REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on contingent liabilities arising from budgetary guarantees and financial assistance and the sustainability of those contingent liabilities Situation at 31 December 2023
Date: 2024-10-28
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, 28.10.2024  COM(2024) 507 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL            on contingent liabilities arising from budgetary guarantees and financial assistance and the sustainability of those contingent liabilities          Situation at 31 December 2023                              
 
 
Table of Contents 

1.  Introduction ........................................................................................................................................... 3 

2.  Analysis of the different sources of contingent liabilities .................................................. 5 

2.1 Budgetary guarantees .................................................................................................................................................. 5 

2.2 Provisioned loans for financial assistance to third countries ................................................................ 7 

2.3 Headroom-backed loans ............................................................................................................................................. 9 

2.4 Overview of contingent liabilities at the end of 2023 ............................................................................ 11 

3.  Assessing the sustainability of EU contingent liabilities ................................................... 13 

3.1 Assessment framework ............................................................................................................................................ 13 

3.2 Assessment of the sustainability of the provisioned contingent liabilities................................. 13 

3.3 Assessment of the sustainability of the headroom-backed contingent liabilities .................. 18 

4.  Conclusions .......................................................................................................................................... 21 

5.  Annexes: ................................................................................................................................................ 22 

Sustainability and headroom in respect of the permanent own resources ceiling ........................ 22 

Sustainability and headroom in respect of the temporary own resources ceiling ......................... 23 

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1. Introduction 
This report is issued in accordance with the requirements of Article 256 of the Financial Regulation1 
and should be read in conjunction with: 

•  working document XI, which accompanies the draft EU budget for the financial year 20252 and 
which provides detailed information on the EU budgetary guarantees (Art. 41(5) Report)3; 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  2025-2029  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 provisioned5  and  headroom-backed  contingent  liabilities  - borne  by the  EU 
budget as of 31 December 2023. 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 on the EU budget, and the size of any such calls, will depend on future events 
which cannot be predicted ex-ante.  

At  the  end  of  2023,  the  EU  budget  was  exposed  to  contingent  liabilities  amounting  to  over 
EUR 255 billion (EUR 206 billion at the end of 2022) relating to loans granted to Member States 
(EUR 221 billion) and third countries (EUR 34 billion), and over EUR 108 billion (EUR 106 billion at 
the end of 2022) relating to budgetary guarantees provided in the context of the European Fund 
for Strategic Investments (EFSI)7, InvestEU8, the External Lending Mandate (ELM)9, the European 
Fund for Sustainable Development (EFSD)10, and the EFSD+11. The upward trend in the amount of 
contingent liabilities has slowed with an increase of 16% in 2023 compared to a 40% increase 
observed in  2022.  

1  Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council of 23 September 2024 on the 

financial rules applicable to the general budget of the Union (recast) (OJ L, 2024/2509, 26.9.2024).  

2  COM(2024) 300 of 19.6.2024. 
3  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(2024) 276 final of 28.6.2024. 
5  

In this document the term “provisioning” is used in the meaning of the Financial Regulation and in particular Article 
214  thereof.  As  laid  down  by  Article  214(2),  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  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).  

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  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). 
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). 

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The bulk of this increase comes from additional loan disbursements to Member States under the 
Recovery and Resilience Facility (RRF)12 and from the extraordinary financial support to Ukraine 
(via the Macro-Financial Assistance (MFA)+ Instrument)13.  

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 comparing contingent liabilities with: 

•  the market value of existing provisions held in the respective  compartments of the Common 
Provisioning Fund (CPF)14 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.  

The main conclusion of the end-2023 sustainability analysis is that the EU budget has adequate 
resources to cope with the potential materialisation of contingent liabilities:  

•  For contingent liabilities arising from budgetary guarantees and financial  assistance to third 
countries,  the  provisioning  available  at  the  end  of  2023  is  adequate  considering  the 
requirements of the respective legal frameworks15. 

•  The EU’s financial capacity under the existing legal framework (i.e. the Own Resources Decision 
(ORD)16 and the 2021-2027 Multiannual Financial framework (MFF) Regulation17) is sufficient 
at the end of   2023  to cover the existing obligations of the  EU in relation to both spending 
programmes and financial markets (for debt issued under financial assistance programmes to 
Member States and the MFA+ instrument), even under extreme adverse circumstances. In other 
words, the headroom is well-resourced to ensure the robustness of the EU financial system and 
its credit worthiness even under an extreme negative scenario that combines adverse impacts 
in economic conditions, revenue and expenditure. 

The management and monitoring of the risks arising from contingent liabilities is implemented 
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  liabilities18.  The  Steering  Committee  on  Contingent  Liabilities  (SCCL)19  plays  an 
important role in that framework. In 2023 the SCCL met four times in order to, inter alia, assess 
the  evolution in volume  and  risk  profile  of  the  exposures  to  the  Middle  East and  to Ukraine.  In 
relation to Ukraine, the SCCL served as a platform to prepare the review process of the adequacy 

12  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). 

13   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). 

14   For  details on  the  CPF see  the Report  from  the  Commission  to  the  European Parliament and  the  Council  on  the 
common  provisioning  fund  in  2023  (COM(2024)  180  final  of  25.6.2024)  and  the  accompanying  Staff  Working 
Document (SWD(2024) 161 final of 25.6.2024). 

15   See Section 3 of the Art 41(5) Report. 
16  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). 

17  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). 

18  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). 

19  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.  

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of the provisioning rate of specific liabilities on Ukraine (as laid down by Article 13 of the “MFA II 
Decision”20).  

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  ELM,  EFSI,  EFSD, 
InvestEU  and  EFSD+  mandates.  Under  all  these  instruments,  the  EU  provides  guarantees  to 
implementing  partners21  to  cover  a  share  of  potential  losses  and  costs22  resulting  from  their 
financing and investment operations (i.e. debt or equity operations). 

