REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on financial instruments, budgetary guarantees, financial assistance and contingent liabilities Situation at 31 December 2021
Date: 2022-10-28
Institutions: Directorate-General for Budget, European Commission
Subjects: EU Member State, EU budget, EU expenditure, EU financial instrument, financial management, guarantee, own resources, risk management, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.10.2022  COM(2022) 560 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL       on financial instruments, budgetary guarantees, financial assistance and contingent liabilities     Situation at 31 December 2021                    
 
 
Table of Contents 

1. 

2. 

3. 

4. 

5.  

5.1.  

5.2.  

5.3.  

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

What are contingent liabilities? ................................................................................ 4 

Contingent liabilities arising from provisioned instruments: budgetary 
guarantees and financial assistance to third countries ........................................... 7 

Contingent liabilities arising from financial assistance to Member States ........... 9 

Assessing the sustainability of EU contingent liabilities ....................................... 10 

Assessment Framework ........................................................................................... 10 

Assessment of the sustainability of the provisioned contingent liabilities .......... 11 

Assessment of the sustainability of the contingent liabilities in respect of the 
limits of the Own Resources ceiling ........................................................................ 13 

6. 

Conclusions ............................................................................................................... 15 

Annex: Sustainability and headroom in respect of the permanent Own Resources ceiling
 .................................................................................................................................... 17 

1 

 
 
 
  
 
 
 
 
 
 
 
 
 
1. 

Introduction 

This  report  is  issued  in  accordance  with  the  requirements  of  Article  250  of  the  Financial 
Regulation1. It has been prepared in conjunction with: 

-  working  documents  X  and  XI,  which  accompany  the  draft  EU  budget  for  the  financial 
year  20232  and  provide  detailed  information  on  the  EU’s  financial  instruments  and 
budgetary guarantees3; and 

- 

the  long-term  forecast  report  on  future  inflows  and  outflows  of  the  EU  budget,  which 
gives  projections  for  the  EU’s  available  financial  capacity  in  2023-2027  once  planned 
budget expenditures have been taken into consideration4.  

The  objective  of  this  report  is  to  provide  an  overview  of  the  amount  and  composition  of 
contingent  liabilities  borne  by  the  EU  budget  as  at  31 December 2021,  paying  particular 
regard to the distinction  between provisioned and unprovisioned contingent liabilities. This 
report  also  presents  an  assessment  of  the  long-term  sustainability  of  contingent  liabilities 
based  on  both  qualitative  and  quantitative  factors.  This  assessment  was  performed  by 
comparison with: 

- 

- 

the  amount  of  existing  provisions  held  in  the  respective  compartments  of  the  common 
provisioning fund (CPF) set up by the Commission for budgetary guarantees and financial 
assistance to third countries; 

the  limits  of  the  own  resources  ceiling  and  the  available  headroom    for  unprovisioned 
contingent liabilities stemming from financial assistance to Member States. 

Financial  instruments  in  the  form  of  guarantees  are  a  source  of  contingent  liabilities. 
However, the budget  always includes full  provision  for such financial instruments, i.e. the 
budget  has  set  aside  the  maximum  financial  liability  that  can  arise  from  each  financial 
instrument.  Contingent  liabilities  stemming  from  financial  instruments  are  therefore  not 
subject  to  the  assessment  of  the  sustainability  of  contingent  liabilities  borne  by  the  EU 
budget. 

The main conclusion of the 2021 sustainability analysis is that the EU budget has adequate 
resources  in  principle  to  cope  with  the  potential  materialisation  of  contingent  liabilities. 
More in detail:  

-  At  the  end  of  2021,  the  EU  budget  included  contingent  liabilities  amounting  to 
approximately  EUR 163 billion  relating  to  loans  granted  to  Member  States  and 
third  countries,  and  over  EUR 60 billion  relating  to  guarantees  provided  in  the 
context  of  the  European  Fund  for  Strategic  Investments  (EFSI)5,  the  European 

1  Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the 
financial rules applicable to the  general budget of the Union,  amending Regulations (EU) No 1296/2013, 
(EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, 
(EU)  No  223/2014,  (EU)  No  283/2014,  and  Decision  No  541/2014/EU  and  repealing  Regulation  (EU, 
Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1). 

2  COM(2022) 400 final of 1.7.2022. 
3  Working  document  X  on  the  use  made  of  financial  instruments,  pursuant  to  Article  41(4)  of  Financial 
Regulation.  Working  document  XI  on  the  implementation  of  budgetary  guarantees,  the  Common 
Provisioning  Fund  and  the  assessment  of  the  sustainability  of  the  contingent  liabilities  arising  from 
budgetary guarantees and financial assistance pursuant to Article 41(5) of the Financial Regulation. 

4  COM(2022) 315 final of 30.6.2022. 
5  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 (OJ L 
169, 1.7.2015, p. 1).  

2 

 
                                                 
Fund for Sustainable Development (EFSD)6, the EFSD+7 and the External Lending 
Mandate (ELM)8. This represents a 43% increase in contingent liabilities compared 
to  the  end  of  2020.  The  bulk  of  this  is  accounted  for  by  loans  to  Member  States 
under  the  European  instrument  for  temporary  support  to  mitigate  unemployment 
risks in an emergency (SURE)9 and the Recovery and Resilience Facility (RRF)10. 

-  At the end of 2021, no under-provisioning issues had been identified for contingent 
liabilities  arising  from  budgetary  guarantees  and  financial  assistance  to  third 
countries. 

-  The  EU’s  financial  capacity  under  the  existing  legal  framework  (i.e.  the  Own 
Resources  Decision  (ORD)11  and  the  2021-2027  multiannual  financial  framework 
(MFF) Regulation12) is sufficient to cover the EU’s existing obligations in relation to 
both  spending programmes  and  financial  markets  (for  debt  issued under  financial 
assistance  programmes  to  Member  States)  -  even  under  extreme  adverse 
circumstances. 

This  report covers contingent  liabilities incurred  before the end of 2021  and analyses how 
they are catered for under the 2021-2027 MFF.  

The  2020  report  already  detailed  the  extensive  measures  and  safeguards  which  the 
Commission can use to protect the EU budget from potential losses arising from contingent 
liabilities13.  These  notably  include  a  horizontal  cross-Commission  framework  for  the  close 
monitoring  of  contingent  liabilities.  The  Steering  Committee  on  Contingent  Liabilities14 
plays  a  central  role  in  that  framework.  In  2021,  this  steering  committee  met  five  times  to 
further  the  development  of  common  methodologies  for  the  design,  negotiation  and 
implementation of budgetary guarantees and financial assistance. 

6  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). 

7   The  EFSD+  was  established  by  the  Neighbourhood,  Development  and  International  Cooperation 
Instrument  (NDICI)  –  Global  Europe  Regulation.  Regulation  (EU)  2021/947  of  the  European  Parliament 
and  of  the  Council  of  9  June  2021  establishing  the  Neighbourhood,  Development  and  International 
Cooperation Instrument – Global Europe, amending and repealing Decision No 466/2014/EU and repealing 
Regulation (EU) 2017/1601 and Council Regulation (EC, Euratom) No 480/2009 (OJ L 209, 14.6.2021, p. 
1). 

