Latest update: 29 July 2009

Set up at a time when the guarantees on loans granted to non-member countries were growing rapidly, the Fund was established:

• to provide a 'liquidity cushion' in order to avoid calling on the Community 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 Community policy on guarantees for Commission and EIB loans to non-member countries.

The lending operations covered by the Fund relate to three different instruments, each of which benefits from a guarantee from the EU budget. These instruments are: European Investment Bank (EIB) lending in non-Member States, Euratom loans and Macro-Financial Assistance loans to non-Member States.

The Fund is provisioned from the general EU 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%. 

At the end of 2006, the amount covered by the Fund was about €11 billion, and the assets of the Fund stood at about €1.1 billion. 

At the end of 2008, the amount covered by the Fund was about €12 billion, and the assets of the Fund stood at about €1.0 billion. The Commission has entrusted the financial management of the Fund to the EIB. The Commission supervises this mandate, monitors and reviews the Guarantee Fund mechanism, and is responsible for regular reporting on the situation of the Fund and its management to the European Parliament, the Council and the Court of Auditors.