07 July 2016

ECA: Implementing the EU budget through financial instruments

ECA has published a special report on implementing the EU budget through financial instruments – lessons to be learnt from the 2007-2013 programme period. The ECA’s special report set out the results of its performance and compliance audits of specific budgetary areas or management topics.

Financial instruments are increasingly used to provide financial support from the EU budget through loans, guarantees and equity investments. During the 2007-2013 programming period, some 21.5 billion euros from the EU budget were allocated to financial instruments. ECA found that while they may have distinct advantages compared to other forms of EU funding such as grants, their implementation faces significant challenges which could limit their efficiency.

If properly implemented, financial instruments provide two specific benefits compared to grants:

— the possibility of leveraging the public funds (i.e. mobilising additional private and public funds to complement the initial public funding); and

— the revolving nature of their capital endowment (i.e. the use of the same funds in several cycles).

The fact that loans have to be paid back, guarantees have to be released or in the case of equity investments returned should in principle also have an impact on the behaviour of final recipients, leading to a better use of pub­lic funds and reducing the likelihood that the final recipients will become dependent on public support.

During the 2007-2013 programme period financial instruments set up under the European Regional Development Fund (ERDF) and the European Social Fund (ESF) were used by 25 out of 28 EU Member States: in total, 972 ERDF and 53 ESF financial instruments had been set up across the EU. By the end of 2014, around 16 billion euro have been paid as contributions from the ERDF and ESF Operational Programmes (OP) to these instruments. This represents a significant increase compared to around 1.3 billion in the 2000-2006 programme period and 0.6 billion euro in the 1994-1999 programme period allocated to such instruments. During the same period, 2007-2013, the overall contri­bution from the EU budget to the 21 financial instruments managed directly or indirectly by the Commission was about 5.5 billion euro. These centrally‑managed financial instruments operate across all EU Member States.

Full report

© European Court of Auditors