8  An  overview  of  the  relevant  legislative  acts  and  corresponding  guarantee  agreements  between  the 
Commission  and  the  European  Investment  Bank  is  available  in  the  Definitive  Adoption  (EU,  Euratom) 
2021/417 of the European Union’s general budget for the  financial year 2021 (Section III – Commission, 
Remarks  for  Item  14 20 03 02  of  the  statement  of  expenditure  ‘External  Action  Guarantee  for  NDICI, 
EINS, IPA III and MFA’) (OJ L 93, 17.3.2021, p. 959). 

9  Council Regulation (EU) No 2020/672 of 19 May 2020 on the establishment of a European instrument for 
temporary  support  to  mitigate  unemployment  risks  in  an  emergency  (SURE)  following  the  COVID-19 
outbreak (OJ L 159, 20.5.2020, p. 1).  

10  Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing 

the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

11  Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the 

European Union and repealing Decision 2014/335/EU, Euratom (OJ L 424, 15.12.2020, p. 1). 

12  Council  Regulation  (EU,  Euratom)  2020/2093  laying  down  the  multiannual  financial  framework  for  the 

years 2021 to 2027 (OJ L 433 I, 22.12.2020, p. 11). 

13  See paragraphs 3.2 and 4.2 of the report from the Commission to the European Parliament and the Council 
on financial instruments, budgetary guarantees, financial assistance and contingent liabilities  - situation at 
31 December 2020 (COM(2021) 676 final of 5.11.2021). 

14  Commission decision of 24.7.2020 on establishing the Steering Committee on Contingent Liabilities arising 
from  Budgetary  Guarantees  (C(2020)  5154  final).  The  present  report  also  contains  all  the  information 
which is referred to in Article 7 of that Decision. 

3 

 
                                                 
Pursuant to Article 250, this report also provides a snapshot of financial instruments that are 
funded by the EU budget and related to both internal and external policies. 

2.  What are contingent liabilities? 

Contingent  liabilities  are  potential  financial  liabilities  which  stem  from  existing  binding 
commitments  or  past  events.  Whether  or  not  these  contingent  liabilities  result  in  actual 
losses,  and the size of any  such losses,  will depend on future events which are difficult  to 
predict. There are three main sources of contingent liabilities for the EU. 

-  Budgetary guarantees are guarantees provided to different implementing partners under 
the  EFSI,  EFSD  and  ELM  mandates.  Under  all  these  instruments,  the  EU  provides 
guarantees  to  implementing  partners  to  cover  a  share  of  potential  losses  resulting  from 
their financing and investment operations (i.e. debt or equity operations). Under the 2021-
2027  MFF,  the  InvestEU  programme15  combines  –  within  a  single  EU  guarantee  –  the 
activities previously conducted under EFSI and several other financial instruments. It has 
provided implementing  partners other than the  European  Investment  Bank (EIB)  Group 
with  access  to  a  portion  of  the  EU  guarantee.  The  EFSD  and  the  ELM  have  similarly 
been  succeeded  by  the  EFSD+,  which  was  established  by  the  Neighbourhood, 
Development  and  International  Cooperation  Instrument  (NDICI)  –  Global  Europe 
Regulation and which now acts as the financing arm of a reinforced External Investment 
Plan. 

-  Loans  and  related  borrowings  to  provide  financial  assistance  to  third  countries  (i.e. 
macro-financial  assistance  programme  (MFA)16  loans  and  Euratom  loans  to  third 
countries17).  Loans  to  third  countries  are  financed  through  ‘back-to-back’  borrowing 
operations, i.e. each loan is funded with a corresponding EU bond that fully matches the 
EU loan in  terms  of  its maturity, interest  rate and repayment schedule. This means that 
investors in EU bonds are only exposed to the EU credit risk and not to the credit risk of 
each  single  beneficiary  country.  The  liability  for  the  EU  is  contingent,  because  the 
beneficiary country is contractually obliged to provide the revenue flow to repay the EU 
bonds. So no outflow of EU resources is in principle required to settle the EU debt. 

-  Loans and related borrowings to provide financial assistance to EU Member States (i.e. 
Balance  of  Payments  (BoP)  loans18,  European  Financial  Stabilisation  Mechanism 
(EFSM)  loans19,  Euratom  loans20,  loans  under  SURE  and  loans  under  the  RRF).  As  a 

15   Regulation  (EU)  2021/523  of  the  European  Parliament  and  of  the  Council  establishing  the  InvestEU 

Programme and amending Regulation (EU) 2015/1017 (OJ L 107, 26.3.2021, p. 30). 

16  The  legal  basis  for  macro-financial  assistance  to  non-EU  countries  other  than  developing  countries  is 
Article  212  of  the Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  Article  213 TFEU  may  be 
used as a legal basis when a third country requires urgent financial assistance. 

17  Council Decision 94/179/Euratom of 21 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  (OJ L  84, 
29.3.1994, p. 41). 

18  Council Regulation (EC) No 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). 

19  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 Regulation (EU) 2015/1360 of 4 August 2015 amending 
Regulation  (EU)  No  407/2010  establishing  a  European  financial  stabilisation  mechanism  (OJ  L  210, 
7.8.2015, p. 1). 

20  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  (OJ  L  88,  6.4.1977,  p.  9)  as 
amended and supplemented. 

4 

 
 
                                                 
general  rule,  these  loans  –  with  the  exception  of  the  RRF  loans  –  are  granted  to  EU 
Member States using the same back-to-back technique that is used for financial assistance 
to  third  countries21.  RRF  loans  are  by  contrast  financed  through  a  diversified  funding 
strategy, which delinks the disbursement of loans to a Member State from the issuance of 
the  EU  bonds.  Irrespective  of  the  funding  method,  the  repayments  by  the  beneficiary 
Member  States  are  used  to  service  the  EU  debt.  They  do  not  count  as  own  resources 
under the corresponding own resources ceiling. 

Contingent liabilities arising from budgetary guarantees and from financial assistance to 
third  countries  are  provisioned  based  on  conservative  assessments  of  the  expected  losses 
for  each  instrument  plus  an  additional  safety  buffer  to  cover  a  portion  of  the  unexpected 
losses.  

the  Commission.  The  market  value  of 

The CPF holds the provisions protecting the EU budget against losses which may arise from 
budgetary guarantees and financial assistance to third countries. On 31 December 2021, the 
CPF  was  composed  of  four  compartments  (EFSI,  EFSD,  the  former  Guarantee  Fund  for 
External  Actions  (GFEA)  and  InvestEU).  The  CPF  is  by  far  the  largest  portfolio  directly 
the  outstanding  shares  on 
managed  by 
31 December 2021 was EUR 12.31 billion, which is equal to the value of net assets22. 
As reported in May 202223, the CPF experienced a 1% loss in market valuation in 2021 as 
interest rates began to rise, reducing the value of bonds already held by the portfolio. These 
accounting losses arise from the application of “mark-to-market’ accounting standards to EU 
managed portfolios. They will only be crystallised as actual losses if the Commission sells 
the bond in question before its maturity date. The accounting losses incurred by the CPF in 
2021 did not materially affect the capacity of the CPF to absorb expected/unexpected losses 
in 2021, and were more than offset by large inflows. The provisioning of all compartments 
remained  in  line  with  the  amounts  stipulated  in  the  legislation  establishing  the  different 
sources of contingent liabilities. The CPF, along with all funds investing in bonds, incurred 
further  losses  through  2022  as  interest  rates  rose  steeply24.  The  Commission  monitors  the 
situation  continuously  and  will  report  on  these  developments  in  the  context  of  the  annual 
reporting on CPF performance in 2022.  

