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 2022
Date: 2023-10-23
Institutions: Directorate-General for Budget, European Commission
Subjects: EU Member State, EU budget, EU expenditure, EU financial instrument, budgetary reserve (EU), financial aid, financial management, own resources, risk management, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.10.2023  COM(2023) 683 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 2022                          
 
 
Table of Contents 

1. 

2. 

2.1  

2.2  

2.3  

2.4  

3. 

3.1  

3.2 

3.3  

4. 

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

Analysis of the different sources of contingent liabilities ....................................... 4 

Budgetary guarantees ................................................................................................ 4 

Provisioned loans for financial assistance to third countries ................................. 5 

Headroom-backed loans to EU Member States ...................................................... 7 

Overview of contingent liabilities at the end of 2022 .............................................. 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 headroom-backed contingent liabilities 15 

Conclusions ............................................................................................................... 18 

Annex:   

Sustainability and headroom in respect of the permanent own resources ceiling ........... 20 

Sustainability and headroom in respect of the temporary own resources ceiling ............ 21 

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1. 

Introduction 

This  report is  issued in  accordance with  the requirements of  Article 250 of the Financial 
Regulation1 and should be read in conjunction with: 

-  working documents X and XI, which accompany the draft EU budget for the financial 
year 20242 and which provide detailed information on the EU 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  2024-2028  taking  into 
consideration planned budget expenditures4.  

The objective of this report is  to  provide  an overview of the amount and  composition  of 
contingent  liabilities  –  both  provisioned  and  headroom-backed5  contingent  liabilities  - 
borne  by  the  EU  budget  as  of  31 December 2022.  Contingent  liabilities  are  potential 
financial liabilities which stem from existing binding commitments or past events6. Whether 
or not these contingent liabilities result in actual calls, and the size of any such calls, will 
depend on future events which cannot be predicted ex-ante..  

This  report  also  presents  an  assessment  of  the  long-term  sustainability  of  contingent 
liabilities  based  on  qualitative  and  quantitative  factors,  including  stress-testing.  This 
sustainability assessment is performed by comparison with: 

- 

- 

the  market  value  of  existing  provisions  held  in  the  respective  compartments  of  the 
Common  Provisioning  Fund  (CPF)7  set  up  by  the  Commission  for  provisioned 
contingent  liabilities,  i.e.  those  arising  from  budgetary  guarantees  and  financial 
assistance to third countries; 
the limits of the own resources ceiling and the available headroom for headroom-backed 
contingent liabilities, i.e. those stemming from financial assistance to Member States. 

The  main  conclusion  of  the  end-2022  sustainability  analysis  is  that  the  EU  budget  has 
adequate resources to cope with the potential materialisation of contingent liabilities. More 
in detail:  

-  At the end of 2022, the EU budget was exposed to contingent liabilities amounting 
to  over  EUR 206 billion  (EUR  163  billion  at  the  end  of  2021)  relating  to  loans 
granted to Member States and third countries, and approximately EUR 106 billion 
(EUR 60 billion at the end of 2021) relating to budgetary guarantees provided in the 

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(2023) 300 of 5.7.2023 
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(2023) 390 final of 20.6.2023. 
5   In  this  document  the  term  “provisioning”  is  used  in  the  meaning  of  the  Financial  Regulation  and  in 
particular Article 211 thereof. The Financial Regulation explains that the provisioning rate needs to cover 
net expected losses plus an adequate safety buffer for unexpected losses. In other circumstances the term 
provisioning (e.g. in an accounting context) might have a different meaning 

6      A separate source of contingent liabilities is represented by the ‘legal risks’. These are not covered by the 

present report. 

7   For details on the CPF see the Report from the Commission to the European Parliament and the Council on 
the common provisioning fund in 2022 (COM(2023) 288 final of 31.5.2023) and the accompanying Staff 
Working Document (SWD(2023) 170 final). 

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context  of  InvestEU8,  the  European  Fund  for  Strategic  Investments  (EFSI)9,  the 
European Fund for Sustainable Development (EFSD)10, EFSD+11 and the External 
Lending Mandate (ELM)12. The total amount of contingent liabilities has increased 
by approximately 40% in comparison with 2021. The bulk of this increase comes 
from  additional  loan  disbursements  to  Member  States  under  the  Recovery  and 
Resilience  Facility  (RRF)13  and  from  the  first  guarantee  amounts  signed  with 
implementing partners under InvestEU and EFSD+. 

-  For contingent liabilities arising from budgetary guarantees and financial assistance 
to  third  countries,  the  provisioning  available  at  the  end  of  2022  is  adequate 
considering the requirements of the respective legal frameworks. 

-  For  headroom-backed  contingent  liabilities,  the  EU  financial  capacity  under  the 
existing legal framework (i.e. the Own Resources Decision (ORD)14 and the 2021-
2027 multiannual financial framework (MFF) Regulation15) is by far sufficient to 
cover  the  EU  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  affecting 
simultaneously economic growth, expenditure and loans repayment. 

This report covers contingent liabilities incurred before the end of 2022 and analyses how 
they are catered for under the 2021-2027 MFF.  

The management and monitoring of the risk arising from contingent liabilities is carried out 
through  a  horizontal  cross-Commission  framework  including  extensive  measures  and 
safeguards which the Commission can use to  protect the EU budget  from potential losses 
stemming from contingent liabilities16.  

8   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). 

9  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).  

10  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). 

11   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). 

12  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). 

13  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). 

14  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). 

15  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). 

16  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). 

3 

 
 
The  Steering  Committee  on  Contingent  Liabilities  (SCCL)17  plays  a  central  role  in  that 
framework  for  provisioned  exposures.  In  2022,  the  SCCL  met  four  times  to  further  the 
development of common methodologies for the design, negotiation and implementation of 
budgetary guarantees  and financial assistance. Particular relevance was given to  the close 
monitoring of the evolution in volume and risk profile of the exposures to Ukraine and to the 
design of adequate budgetary safeguards to cope with potential losses originating from those 
exposures. 

