REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget Situation at 31 December 2018
Date: 2019-10-23
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, 23.10.2019  COM(2019) 484 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget     Situation at 31 December 2018 {SWD(2019) 379 final}  
 
 
Table of Contents 

1. 

2. 

2.1 

2.2 

2.3 

2.4 

2.5 

3. 

3.1 

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

Operations guaranteed by the EU budget and crisis mechanisms of the euro-area not 
covered by the EU budget ............................................................................................ 3 

Loans granted by the European Union with macroeconomic objectives ..................... 4 

Loans with microeconomic objectives ......................................................................... 4 

European Investment Bank ("EIB") financing of operations in non-Member States 
("EIB external financing") covered by EU guarantees (ELM). ................................... 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) ........................................................................ 5 

Crisis management mechanisms which are not covered by the EU budget ................. 7 

Evolutions of guaranteed operations ............................................................................ 7 

Operations managed directly by the Commission ....................................................... 8 

3.1.1 

European Financial Stabilisation Mechanism (EFSM) ................................................ 9 

3.1.2  Balance of Payments facility (BOP) .......................................................................... 10 

3.1.3  Macro-Financial Assistance loans (MFA) ................................................................. 11 

3.1.4 

Euratom loans ............................................................................................................. 12 

3.2 

4. 

4.1 

4.2 

4.3 

Evolution of the EIB external financing operations ................................................... 12 

Risks covered by the EU budget ................................................................................ 13 

Definition of risk ........................................................................................................ 13 

Total risk composition................................................................................................ 13 

Annual risk covered by the EU budget ...................................................................... 14 

4.3.1  Member State exposure .............................................................................................. 14 

4.3.2 

Third country exposure .............................................................................................. 15 

5. 

5.1 

Activation and payment of guarantees ....................................................................... 16 

Debt service not covered by the Guarantee Fund for External Action (Euratom loans 
to Member States, EFSM and BoP) ........................................................................... 16 

5.1.1 

Payments from cash resources ................................................................................... 17 

5.1.2 

Payments from the EU budget ................................................................................... 17 

1 

 
 
 
5.2 

Calls on the Guarantee Fund for External Actions and recoveries (ELM, MFA 
and Euratom loans to Third countries) .................................................................. 17 

5.3 

Evolution of the Fund................................................................................................. 19 

6. 

7. 

7.1 

7.2 

The European Fund for Strategic Investments (EFSI) ............................................... 20 

European Fund for Sustainable Development (EFSD)  ............................................. 22 

About the EFSD Guarantee ........................................................................................ 23 

The EFSD Guarantee Fund ........................................................................................ 23 

2 

 
 
 
 
1. 

INTRODUCTION 

The  objective  of  this  report  is  to  monitor  the  credit  risks  borne  by  the  EU  budget  resulting 
from  the  guarantees  given  for  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 previous Financial Regulation1 which 
was  still  applicable  for  part  of  2018.  Hence,  this  report  on  EU  budget  guarantees  and  the 
corresponding risks for the year 2018 is submitted for the last time and will be replaced by the 
future reporting scheme foreseen in the new Financial Regulation.  

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  CRISIS  MECHANISMS  OF  THE 

EURO-AREA NOT COVERED BY THE EU BUDGET  

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

1 

2 

3 

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  2728/94  of  31  October  1994  establishing  a  Guarantee  Fund  for 
external  actions  (OJ  L  293,  12.11.1994,  p.  1),  and  subsequently  amended  by  Council  Regulation  (EC, 
Euratom) No 480/2009 (OJ L 145, 10.6.2009, p. 10) and Regulation (EU) 2018/409 (OJ L 76, 19.3.2018, 
p. 1), the "Guarantee Fund Regulation". 
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.  The  EFSI 
Regulation  was  amended  by  Regulation  (EU)  2017/2396  of  the  European  Parliament  and  Council  of 
13 December 2017 as regards the extension of the duration of the European Fund for Strategic Investments 
as well as the introduction of technical enhancements for that Fund and the European Investment Advisory 
Hub (the "EFSI 2.0 Amendment") OJ L 345, 27.12.2017, p. 34. The EFSI 2.0 Amendment increased, inter 
alia, the size of the EU Guarantee and adjusted the target rate. 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  and  was  amended  and 
restated on 21 July 2016, 21 November 2017, 9 March 2018 and December 2018. 

3 

 
                                                 
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 
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 loans7. The Euratom loan facility may be used: 

• 

• 

[in Member States]: investments in nuclear power stations and in industrial installations 
in the nuclear fuel cycle 8 and  

[in certain non-member  countries]: investments to improve the safety and efficiency of 
nuclear power stations  that exist or are under construction, as well as decommissioning 
projects9. 

2.3  European Investment Bank ("EIB") financing of operations in non-Member States 

("EIB external financing") covered by EU guarantees10 (ELM). 

the  EU  budget  guarantees  up 

Under  the  External  Lending  Mandate  (ELM),  the  EU  provides  a  guarantee  from  the  EU 
budget to enable the EIB to increase its lending outside the EU in support of EU policies. The 
ELM  supports  EIB  activity  in  the  pre-accession  countries,  the  Eastern  and  Southern 
Neighbourhood, Asia, Latin America and South Africa. Under the current ELM period (2014-
2020), 
to  EUR 32.3 billion  of  EIB  operations.  On 
14 March 2018,  the  European  Parliament  and  the  Council  adopted  the  Decision  (EU) 
2018/412 amending Decision No 466/2014/EU in the context of the mid-term review of the 
ELM  notably  increasing  the  maximum  ceiling  for  the  current  ELM  from  EUR 27 billion  to 
EUR 32.3 billion. This review adds a new objective of the long-term economic resilience of 
refugees,  migrants,  host  and  transit  communities,  and  communities  of  origin  as  a  strategic 
response to addressing root causes of migration. 