Contingent  liabilities  stemming  from  financial  assistance  to  EU  Member  States  are  not 
provisioned.  The  amounts  borrowed  by  the  EU  constitute  direct  and  unconditional 
obligations  of  the  EU25.  This  means  that,  if  a  beneficiary  Member  State  were  to  fail  to 
honour its obligations towards the EU, the EU would be entitled – as a last resort and only 
after having exhausted all other possibilities to find solutions within the existing budgetary 
framework  –  to  call  on  the  other  Member  States  to  temporarily  cover  the  amount  in 

21  Under  NGEU  the  Commission  also  borrows  on  the  markets  to  finance  non-repayable  support  (including 
RRF  grants).  The  repayment  of  these  borrowing  operations  is  covered  through  the  appropriations  of  the 
annual  budgets,  within  the  ceilings  of  the  Multiannual  Financial  Frameworks,  and  therefore  does  not 
constitute  a  contingent  liability  for  the  EU.  The  NGEU’s  borrowing-to-lend  activities  (i.e.  to  fund  RRF 
loans) do, however, give rise to new contingent liabilities and are addressed in this report. 

22   The  assets  of  the  common  provisioning  fund  are  currently  invested  in  compliance  with  the  Asset 
Management  Guidelines  with  the  aim  of  delivering  capital  preservation  over  its  investment  horizon.  The 
portfolio is made up of Euro-denominated money market instruments, fixed income securities denominated 
in Euro and US Dollar. The Commission is currently reviewing the CPF benchmark to include new asset 
classes (i.e. equity instruments). Together with the emerging more favourable market conditions, the new 
investment policy is expected to improve the expected returns of the CPF benchmark over the long term.  
23   See Report from the Commission to the European Parliament and the Council on the common provisioning 
fund  in  2021  (COM(2022)  213  final  of  16.5.2022)  and  the  accompanying  Commission  Staff  Working 
Document (SWD(2022) 143 final of 16.5.2022). 

24   The present report was completed on 30th September, 2022. 
25   This also applies to the amounts borrowed for the purpose of on-lending to third countries. 

5 

 
                                                 
question.  Such  calls  for  funds  would  be  made  over  and  above  the  MFF  ceilings,  while 
respecting the own resources ceiling26.  

At the end of 2021, the EU budget included total contingent liabilities of EUR 223 billion 
(approximately  EUR 163 billion  relating  to  loans  granted  to  Member  States  and  third 
countries, and over EUR 60 billion  relating to  guarantees provided in  the context  of  EFSI, 
EFSD,  EFSD+  and  ELM).  The  largest  exposure  for  the  EU  budget  originated  in  financial 
assistance programmes targeting Member States (see Figure 1).  

Figure 1: Breakdown of contingent liabilities by source as at 31 December 2021 

 (*) Based on the total amount of ‘available guarantee signed with counterparts’ (see Table 1). 

The increasing importance of budgetary guarantees and financial assistance programmes for 
the implementation of EU policies is demonstrated by the steep increase of 43% in the total 
amount of contingent liabilities between 2020 and 2021 year ends. Loans to Member States 
increased  the  most  (+78%).  This  was  primarily  due  to  the  additional  loan  disbursements 
under  SURE  and  the  first  disbursements  under  the  RRF.  Contingent  liabilities  stemming 
from  financial  assistance  to  third  countries  also  increased  substantially  (+30%)  while 
contingent liabilities arising from budgetary guarantees remained fairly stable (see Figure 2 
below). 

The amount of contingent liabilities arising from the use of budgetary guarantees is expected 
to  increase  in  2022,  when  the  investment  phase  of  InvestEU  and  EFSD+  (involving 
EUR 26.2 billion  and  EUR 39.8 billion  of  guarantees  respectively)  will  actually  start.  This 
will be partly offset by maturing underlying exposures under EFSI and ELM. 

EU  contingent  liabilities  are  also  expected  to  increase  significantly  by  the  end  of  2022  in 
relation to the additional disbursement of RRF loans to Member States.  

26  See  Articles 2(3) and 3(1) of  Council  Regulation (EU, Euratom)  2020/2093 of 17 December 2020 laying 

down the multiannual financial framework for the years 2021 to 2027.  

6 

 
 
 
 
 
 
 
                                                 
Figure 2: Breakdown of contingent liabilities by source at the end of 2020 and 2021 

180

160

140

120

100

80

60

40

20

0

Financial assistance to MS Financial assistance to Third

Budgetary guarantees

Countries

2020

2021

As already explained above, financial instruments in the form of guarantee do not create 
any risk exposure to the EU budget as they are fully provisioned.  

The EU budget funds a wide variety of financial instruments (equity, debt, loan guarantees, 
venture  capital,  capacity  building  and  risk  sharing  facilities).  These  can  be  classified  into 
two  main  categories:  those  related  to  the  EU  internal  policies  and  those  related  to  the  EU 
external policies (depending on whether the final recipients are mainly located in or outside 
the  EU).  An  internal  policy  example  is  the  Marguerite  Fund27,  an  equity  fund  that  has 
allowed the Commission to promote investments in infrastructure projects and companies in 
the  transport,  energy  and  mature  renewable  energy  sectors.  An  external  policy  example  is 
the European Fund for Southern Europe (EFSE)28, one of the world’s largest microfinance 
funds with around EUR 1 billion in capital commitments. The EFSE is the leading provider 
of  long-term  funding  to  selected  partner  lending  institutions  in  south-east  Europe  and 
Turkey,  and  in  the  Eastern  Neighbourhood  Region.  It  serves  the  financing  needs  of  micro 
and small enterprises and low-income households.  

Working  document X accompanying  the draft 2023 budget  provides a detailed description 
of the 36 financial instruments that existed on 31 December 2021. 

3.  Contingent 

from  provisioned 
guarantees and financial assistance to third countries 

liabilities  arising 

instruments:  budgetary 

In 2021 the EU provided budgetary support in the form of guarantees to the EIB Group on 
debt  and  equity  operations  covered  by  the  EFSI;  and  to  the  EIB  Group  and  nine  other 
financial  institutions  (including  the  European  Bank  for  Reconstruction  and  Development 

27  See Regulation (EC) No 680/2007 of the European Parliament and of the Council of 20 June 2007 laying 
down general rules for the granting of Community financial aid in the field of the trans-European transport 
and  energy  networks  (OJ  L  162,  22.6.2007,  p.  1),  and  Commission  Decision  C(2010)  941  of 
25 February 2010 on European Union participation in the 2020 European Fund for Energy, Climate Change 
and Infrastructure (the Marguerite Fund). 

28  Regulation  (EC)  1638/2006  (OJ  L  310,  9.11.2006,  p.  1–14),  Regulation  (EU)  232/2014  (OJ  L  77, 

15.3.2014, p. 27–43) and Regulation (EU) 236/2014 (OJ L 77, 15.3.2014, p. 95–108). 

