REPORT FROM THE COMMISSION TO THE COUNCIL Report on the European Union's facility providing medium-term financial assistance for Member States' balances of payments pursuant to Article 10 of Council Regulation (EC) No 332/2002
Date: 2024-01-29
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU loan, Hungary, Latvia, Romania, balance of payments, balance of payments assistance, economic recovery, financial aid, non-participating country (euro area)

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 29.1.2024  COM(2024) 41 final  REPORT FROM THE COMMISSION TO THE COUNCIL Report on the European Union's facility providing medium-term financial assistance for Member States' balances of payments pursuant to Article 10 of Council Regulation (EC) No 332/2002  
 
 
1.  SUMMARY 

This  is  a  report  of  the  Commission  to  the  Council  on  the  use  of  the  EU’s  facility 
providing  medium-term  financial  assistance  for  Member  States’  balances  of 
payments  (‘BoP  Facility’)  for  Member  States  that  have  not  yet  adopted  the  euro. 
According to Article 10 of Council Regulation (EC) No 332/20021 of 18 February 2002 
(the  ‘BoP  Regulation’),  based  on  a  Commission  report  and  taking  into  account  the 
opinion  of  the  Economic  and  Financial  Committee  (EFC),  the  Council  is  required  to 
examine  ‘[…] whether the facility established still meets,  in its principle, arrangements 
and ceiling, the need which led to its creation.’ 

Since the previous report2 and discussion in the Council3, the BoP Facility has not been 
activated, and no new loans have been granted. This means that the latest disbursement 
under the BoP Facility took place in June 2011 with an instalment of EUR 150 million of 
a loan to Romania.  

Romania  and  Hungary  have  fully  repaid  the  assistance  received,  whereas  EUR  217 
million  out  of  EUR  2.9  billion  in  loans  to  Latvia,  disbursed  between  2009  and  2010, 
remains to be repaid in line with the agreed repayment schedule. Following the economic 
adjustment supported by the BoP Facility, these Member States saw the sustainability of 
their  balance-of-payments  situation  improve  rapidly,  leading  to  renewed  access  to 
market-based external financing and allowing for timely repayments. 

The Commission assesses the instrument as follows: 

•  Since its last amendment in May 2009, the Facility has been working properly 
and  beneficiary  Member  States  have  been  able  to  address  balance-of-payment 
difficulties and systemically access capital markets following financial assistance. In 
all instances, the repayment schedule was also respected.  

•  Currently at EUR 50 billion, the overall ceiling for outstanding loans (in terms of 

principal) and credit lines under the instrument appears appropriate. 

• 

In 2012, a Commission proposal for a new Council Regulation (COM (2012) 336 
final)  set  out  several  amendments  to  reflect  changes  in  the  EU  economic  policy 
coordination  framework  for  the  euro  area,  equipped  with  the  European  Financial 
Stability Facility (EFSF)4 and later its successor the European Stability Mechanism 
(ESM)5,  to  disburse  financial  assistance.  The  aim  was  to  reflect  some  of  these 
changes  also  in  the framework for non-euro area Member States. For example, the 
Commission’s  proposal  envisaged  adding  precautionary  credit  lines  to  the  BoP 
Facility to mimic the ESM’s precautionary financial assistance toolkits. The Council 
discussed the Commission  proposal,  but  due to  a lack of consensus,  the legislative 
process has not progressed since 2013.  

1 

2 
3       

4 
5       

OJ L 53, 23.2.2002, p. 1. 
COM(2017) 459 final, 30.8.2017. 
Council Conclusions of 10 November 2017, available at:  
https://data.consilium.europa.eu/doc/document/ST-14201-2017-INIT/en/pdf. 
Established in 2010. 
Established in 2012. 

 
 
 
•  Since then, further institutional  and economic developments  have taken place, 
most notably with the creation of the Single Resolution Mechanism in 2014 and the 
ESM reform agreed in late 2020. 