4 

5 

6 

7 

8 

9 

10 

MFA may also take the form of grants to third countries (not covered by this report).  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).  
Treaty  dated  25  March  1957  establishing  The  European  Atomic  Energy  Community  (Euratom)  as 
amended and supplemented. 
For Member States: Council Decision 77/270/Euratom of 29 March 1977 empowering the Commission to 
issue  Euratom  loans  for  the  purpose  of  contributing  to  the  financing  of  nuclear  power  stations  (Official 
Journal n° L 88 of 6 April 1977, p. 9) as amended and supplemented. 
For  certain  non-Member  States:  Council  Decision  94/179/Euratom  of  21  March  1994  (Official  Journal 
n° L 84 of 29 March 1994) amending Decision 77/270/Euratom, to authorize the Commission to contract 
Euratom borrowings in order to contribute to the financing required for improving the degree of safety and 
efficiency of nuclear power stations in certain non- member countries.. 
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 (OJ L135 of 8.5.2014, p.1). 

4 

 
                                                 
The  EU  guarantee  to  the  EIB  covers  risks  of  a  sovereign  and  political  nature  in  connection 
with its financing operations carried out outside the Union in support of the Union's external 
policy objectives. In addition, the EIB finances investment operations outside the Union at its 
own risk, as well as activities under specific mandates such as in ACP countries.11 

With a view to  supporting  Union external action, and in order to  enable  the EIB to  finance 
investments outside the Union without affecting the credit standing of the EIB, the majority of 
its operations outside the Union benefit from an EU budgetary guarantee.  

Guarantee Fund for External Actions12 

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 
countries13. 

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%14. If resources of the Fund are not sufficient, the EU 
budget will provide the necessary funds. The assets of the Fund are managed by the EIB.  

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. 

11   The  ACP-EU  Partnership  Agreement,  signed  in  Cotonou  on  23  June  2000,  was  concluded  for  a  20-year 
period  from  2000  to  2020.  It  is  the  most  comprehensive  partnership  agreement  between  developing 
countries and the EU. It is not financed by the EU budget. 

12  Council Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions (OJ L 

145, 10.6.2009, p. 10) as amended by Regulation (EU) 2018/409 (OJ L 76, 19.3.2018, p. 1). 

13  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 2018 annual report on the Fund 
and  its  management  (COM(2019)  363  final)  and  its  Staff  Working  Document  (SWD(2019)  314  final) 
approved on 5.8.2019, they are available 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. 

14 

5 

 
                                                 
The EU Guarantee15 covers financing and investment operations signed by the EIB under the 
main  part  of  the  Infrastructure  and  Innovation  Window  ("IIW"),  and  by  the  EIF  under  the 
SME Window ("SMEW") and the SME / MidCap fund investment sub-window of IIW. Part 
of the overall EFSI operations is covered by the EU Guarantee while a part is carried out at 
the own risk of the EIB Group16. 

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)17 

According  to  Article  12  of  the  EFSI  Regulation,  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  and  recovered  amounts  resulting  from  EFSI  operations  under  the  EU 
Guarantee and, to the extent of the available balance, for the payment of calls under the EU 
Guarantee.  

The Guarantee Fund has to be maintained at a certain percentage18 (the Target Amount) of the 
total  amount  of  the  obligations  under  the  EU  Guarantee,  currently  35%.  Thus,  the  liquidity 
cushion  is  intended  to  provide  an  appropriate  safety  margin  avoiding  exposing  the  Union 
budget  to  sudden  guarantee  calls,  which  could  entail  spending  cuts  or  budget  amendments. 
Therefore, it contributes to the predictability of the budgetary framework. 

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

According to Article 12(4) of the EFSI Regulation, 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. 

The EIB and the EIF are responsible for  assessing and monitoring the risk of the individual 
operations  backed  by  the  EU  Guarantee.  On  the  basis  of  this  reporting  and  of  coherent  and 
prudent  assumptions  on  future  activity,  the  Commission  ensures  the  adequacy  of  the  target 
amount  and  the  level  of  the  EFSI  GF  under  review.  In  line  with  Article  16(3)  of  the  EFSI 
Regulation, the EIB and the EIF reported back to the Commission and the European Court of 
Auditors in March 2019. 

Pursuant to Article 16(2) of the EFSI Regulation, the annual report of the EIB to the European 
Parliament  and  Council  shall  contain  specific  information  on  the  aggregate  risk  associated 

15 

16 

17 

18 

The size of the EU Guarantee has been increased from EUR 16 billion to EUR 26 billion by the EFSI 2.0 
Amendment. 
The size of EIB Group Guarantee  has been  increased from EUR 5 billion to EUR 7.5 billion by the EFSI 
2.0 Amendment.  
For  more  information  on  the  management  of  the  EFSI  Guarantee  Fund,  see  COM(2019)  244  final  of 
28.05.2019.  
The  Target  Amount  was  originally  set  by  Article  12(5)  of  the  EFSI  Regulation  at  50%  of  the  total  EU 
guarantee  obligations.  As of the entry  into  force of the  EFSI  2.0 Regulation, the Target Amount is  set at 
35% of the total EU guarantee obligations. 

6 

 
                                                 
with  the  financing  and  investment  operations  carried  out  under  the  EFSI  as  well  as  on  the 
guarantee calls. 

