EN 
 
 EUROPEAN COMMISSION 
Brussels, 24.2.2011 
SEC(2011) 240 final 
  
COMMISSION STAFF WORKING PAPER 
The Economic Adjustment Programme  for Greece Third review – winter 2010 
  
Accompanying document to the Communi cation from the Commission to the 
Council: Follow-up to the Council Decision 2010/320/EU addressed to Greece, with 
a view to reinforcing and deepening fiscal  surveillance and giving notice to Greece 
to take measures for the deficit reduction  judged necessary to remedy the situation 
of excessive deficit 
COM(2011) 85 final 
EN EN
OUTLINE OF THE REPORT 
iii Executive summary and conclusion          1 
 
1. Introduction                        3 
 2. Macroeconomic de velopments and outlook        5 
 
3. Financial markets and financial  sector developments    12 
 
4. Programme implementation and policy discussions     17 
4.1 Fiscal policy          17  4.1.1 Fiscal developments in 2010      10 
 4.1.2 Fiscal policy in 2011       19 
 4.1.3 Fiscal policy in 2012 and beyond     21 
 4.2 Structural fiscal reforms       25 
 4.2.1 Public administration       25 
 4.2.2 Pension and healthcare reforms     26  4.2.3    Fiscal institutions    20 
 4.2.4 Health care and education reforms     20 
 4.3 Fiscal financing and treasury management     28 
4.4 Growth-enhancing structural reforms     29 
 4.4.1  Labour market reforms      30 
 4.4.2  Energy and transport       32 
 4.4.3 Investment, export and R & D promotion    33 
 4.4.4.  Other reforms to im prove business environment and 
           strengthen competition      33 
 
Annex 1 Assessment of compliance  with required action for the 
t h i r d  r e v i e w          3 7  
A n n e x  2   P r o v i s i o n  o f  d a t a         5 9  
Annex 3 Macroeconomic forecast       65 Annex 4 Financing needs and sources      66 
Annex 5 Statement by the European Commission, the ECB and IMF on  
the third review Mission to Greece      72 
Annex 8 Updated programme documents     67 
    L e t t e r  o f  i n t e n t       6 7  
    Memorandum of Economic and Financial Policies  71  Memorandum of Understanding on Specific Economic 
P o l i c y  C o n d i t i o n a l i t y       8 3  
    Technical Memorandum of Understanding             115  
LIST OF BOXES 
 
  1. Export growth drivers         9 
  2. State aid to financial institutions in the context of the financial crisis 15 
  3. From cash accounts to ESA95 accounts      19   4. Reforming the tax collection mechanism     25 
  5. Reforming the healthcare system: improving efficiency and  
q u a l i t y  o f  h e a l t h  s e r v i c e s        2 7  
  
 
vi   6. Financing profile in a medium-term perspective       29 
  7. Labour market reforms       30   8. The reform of professional services      34 
 
LIST OF TABLES 
 
1. Disbursements under the economic  adjustment programme     4 
2. Contribution by the euro-area me mber states to disbursements to  
 Greece                                 4 
3. Macroeconomic scenario: main features        8 
4. Banking sector soundness indicators       15 
5. Summary of compliance with cond itionality for end-December 2010  17 
6. Quantitative performance criteria and outcomes     18 
7. Deficit accounting: from the deficit in one year to the next   22 
 
LIST OF GRAPHS 
 
1. Real GDP growth                       5                                     
2. Employment and unemployme nt rate                         5 
3. Nominal Unit Labour Cost                      5 
4. Exports and non-domestic orders         6 
5. HICP inflation developments and projections                               6 
6. HICP inflation main drivers developments                     7 
7. Current account and net external liabilities       8 
8 .  Y i e l d  s p r e a d s          1 2  9 .  B a n k  d e p o s i t s          1 4  
10. Greek banks' borrowing from the ECB       14 
1 1 .  C r e d i t  t o  p r i v a t e  s e c t o r         1 4  12. Non-performing loans                          14 
13. Holding of Greek government debt                                 15 
14. State primary payments                    18 
15. (Available) government primary balance        18 
16. Public debt sustainability scenarios       24 17. T-bill auctions since May 2010       28 
1 8 .  M a t u r i n g  d e b t          2 8  
  
 
  
 
  
 
  
 
v 
3  
  
 
  
 
  
 
  
 
ACKNOWLEDGEMENTS 
 
The report was prepared in the Directorate General Economic and Financial Affairs under the 
direction of Servaas Deroose, Deputy Director-General.  
Contributors: 
Servaas Deroose, Uwe Boewer, Giuseppe Carone, Fotini Dionyssopoulou, Leila Fernández 
Stembridge, Loukas Kaskarelis, Filip Keereman , Daniel Kosicki, Luis García Lombardero, 
George Moschovis, João Nogueira Mar tins, Elena Pavlova, Milda Valentinait ė, Peter Weiss and 
Ana Xavier, and Danila Malvolti. Christos Zavos was responsible for the layout. 
The report was prepared in  liaison with the ECB. 
Comments on the report would be gratefully recei ved and should be sent, by mail or e-mail to: 
João Nogueira Martins, 
European Commission, Unit ECFIN-F-3, BU 1  01-140 B-1040 Brussels e-mail: joao.nogueiramartins@ec.europa.eu 
 
   
  
 
vi  
  
 
EXECUTIVE SUMMARY AND CONCLUSION 
 
1  
A joint Commission/ECB/IMF mission met with th e Greek authorities in Athens on 27 January–10 
February 2011. The mission assessed compliance with the terms and conditions of the third review under the economic adjustment programme and updated conditio nality for the next reviews. Completion of the 
review will release the fourth tranche of financial assistance from euro-area Me mber States to Greece 
(EUR 10.9 billion) according to the loan facility agreement. Completion of the IMF review under the stand-by arrangement is expected to release an additional EUR 4.1 billion.  
 
The programme's objectives remain intact . The objectives of the adjustment programme are financial 
stability and adequate liquidity in the banking sector, reduction in fiscal deficit to bend the increasing dynamics in the government debt-to-GDP ratio, and a change to a growth model based on exports and investment, to ensure growth and jo bs and the sustainability of the ex ternal accounts. As this compliance 
report documents, these objectives remain intact. Desp ite a number of hurdles, including a tense financial 
situation, contagion from other peripheral economies, persistent slippages in tax collection and delays in the adoption of complex and far-reaching structural reforms, the programme is broadly on track. However, determination in the im plementation of economic policy is necessary for the programme to 
remain on track.  
The main features of the macroeconomic scenar io remain valid, but growth composition needs 
reshaping . Economic activity contracted by 4.5 percent in 2010, broadly as planned when the adjustment 
programme was designed. However, available data suggest that the downturn in domestic demand, mainly private consumption, was deeper than expected, while exports and non-domestic orders were strong at the end of 2010. The inflexion point of activity is estimated to sit in Q4-2010, while positive quarterly growth rates are expected to be recorded in the second half of 2011. The progressive rebalancing of the economy, supportive external de mand and growth-friendly reforms will move the 
economy back to its potential. Growth rates for 2012–14, which underlie the programme, are prudent. Inflation at constant tax rates is hovering zero and are expected to remain moderate, despite commodity price-related upward risks. 
Most fiscal criteria for 2010 have been met, but ac tion is needed for the 2011 fiscal targets to 
remain credible . A severe contraction in payments by the end of the year offset large shortfalls in tax 
collection, thus resulting in the fulfilment of the cas h-based quantitative criteria. The ESA fiscal deficit – 
which has a wider coverage and refers to underlying expenditure commitments rather than cash outflows – is estimated to have exceeded its ceiling by 1½ percen t of GDP, as already projected at the time of the 
previous review in November. This slippage was in part  because of the revision of historical statistics in 
autumn. Fiscal policy in 2011 aims at further reduci ng the deficit-to-GDP ratio, effectively cutting it to 
less than half the peak of 2009. However, meeting and over achieving those targets will require discretionary actions beyond the measures in the budget and an enhancement of the mechanisms to monitor expenditure commitments, and to ensure a successful fight against pervasive tax evasion. 
The government is preparing its medium-term fiscal strategy . Fiscal consolidation measures adopted 
in the course of 2010 and in the budget for 2011 have been in excess of 14½ percent of GDP and aim at reducing the deficit ratio in two years (from 2009 to planned 2011) by around 8 points of GDP. However, the primary balance is still negative in 2011 and the increasing debt dynamics has not been stopped. The 
government has committed to identify additional consolidation measures, which will be implemented in 2012-14, so that fiscal targets are met. On current pr ojections, these measures will have to be of at least 8 
percent of GDP, though part of this total has already been identified.   
Following a slowdown in momentu m in autumn, a wave of structural reforms is now underway . 
After some early reforms adopted before the summer 2010, including a landmark pension reform and a first leg of labour reforms, the structural reform mo mentum lost traction last autumn, and there have been 
delays compared to earlier policy commitments. A law to further liberalise the labour market was adopted 
European Commission 
The economic adjustment programme for Greece  
 
 
2 at the end of the year, with a reform of collective ba rgaining and other associat ed measures: its ambition 
was below expectations, though time is necessary to assess its effectiveness. Several other reforms are being prepared. The removal of unnece ssary hurdles to the access and exerci se of professions is a flagship 
reform of the whole adjustment programme. The re form of the national healthcare system aims at 
reducing costs without endangering the quality of care. A number of business environment-related measures, such as a new investment law, a new competition law or new rules on licensing have been adopted are approaching parliame ntary proceedings. Irrespective of  the urgency in adopting these 
reforms, it is critical to ensure the quality and ambition of legislation, and determined and effective implementation. 
The banking sector is stable, but tense . The liquidity situation of banks remains tight; the outflow of 
deposits has not yet stopped. The collateral buffers of banks keep declining and the situation is likely to deteriorate due to changes in the ECB collateral framework and sovereign rating downgrades. Another 
tranche of the government-guaranteed bond scheme may be necessary in the course of the year.  However, a number of banks are improving their so lvency ratios by increasing share capital, selling 
subsidiaries abroad and cutting costs. No bank has had to get financing from the Hellenic Financial Stability Fund so far.    
Greece is suffering from contagion from  other peripheral euro-area economies . In order to convince 
markets, the programme benchmarks will have to be  overachieved in the course of 2011. However, 
improvements in investor sentiment vis-à-vis Gr eece will depend very much on progress in the EU 
stability mechanisms. Therefore, progress in fiscal consolidation, structural reforms and growth prospects in Greece are a necessary but no longer a sufficient condition for confidence. A lthough a final decision on 
the extension of maturities would help overcoming the 2013 and 2014 financing humps, the main question that the markets are asking now is whether Gr eece will be able to return to the markets in 2012 
to finance a substantial part of its long-term financing needs. In this respect, the recent decision by the Greek government to privatise assets worth EUR 50  billion in five years may substantially help in 
overcoming the immediate post-programme years. 
There is an intense debate on debt manag ement transactions to reduce the debt stock . These 
operations could cover buy-backs, rolling-over of debt s or the voluntary extension of maturities. These 
transactions could be done by Greece with or withou t the support of EU facilities, without imposing a 
cost on creditors. Irrespective of the merit of those actions – which this report does not discuss – they would not do more than a small cont ribution to budgetary sustainability and financial stability in Greece. 
Therefore, this debate and those actions if implemented, must not reduce the political determination to, or distract the public opinion from, fiscal consolidation, privatisation and growth-enhancing structural reforms. 
 
