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Investor Presentation
23 May 2012
European UnionAAA / Aaa / AAA
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The European Commission, on behalf of the EU, operates 3 loan programmes funded in thecapital markets:
European Financial StabilisationMechanism (EFSM)
Support to all EU Member States, with current focus onEuro Area Member States (EA MS), up to 60 billion(committed for Ireland and Portugal: 48.5 bn,disbursed: 38.5 bn)
Balance of Payments (BoP)
Support to non-EA MS, up to 50 billion- disbursed 13.4 bn for Hungary, Latvia and Romania ( 11.4 bn
outstanding)- precautionary programme: 1.4 bn for Romania- request from Hungary for another financial assistance of
precautionary nature received - programme to be determined
Macro-Financial Assistance (MFA)Financial aid programme to assist non-EU countries with anIMF programme ( 592 million outstanding)
EU as a borrower: Funding framework and approach
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Ireland - December 2010 programme: 85 billion
17.5 billion contribution Ireland (Treasury and National Pension Reserve Fund)
67.5 billion external contribution:
22.5 billion EU (EFSM) disbursed: 18.4 bn
17.7 billion EFSF* disbursed: 12.0 bn 22.5 billion IMF disbursed: 16.1 bn
*+ bilateral loans UK ( 3.8bn), Denmark ( 0.4bn), Sweden ( 0.6bn)
Portugal - May 2011 programme: 78 billion
26 billion EU (EFSM) disbursed: 20.1 bn 26 billion EFSF disbursed: 9.6 bn
26 billion IMF disbursed: 18.6 bn
Programme disbursements over 3 years on a quarterly basisMaturities: 5 - 30 years, maximum average maturity 12.5 years
Financial assistance packages: Ireland and Portugal
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Agency Rating CommentsAAA / Stable Rating of EU based on the support it receives from its
27 Member States
Highly conservative and prudential rules of EUslending and borrowing activities
EU debt service relies on several layers, including
coverage of EU borrowings by the EU budget andMember States' obligations to provide funds necessary tobalance the budget (March 2012)
Aaa / Stable Firm commitment of the 27 EU Member States
Multiple layers of protection for loan repayments
Conservative budget management (March 2012)
AAA /Outlook Negative
EU benefits from multiple layers of debt-serviceprotection sufficient to offset current deterioration inMember States creditworthiness
On 20 January 2012, S&P confirmed EU's "AAA" long-term rating and "A-1+" short-term rating
AAA rating confirms Commission's view that EU credit
rating should be assessed on its own merits, due to thespecial status of the EU budget (without deficit or debt)and the EU Own Resources
Outlook negative reflecting in S&P's view ongoing risksat euro area level to the creditworthiness of EU MemberStates (January 2012).
European Union Credit strengths (1)
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European Union Credit strengths (2)
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Borrowings are direct and unconditional obligations of the EU and guaranteed bythe 27 EU Member States, which are legally obliged by the Treaty on theFunctioning of the EU (Articles 310, 323) to provide funds to meet all EUsobligations
Investors in EU bonds are ultimately exposed to the credit risk of the EU, not tothat of the beneficiaries of loans funded
EU may not borrow to finance a budget deficit
EU budget does not assume any interest rate or foreign exchange risk
Borrowings are zero-risk weighted
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What determines EU funding?