For the sake of completeness, it should be mentioned that financial instruments in the form 
of guarantees are stricto sensu also a source of contingent liabilities. However, the budget 
always includes full provisioning 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. 

More detailed information on financial instruments can be found in the working document 
X accompanying the draft 2024 budget which provides a detailed description of 79 financial 
instruments as of 31 December 2022. 

This  report  maps  the  three  different  categories  of  contingent  liabilities  (budgetary 
guarantees, provisioned loans to third countries, and loans backed by the headroom) before 
providing  an  assessment  of  their  sustainability  against  the  relevant  sources  of  budgetary 
cover. 

2.  Analysis of the different sources of contingent liabilities  

2.1   Budgetary guarantees  

These are guarantees provided to different implementing partners under the InvestEU, EFSI, 
EFSD, EFSD+ and ELM mandates. Under all these instruments, the EU provides guarantees 
to implementing partners to cover a share of potential losses and costs18 resulting from their 
financing and investment operations (i.e. debt or equity operations).  

In 2022, the EU provided budgetary support in the form of guarantees to the EIB Group and 
to other financial institutions (including EBRD and National Promotional Banks) under the 
different existing guarantee programmes. 

The oldest budgetary guarantee is the one provided under the ELM. Its basic purpose is to 
enhance the EIB 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. In 2015, EFSI was launched to remedy the problem of prolonged subdued 
private  investments  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,  which  is 
supplemented by an EIB own resources allocation of EUR 7.5 billion. In 2020, the EFSD 
guarantee was put in place to support investments and improve access to finance primarily 
in  Africa  and  the  neighbourhood  countries  and  to  help  those  countries  meet  the  UN 
Sustainable Development Goals.  

Under  the  2021-2027  MFF,  the  InvestEU  programme  combines  the  activities  previously 
conducted  under  EFSI  and  several  other  financial  instruments.  It  has  also  provided 

17  Commission decision of 24.7.2020 on establishing the Steering Committee on Contingent Liabilities arising 
from Budgetary Guarantees (COM(2020) 5154 final). The present report also contains all the information 
which is referred to in Article 7 of that Decision. In 2022, this decision was amended so as to make the 
Chief Risk Officer a full member of the steering committee. 

18   In some cases, the guarantee can also cover additional items such as funding costs and other fees. 

4 

 
 
implementing partners other than the EIB Group with access to a 25% portion of the total 
EU guarantee. The InvestEU programme aims to ensure an additional boost to investments 
fostering recovery, resilience, green growth and employment in the EU over the 2021-2027 
period. This goal is to be achieved by mobilising public and private financing sources, in 
order to provide long-term funding and support to companies and projects in line with the 
EU  priorities  in  the  current  challenging  economic  and  social  context.  Building  on  the 
successful implementation of ELM and EFSD, EFSD+ has been established for the 2021-
2027 MFF period as an integrated financial package providing 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: State of play of budgetary guarantees (as at 31 December 2022) (EUR million) 

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 

InvestEU 

EFSD+ 

Total 

25 793.34 

1 176.02 

30 598.89 

21 280.36 

27 020.00 

105 868.61 

24 615.20 

534.00 

30 598.89 

2 107.69 

4 515.09 

62 370.87 

21 083.72 

446.13 

20 908.78 

324.25 

156.20 

42 919.08 

(*)  The  guarantee  signed  with  counterparts  represents  the  amount  of  the  guarantee  granted  to  the 
implementing partner through the signature of the guarantee agreement. The guarantee related to operations 
signed by counterparts includes amounts of the guarantee in all operations signed by the counterparts with the 
final recipients/financial intermediaries. The guarantee related to operations signed and disbursed includes 
the amounts of operations disbursed from the counterpart to the final recipient/the financial intermediaries. 

The five budgetary guarantee programmes vary in respect of several features, including the 
different stage of implementation. While the ELM (that came into existence in 1977) has a 
long track record and the EFSI constitution period ended in 2022, the investment phase of 
InvestEU and EFSD+ has started only  recently. 

2.2   Provisioned loans for financial assistance to third countries  

The contingent liabilities under this heading arise from financial assistance provided in the 
form of macro-financial assistance programme (MFA)19 loans and Euratom loans to third 
countries20.  

Financial support to third countries in the form of bilateral loans from the EU (and funded 
back-to-back from the capital markets, until the MFA+ programme for Ukraine) has been 
granted mainly in the context of the macro-financial assistance programme, which targets 

19  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. 

20  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). 

5 

 
 
 
countries outside the EU experiencing a balance of payment crisis. In 2022, new MFA loans 
for an amount of EUR 7 535 million were disbursed21.  

A smaller portion of financial support to third countries takes the form of Euratom loans. 
The  Euratom  loan  facility22  helps  both  Member  States  and  third  countries  finance 
investments in nuclear power stations and in industrial installations in the nuclear fuel cycle. 

Table  2:  Outstanding  amounts  in  respect  of  loans  to  third  countries  (as  at 
31 December 2022) (EUR million) 

Outstanding loans  Accrued interests 

Total 

MFA  

Euratom 

Total  

14 963.00 

300.00 

15 263.00 

70.85 

0.47 

71.32 

15 033.85 

300.47 

15 334.32 

Traditionally, loans to third countries have been funded 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. In principle no 
outflow of EU resources is required to settle the EU debt.  

The  repayment  amounts  reported  in  Table  3  are  therefore  to  be  seen  as  the  maximum 
envisageable amounts that could be called against provisions in the years 2023-2027. 

Table 3: Yearly repayment schedule of outstanding loans to third countries (capital + 
interest) under the existing programmes for the years 2023-2027 (at 31 December 2022) 
(EUR million) 

Year 

2023 
2024 
2025 
2026 
2027 
Total 

Euratom 

MFA 

All 
 programmes 

0.82 
0.82 
0.82 
0.82 
50.82 
54.10 

234.04 
863.55 
251.34 
368.18 
400.58 
2 117.69 

234.86 
864.37 
252.16 
369.00 
451.40 
2 171.79 

21  These includes also A) the first instalment of EUR 35 million of a  new MFA loan of EUR 120 million 
granted to Moldova in 2022, and B) the second instalment of COVID-19 MFA  to Tunisia of EUR 300 
million. For more 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 2022 COM(2023) 409 final of 11.7.2023 and the accompanying SWD(2023) 
244 final of 11.7.2023.  