The five guarantee programmes have a different geographical focus which influences the risks 
which they bear. The EFSI and InvestEU help to overcome investment gaps within the European 
Union. The ELM, EFSD and EFSD+ are part of the European Union’s external policies and support 
investment in third countries (with the ELM and EFSD+ Investment Window 1 mainly focusing on 
sovereign counterparts, while the EFSD and EFSD+ Open Architecture and Investment Window 4 
mainly targeting private operations). 

a) Budgetary guarantees to support investment outside the EU 

The oldest budgetary guarantee is the one provided under the ELM. Its basic purpose is to increase 
the  European  Investement  Bank’s  (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  2017,  the  EFSD  guarantee  was  put  in  place to  support  investments  and  improve  access  to 
finance  - primarily in Africa and the neighbourhood countries  - and help those countries meet 
the UN Sustainable Development Goals.  

Building on the experience of the ELM and the EFSD, the EFSD+ was set-up for the 2021-2027 
MFF period as an integrated financial package providing financing capacity to sub-Saharan Africa, 
Asia, the Pacific Region, Latin America, the Caribbean and the neighbourhood and enlargement 
countries  in  areas  such  as  the  (i)  reduction  of  socio-economic  inequalities;  (ii)  sustainable  and 
inclusive growth; (iii) climate change adaptation and mitigation; (iv) environmental protection and 
management; and (v) job creation. 

20   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. 

21   In  2023,  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. 

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

4 

 
 
 
b) Budgetary guarantees to support investment within the EU 

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

Under the 2021-2027 MFF, the InvestEU programme puts under the same umbrella the activities 
previously conducted under the EFSI and several other financial instruments. It has also provided 
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 
economic recovery, resilience, green growth and employment in the EU over the 2021-2027 period. 
It seeks to achieve this goal by mobilising public and private financing sources, to provide long-
term funding and support to companies and projects in line with the EU’s priorities in the current 
challenging economic and social context.  

The  five  budgetary  guarantee  programmes  vary  in  respect  of  several  features,  including  their 
different stages of implementation. While the ELM (that came into existence in 1977) has a long 
track record, the EFSI constitution period ended in 2022 and the EFSD constitution period will end 
in 2024. At the same time, the investment phase of InvestEU and EFSD+ has started only recently. 
These  different  stages  of  implementation  for  the  five  budgetary  guarantee  programmes  are 
reflected in the table below, which shows that operations consuming the full amount of the ELM 
guarantee and close to  the  full amount of  the  EFSI have been signed, and a large part of the 
support  guaranteed  by  these  instruments  has  been  disbursed.  The  EFSD+  and  InvestEU,  by 
contrast, are at a much earlier stage in their ramp-up.  

Table 1: State of play of budgetary guarantees (as at 31 December 2023) (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 

25 591 

1 077 

27 729 

25 767 

28 115 

108 279 

23 635 

548 

27 729 

6 592 

7 660 

66 164 

21 551 

478 

19 856 

1 433 

634 

43 952 

(*)  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. 

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Other notable differences between the guarantee programmes are summarised in the bullet points 
below: 

•  The ELM offers two types of products (mainly direct sovereign lending and, to a limited extent, 

also private lending) and is operated on an exclusive basis by the EIB23. 

•  The EFSI is structured into two windows (an Infrastructure and Innovation window (“IIW”) and 
an SME window ("SMEW”) with different products implemented under both windows) and is also 
using one exclusive implementing partner, namely the EIB Group.  

•  The  EFSD  is  implemented  by  10  counterparts  deploying  different  financial  products  with 
different risk levels, and investing in five key sectors: i.e. small business financing; sustainable 
energy and connectivity; local currency financing; digitalisation; and sustainable cities.  

•  The new budgetary guarantees such as InvestEU and EFSD+  have built on the experience of 
older guarantees and have similar features to the older guarantees. However, both InvestEU 
and EFSD+ have a larger number of implementing partners (“open architecture”) and a relatively 
broader variety of products. 

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)24  loans  and  Euratom  loans  to  third 
countries25.  

Financial support to third countries in the form of bilateral loans from the EU has been granted 
mainly in the context of the MFA programme, which targets countries outside the EU experiencing 
a  balance-of-payments  crisis.  In  2023,  new  MFA  loans  to  the  value  of  EUR 18.3  billion  were 
disbursed26. EUR 18 billion of this amount was accounted for by MFA+ loans to Ukraine which are 
backed by the headroom. 

In addition to MFA to third country sovereigns, EUR 300 million in Euratom loans provided to the 
Ukrainian nuclear energy programme are still oustanding. 

23   The private entity exposures mainly relate to the Economic Resilience Initiative Private Mandate of EUR 2.3 billion 
(supported under the ELM 2014-2020 on the basis of Decision (EU) 2018/412, amending the original Decision No 
466/2014/EU) and to a number of political risk guarantees to commercial exposures. 

24  The legal basis for MFA 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. 

25  The  Euratom  loan  facility  helps  both  Member  States  and  third  countries  finance  investments  in  nuclear  power 
stations and in industrial installations in the nuclear fuel cycle. See 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  These include EUR 18 billion to Ukraine under the MFA+ instrument, the third instalment of 200 million of the MFA 
loan to Jordan, the second instalment of EUR 40 million of the 120 million MFA loan to Moldova originally granted 
in 2022, and the first instalment of EUR 50 million of the 100 million top-up of the loan to Moldova decided in 2023. 
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 2023 COM(2024) 240 final of 10.6.2024 and the accompanying SWD(2024) 150 final of 10.6.2024.  

6 

 
 
 
Table 2: Outstanding amounts in respect of loans to third countries (as at 31 December 2023) 
(EUR million) 

Outstanding loans  Accrued interests 

Total 

MFA(*)  

Euratom 

Total  

15 193 

300 

15 493 

150 

1 

151 

15 343 

301 

15 644 

(*) Excluding MFA+ loans (backed by the headroom) 

Traditionally, loans to third countries (with the exception of the MFA+ loans) 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. 
Investors in EU bonds are only exposed to the EU credit risk and not to the credit risk of the ultimate 
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 planned to settle the EU debt. 

