Cyprus remained the country with the highest stock of non-performing loans (assets) of the general government in 2020, according to data released by Eurostat, the statistical office of the European Union.
The share of non-performing loans over the country’s GDP stood at 28.3%, a far larger share compared with the other EU Member States.
The statistical office of the EU points out that this large percentage is explained by “a large transaction in 2018, whereby non-performing loans from a Cypriot public financial corporation (classified outside government) were transferred to a government unit”.
The three other EU Member States that recorded a share higher than 1% of GDP were Slovenia (2.2%), Portugal (1.5%) and Croatia (1.4%).
For Cyprus, Slovenia and Portugal, the majority of non-performing loans refer to loans of financial defeasance structures. In the case of Croatia, the figure mainly refers to the loans of a national development bank (classified inside the general government).
The data released by Eurostat cover the notable increase of guarantees provided in the EU’s 27 member states in 2020, due to new government guarantee programmes in the context of the COVID-19 pandemic.
The most common form of contingent liabilities in the EU Member States is government guarantees on liabilities, and occasionally, on assets of third parties, Eurostat points out.
In several countries (Belgium, Spain, France, Cyprus, Luxembourg, Portugal and Finland) a major part of the guarantees are provided to financial institutions, often granted in the context of either the COVID-19 crisis, or the 2008-09 financial crisis.
In most EU Member States, the central government is the predominant guarantor. A notable level of state and/or local government guarantees can also be seen in Finland, Denmark, France, Sweden, Austria, Germany and Belgium.
The highest overall rate of government guarantees was recorded in Finland (27.1% of GDP), ahead of Denmark (19.8%), Austria (19.1%), Germany (17.5%) and France (17.1%). Data in Finland also include some guarantees underwritten by a financial public corporation classified outside of government, but only to the extent they are counter-guaranteed by the government.
Slovakia was the country with the lowest level of government guarantees (0.1%). Rates of less than 1% of GDP were also recorded in Bulgaria, Ireland and Czechia.
Liabilities of public corporations
The level of liabilities of public corporations classified outside general government in 2020 varied widely across the 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%).
In contrast, small amounts of public corporation liabilities were recorded in Slovakia (5.8%) followed by Romania (7.7%), Lithuania (9%), Hungary (9.1%) and Croatia (10.3%).
Eurostat points out that the main reason for the high level of these liabilities in certain member states is that the data include government-controlled financial institutions, in particular public banks.
Most of these liabilities consist of deposits held in the public banks by households or by other kinds of private or public entities. In general, financial institutions report high amounts of debt liabilities and have, at the same time, a significant level of assets, which are not captured in this data collection.
In all EU Member States, liabilities related to off-balance public-private partnerships (PPPs, long-term construction contracts where assets are recorded outside government accounts) were below 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 both Slovakia and Portugal, the liabilities relate mainly to motorway projects.
In many EU Member States, off-balance PPPs were observed at the level of central government, whereas in Spain, Belgium and Austria they were also notably related to state and local governments.