22   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. 

6 

 
 
 
 
 
2.3   Headroom-backed loans to EU Member States 

The contingent liabilities under this heading arise from loans to EU Member States (i.e. 
Balance of Payments (BoP) loans23, European Financial Stabilisation Mechanism (EFSM) 
loans24, Euratom loans25, loans under SURE26 and loans under the RRF which are provided 
to support investment and reform). 

Contingent liabilities stemming from loans to EU Member States are not provisioned ex-
ante.  Instead,  they  are  back-stopped  by  the  remaining  scope  (‘headroom’)  for  calling 
additional ‘own resources’ from Member States under the Union’s budgetary framework.  

This means that, if a beneficiary Member State would not 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 
Member States to temporarily cover the amount in question. Such calls for funds would be 
made over and above the MFF ceilings, but in full respect of the own resources ceiling. 

As a general rule, these loans – with the exception of the RRF loans – were granted to EU 
Member States using the same back-to-back technique that was used for financial assistance 
to  third  countries.  RRF  loans  by  contrast  have  been  financed  from  the  start  through  the 
Diversified Funding Strategy (DFS)27.  

In 2022 the Commission, acting on behalf of the EU, operated five programmes under which 
it had granted loans to Member States: 

-  Balance of Payments (BoP) assistance was created to help EU countries outside the 
euro  area  that  experience  or  run  the  risk  of  experiencing  balance  of  payments 
difficulties. 

-  The European Financial Stabilisation Mechanism (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 Euratom Loan Facility. 

-  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. All Member States have agreed 
to  provide  irrevocable,  unconditional  and  on-demand  guarantees  for  25%  of  the 

23  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). 

24  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). 

25  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. 

26   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) 

27   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 
future annual budgets, within the ceilings of the Multiannual Financial Frameworks, and therefore does not 
constitute a contingent liability for the EU. The NGEU borrowing-to-lend activities (i.e. to fund RRF loans) 
do, however, give rise to new contingent liabilities and are addressed in this report. 

7 

 
 
maximum  amount  of  financial  assistance28.  Each  Member  State  contributes  to  the 
overall  amount  of  the  guarantee  proportionate  to  its  relative  share  in  the  total  gross 
national income of the EU (based on the 2020 EU Budget). 

-  The RRF is the central pillar of the NGEU programme29 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, setting clear milestones 
and targets for their implementation by 31 August 2026. Each plan must be positively 
assessed by the Commission and approved by the Council.  

Only  RRF  loans  (as  opposed  to  RRF  grants)  give  rise  to  contingent  liabilities  and 
therefore only RRF loans are considered in this analysis. It is important to underline, as 
mentioned above, that the funding of the RRF loans is financed via a diversified funding 
strategy  and  not  via  the  traditional  back-to-back  approach.  All  NGEU  borrowings, 
amounting  to  EUR 188 billion  at  the  end  of  2022,  are  guaranteed  by  the  EU  budget 
under  Article  9(4)  of  the  ORD  through  a  temporary  increase  of  the  Own  Resources 
ceiling of 0.6% GNI, which is exclusively available for NGEU liabilities. 

Table  4:  Outstanding  amounts  in  respect  of  loans  to  EU  Member  States  (as  at 
31 December 2022) (EUR million) 

Outstanding loans 

Accrued interests 

Total 

BoP 

Euratom 

EFSM 

SURE 

RRF (loans) 

Total 

200.00 

26.30 

46 300.00 

98 355.00 

45 156.37 

190 037.67 

1.15 

0.07 

415.49 

104.02 

183.80 

704.53 

201.15 

26.37 

46 715.49 

98 459.02 

45 340.17 

190 742.2 

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, the repayment flows coincide in amounts 
and timing with the payments owed to investors in EU bonds issued to fund the loans to 
Member  States.  For  RRF  loans,  funded  by  the  diversified  funding  strategy,  the  central 
funding pool is able at all times to meet payments owed to EU-Bond investors.  

28   In addition to the guarantee provided by all Member States, there are a number of safeguards foreseen in 
the  SURE  Regulation  to  mitigate  the  risk  sourced  by  SURE  contingent  liabilities.  These  include  a 
concentration  limit  on  the  three  largest  loans  of  60%  of  the  maximum  amount  granted  under  SURE,  a 
maximum annual exposure of 10% (i.e. payments due each year shall not exceed EUR 10 billion), and the 
possibility for the Commission to roll over its borrowings if necessary. 

29  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). 

8 

 
 
 
The Union budget has identified budgetary resources to meet the payments arising from its 
bonds  at  any  time  including  in  the  extreme  and  unprecedented  situation  in  which  a 
beneficiary defaults on its loans to the EU. 

Table 5: Yearly repayment schedule of outstanding loans to EU Member States (capital 
+ interest) under the existing programmes for the years 2023-2027 (at 31 December 
2022) (EUR million) 

Year 

Euratom 

BoP 

EFSM 

SURE 

2023 
2024 
2025 
2026 
2027 
Total 

13.83 
13.50 
0 
0 
0 
27.32 

5.75 
5.75 
205.75 
0 
0 
217.25 

326.56 
4 239.25 
326.98 
3 317.38 
8 326.98 
3 068.63 
8 326.98 
6 856.63 
3 531.13 
326.98 
21 013.02  17 634.48 

RRF 
loans (*) 
516.11 
552.62 
552.78 
552.78 
552.78 
2 727.07 

All 
 programmes 
5 101.49 
4 216.23 
12 154.14 
15 736.39 
4 410.89 
41 619.14 

 (*) Interests for RRF loans under the NGEU programme are calculated on a rolling basis according to a specific 
methodology (see Commission implementing decision C(2022)9701 final of 19.12.2022). The annual interest 
charge for these loans presented above is therefore an estimate based on current funding conditions.  