However,  as  contingency  against  the  eventuality  that  the  beneficiary  country  does  not  repay 
interest  or  principal  on  the  loan  received,  the  EU  budget  sets  aside  provisions  for  these  loans. 
Traditionally, 9% of the value of the loans is held as provisions for MFA or Euratom loans to third 
countries  in dedicated  compartments in  the  CPF.  As  the  possibility  that  losses  are  experienced 
across  two  or  more  MFA  loans  simultaneously  is  relatively  remote,  the  pooling  of  provisions 
strengthens the capacity of the EU budget to absorb losses through this diversification effect. The 
levels of provisioning against these loans are discussed further in section 3.2. 

The repayment amounts reported in Table 3 are therefore to be seen as the maximum foreseeable 
amounts that could be called against provisions in the years 2024-2029. 

Table 3: Yearly repayment schedule of outstanding provisioned loans to third countries (principal 
+  interest)  under  the  existing  programmes  for  the  years  2024-2029  (at  31  December  2023)  
(EUR million) 

Year 

2024 

2025 

2026 

2027 

2028 

2029 

Total 

Euratom 

MFA 

All programmes 

877 

261 

378 

410 

409 

1 153 

3 488 

878 

262 

379 

461 

459 

1 153 

3 592 

1 

1 

1 

51 

50 

0 

104 

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2.3  Headroom-backed loans  

The contingent liabilities under this heading arise from loans to EU Member States (i.e. Balance-
of-Payments  (BoP)  Facility  loans27,  European  Financial  Stabilisation  Mechanism  (EFSM)  loans28, 
Euratom Facility loans, loans under SURE29 and loans under the RRF which are provided to support 
investments and reforms) and recent loans to Ukraine (EUR 18 billion in MFA+ loans to Ukraine 
and – from 2024 on – loans granted under the Ukraine Facility30). 

Contingent liabilities stemming from loans to EU Member States and from recent loans to Ukraine 
are  not  provisioned  ex-ante.  Instead,  they  are  back-stopped  by  the  possibility  of  calling  on 
additional ‘own resources’ from Member States under the EU’s budgetary framework (up to the 
limits of the own resources ceiling, i.e. using the ‘headroom’ of the budget). 

This means that, if a beneficiary did 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 compliance with  of the own resources ceiling. 

Traditionally loans  were  granted  to  EU  Member  States  using  the  same  back-to-back  technique 
that was used for financial assistance to third countries. By contrast, RRF loans, and loans under 
the Ukraine MFA+ Instrument (and under the Ukraine Facility from 2024 on) are financed through 
the unified funding approach31.  

In 2023 the Commission, acting on behalf of the EU, operated five programmes under which it 
had granted loans to Member States. These five programmes are discussed in the five bullet points 
below: 

•  The  BoP  Facility  was  created  in  2002  to  help  EU  countries  outside  the  euro  area  that 

experience or run the risk of experiencing balance of payments difficulties. 

•  The  EFSM  was  put  in  place  in  2010  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. 

27  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). 

28  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). 

29   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). 

30   Regulation (EU) 2024/792 of the European Parliament and of the Council of 29.2.2024 establishing the Ukraine 

Facility. See Box 1 below for details. 

31   At the end of 2022, in conjunction with the adoption of the so called ‘MFA+’ instrument which was designed to help 
Ukraine to cover part of its short-term funding needs, the unified funding approach has been established as the 
baseline method for the implementation of all borrowing operations including MFAs. Under this funding strategy the 
Commission issues single branded EU bonds and allocates the proceeds to a central funding pool from which the 
EU's different policy programmes are funded. In essence  the unified funding approach makes it possible to fully 
delink the disbursement of loans to a Member State or a third country from the issuance of the EU bonds.  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.  Nevertheless,  the  NGEU  borrowing-to-lend  activities  (i.e.  to  fund  RRF  loans)  do  give  rise  to  new  contingent 
liabilities and are addressed in this report. 

8 

 
 
•  The SURE programme was agreed in June 2020 to help finance sudden and severe increases 
in  national  public  expenditure  related  to  national  short-time  work  schemes  and  similar 
measures in response to the COVID-19 crisis. As this emergency instrument was put in place 
before the increase in the own resources ceiling and headroom entered into effect, all Member 
States have agreed to provide irrevocable, unconditional and on-demand guarantees for 25% 
of the maximum amount of financial assistance32. 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  NextGenerationEU  (NGEU)  programme (2020)33  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).  

All NGEU borrowings, amounting to EUR 284 billion at the end of 2023, 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%  of  EU  gross  national  income  (GNI),  which  is  exclusively  available  for  NGEU 
liabilities.  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 the unified funding approach. 

Table 4: Outstanding amounts in respect of headroom-backed loans (as at 31 December 2023) 
(EUR million) 

Outstanding loans 

Accrued interests 

Total 

BoP Facility 

Euratom 

EFSM 

SURE 

RRF (loans) 

MFA + 

Total 

200 

13 

42 800 

98 355 

79 240 

18 000 

1 

0 

411 

104 

349 

270 

201 

13 

43 211 

98 459 

79 589 

18 270 

238 608 

1 135 

239 743 

32   In addition to the guarantee provided by all Member States, there are a number of safeguards laid down in the SURE 
Regulation to mitigate the risk  from 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  may not exceed EUR 10 billion), and the possibility for the Commission to roll over its 
borrowings if necessary. 

33  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). 

9 

 
 
 
 
 
 
Table 5 below presents the amounts of the total yearly repayments (principal + interest) due by 
all the beneficiaries of the EU loans granted in the context of the financial assistance to Member 
States and the MFA+ instrument.  

For each of the years under consideration, these amounts provide an indicator of the theoretical 
maximum outflow to be covered by  the EU budget in relation to the contingent liabilities arising 
from financial assistance to Member States and the MFA+ exposures. However, the EU 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  one  or  more  beneficiaries  default 
simultaneously on their loans to the EU. 

