  in  respect  of  the 
subrogated sums30. 

28 

29 

30 

See Article 14 of Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and 
procedure for making available the traditional, VAT and GNI-based own resources and on the measures 
to meet cash requirements (OJ L 168, 7.6.2014, p. 39). 
See Article 8.7 of Decision No 466/2014/EU of the European Parliament and of the Council of 16 April 
2014  granting  an  EU  guarantee  to  the  European  Investment  Bank  against  losses  under  financing 
operations supporting investment projects outside the Union. 
For further information on recovery proceedings, see also the Recovery Agreement signed on 25 July 
2014  between  the  European  Union  and  The  European  Investment  Bank  governing  modalities  and 
procedures  for  recovery  of  payments  made  by  the  EU  under  the  guarantees  granted  by  it  to  the  EIB 
against losses under financing operations supporting investment projects outside the EU. 

12 

 
                                                 
EIB loans to projects in Syria 

Starting from December 2011, the EIB has experienced defaults on certain interest payments 
and  loan  repayments  from  the  Syrian  Government.  Since  official  payment  requests  have 
remained  unsuccessful,  the  EIB  started  to  call  on  the  Guarantee  Fund  in  May  2012.  The 
evolution of the calls corresponding to defaulting loans in Syria is presented in Table 4a. 

Table 4a: Calls on the Guarantee Fund due to defaulting loans in Syria (in EUR million) 

Year 
(Withdrawal 
from GF 
account on) 

Number of 
calls paid 

Amount of 
due 
instalments 

Penalties and 
accrued 
interests31 

Amount 
recovered 

Total 

2012 

2013 

2014 

2015 

2016 

Total 

2 

8 

8 

8 

12 

38 

24.0 

59.3 

58.7 

58.7 

103.8 

304.4 

0.0 

1.4 

1.5 

1.5 

2.4 

6.8 

2.2 

0.0 

0.0 

0.0 

0.0 

2.2 

21.8 

60.7 

60.2 

60.2 

106.2 

309.1 

At  31  December  2016,  the  total  capital  outstanding  of  guaranteed  loans  related  to  Syria 
amounted to EUR 555 million32, with the final loan maturity in 2030. 

TAV Tunisie S.A. (Enfidha airport) 

The  EIB  called  on  29  June  2016  the  EU  guarantee  under  the  external  lending  mandate  in 
relation to a loan to TAV Tunisie S.A. (Enfidha airport). 

On 29 September 2016, the European Commission paid EUR 4.65 million (payment of arrears 
and  interests)  to  the  EIB  for  the  above  mentioned  guarantee  call,  which  is  currently  being 
discussed with the EIB.  

The call on the Fund corresponding to defaulting loan for TAV Tunisie S.A. (Enfidha airport) 
is presented in Table 4b.

31  

32  

Penalties and accrued interests are claimed by the EIB only with the second payment request of each 
individual loan and run from the default date until the payment date by the Guarantee Fund. 
This includes the amount of EUR 304.43 million (principal + interest) already called by the EIB. 

13 

 
                                                 
Table 4b: Call on the Guarantee Fund relating to TAV Tunisie S.A. (Enfidha airport) (in EUR million) 

Year of 
withdrawal  

Number of 
calls paid 

Amount of 
due 
instalments 

Penalties and 
accrued 
interest32  

Amount 
recovered 

Total 

2016 

Total 

1 

1 

4.56 

4.56 

0.09 

0.09 

0.00 

0.00 

4.65 

4.65 

At  31  December  2016,  the  total  capital  outstanding  of  guaranteed  loans  related  to  TAV 
Tunisie S.A. (Enfidha airport) amounts to EUR 64.4 million33, with the final loan maturity in 
2028. 

Developments subsequent to 31 December 2016 (until 30 June 2017) 

By  the  end  of  June  2017,  six  additionnal  calls  related  to  Syria  for  a  total  amount  of  EUR 
28.38  million  (including  interest  and  penalties)  and  one  additionnal  call  related  to  TAV 
Tunisie S.A. (Enfidha airport) for a total amount of EUR 2.21 million (including interest and 
penalties) have been received. 

5.2. 

Evolution of the Fund 

In accordance with the Guarantee Fund Regulation, 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.  A  provisioning  mechanism  is  in  place  to  ensure  the  target 
amount is met. 

On the basis of the provisioning mechanism, the EU budget paid EUR 257.12 million to the 
Fund  in  February  2016,  while  in  February  2017  the  respective  payment  amounted  to  EUR 
240.54 million. 

At 31 December 2016, the net assets34 of the Fund amounted to EUR 2 505.14 million. The 
ratio between the net assets and the outstanding capital liabilities35 (EUR 29 365.98 million), 
within  the  meaning  of  the  Guarantee  Fund  Regulation,  was  lower  than  the  target  amount. 
Consequently,  a  provisioning  of  EUR 137.80  million was  inserted  in  the  preliminary  EU 
budget of 2018. 