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 and they are only mentioned below for the 
sake of completeness: 

- the Greek Loan Facility (GLF)19 which is financed via bilateral loans from other euro area 
Member States to Greece, centrally administered by the Commission. 

-  European  Financial  Stability  Facility  (EFSF)20:  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)21  but  is  no  longer  engaged  in  new  financing  programmes  or  loan  facility 
agreements.  

-  European  Stability  Mechanism  (ESM)22:  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 billion. 

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 2018 (in EUR million) 

Outstanding 
Capital 

Accrued 
Interest 

Total 

% 

Member States* 

Euratom 

BOP 

EIB 

EFSM 

 152.9  

 1,700.0  

 1,141.0  

 0.5  

 153.4  

0.2% 

 33.9  

 1,733.9  

2.1% 

 9.0  

 1,150.0  

1.4% 

 46,800.0  

 600.0  

 47,400.0  

57.5% 

19 
20 
21 
22 

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

7 

 
 
 
 
 
 
                                                 
Sub-total Member 
States** 

Third Countries*** 

MFA 

Euratom 

EIB**** 

 49,793.9  

 643.3  

 50,437.2  

61.2% 

 4,360.7  

 100.0  

 26.8  

 4,387.6  

5.3% 

 0.5  

 100.5  

0.1% 

 27,395.2  

 147.6  

 27,542.8  

33.4% 

Sub-total third countries 

 31,855.9  

 174.9  

 32,030.9  

38.8% 

Total 

 81,649.9  

 818.2  

 82,468.1  

100% 

* 

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 15.8 billion  have  been  disbursed  at  the 

reporting date. 

***  The  risk  covered  by  the  Fund  is  limited  to  EUR 18 billion  due  to  the  limitations  of  the  guarantees 
given  to  the  EIB  under  each  one  of  the  external  lending  mandates  (ELM)  (see  section  2.1.3  - 
Guarantees given to the EIB of the associated Staff Working Document). 

**** Loans subrogated to the EU following Syria and Enfidha (Tunisia) defaults on EIB loans are included 
(amount:  EUR 502.02 million  including  outstanding  capital,  accrued  interest  and  penalties).  These 
loans have been fully impaired in the EU Financial Statements of 2015, 2016, 2017 and 2018.  

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  

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 pursued. The consistency of financial support to third countries 
with the overall objectives of the EU external action policy is ensured by the Commission and 
the High Representative of the Union for Foreign Affairs and Security Policy, assisted by the 
European External Action Service (EEAS). 

Therefore, 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  risk.  Outstanding 
borrowings are matched by outstanding loans. 

8 

 
 
 
 
 
Table 1b Operations of the EU in 2018 (in EUR million) 

Table 2: New Borrowing-and-lending operations (guaranteed by the Union budget) planned for 2019 and 2020 (in EUR 
million)

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 billion23.  In  addition,  euro-area  Member  States  stood  ready  to 
complement  such  resources  if  necessary.  Article  2(2)  of  Council  Regulation  No  407/201024 

23 

24 

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). 

9 

InstrumentBeneficiary (instalment tranche)Disbursement dateMaturityAmountTotals per program06-02-201804-04-20252 40006-03-201804-04-20331 000Ireland - 3rd lengthening29-06-201804-04-2033500Portugal - 2nd lengthening29-06-201804-04-2033600EuratomEnergoatom (Ukraine) - 2nd instalment06-07-201806-07-20285050Georgia MFA II - 1st instalment11-12-201804-04-203315Ukraine MFA IV - 1st instalment11-12-201804-04-2033500Total5 065MFA515EFSMIreland - 2nd lengthening4 500Instrument20192020A. Union and Euratom borrowing-and-lending operations with a Union budget guarantee1. Union macro-financial assistance for third countries (MFA)sOperations decided or scheduled:Georgia II20Jordan II100Moldova2040Tunisia II 150150Ukraine IV500Subtotal MFA 7901902. Euratom loans1001003. Balance of payments 004. European Financial Stabilisation Mechanism (EFSM) 00Subtotal A890290B. European Investment Bank loans with a Union budget guarantee1. Pre-accession countries1 2001 490 2. Neighbourhood and partnership countries2 5232 7493. Asia and Latin America5596234. Republic of South Africa7879Subtotal B4 3594 940Grand total5 2495 230 
 
  
                                                 
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  Ireland25  (up  to 
EUR 22.5 billion)  and  Portugal26 
reached 
EUR 22.5 billion to Ireland and EUR 24.3 billion to Portugal (the remaining EUR 1.7 billion 
were not requested by the Portuguese government). Accordingly, the EFSM has a remaining 
capacity of EUR 13.2 billion to provide further assistance, if required. 

to  EUR 26 billion),  disbursements 

(up 

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 2018 

Ireland 

A request to lengthen the EFSM loan of EUR 3.4 billion - disbursed to Ireland in March 2011 
and due on 4 April 2018  -  was  received from  Ireland on 27 November  2017. The loan was 
refinanced during the first quarter of 2018 in two transactions with maturities in April 2025 
(EUR 2.4 billion) and April 2033 (EUR 1 billion).  

Furthermore, an additional request to lengthen the EFSM loan of EUR 500 million disbursed 
to  Ireland  in  October  2011  and  due  on  4  October  2018  was  received  from  Ireland  in  the 
second quarter of 2018. The loan was refinanced in June 2018 by increasing the existing bond 
with maturity April 2033 (EUR 500 million). 

Following  the  maturity  extensions  by  7  years  (EUR 2.4 billion)  and  by  15  years 
(EUR 1.5 billion) in Q1/2018 and Q2/2018, the weighted average maturity of the EFSM loans 
to Ireland is now 17.1 years. 