•  Following the change in context since the last amendment of the Facility in May 
2009,  during  its  examination  on  whether  the  Facility  still  meets,  in  its  principle, 
arrangements and ceiling, the need which led to its creation, the Council is invited to 
discuss  the  lessons  to  be  drawn  from  the  recent  crises  and  the  institutional  and 
economic developments  that have taken place since 2009  regarding  the  design  and 
implementation of the BoP Facility.  

2. 

INTRODUCTION 

According to  the BoP Regulation,  the BoP Facility was set  up to  provide  EU medium-
term financial assistance to Member States that have not yet adopted the euro6 (‘Member 
States  with  a  derogation’)  and  are  experiencing,  or  are  threatened  with,  difficulties  in 
their balance of payments. Such balance-of-payments financial assistance can be granted 
either in the form of an EU loan or a ‘financing facility’ (e.g. credit line). The latter can 
also  be  granted  as  a  precaution.  BoP  financial  assistance  is  always  conditional  on  the 
implementation of a programme of policies fostering an adjustment of the economy to its 
external financing constraints.  

The  BoP  Regulation  requires  the  Council  to  regularly  examine  the  extent  to  which  the 
Facility  serves  its  purpose  in  terms  of  its  principle,  arrangements,  and  ceiling.  The 
Council examination is to be based on a report from the Commission and to be conducted 
after the EFC has delivered an opinion. This exercise led to the proposal of 22 June 2012 
(COM (2012) 336 final) to reform the BoP Facility (see dedicated section below) in light 
of the institutional developments since the creation of the Facility. However, the Council 
was unable to agree a common position and the legislative process has not subsequently 
progressed.  Since  then,  further  institutional  developments  have  occurred,  most  notably 
with  the  creation  of  the  Single  Resolution  Mechanism  in  2014  and  the  ESM  reform 
agreed in late 20207.  

Against this background, this report invites the Council to examine whether the Facility 
still meets, in its principle, arrangements and ceiling, the need which led to its creation, 
and  to  discuss  the  lessons  to  be  drawn  from  the  recent  crises  and  the  institutional  and 
economic developments since 2009 in implementing the BoP Facility. 

3.  LATEST DEPLOYMENT AND APPROPRIATENESS OF THE BOP FACILITY 

Since  2017,  when  the  last  report  required  under  Article  10  of  the  BoP  Regulation  was 
discussed, no Member State has requested or received assistance under the Facility. The 
last balance-of-payments assistance operations took place between 2008 and 2015, for:  

•  Hungary (EUR 5.5 billion disbursed in 2008/2009); 
•  Latvia (EUR 2.9 billion disbursed in 2009/2010) and  

6 

7 

Currently,  seven  Member  States  fall  into  this  category:  Bulgaria,  Denmark,  Czechia,  Hungary, 
Poland, Romania and Sweden; Denmark and Bulgaria participate in ERM II. Following a Council 
decision on 12 July 2022, Croatia joined the euro area on 1 January 2023. 
 Statement of the Eurogroup in inclusive format on the ESM reform and the early introduction of 
the backstop to the Single Resolution Fund, 30 November 2020. 

2 

 
 
•  Romania  (EUR  5.0  billion  disbursed  in  2009-2011;  two  successor  operations 
(2011-2013  and  2013-2015)  were  treated  as  precautionary,  and  hence  no  funds 
were disbursed). 

Repayments have always been made on schedule: after Hungary’s repayment, Romania 
fully repaid the assistance it received in 2019. Regarding Latvia, EUR 217 million of its 
loan is still outstanding, in line with the agreed repayment schedule (see Table 1)8.   