———————  
  
Subject to approval by the Eurogroup, the po sitive assessment of compliance with programme 
conditionality will release the fourth tranche of th e loan from euro-area Member States (EUR 10.9 
billion).  Overall, the mission concluded that the conditions for the fourth disbursement were broadly met. 
The government remains committed to the adjustment prog ramme. In particular, the fiscal target for 2011 
is within the interval of credible outcomes, and a wave of structur al reforms is being prepared. The next 
steps in the implementation of the programme keep requiring the government's determination, political coordination and the consensus of the Greek society. 
1. INTRODUCTION  
 
 
3 1. This report assesses compliance with the condition s of the third review of the Greek adjustment 
programme. The assessment is based on the Greek government's quarterly progress report and the 
findings of the joint Commission/ECB/IMF review mission to Athens (27 January-10 February 2011). The mission assessed compliance with conditionality associated to the fourth disbursement and progress towards the key programme objectives of safeguarding the stability of the financial system, securing fiscal sustainability, and boosting competitiveness, potential growth and jobs. The mission discussed policy challenges and updated conditionality requirements for the next quarters. Updated memoranda were agreed with the authorities on 11 Fe bruary 2011 and are attached to this compliance 
report.
* 
2. In May 2010, the euro-area Memb er States and the IMF provided  financial support to Greece 
given the deterioration of its financing conditions.  On 2 May 2010, the Eurogroup agreed to 
provide bilateral lo ans pooled by the European Commission fo r a total amount of EUR 80 billion to 
be disbursed over the period May 2010-June 2013. The financial assistance provided by the euro-area Member States is part of a joint package, with  the IMF financing additional EUR 30 billion. This 
financial assistance package fully covers government financing needs related to its fiscal deficit and 
maturing medium- and long-term liabilities until the beginning of 2012, and progressively less thereafter. During the whole prog ramme duration, Greece keeps its access to short-term financing. 
3. Three instalments have already been  disbursed under the programme. After the fourth 
disbursement, which, if approved by  the Eurogroup and IMF board, is  expected to take place by mid-
March 2011, four tenths of the full package will have  been disbursed. Two euro-area Member States – 
Ireland and Slovakia – are currently not participating in the disburseme nt of bilateral loans to Greece. 
Given the conditions of the loan facility agreement between Greece a nd the euro-area partners, this 
has no material impact on amounts that have already been paid or that are planned to be paid to Greece in 2010-12, as the relatively small shares of those two countries  to the total euro-area loan to 
Greece are being redistributed among other partners.  
                                                          
 
*  This compliance report is released together with the Commission Communication "Follow-up to the Council Decision of 
10 May 2010 addressed to Greece" (COM (2010) [ xxx]) of 24 February 2011. 
 The quarterly report submitted on 12 February 2011, by the Greek Ministry of Finance is  available for download at: 
http://ec.europa.eu/economy_finance/s gp/deficit/ countries/greece_en.htm. 
During the review mission in Athens, the Commission/ECB/IM F staff teams met with the ministers of Finance, of 
Regional Development and Competitivene ss, National Defence, Energy and Environment, Labour and Social Security, 
Health and Social Solidarity, Interior and e-Government, as  well as with the governor of the Bank of Greece. Moreover 
the teams met with staff of these ministries and the central ba nk, as well as of the ministries of Infrastructure, Transport 
and Networks, Culture and Tourism, Education, Public De bt Management Agency, Helleni c Financial Stability Fund, 
Hellenic Statistical Authority, Hellenic Capital Markets Committee and Hellenic Compet ition Commission. Meetings 
also took place with social partners, think-tanks and several banks. 
European Commission 
The economic adjustment programme for Greece 
 
 
4 Table 1. Disbursements under the economic adjustment programme (EUR billion) 
 
Total
1st tranche 18 May 2010 14.5 12 May 2010 5.5 20.0
2nd tranche 13 September 2010 6.5 14 September 2010 2.5 9.03rd tranche 19 January 2011 6.5 21 D ecember 2010 2.5 9.0
Total past disbursements 27.5 10.5 38.0
Total
4th tranche March 2011 10.9 March 2011 4.1 15.0
5th tranche June 2011 8.7 June 2011 3.3 12.0
6th tranche September 2011 5.8 September 2011 2.2 8.0
7th tranche December 2011 3.6 D ecember 2011 1.4 5.0
8th tranche March 2012 7.3 March 2012 2.7 10.09th tranche June 2012 4.4 June 2012 1.6 6.010th tranche September 2012 4.4 September 2012 1.6 6.011th tranche December 2012 1.5 D ecember 2012 0.5 2.0
12th tranche March 2013 4.4 March 2013 1.6 6.013th tranche June 2013 1.5 June 2013 0.5 2.0Total planned disbursements 52.5 19.5 72.0
Total programme 110.0Past disbursements
Euro-are a M e mbe r State s IM FEuro-are a M e mbe r State s IM F
Planned disbursements
Source : Commission services and IMF. 
 
 
Table 2. Contributions by the eu ro-area Member States to disbur sements to Greece (EUR million) 
 
BE DE IE ES FR IT CY LU
May 2010 0.0 4427.9 0.0 1941.6 3325.2 2921.9 32.0 40.8
September 2010 758.8 1495.9 347.4 656.0 1123.4 987.2 10.8 13.8
January 2011 238.8 1864.4 0.0 817.5 1400.1 1230.3 13.5 17.2
MT NL AT PT SI SK FI Total
May 2010 14.8 932.5 454.0 409.3 0.0 0.0 0.0 14500.0
September 2010 5.0 315.0 153.4 138.3 102.9 0.0 392.2 6500.0
January 2011 6.2 392.6 191.2 172.3 32.4 0.0 123.4 6500.0  
Source : Commission services. 
 
 
2. MACROECONOMIC DEVELOPMENTS 
 
5 4. The economy is contracting fast but the quarter of deeper contract ion should be already behind 
us. After a contraction by 5½ percent (year-on-year) in the second and third quarters of 2010, on 
average, the economy is estimated to  have narrowed by 6½ percent in the last quarter of the year. For 
the year as a whole, real GDP growth was -4.5 pe rcent. In 2010, private consumption fell by more 
than 4 percent, with a particularly strong contractio n in the fourth quarter, consistent with a drop in 
consumer sentiment and a fall in credit to households, which resulted in a sharp deterioration in retail 
sales. In addition, employment and wage developm ents weighted on households' disposable income, 
in particular at the end of 2010: the full effect of public sector wage and pension cuts, including the year-end seasonal bonuses, which used to have a ve ry large propensity to consume, materialised only 
at the end of the year. Investme nt recorded very negative readings, as business sentiment was 
depressed, capacity utilisation well below the hi storical average and credit supply restrained. 
Graph 1. Real GDP growth
-7-5-3-11357
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-3-2-10123
% change, q-o-q (rhs)
% change, y-o-y (lhs)Break in series
Source : EL.STAT and Commission services.
 
Graph 2. Em ployment and unem ployment rate Gra ph 3. Nominal unit labour cost (annual growth rate )
-5-4-3-2-101234
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-100246810121416
Employment (% change, y-o-y) (lhs)
Unemployment rate (rhs)
 -2024681012
2000 2002 2004 2006 2008 2010 2012Greece
EA-16
 
Source : EL.STAT.  Source : EL.STAT .
 
 5. The strength of external demand at the end of 2010 is encouraging.  Although complete data on 
the composition of demand are not yet available, high frequency indicators – such as monthly data on exports of goods and non-domestic orders – suggest a rebound in exports in autumn. Such a development reflects an improvement in the economi c climate of Greece's main trading partners and 
gains in price competitiveness. Moreover, asymmetric developments in the domestic and global markets are prompting a diversion of Greek firms to foreign markets. This augurs well for the necessary change in the economy's growth model, w ith a shift of resources from the sheltered sectors 
to exports. Forecast
European Commission 
The economic adjustment programme for Greece 
 
 
6 Graph 4. Exports and non-do mestic industrial orders 
-40-30-20-1001020304050
Jan-08 Jan-09 Jan-10-60-40-20020406080E xports of goods 
(% change, y-o-y, lhs)
Industrial non-domestic orders 
(% change, rhs)
 
Sources: EL.STAT and Bank of Greece.
 
 
6. Inflation has surprised again on the high side . Inflation may have already passed its peak – in 
September the annual growth rate reached a peak of 5.7 percent – but remains stubbornly high. For 2010, average consumer price inflation was 4.7 percent. In January 2011, HICP increased by 4.9 percent (year-on-year). These growth rates are bein g driven by the tax increases adopted in several 
waves over the last twelve months: for 2010 as a whol e, the tax component of the inflation rate was in 
excess of 3½ percentage points. Constant-tax infl ation has touched negative territory in November, 
and this indicator is expected to be  very moderate in the near future. 
 
Graph 5. HICP inflation developments and projections (% change, y-o-y) 
-2-10123456
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 %
GR-Headline inflation
GR-At constant taxes
EA-16-At constant taxes
Source: EL.STAT.  Forecast
2. Macroeconomic developments 
v 
7 Graph 6. HICP inflation main driver s developments (% change, y-o-y) 
02468
Jan-07 Jan-08 Jan-09 Jan-10%
048121620Headline inflation (lhs)
Alcohol (rhs)
Transport (lhs)
 0123456789
Jan-07 Jan-08 Jan-09 Jan-10%
-30-20-1001020304050Core inflation (lhs)
Processed food (lhs)
Energy (rhs)
 
Source: EL.STAT.  Source: EL.STAT.
 