Portugal 

A  request  to  lengthen  the  EFSM  loan  of  EUR 600 million  disbursed  to  Portugal  in  October 
2011 and due on 4 October 2018 was received from Portugal in the second quarter of 2018. 
The  loan  was  refinanced  in  June  2018  by  increasing  the  existing  bond  with  maturity 
April 2033 (EUR 600 million). 

Following  the  maturity  extension  by  15  years  (EUR 600 million)  in  Q2/2018,  the  weighted 
average maturity of the EFSM loans to Portugal is now 15.3 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 14.6 billion,  of  which  EUR 13.4 billion  were 
disbursed.  

25 

26 

Council Implementing Decision 2011/77/EU of 7 December 2010 on granting Union financial assistance 
to Ireland (OJ L 30, 4.2.2011, p. 348). 
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); see also corrigendum (OJ L 178, 10.7.2012, p.15). 

10 

 
                                                 
Developments during 2018 

Romania repaid two loan tranches of EUR 1.2 billion in April 2018 and EUR 150 million in 
October  2018.  The  outstanding  amount  of  BOP 
thus  decreased  from 
EUR 3.05 billion to EUR 1.7 billion in 2018. 

loans  has 

At 31 December 2018, the BOP facility had a remaining capacity of EUR 48.3 billion out of 
an overall ceiling of EUR 50 billion 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). That procedure was used in the second MFA package for Ukraine 
in 2014. 

Developments during 2018 

Georgia 

On 18 April 2018 the European Parliament and Council decided to provide further MFA of up 
to EUR 45 million to Georgia (MFA II), consisting of a EUR 10 million grant element and a 
loan of EUR 35 million27. 

The first loan tranche of EUR 15 million  (out of the EUR 35 million  decision) of Georgia’s 
second programme (MFA II) was disbursed i 

n December 2018.  

Ukraine 

On 4 July 2018 the European Parliament and Council decided to provide further MFA of up 
to EUR 1 billion to Ukraine (MFA IV), consisting of two tranches of EUR 500 million each 
with a view to supporting Ukraine's economic stabilisation and substantive reform agenda28. 

The  first  tranche  of  EUR 500 million  of  Ukraine’s  fourth  programme  (MFA  IV)  was 
disbursed in December 2018.  

Republic of Moldova 

On 13 September 2017, the European Parliament and the Council decided to provide further 
macro-financial  assistance  to  the  Republic  of  Moldova  of  EUR 100 million  (up  to 
EUR 60 million  provided  in  the  form  of  loans  and  up  to  EUR 40 million  in  the  form  of 
grants) 29. 

27 

28 

29 

Decision  (EU)  2018/598  of  the  European  Parliament  and  of  the  Council  of  18  April  2018  on  providing 
macro-financial assistance to Georgia (OJ L 103, 23.04.2018, p.8). 
Decision  (EU)  2018/947  of  the  European  Parliament  and  of  the  Council  of  4  July  2018  on  providing 
macro-financial assistance to Ukraine (OJ L 171, 6.7.2018, p.11). 
Decision  (EU)  2017/1565  of  the  European  Parliament  and  of  the  Council  of  13  September  2017  on 
providing macro-financial assistance to the Republic of Moldova (OJ L 242, 20.09.2017, p.14). 

11 

 
                                                 
This operation is currently suspended due to non-compliance with political pre-conditions. 

Additional information  

Regarding repayments, EUR 55.73 million were repaid by the beneficiary countries: Albania 
(EUR 4 million),  North  Macedonia 
and  Herzegovina 
(EUR 1.8 million),  Bosnia 
(EUR 5.6 million), Montenegro (EUR 1.10 million) and Serbia (EUR 43.23 million).  

The outstanding amount of MFA loans has increased from EUR 3.9 billion to EUR 4.4 billion 
between 31 December 2017 and 31 December 2018. Loans to Ukraine represent 76% of the 
total MFA exposure. 

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 billion of which around 92% 
has already been disbursed. EUR 326 million remain under the EUR 4 billion Decision. 

Ukraine 

A  loan  of  EUR 300 million  to  Ukraine  dedicated  to  the  safety  upgrade  of  existing  nuclear 
facilities  was  granted  by  COM  Decision  of  24/06/201330.  The  loan  is  provided  in  close 
cooperation with the EBRD, which provides another EUR 300 million loan in parallel.  

These loans benefit from State guarantees which cover 100% of the amounts outstanding at 
year  end. The first Euratom  tranche of  EUR 50 million  was disbursed in May 2017  and the 
second Euratom tranche of EUR 50 million was disbursed in June 2018. 

Bulgaria and Romania 

A loan of EUR 212.5 million was granted to Bulgaria in the form of a multicurrency facility 
for  the  modernization  of  the  nuclear  power  plant  of  Kozloduy  (Units  5  and  6).  The  loan 
agreement  signed  between  the  European  Atomic  Energy  Community  and  AEZ  “Kozloduy” 
EAD  was  signed  on  29  May  2000.  At  31  December  2018,  the  outstanding  amount  was 
EUR 33.8 million. 

A loan of EUR 223.5 million was granted to Romania in the form of a multicurrency facility 
for  the  completion  of  Unit  2  of  the  nuclear  power  plant  Cernavoda.  The  loan  agreement 
signed  between  the  European  Atomic  Energy  Community  and  Societatea  Nationala 
Nuclearelectrica  S.A.  was  signed  on  11  June  2004.  At  31  December  2018,  the  outstanding 
amount was EUR 119.1 million. 