7 

 
 
 
 
                                                 
and several national promotional banks) on operations covered by the EFSD. The EU also 
guaranteed loans granted by the EIB to beneficiaries outside the EU under the ELM. 

The oldest budgetary guarantee is the one provided under the ELM. Its basic purpose is to 
enhance the EIB’s ability to undertake financing operations in riskier environments outside 
the  EU  in  areas  such  as  local  private  sector  development  and  development  of  socio-
economic infrastructure. 

The  EFSI  was  launched  in  2015  to  remedy  the  problem  of  prolonged  subdued  private 
investment  in  the  EU  following  the  financial  crisis.  It  takes  the  form  of  a  EUR 26 billion 
budgetary  guarantee  from  the  EU  budget  to  the  EIB  Group.  This  is  supplemented  by  an 
allocation of EUR 7.5 billion from the EIB’s own resources.  

The guarantee under the EFSD was put in place to support investments and improve access 
to finance primarily in Africa and the neighbourhood countries and to help them to meet the 
UN Sustainable Development Goals.  

Building on the successful implementation of the ELM and the EFSD, the EFSD+ has been 
established as an integrated financial package supplying financing capacity to  sub-Saharan 
Africa, Asia and the Pacific, Latin America and the Caribbean and to the neighbourhood and 
enlargement  countries  in  areas  such  as  the  reduction  of  socio-economic  inequalities; 
sustainable and inclusive growth; climate change adaptation and mitigation; environmental 
protection and management; and job creation. 

Table 1 provides information on the total risk exposure for the EU budget originating from 
the four guarantees.  

Table  1:  Contingent 
31 December 2021) (EUR million)29 

liabilities  arising 

from  budgetary  guarantees 

(as  at 

Available guarantee 
signed with 
counterparts 

Available guarantee 
related to operations 
signed by 
counterparts 

Available guarantee 
related to operations 
signed by counterparts 
and disbursed 

EFSI 

EFSD 

ELM 

EFSD+ 

Total 

25 825.74 

1 390.7 

33 025.55 

200 

24 730.24 

610.67 

33 025.55 

200 

60 441.99 

58 566.46 

20 358.06 

535.25 

20 834.52 

200 

41 927.83 

Financial support to  third countries in  the form  of bilateral  loans  from  the EU and  funded 
back-to-back from the capital markets has been granted mainly in the context of the macro-
financial  assistance  programme,  which  targets  countries  outside  the  EU  experiencing  a 

29  Disbursed amounts represent the amounts already paid to final beneficiaries. Amounts related to operations 
signed by counterparts include the disbursed amounts plus agreements already signed with beneficiaries or 
financial intermediaries but not yet disbursed. The available guarantee signed with counterparts represents 
the total guarantee that is covered by the EU budget and therefore the EU’s maximum potential exposure, 
including operations authorised for signature but not yet signed. The figures include amounts classified as 
‘provisions/financial liabilities’ in accordance with the applicable EU accounting rules. 

8 

 
 
 
                                                 
balance of payment crisis. New loans for an amount of EUR 1 665 million were disbursed in 
202130.  

The outstanding amounts at the end of 2021 are presented in Table 2. 

Table  2:  Outstanding  amounts  in  respect  of  loans  to  third  countries  (as  at 
31 December 2021) (EUR million) 

Outstanding loans   Accrued interests 

Total 

MFA  

Euratom 

Total  

7 438 

300 

7 738 

28.44 

0.47 

28.91 

7 466.44 

300.47 

7 766.91 

4.  Contingent liabilities arising from financial assistance to Member States 

In 2021 the Commission, acting on behalf of the EU, operated five programmes under which 
it had granted loans to Member States. 

-  BoP assistance was intended to help EU countries outside the euro area that experience 

or run the risk of experiencing balance of payments difficulties. 

-  The EFSM was created to provide financial support to EU Member States experiencing 
or threatened by severe financial difficulties caused by exceptional occurrences beyond 
their control. 

-  The  SURE  programme  was  agreed  in  June 2020  to  help  finance  sudden  and  severe 
increases of national public expenditure related to national short-time work schemes and 
similar measures in response to the COVID-19 crisis. 

-  The  RRF  is  the  central  pillar  of  NextGenerationEU  (NGEU)31  and  is  a  temporary 
instrument  to  support  reforms  and  investments  in  the  EU  Member  States  with  the 
ultimate goal of facilitating recovery from the COVID-19 pandemic while helping the 
green  and  digital  transitions.  Under  the  EU  recovery  instrument,  the  Commission 
borrows  funds  which  the  RRF  then  uses  to  finance  the  Member  States’  reforms  and 
investments.  The  financing  can  be  either  a  loan  (repayable  support)  or  a  grant  (non-
repayable  support).  To  benefit  from  the  support,  Member  States  submitted  national 
recovery  and  resilience  plans  to  the  Commission.  Each  plan  sets  out  the  reforms  and 
investments to be implemented by the end of 2026, setting clear milestones and targets 
that are to be analysed by the Commission and approved by the European Council. Only 
RRF loans (as opposed to RRF grants) give rise to contingent liabilities and they alone 
are therefore considered in this analysis. It is important to underline that the funding of 
the  RRF  loans  is  financed  via  a  diversified  funding  strategy  (DFS)  and  not  via  the 
traditional  back-to-back  approach32.  All  NGEU  borrowings,  amounting 
to 

30  For  details,  including  the  outstanding  amount  per  individual  beneficiary,  see  the  report  from  the 
Commission  to  the  European  Parliament  and  the  Council  on  the  implementation  of  macro-financial 
assistance to third countries in 2021 (COM(2022) 341 final of 19.7.2022). 

31  Council  Regulation  (EU)  2020/2094  establishing  a  European  Union  Recovery  Instrument  to  support  the 

recovery in the aftermath of the COVID-19 crisis (OJ L 433 I, 22.12.2020, p. 23). 

32  NGEU  issuances  are  used  to  finance  indiscriminately  RRF  loans,  RRF  non-repayable  support  and  other 
MFF programmes.. Issuances are based on an annual borrowing plan that is itself based on the forecasted 
outflows for loans and non-repayable support. The Commission follows a diversified funding strategy and 
uses  different  long-  and  short-term  funding  instruments.  This  allows  the  Commission  to  offer  long-term 

9 

 
 
 
                                                 
 
EUR 91 billion at the end of 2021, are guaranteed by the EU budget under Article 9.4 of 
the ORD. 

-  The Euratom loan facility helps Member States finance investments in nuclear power 

stations and in industrial installations in the nuclear fuel cycle. 

The outstanding  amounts  of loans under the  five  different  programmes at the end of 2021 
are presented in Table 3. 