Table 5: Yearly repayment schedule of outstanding headroom-backed loans (capital + interest) 
under the existing programmes for the years 2024-2029 (at 31 December 2023) (EUR million) 

Year 

Euratom 

BoP 

EFSM 

SURE 

RRF 
loans (*) 

MFA+ 
(**) 

All 
programmes 

2024 

2025 

2026 

2027 

2028 

2029 

Total 

14 

6 

3 317 

327 

0 

0 

0 

0 

0 

206 

3 069 

8 327 

0 

0 

0 

0 

6 857 

8 327 

3 531 

327 

2 756 

10 327 

1 790 

8 464 

918 

917 

917 

917 

919 

917 

419 

567 

566 

566 

567 

567 

5 001 

13 086 

16 667 

5 341 

14 569 

11 738 

14 

212  21 320  36 099 

5 505 

3 252 

66 402 

 (*)  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.  
(**) In accordance with Article 17 of Regulation 2022/2463, each year the EU, upon Ukraine’s request, may 
grant an interest rate subsidy to cover interest costs related to MFA+ loans. 

Taking into account all outstanding loans at the end of 2023, in the period 2028-2054 the yearly 
repayments (principal + interest) in relation to loans backed by the headroom under the permanent 
own resources ceiling amount to EUR 5.4 billion on average. Average yearly repayments (principal 
+ interest) for RRF loans, backed by the headroom under the temporary own resources ceiling, 
amount to EUR 3.5 billion over the same period. 

2.4  Overview of contingent liabilities at the end of 2023 

At the end of 2023, the EU budget was exposed to contingent liabilities for a total  amount of 
EUR 255 billion  relating  to  loans  granted  to  Member  States  and  third  countries,  and 
EUR 108 billion  relating  to  guarantees  provided  through  the  EFSI,    InvestEU,  ELM,  EFSD,  and 
EFSD+. The largest exposure for the EU budget originated from financial assistance programmes 
targeting Member States.  

10 

 
 
 
Figure 1: Breakdown of contingent liabilities by source as at 31 December 2023 

Financial assistance 
to MS
(headroom)
61%

Financial assistance to Third 
Countries
4%

Financial assistance to 
Ukraine
(headrooom)
5%

Budgetary guarantees 
30% (*)

 (*) 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 can be seen in the constant upward trend in the period 2021-2023. 
A more moderate increase of 16% in the total amount was registered between year-end 2022 
and year-end 2023 compared to the 40% increase seen between year-end 2021 and year-end 
2022.  

Figure 2: Breakdown of contingent liabilities by source in the period 2021-2023 (EUR billion) 

221

191

155

240
220
200
180
160
140
120
100
80
60
40
20
0

106

108

60

15

16

8

18

Budgetary guarantees

Financial assistance to MS
(headroom)

Financial assistance to
Third Countries (MFA +
Euratom loans)

Financial assistance to
Ukraine
(headroom)

2021

2022

2023

A moderate increase in loans to Member States (+16%) was recorded between year-end 2022 
and  year-end  2023,  in  particular  because  of  additional  loan  disbursements  under  the  RRF. 
Financial assistance to third countries more than doubled, mostly in relation to the extraordinary 
efforts to support Ukraine financially, while contingent liabilities stemming from the budgetary 
guarantee  programmes  remained  largely  stable.  The  increase  in  liabilities  arising  from  the 
budgetary guarantee programmes due to the start of the implementation phase for InvestEU and 
EFSD+  was  almost  entirely  compensated  by  the  decline  in    ELM  and  EFSI  exposures  due  to 
increasing reimbursement by the final recipients.  

EU contingent liabilities are expected to increase further by the end of 2024 in relation to: (i) the 
additional  support  to  third  countries  (notably  under  the  Ukraine  Facility);  (ii)  the  additional 
disbursements  of  RRF  loans;  and  (iii)  further  progress  in  the  implementation  of  the  budgetary 
guarantee programmes (InvestEU, EFSD+ and the Ukraine Facility).  

11 

 
 
 
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  213(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 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 (EU,  Euratom)  2020/2053.’  (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 planned 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 2023. 

Payments  related  to  materialising  contingent  liabilities  resulting  from  headroom-backed 
financial  assistance  to  EU  Member  States  and  to  Ukraine  can  be  financed  by  calling  on 
additional own resources up to the ceiling laid down by the Own Resources Decision. The headroom 
(i.e. difference between the own resources ceiling and the own resources necessary to finance the 
EU  budget  expenditures)  represents  the  EU’s  financial  capacity  to  cover  additional  outflows 
relating  to  the  materialisation  of  contingent  liabilities  arising  from  headroom-backed  financial 
assistance. The assessment framework for this set of contingent liabilities was described in detail 
in  the  2021  report  under  former  Art.  250  of  the  Financial  Regulation34.  The  results  of  the 
assessment of the sustainability of headroom-backed contingent liabilities existing at the end of 
2023 are presented in Section 3.3 below. The 2020 Own Resources Decision temporarily increases 
the  own  resources  ceiling  to  cater  for  the  liabilities  incurred  during  the  implementation  of  the 
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 2023 

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 cater for unexpected losses). The 
provisions protecting the EU budget against losses that may arise from budgetary guarantees and 
financial assistance to third countries are held in the compartments of the CPF. On 31 December 
2023,  the  CPF  was  composed  of  16  compartments  (13  of  which  were  fully  operational  and 
contained  funds), including  the  compartments  for  all  the  on-going  guarantee programmes,  the 
Guarantee Fund for External Action (GFEA) compartment (that covers legacy ELM, Euratom and 
MFA loans) and those for the post 2020 MFA and Euratom loans.  

34   COM(2021) 676 final of 5.11.2021. 

12 

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

•  the legacy exposures (EUR 7.9 billion of MFA loans and EUR 300 million of Euratom loans) are 

part of the GFEA compartment; 

•  the new MFA loans (EUR 1.4 billion), including the emergency MFA loan to Ukraine, committed 

in 2022 and 2023 are in the post-2020 MFA compartment; 

•  the exceptional MFA loans to Ukraine of EUR 6 billion (exceptional MFA I and MFA II) are in a 
newly  created  separate  compartment  given  that  these  loans  benefit  from  supplementary 
coverage of risks  (i.e. for this exceptional MFA loans package to Ukraine, a coverage rate of 
70% is required: 9% paid-in provisioning from the EU budget and 61% of callable guarantees 
from Member States). 