Since 1 January 2007, when Bulgaria and Romania became Member States , the outstanding 
risk of these operations  have been directly covered by the  EU Budget  and no longer by the 
Guarantee Fund for External Actions. 

3.2  Evolution of the EIB external financing operations 

Developments during 2018 

30 

C(2013) 3496. 

12 

 
                                                 
Under  the  EIB  ELM  mandate  covering  the  period  2014-2020,  a  total  amount  of 
EUR 17.64 billion  had  been  signed  at  31  December  2018,  of  which  only  EUR 5.77 billion 
was disbursed at that date, leaving the outstanding capital at EUR 5.41 billion (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 lending mandates, see Table A3 of the SWD. 

Defaults on interests payments and loan repayments from the Syrian Government continued 
in 2018. The EIB has called on the Guarantee Fund to cover those defaults (see paragraph 5.2 
below). 

Outstanding amounts at 31 December 2018 for the various facilities referred to in this section 
are presented in Table 1. 

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 interest31.  

–  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 
default32. 

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 2018, 61.2% of the 
total  outstanding amount33 concerns borrowing operations linked to  loans to  Member States 
which are directly covered by the EU budget (compared to 45% at 31.12.2010). 

31 
32 

33 

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. 

13 

 
                                                 
4.3  Annual risk covered by the EU budget 

With reference to outstanding loans at 31 December 2018 (see Table 1 above) the maximum 
amount which the EU would have to pay out during the year 2019 (directly and via the Fund) 
- assuming that all guaranteed loans would be in default - is EUR 6 337 million. That amount 
represents  the  capital  and  interest  payments  from  guaranteed  loans  falling  due  during  2019, 
assuming that defaulting loans are not accelerated (for details see Table A4 in SWD).  

4.3.1  Member State exposure 

In 2019, the EU will bear a maximum annual risk related to operations with Member States 
(MS) of EUR 2 953.1 million (46.6% 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.  

14 

 
Table 2: Ranking of the Member States according to the annual risk borne by the EU budget in 2019 (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 2019 (MS 
and non-MS) 

40.2% 

19.8% 

17.7% 

17.6% 

1.9% 

1.2% 

0.6% 

0.5% 

0.4% 

0.1% 

18.8% 

9.2% 

8.3% 

8.2% 

0.9% 

0.5% 

0.3% 

0.2% 

0.2% 

0.0% 

1,188.58 

584.84 

524.04 

518.98 

54.85 

34.11 

18.90 

13.40 

12.62 

2.74 

2,953.1 

100.0% 

46.6% 

1 

2 

3 

4 

5 

6 

7 

8 

9 

Romania 

Portugal 

Latvia 

Ireland 

Bulgaria 

Croatia 

Poland 

Slovakia 

Czech Republic 

10 

Lithuania 

Total 

a+b) 

c) 

a+b) 

c) 

a) 

a) 

a) 

a) 

a) 

a) 

4.3.2 

Third country exposure 

In 2019, the Fund will bear a maximum annual risk related to the exposure to third countries 
of  EUR 3 383.8 million  (53.4%  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 46 non-MS) are ranked below according to the repayments due 
in 2019. They account for EUR 2 864.50 million or 84.7% of the annual risk related to third 
countries borne by the Fund for 2019. 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.  

15 

 
 
 
Table 3: Ranking of the 10 third countries with the highest exposure according to the annual risk borne by the EU budget in 
2019 (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 2019 (MS 
and non-MS) 

1 

2 

3 

4 

5 

6 

7 

8 

9 

Turkey 

Egypt 

Tunisia 

Morocco 

Serbia 

Ukraine 

Bosnia 
Herzegovina 

and 

Lebanon 

South Africa 

10 

Panama 

977.50 

739.28 

279.98 

260.06 

187.00 

161.05 

73.41 

64.53 

62.76 

58.94 

28.9% 

21.8% 

8.3% 

7.7% 

5.5% 

4.8% 

2.2% 

1.9% 

1.9% 

1.7% 

15.4% 

11.7% 

4.4% 

4.1% 

3.0% 

2.5% 

1.2% 

1.0% 

1.0% 

0.9% 

Total (top 10) 

2,864.50 

84.7% 

45.2% 

5.  ACTIVATION AND PAYMENT OF GUARANTEES 

5.1  Debt  service  not  covered  by  the  Guarantee  Fund  for  External  Action  (Euratom 

loans to Member States, EFSM and BoP) 

Article 323 TFEU states that “the financial means are made available to  allow the Union to 
fulfil  its  legal  obligations  in  respect  of  third  parties”.  Accordingly,  the  EU  legislative 
framework  and  the  procedures  in  place  ensure  that  Member  States  make  mandatorily 
available  to  the  EU  budget  the  financial  means  necessary  for  the  Union  to  always  fulfil  its 
legal obligations.  

Thus the EU has in place multiple layers of very robust safety mechanisms to ensure that it 
will  always  reimburse  its  own  lenders  timely  and  in  full.  Each  one  of  the  main  safety 
mechanism would per se be enough to ensure reimbursements are made. 

16 

 
 
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 operations34.  

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. 

5.1.2 

Payments from the EU budget  

In the event of default by a Member States35 and if 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  Article  14(4)  of  Council  Regulation  No 
609/2014,  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  2018,  no  appropriation  was 
requested. 

5.2  Calls on the Guarantee Fund for External Actions and recoveries (ELM, MFA and 

Euratom loans to Third countries) 

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. 

For  ELM  loans,  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  36.  For 
Euratom  and  MFA  loans,  if  the  payment  delay  reaches  three  months  after  the  due  date,  the 
Commission draws on the Fund to cover the default37 and to replenish its treasury. 