Table  3:  Outstanding  amounts  in  respect  of  loans  to  EU  Member  States  (as  at 
31 December 2021) (EUR million) 

Outstanding loans 

Accrued interests 

Total 

BoP 

Euratom 

EFSM 

SURE 

RRF (loans) 

Total 

200 

49.5 

46 800 

89 637 

17 969.73 

154 656.23 

1.15 

0.01 

469.59 

65.15 

26.06 

561.96 

201.15 

49.51 

47 269.59 

89 702.15 

17 995.79 

155 218.19 

A measure of the total annual risk to the EU budget emanating from the contingent liabilities 
arising from financial assistance to Member States is the total amount of annual capital and 
interest repayments due from beneficiary Member States under the different programmes in 
a  given  year.  In  the  case  of  back-to-back  lending,  this  coincides  with  the  total  amount  of 
repayments of the EU bonds issued to fund the loans to Member States. 

Table 4: Yearly repayment schedule of outstanding loans (capital + interest) under the 
existing programmes for the years 2022-2027 (at 31 December 2021) (EUR million) 

Year 

Euratom 

BoP 

EFSM 

SURE 

RRF 
loans 

All 
 programmes 

2022 
2023 
2024 
2025 
2026 
2027 
Total 

23.24 
13.22 
13.11 
0 
0 
0 
49.57 

5.75 
5.75 
5.75 
205.75 
0 
0 
223 

3 507.86 
111.11 
4 233.75 
122.5 
3 311.88 
122,5 
3 063.13 
8 122,5 
4 651.13 
8 122,5 
122.5 
3 531.13 
22 298.88  16 723.61 

32.76 
32.76 
32.76 
32.76 
32.76 
32.76 
196.56 

3 680.72 
4 407.98 
3 486 
11 424.14 
12 806.39 
3 686.39 
39 491.62 

5. 

Assessing the sustainability of EU contingent liabilities  

5.1.   Assessment framework 

Without prejudice to the assessment of provisioning of certain financial liabilities over their 
entire lifetime that is  required  when liabilities are incurred,  Article 210(3) of the  Financial 
Regulation  stipulates  that  ‘contingent  liabilities  arising  from  budgetary  guarantees  or 

loans  on  attractive  terms  to  Member  States.  The  borrowing  costs  are  then  allocated  –  following  a  single 
unified approach – to beneficiaries of the loans and to the EU budget (for non-repayable support). See the 
Communication  from  the  Commission  to  the  European  Parliament  and  the  Council  on  a  new  funding 
strategy to finance NGEU (COM(2021) 250 final of 14.4.2021). 

10 

 
 
  
                                                                                                                                                      
financial  assistance  borne  by  the  budget  shall  be  deemed  sustainable  if  their  forecast 
multiannual  evolution  is  compatible  with  the  limits  set  by  the  regulation  laying  down  the 
multiannual  financial  framework  provided  for  in  Article  312(2)  TFEU  and  the  ceiling  on 
annual  payment  appropriations  set  out  in  Article  3(1)  of  Decision 2014/335/EU,  Euratom.’ 
(i.e. the MFF ceilings and the own resources ceiling). 

This  means  that  the  resources  that  the  EU  is  able  to  draw  on  in  a  single  year  under  the 
current  MFF (own resources  ceiling) should  be enough to  finance the expenditures  arising 
under the MFF as well as any contingent liabilities that may materialise.  

In particular, payments relating to provisioned contingent liabilities for budgetary guarantees 
and financial assistance to third countries must be financed from the established provisions 
and  any  further  payments  foreseen  under  the  MFF.  Section  5.2  of  this  report  presents  the 
assessment  of  the  adequacy  of  the  available  provisions  to  meet  the  expected  payments 
arising  from  budgetary  guarantees  and  financial  assistance  to  third  countries  for  the 
liabilities as they stood at the end of 2021. 

Payments  related  to  materialising  contingent  liabilities  resulting  from  unprovisioned 
financial  assistance  to  EU  Member  States  can  be  financed  by  calling  on  additional  own 
resources  up  to  the  ceiling  established  by  the  Own  Resources  Decision.  The  difference 
between  the  own  resources  ceiling  and  the  own  resources  necessary  to  finance  the  EU 
budget (known as the ‘headroom’) represents the EU’s financial capacity to cover additional 
outflows relating to the  materialisation of  contingent liabilities arising from  unprovisioned 
financial  assistance  to  EU  Member  States.  The  assessment  framework  for  this  set  of 
contingent  liabilities  was  described  in  detail  in  the  2021  report.  The  results  of  this 
assessment of unprovisioned contingent liabilities existing at the end of 2021 are presented 
in Section 5.3. The 2020 Own Resources Decision temporarily increased the own resources 
ceiling  in  order  to  cater  for  the  liabilities  incurred  during  the  implementation  of 
NextGenerationEU, including unprovisioned contingent liabilities arising from RRF loans to 
Member States. 

5.2.   Assessment of the sustainability of the provisioned contingent liabilities 

As  a  preliminary  remark,  EU  budgetary  guarantees  might  differ  substantially  in  terms  of 
policy  objectives  and  risk  profile  of  the  underlying  operations  supported  under  a  specific 
programme.  This  might  in  turn  lead  to  a  different  risk  appetite  being  applied  to  each  of 
them.  Risk  appetite  is  usually  expressed  in  terms  of  a  lifetime  Value  at  Risk  (VaR)33  at  a 
certain (predefined) percentage of confidence level. 

It  is  possible  to  draw  the  following  conclusions  from  the  available  data  on  lifetime  net 
expected losses on 31 December 2021 concerning the budgetary guarantees in place on that 
date: 

- 

the applicable provisioning rate of 35% of the total EFSI guarantee is sufficient to cover 
estimated  lifetime  net  losses  from  the  operations  guaranteed  under  the  different  EFSI 
windows  with  a  confidence  level  of  95%,  in  line  with  the  ex-ante  risk  appetite  of  the 
programme34; 

33  The Value-at-Risk (VAR) can be defined as the portfolio loss level which, statistically, over a certain time 

horizon, will not be exceeded with a certain confidence level. 

34  Taking into consideration the results of the  Commission’s  credit risk  model  with respect to the IIW debt 
product in combination with the evolution of exposures and losses under the Infrastructure and Innovation 
Window  (IIW)-equity  sub  window  and  the  SME  Window  (SMEW)  as  of  31 December 2021.  Further 
details can be found in paragraph 3.3.1 of working document XI accompanying the Draft Budget 2023. 

11 

 
                                                 
-  with  regard  to  the  EFSD,  the  provisioning  rate  of  50%  is  consistent  with  the  estimated 
lifetime losses with a target confidence level of 90%, in line with the ex-ante risk appetite 
of the programme; 

- 

the  provisions  for  the  ELM  held  in  the  external  action  compartment  of  the  Common 
Provisioning  Fund  (the  former  Guarantee  Fund  for  External  Actions  or  GFEA)  are 
sufficient to cover estimated losses with a confidence level of 91%35. 

With regard to the existing exposures arising from financial assistance to third countries, the 
adequacy of the 9% target provisioning rate takes the following factors into consideration: 

- 

- 

- 

- 

the absence of payment default in the 2021 reporting year as well as in previous years;  

the amount of the impairment allowance recognised in the EU’s 2021 accounts compared 
to the total outstanding amount36;  

the geographical exposure of the outstanding loans; 

the structure of the maturities of the loans related to the third countries benefitting from 
financial  assistance  that  are  reasonably  well  spread  over  the  current  MFF  and  the 
subsequent ones; 

-  MFA loans’ direct link to, and contingency on, an existing International Monetary Fund 
programme,  which  ensures  the  financial  viability  of  the  third  country  and  thus  the 
eventual repayment of the EU funds. 