7. The mission revisited the macroeconomic scenario  in light of new, albeit limited, evidence:  
• Economic activity should start growing in the second half of 2011. GDP is projected to decline 
by 3 percent in real terms in 2011. This re mains unchanged as compared to the previous 
compliance report. However, the composition of demand has changed with stronger net exports and weaker internal demand as higher consumer prices compress disposable income: during the three years 2009-11, per capital private consump tion is falling by around. 10 percent The average 
growth rate for the year as a whole hides substantial differences in quarterly growth rates – positive growth rates are expected for the second ha lf of the year – and a strong negative carryover 
coming from 2010. Risks to the macroeconomic scenario for 2011 and onwards are balanced. These risks are related to both the strength of  external demand and domestic developments. In 
particular, risks on net exports are on the upside, but less favourable employment could depress income and consumption.  
• The inflation outlook has been revised upwards. HICP inflation is projected to moderate from 
4.7 in 2010 to 2.4 percent in 2011. This is in spite of the VAT increase in  January 2011, the plans 
to increase excises on heating oil in autumn and the cost recovery in the tariff policy of state-
owned enterprises. The forecast has been slightly revised upwards, mostly due to revised prospects for commodities and oil prices. Constant-tax inflation is expected to be negative during 2011 and to remain close to zero thereafter. This forecast does not yet fully reflect the impact of 
the ongoing structural reforms, which will contri bute to productivity, competition and higher price 
flexibility. Therefore, prices could fall by more th an in the central scenario. However, there are 
also upward risks in relation to import prices. Over all inflation is expected  to decelerate markedly 
in the course of 2011 and to remain below or around 1 percent in 2012-13. 
• The labour market is adjusting fast. There is evidence of strong downward pressure on labour 
costs, in particular non-basic pay, as the cuts in public sector wages spill over the private sector 
and firms endeavour to recover competitiveness, and to absorb indirect taxes in their margins and costs. Employment has contracted in 2010 and is projected to decline further by some 2½ percent in 2011, with the unemployment rate peaking at above 14¾ percent – higher than previously projected. On the other hand, a symmetric faster rebound of employment in the recovery phase is possible, especially if ongoing labour market reforms are implemented as planned, and the economy is successful in swiftly reallocating reso urces from the non-traded sectors to tradables. 
Wage projections remain very subdued in line with the national collective agreement of July 2010 (for minimum wages, but which also play a guiding role for other wages as well).  
European Commission 
The economic adjustment programme for Greece 
 
 
8 • The external deficit is contracting, but remains high. The current accoun t was marginally 
below 11 percent of GDP in 2010, and is estimated to decline to about 8 percent in 2010. This 
improvement resulted mainly from a contraction in imports (by more than 6 percent in real terms), while the strong exports in the last months of 2010 have only partially offset anaemic external demand in the first half of the year. For 2011 and beyond, the external current account is projected 
to fall to 6¼ percent of GDP in 2012 and 5 percent in 2013. The net external debt-to-GDP ratio is projected to increase to 134 percent to in 2012 and stabilising after then.   
8. The success of the programme and the orderly ad justment of the Greek economy depend very 
much on a strong recovery from 2012 onwards. The economy is currently projected to grow by 1 
percent in 2012 and by slightly above 2 percent in  2013 and 2014. These gr owth rates are still below 
potential growth rate for the Greek economy once barriers hampering growth are removed, markets are liberalized, credit flow  normalizes and confidence returns. After three years of contraction in 
economic activity, potential for a larger rebound is substantial if implementation of programme policies proceeds as planned, with key reforms enacted upfront. However, given the necessary large-scale change in the growth model and the need to improve price and non-price competitiveness of 
Greek firms, prudent medium-term projections appear  appropriate and contribute to robust fiscal 
planning.  
Graph 7. Current account a nd net external liabilities 
(percent of GDP)
246810121416
2009 2010 2011 2012 2013 2014%
8090100110120130140150
Net external liabilities  (rhs)
Current external account (deficit) (lhs)
Source:  EL.STAT and Commission services.
 
2. Macroeconomic developments 
v 
9 Table 3. Macroeconomic scenario: main features 
 
Real GDP (growth rate) -4,5 -3,0 1,1 2,1 2,1
Domestic demand contribution* -8,0 -6,2 -1,0 0,8 1,0
Net trade contribution 3,9 3,1 1,8 1,4 1,1
Employment (growth rate) -2,8 -2,6 0,1 0,9 1,2
Unemployment rate (percent of labour force) 12,1 14,7 14,9 14,3 13,5
Unit labour cost (growth rate) -1,1 -0,5 0,2 -0,3 0,0
HICP inflation 4,7 2,4 0,6 0,7 1,1
Current account balance (percent of GDP) -10,6 -7,9 -6,3 -5,0 -4,0Net borrowing vis-à-vis RoW (percent of GDP) -9,5 -6,6 -5,0 -3,6 -2,4
Source : Commission services. * Excludin g chan ge in inventories and net ac quisition o f valuables2012 2013 2014 2010 2011
 
 
 
 
Box 1:  Export growth drivers  
The Greek economic growth in the medium-term is expected to be driven by external trade, as the economy 
shifts to a more sustainable model . GDP growth rates have been negative si nce Q4-2008 and activit y is expected to 
further shrink in the first half of 2011, on the back of contraction in private and public consumption and sluggish 
investment. Net exports are the only GDP component which is  estimated to have exhibite d a positive contribution to 
growth in 2010. This reflected both st rongly falling imports, and s lightly positive growth in exports in 2010, after a 
20 percent slump in the previous year. Exports are expected to rise by around 5 percent in real terms in 2011, as 
demand from trade partners accelerates and Greece recovers  competitiveness. Given the losses in market share of 
goods and services exports accumulated during the pre-cris is decade, exploiting the potential of the underdeveloped 
external sector of Greece will pl ay a key role in driving economic activity in the coming years.   
Greece is a relatively closed economy with a structural trade deficit. Considering its size, the Greek economy is 
surprisingly closed, with imports at 30 percent, and exports of not more than  19 percent of GDP (2009 data). During 
the last decade, the goods and services  deficit was systematically above 10 percent of GDP, though it fell slightly 
from 13½ percent in 2000 to 10¾ percent in 2009. The de ficit in goods trade of 16½ percent of GDP in 2009 was 
only partly mitigated by a surplus in services of 5¾ percen t. Therefore, while there is a large unexploited potential, 
the small size of Greek exports mean that very dynamic gr owth rates will be necessary to pull the whole economy.  
Mapping the sectoral market shares and global export demand helps in identifying the opportunities and 
shortcomings of the Greek export sectors. Graphs 1 and 2 show Greece's major export sectors in goods and 
services, in perspective of market sh ares and global export dynamics. Sectors with above-average growth rates in 
world markets are shown above the horizontal axis. To the ri ght of the vertical axis, Greek export sectors that have 
increased their market shares are found. The top right quadr ant, therefore, identifies the most promising sectors, 
benefiting from dynamic world de mand and enjoying relatively large market shares. Sectors located in the top left 
quadrant imply growth opportunities since world demand for th ese products is above-average, while Greece's market 
share is still weak and could be expanded. Sectors in  the bottom right quadrant, on the other hand, are well 
represented in Greece's exports and could yield sizeable ear nings, but world demand has not been, or is not expected 
to be, dynamic. Finally, the sectors in the bottom-left quadrant are the least promisi ng, characterised by sluggish 
world demand and low Greek market shares. The size of the bubbles is proportional to the share of each sector in 
total Greek exports of goods and services. This mapping s uggests that Greece's most promising export sectors are 
pharmaceuticals, petroleum products and transport services, while the outlook for tourism is mixed. 
Graph 1. Mapping of opportunities for Greek exports of goods 
European Commission 
The economic adjustment programme for Greece 
 
 
10 -7-5-3-11357
-0.5 -0.3 -0.1 0.1 0.3 0.5
Evolution of the Greek market share in world market in percentage points (2000-2009)Growth rate of sector in world market 
compared to the average in percentage 
points (2000-2009)Pharmaceuticals
Petroleum products
Non-metallic 
mineralsMisc.manufactures
Man. of metalsIron and 
s teel
Fish
TobaccoNon 
ferrous
Vegetables 
and fruits Apparel and 
clothingOth.transp. 
equipment
CerealsTextiles
Electrical 
machinery
Source: Comtrade 
Graph 2. Mapping of opportunities  for Greek exports of services 
-6-4-20246
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5
Evolution of Greece's  market s hare in the world 
exports of services (in percentage points, 2000-2009) Growth rate of sector in world
market compared to the average (in 
percentage points, 2000-2009)Transport
Personal, culture and 
recreational servicesOth.business 
se rvice s CommunicationsConstructionFinancial servicesComputer and 
information
Insurance
Travel
 
Pharmaceuticals are among the most promising export sectors. Greek pharmaceuticals are characterised by both 
growing market share and above-average world export grow th over the last decade. Th e presence of multinational 
pharmaceutical companies in Greece offers the opportunity  for knowledge spill-overs and access to R&D resources 
which have been scarce in Greece due to the large share of SMEs. Significant investments are underway in this sector 
and an effort to promote FDI and improve the R&D framework could help to further improve competitiveness.  
Greece's petroleum sector has benefited from dynamic world markets and new projects are in the pipeline.  
Greece operates ten oil terminals and four major refineries with a total crude oil refining capacity of 
490 000 bbl./day, of which one third is exported. Greece's oil product exports increased by 57 percent in 2004-09. 
However, the feedstock is largely imported, thereby lim iting the domestic value added.  Future prospects of the 
petroleum sector may be fuelled by an envisaged new oil pipeline connecting Greece and Russia via Bulgaria, 
bypassing Turkey's Bosporus. The pipeline is  expected to commence operation in 2013. 
Greece's market share of transport services has grown fast, although global dyna mism in this sector was 
sluggish.  Greece's sea transport sector further increased its al ready dominant market share in recent years. The Greek 
maritime fleet is the largest in the world in terms of capacity. In the short-term, prospects for shipping remain 
difficult and uncertain, due to oversupply. In the medium to longer term, however, Greece could strengthen its role as 
a regional transportation hub and gateway to Southern Eastern Europe, provided th at the infrastructure of other means 
of transport and their connectivity were sufficiently upgraded. The contin uing rise in Chinese demand for 
containerised exports, already making up a quarter of th e world total, also strengthens Greek potential.   
The Greek tourism sector has lost ground but bears the potential for higher growth contributions. The 
contribution of tourism to GDP has been constant at around 15 percent since 1990. However, Greece has fallen 
behind its most important competitors. While Greece's tourist receipts grew by 57 percent in 2000-09, they rose by 
116 percent in Egypt, 178 percent in Turkey and 219 percent in Croatia during the same pe riod. As a result, Greece's 
world ranking in tourist receipts fell from rank 11 to 15. Greek tourism suffers from over-concentration of 65 percent 
2. Macroeconomic developments 
v 
11 of supply in only four geographical regions and an intense s easonality of demand with 50 percent of arrivals within 
three months. According to tourism experts, a new growth model to better develop the unexploited potentials of the 
tourism sector would include facilitating investment in the tourism sector by fast-track procedures and zoning 
simplifications; improving the coordination of tourism promotion efforts; creatin g a better marketing infrastructure 
via web applications and prom oting niche markets such as winter holiday  homes; developing more synergies with the 
culture, sports, education, me dical and gastronomy sectors,  and investing in technology and human resources with a 
view to improving value-for-money and positioning Gree ce as a high-quality tourist destination. Moreover, 
improving airline connections both with the European low-cost network and wi th long-haul emerging market origin 
countries has shown to vitalise the tourism industries in ot her countries and could also enhance Greece's attraction as 
a holiday destination.   
The food and beverage industry has experienced sluggish wo rld market growth but Greek products could 
capitalise on their high quality.  The food and beverage industry is one of  Greece's major export sectors, accounting 
for around 25 percent of manufacturing value added and 12 percent of goods exports. Agriculture and fish add 
another 13 percent. Greek food products generally be nefit from exceptionally high quality and specific 
characteristics. However, the sector suffers from small average firm size, low market prices and difficulties in finding 
markets outside the EU. Greece has been losing ground to its competitors, notably Spain. In Turkey, Greece's market 
share in the food industry has remained constant at ar ound 1.5 percent since the early 1990s, overtaken by that of 
Spain which rose from 0.5 to 2.5 percent during the same period. In Germany, Spain's market share increased from 
12 percent to 17 percent while Greece's shrank from 3 to 2 percent. Opportunities for the Greek food and agricultural 
sector could be exploited by developing the market for traditional products, benefiting from the tendency to 
Mediterranean diets, and healthy and high-quality products.  
The Greek clothing industry has been facing structural challenges , most notably by low-cost competitors, such as 
China and other Asian countries. Graph 1 shows that both apparel and textile have been growing below-average on 
world markets. In 2010, of the Greek textile exports grew by around 12 percent, catching up after a sharp decline in 
the previous year. Unless the Greek text ile industry manages to move to a high -quality niche segment, it is, however, 
unlikely that the textile industry will regain structural competitiveness on world markets. 
The iron/steel and mineral sectors are facing short-term difficulties despite market opportunities. Greece's iron 
and steel sector enjoyed a growing market share and dynamic world demand over the last decade. However, the 
Greek steel industry is relatively sma ll, contributing only around 1 percent to the EU's annual production. Despite a 
strong pick-up in global steel markets of 15 percent in 2010, Gr eece's output contracted by  8 percent. While Turkey's 
growing steel sector exports mostly to the Middle Eastern and North Afri can region, Greece does not seem to 
capitalise sufficiently on thes e neighbouring dynamic markets.  Greece's minerals industry,  although among the EU's 
largest in terms of bauxite, magnesium and nickel, has been suffering from a rela tively small industrial base, lack of 
adequate investment and distance from EU markets. Its world market share has increased since the beginning of the 
decade, but world markets have been growing below aver age. In the medium-term future, the emerging Balkan 
markets could offer new opportunities for growth. The pr ivatisation of a state-owned mining company (LARKO) 
could also help revitalising the sector.  
3. FINANCIAL MARKETS AN D FINANCIAL SECTOR 
DEVELOPMENTS 
 
