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Planned guarantee scheme incompatible with EU rules

The European Commission said Thursday that a planned scheme for providing short-term export credit guarantees to Hungarian SME exporters and their foreign clients is incompatible with EU rules as risks covered by the guarantees are too wide and give Hungarian exporters an unfair competitive advantage over companies in other member states.

The European Commission said Thursday that a planned scheme for providing short-term export credit guarantees to Hungarian SME exporters and their foreign clients is incompatible with EU rules as risks covered by the guarantees are too wide and give Hungarian exporters an unfair competitive advantage over companies in other member states.

The scheme, to be operated by Hungary’s Eximbank, would provide short-term export-credit guarantees against the non-repayment of loans to finance exports by Hungarian SMEs with a total annual export turnover of less than €2 million. The guarantee could cover both the exporting SMEs, or their foreign clients. Hungary claimed, that such guarantees are not available from commercial sources and notified the Commission. EU rules allow member states to provide export-credit insurance only to cover the risks of non-payment by the foreign buyer for goods or services exported on credit terms in cases where no private insurance is available and if the premium rates charged are sufficiently high.

The Hungarian scheme, however, would also cover domestic risks of the exporting SMEs, and it would directly improve the ability of the foreign buyer to obtain a loan from a commercial bank, thereby giving the exporting SMEs an unfair advantage. The Commission noted, that it approved in January 2007 a Hungarian short-term export-credit insurance aid scheme run by Magyar Exporthitel Biztositó, which should be appropriate to tackle the alleged market failure. (MTI-Econews)