Contingent liabilities and non-performing loans in 2020 – Products Eurostat News

In 2020, the highest public guarantee rates in the EU were recorded in Finland

The most common form of contingent liability in EU Member States is the public guarantee on the liabilities and, occasionally, on the assets of third parties. In 2020, there was a notable increase in guarantees provided in the EU, due to new government guarantee programs in the context of the COVID-19 pandemic.

The highest overall rate of public guarantees was recorded in Finland (27.1% of GDP), ahead of Denmark (19.8%), Austria (19.1%), Germany (17.5 %) and France (17.1%). The Finnish data also includes some guarantees taken out by a public financial company classified outside the government, but only to the extent that they are counter-guaranteed by the government. Slovakia is the country with the lowest level of public guarantees (0.1%). Rates below 1% of GDP were also recorded in Bulgaria, Ireland and Czechia.

This information comes from data on contingent liabilities and non-performing loans published today by Eurostat. The article presents some findings from the more detailed Statistics Explained article.

In most EU Member States, the central government is the main guarantor. A notable level of state and/or local authority guarantees can also be observed in Finland, Denmark, France, Sweden, Austria, Germany and Belgium. In several countries – Belgium, Spain, France, Cyprus, Luxembourg, Portugal and Finland – a large part of the guarantees are provided to financial institutions, often granted in the context of either the COVID-19 crisis or the financial crisis of 2008 -09 .

Source dataset: gov_cl_guar

The highest public company liabilities in Greece

The level of liabilities of public corporations classified outside general government in 2020 varied considerably across EU Member States. Significant amounts of liabilities were recorded in Greece (170.6% of GDP), ahead of Germany (100.7%), the Netherlands (88.9%), Luxembourg (76.7%) and Italy (65%).

On the other hand, low amounts of public company commitments were recorded in Slovakia (5.8%), followed by Romania (7.7%), Lithuania (9%), Hungary (9.1 %) and Croatia (10.3%).

The main reason for the high level of such liabilities in some Member States is that the data includes state-controlled financial institutions, in particular state-owned banks. Most of these liabilities consist of deposits held in public banks by households or by other types of private or public entities. In general, financial institutions declare high amounts of debt and have, at the same time, a significant level of assets, which are not taken into account in this data collection.

Source dataset: gov_cl_liab

Slovakia and Portugal with largest off-balance sheet PPP liabilities

In all EU Member States, liabilities related to off-balance sheet public-private partnerships (PPPs, long-term construction contracts where the assets are recorded outside the public accounts) were less than 2.5% of GDP in 2020. Slovakia had the highest share (2.4% of GDP), followed by Portugal (2.3%) and Hungary (1.1%). In Slovakia as in Portugal, the liabilities relate mainly to motorway projects.

In many EU Member States, off-balance-sheet PPPs were observed at the level of central government, while in Spain, Belgium and Austria they also notably concerned states and local governments.

Cyprus remains the country with the highest level of non-performing loans

In 2020, Cyprus remained the country with the highest stock of general government non-performing loans (assets), at 28.3% of GDP, a much larger share compared to other EU member states. This was due to a large transaction in 2018, whereby non-performing loans from a Cypriot public finance company (classified outside the government) were transferred to a government unit.

Three other EU Member States recorded a share above 1% of GDP: Slovenia (2.2%), Portugal (1.5%) and Croatia (1.4%). For Cyprus, Slovenia and Portugal, the majority of non-performing loans relate to loans from financial defeasance structures. In the case of Croatia, the figure mainly refers to loans from a national development bank (classified within general government).

For more information

• France, the Netherlands and Austria: 2019 data instead of 2020 on the liabilities of public enterprises.
• Eurostat Statistics Explained article on contingent liabilities and non-performing loans
• This article includes data on:
• Warranty data does not include:
  • public guarantees issued under the guarantee mechanism of the framework agreement of the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM);
  • derivative-type guarantees meeting the SEC2010 definition of a financial derivative;
  • deposit insurance guarantees and comparable schemes;
  • government guarantees issued on events whose occurrence is very difficult to cover by commercial insurance (earthquakes, large-scale floods, etc.).
• Data on off-balance sheet PPPs do not include off-balance sheet concession contract liabilities, in accordance with the definition of concession in Chapter 2 of the Guide to the statistical treatment of PPPs.
• Data in this article refers to December 31, 2020 (with some minor exceptions for liabilities of government-controlled entities classified outside general government). According to the Eurostat decision of 2013, data on contingent liabilities are reported by EU Member States annually in December, with a typical lag of T+12 months. The current article therefore occurs with a time lag of T+13 months.
• Data on contingent liabilities and potential government obligations are provided by EU Member States as part of the enhanced economic governance package (the “six-pack”) adopted in 2011. In particular, the 2011 Directive /85 on requirements for Member States’ budgetary frameworks requires Member States to publish relevant information on contingent liabilities with potentially material implications for public budgets, including public guarantees, non-performing loans and liabilities arising from of the operation of public enterprises, including the extent thereof.
• Contingent liabilities are not part of general government debt (Maastricht), as defined in Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community.
• Eurostat overview of government finance statistics
• Eurostat database on government finance statistics and EDP statistics

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