34 

35 
36 

37 

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 14(3) of Regulation (EU, Euratom) No 609/2014. 
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  (OJ  L  135,  8.5.2014,  p.  1),  amended  by 
Decision  (EU)  2018/412  of  the  European  Parliament  and  the  Council  of  14  of  March  2018  amending 
Decision  No  466/2014/EU  granting  an  EU  guarantee  to  the  European  Investment  Bank  against  losses 
under financing operations supporting investment projects outside the Union (OJ L 76, 19.3.2018, p. 30). 
Except for Bulgaria and Romania which were granted Euratom loans before joining the Union. The loans 
(and loans guarantees) to accession countries were covered by the Fund until the date of accession. From 
that  date,  those  that  remained  outstanding  ceased  to  be  external  actions  of  the  Union  and  are  therefore 
covered directly by the EU budget. 

17 

 
 
                                                 
In the context of the ELM, recovery proceedings are undertaken by the EIB on behalf of the 
EU in respect of the subrogated sums38. 

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 
interests39 

Amount 
recovered 

Total 

2012 

2013 

2014 

2015 

2016 

2017 

2018 

Total 

2 

8 

8 

8 

12 

13 

12 

63 

24.0 

59.3 

58.7 

58.7 

103.8 

56.1 

55.7 

0.0 

1.4 

1.5 

1.5 

2.4 

0.2 

0.1 

416.17 

7.03 

2.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

2.1 

21.8 

60.7 

60.2 

60.2 

106.2 

56.3 

55.7 

421.1 

At  31  December  2018,  the  total  capital  outstanding  of  guaranteed  loans  related  to  Syria 
amounted to EUR 555 million of principal40, with the final loan maturity in 2030. 

TAV Tunisie S.A. (Enfidha airport) 

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

On 15 January 2018, EUR 0.14 million recovered from Enfidha Airport were credited to the 
Guarantee  Fund  for  External  Actions.  This  amount  had  already  been  recognised  as  an  asset 
(receivable) in the balance sheet of 31 December 2017. 

38 

39 

40 

For further information on recovery proceedings, see also  the Recovery  Agreement signed on 3 October 
2018  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. 
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 375.39 million (principal) already called by the EIB until 31.12.2018. 

18 

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

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 

2017 

2018 

Total 

1 

3 

0 

4 

4.63 

0.03 

 30.16  

 0.01  

0.0 

0.0 

0.00 

0.00 

0.14 

4.65 

 30.17  

-0.14 

 34.78  

 0.04  

 0.14  

 34.68  

Developments subsequent to 31 December 2018 (until 30 June 2019) 

In February and March 2019, EUR 10.6 million in total were paid in two calls for defaulted 
payments of Syria (EUR 3.2 million and EUR 7.4 million including penalties applied by EIB). 

5.3  Evolution of the Fund 

In accordance with the Regulation establishing the Guarantee Fund for External Actions ("the 
Guarantee Fund Regulation")41, the appropriate level (target amount) is 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 137.8 million  to  the 
Fund  in  February  2018,  while  in  February  2019  the  respective  payment  amounted  to 
EUR 103.2 million. 

At  31  December  2018,  the  net  assets42  of  the  Fund  amounted  to  EUR 2 608.84 million. 
target  amount43 
Therefore,  as 
the  Fund  were 
(EUR 2,848.99 million), the  Guarantee  Fund  will  be  provisioned  by  EUR 240.15 million   in 
2020. 

the  net  assets  of 

lower 

than 

the 

A review to assess the main parameters of the Fund, in particular the target amount, 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 

41  Council Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions (OJ L 

42 
43 

145, 10.6.2009, p. 10) as amended by Regulation (EU) 2018/409 (OJ L 76, 19.3.2018, p. 1). 
Total assets of the Fund minus accrued payables (EIB fees and audit fees). 
9%  of  EUR 31 655.46 million.  The  target  amount  is  calculated  applying  a  percentage  of  9%  to  the  total 
outstanding  capital  liabilities  arising  from  each  operation,  plus  accrued  interest  (MFA,  Euratom  and  EIB 
loans to third countries) and less the sugrogated loans at the end of year “n–1”. 

19 

 
 
                                                 
delivered  in  August  2016  and  the  main  conclusion  was  that  a  9%  Target  Amount  was  still 
deemed  optimal  for  the  current  risk  level  of  the  loan  portfolio,  even  under  a  scenario  of 
further rating downgrades of the main obligors. Therefore, the 9% Target Amount was kept 
unchanged. 

6. 

THE EUROPEAN FUND FOR STRATEGIC INVESTMENTS (EFSI) 44 

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

According to Article 12(4) of the EFSI Regulation, 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. 

The EIB and the EIF are responsible for assessing and monitoring the risk of the individual 
operations  backed  by  the  EU  Guarantee.  On  the  basis  of  this  reporting  and  of  coherent  and 
prudent  assumptions  on  future  activity,  the  Commission  ensures  the  adequacy  of  the  target 
amount  and  the  level  of  the  EFSI  GF  under  review.  In  line  with  Article  16(3)  of  the  EFSI 
Regulation, the EIB and the EIF reported back to the Commission and the European Court of 
Auditors in March 2019. 

Pursuant to Article 16(2) of the EFSI Regulation, the annual report of the EIB to the European 
Parliament  and  Council  shall  contain  specific  information  on  the  aggregate  risk  associated 
with  the  financing  and  investment  operations  carried  out  under  the  EFSI  as  well  as  on 
guarantee calls. 