Contingent  liabilities  stemming  from  the  ‘Macro-Financial  Assistance  +’  (MFA+) 
programme for Ukraine30 adopted in December 2022, and where EUR 15 billion in loans 
have been provided to date in 2023, are also not provisioned as traditional MFA loans. This 
is the only financial assistance programme to a third country for which the borrowed amounts 
are back-stopped by the Union budgetary headroom. 

Looking beyond 2027, taking into account all outstanding loans at the end of 2022, in the 
period 2028-2053 the yearly repayments (principal + interest) in relation to loans backed by 
the  headroom  under  the  permanent  own  resources  ceiling  amount  to  4.6  EUR  billion  on 
average.  Average  yearly  repayments  (principal  +  interest)  for  RRF  loans,  backed  by  the 
headroom under the temporary own resources ceiling, amount to EUR 2.1 billion over the 
same period. 

2.4   Overview of contingent liabilities at the end of 2022 

At the end of 2022, the EU budget was exposed to contingent liabilities for a total amount 
of EUR 312 billion (over EUR 206 billion relating to loans granted to Member States and 
third  countries,  and  EUR 106 billion  relating  to  guarantees  provided  in  the  context  of 
InvestEU,  EFSI,  EFSD,  EFSD+  and  ELM).  The  largest  exposure  for  the  EU  budget 
originated from financial assistance programmes targeting Member States.  

30   Regulation  (EU)  2022/2463  of  the  European  Parliament  and  of  the  Council  of  14  December  2022 
establishing an instrument for providing support to Ukraine for 2023 (macro-financial assistance +) (OJ L 
322, 16.12.2022, p. 1–14). More details on the MFA+ can be found in Box 1. 

9 

 
 
 
 
 
 
 
 
 
Figure 1: Breakdown of contingent liabilities by source as at 31 December 2022 

Financial assistance to 
Third Countries 5%

Budgetary 
guarantees 
34% (*)

Financial 
assistance to MS
61%

 (*) 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 substantial increase of 40% in the 
total amount of contingent liabilities between year-end 2021 and year-end 2022. Financial 
assistance to third countries almost doubled (+ 96%), primarily because of the extraordinary 
efforts to financially support Ukraine.  

Contingent liabilities stemming from the budgetary guarantee programmes also increased 
substantially  (+75%)  because  of  the  start  of  the  implementation  phase  for  InvestEU  and 
EFSD+.  A  moderate  increase  for  loans  to  Member  States  (+23%)  was  also  recorded,  in 
particular because of additional loan disbursements under the RRF. 

Figure 2: Breakdown of contingent liabilities by source at the end of 2021 and 2022 

200
180
160
140
120
100
80
60
40
20
0

(EUR billion) 

190,7

155

105,9

60,4

Budgetary guarantees

Financial assistance to MS

7,8

15,3

Financial assistance to Third
Countries

2021

2022

EU contingent liabilities are expected to increase further by the end of 2023 in relation to 
the additional support to third countries, the additional disbursement of RRF loans and the 
further progress in the implementation of InvestEU and EFSD+.  

3.  Assessing the sustainability of EU contingent liabilities  

3.1   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 
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 

10 

 
 
 
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 arising contingent liabilities.  

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  3.2  of  this  report 
presents the assessment of the adequacy of the available provisions to meet the expected and 
unexpected  payments  arising  from  budgetary  guarantees  and  financial  assistance  to  third 
countries for the liabilities as they stood at the end of 2022. 

Payments  related  to  materialising  contingent  liabilities  resulting  from  headroom-backed 
financial assistance to EU Member States31 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 financial capacity to cover additional outflows 
relating  to  the  materialisation  of  contingent  liabilities  arising  from  headroom-backed 
financial  assistance  to  EU  Member  States.  The  assessment  framework  for  this  set  of 
contingent  liabilities  was  described  in  detail  in  the  2021  report32.  The  results  of  the 
assessment of sustainability of headroom-backed contingent liabilities existing at the end of 
2022 are presented in Section 3.3 below. The 2020 Own Resources Decision temporarily 
increases the own resources ceiling in order to cater for the liabilities incurred during the 
implementation  of  NGEU,  including  headroom-backed  contingent  liabilities  arising  from 
RRF loans to Member States. 

3.2  Assessment of the sustainability of the provisioned contingent liabilities 

a) Provisioning available at end of 2022 

Contingent  liabilities  arising  from  budgetary  guarantees  and  from  financial  assistance  to 
third countries are provisioned for in the EU budget based on a conservative assessment of 
the expected losses for each instrument plus an additional safety buffer (to cover a portion 
of the unexpected losses). The provisions protecting the EU budget against losses which may 
arise from budgetary guarantees and financial assistance to third countries are held in the 
CPF. On 31 December 2022, the CPF was composed of 14 compartments, including those 
for all the on-going  guarantee programmes, that  for the legacy ELM, Euratom and MFA 
loans (the former  Guarantee Fund For External  Action or GFEA), and those for the post 
2020 MFA and Euratom loans.  

In particular, the MFA and Euratom loans are backed by different compartments of the CPF:  

- 

- 

the legacy exposures (EUR 7.7 billion of MFA loans and EUR 300 million of Euratom 
loans) are backed by the GFEA compartment; 

the new MFA loans (EUR 1.2 billion) committed in 2022 are covered by the Post-2020 
MFA compartment33; 

31   And, since the adoption of the MFA+ instrument, financial assistance provided to Ukraine in 2023 under 

this instrument. 

32   COM(2021) 676 final of 5.11.2021. 
33   These include the first disbursement (EUR 35 million) in July 2022 of the MFA to Moldova adopted by the 

European Parliament and the Council on 6.4.2022.  