Box  1:  EU  contingent  liabilities  arising  from  MFA  and  Euratom  loans  and  ELM 
operations in Ukraine 

After  the  closing  of  the  reporting  exercise,  on  24  February  2022,  Russia  started  an 
unprovoked and unjustified  war of  aggression against  Ukraine, which  could  impact  on  the 
exposures  to  beneficiary  countries  that  are  affected,  either  directly  or  indirectly,  by  the 
conflict.  

At  the  time  of  writing37,  the  Commission  had  direct  exposures  relating  to  Ukraine  of 
EUR 6.9 billion  backed  by  the  CPF.  As  at  31 December 2021,  the  EU  had  granted  MFA 
loans worth EUR 4.4 billion and a Euratom loan worth EUR 300 million.  

Following  the  Russian  invasion  of  Ukraine,  the  EU  has  provided  an  additional 
EUR 2.2 billion to Ukraine in the form of MFA loans. EUR 1.2 billion of emergency MFA 
was  disbursed  in  March  and  May  and  a  further  EUR 1 billion  of  exceptional  MFA  was 
disbursed at the beginning of August. In September 2022 an additional extraordinary EUR 5 
billion MFA to Ukraine was agreed by the Council and the European Parliament.  

In addition to the provision of direct support, the Commission is also indirectly exposed via 
its guarantee of the EIB’s ELM portfolio38. At the end of 2021, the portfolio covered under 

35  When  the  predecessors  of  the  external  action  compartment  of  the  CPF  were  established,  an  ex-ante  risk 
appetite  in  the  form  of  a  confidence  level  of  the  provisioning  for  the  lifetime  of  the  operations  was  not 
defined. The time horizon of the future guarantee calls used for the analysis is 5 years.  

36  The  impairment  allowances  for  MFA  and  Euratom  loans  were  EUR 293 million  and  EUR 13 million 
respectively.  See  paragraph  2.4.1.1.  in  ‘Loans  for  RRF  (NGEU)  and  financial  assistance’  of  the 
consolidated  annual  accounts  of  the  European  Union  -  financial  year  2021  (COM(2022)  323  final  of 
23.6.2022). 
37   30.9.2022. 

12 

 
                                                 
the  ELM  included  loans  disbursed  to  Ukraine  of  EUR 2 billion.  The  amount  of  ELM 
exposures  has  further  increased  since  then.  In  March 2022  the  EIB  and  the  Commission 
decided  to  repurpose  EUR 688 million  of  ELM  undisbursed  loans.  This  was  followed  in 
July 2022  by  the  Commission’s  decision  to  repurpose  a  further  EUR 1.59 billion  in 
undisbursed loans. 

Given the above-average risks associated with the financial support to Ukraine in the current 
war context, all new exposures to Ukraine, i.e. so far the EUR 1 billion MFA disbursed in 
August  (MFA1);  the  EUR  5  billion  MFA  agreed  by  the  Council  and  the  European 
Parliament in September 2022 (MFA2)39; and the EUR 1.59 billion repurposed loans under 
the ELM will be subject to a budgetary coverage of  70% which is higher than the traditional 
provisioning rate applied to countries receiving macro-financial  assistance (9%). While the 
need  for  higher  protection  in  the  case  of  repurposed  ELM  loans  is  obtained  entirely  by 
increasing  the  provisioning  rate  to  the  level  of  70%  from  the  EU  budget,  the  same  is 
achieved  for  the  EUR  6  billion  in  exceptional  MFA  through  maintaining  the  provisioning 
rate at the level of 9% and supplement it with guarantees by Member States covering 61% of 
the  loan  exposures.  As  from  mid-2023  the  adequacy  of  this  provisioning  rate  will  be 
regularly reviewed to ensure that it reflects any future developments in the risk profile of the 
exposures in an adequate and prompt manner40.  

The  exposures  to  Ukraine,  whose  volume  and  risk  profile  have  been  transformed  by  the 
Russian invasion earlier this year, are being monitored and managed continuously. They will 
not  be  discussed  further  here,  because  they  fall  outside  the  time  period  and  scope  of  this 
report.  

5.3.   Assessment of the sustainability of the contingent liabilities in respect of the limits of 

the own resources ceiling 

The  EU  budget’s  capacity  to  cater  for  a  situation  where  the  exposure  in  respect  of 
unprovisioned  contingent  liabilities  materialises  is  assessed  by  applying  the  framework 
referred to in paragraph 5.1 above.  

NGEU-related issuances started in 2021 so this year’s report also covers the temporary own 
resources  ceiling  of  0.6%  EU  GNI  which  is  only  available  for  all  NGEU  liabilities.  As 
mentioned in Section 4 above, the Commission is financing NextGenerationEU with a DFS 
that  provides  a  common  funding  pool  for  loans  and  non-repayable  support  -  but  only  the 
loans represent contingent liabilities. Borrowing for the non-repayable support is repaid via 
the EU budget and financed from budget revenue. The headroom is therefore estimated with 
respect to the total NGEU liabilities, but the sensitivity analysis focuses specifically on the 
contingent  liabilities  in  line  with  the  requirements  of  Article  210(3)  of  the  Financial 
Regulation. 

The  first  step  is  to  establish  a  central  scenario  (baseline)  that  corresponds  to  the  expected 
evolution of EU spending and financial capacity in the years until 2027 in line with the long-
term forecast report on budget expenditure and revenue needs (Figure  3 below). Excluding 
the current budgetary year, the headroom available for covering existing and new contingent 

38   The EU guarantee covers the losses that may arise in the guaranteed portfolio up to 65% of the guaranteed 

portfolio. 

39   Decision (EU) 2022/1628 of the European Parliament and of the Council of 20 September 2022 providing 
exceptional  macro-financial  assistance  to  Ukraine,  reinforcing  the  common  provisioning  fund  by 
guarantees by Member States and by specific provisioning for some financial liabilities related to Ukraine 
guaranteed  under  Decision  No  466/2014/EU,  and  amending  Decision  (EU)  2022/1201  (OJ  L  245, 
22.9.2022, p. 1–13). 

40   See Article 13 of the Decision (EU) 2022/1628. 

13 

 
                                                                                                                                                      
liabilities in 2023-2027 is on average EUR 187 billion per year (around EUR 83 billion for 
the  permanent  portion  of  the  own  resources  ceiling  of  1.40%  EU  GNI  and  around 
EUR 104 billion for the temporary ceiling of 0.6% of EU GNI). 

Once  the  central  scenario  has  been  established,  additional  tests  assess  the  sustainability  of 
existing contingent liabilities under extreme scenarios in 2023-2027. 

1)  Stress test on the economy. In the central scenario, the GNI follows the projections for 
real  growth  and  inflation  in  the  Commission’s  spring  2022  European  economic 
forecast41.  For  the  stress  test,  the  projected  nominal  growth  rates  are  lower  than  the 
baseline by  one  percentage point for  each  year of the reporting period42. This  reduces 
the  own  resources  ceiling’s  nominal  value  and  therefore  the  available  headroom  by 
EUR 3.5 billion per year on average (EUR 2.4 billion of this relates to the permanent 
own resources ceiling). 