12 9. Investor sentiment towards Greek sove reign debt remains very negative.   T h e  m a i n  r i s k  
indicators – like CDS spreads and yield spreads vis-à-vis the German government paper for similar maturities – show that financial markets keep a very sceptic view on Greece tapping financial markets from 2012 on. Given investment restrictions and rules by international banks, insurance companies and pension schemes, the current ratings do not help: all three rating agencies now rate Greek 
government paper as junk. Fitch has recently do wngraded the Greek sovere ign rating (from BBB- to 
BB+) and keeps a negative outlook while Moody’s (Ba1) and S&P (BB+) are reviewing ratings.  
Graph 8. Yield spreads
0200400600800100012001400160018002000
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11basis points2 years bond
10 years bond
Note: Greek government bond spreads (2-year and 10-year bonds) vis-à-vis German Bundes. 
 
10. The liquidity situation of banks remains tight. The deposit outflow since the beginning of 
2010 is at 16 percent and the sovereign debt crisis and the concomitant rating downgrade have 
reduced the collateral available for ECB liquidity provision. Market volatility, the changes to the ECB collateral framework and possible downgrades of the sovereign were grounds for further enhancement of the liquidity cushion in the system.  
11. Responding to the need to strengthen balance sheets, some modest deleveraging is ongoing.  
A number of banks have expanded their balance sheets in the course of 2010, however , despite 
the contracting economy. The banks increased their exposure to the Government while they 
modestly deleveraged from the real economy. Total assets of Greek commercial banks increased from EUR 454 billion at the end of 2009 to EUR 465 billion in September, driven by growing holding of government bonds. Total loans and advances of the banking groups decreased from EUR 308 billion to EUR 306 billion at the same time. The average loan-to-deposit ratio in 
Greece was 120 percent at the end of 2010, up from  about 114 percent in 2008-09. The increase 
was mainly due to the shrinking deposits.    
12. The banking sector remains solvent, though  asset quality continued to deteriorate . Despite 
better than expected net interest income in the first nine months of 2010, the Greek banks suffered from losses on their lo an and trading book. The non-pe rforming loans increased to 10 
percent in September 2010, from 7.7 percent at the end of 2009. The corresponding increase in provisioning, especially in the domestic lending portfolio, resulted in a loss for the system on a consolidated basis. Profitability measured by return on assets and equity fell to -0.3 percent and -3.7 percent, respectively, during the first nine months of 2010. The average capital adequacy ration (CAR) at the end of September was 11.4 percent, while the tier I ratio was 10.1 percent.  
13. Some banks carried out successful capital increases on the market.  In October, NBG raised 
EUR 1.8 billion by issuing shares and convertible bonds. A similar operation was completed by Piraeus Bank (EUR 0.8 billion) in early 2011. Other opportunities for improving capital 
4. Programme implementation and policy discussions 
v 
13 adequacy include reduction of risk-weighted assets, including sales of subsidiaries. The latter 
refers to the sale by NBG of a minority stake in Finansbank (Turkey) and the Eurobank sale of a majority stake in Polbank (Poland). Moreove r, the Hellenic Financial Stability Fund (FSF) 
remains available as a capital backstop 
 
Graph 9. Bank deposits Graph 10. Greek banks 'borrowing from the ECB
050100150200250
Jan-07 Jan-08 Jan-09 Jan-10EUR billion
Total deposits Sight deposits
 0100002000030000400005000060000700008000090000100000
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-100510152025Borrowing from the ECB (EUR
million) (lhs)
ECB liquidity as percent of bank'sliabilities (rhs)
Source: Bank of Greece  Source: IMF, FIS 
  
14. The Greek financial system has benefited from various Eurosyst em policies in 2010 and 2011. 
The fixed-rate full-allotment tender procedures in the Eurosystem monetary policy operations have 
eased the funding activity of all banks in the euro area, including Greek banks. Furthermore, the already very flexible collateral framework was further broadened on 3 May 2010 based on the ECB Governing Council's positive assessment of the Gree k adjustment programme. The ECB decided to 
suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purpose of the Eurosystem credit operations, in the case of marketable debt 
instruments issued or guaranteed by the Greek State. This suspensi on, combined with the pre-existing 
flexible collateral framework, eas ed the access to Eurosystem fund ing for all counterparties, in 
particular the Greek ones. In a similar vein, the ECB’s securities markets programme (SMP) helped contain undue volatility in sovereig n bond market prices in Greece an d other peripheral euro area 
economies. 
Graph 11. Credit to private sector (percent change, y -o-y) Graph 12.N o n -performing loans
-5051015202530
Jan-07 Jan-08 Jan-09 Jan-10%
Households
Enterprises
Private sector(total)
 4567891011
2007 2008 2009 2010%
Source: Bank of Greece  Source: Bank of Greece
European Commission 
The economic adjustment programme for Greece 
 
 
14 Table 4. Banking sector  soundness indicators 
basi s 2007 2008 2009 2010-Q1 2010-Q2 2010-Q3
Capital adequacy ratio consolidated 11,2 9,4 11,7 11,7 11,2 11,4
solo (1) 12,7 10,7 13,2 12,3 12,8
Tier I ratio consolidated 9,2 7,9 10,7 10,6 10,1 10,1
solo 9,3 8,7 12,0 11,0 11,2
Return on assets (after tax) consolidated 1,4 0,7 0,2 -0,3 -0,3
solo 1,0 0,2 -0,1 -0,6 -0,6
Return on equity (after tax) consolidated 17,7 10,0 2,4 -4,5 -3,7
solo 14,8 3,2 -1,5 -8,7 -9,7
Loan to deposit ratio consolidated 106,0 114,0 113,8 122,4 120,0
Non performing loan ratio (2) solo 4,5 5,0 7,7 8,2 9,0 10,0
Coverage ratio (3) solo 53,4 48,9 41,5 42,8 43,4 43,2
Source: Bank of Greece. Notes: (1) at the level of the individual entity; (2) Non performing loans as percentage of total gross loans; (3) 
Provisions as percentage of non-performing loans.
 
Graph 13. Holding of Greek government debt 
050100150200250300350400
déc-07 mars-08 juin-08 sept-08 déc-08 mars-09 juin-09 sept-09 déc-09 mars-10 juin-10 sept-10EUR billionDomestic banks Other domestic entities
Foreign banks Other foreign entities
EA and IMF
 
Source : ECB and Commission services.
 
Box 2: State aid to financial institutions in  the context of the financial crisis 
State aid control is an integral part of the EU’s competition policy.  Since the beginning of the current crisis, the 
Commission’s interventions have contribu ted to maintaining financial stability while preserving a level playing-field 
across Member States and financial institutions and safeguarding the real economy and the internal market. From the 
competition and state aid standpoint, the Commission achieve d this objective by giving legal certainty to the support 
measures given by Member States a nd by making possible that real economy had access to credit. The absence of 
state aid rules could have led to a costly and distortive subsidy race between Member States at taxpayers' expense. 
Uncoordinated national action would have seriously undermi ned the internal market and financial stability.   
Exceptional circumstances and systemic risk. From the viewpoint of competition policy, the European 
Commission approached the resolution of the financial crisis  in different steps.  During the first phase, before the 
Banking Communication was published in  mid October 2008, the Commission tack led the individual state aid cases 
according the Community Guidelines on State aid for rescuing and restructuring firms in difficulty (the so-called 
‘R&R Guidelines’).  The general erosion of confidence within the ba nking sector and the serious  difficulties to access 
liquidity, in October 2008, led to a system ic dimension of the crisis, justifying th e application of the legal basis that 
allows for remedying a serious disturbanc e to the economy of a Member State.   
The Commission’s communications. The 'Banking Communication' of 13 October 2008 provided an appropriate 
European framework to allow rescue operations in order to stop or prevent runs on financ ial institutions. It indicates 
how the Commission intends to apply state aid rules to state support schemes an d individual assistance for financial 
4. Programme implementation and policy discussions 
v 
15 institutions. Support schemes such as guarantees or recapita lisation schemes must be well-targeted and proportionate 
to the objective of stabilising financial markets and contai n certain safeguards against unnecessary negative effects on 
competition. In a second step, the 'Recapitalisation Communi cation' of 5 December 2008 identified a set of standards 
and safeguards allowing Member States to  recapitalise banks in order to ensu re adequate levels of lending to the 
economy. The third step was the clean-up phase of financial institutions' balance sheets by  removing toxic assets and 
underperforming loans. The 'Impaired A ssets Communication' of 25 February 2009 provided the framework for this 
phase. The ‘Restructuring  Communication' of 14 August 2009 addressed the follow-up to such support measures. It 
builds on three fundamental principles: (i ) aided banks must be made viable in  the long term without further state 
support; (ii) aided banks and their owners must carry a fair burden of the restructuring costs and (iii) measures must 
be taken to limit distortions of competition in the Single Market.  
The phasing out process. On 2 December 2009, the ECOFIN Council emphasised the need to phase out from 
various forms of temporary support for the financial sector, starting from the guarantee schemes. Since 1 July 2010, 
the Commission has applied tighter conditions for the compa tibility of government guarantees, by introducing (i) an 
increased guarantee-fee based on a bank's creditworthiness and (ii) the new requirement of a viability plan for 
beneficiaries that have recourse to new guaranteed and exceed a certain th reshold of total outstanding guaranteed 
liabilities.  As of 1 January 2011, a restructuring plan is  required from every beneficiary of a new recapitalisation or 
an impaired asset measure, thus creating an incentive to accelerate the necessary restructuring. 
State aid to financial institutions in Greece.  In 2009, before the sovereign debt  crisis, Greece had already put 
together a banking rescue package which provided for liqui dity and capital support to banks in Greece. This support 
package has been used by all major Greek banks. Tzn banks were recapitalised in May and July 2009. As a 
consequence of the capital support,  the recapitalised banks have to  present restructuring plans.  
In 2010, following the sovereign debt cr isis, euro area Member States and IMF provided financial support to the 
country. In order to strengthen the Greek financial system, two important schemes with re levance in terms of State 
aid control were put into place:  (i) Issuance of additional government guarantees to be used as collateral in order to 
obtain funding from the ECB. An additional amount of  EUR 25 billion was authorised by the Commission under 
State aid rules in June and December 2010. (ii) The estab lishment of an independent Fi nancial Stability Fund (FSF) 
as a safety net to preserve the solvency of the financial sector by providing capital s upport to banks. The granting of 
aid was subject to a scheme which was authorized by the Commission unde r state aid rules in September and 
December 2010. 
4. PROGRAMME IMPLEMENTATION AND POLICY 
DISCUSSIONS 
 