11 

 
 
 
- 

the exceptional MFA loans to Ukraine of EUR 6 billion (exceptional MFA I34 and MFA 
II35) are in a newly created separate compartment given their special risk sharing set-up. 
Pro memoria, for this exceptional MFA loans package to Ukraine, a coverage rate of 
70% is foreseen: 9% in the form of paid-in provisioning from the EU budget and 61% 
in  the  form  of  callable  second  loss  guarantees  from  the  Member  States  (see  Box  1 
below). 

As at 31 December 2022, the market value of net assets in the CPF amounted to EUR 14.39 
billion, as compared to EUR 12.31 billion as at 31 December 202136. For the remaining years 
of  this  MFF,  the  Commission  has  already  assigned  further  provisions  to  the  CPF  (in 
particular provisions related to InvestEU and EFSD+), which will lead to a further increase 
of the CPF. 

The  assets  of  the  CPF  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 unprecedented and unexpected steep increase in interest rates led to a reduction of the 
market  value  of  the  CPF  portfolio  in  2022  of  around  8.8%,  mainly  due  to  unrealised 
valuation losses.  

However,  in  the  longer-term,  higher  interest  rates  should  provide  the  foundation  for  a 
sustained positive investment return and make the CPF well-placed to recover a large portion 
of the lost value over the coming years.  

To further improve the long-term  return/risk profile of the CPF the Commission in  2022 
continued to work on asset diversification and incorporated small equity exposures in the 
CPF  benchmark.  The  CPF  benchmark  was  also  updated  to  ensure  a  stronger  ESG 
(Environmental, Social and Governance) focus of the portfolio37.  

b) Assessment of sustainability of Budgetary guarantees 

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 provisioning level, per programme, based 
on a lifetime Value-at-Risk (VaR)38 at a certain (predefined) percentage of confidence level 
to ensure appropriate coverage of potential losses. Despite the fact that in some cases the 
available provisions at the end of 2022 were somewhat lower than the respective VaRs with 
the  applicable  confidence  level,  the  provisioning  adequacy  conclusion  is  underpinned  by 

34   Decision  (EU)  2022/1201  of  the  European  Parliament  and  of  the  Council  of  12  July  2022  providing 

exceptional macro-financial assistance to Ukraine (OJ L 186, 13.7.2022, p. 1–7). 

35   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). 

36   In 2022 the CPF received EUR 3.26 billion of net contributions. 
37   For additional information see the Report from the Commission to the European Parliament and the Council 

on the common provisioning fund in 2022. 

38  The Value-at-Risk can be defined as the portfolio loss level which, statistically, over a certain time horizon, 
will  not  be  exceeded  with  a  certain  confidence  level.  The  respective  confidence  levels  for  internal 
programmes (EFSI/InvestEU) and external programmes (EFSD, EFSD+)  – 95% and 90% respectively - 
take  into  account  factors  such  as  the  different  policy  objectives,  their  relative  sizes  and  the  respective 
frameworks. 

12 

 
 
 
 
 
several elements including the lifecycle phase of the guarantee (fully constituted or not fully 
constituted), the fact that CPF market values were affected by losses of an unrealised nature, 
and for ELM the specific provisioning rules. 

In more detail, it is possible to draw the following conclusions from the available data on 
lifetime net losses on 31 December 2022 concerning the budgetary guarantees in place on 
that date39: 

-  For EFSI, the results of the risk analysis conducted based on a credit risk model for the 
Infrastructure and Innovation debt operations and on expert judgment for equity and the 
SME Window debt products, indicate a VaR amount of EUR 8 977 800 000 at a 95% 
lifetime  confidence  level.  This  amount  is  broadly  in  line  with  the  market  value  of  the 
EFSI CPF compartment (EUR 8 570 691 859) in particular taking into account that the 
EFSI CPF compartment will book revenues40 in 2023 and that the EFSI CPF compartment 
- because of rising interest rates on the markets - faced in 2022 losses but of an unrealised 
nature; 

-  with regard to EFSD, the results of the risk analysis indicate a lifetime VaR amount of 
EUR 766 824 213 at the targeted 90% confidence level. This amount is somewhat higher 
than the market value of the EFSD CPF compartment as of end 2022 (EUR 728 175 822) 
where  the  EFSD  CPF  compartment  has  reported  total  unrealised  valuation  losses  of 
approximately EUR 75 million. The EFSD is still in the ramp-up phase; 

-  with regard to ELM, the results of the risk analysis indicate a  lifetime VaR amount of 
EUR  3  863  044  953  at  the  90%  confidence  level.  This  exceeds  the  corresponding 
provisioning in the CPF compartment (at 31 December 2022, the ELM pro-rata part of 
the  GFEA  compartment  amounted  to  EUR  2  118  601  769).  Note  that  ELM  is  an  old 
instrument without a pre-defined confidence level which follows specific under and over-
provisioning rules. The GFEA compartment (in which the ELM is housed) is topped-up 
on a yearly basis in case the provisioning falls below 9% of the outstanding disbursed 
amounts  guaranteed.  In  this  regard,  it  should  be  recalled  that  the  ELM  consists  of 
amortising loans with long repayment periods, where losses tend to crystallise in a non-
abrupt manner. Furthermore, the provisioning for repurposed loans to support Ukraine is 
set at 70% and will be paid into a ring-fenced provisioning compartment over the coming 
years. 

c) Assessment of sustainability of provisioned loans to third countries 

The composition of the outstanding MFA loan portfolio to third countries comprises of loans 
to  a  diversified  set  of  EU  candidate  and  potential  candidate  countries,  countries  and 
territories covered by the European Neighbourhood Policy and other third countries that play 
a determining role in regional stability and which are of strategic importance for the Union, 
and are politically, economically, and geographically close to the Union. The amounts of 
provisioning available for the different MFA exposures, in accordance with the rate under 
the relevant legislative acts setting up the loans, appears adequate when account is taken of 
the following factors:  

- 

- 

the absence of payment default in the 2022 reporting year as well as in previous years;  

the adjustment of provisioning levels to reflect heightened country-specific risks as with 
UKR MFA 1 and 2; 

39   For EFSD+ and InvestEU, still in the inception phase, formal reporting on provisioning and riskiness of the 

guaranteed operations as compared to the ex-ante risk appetite will start as of next year. 