Table 1: Residual payment obligations under the BoP Facility 

Year 

2023 
2024 
2025 

Country 

Capital  
repayment 

Interest  
payment 

Total 

Latvia 
Latvia 
Latvia 

Grand total 

200 
200 

5.8 
5.8 
5.8 
17.4 

5.8 
5.8 
205.8 
217.4 
In EUR million 

Against  this  backdrop,  the  remaining  capacity  of  the  BoP  Facility  currently  stands  at 
EUR 49.8 billion,  available to  support non-euro area Member States facing  balance-of-
payments  financing  issues.  The  BoP  Facility’s  EUR  50  billion  ceiling  is  equivalent  to 
around 3% of the  2021 GDP of non-euro area Member States. As a point of reference, 
the ESM’s total lending capacity represents 4% of the 2021 GDP of euro area9 Member 
States.  On  this  basis  and  considering  the  financing  needs  of  previous  balance-of-
payments programmes, the current ceiling of the BoP Facility appears appropriate. 

The successfully concluded BoP Facility operations have demonstrated the effectiveness 
and versatility of the instrument. Beneficiary Member States addressed their balance-of-
payment issues and regained or maintained access to capital markets following their use 
of the BoP Facility.  

While  the  BoP  Facility  arguably  still  serves  its  purpose  in  terms  of  its  principle  and 
ceiling, some improvements to its arrangements  could be considered, for instance to its 
funding10 mechanism. 

4.  CONTENT OF THE 2012 LEGISLATIVE PROPOSAL 

On  22 June 2012,  the  Commission  submitted  a  legislative  proposal  to  reform  the  BoP 
Facility. This  proposal was  for  a new regulation to  repeal  and replace the  existing  BoP 
Regulation. The overall aim of the Commission proposal was to mirror the  institutional 
set-up for financial assistance and policy coordination established for euro area Member 
States,  in  particular  with  the  ESM,  to  non-euro  area  Member  States.  The  proposal 
suggested the following main amendments to the BoP Facility:  

8    
9    
10  

Latvia made an interest payment of EUR 5.8 million on 20 October 2020. 
This figure does not include Croatia which joined the euro area in January 2023.  
Different techniques are available to the Commission to access capital markets funding, differing 
in  flexibility:  (i)  back-to-back  funding,  where  borrowing  and  lending  operations  have  the  same 
value  date;  (ii)  funding  in  anticipation  of  later  disbursements;  and  (iii)  a  diversified  funding 
strategy allowing the Commission to issue in function of market conditions, collect the proceeds 
in a central funding pool, and subsequently allocate the funds to the designated programme at any 
point in time.   

3 

 
  
  
 
i.  A  more  flexible  toolkit:  mirroring  the  innovations  of  the  EFSF/ESM,  the 
proposed revisions to the BoP Facility would have introduced a dedicated credit 
line instrument taking the form of a precautionary conditioned credit line (PCCL) 
or an enhanced conditions credit line (ECCL). The granting of a PCCL would be 
conditional on the fulfilment of eligibility criteria only, whereas the granting of an 
ECCL would be conditional on a combination of eligibility criteria and corrective 
policy measures being adopted. Access to a PCCL was to be limited to Member 
States  whose  economic  and  financial  situation  is  assessed  to  be  ‘fundamentally 
sound’  based  on  said  criteria11.  Access  to  an  ECCL  was  to  be  open  to  Member 
States that do not qualify for accessing a PCCL but whose general economic and 
financial situation remained sound, and who in addition committed to implement 
(a limited set of) corrective measures. In contrast to a precautionary BoP Facility 
loan,  credit  lines  would  therefore  not  require  the  implementation  of  a 
macroeconomic adjustment programme but rather include either no (PCCL) or a 
reduced (ECCL) set of economic policy conditions. 

ii.  Closer surveillance:  

o  As is the case for euro area Member States (according to Regulation (EU) No 
472/2013),  enhanced  surveillance  would  be  triggered  when  an  ECCL  is 
granted or a PCCL is drawn upon. Enhanced surveillance means wider access 
for  the  Commission  to  the  information  needed  for  a  close  monitoring  of  the 
economic,  budgetary  and  financial  situation  of  the  Member  State  concerned 
and  regular  reporting.  A  Member  State  under  enhanced  surveillance  would 
adopt measures12 to address the potential sources of economic difficulties.  

o  Codification of the practice of post-assistance surveillance: after the assistance 
ends,  Member  States’  repayment  capacity  would  remain  under  scrutiny  until 
they had reimbursed 75% of the financial assistance received13. 

iii. 