16  
15. Implementation of the programme has encountered a number of barriers.  While Greece was a 
source of financial contagion in the first half of 2010, it is now suffering from contagion from other peripheral economies and the political uncertainty in relation to the EU-wide facility mechanisms. 
Fiscal consolidation was held back by a less than successful fight against tax evasion and incomplete expenditure control. The implementation of a wide and ambitious agenda of structural reforms stretched the capacity of the Greek administration, all the more as from a technical point of view, reforms have become more complex and therefore more difficult to design. Moreover, many reforms have met fierce resistance  by vested interests.  
16. The government remains committed to the programme.  In 2011, this commitment will be tested in 
the implementation of fiscal policy, including preparin g a credible medium-term fiscal strategy and in 
overcoming interest groups that oppose growth-enhancing reforms. Polls suggest that the Greek society understands the need for, and supports, fiscal austerity and other measures to liberalise the economy and modernise institutions.       
Table 5. Summary of compliance with conditionality for end-December 2010 
Overall assessment Comments
Fiscal policy Partially observedThe ESA-based fiscal deficit was missed. Cash-based 
spending and deficit ceilings were respected.
Structural fiscal re forms Partially observedA key healthcare reform has been adopted. A tax policy act 
has been tabled in Parliament. The government announced 
its privatisation plan for 2011, and decided to substantially 
scale it up.
Financial sector policy Largelly observedA EUR 25 billion tranche of government guarantees on bank 
bonds was made available in November. The FSF is 
operational, though there are lingering problems in staffing.
Othe r s tructural re forms Partially observedA new wave of structural reforms is ongoing, though with 
some delay compared to previous policy commitments
Data provision Largelly observedThere are still issues in the prompt availability of data on 
expenditure commitments and payment arrears.
Source:  European Commission.  
4.1. FISCAL POLICY 
4.1.1. Fiscal developments in 2010 
17. The ESA-based government de ficit for 2010 is estimated at 9½ percent of GDP  or EUR 22 
billion. This is in excess of the target of EUR 18 .0 billion (8 percent of GDP). There is still some 
uncertainty on the 2010 outcome as data on the financial performance of state-owned enterprises, extra-budgetary funds, social secur ity and hospitals, and local government are not yet complete. There 
are also uncertainties on the differences between cash and accrual accounting. For Greece, as for all 
other EU Member States, the first complete set of  ESA-based annual data will be available by end-
March, and validated by Eurostat in April.  
18. The quarterly quantitative perf ormance criteria on a cash ba sis for the Q4- 2010 were met. 
While the criterion on state primar y spending (cash) for the fourth quarter of 2010 was met with a 
large margin reflecting an under execution of paymen ts compared to plans, the criterion on (available) 
general government primary balance (cash) was respected by a very thin margin. The outcome for both criteria was better than projected in the previous compliance report. However, it may have been 
4. Programme implementation and policy discussions 
v 
17 distorted by the accumulation of ar rears and other payables. The centr al government debt criterion has 
also been respected. 
Table 6. Quantitative performance crit eria and outcomes (EUR billion)   
Actual data QPC Actual data QPC Actual data QPC 
General government primary cash balance1-3,9 -5.0 (floor) -3,6 -4.0 (floor) -5,5 -5.7 (floor)
State budget primary spending 28,4 34 (ceiling) 43 50 (ceiling) 61.1 67 (ceiling)Overall stock of central government debt 317 342 328 342 366* 342
New guarantees granted by the central government 0,3 2,0 1,2 2,0 1,3 2,0
Accumulation of external payment arrears on 
external debt contracted or guaranteed by general government00 00 00
Accumulation of domestic arrears (indicative) 1 0,0 0,8 0 3,0 (estimate) 0,0end June 2010 end December 2010 end September 2010
1/ Available general government: it does not incl ude extra-budgetary funds and public enterprises. 
* Adjusted for upward revision to end-2009 stock of central government debt (original ceiling EUR 342 billion) 
Source : Commission services. 
 
Graph 14.  State primary payments - 2010 
(cumulative balance EUR million)Graph 15.  (Available) government primary balance - 2010  
(cash basis cumulative balance EUR million)
Ceilings
34 00050 00067 000
Outcome
010000200003000040000500006000070000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FloorsOutcome
-5700-4000
-5000
-6500-5500-4500-3500-2500-1500-5005001500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 
Sources : GAO and Commission services  Sources : GAO and Commission services
 
19. Three main features characteri sed the fiscal year 2010: 
• The implementation of several wave s of deficit-reducing measures. The full-year impact of 
total measures implemented in 2010 reached EUR 22 billion (or 10 percent of GDP), of which EUR 19.5 billion were reflected in the 2010 accounts, and EUR 2. 5 billion carryover  into 2011. 
Measures weighing on 2010 accounts were EU R 10.4 billion (or 4.4 percent of GDP) on 
expenditure and 9.2 billion (or 4 percent of GDP) on the revenue side of the budget. The reduction in the deficit was much less than total measures, given the underlying upward pressure on expenditure (e.g. interest, old-age pensions) and the impact of the unfavourable economic activity on taxes and social spending.  
• Large shortfalls in tax collection. Revenue collection disappointed and was revised downwards 
on several occasions. For the year as a whole, state revenue was EUR 4.5 billion (2 percent of 
GDP) less than projected in May 2010, when the adjustment programme was designed. This result reflected a weaker-than-planned internal demand, and households' and corporates' liquidity constraints. However, there is al so evidence that the measures agai nst tax evasion in the course of 
2010 were not fully successful and need to be st rengthened. A tax settlement organised at the end 
European Commission 
The economic adjustment programme for Greece 
 
 
18 of the year was only partially successful: it collected EUR 1 billion, much above plans, but this 
was at the costs of underperformance of regular tax collection.  
• Underexecution of the state's spending plans. In order to offset revenue shortfalls, and 
unfavourable local government an d social security accounts, th e Government under executed 
ordinary state primary spending and military procurement-related payments by around EUR 4.9 billion (more than 2 percent of GDP) compared to the plans of May 2010. Despite this effort, the 
incompleteness of the data on arrears and accounts payable do not allow assessing the share of the payment compression reflecting durable expenditure savings or simply delays in payments.   
4.1.2. Fiscal policy in 2011 
20. The implementation of fiscal polic y in 2011 will be challenging. In the budget for 2011 voted by 
Parliament in December, the Gove rnment confirmed its commitment to meet the ESA-based fiscal 
deficit target below EUR 17 billion (or 7.5 percent of GDP), fully recouping the slippage of 2010. Therefore, the reduction in the government deficit- to-GDP ratio in 2011 will have to be larger than 
planned at the inception of the adjustment programme: at around 2¼ percentage points of GDP, instead of 0.4 points. Most of the fiscal measures underpinning the 2011 deficit target have been legislated and are being implemented. 
21. Additional measures may be necessary  to secure the 2011 deficit target. The mission and the 
government have updated the fiscal projections for 2011. The revised projections, based on current trends, indicate that the 2011 fis cal deficit ceiling may be exceeded by ¾ of a percentage point of 
GDP, unless corrective action is adopted. This gap comes mainly from the less favourable expectations for the tax bases (weaker internal demand), updated estimates for the yield of fiscal measures in the state budget, as well as a base effect from the worse than expected 2010 outcome for several revenue categories. Higher than the previously projected interest expenditure also contributes to the fiscal gap. 
22. The government committed to offset this fiscal gap. The additional budgetary savings are expected 
to come from a compression in ordinary spending – a strategy that was not fu lly successful in 2010 –
and through structural measures to  be prepared in the context of the medium-term fiscal strategy. A 
further effort against tax evasion would also contribute to offset the gap. 
23. Ambitious results from the fight against evasion are indispensable in 2011.  The structural 
improvement of tax collection remains a crucial element of the programme, not only given its direct impact on the fiscal accounts, but also on equity grounds. The ac hievement of th e 2011 budgetary 
targets implies an increase in total tax revenue of more than EUR 1.5 billion or some ¾ percent of GDP, compared with 2010. EUR 1.6 billion of receipts have been specif ically projected in the budget 
for 2011 from the fight against tax evasion, incr ease the efficiency of the tax collection mechanism 
and other measures to accelerate tax-related court cases. The mission has encouraged the Ministry of 
Finance to keep its determination against tax evader s, as well as against inertia and specific interests 
inside the tax administration. 
Box 3: From cash accounts to ESA95 accounts 
As in previous reports, this box provide s estimates and forecasts on the differen ce between available cash figures and 
the ESA95 data.  
Cash and accruals. The government accounts that are monitored w ith a monthly frequency, and on the basis of 
which compliance with quarterly performance criteria ar e assessed are compiled on a cash basis. The annual ESA 
accounts are compiled on an accrual basis, i.e. at the tim e of the underlying transacti ons. Thus, while a delay in 
4. Programme implementation and policy discussions 
v 
19 payments to suppliers may temporarily improve the cash -base data, it has no dire ct impact on the ESA-based 
accounts. An improvement in the ESA accounts from the saving  side of the budget is only possible if there is an 
effective deceleration in expenditure commitments  
Scope. The data available with high frequency cover only part  of the general government sector. In particular, 
monthly data for state-owned enterprise s that are classified in the government  sector and for most extra-budgetary 
funds are not available, or are not yet of appropriate quality for continuous monitoring. Also the monthly local 
government and social security monthly data are co mpiled from banking statistic s, which may limit their 
exhaustiveness. It is expected that data on state-owned enterprises and on extra-budgetary funds will be progressively 
available on a monthly basis. Thus, the differences in scope between the data series are expect to progressively 
narrow.   
The Table shows estimates  for 2010, and forecasts for 2011, of the seve ral variables that establish the link between 
the cash figures that are mon itored monthly under the progra mme and the ESA accounts.  
2010 2011
Ex trabudgetary funds 72 0
M ilitary deliveries  (difference with cas h payments ) -223 800Single Treasury account 227 200Tax -related time adjustment 70 -550
Direct tax es 50 -550Indirect taxes 20 0Social contributions 0 0
EETT (Post-telecommunication authority) -36 30EU funds time adjustment 1271 248Hospitals spending, accrued in 2009 and paid in 2010 375 0Guarantees called -972 -1468Interest accrued -715 640Privatizations account -324 0Intergenerational fund, Agricultural Fund (ELEGEP) and ATE Bank 276 763Special fund for unauthoris ed buildings  (ETERPS) 151 230Tax refunds 300 0Bond payments 0 -420Accounts payable -1673 450
Health (public hospitals) -1708 450Health (private clinics  and s uppliers ) -70 0Other-than-state sectors 105 0
Reclas s ified Public enterpris e balance -360 245Lump sum payment to public sector retirees -524 -240Other -7 -42
Total -2092 886
General gov ernment mod ified  cash b alance -19937 -19693
General gov ernment balance (E SA 95) -22029 -18807
General gov ernment b alance (E SA 95): Ceiling -18508 -17065
difference 3521 1742
Source:  Commis s ion s ervicesTab le 1 : Annual ad justment - from cash to accrual accounts E SA 95 for 2010, 2011
 