As at 31 December 2023, the market value of net assets in the CPF amounted to EUR 18.8 billion, 
up  from  EUR 14.39 billion  at  the  end  of  202235.  For  the  remaining  years  of  this  MFF,  the 
Commission has already assigned further provisions to the CPF (in particular provisions related to 
InvestEU, the EFSD+ and Pillar 2 of the Ukraine Facility), which will lead to a further increase in 
the CPF. 

As per its Asset Management Guidelines, the CPF maintains a liquid diversified portfolio, primarily 
investing in highly-rated debt instruments, such as bonds issued by governments, supra-nationals, 
state agencies and corporates with the aim of delivering capital preservation over its investment 
horizon. The CPF portfolio at year-end was well diversified across the different asset classes in 
the  eligible  fixed  income  universe,  including  some  limited  exposure  to  non-euro  denominated 
securities (USD), equity exchange-traded funds (ETFs) and cash or cash equivalents.  

In 2023 the CPF achieved an annual return of +5.21%, broadly in line with its portfolio benchmark 
(+5.40%)36.  

b) Assessment of sustainability of Budgetary guarantees 

As  a  preliminary  remark,  EU  budgetary  guarantees  differ  substantially  in  terms  of  the  policy 
objectives, risk sharing structures and risk profile of the underlying operations. This can in turn 
lead to a different provisioning rate for different programmes, based on a lifetime value-at-risk 
(VaR)37 which ensures appropriate coverage of potential losses at a certain (predefined) confidence 
level. Although in some cases the available provisions at the end of 2023 were somewhat lower 
than  the  respective  VaRs  with  the  applicable  confidence  level,  the  provisioning  adequacy 
conclusion is underpinned by several elements including the lifecycle phase of the guarantee (fully 
constituted or not fully constituted), and the specific provisioning rules for the respective budgetary 
guarantees (e.g. for the ELM). 

The  following  conclusions  can  be  drawn  from  the  available  data  on  lifetime  net  losses  on 
31 December 2023 concerning the budgetary guarantees in place on that date: 

•  For the EFSI the results of the risk analysis conducted based on a credit risk model for IIW debt 
operations38 and on expert judgment for IIW and SMEW equity and SMEW debt products, indicate 

35   In 2023 the CPF received EUR 3.53 billion of net contributions from the EU budget or contributed by participating 

Member States and EFTA countries. 

36   For additional information see the Report from the Commission to the European Parliament and the Council on the 

common provisioning fund in 2023. 

37  The VaR can be defined as the portfolio loss level which, statistically, over a certain time horizon, will not be exceeded 
with  a  certain  confidence  level.  The  respective  confidence  levels  for  internal  programmes  (EFSI,  InvestEU)  and 
external  programmes  (EFSD,  EFSD+)  are  95%  and  90%  respectively  and  take  into  account  factors  such  as  the 
different policy objectives and the respective frameworks. 

38   For details on the risk assessment see the Art 41(5) report. 

13 

 
 
 
a VaR amount of EUR 7.4 billion at a 95% lifetime confidence level. This VaR is fully covered by 
the currently available EFSI provisions of EUR 9.2 billion 39. 

•  For  the  EFSD,  the  results  of  the  risk  analysis  indicate  a  lifetime  VaR  amount  of  EUR 700.7 
million at the desired 90% lifetime confidence level. This amount is fully covered by the market 
value of the EFSD CPF compartment as of end 2023 (EUR 765 million). 

•  The ELM programme, across its several mandates, has experienced some deterioration in its 
main credit risk metrics due in part to the fact that the ELM has legacy Ukrainian exposures of 
EUR 2.3 billion40. The results of the risk analysis indicate a VaR amount of EUR 3.2 billion at the 
90% confidence level over the full lifetime of the guarantee which exceeds the corresponding 
pro-rata  provisioning  in  the  CPF  compartment  (EUR  2.3  billion).  In  this  respect  it  must  be 
stressed that the ELM is an old instrument without a predefined 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 if the provisioning falls below 9% of the outstanding disbursed 
amounts  guaranteed.  Moeover,  the  ELM  consists  of  amortising  loans  with  long  repayment 
periods, where losses tend to crystallise in a non-abrupt manner.  

•  For InvestEU and the EFSD+, given that the ramp-up of the programmes is still in an early 
stage and the first operations were signed in 2022, it is premature to draw any conclusions 
about provisioning adequacy. 

c) Assessment of sustainability of provisioned loans to third countries 

The  composition  of  the  outstanding MFA  loan  portfolio  to  third  countries  comprises loans  to  a 
diversified set of: (i) EU candidate and potential candidate countries; (ii) countries and territories 
covered  by  the  European  Neighbourhood  Policy;  and  (iii)  other  third  countries  that  play  a 
determining role in regional stability and which are of strategic importance for the EU, and are 
politically, economically, and geographically close to the EU.  

The considerations set out in the three bullet points below support the continued suitability of the 
overall 9% target provisioning rate for MFA loans. 

•  The economic standing of MFA beneficiaries (taking into account factors such as GDP per capita, 

relative maturity of the economy, proximity to the EU economy, etc.). 

•  The conditions imposed for MFA loans being on satisfactory track record in implementation of 
an IMF programme, which provides confidence in the financial viability of the third country and 
the full repayment of EU funds.  

•  An  assessment  of  the  economic  situation  of  the  MFA  beneficiaries  and  the  recent 
macroeconomic  developments  in  partner  countries  showing  that  in  2023  most  countries 
reported a solid post-COVID-19 recovery. However, Russia’s war of aggression against Ukraine 
has increased economic uncertainty, aggravated the energy crisis and contributed to high food 
and energy inflation in the region. The geopolitical outlook for beneficiaries located in the Middle 
East has further deteriorated after the conflict in the Gaza Strip following the Hamas terrorist 
attack  in  October  2023,  although  the  economic  impact  (through  trade,  tourism  and 
consumption) on the region overall is limited so far. 

On liquidity risk, it should also be borne in mind that the current structure of MFA loans, maturities 
and repayments from beneficiaries are well-spread over current  and subsequent  MFFs thereby 
reducing the magnitude of the EU budget’s exposure if there is a delay or default event.  

