Report from the Commission to the European Parliament and the Council on guarantees covered by the general budget. Situation at 30 June 2012

This report is submitted pursuant to the Financial Regulation which requires the Commission to report to the European Parliament and to the Council on budgetary guarantees and the corresponding risks. It is completed by a Commission Staff Working Document with a set of detailed tables and explanatory notes.

The risks covered by the budget of the European Union (the "Budget") derive from a variety of lending and guarantee operations which can be divided into two categories:
– loans granted by the European Union with macroeconomic objectives, i.e. macro-financial assistance ("MFA") loans to third countries in conjunction with the Bretton Woods institutions, balance-of-payments ("BOP") loans granting support to non-euro Member States experiencing balance-of-payments difficulties, loans under the European financial stabilisation mechanism ("EFSM") granting support to all Member States experiencing or seriously threatened with a severe economic financial disturbance caused by exceptional occurrences beyond their control; and
– loans with microeconomic objectives, i.e. Euratom loans and most importantly European Investment Bank ("EIB") financing of operations in non-Member States ("EIB external financing") that are covered by EU guarantees.

The guaranteed EIB external financing, the Euratom loans and the MFA loans have since 1994 been covered by the Guarantee Fund for external actions ("the Fund"), while BOP and EFSM loans are directly covered by the Budget.

The Fund covers defaults on loans and loan guarantees granted to non-Member States or for projects in non-Member States. It was established:
– to provide a 'liquidity cushion' in order to avoid calling on the Budget every time a default or late payment on a guaranteed loan arises; and
– to create an instrument of budgetary discipline by laying down a financial framework for the development of the EU policy on guarantees for Commission and EIB loans to EU non-member countries.

If third countries become Member States, loans relating to such countries are no longer covered by the Fund and the risk has to be directly borne by the Budget. The Fund is provisioned from the Budget and has to be maintained at a certain percentage of the outstanding amount of the loans and loan guarantees covered by the Fund. This percentage, known as the target rate, is currently 9%. If resources of the Fund are not sufficient, the Budget will provide the necessary funds.

EUR-Lex: COM(2013)211: Follow the progress of this report through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2013:211:FIN

EUR-Lex: SWD(2013)130: Commission Staff Working Document accompanying the report http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2013:130:FIN

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