Streamlining of surveillance procedures: by avoiding duplication between the 
the 
EU’s  budgetary  and  economic  surveillance  and 
macroeconomic adjustment programme in the same way as for euro area Member 
States according to Regulation (EU) No 472/201314.  

the  monitoring  of 

11  

12 

13 

14 

Such as a sustainable general government debt, respect of the commitments under the excessive 
imbalance procedure (EIP), a track record of access to international capital markets on reasonable 
terms, a sustainable external position, and an absence of bank solvency issues posing a systematic 
threat to the euro-area banking system. 
Continued  access  to  a  PCCL  would  not  be  conditional  on  implementing  corrective  measures  in 
accordance with enhanced surveillance.   
The  provisions  for  post-programme  surveillance  for  non-euro  area  Member  States  were 
established  by  the  EFC  in  2011,  with  the  update  of  the  ‘EU  procedures  for  providing  financial 
assistance for non-euro area EU Member States’, commonly referred to as the ‘Green File’. 
When  under  a  macroeconomic  adjustment  programme  (MAP),  Reg.(EU)  No  472/2013  exempts 
euro-area Member States from: (i) submitting a stability programme under Article 3 of Regulation 
(EC)  No  1466/97  which  is  integrated  instead  in  the  MAP;   (ii)  submitting  reports  under  Article 
3(4a) and Article 5(1a) of Regulation (EC) No 1467/97 when subject to a recommendation under 
Article 126(7) TFEU or of a decision to give notice under Article 126(9) TFEU for the correction 
of an excessive deficit: (iii) from Regulation (EU) No 1176/2011 on the prevention and correction 
of  macroeconomic  imbalances;  and  (iv)  from  the  monitoring  and  assessment  of  the  European 
Semester for economic policy coordination under Article 2-a of Regulation (EC) No 1466/97 for 
the duration of the MAP. 

4 

 
 
 
iv.  Timing of borrowing operations: by authorising the Commission to borrow on 
the markets well before the planned loan disbursements to benefit from the most 
advantageous market conditions.  

In  addition  to  these  changes  proposed  by  the  Commission,  the  European  Parliament 
requested  that  a  dedicated  instrument  be  created  to  provide  loans  to  Member  States  to 
recapitalise 
(‘indirect 
recapitalisation’)15. The Commission supported this request. 

(non-euro  area)  Member  States’ 

institutions 

financial 

Like the BoP Regulation, the 2012 Commission proposal on the BoP Facility was based 
on  Article  352  TFEU.  It  therefore  required  a  unanimous  approval  in  the  Council  and 
consent from the European Parliament.  

The Council discussed the Commission proposal for the last time in December 2013  in 
order  to  agree  a  common  position.  The  proposal  was  not  adopted  and  the  legislative 
process  has  not  progressed  since  2013.  Nevertheless,  the  amendments  set  out  in  the 
Commission’s  2012 proposal  remain  necessary  to align the financial assistance toolkits 
between euro area and non-euro area Member States. 

5.  CURRENT STATE-OF-PLAY 

While the BoP Facility has been successful and effective in the past, the landscape of the 
EU’s  general  financial  assistance  and  economic  policy  coordination  framework  has 
undergone some major changes since the last revision of the BoP Regulation in 2009.   

1.  The EFSM, established in 2010 as an EU-wide instrument and broadly similar in 
its workings to the BoP Facility, allowed borrowing operations in anticipation of 
later  loan  disbursements,  departing  from  the  Commissions’  traditional  back-to-
back financing, in order to benefit from the most advantageous market conditions. 