Funds raised lent back-to-back to beneficiary country
Specific Council Decision determines amount of country programme, instalmentsand maximum average maturity of loan package
Loan disbursements depend on compliance with policy conditionality, subject to
EU/IMF/ECB quarterly reviews Funding exclusively denominated in euro
Maturities: 5 - 30 years
Syndicated bond issues, no auctions
Established liquid yield curve as pricing reference
Lead managers committed to secondary market liquiditySecondary market turnover 2011 (14 EU bonds): 40 billion
EU bonds in indexes:
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Index EU weighting
iBoxx EUR Sub-sovereigns index 4.97%
JPM Maggie Euro Credit Index 2.33%
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EU funding 2011: 7 benchmark issues
EFSM: 28 bn for loans to Ireland and PortugalBoP: 1.2 bn for a loan to Romania
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Bonds issued in 2011
Amount Maturity Raised on Beneficiaries
5.0 bn 5 yr 5 January Ireland
4.6 bn 7 yr 17 March 3.4 bn Ireland, 1.2 bn Romania
4.75 bn 10 yr 24 May 3 bn Ireland, 1.75 bn Portugal
4.75 bn 5 yr 25 May Portugal
5.0 bn 10yr 14 Sept. Portugal
4.0 bn 15yr 22 Sept. 2 bn Ireland, 2 bn Portugal
1.1 bn 7yr 29 Sept. 0.5 bn Ireland, 0.6 bn Portugal
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EU issuance: 2009 to date
Benchmark Paymentdate
Maturity Amount()
Spread vs. mid
swap (bps)at issu-
ancecurrent
*
EU 3.125 2014 25/02/2009 03/04/2014 1,000,000,000 +30 -43
EU 3.250 2014 26/03/2009 07/11/2014 2,000,000,000 +35 -32
EU 3.125 2015 27/07/2009 27/01/2015 2,700,000,000 +25 -24
EU 2.500 2015 12/01/2011 04/12/2015 5,000,000,000 +12 -11
EU 3.625 2016 06/07/2009 06/04/2016 1,500,000,000 +40 -2
EU 2.750 2016 01/06/2011 03/06/2016 4,750,000,000 flat -2
EU 2.375 2017 22/09/2010 22/09/2017 1,150,000,000 +8 +7
EU 3.250 2018 24/03/2011 04/04/2018 4,600,000,000 +8 +15
EU 2.375 2018 06/10/2011 04/10/2018 1,100,000,000 +15 +16
EU 3.375 2019 10/03/2010 10/05/2019 1,500,000,000 +20 +32
EU 3.500 2021 31/05/2011 04/06/2021 4,750,000,000 +14 +51
EU 2.750 2021 21/09/2011 21/09/2021 5,000,000,000 +20 +50
EU 2.750 2022 04/05/2012 04/04/2022 2,700,000,000 +56 +53EU 3.000 2026 29/09/2011 04/09/2026 4,000,000,000 +40 +58
EU 3.375 2032 05/03/2012 04/04/2032 3,000,000,000 +78 +74
EU 3.375 2038 24/04/2012 04/04/2038 1,800,000,000 +87 +84
EU 3.750 2042 16/01/2012 04/04/2042 3,000,000,000 +125 +93
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* mid swap levels as of 21 May 2012
Source: Bloomberg
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Investor distribution
11 EU benchmark issues 2011 to date:
39.7 bn*
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* 38.5 bn EFSM + 1.2 bn BoP
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Latest transaction: EU2.7 bn benchmark due April-2022
Key terms Investor distribution by region
Investor distribution by type
Issuer European Union (EU)
Represented by theEuropean Commission
Rating AAA/Aaa/AAA
Bloomberg Ticker EUGuarantee 27 Member States
Tenor 4 April 2022
Size 2.7 billion
Format 2.75%, annual coupon, Act/Act
Spread Mid-swaps +56 basis points
Risk Weighting 0%1
Lead Managers Crdit Agricole CIB, DZ Bank, J.P. Morgan,Morgan Stanley, Socit Gnrale CIB
Payment Date 4 May 2012
Market Eurobond
Listing Luxembourg Stock exchange
Denominations 1,000
ECB Eligible Yes, category 2
Law English
1. Basel Committee on Banking Supervision, Article 56, p20. "Claims on the Bank forInternational Settlements, the International Monetary Fund, the European Central Bankand the European Community may receive a 0% risk weight."
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Directorate-General ECFIN, Directorate L
12 Rue Guillaume Kroll, L-1882 Luxembourg
Gerassimos THOMAS, DirectorTel: +352 4301 34067
Email: [email protected]
ECFIN L-04 Borrowing and Lending
Direct access to investor relations site: http://ec.europa.eu/economy_finance/eu_borrowerGeneral ECFIN website: http://ec.europa.eu/economy_finance
Bloomberg: EUEU
Javier GARCIA LON, Head of UnitTel: +352 4301 36372
Email: [email protected]
Contacts European Commission
Stefan KOHLER, Senior Borrowing ManagerTel: +352 4301 37453
Email: [email protected]
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Daniel KOERHUIS, Senior Borrowing ManagerTel: +352 4301 32845
Email: [email protected]
Herbert BARTH, Senior Borrowing AdviserTel: +352 4301 36182
Email: [email protected]
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