 
24. Fiscal management on the expenditure side of the budget also needs to be improved. While cash 
payments were comfortably below the ceiling in 20 10, the accumulation of arr ears in other-than-the-
state sectors was only marginally restrained, reflecting shortcomings in the expenditure monitoring and control. The commitment registers in each government department are still not fully operational, 
European Commission 
The economic adjustment programme for Greece 
 
 
20 while progress has only been made at the state level. The registry needs to be made operational 
shortly, and include the commitments taken by local governments, social security funds, hospitals, state-owned enterprises and other extra-budgetary entities. 
25. Reforms of budgetary institut ions are progressing slowly . In line with the provisions of the organic 
budget law of July 2010, the government has set expenditure ceilings for 2011 for the State and deficit targets for the several government s ectors. There has been progress in  the timely provision of fiscal 
data, although there are still some quality issues: monthly data availability for the government entities other than the state remains clearly below par an d prevents adequate monitoring of intra-year 
budgetary developments for the government as a whole. While the situation has somewhat improved in the social security sector a nd state-owned enterprises, fiscal information on local governments 
remains very limited.  
4.1.2. Fiscal policy in 2012 and beyond  
26. The medium-term fiscal strate gy is under preparation. In November 2010, the government 
committed to announce by March 2011 the medium-term fiscal structural measures to ensure meeting the annual fiscal targets for 2012- 14. To ensure wider consultation of a technical complex document, 
the government has eventually decided to finalise the medium-term fiscal strategy by May 2011. A first draft is expected to be available for public  consultation in the second half of March. The 
subsequent steps in the preparation of the medium-term strategy include approval by the Council of Ministers before mid-April and the vote of Parliamentary resolution by mid-May. The medium-term targets are unchanged: deficits below EUR 14.9 billion (6.4 percent of GDP) in 2012, EUR 11.4 billion in 2013 (4.8 percent) and EUR 6.4 billion (2.6 percent) in 2014. Although there is no official target for the 2015 deficit target, the mission enco uraged the government to  aim at a 2015 fiscal 
deficit of below 1 percent of GDP.  
4. Programme implementation and policy discussions 
v 
21 Table 7. Deficit accounting: from th e deficit in one year to the next 
2010-2014 2012-2014 2010-2014 2012-2014
2009 d eficit 36150 15,4
Nominal deficit drift in 2010 3880 1,7
Identified measures 18000 18000 7,8 7,8
Impact on ratio of nominal G DP growth -- 0,4
2010 d eficit 22030 9,6
Nominal deficit drift in 2011 11575 5,1
Identified measures /1 14800 32800 6,6 14,5Unidentified measures 1741 1741 0,7 0,7
Impact on ratio of nominal G DP growth -- 0,1
2011 d eficit 18806 8,3
Nominal deficit drift in 2012 3715 1,6
Identified measures* 5575 38375 5575 2,4 16,7 2,4
Unidentified measures 2029 3770 3770 0,9 1,6 1,6
Impact on ratio of nominal G DP growth -- -0,1
2012 d eficit (target) 14916 6,5
Nominal deficit drift in 2013 2218 0,9
Identified measures* 575 38950 6150 0,2 16,5 2,6
Unidentified measures 5160 8930 8930 2,2 3,8 3,8
Impact on ratio of nominal G DP growth -- -0,2
2013 d eficit (target) 11399 4,8
Nominal deficit drift in 2014 491 0,2
Identified measures* -1050 37900 5100 -0,4 15,5 2,1
Unidentified measures 5573 14503 14503 2,3 5,9 5,9
Impact on ratio of nominal G DP growth -- -0,6
2014 d eficit (target) 6385 2,6
1/ Including carry-over of fiscal measures enacted before May 2010
* Measures for 2012-14 identified and quantified in the original programme of May 2010 are subject to revision.EUR million % of GDP
cumulative measures cumulative measures
Deficit in year t equals deficit in year t-1 plus nominal deficit drift in year t minus identified measures minus unidentified 
measures (and for the ratios: plus impact on ratio of nominal G DP).
Deficit drift includes the increase in the deficit level that would take place without measures. It includes in particular the
structural increase in pension ex penditure, the increase in interest ex penditure and other structural increase in spending.
The deficit drift has been calculated assuming wage freeze and the implementation of the 1-to-5 rule between recruitments
and ex its. It also reflects the increase/decrease in revenue because of developments in tax  bases.
 
27. The medium-term fiscal strategy is a cornerstone in the programme. In 2012-14, 8 percent of 
GDP of measures will be necessary to reach the defic it targets. Of this total,  around 2 percent of GDP 
of measures were previously identified; however, the mission advised the government to revisit the measures planned to feature in the 2012, 2013 and 2014 budget, and in any case to update their yields. Given the scale of the required additional measures, continuous increases in tax rates and across-the-board cuts in expenditure are not sustainable. The bu dgetary measures to reach the targets will have to 
come from structural actions in the several fields of government action, for which sectoral plans will be prepared:  
• Tax policy reform. It will aim at simplifying the tax system, broadening bases and facilitating 
more effective tax administration to fight tax evaders, while supporting growth and investment. Implementing legislation is expected to be tabled in Parliament by end-September. 
European Commission 
The economic adjustment programme for Greece 
 
 
22 • State-owned enterprises . The objective should be of bringing the enterprises' efficiency into line 
with well-run private companies and other EU pub lic companies. Tariff increases, reduction in 
operational costs, reprioritization of investments, and wages and employment adjustments are expected to reduce deficits and increase dividends. 
• Extrabudgetary funds. The plan should aim at identifyi ng entities with overlapping mandates 
that can be merged, restructured, integrated into the state budget, privatised or closed. 
• Public employment and public wages . The system of wages and benefits in the Greek 
administration is inordinately complex, unfair and providing remunerations above the private 
sector for similar tasks, as rev ealed by a recent governmnet’s re port. The government expects that 
through the strict implementation of the rule of not more than 1 recruitment for 5 exits, public employment will be reduced by more than 20 thousand per annum until 2013. The implementation of this rule requires a substantial upgrade in the government mechanisms to monitor staff movements in real time. The mission welcomed  the government's recen t initiative of aligning 
working hours in the public sector with those prevailing in the private sector. 
• Public administration. This restructuring plan for public administration should identify services 
to be rationalised, eliminating overlapping responsibilities and ensuring efficient lines of 
command. The plan will benefit from the findings of the ongoing functional reviews of central administration. 
• Social spending reform. A number of social programmes may be eliminated, as because they 
overlap with other initiatives or need to be better targeted, while keeping the appropriate safety net. As for public administration, the ongoing functional review of social programmes will contribute to identify prioritie s and quantify potential savings. 
• Public investment. The objective is to prioritize projects and identify budgetary savings. 
Moreover, the financial oversight of the public investment programme by the Ministry of Finance 
needs to be strengthened. A reassessment of public investment will also contribute to a faster absorption of EU structural and cohesion funds.  
• Military spending. Greece is one of the EU countries with the highest per capita spending on 
defence. However, the reduction in military procurement in 2010 gave a notable contribution to the deficit reduction. The medium-term military programming should durably contribute to the 
fiscal consolidation needs. 
• The medium-term fiscal strategy will also be articulated with the ongoing heathcare and pension 
reform . 
28. The government has substantially scal ed up its privatisation programme. The government aims 
at collecting EUR 50 billion in priv atisation receipts. Such a plan w ill contribute to reduce the debt-to-
GDP ratio by almost 20 percentage points of GDP by 2015, and may help in regaining investors’ confidence. Such an ambitious privatisation plan shou ld be able to put the debt ratio into a declining 
trend faster than it could be achieved via accumula tion of primary surpluses.  Although pr ivatisation 
proceeds themselves do not substitute fiscal cons olidation efforts, they contribute to fiscal 
sustainability, as the reduction in debt will lead to a reduction in interest expenditure. Moreover, an ambitious privatisation plan will contribute to in crease the overall productivity and competition of the 
economy and bring in foreign capital. Privatisati on should also contribute to reduce corruption 
potential. 
4. Programme implementation and policy discussions 
v 
23 29. The mission encouraged the government to set up an appropriat e governance system to 
accelerate privatisation. Experience shows that large privatisation plans are more effective when a 
single entity is in the lead of the whole process and takes full ownership of the assets to be privatised. The current set-up where each ministry and a myriad of smaller entities manage and control government assets is less effective in extracting value from assets. The mission welcomed the fact that the government has started preparations for the compilation of a comprehensive inventory of state assets – stakes in listed and unlisted companies, buildings and commercially-viable land – on the basis of which the privatisation plan will be made more specific.  
30. High primary surpluses and pri vatisation ensure sustainability. The chart below shows three pairs 
of long-term debt scenarios, until 2025. For each pair there are two assumptions on nominal interest 
rates 4.5 percent and 5.5 percent, both of which are much below market yields, but are not unrealistic if financial markets stabilise and the determination of Greece to keep fiscal  accounts in order beyond 
the programme horizon is credible . In scenario 1, growth remain s anaemic not exceeding 2 percent, 
and the primary surplus does not exceed 3¼ percent of  GDP (level projected fo r 2013): it is a scenario 
of insufficient and unfinished consolidation. In this case, debt developments are not sustainable. This scenario suggests that, to ensure sustainability, c onsolidation needs to continue in coming years and 
structural reforms should be implemented with amb ition to contribute to potential growth. In scenario 
2, nominal growth beyond 2014 is 3½ percent, practically the same as the one currently projected for 2014, while the primary surplus from 2014 onwards is 5.5 percent: a high value, but not higher than other EU countries managed to keep for relatively long periods. The primary surplus is the one that is currently projected for 2014. In scenario 2, government debt is sustainable and declines, though it will remain above 100 percent o GDP by 2025. Scenario 3 is the most favourable scenario: it is a derivation of scenario 2, talking into account the government plans of privatising EUR 50 billion in 
2011-15. In order to reach the same debt ratio by  2025 without privatisation, the primary surpluses 
would have to be above 7.5 percent of GDP, from 2014 on, a level that does not seem realistic. 
 