2)  Stress test on the revenue side of the budget. This extreme scenario assesses whether 
the  available  headroom  would  be  sufficient  if  all  unprovisioned  contingent  liabilities 
were  to  materialise  at  the  same  time.  In  practical  terms,  this  would  mean  that  all 
Member States benefitting from financial assistance programmes would simultaneously 
fail  to  honour  their  repayments  when  they  fall  due.  The  amounts  at  stake  reflect  the 
repayment  schedules  at  the  end  of  2021  (see  Table  4  above).  This  is  an  extremely 
unlikely  scenario  which  does  not  take  into  account  all  the  measures  that  the 
Commission can take to avoid such a situation (e.g. debt rescheduling and active cash 
management).  Under  this  scenario,  the  available  headroom  would  be  reduced  by 
EUR 3.85 billion  per  year  on  average.  This  would  be  almost  entirely 
(EUR 3.82 billion)  related  to  the  permanent  own  resources  ceiling.  The  contingent 
liabilities  resulting  from  RRF  loans  would  be  minimal  (EUR 0.03 billion  per  year), 
because  repayment  of  the  principal  amount  of  RRF  loans  under  the  temporary  ceiling 
will only start in 2032. 

3)  Stress test on the expenditure side of the budget. Under this scenario which concerns 
the  MFF,  expenditure  is  projected  at  its  theoretical  maximum  (i.e.  the  maximum 
possible  ceilings  for  the  MFF  payments  and  individual  special  instruments).  It  is 
important to underline that this does not reflect a bottom-up forecast and is unrelated to 
any  actual  expectations  regarding  the  evolution  of  EU  payments.  Moreover  on  the 
expenditure  side  of  the budget  -  unlike  a  revenue  stress  test  -  the  decision  to  increase 
spending  (within  the  MFF  ceilings)  requires  a  proposal  by  the  Commission  and  the 
approval  of the European Parliament and the Council.  It  is  unrealistic  to  consider that 
the  Commission  would  propose  a  decision  that  would  be  incompatible  with  the  EU’s 
financial capacity in a given year. There is no specific MFF ceiling exclusively for EU 
budget expenditure to meet repayment obligations for NGEU  non-repayable support43. 
The stress test therefore assumes, as regards NGEU debt repayments, that the maximum 
budget expenditure is equivalent to the maturing NGEU issuances (less the contingent 
liabilities  tested  in  the  above-mentioned  stress  test  on  the  revenue  side  of  the  budget, 
because this present stress test on the expenditure side of the budget does not consider 
the  scenario  where  all  Member  States  benefitting  from  financial  assistance 
simultaneously fail to honour their repayment obligations). Planned debt roll-overs are 
not considered in this hypothetical situation. The headroom would be around EUR 15.8 

41  https://economy-finance.ec.europa.eu/publications/european-economic-forecast-spring-2022_en  
42  This is similar to the stress test performed in the Commission’s Fiscal Sustainability Report: 

https://ec.europa.eu/info/sites/default/files/economy-finance/dp171_en_vol1.pdf 

43  Article  5(2)  of  the  ORD  limits  the  EU’s  repayment  of  the  principal  of  the  funds  borrowed  in  the  capital 
markets  for  NextGenerationEU  in  a  given  year  to  7.5  %  of  EUR 390 billion  in  2018  prices  (i.e. 
EUR 29.25 billion in 2018 prices). 

14 

 
                                                 
billion lower than in the central scenario, including EUR 14.2 billion for the permanent 
own resources ceiling.  

4)  A combined stress test on the economic conditions, revenue and expenditure. This 
is an extremely negative scenario that combines all unfavourable scenarios described in 
the  three  points  above.  It  would  reduce  the  headroom  by  an  annual  average  of 
EUR 23 billion  down  to  a  level  of  around  EUR 164 billion  per  year  in  2023-2027 
(including  EUR 63 billion  for  the  permanent  own  resources  ceiling).  This  amount 
appears  to  constitute  a  large  safety  buffer  for  the  EU’s  financial  capacity  to  cover  its 
liabilities (stemming from both non-NGEU and NGEU operations) even in the event of 
deep economic shocks, a potential legislative change triggering higher spending and the 
possible emergence of new contingent liabilities. 

The detailed results for the baseline and stress test scenarios are provided in the Annex. 

Figure  3:  Own  resources  ceiling  and  own  resources  needs  under  a  baseline  and 
combined sensitivity test 

6.  Conclusions 

At  the  end  of  2021,  the  EU  budget  included  contingent  liabilities  of  approximately 
EUR 163 billion in relation to loans granted to Member States and third countries, and over 
EUR 60 billion in relation to the guarantees provided in the context of EFSI, EFSD, EFSD+ 
and ELM.  

The  risks  that  these  loans  are  not  repaid  by  beneficiary  countries  or  that  guarantees  are 
called  upon  are  carefully  managed  through  a  comprehensive  risk  management  framework 
that  includes,  for  certain  categories  of  contingent  liabilities,  the  earmarking  of  budgetary 
resources to cover potential losses with a sufficiently conservative level of confidence.  

Taking  into  account  the  multiple  safeguards  provided  in  the  EU  framework  for  the 
monitoring  and  management  of  the  risks  linked  to  both  provisioned  and  unprovisioned 

15 

 
 
contingent liabilities and the sustainability assessment presented in this report, it is possible 
to draw several conclusions.  

-  Risks  arising  from  provisioned  instruments  (i.e.  budgetary  guarantees  and  financial 
assistance  to  third  countries)  are  carefully  managed  and  adequately  provisioned.  This 
assessment  takes  into  account  the  build-up  of  risk  positions  in  the  past;  data  on  past 
defaults and expected losses; the measures that are in place to ensure that losses do not 
exceed  predefined  tolerance  levels;  and  the  budgetary  provisions  that  are  available  to 
cover expected losses. 

-  The EU’s financial capacity under the existing legal framework (i.e. the Own Resources 
Decision and the MFF Regulation) is sufficient to cater for the materialisation of losses 
that may arise in respect of unprovisioned loans between now and the end of 2027. On 
average over the 2023-2027 period, EUR 187 billion per year (i.e. 1.05% of the EU’s 
GNI)  is  available  under  the  own  resources  ceiling  (including  0.47%  of  the  EU  GNI 
under  the  permanent  ceiling)  for  meeting  extraordinary  revenue  calls  to  finance 
unforeseen expenditure or for honouring any existing and potential contingent liabilities 
that might materialise. 

-  The headroom is adequate even in an extreme negative scenario that combines adverse 
impacts on budget revenues, expenditures and economic growth. An average amount of 
EUR 164 billion per year (i.e. around 0.94% of the EU’s GNI) would remain available 
under the own resources ceiling (including 0.37% of the EU’s GNI under the permanent 
ceiling) to ensure the robustness of the EU’s financial system and its credit rating, which 
provides  a  safety  buffer  against  further  negative  economic  shocks,  new  spending 
initiatives and contingent liabilities. 