2.  The EFSF was set up in 2010, and subsequently replaced by the ESM in 2012, to 
provide  financial  assistance  to  euro  area  Member  States.  The  ESM’s  toolkit 
includes 
loans  conditional  on  a  macroeconomic  adjustment  programme, 
precautionary  financial  assistance,  primary  and  secondary  market  sovereign 
bonds  purchases, 
recapitalisation  and  direct 
recapitalisation of financial institutions. The ESM relies on a diversified funding 
strategy to raise funds on capital markets. 

indirect  bank 

loans 

for 

3.  In  2014,  co-legislators  adopted  the  Bank  Recovery  and  Resolution  Directive16, 
the cornerstone of the  EU’s bank resolution  framework. Further integration  was 

15  

European  Parliament  resolution  of  17  April  2013  on  the  proposal  for  a  Council  regulation 
establishing a facility for providing financial assistance for Member States whose currency is not 
the 
https://eur-lex.europa.eu/legal-
available 
content/EN/TXT/?uri=celex:52013IP0174. 

(2016/C 

045/04) 

Euro 

at: 

   16           Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing 
a    framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and 
amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 
2005/56/EC,  2007/36/EC,  2011/35/EU,  2012/30/EU  and  2013/36/EU,  and  Regulations  (EU) 
No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council Text with 
EEA relevance 

5 

 
 
 
 
 
achieved with the creation of the Single Resolution Mechanism, strengthening the 
legislative  framework  for  banking  in  resolution,  and  forming  the  Banking 
Union’s second pillar. As part of this framework, the Single Resolution Fund was 
established in 2014.  It is financed by the banking sector contributions and can be 
relied  upon  as  last  resort,  to  ensure  the  effective  application  of  the  resolution 
tools. 

4.  In  2013,  the  economic  surveillance  framework  for  the  euro  area  expanded  with 
the  entry  into  force  of  the  ‘two  pack’17.  Regulation  (EU)  No  472/201318 
introduced  an  enhanced  surveillance  monitoring  regime  for  euro  area  Member 
States  experiencing  or  threatened  with  serious  financial  stability  difficulties  and 
in  particular  for  Member  States  receiving  precautionary  financial  assistance19. 
This Regulation also sets out several provisions to avoid duplication of reporting 
and  monitoring  obligations  for  euro  area  Member  States  subject 
to  a 
macroeconomic  adjustment  programme20.  Finally,  it  sets  out  a  framework  for 
monitoring euro area Member States after they receive financial assistance in the 
form of ‘post programme surveillance’21.  

5.  The ESM reform, enshrined in the revisions to its Treaty and agreed in late 2020 
but not yet ratified, further clarifies the eligibility and conditionality of the ESM’s 
precautionary conditioned credit line (PCCL) and enhanced conditions credit line 
(ECCL). The ESM reform also sets up a backstop to the Single Resolution Fund 
(SRF).  In  the  event  that  the  SRF  is  depleted,  the  ESM  can  lend  the  necessary 
funds  to  the  SRF  to  finance  a  resolution  in  the  form  of  a  revolving  credit  line 
granted to the institution, subject to the approval of the ESM governing bodies. 

6.  In  November 2022,  as part of the ongoing  economic governance review,  and in 
reaction  to  the  European  Court  of  Auditors  2021  report  on  post  programme 
surveillance,  the  Commission  proposed  to  leave  the  concerned  legislation  intact 
but  to  conduct  the  post  programme  surveillance  differently,  with  clearer 
objectives,  and  to  link  the  intensity  of  the  framework  to  those  objectives22.  In 
particular, the Commission has proposed that post programme surveillance focus 
on:  (i)  assessing  the  repayment  capacity  of  Member  States;  (ii)  monitoring  the 
implementation  of  unfinished  reforms 
the  adjustment 
programme; and (iii) assessing whether further corrective measures are needed. 