40   For information, in 2022, revenues amounted to EUR 382 million. 

13 

 
 
 
 
- 

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  MFFs,  ensuring  that  impact  of  any  failure  by  loan  beneficiaries  to  repay 
amounts  owed  to  EU  are  spread  over  time  and  can  be  accommodated  by  available 
provisions; 

-  The  linkage  between  traditional  MFA  loans  and  IMF  programmes  and  related  debt 
sustainability  assessment. The disbursement of MFA loan instalments  is dependent  on 
satisfactory track record in implementation of these programmes, which seek to ensure 
the financial viability of the third country and, thus, the  repayment of Union funds. For 
the recent UKR MFA loans, the absence of a formal requirement of an IMF programme 
is  compensated  for  by  a  close  working  relationship  with  the  UKR  authorities  on  their 
public  finance  management,  continued  strong  focus  on  UKR  debt  sustainability  and 
matched  by  an  elevated  level  of  provisioning  and  the  respective  additional  budgetary 
covers for these specific loans.  

At the same time, Ukraine has benefitted from IMF support during the availability period 
of the Exceptional MFA operation in the form of both a disbursement under the Food 
Shock Window of the Rapid Financing Instrument in October 2022, and the approval of 
the  non-disbursing  Program  Monitoring  with  Board  Involvement  (PMB)  in  December 
2022. The successful conclusion of the PMB was an important stepping stone towards the 
approval of the (“full-fledged”) financing arrangement under the Extended Fund Facility 
(EFF) in March 2023. 

Box 1: EU contingent liabilities arising from EU financial support to Ukraine – Main 
developments in 2022-23 

Since the outbreak of the unprovoked and unjustified war of aggression started by Russia 
against Ukraine, the EU has been committed to firmly and fully stand with Ukraine providing 
strong political, economic, military, financial and humanitarian support to the Country. The 
new  2022  MFA  disbursements,  amounting  to  EUR  7.2  billion,  were  vital  to  maintain 
macroeconomic  stability  in  the  country  (EUR  1.2  billion  in  the  first  quarter  and  EUR  6 
billion later in the year)41. Financial support to the Country was also granted via the EIB 
ELM portfolio by means of the repurposing of undisbursed loans for a total amount of EUR 
2.28 billion (EUR 0.69 billion in March 2022 and EUR 1.59 billion to be fully disbursed by 
the end of 2023) as well as EUR 120 million in  EBRD loans partially guaranteed by the 
EFSD.  

Given  the  exceptional  risks  associated  with  the  financial  support  to  Ukraine  in  the  war 
context  the  exceptional  EUR  6  billion  MFA  and  the  EUR 1.59 billion  repurposed  loans 
under the ELM are subject to a budgetary coverage of 70%. While for the repurposed ELM 
loans the coverage will take the form of paid-in provisioning funded by the EU Budget, the 
same  effect  is  achieved  for  the  exceptional  MFA  through  maintaining  the  paid-in 
provisioning rate at the level of 9% and supplement it with guarantees by Member States 
covering a second loss piece of 61% of the loan exposures.  

In  compliance  with  Article  13  of  the  MFA  II  Decision,  the  Commission  reviewed  the 
adequacy of the 70% provisioning rate at the end of June 2023 and concluded for the period 

41   EUR 1.2 billion of emergency MFA was disbursed in March and May (See Decision (EU) 2022/313 of the 
European  Parliament  and  of  the  Council  of  24  February  2022  providing  macro-financial  assistance  to 
Ukraine in OJ L55, 28.2.2022, p. 4-11). A further EUR 1 billion of exceptional MFA (MFA I) was disbursed 
at the beginning of August. In October-December 2022 an additional extraordinary EUR 5 billion MFA 
(MFAII) was disbursed to Ukraine following a decision of the Council and the European Parliament on 20 
September 2022.  

14 

 
 
under examination, that there were no sufficient new lasting and meaningful elements which 
would justify changing the provisioning rate of 70%42.  

EU financial support to Ukraine has continued in 2023. At the date of writing, Ukraine had 
received  additional  EUR  15  billion  disbursed  from  the  EUR  18  billion  MFA+  package 
adopted by the European Parliament and the Council on 14 December 202243.  

This amount has brought the direct exposures to Ukraine to the level EUR 26.9 billion, of 
which EUR 4.7 billion (legacy MFA and Euratom loans) backed by the GFEA compartment, 
EUR 1.2 billion (Emergency MFA) by Post-2020 MFA, EUR 6 billion (Exceptional MFA I 
and II) by the exceptional MFA compartment, and EUR 15 billion (MFA+ loans) by the EU 
budget ‘headroom’ (which implies no provisioning in the CPF).  

At the same time, at the end of 2022, the portfolio covered under the ELM (i.e. the indirect 
exposures) also contained legacy disbursed Ukrainian loans of EUR 2.5 billion. Additional 
EUR 1.1 billion of ELM exposures (from the EUR 1.59 billion ‘repurposed loans’ package 
of July 2022) will be backed by a dedicated compartment of the CPF (with a 70% applicable 
provisioning  rate).  An  additional  EU  exposure  of  EUR  74  million  was  outstanding  with 
regard to operations carried out under the EFSD guarantee.  

Moreover,  as  of  the  first  half  of  2023,  the  EU  has  increased  its  exposure  to  Ukraine  by 
enabling up to EUR 100 million of new EIB loans to Ukraine under the EU4Ukraine Fund 
provisioned  at 70% under EFSD+, as well as by supporting Ukraine’s private sector through 
the Small Loans Guarantee Programme with IFC, covering under EFSD 50% of the EUR 
97.2 million aggregate portfolio of operations in Ukraine. 

