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. Last Updated: 07/27/2016

EU Moves To Balance Credit Woes

BRUSSELS -- The European Commission presented proposals Wednesday to harmonize export credit insurance schemes to stop unfair competition and cut spiraling losses in member states.

Over the past three years, EU governments have lost $9 billion as a result of cut-throat competition and claims linked to the collapse of the Soviet Union, the Gulf War and the international debt crisis.

As a result member states have started to show interest in common export credit rules after 30 years of stonewalling.

"It's a first step, further steps will be needed in the EU and the OECD to avoid the distortion of competition and ensure equal cover," Allan Dalvin, head of the Commission's export credits unit, told a press briefing.

The EU, which insures nearly $40 billion of medium and long-term export business annually, representing 70 percent of world credit insurance, hopes other countries will follow its lead.

"Japan is working on a similar model. Only the U.S. has a different approach," Dalvin said.

The Commission's aim is to fix premiums that reflect the risk involved and broadly cover the long-run costs of claims.

Buyers' credits would cover up to 95 percent and sellers' credits up to 90 percent of contracts of more than one year but higher cover could be offered to match terms of the United States and other competitors.

Britain, which has granted 100 percent guarantees, would lower its cover but British exporters are also likely to pay lower premiums.

The Commission set guidelines for the types of risk to be covered as well as for the insurance premium -- the cost of the guarantee -- according to the threat involved.

The Commission also seeks to define the amount of extra cover that may be granted certain countries in view of special political or trading links, such as between France and North Africa or between Britain and its former African colonies.

"The Commission is not in an ivory tower, out of touch with the real world," said Dalvin, adding he hoped trade ministers would adopt the proposals by the end of the year.