The €24.4 billion European Guarantee Fund, part of an initial EU COVID-19 recovery package to be deployed within 2021, is about to hit halfway mark
€11.7 billion in financing to support businesses around the EU in COVID-19 pandemic
Approved funding is expected to mobilise nearly €94 billion
The European Guarantee Fund (EGF), part of the €540 billion EU recovery package agreed in 2020, has approved funding amounting to almost half its target for 2021. After clearance under the EU state aid notification process in December 2020, the initiative has now approved €11.7 billion in support of European businesses struggling with the economic fallout of the COVID-19 pandemic. This is almost half the fund’s target for 2021. The fund mobilises additional financing, and initiatives financed so far are expected to generate €93.9 billion in funding for the EU economy. With €2.1 billion in financing also signed at the end of April, EGF funding is already reaching businesses across the European Union.
“The EIB Group was among the first off the mark in ensuring Europe helped businesses and citizens deal with the economic fallout of the COVID-19 crisis. Our main effort with EGF is to support EU companies and providing the financing they need to survive the pandemic”, said EIB President Werner Hoyer. “These figures show that Europe’s response is making a real difference in record time. They add to the EIB Group’s track record in financing the research and development of treatments and vaccines, which today bring us light at the end of the COVID tunnel”, President Hoyer added.
With agreements signed in nearly all of the 22 participating EU countries, including sizeable deals with Nordea, Raiffeisen and Banca March, the EGF is currently on track to mobilise up to 8 times its volume of EUR 24.4 billion by the end of 2021. Demand for EGF financing is strong, and further approvals and signatures are expected to rapidly bring the EGF well beyond 50% of its target by early summer.
“SMEs need financing and they need it now.” Added EIB Vice-President and Chairman of the EGF Board Dario Scannapieco. “We are working flat out to deliver record amounts of resources to the markets. In the first six months we have mobilised nearly €94 billion, almost 50% of the initiative’s target, this will ensure that EU entrepreneurs have the support they need.”
The EGF was founded by the European Investment Bank Group and EU Member States as a protection shield for European companies hard hit by the COVID-19 crisis. EGF guarantees act as an incentive for financial intermediaries to lend more money to companies under better conditions, helping businesses access rapid and advantageous financing and overcome the economic fallout of the COVID-19 pandemic.
TheEuropean Guarantee Fund(EGF) was set up by the EIB Group with contributions from EU Member States to shield companies suffering from the COVID-19 crisis. Using nearly €25 billion in guarantees, the EGF allows the EIB and the EIF to quickly make loans, guarantees, asset-backed securities, equity and other financial instruments available to mostly small and medium-sized enterprises. The EGF is part of the European Union’s recovery package aiming to provide a total of €540 billion boost those parts of the EU economy that have been hit the worst. Its goal is to ensure that SMEs with sustainable business plans can get the liquidity to overcome COVID-19 related adversities, and that healthy business can get the support they need, in order to grow.
The European Guarantee Fund, which started operations in December 2020, has reached €16 billion in approved financing at the end of June. This represents over 65% of the available € 24.4 billion in EU Member States’ guarantees to support financing to European businesses struggling after the economic downturn. Total signatures with beneficiaries of financing under the EGF stood at €8.4 billion, mostly benefitting SMEs.
The European Investment Bank (EIB) and the Croatian Bank for Reconstruction and Development (HBOR) have signed a Guarantee Agreement amounting to €50 million for loans to Croatian mid-caps and large corporates to finance their recovery from the effects of the COVID-19 pandemic. The EIB contribution stems from the European Guarantee Fund (EGF) set up by the EIB Group in 2020 to accelerate the post-COVID-19 recovery of Europe’s economy, safeguard jobs, and provide much needed liquidity to European companies.
The Board of Directors of the EIB has on 26 May agreed on the structure and business model of the new Pan-European Guarantee Fund to tackle the economic consequences of the Covid-19 pandemic. The Fund was endorsed by the European Council on 23 April as part of the overall EU Covid-19 response package.