Cyprus has EU’s highest stock of NPLs

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Cyprus has the EU’s highest stock of non-performing loans (assets) of the general government, according to Eurostat data.

The share of non-performing loans over the country’s GDP stood at 28.3% in 2020, a far larger share than other EU states.

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, most 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 for the COVID-19 pandemic.

The most common form of contingent liabilities in the EU is government guarantees on liabilities, and occasionally, on assets of third parties.

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.

However, 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 public financial 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.