 
Graph 16. Public debt sustainability scenarios  
(% f GDP)
90100110120130140150160170
2006 2009 2012 2015 2018 2021 2024Scenario 3Scenario 1
Scenario 2
Common assumptions: 
The chart shows three pairs of debt scenarios. For each pair, th ere are two average interest rate assumptions (4.5 and 5.5 perc ent).  
Specific assumptions: 
Scenario 1: nominal growth rate: 2 percent; primary surplus st able at 3.2 percent of GDP from 2013 on; privatisation: nil.   
Scenario 2: nominal growth rate: 3.5 percent; primary surplu s stable at 5.5 percent from 2014 on; privatisation: nil. 
Scenario 3: nominal growth rate: 3.5 per cent; primary surplus stable at 5.5 percen t from 2014 on; privatisation: EUR 50 billion  in 
 
European Commission 
The economic adjustment programme for Greece 
 
 
24 4.2. STRUCTURAL FISCAL REFORMS 
4.2.1. Public administration 
31. Reforms in the institutiona l framework of public administration are ongoing. Two functional 
reviews of the central administration and of the existing social programmes have now been launched, albeit with substantial delay compared to initial pl anning. The aim is to identify actions that will 
rationalise the system and to quantify potential savings. Both reviews are being conducted by the OECD secretariat and should lead to the adoptio n of administrative measures by end-2011, and 
contribute to the medium-term sectoral plan on public administration and social spending.  
32. There have been delays in the upgrading of public procurement procedures. However, the 
Government has prepared a draft law creating a Si ngle Public Procurement Authority (SPPA); the law 
is to be adopted by March. It should grant the SPPA  the power to define pub lic procurement policy, to 
coordinate the ministries with competences on public procurement and to issue binding guidelines on the application of public procurement rules. Savings that would result from the operation of the SPPA are also expected to be considered in the medium-term fiscal strategy. 
Box 4:  Reforming the tax co llection mechanism 
The improvement of the tax collection mechanism is a key feature of the programme and it is crucial for the 
achievement of such a dema nding fiscal adjustment.  Reforms in the tax administration area are gaining 
momentum, with several steps being ongoing. This mainly concerns legisl ation to improve the efficiency of tax 
administration and controls, putting in place an effective project management  arrangement and implementing an anti-
evasion plan to restore tax disc ipline and improve compliance.  
The government has presented a draft law, to be adopted by Parliament by end-February. It focuses on 
administrative issues of the tax, audit and enforcemen t mechanisms, while also completing the new framework to 
combat tax evasion and fraud. The bill includes (i) specifi c measures to combat tax evasion and tax avoidance, 
(ii) reorganization of the audit and enforcement mechanis ms, and (iii) improving the ta x legal and administrative 
framework. 
• Fight against tax evasion. Within a three-year framework, the bill provides for the creation of an attorney-
general for economic crime. The new attorney will have priority jurisdiction to conduct preliminary 
investigations, and supe rvise, coordinate and guide the conduct of ta x investigations by staff (Financial Crime 
Unit, tax offices, police, Coast Guard, customs, etc. ). Based on the new legal and institutional framework 
provided, a number of specific measures  against tax evasion are planned, su ch as criminal prosecution for the 
offense of withholding VAT; criminal prosecution for unpaid  and overdue taxes owed to the State; suspension of 
court sentences upon appeal not allowe d for major fraud crimes, non-permissi on for the conversion of penalties 
and fines for large evasion; enforcement of penalties pr ior to appeals; temporary imprisonment for tax-related 
crimes; priority in audits for high probability sectors a nd freelancers, and increase in the rate of the payment for 
cases assessed but appealed, from 25 to 50 percent of the verified amount.  
•  Tax and audit services restructuring. The draft law provides for the reorga nization of the directorate general 
for tax audits and its transformation in an operational se rvice, instead of its current legislative and advisory 
status. The aim of the reorganization is the adaptation of th e audit services in the use of modern audit tools with 
a view to minimising contact between the supervis ory authorities and tax payers, new methodologies and 
international auditing standards; and also to enable the directorate general to centrally monitor the operation of 
the decentralized tax audit services. To this end, a pr ocess set up, for the assessment of tax arrears and their 
separation between “recoverable” and non-recoverable”. In ad dition, an internal affairs department is set-up, 
with a view to collecting, processing, evaluating and us ing information and investigating cases of corruption. 
4. Programme implementation and policy discussions 
v 
25 • Tax framework simplification. A number of provisions aimed at impr oving the taxation framework, correcting 
distortions and facilitating entrepreneurship are also introduced. This includes the reduction in the corporate 
income tax rate, from 24 to 20 percent (fiscal impact  in 2012); the extension – for 4 more years – of the 
provision on tax credits for research and technology e xpenditure and changes in VAT statement submission: 
instead of requiring the payment of the full amount at the time the VAT forms are submitted, taxpayers in 
hardship are allowed to pay only 40 percent of their due, with the remainder paid in two instalments.  
4.2.2. Pension and healthcare reforms 
33. The National Actuarial Authority (NAA) pursues its efforts to quantify the impact of the 
pension reform. The NAA has completed the long-term projections (2009-60) on pension 
expenditure by the largest pension schemes, and continues its work to extend the projections to other schemes. These projections will be subject to a p eer review by the EU Economic Policy Committee. 
The currently available data sugges t, as expected, that the pension reform of July 2010 has gone a 
long way towards moderating pension expenditure. Other than the completion of the projections, the next phase of the reform concerns the supplementary pension schemes, which should become notionally-defined benefit schemes. If after the supplementary pension scheme reform, projections indicate that the projected increase in the total public pension expenditure exceeds 2.5 percentage points of GDP over 2009-60, the government is expected to adjust the main parameter of the pension system, so as to ensure that that benchmark is not exceeded. 
34. There has been a new impetus to a deep reform of the health sector. Many reform proposals are 
either under implementation, adoption or development.  The overarching objective of the reform is to 
improve the cost efficiency of th e system: keep public health expenditure at or below 6 percent of 
GDP, while maintaining universa l access and improving the quality of care delivery. In the short-
term, the focus will be on macro-level discipline an d cost control. In a medium-term perspective, 
deeper structural changes will be needed to contain spending in the context of the medium-term fiscal strategy while improving the governance of the system.  
 
Box 5.  Reforming the healthcare system: improving efficiency and quality of health services  
Important steps have recently been taken to reform the health sector in order to increase the efficiency and 
quality of health services delivery.  The reform aims to ensure a more rational use of services and medical goods, 
reduce waste and corruption and increase productivity. Actions  planned for 2011 are expected to generate at least 
about ½ percent of GDP in savings, including savi ngs of more than EUR 2 200 million in pharmaceutical 
expenditure.  
Several measures have been implemented so far:  
• Increase in co-payments for outpatient visits to NHS facilities fro m EUR 3 to EUR 5 and improvements in the 
ability to collect payments.  This should ensure an additional revenue of about EUR 30 million while increasing 
patients' awareness and reducing some unnecessary healthcare. A system of exemptions ensures that those most 
vulnerable are not deterred from seeking necessary he althcare. In the long-term , when a well–functioning 
primary care system is put in place, the uniform EUR 5 co-payment can be replaced by a system whereby co-
payments for specialist care are made higher than those for primary care doctors and co-payments for emergency 
services are made the highest, so as to encourage the use of primary care and reduce the use of unnecessary 
emergency care. Additional efforts are being made to ensu re the appropriate billing of services provided to non-
residents when in Greece. 
• The all-day functioning of hospitals has been extended to 65 (out of 130 hospitals). Th is is projected to result 
in additional hospital revenue of EUR 40 milli on, without a significant increase in costs.  
European Commission 
The economic adjustment programme for Greece 
 
 
26 A number of other measures are being implemented in the area of pharmaceuticals. These measures aim at 
reducing unnecessary expenditure associated with over-prescri ption, waste and corruption:  
• An initial price list published in September 2010 led to reduction in the price of medicines of almost 20 
percent leading to important savings. This policy action may have led to savings of more than EUR 750 
million. The current price list is to be replaced by an updated and comple te list inducing smaller but additional 
savings.  
• Another measure is the publication of a negative list of medicines not reimbursed by the social security 
funds and which could result in savings up to EUR 140 million within one year.  This is to be coupled with 
the definition of prescription guidelines and the developmen t of a reference price system establishing a reference 
price for reimbursement purposes. The government needs now  to put these two measur es into practice in the 
coming months to ensure further savi ngs from the reduction in unnecessary pr escription of medicines (up to EUR 
300 million) and a reduction in the effective price paid by social security.  
• The government has set the target of increasing the share of  generics and off-paten ted medicines used in 
NHS hospitals to 50 percent. Further steps can be taken to ensure a faster and easier entry of generics in the 
market, ensuring prescription by active substance by  doctors and generic substitution by pharmacies.  
• steps have been taken to extend the pilot e-prescription system from OAEE to other social security funds. 
The pilot e-prescription system for medicines has le d to a reduction in the number of prescriptions and 
contributed to a reduction in the average value per prescr iption. The extension of e-prescription has nevertheless 
faced delays due to the system complexity and the in itial costs involved. E-prescription is now due to be 
extended to all funds by May 2011. E-prescription is expected to induce savings of EUR 1.4 billion. 
• A set of measures have been legislated to induce some liberalisation of the pharmacies sector  (easing 
population- based restrictions,  increasing opening hours , allowing new pharmacists to form partnerships with 
incumbents ) and reduc e the effective profit margin for pharmacies (through a system  of rebates). The profit 
margin of wholesalers has been cut from 8 to 5.4 percent.  
The centralised public procurement of medica l supplies is also high in the agenda. In 2010, seven central tenders 
were launched which are estimated to have resu lted in savings of about EUR 300 million.  
Significant efforts have been taken to improve hospital computerisation including modern accounting and billing 
systems, bookkeeping of medical supplies in NHS hospitals, monitoring activity of NHS facilities, timely invoicing 
and hospital spending control.   
4.3. FISCAL FINANCING AND TREASURY MANAGEMENT 
35. The T-bill market has remained acti ve and issuances were successful. The Public Debt 
Management Agency (PDMA) keeps organising regular T-bill auctions.  In the second half of 2010, auctions were held every month, except August  and December. The short-term issuances were 
successful despite negative sentimen t towards longer maturities. Au ctions met strong demand with 
bid-to-cover ratio ranging between 3.4 to 6.3. Foreign investors regularly bought one third of the total amount.  
36. Yields on short-term securities in the primary market remained stable. Since May 2010, the 
three-month T-bills have been sold  at around 4 percent yield, while  six-month papers were placed at 
and average yield of 4.7 percent. The fall in yields in the two October 2010 auctions was short-lived. The upward revision in the Greek government debt and contagion from other peripheral EU countries led to downbeat market sentiment again in late autu mn. As a result, the shift from shortest maturities 
4. Programme implementation and policy discussions 
v 
27 to longer (six-month) paper was slower than expected. PDMA intends to continue shifting to six-
month maturities in the course of 2011 and move to one-year b ill issuance when market conditions 
permit. 
Graph 17. T-bill auctions since May 2010 
(amounts and yields)Graph 18. Maturing debt, EUR billion 
4.64%4.90%
4.82%4.54% 4.82%4.65%
4.10%
4.10%3.75%
3.98%4.05%
0.00.51.01.52.02.53.0
Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11EUR billio n26-week bills
13-week bills
 0246810121416
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12T-bills
Medium and long term debt
 
Source : PDMA Source : GAO
 
37. Refinancing needs are concentrated in the first eight months of 2011. Largest redemptions fall in 
March, May and August when me dium and long-term debt matures. These amounts will be fully 
covered by international assistance loans. However, the scheduling of disbursements currently planned for 2011 for mid March, June, September an d December requires prefinancing with T-bills 
and an accumulation of cash buffers.  
 