Finally, the Commission has proposed additional long-term financial support to Ukraine in 
the context of its proposal for the mid-term review/revision of the 2021-2027 MFF adopted 
on the 20 June 2023. In particular, to cater for the country’s evolving needs until 2027, the 
Commission has proposed the creation of an integrated and flexible instrument, the Ukraine 
Facility,  with  an  overall  capacity  of  up  to  EUR  50  billion  for  2024-27.  Supports  will  be 
provided in the form of loans, grants and guarantees44. 

3.3   Assessment of the sustainability of the headroom-backed contingent liabilities  

The EU budget capacity to cater for a situation where the exposure in respect of headroom-
backed contingent liabilities materialises is assessed by applying the framework referred to 
in paragraph 3.1 above.  

As regards NGEU liabilities, the Own Resources ceiling has been increased by 0.6% of EU 
GNI  exclusively  to  guarantee  these  issuances.  This  ensures  that  EU  has  means  to  repay 
interest and principal on debt issued to fund NGEU non-reimbursable support (RRF grants) 
and RRF loans to Member States. As the former will be paid through amounts included in 
future annual budget programming, only the RRF loans represent contingent liabilities. The 
headroom is therefore calculated including total NGEU liabilities, but the sensitivity analysis 
reported in this section focuses specifically on the materialisation of contingent liabilities 

42   SWD (2023) 264 of 18 July 2023. 
43   Regulation  (EU)  2022/2463  of  the  European  Parliament  and  of  the  Council  of  14  December  2022 
establishing an instrument for providing support to Ukraine for 2023 (macro-financial assistance +) (OJ L 
322, 16.12.2022, p. 1–14). 

44   See Communication of the Commission to the European Parliament, the European Council, the Council, 
the European Economic and Social Committee and the Committee of the Regions Mid-term review of the 
Multiannual Financial Framework 2021-2027 (COM(2023) 336 final of 20.6.2023) and the Proposal for a 
Regulation of the European Parliament and of the Council on establishing the Ukraine Facility (COM(2023) 
338 final of 20.6.2023). 

15 

 
 
arising  from  RRF  loans,  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)45. Excluding 
the current budgetary year, the headroom available for covering existing and new contingent 
liabilities in  2024-2027 is  on average around  EUR 97.4 billion per year in  respect  of the 
margin under the own resources ceiling of 1.40% of EU GNI and around EUR 109.1 billion 
per year 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 spring 2023 European economic forecast46. 
For the stress test, the projected nominal growth rates are lower than the baseline by one 
percentage  point  for  each  year  of  the  reporting  period47.  This  reduces  the  own  resources 
ceiling’s nominal value and therefore the available headroom by EUR 6.5 billion per year 
for the ‘unbudgeted’ amounts (headroom) under the permanent own resources ceiling and 
by EUR 2.8 billion under the temporary ceiling for NGEU. 

2) 
Stress  test  on  the  revenue  side  of  the  budget.  This  extreme  scenario  assesses 
whether  the  available  headroom  would  be  sufficient  if  all  headroom-backed  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 due48. The amounts at stake reflect the repayment 
schedules at the end of 2022 (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  headroom  under  the  permanent  own  resources  ceiling  would  be  reduced  by 
EUR 4.3 billion.  The  contingent 
loans  under 
NextGenerationEU  would  be  small  during  the  period  considered  (approximately 
EUR 0.6 billion per year in interest rate payments), as repayment of the principal amount of 
RRF loans will only start in 2032.  

from  RRF 

liabilities 

resulting 

3) 
Stress test on the expenditure side of the budget. Under this scenario, as regards 
the MFF, expenditure is projected at its theoretical maximum (i.e. the maximum possible 
ceilings  for  the  MFF  payments  and  all  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 and that on the expenditure side of the 
budget, any decision to increase spending (within the MFF ceilings) requires a proposal by 
the Commission and the approval of the European Parliament and the Council. As regards 
budget expenditure to meet repayment obligations for NGEU non-repayable support, there 

45   On 20 June 2023, the European Commission proposed a mid-term revision of the Multiannual Financial 
Framework (COM(2023)336) which, once adopted, would modify the profile of EU spending up to 2027. 
Since, at the time of writing, negotiations are ongoing, the impact of the MFF mid-term revision is not 
factored in in this analysis. Given the targeted size of the package and the size of the available headroom, 
however, the conclusions of the report would not be affected. 

46  https://economy-finance.ec.europa.eu/system/files/2023-05/ip200_en_1.pdf.  
47  This is similar to the stress test on the ‘adverse r-g scenario’ performed in the Commission’s Debt 

Sustainability Monitor: https://economy-finance.ec.europa.eu/system/files/2023-06/ip199_en_UPD.pdf.  
48   As the report analyses the situation as of 31.12.2022, contingent liabilities related to the MFA+ to Ukraine 

are not included in the analysis. 

16 

 
 
is no specific expenditure ceiling in the 2021-2027 MFF49. Therefore, as regards NGEU debt 
repayments, the assumption in this stress test is that all NGEU issuances maturing in a given 
year  are  repaid.  Planned  debt  roll-overs  are  thus  not  considered  in  this  hypothetical 
situation50.  This  stress  test  shows  that  the  headroom  is  sufficient  in  the  scenario  where 
expenditure reaches the theoretical maximum. The resulting headroom under the permanent 
own resources ceiling would be EUR 81.3 billion on average, i.e. EUR 16.1 billion lower 
than in the baseline. The headroom under the temporary own resources ceiling of 0.6% of 
EU GNI that guarantees NGEU issuances would be reduced by EUR 9.8 billion per year on 
average, to a level of EUR 99.3 billion on average over the period 2024-2027. 

4) 
A combined stress  test on the economic conditions, revenue and expenditure. 
This is an extreme scenario that combines all unfavourable scenarios described in the three 
to 
points  above.  It  would  reduce 
EUR 70.6 billion on average over the period 2024-2027 and for the temporary ceiling to 
EUR 96.0 billion.  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, increased budgetary expenditures 
and the possible emergence of new contingent liabilities. 

the  permanent  ceiling 

the  headroom  under 

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 tests for the permanent 1.4% of EU GNI ceiling.  

49  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). 