A  review  to  assess  the main  parameters  of  the Fund,  in  particular  the  target  rate,  should  be 
undertaken  at  the  time  of  the  mid-term  review  of  the  EIB  external  lending  mandate. 
Therefore,  an  evaluation  of  the  Guarantee  Fund  was  carried  out  by  an  external  contractor 
taking  into  account  the  risk  profile  of  the  Fund  and  its  effectiveness  in  the  light  of  the 
evolution of the external financing covered by the Fund and the related risks. The report was 
delivered in August 2016 and the main conclusion was that a 9% Target Rate is still deemed 

33  
34 
35 

This includes the amount of EUR 4.56 million (including interest) already called by the EIB. 
Total assets of the Fund minus accrued payables (EIB fees and audit fees). 
Including accrued interests. 

14 

 
 
                                                 
optimal for the current risk level of the loans portfolio, even under a scenario of further rating 
downgrades of the main obligors. Therefore, the 9% Target Rate is kept unchanged. 

6. 

THE EUROPEAN FUND FOR STRATEGIC INVESTMENTS (EFSI) 36 

The EU Guarantee covers financing and investment operations signed by the EIB under the 
Infrastructure  and  Innovation  Window  ("IIW")  and  by  the  EIF  under  the  SME37  Window 
("SMEW"). Part of these operations are covered by the EU Guarantee while the other part is 
carried out at the own risk of the EIB Group. 

According to Article 12 of the EFSI Regulation, the EFSI Guarantee Fund ("EFSI GF") shall 
constitute a liquidity cushion from which the EIB shall be paid in the event of a call on the EU 
guarantee.  In  accordance  with  the  EFSI  Agreement  between  the  EU  and  the  EIB,  calls  are 
paid by the EFSI GF if their amount is in excess of the funds at the disposal of the EIB on the 
EFSI Account. The EFSI Account, managed by the EIB, has been established for the purposes 
of  collecting  the  EU  revenues  resulting  from  EFSI  operations  under  the  EU  guarantee  and 
recovered amounts and to the extent of the available balance, for the payment of calls under 
the EU guarantee.  

The EFSI GF is provisioned progressively taking into account the increase in exposure borne 
by the EU Guarantee. 

The  resources  of  the  EFSI  GF  are  directly  managed  by  the  Commission  and  invested  in 
accordance  with  the  principle  of  sound  financial  management  following  appropriate 
prudential rules.  

Developments during 2016 

The guarantee exposure of the EU in relation to disbursed outstanding EFSI operations by the 
EIB  Group  amounted  to  EUR  4  392  million,  as  at  31  December  2016,  out  of  the  legal 
commitment  of  EUR  16  billion  guaranteed  by  the  EU  (Article  11  of  the  EFSI  Regulation). 
The amount of EUR 4 392 million is recorded as a contingent liability in the notes to the 2016 
financial statements of the EU.  

Under the IIW, the outstanding disbursed exposure covered by the EU Guarantee was EUR 
4.02 billion, of which EUR 3.98 billion for debt operations and EUR 0.04 billion for equity-
type operations38. 

As of end 2016 under SMEW, the total outstanding exposure covered by the EU Guarantee 
was  EUR  369.7  million,  of  which  EUR  364.8  million  for  guarantee  operations  and  
EUR 5 million for equity operations.  

36  

37  
38  

Regulation  (EU)  2015/1017  of  the  European  Parliament  and  of  the  Council  of  25  June  2015  on  the 
European  Fund  for  Strategic  Investments,  the  European  Investment  Advisory  Hub  and  the  European 
Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013  — 
the European Fund for Strategic Investments  (the "EFSI Regulation"). OJ L 169, 1.7.2015, p. 1. 
Micro, small or medium-sized enterprise (SME). 
As at end 2016, the total signed (disbursed and undisbursed) exposure of the IIW portfolio benefitting 
from  the  EU  Guarantee  was  EUR  13.38  billion  of  which  EUR  12.84  billion  for  debt  operations  and 
EUR 0.54  billion for  equity-type  operations.  However, due  to  the  first  loss piece coverage  of  the  EU 
Guarantee, potential losses for the EU budget under the IIW were capped at EUR 10.6 billion. 

15 

 
 
                                                 
The net assets of the Guarantee Fund stood at EUR 1 020 million as at 31/12/2016. 

As  of  end-2016,  total  cumulated  signatures  under  EFSI  amounted  to  EUR  21.3  billion 
covering 28 Member States, of which an amount of EUR 14.2 billion was signed39 by the EIB 
(121 operations) and EUR 7.1 was signed by the EIF (225 operations). Overall, this represents 
a  significant  increase  compared  to  2015,  at  the  end  of  which  total  signatures  amounted  to 
EUR 1.2 billion. 

For more information on the management of the EFSI Guarantee Fund, see the last version of 
the  report  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  Court  of 
Auditors  on  the  management  of  the  Guarantee  Fund  of  the  European  fund  for  strategic 
investments40 and the associated Staff Working Document (SWD). 

39  

40  

The  difference  between  total  signatures  and  signed  exposure  depends  on  several  factors,  such  as  the 
latter  excluding  EIB  share  in  equity-type  operations  as  well  as  differences  due  to  repayments  and 
applied foreign exchange rates. 
Last version - COM(2017)326 final of 16.6.2017. 

16