39   The current EFSI provisioning is above the legally required provisions (35% of the amount of the total guarantee 
signed with counterparties) by EUR 859 million. This surplus,  in line with the provisions of the Public Sector Loan 
Facility (PSLF) and the InvestEU Regulation, will be allocated to the financing of the PSLF and the provisioning of 
InvestEU. 

40   Another EUR 1.3 billion of ELM repurposed loans were also disbursed. These are subject to a 70% provisioning rate 

and are backed by a dedicated compartment (see Box 1 below)  

14 

 
 
 
 
Box 1: EU contingent liabilities arising from EU financial support to Ukraine – Main 
developments in 2024 

Since Russia’s invasion of Ukraine in 2022, the EU has consistently provided strong political, 
economic, military, financial and humanitarian support to Ukraine. The full set of direct and 
indirect  exposures  to  Ukraine  (capital)  under  existing  programmes  at  30  June  2024  are 
presented in Table 6 below.  

The main vehicle for delivering financial support to Ukraine for the period 2024-2027 is the 
Ukraine Facility, with an overall capacity of up to EUR 50 billion for 2024-2027.  Support 
will  be  provided  in  the  form  of  loans,  grants  and  guarantees  based  on  the  three  pillars 
described below.  

•  Pillar 1 (Support to Ukraine through the Ukrainian plan): this pillar entails providing financial 
assistance to Ukraine, totalling EUR 38.27 billion, comprising both grants (EUR 5.27 billion) 
and loans (EUR 33 billion). Loans disbursed under the Ukraine Facility, like those granted 
under the MFA+ package, are financed via borrowing and backed by the ‘headroom’. 

•  Pillar 2 (Ukraine Investment Framework): with nearly EUR 7 billion of EU budget allocation, 
this  pillar  aims  at  attracting  and mobilising public  and  private investments  for  Ukraine’s 
recovery and reconstruction. To implement Pillar 2, a Ukraine Guarantee of EUR 7.8 billion 
is  established  with  a  provisioning  rate  of  70%  (and  €1.51  billion  available  for  blended 
finance).  

•  Pillar 3 (EUR 4.6 billion non-repayable support): this pillar will, among other things, cover the 
interest rate subsidy for the exceptional MFA loans and for the loans granted under Pillar I.  

The  Ukraine  Facility  loans  are  provided  with  high  concessionality,  given  the  interest 
subsidisation and the long repayment period of 35 years, with a 10-year grace period. This 
reduces the annual burden on Ukraine’s public finances while also minimising the risks for the 
EU  budget.  Loans  for  a  total  amount  of  EUR  7.9  billion  were  disbursed  under  the  Ukraine 
Facility in the first half of 2024 (EUR 4.5 billion in March, EUR 1.5 billion in April and EUR 1.9 
billion in June). Additionally, guarantee agreements to support operations in Ukraine for a total 
value of EUR 940 million were signed in the first half of 2024 under the Ukraine Guarantee. 

Budgetary cover for contingent liabilities arising from loans to Ukraine since 2023 has been 
provided  by  the  budgetary  headroom  (discussed  in  the  next  section).  The  loans  granted  to 
Ukraine in late 2022 (EUR 6 billion MFA and the EUR 1.59 billion in repurposed loans under the 
ELM) are subject to a budgetary coverage of 70%41. 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 2024 in the context of the Article 41(5) Report and concluded that for the period under 
examination there were no sufficient new lasting and meaningful elements which would justify 
changing the provisioning rate of 70%.  

41   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 by supplementing the paid-in provisioning rate at the level of 
9% with guarantees from Member States to cover a second loss piece of up to 61% of the loan exposures. 

15 

 
 
That conclusion was based on both a qualitative and quantitative assessment of the risks as 
they stood at end-202342. The most recent assessment by the IMF confirms that maintaining 
this provisioning level is a prudent approach43 44. 

Table  6:  Outstanding  direct  and  indirect  exposures  to  Ukraine  (capital)  under  the  existing 
programmes (at 30 June 2024) (EUR million) 

Direct exposures 

Outstanding amount 

Budgetary coverage 

Legacy MFA 

Legacy Euratom Loans 

Emergency MFA 

Exceptional MFA I + II 

MFA+ 

Ukraine Facility - Pillar I 

Total 

Indirect exposures 

ELM loans disbursed before 
February 2022 
EIB first package under ELM 

EIB second package under ELM 

EBRD loans under EFSD 

Ukraine Guarantee 

Total 

              3 810  

                 300  

              1 200  

9% 

9% 

9% 

              6 000  

9% (+61% MS guarantees)  

            18 000  

7 890 

37 200 

              1 708  

                 668  

              1 338  

103 

940 

4 757 

Headroom 

Headroom 

9% 

9% 

70% 

50% 

70% 

42   Besides a number of risk indicators, elements which were taken on board in the qualitative assessment included: (i) 
the IMF third review of the extended arrangement under the Extended Fund Facility published in March 2024; (ii) the 
adoption and entry of operations of the EU’s Ukrainian Facility; and (iii) the US support package of May 2024. In 
particular the IMF provided a mixed picture with regard to the financial and macro-economic situation of the country 
at the time. On the positive side, the IMF underlined that the economy in 2023 was more resilient than expected, 
with reasonably robust growth, continued disinflation, and good foreign currency reserves figures. On the negative 
side, the IMF warned that headwinds were re-emerging in 2024, with growth expected to soften to 3-4% due to 
uncertainty about the ongoing war and labour supply constraints, including from the anticipated mobilisation. The 
outlook  in  IMF’s  view  remained  subject  to  exceptionally  high  downside  risks  arising  from  war-related  factors, 
potential shortfalls in external financing and the socio-economic impact of policies that may be required if shocks 
were to materialise. 

43   The  IMF  fourth  review  of  the  extended  arrangement  under  the  Extended  Fund  Facility  concluded  that  while  the 
Ukrainian  economy was more resilient than expected in the first quarter of 2024, the outlook for the remainder of 
2024 and into 2025 has worsened since the third review, largely due to devastating attacks on Ukrainian energy 
infrastructure and uncertainty about the length of Russia’s war against Ukraine.  
See Ukraine: Fourth Review of the Extended Arrangement under the Extended Fund Facility, Request for Modifications 
of a Performance Criterion, and Financing Assurances Review-Press Release; Staff Report; and Statement by the 
Executive Director for Ukraine (imf.org). 