that  begun  under 

17 
18   

19 

20 

21 

22 

The ‘2 pack’ includes Regulation (EU) No 473/2013 and Regulation (EU) No 472/2013. 
Regulation (EU) 472/2013 of the European Parliament and of the Council of 21 May 2013 on the 
strengthening  of  economic  and  budgetary  surveillance  of  Member  States  in  the  euro  area 
experiencing or threatened with serious difficulties with respect to their financial stability  - OJ L 
140, 27.5.2013, p. 1. 
Unless the financial assistance is not conditional on the adoption of policy measures and remains 
undrawn. 
This is done by suspending the application of the  macro-economic imbalances procedure  (MIP) 
under Regulation 1176/2011 and the monitoring and assessment of the European Semester for as 
long as the Member State concerned is implementing its programme. 
The  provisions  for  post  programme  surveillance  for  non-euro  area  Member  States  were 
established  by  the  EFC  in  2011,  with  the  update  of  the  ‘EU  procedures  for  providing  financial 
assistance for non-euro area EU Member States’, commonly referred to as the ‘Green File’. 
See  COM  (2022)  583  final  ‘Communication  from  the  Commission  to  the  European  Parliament, 
the Council, the European Central Bank, the European Economic and Social Committee and the 
Committee  of  the  Regions:    Communication  on  orientations  for  a  reform  of  the  EU  economic 
governance framework’. 

6 

 
 
 
 
 
7.  The Financial Regulation23 was amended in late 2022 to enable the Commission 
to implement a diversified funding strategy comprising the borrowings authorised 
under Article 5(1) of Council Decision  (EU, Euratom) 2020/2053 24  and, except 
in  duly  justified  cases,  borrowing  and  debt  management  operations  to  fund 
programmes of financial assistance.  

8.  On  26 April 2023,  as  part  of  the  economic  governance  review,  the  Commission 
presented  a  legislative  proposal  on  the  effective  coordination  of  economic 
policies  and  multilateral  budgetary  surveillance.  This  proposal  sets  out  the 
interaction with Regulation (EU) No 472/2013 on the strengthening of economic 
and  budgetary  surveillance  of  euro  area  Member  States  experiencing  or 
threatened  with  serious  difficulties  with  their  financial  stability.  Under  the 
Commission’s  proposal,  euro  area  Member  States  subject  to  a  macroeconomic 
adjustment  programme  would  be  exempted  from  submitting  a  medium-term 
fiscal-structural  plan  and  an  annual  progress  report.  The  proposal  would  also 
require  that  euro  area  Member  States  under  enhanced  surveillance  consider 
recommendations addressed by the Council under Article 121(4) TFEU in case of 
a deviation from the net expenditure path.  

In contrast, putting aside the 2009 legislative amendments which increased the ceiling of 
the BoP Facility and clarified the responsibilities of the Commission and of the Member 
States,  the  workings  of  the  BoP  Facility  have  remained  unaltered  since  2002.  For 
example,  the  EU  must  borrow  tightly  ‘back-to-back’  with  lending  operations  to  fund 
financial assistance under the BoP Facility.   

6.  CONCLUSIONS AND RECOMMENDATIONS 

Since  2009,  the  BoP  Facility  has  fulfilled  its  role  effectively.  The  latest  beneficiary 
Member  States  have  restored  a  sustainable  balance-of-payment  position  and  repaid  the 
assistance  on  time.  The  ceiling’s  amount  of  EUR  50  billion  for  the  principal  of 
outstanding  loans  appears  appropriate.  It  has  helped  to  meet  the  demand  for  the  BoP 
Facility while maintaining spare capacity. This provides a strong signal that the EU has 
both the willingness and capacity to stand by all of its Member States in difficult times.  

Nevertheless, there is scope to adapt the BoP Facility to reflect the institutional reforms 
that have taken place since the last revision of the BoP Facility in 2009, which was the 
spirit  of  the  Commission’s  2012  proposal.  The  amendments  suggested  under  this 
proposal remain necessary to align the financial assistance toolkits between euro area and 
non-euro area Member States. Against this background, the Council is invited to discuss 
the  lessons  to  be  drawn  from  the  recent  crises  and  the  institutional,  economic  and 

23   

24 

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. 
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). 

7 

 
 
 
 
financial  sector  developments  since  2009,  and  their  implications  for  the  design  and 
implementation of the BoP Facility. 

8