Developments during 201845 

total  cumulated  signatures  under  EFSI  amounted 

As  of  31  December  2018, 
to 
EUR 53.6 billion covering 28 Member States, of which EUR 39.1 billion were signed under 
the  Innovation Window (IIW) (407 operations) and EUR 14.5 billion were signed under the 
SME  window  (SMEW)  (470  operations).  Overall,  this  represents  a  significant  increase 
compared to 2017, at the end of which total signatures amounted to EUR 37.4 billion.  

As  of  31  December  2018,  the  overall  outstanding  disbursed  exposure  covered  by  the  EU 
Guarantee amounted to nearly EUR 15.8 billion, up from EUR 10.1 billion in 2017.  

44 

45 

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.  The  EFSI 
Regulation  was  amended  by  Regulation  (EU)  2017/2396  of  the  European  Parliament  and  Council  of 
13 December 2017 as regards the extension of the duration of the European Fund for Strategic Investments 
as well as the introduction of technical enhancements for that Fund and the European Investment Advisory 
Hub    (the  "EFSI  2.0  Amendment").  The  EFSI  2.0  Amendment  increased,  inter  alia,  the  size  of  the  EU 
Guarantee and adjusted the target rate. 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  and  was  amended  and  restated  on  21  July  2016, 
21 November 2017, 9 March 2018 and December 2018.  
Information  for  this  section  has  been  extracted  from  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 Investments in 2018 - COM(2019) 244 final of 28.05.2019. 

20 

 
                                                 
The exposure of the EU budget to possible future payments under the EU Guarantee in terms 
of signed operations (disbursed and undisbursed) amounted to EUR 19.8 billion. 

The guarantee exposure of the EU in relation to disbursed outstanding EFSI operations by the 
EIB Group amounted to EUR 15.8 billion, as at 31 December 2018, out of the net available 
legal  commitment46  of  EUR 25.9 billion  guaranteed  by 
the  EU.  The  amount  of 
EUR 15.8 billion  is  recorded  as  a  contingent  liability  in  the  notes  to  the  2018  financial 
statements of the EU. 

Under  the  Infrastructure  and  Innovation  Window  (IIW),  the  outstanding  disbursed  exposure 
covered  by  the  EU  Guarantee  was  EUR 14.8 billion,  of  which  EUR 14.2 billion  for  debt 
operations and EUR 600 million for equity-type operations. 

In  2018,  EFSI  operations  managed  by  the  EIB  under  the  Infrastructure  and  Innovation 
Window (IIW)  generated a net revenue of EUR 112.7 million for the EU. Of this amount, a 
net  receivable  of 
the  EIB  as  at  31  December  2018  of 
the  Commission  from 
EUR 38.9 million47 was recorded in the 2018 EU financial statements.  

As  of  31  December  2018,  under  SME  window  (SMEW),  the  total  outstanding  exposure 
covered by the EU Guarantee was EUR 995 million, of which EUR 880 million for guarantee 
operations and EUR 115 million for equity operations. 

For  the  EFSI  operations  under  the  SME  Window  (SMEW),  the  EU  incurred  costs  of 
EUR 30.3 million in 2018. Out of this, EIF administrative fees of EUR 21.9 million recorded 
in the 2018 EU financial statements are payable to the EIF on or after 30 June 2019. 

The total assets of the EFSI GF48 stood at EUR 5 452 million as at 31 December 2018. The 
investment  securities  portfolio,  classified  as  available-for-sale 
assets  comprised 
(EUR 5 000 million), an FX forward sale of USD with positive net present value, classified as 
financial assets at fair value through surplus and deficit (EUR 2 million), and cash and cash 
equivalents (EUR 450 million). 

the 

Provisioning of the EFSI Guarantee Fund  

A total budgetary appropriation of EUR 2 069 million was committed in 2018 relating to the 
provisioning of the EFSI GF. Of this amount, a budgetary appropriation of EUR 1 905 million 
was  committed 
in  compliance  with  Commission  Decision  C(2018)307.  Additional 
commitment appropriations for an amount of EUR 105 million were made available from the 
budget line "Reserves for Financial Interventions". Finally, an amount of EUR 59 million was 
committed as assigned revenue.  

A total amount of EUR 2 014 million was effectively paid into the EFSI GF during the year. 
Of this, the bulk came from payment appropriations of the general budget of the EU, while an 
amount of EUR 59 million was recovered as assigned revenue (EUR 53.4 million from EFSI 

46  According  to  Article  11  of  the  EFSI  2.0  Amendment,  the  EU  Guarantee  shall  not,  at  any  time,  exceed 
EUR 26 billion  and  shall  not  exceed  EUR 16 billion  before  6  July  2018.  Calls  and  uses  of  the  EU 
Guarantee,  and  provisions  for  portfolio  guarantee  products  under  SME  Window,  are  deducted  from  the 
maximum amount of the EU Guarantee.  

47  Net of outstanding recovery costs of EUR 0.5 million payable to the EIB in 2019 in relation to a defaulted 

operation. 
The audited financial statements of the EFSI Guarantee Fund are disclosed in the staff working document 
accompanying the EFSI GF report – SWD (2019) 188. 

48 

21 

 
                                                 
revenues  and  EUR 5.6 million  from  Marguerite  Fund  revenues)  and  an  amount  of 
EUR 154.9 million  was  transferred  as  additional  payment  appropriations  at  the  end  of  the 
budgetary year. 