44   At the end of August 2024 the Ukrainian government announced the successful conclusions of the negotiations with 

commercial bondholders on the restructuring of over USD 20 billion of external debt. 
See https://mof.gov.ua/en/news/ukraine_announces_successful_bondholders_vote_in_favor_of_debt_restructuring-
4761. 

16 

 
 
 
 
 
 
 
 
3.3  Assessment  of  the  sustainability  of  the  headroom-backed 

contingent liabilities  

The  EU  budget’s  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.  

For NGEU liabilities, the own resources ceiling has been increased by 0.6% of EU GNI exclusively 
to  guarantee  these  issuances.  This  ensures  that  the  EU  has  the  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 arising 
from RRF loans, in line with the requirements of Article 213(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 coming years. For the years up to 2027, this 
is in line with the draft budget for 2025 and the long-term forecast of future inflows and outflows 
of the EU budget.  

For the years 2028-2029, a simple extrapolation is used, taking as a reference the average annual 
payments over the 2021-2027 period increased by the rate of growth of EU GNI. This is only a 
mechanical extrapolation, which is performed to provide in this report a sufficiently long horizon 
of analysis. It is not to be considered as prejudging in any way the proposal for the MFF post-
2027. These extrapolations assume a linear repayment of NGEU debt issued over the years 2021-
2023, starting in 2028. 

Excluding  the  current  budget  year,  the  headroom  available  for  covering  existing  and  new 
contingent liabilities in 2025-2029 is on average around EUR 106.3 billion per year in respect of 
the margin under the own resources ceiling of 1.4% of EU GNI and around EUR 111.7 billion per 
year for the temporary ceiling of 0.6% of EU GNI. 

Once  the  central  scenario  has  been  established,  four  additional  stress  tests  assess  the 
sustainability  of  existing  contingent  liabilities  under  extreme  scenarios  in  2024-2029.  Further 
details of these four stress tests are set out in the paragraphs below. 

1)  Stress test on the economy. In the central scenario, EU GNI follows the projections for real 
growth and inflation set out in the Commission Spring 2024 European Economic Forecast45. 
For the stress test, the projected nominal growth rates are lower than the baseline by one 
percentage point for each year of the reporting period46.  

This  reduces  the  nominal  value  of  the  own  resources  ceiling  and  therefore  the  available 
headroom by EUR 8.2 billion per year for the ‘unbudgeted’ amounts (headroom) under the 
permanent own resources ceiling and by EUR 5.2 billion under the temporary ceiling for the 
NGEU over the period 2025-2029. 

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  countries 
benefitting from financial assistance programmes would simultaneously fail to honour their 
repayments when they are due. The amounts at stake reflect the repayment schedules at the 
end of 2023 (see Table 5 above).  

45  https://economy-finance.ec.europa.eu/document/download/c63e0da2-c6d6-4d13-8dcb-

646b0d1927a4_en?filename=ip286_en.pdf.  

46  This is similar to the stress test on the ‘adverse r-g scenario’ performed in the Commission’s Debt Sustainability 

Monitor: Debt Sustainability Monitor 2023 - European Commission (europa.eu). 

17 

 
 
 
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 10.5 billion per year on average. The contingent liabilities resulting 
from  RRF  loans  under  NGEU  would  be  comparatively  small  during  the  period  considered 
(approximately  EUR 0.9 billion  per  year  in  interest  rate  payments),  as  repayment  of  the 
principal amount of RRF loans will only start in 2032. 

3)  Stress test on the expenditure side of the budget. Under this scenario MFF expenditure 
is  projected  at  its  theoretical  maximum  (i.e.  the  maximum  possible  ceilings  for  the  MFF 
payments and all individual special instruments, including the Ukraine reserve). It is important 
to underline that: (i) this does not reflect a bottom-up forecast and is unrelated to any actual 
expectations as to the evolution of EU payments; and (ii) 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.  

Similarly, for 2028-2029, a simple linear projection of the current payment ceilings into the 
future, using forecast GNI growth, is used, without prejudice to the next MFF proposal which 
will  also  include  a  ceiling  for  payments.  On  the  budget  expenditure  to  meet  repayment 
obligations for NGEU  non-repayable support, there is no specific expenditure ceiling in the 
2021-2027 MFF. Therefore, for 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 situation47.  

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 85.3 billion on average, i.e. EUR 12.9 billion less 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 19.5 billion per year on average, 
to a level of EUR 92.2 billion on average over the period 2025-2029. 

4)  A combined stress test on economic conditions, revenue and expenditure. This is an 
extreme  scenario  that  combines  all  unfavourable  scenarios  described  in  the  three  points 
above. It would reduce the headroom under the permanent ceiling to  EUR 66.7 billion on 
average over the period 2025-2029 and for the temporary ceiling to EUR 86.1 billion. These 
amounts appear to constitute a large safety buffer for the EU’s financial capacity to cover its 
liabilities (stemming from both non-NGEU and NGEU operations). 

The  detailed  results  for  the  baseline  and  stress  test  scenarios  are  provided  in  the  Annex  and 
summarised in Figures 3 and 4 below. 

47   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.  

18 

 
 
 
 
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.  

n
o

i
l
l
i

b

R
U
E

300

250

200

150

100

50

0

2025

2026

2027

2028

2029

Own resources ceiling 1.4% EU GNI under GNI stress test

Extraordinary own resources under revenue stress test

Additional own resources under expenditure stress test

Own resources to finance the budget (excl. NGEU)

Own resources ceiling 1.4% GNI (baseline)

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.  

n
o

i
l
l
i

b

R
U
E

140

120

100

80

60

40

20

0

2025

2026

2027

2028

2029

Own Resouces ceiling 0.6% EU GNI under GNI stress test

Extraordinary own resources under revenue stress test

Additional own resources under expenditure stress test

Own resources to finance NGEU

Own resources ceiling 0.6% GNI (baseline)

19 

 
 
 
 
 
 
 
 
 
4. Conclusions 

At the end of 2023, the EU budget supported over EUR 255 billion in contingent liabilities arising 
from loans granted to Member States and third countries. Of this, EUR 221 billion relate to loans 
to EU Member States and EUR 34 billion  to loans to non-Member States. In addition,  a further 
EUR 108 billion in contingent liabilities arises from investment  guarantees provided under the 
ELM, EFSI, EFSD, InvestEU, and EFSD+ programmes.   