16 

 
Annex: Sustainability and headroom in respect of the own resources ceiling (in EUR billion, 
at current prices) 

Baseline 

Own resources ceiling (1.4% + 0.6% GNI) 

Own resources to finance the budget (excl. NGEU) 

Own resources to finance NGEU 

Headroom 

Stress tests 

1) Stress test on the economy 

Own resources ceiling (1.4% + 0.6% GNI) 

Own resources to finance the budget (excl. NGEU) 

Own resources to finance NGEU 

Headroom 

2) Stress test on the revenue 

Own resources ceiling (1.4% + 0.6% GNI) 

Own resources to finance the budget (excl. NGEU) 

Own resources to finance NGEU 
Extraordinary own resources to cover non-NGEU 
CLs* 
Extraordinary own resources to cover NGEU CLs 
(NGEU loan reimbursements due) 
Headroom 

3) Stress test on expenditure 

Own resources ceiling (1.4% + 0.6% GNI) 

Own resources to finance the budget (excl. NGEU) 

Own resources to finance NGEU 

Additional own resources (up to MFF ceilings and 
special instruments' maximum)** 

Additional own resources for NGEU (maturing 
issuances, excluding CLs and budgeted amounts) 

a 

b 

c 

a-b-c 

a 

b 

c 

a-b-c 

a 

b 

c 

d1 

d2 

a-b-c-d1-d2 

a 

b 

c 

b* 

c* 

2023 

2024 

2025 

2026 

2027 

326.85  342.00  356.97  371.81  386.25 

153.15  148.28  169.32  175.94  186.19 

1.04 

4.99 
2.68 
172.66  191.64  184.97  192.12  195.07 

2.08 

3.75 

323.68  338.66  353.48  368.18  382.47 

153.15  148.28  169.32  175.94  186.19 

1.04 

4.99 
2.68 
169.49  188.30  181.48  188.49  191.29 

2.08 

3.75 

326.85  342.00  356.97  371.81  386.25 

153.15  148.28  169.32  175.94  186.19 

1.04 

2.08 

2.68 

3.75 

4.99 

4.25 

3.33 

3.27 

4.65 

3.58 

0.03 

0.03 
0.03 
168.38  188.28  181.67  187.44  191.46 

0.03 

0.03 

326.85  342.00  356.97  371.81  386.25 

153.15  148.28  169.32  175.94  186.19 

1.04 

2.08 

2.68 

3.75 

4.99 

7.21 

17.78 

13.92 

16.89 

15.12 

0.00 

0.00 

0.00 

7.85 

0.00 

Headroom 

a-(b+b*+c+c*) 

165.46  173.86  171.05  167.38  179.96 

4) Combined adverse/unfavourable shock 

Own resources ceiling (1.4% + 0.6% GNI) 

Own resources to finance the budget (excl. NGEU) 

Own resources to finance NGEU 

Additional own resources (up to MFF ceilings and 
special instruments' maximum)** 

Additional own resources for NGEU (maturing 
issuances, excluding CLs and budgeted amounts) 
Extraordinary own resources to cover non-NGEU 
CLs* 
Extraordinary own resources to cover NGEU CLs 

a 

b 

c 

b* 

c* 

d1 

d2 

323.68  338.66  353.48  368.18  382.47 

153.15  148.28  169.32  175.94  186.19 

1.04 

2.08 

2.68 

3.75 

4.99 

7.21 

17.78 

13.92 

16.89 

15.12 

0.00 

0.00 

0.00 

7.85 

0.00 

4.25 

3.33 

3.27 

4.65 

0.03 

0.03 

0.03 

0.03 

3.58 

0.03 

Headroom 

a-(b+b*)-(c+c*)-d1-d2  158.00  167.16  164.26  159.06  172.56 

17 

 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
Of which – permanent own resources ceiling 
Baseline 

Own resources ceiling 1.4% GNI 

Own resources to finance the budget (excl. NGEU) 

Headroom 

Stress tests 

1) Stress test on the economy 

Own resources ceiling 1.4% GNI 

Own resources to finance the budget (excl. NGEU) 

Headroom 

2) Stress test on the revenue 

Own resources ceiling 1.4% GNI 

Own resources to finance the budget (excl. NGEU) 

Extraordinary own resources to cover CLs* 

Headroom 

3) Stress test on expenditure 

Own resources ceiling 1.4% GNI 

Own resources to finance the budget (excl. NGEU) 

Additional own resources (up to MFF ceilings and special 
instruments' maximum)** 

a 

b 

a-b 

a 

b 

a-b 

a 

b 

c 

a-b-c 

a 

b 

b* 

Headroom 

a-(b+b*) 

4) Combined adverse/unfavourable shock 

Own resources ceiling 1.4% GNI 

Own resources to finance the budget (baseline) 

Additional own resources (up to MFF ceilings and special 
instruments' maximum)** 

Extraordinary own resources to cover CLs* 

a 

b 

b* 

c 

Headroom 

a-(b+b*)-c 

2023 

2024 

2025 

2026 

2027 

228.80 

239.40 

249.88 

260.27 

270.38 

153.15 
75.64 

148.28 
91.12 

169.32 
80.56 

175.94 
84.33 

186.19 
84.18 

226.57 

237.06 

247.44 

257.73 

267.73 

153.15 
73.42 

148.28 
88.78 

169.32 
78.12 

175.94 
81.78 

186.19 
81.54 

228.80 

239.40 

249.88 

260.27 

270.38 

153.15 

148.28 

169.32 

175.94 

186.19 

4.25 
71.39 

3.33 
87.78 

3.27 
77.29 

4.65 
79.68 

3.58 
80.60 

228.80 

239.40 

249.88 

260.27 

270.38 

153.15 

148.28 

169.32 

175.94 

186.19 

7.21 
68.44 

17.78 
73.34 

13.92 
66.64 

16.89 
67.44 

15.12 
69.07 

226.57 

237.06 

247.44 

257.73 

267.73 

153.15 

148.28 

169.32 

175.94 

186.19 

7.21 

4.25 
61.96 

17.78 

3.33 
67.67 

13.92 

3.27 
60.93 

16.89 

4.65 
60.24 

15.12 

3.58 
62.84 

* The risk assessment linked to the SURE instrument takes into account the specific counter-guarantee 
provided by all the Member States for 25% of the maximum amount of financial assistance. In practice, 
all annual payments in relation to the SURE loans can be excluded from the annual risk for the years 
covered  in  the  period  under  examination,  because  the  amounts  falling  due  are  fully  covered  by  the 
Member States’ guarantees.  

**  Expenditure  is  projected  at  the  theoretical  maximum  for:  1)  the  MFF  payment  ceiling  in  2023-
202744,  2)  future  adjustments  up  to  their  potential  maximum  in  any  single  year45,  and  3)  the  annual 
ceilings  of  the  thematic  special  instruments  (the  European  Globalisation  Adjustment  Fund,  Solidarity 
and Emergency Aid Reserve, and Brexit Adjustment Reserve) and the Flexibility Instrument. 

44  As established in the most recent technical adjustment of the MFF (COM(2022) 266 final of 7.6.2022). 
45  In relation to the mechanism of Article 5 and Article 11(1)(b) of the MFF Regulation (up to the ceilings set 
in  Article  11(3)  of  the  same  Regulation  and  taking  only  the  possible  upward  adjustments  into 
consideration). 

18