Calls and use of the EU guarantee 

In accordance with Article 8.1(a) of the EFSI Agreement, the EU Guarantee was called for an 
amount  of  EUR 97.1 million  related  to  a  defaulted  operation  under  the  Infrastructure  and 
Innovation  Window.  In  accordance  with  the  Article  11  of  the  EFSI  Agreement,  the  EIB 
recovered  initially  the  amount  of  EUR 18.6 million,  reducing  the  amount  to  be  paid  to 
EUR 78.5 million. The call was paid from the EFSI Account (EUR 17.7 million) and from the 
EFSI GF (EUR 60.8 million). Subsequently, the amount of EUR 1.6 million was recovered. In 
relation  to  this  defaulted  operation,  an  amount  of  EUR 1.0 million  for  recovery  costs  and 
EUR 0.6 million for recoverable administrative costs were called by the EIB. 

In  2018,  an  amount  of  EUR 0.6 million  was  paid  to  the  EIB  for  funding  costs49  and 
EUR 10.7  million for value adjustments50. 

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 
investments51 and the associated Staff Working Document (SWD). 

7. 

EUROPEAN FUND FOR SUSTAINABLE DEVELOPMENT (EFSD)  

The  European  Commission  proposed  on  14  September  2016  an  External  Investment  Plan 
(EIP)  to  encourage  investment  in  the  EU’s  partner  countries  in  Africa  and  the  EU 
Neighbourhood  region,  to  strengthen  partnerships  and  contribute  to  achieving  Sustainable 
Development Goals, helping to address some root causes of migration.  

Part  of  the  External  Investment  Plan  (EIP)  is  the  new  European  Fund  for  Sustainable 
Development (EFSD) as an integrated financing mechanism to support investments by public 
financial  institutions  and  the  private  sector.  By  being  open  to  a  range  of  implementing 
partners,  the  EFSD  is  able  to  leverage  much  more  public  and  private  investment  in  target 
countries than would otherwise be possible. It comprises: 

- 

a budgetary guarantee and 

-  blending instruments. 

The EFSD Legislation entered into force on 26 September 2017. 52 

49 

See  Article  8.1(d)  of  the  EFSI  Agreement.  This  amount  does  not  include  the  EUR 1.6 million  of  costs 
related to the call mentioned above. 
See Article 8.1(b) of the EFSI Agreement. 
Last version - COM(2019) 244 final of 28.5.2019. 

50 
51 
52  Regulation  (EU)  2017/1601  of  the  European  Parliament  and  of  the  Council  of  26  September  2017 
establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD 
Guarantee Fund (OJ L 249, 27.9.2017, p. 1). 

22 

 
 
                                                 
7.1  About the EFSD Guarantee 

The  EFSD  Guarantee  will  be  used  to  reduce  the  risks  for  investment  in  sustainable 
development  in  partner  countries,  thus  helping  mobilise  investment,  especially  from  private 
sources.  

The  guarantee  is  designed  to  mobilise  private  investment  worth  EUR 1.54 billion.  This 
amount has been allocated to 28 proposed investment programmes, expected to leverage up to 
EUR 17.5 billion  of  sustainable  investment  in  partner  countries  (much  of  it  from  private 
sources). The guarantee can: 

- 

- 

attract financing for some of the initial capital ('equity' or 'risk capital') a project needs 
to get off the ground; 

serve as a pledge (guarantee) to pay back part of a loan if a borrower incurs losses and 
defaults on it. 

Investment Programmes 

By  April  2018,    a  number  of  partner  financial  institutions  (FIs)  had  proposed  more  than  40 
investment programmes in excess of EUR 3.5 billion for cover by the EFSD Guarantee under 
the  five  priority  areas  for  investment  (investment  windows),  i.e.  a)  Sustainable  Energy  and 
Connectivity,  b)  Micro,  small  and  medium  sized  enterprises  ('MSME')  Financing,  c) 
Sustainable  Agriculture,  Rural  Entrepreneurs  and  Agribusiness,  d)  Sustainable  Cities  and  e) 
Digital for Development. 

In  June  and  November  2018,  based  on  the  FIs’  proposals,  the  EU  finally  allocated 
EUR 1.54 billion for 28 guarantees.  

NASIRA 

The  first  EFSD  Guarantee  agreement  was  signed  on  18  December  2018  with  the  triple  A-
rated Dutch Development Bank FMO for the NASIRA Risk-Sharing Facility.  

FMO expects that NASIRA will create and support up to 800 000 jobs and benefit small and 
medium-sized  enterprises  (SMEs),  internally  displaced  people,  refugees,  returnees,  women 
and young people.  

Multiple parallel  negotiations with  other partner  financial institutions (FIs) have been set  to 
commence, and a significant number of them are expected to be concluded before the end of 
2019. 

7.2  The EFSD Guarantee Fund 

The  EFSD  Guarantee  Fund  shall  constitute  a  liquidity  cushion  from  which  the  eligible 
counterparts  shall  be  paid  in  the  event  of  a  call  on  the  EFSD  Guarantee  further  to  the 
conclusion  of  Guarantee  Agreements  with  eligible  counterparts  and  in  line  with  the 
corresponding provisions, in accordance with Chapter III of Regulation (EU) No 2017/1601.  

23 

 
 
The resources  of the EFSD Guarantee  Fund are  to  be directly managed  by the Commission 
and  invested  in  accordance  with  the  principle  of  sound  financial  management  under 
appropriate prudential rules. 

The EFSD Guarantee Fund is to be endowed by contributions from the budget of the Union 
and the European Development Fund (EDF) as well as voluntary contributions from Member 
States and other contributors, and other sources of endowments, in accordance with Article 14 
of Regulation (EU) No 2017/1601. 

The provisioning rate is stablished at 50 % of the total EFSD Guarantee obligations covered 
by the general budget of the Union. 

24