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  three  main 
conclusions. These conclusions are set out in the three bulleted paragraphs below. 

•  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: (i) data on past defaults and expected losses; (ii) the measures that are in place 
to  ensure  that  losses  do  not  exceed  predefined  tolerance  levels;  and  (iii)  the  budgetary 
provisions that are available to cover potential payments. 

•  The EU’s 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  2029,  under 
mechanical  extrapolations  of  the  level  of  expenditures  beyond  2027.  On  average  over  the 
2025-2029 period, the headroom available for covering these contingent liabilities is around 
EUR 106.3 billion per year in respect of the margin under the own resources ceiling of 1.4% 
of EU GNI and around EUR 111.7 billion per year for the temporary ceiling of 0.6% of EU GNI. 
This headroom can be called upon to meet extraordinary revenue needs to finance unforeseen 
expenditure  or  to  honour  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  1.4%  of  EU  GNI  would  amount  to 
EUR 66.7 billion on average per year over the 2025-2029 period and to EUR 86.1 billion on 
average per year over the 2025-2029 period under the temporary ceiling of 0.6% of EU GNI. 
These amounts represent a safety buffer against further negative economic shocks, potential 
new needs and contingent liabilities for both non-NGEU and NGEU operations.

20 

 
5. Annexes:  

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 
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 
Headroom 

2025  2026 

2027 

2028 

2029 

a 

b 

257.9 

267.0 

275.9 

285.0  293.9 

143.2 

177.9 

189.0 

166.1  171.8 

a-b 

114.7 

89.1 

86.9 

118.8  122.1 

a 

b 

255.4 

261.8 

267.9 

274.0  279.7 

143.2 

177.9 

189.0 

166.1  171.8 

a-b 

112.2 

83.9 

78.9 

107.8  108.0 

a 

b 

c 

257.9 

267.0 

275.9 

285.0  293.9 

143.2 

177.9 

189.0 

166.1  171.8 

9.5 

14.0 

6.2 

11.9 

10.7 

a-b-c 

105.2 

75.1 

80.7 

106.9  111.4 

a 

b 

c 

257.9 

267.0 

275.9 

285.0  293.9 

143.2 

177.9 

189.0 

166.1  171.8 

40.5 

19.5 

14.5 

14.9 

15.8 

a-b-c 

74.3 

69.6 

72.4 

104.0  106.3 

a 

b 

c 

d 

255.4 

261.8 

267.9 

274.0  279.7 

143.2 

177.9 

189.0 

166.1  171.8 

40.5 

19.5 

14.5 

14.9 

15.8 

9.5 

14.0 

6.2 

11.9 

10.7 

a-b-c-d 

62.2 

50.4 

58.2 

81.1 

81.5 

(*) This includes loan support through the EFSM, BoP Facility, SURE and MFA+. 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.  
(**)  Expenditure  is  projected  at  the  theoretical  maximum  for:  1)  the  MFF  payment  ceiling  in  2025-202748,  2)  future 
adjustments  up  to  their  potential  maximum  in  any  single  year49,  and  3)  the  annual  ceilings  of  the  thematic  special 
instruments (the European Globalisation Adjustment Fund, Solidarity and Emergency Aid Reserve, and Brexit Adjustment 
Reserve), the Flexibility Instrument, and the Ukraine Reserve.  

48  As set out in the most recent technical adjustment of the MFF (COM(2024)110 final of 29.2.2024). 
49 

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). 

21 

 
 
 
 
 
 
 
 
 
Sustainability and headroom in respect of the temporary own resources ceiling  

(in EUR billion, at current prices) 

Baseline 

2025 

2026 

2027 

2028 

2029 

Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU(*) 

a 

b 

110.5 

114.4 

118.3 

122.1 

125.9 

5.2 

3.7 

5 

9.5 

9.3 

Headroom 

Stress tests 

1) Stress test on the economy 

Own Resources ceiling (0.6% GNI) 

Own resources to finance NGEU 

a-b 

105.4 

110.7 

113.3 

112.6 

116.6 

a 

b 

109 

111.1 

113.2 

115.2 

117.1 

5.2 

3.7 

5 

9.5 

9.3 

Headroom 

a-b 

103.8 

107.4 

108.2 

105.7 

107.7 

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) 

a 

b 

c 

110.5 

114.4 

118.3 

122.1 

125.9 

5.2 

0.9 

3.7 

0.9 

5 

0.9 

9.5 

0.9 

9.3 

0.9 

Headroom 

a-b-c 

104.5 

109.8 

112.4 

111.7 

115.7 

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) 

a 

b 

c 

110.5 

114.4 

118.3 

122.1 

125.9 

5.2 

3.7 

5 

9.5 

9.3 

17.2 

26.5 

15.8 

21.2 

16.9 

Headroom 

a-b-c 

88.2 

84.2 

97.5 

91.4 

99.7 

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 

109 

111.1 

113.2 

115.2 

117.1 

5.2 

3.7 

5 

9.5 

9.3 

17.2 

26.5 

15.8 

21.2 

16.9 

0.9 

0.9 

0.9 

0.9 

0.9 

Headroom 

a-b-c-d 

85.6 

80 

91.5 

83.6 

90.0 

(*)  For  2025  the  amount  reflects  the  commitments  appropriations  in  the  draft  budget  2025.  For  2026  and  2027  the 
amounts correspond to the financial programming of the EURI budget line. The amounts for 2028 and 2029 are based on 
a technical extrapolation including linear repayment of the principle of NGEU debt issued over the years 2021-2023 for 
non-repayable support. 

22