50   The contingent liabilities related to RRF loans are deducted from the maturing NGEU obligations in this 
stress test. This is because the stress test focuses on the expenditure side and not on the revenue side as 
stress test 2).  

17 

 
 
 
 
 
Figure  4:  Own  resources  ceiling  and  own  resources  needs  under  a  baseline  and 

combined sensitivity tests for the temporary 0.6% of EU GNI ceiling. 

4.  Conclusions 

At the end of 2022, the EU budget included over EUR 206 billion (EUR 15.3 billion for 
non-Member  States  and  EUR  190.7  billion  for  Member  States)  in  contingent  liabilities 
arising from loans granted to Member States and third countries, and  EUR 106 billion in 
relation to the guarantees provided in the context of EFSI,  InvestEU, 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 headroom-backed 
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 potential losses. 

-  The EU financial capacity under the existing legal framework (i.e. the Own Resources 
Decision and the MFF Regulation) is largely sufficient to cater for the materialisation of 
losses that may arise in respect of headroom-backed loans between now and the end of 
2027. On average over the 2024-2027 period, the headroom available for covering these 
contingent liabilities in 2024-2027 is around EUR 97.4 billion per year in respect of the 
margin  under  the  own  resources  ceiling  of  1.40%  of  EU  GNI  and  around 
EUR 109.1 billion  per  year  for  the  temporary  ceiling  of  0.6%  of  EU  GNI.  This 
headroom can be called upon to meet extraordinary revenue calls to finance unforeseen 

18 

 
 
 
expenditure or for honouring any existing and potential contingent liabilities should these 
materialise. 

-  The  headroom  is  well-resourced  to  ensure  the  robustness  of  the  EU’s  financial 
system  and  its  credit  worthiness  even  under  an  extreme  negative  scenario  which 
combines  adverse  impacts  in  respect  of  the  economic  conditions,  revenue  and 
expenditure.  In  such  an  adverse  scenario,  the  remaining  headroom  under  the  own 
resources ceiling of 1.40% of EU GNI would amount to EUR 70.6 billion on average 
per year over the 2024-2027 period and to EUR 96.0 billion on average per year over 
the 2024-2027 period under the temporary ceiling of 0.6% of EU GNI. These amounts 
represent  a  safety  buffer  against  further  negative  economic  shocks,  new  spending 
initiatives and contingent liabilities for both non-NGEU and NGEU operations. 

19 

 
Annex:  

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

Baseline 
Own Resources ceiling (1.4% GNI) 

Own resources to finance the budget (excl. NGEU) 

Headroom under permanent ceiling 

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 non-NGEU 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 ceiling maximum, and special 
instruments' maximum)** 
Headroom 

2024 

2025 

2026 

2027 

a 

b 

247.76 

258.36 

268.70 

278.98 

133.18 

159.31 

186.62 

184.95 

a-b 

114.58 

99.05 

82.09 

94.03 

a 

b 

245.34 

253.34 

260.91 

268.23 

133.18 

159.31 

186.62 

184.95 

a-b 

112.16 

94.03 

74.29 

83.28 

a 

b 

c 

247.76 

258.36 

268.70 

278.98 

133.18 

159.31 

186.62 

184.95 

a-b-c 

111.24 

3.34 

3.28 

95.77 

6.86 

75.23 

3.58 

90.45 

a 

b 

c 

247.76 

258.36 

268.70 

278.98 

133.18 

159.31 

186.62 

184.95 

29.72 

21.24 

2.34 

11.08 

a-b-c 

84.86 

77.81 

79.75 

82.95 

4) Combined adverse/unfavourable shock 
Own Resources ceiling (1.4% GNI) 

Own resources to finance the budget (excl. NGEU) 

Additional own resources (up to MFF ceiling maximum, and special 
instruments' maximum) 
Extraordinary own resources to cover non-NGEU CLs 

a 

b 

c 

d 

245.34 

253.34 

260.91 

268.23 

133.18 

159.31 

186.62 

184.95 

29.72 

21.24 

2.34 

11.08 

3.34 

3.28 

6.86 

3.58 

Headroom 

a-b-c-d 

79.10 

69.52 

65.10 

68.62 

* 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 2024-202751, 
2) future adjustments up to their potential maximum in any single year52, 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  

51  As established in the most recent technical adjustment of the MFF (COM(2023)320 final of 6.6.2023). 
52  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). 

20 

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

Baseline 
Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU 

Headroom 

Stress tests 

1) Stress test on the economy 
Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU 

Headroom 

2) Stress test on the revenue 
Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU 

Extraordinary own resources to cover NGEU CLs (NGEU loan 
reimbursements due) 
Headroom 

3) Stress test on expenditure 
Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU 

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

2024 

2025 

2026 

2027 

a 

b 

106.18 

110.73 

115.16 

119.56 

3.87 

2.68 

3.75 

4.99 

a-b 

102.31 

108.04 

111.41 

114.58 

a 

b 

105.15 

108.57 

111.82 

114.96 

3.87 

2.68 

3.75 

4.99 

a-b 

101.28 

105.89 

108.07 

109.97 

a 

b 

c 

106.18 

110.73 

115.16 

119.56 

3.87 

0.55 

2.68 

0.55 

3.75 

0.55 

4.99 

0.55 

a-b-c 

101.76 

107.49 

110.86 

114.02 

a 

b 

c 

106.18 

110.73 

115.16 

119.56 

3.87 

0.00 

2.68 

11.25 

3.75 

18.95 

4.99 

8.95 

Headroom 

a-b-c 

102.31 

96.79 

92.46 

105.63 

105.15 

108.57 

111.82 

114.96 

3.87 

0.00 

0.55 

2.68 

11.25 

0.55 

94.09 

3.75 

18.95 

4.99 

8.95 

0.55 

0.55 

88.56 

100.47 

4) Combined adverse/unfavourable shock 
Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU 

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

Extraordinary own resources to cover NGEU CLs 

a 

b 

c 

d 

Headroom 

. 

a-b-c-d 

100.72 

21