Box 6: Financing profile in a medium-term perspective  
The government debt financing profile is driven by maturity of outstanding debt and to a lesser extent by the 
cash deficits in each quarter. The euro-area and IMF loans are heavily frontloaded. By end March 2011, euro-area 
Member States and the IMF are expected to have disbur sed EUR 53 billion or 48 percent of the total package of 
EUR 110 billion. The frontloading minimises the need to borrow from the markets in distressed conditions and gives 
Greece sufficient time to consolidate public finances, implement the necessary structural reforms and recover the 
investors' confidence. Greece is expected to regain market access and refinance at least three-quarters of its maturing 
medium and long-term debt in 2012 and to fu lly roll-over debts from the summer 2013 onwards.  
Both the euro-area and the IMF loans have an average maturity of around 4 years. The reimbursement of each 
tranche of the euro-area loans starts three years after the disbursement and is spread in  eight quarterly instalments 
over two years. The repayment of each tranche of the IMF loan  starts slightly later: thre e years and one quarter after 
disbursement. IMF loans are also repaid in  quarterly instalments over two years.  
In 2013-15, Greece will have to raise substantial funds in  the market in the immedi ate post-programme period 
to repay the euro-area and IMF loans, as  well as to roll-over other liabilities.  Combined with the projected 
budget deficit and short-term debt amortisation, the total re financing needs according to current projections stand at 
around EUR 57 billion in 2013, EUR 81 billion in 2014 and EU R 73 billion in 2015, although sales of assets will 
reduce financing needs. The repaymen t of euro-area and IMF loans amount to EUR 10 billion in 2013, EUR 32 
billion in 2014 and EUR 38 billion in 2015.  
High financing needs in the immediate post-programme period have a negative impact on market confidence. 
Therefore, the euro-area Member States ministers agreed, in principle, to align the length of the Greek loan with the 
maturities of the financing provided to Ireland: an average maturity of 7½ years. However, at the time of writing, 
European Commission 
The economic adjustment programme for Greece 
 
 
28 such a change has not yet been formally agreed. The charts below illustrates that an extension of the maturity of the 
Greek loans would avoid the hump in refinancing in the immediate post-programme years: 2014 and 2015.   The chart 
does not reflect yet, the reduction in financing needs that result from the recently announced upscaling of the 
government’s privatisation plans.  
Graph 1. Refinancing profile for the Greek government debt 
(current conditions and extension of loan maturities)  
EUR billion
102030405060708090
2011 2013 2015 2017 2019 2021 2023Market financing needs according to current 
arrangement (average maturity of EU and IMF 
loans: 4 years)
Market financing needs if E U  and IMF  loans maturities 
are extended to 7 1/2 years on average
 
Source : Commission services  
4.4. FINANCIAL SECTOR POLICIES 
38. While providing for sufficient collateral buffer, a strategy was adopted by the Bank of Greece in 
cooperation with the ECB to reduce banks' reliance on  Eurosystem credit. Borrowing from the 
ECB now represents nearly 20 percent of banks' lia bilities. The last tranche of government guarantee 
scheme under which banks can issue repo-eligible  bonds was allocated to banks in December, 
increasing their pools of available collateral. However, due to market volatility, changes to the ECB provided collateral framework and any further downgrades of the sovereign debt grounds for further enhancement of the liquidity cushion in the system. To this extent, enhancing the existing guarantee scheme by additional EUR 30 billion appears to be necessary.  Banks' access to the new tranche 
should be made conditional on the adoption of medium-term funding plans
. The plans should outline 
the bank-specific targets and measur es to reduce reliance on the Eurosystem liquidity over 2-3 year 
time span. At the same time, these plans have to be consistent with the Programme macroeconomic and fiscal assumptions and the restructuring pl ans requested under the EU state aid rules. 
39. With the aggregate balance sheet at 210 percent of GDP, the size of the Greek banking system is 
not excessive compared to other countries.   Nevertheless, some downscaling seems appropriate 
given the tense situation at the funding side. In the context of the medium-term funding plans the banks will have to indicate how they to phase out their borrowing from the ECB.  Furthermore, to 
compensate for the state aid received the viability pl ans that the banks are expected to submit should 
contain measures that limit the banks' expansion. Deleveraging has, however, some drawbacks as the repercussions on the real economy have to carefully be taken into account.  
40. The Hellenic Financial Stability Fund is function ing and received its first tranche of  funding.   
The Board has been operating since October but st affing of the HFSF is proceeding slowly due to 
legal constraints. It should be completed by mid-2011. In the meantime, solutions have been worked out to transfer staff from the Bank of Greece or to outsource. In terms of funding, EUR 1.5 billion has 
been transferred to the HFSF accoun t at the Bank of Greece. The rema inder of the EUR10 billion will 
be made available on a dedicat ed government account, beginnin g two EUR 1 billion instalments 
during the first two quarters of 2011. To estimate  possible future needs for recapitalisation by the 
4. Programme implementation and policy discussions 
v 
29 HSFS the Bank of Greece conducts regular solven cy forecast exercises for the Greek commercial 
banks.  
41. The efforts have intensified to strengt hen the financial sector supervision. Shortage of 
appropriately qualified staff remains an issue, but recruitment is expected to be completed by June 2011. At the same time, the Bank of Greece is committed to reduce re munerations of its employees as 
part of the overall fiscal consolidation effort. The supervision of the insurance sector is being 
enhanced since the Bank of Greece took it over in December 2010. In parallel to increasing human 
resources, it is undertaking a diagnostic assessment of insurance companies' solvency and reviewing 
the adequacy of existing polic yholder guarantee schemes. 
4.4. GROWTH-ENHANCING STRUCTURAL REFORMS 
42. The adjustment programme for Greece contains a very wide agenda of structural reforms. The 
aim of structural reforms is to improve the supply-side conditions of the economy, increase internal competition and increase external competitiveness. Th eir implementation will facilitate the return of 
the economy to potential growth, while strengthen ing this potential. Structural actions increase 
efficiency, reduce prices with benefits for consum ers and help shifting resources from the domestic 
market to exports. Reforms need to take place in parallel as theoretical and empirical evidence shows 
that a comprehensive reform programme leads to significantly better outcomes than a sequential implementation of partial reforms. In particular, a simultaneous implementation of reforms helps to overcome opposition from interest groups that benefit from specific restrictions and impose a burden on the whole Greek society. Moreover, the faster re forms are implemented, the sooner they will have 
an effective impact and contribute to jobs and growth. 
43. Following a slowdown in momentum in autumn, a new wave of structural reforms is underway . 
After a landmark pension reform before the summer , the reform momentum lost traction in autumn 
2010 for reasons that appear related to the No vember local elections, changes in government and 
limits in the administrative and operational capac ity of the Greek state.  The policy commitments 
agreed in May and then revised in August and November planned for the implementation of several reforms by end-2010. Although some of these reforms are delayed compared to plans, a new wave of reforms is being implemented, under preparation or on the point of being legislated in areas such as labour market, competition policy, access to and exercise of professions, reduction in red-tape, 
investment and export promotion and restructuring of state-owned companies. 
4.4.1. Labour market reforms 
44. The new labour law adopted in Decembe r has been a major step forward. The reform undertaken 
aims at enhancing the dynamism of the labour market and improving firms' adaptability to market conditions with a view to enhance competitiveness and attract foreign investment. After a number of reforms adopted in July, the new labour law of D ecember goes in the direction of moving the wage 
bargaining system towards the firm level, where the firm growth strategies are decided. The government is of the view that the new law will be effective in supporting growth and promoting employment. While the mission shared the government's intention in this respect, it put forward that the law missed ambition in a number of respects and encouraged the government to adopt the necessary legislative adjustment in case of need (see Box). 
45. The government view the new special firm-level  collective agreement (SFLCA) as an instrument 
conducive to wage decentralization, targeted to firms in difficulties. They are committed to 
communicate to market players their rights as regards their access to SFLCA, to follow up on 
implementation and to build the change in mindset favourable to the use of SFLCA, including by 
European Commission 
The economic adjustment programme for Greece 
 
 
30 reiterating the non-binding nature of the labour insp ectorate report. Conversely, the authorities are of 
the view that the general elimination of the legal provisions allowing for the mandatory extension of collective agreements to non-signatory parties is both politically unfeasible and unnecessary to 
improve competitiveness. 
Box 7:  Labour market reforms  
In the course of 2010, Greece adopted tw o batches of labour market reforms. Already in July, Parliament voted 
legislative changes related to overtime pay rates, severance costs, and sub-minima wages fo r groups at risk, such as 
young and long-term unemployed. The Government and the so cial partners also agreed that the minimum wage 
would be frozen until summer 2012, which is then expected to  increase in line with euro-area inflation (a 1.5 percent 
increase in July 2012 and 1.7 percent in July 2012). Alt hough a longer period of wage  freeze would have been 
desirable, the agreement marked a clear change compared to the recent years' practice. A second wave of labour 
market reforms was adopted in December.  
The special firm-level collective agr eements (SFLCA) is a promising step towards making the wage setting 
system more adequate to reflect firm economic conditions.  Until now, firm-level agre ements could only improve 
wages on top of what agreed at sector level, but c ould in no case establish le ss favourable wage conditions. 
Moreover, the sector agreement use to be generally extended by  the Government to all firms in the sector, even if to 
those that are not members of the employers' associations signing the sector agreement. According to the law on 
SFLCA, employers and employees at firm  level may now agree on remuneration  conditions that are less favourable 
than those stipulated in sector agreements  with the view to preserve jobs. This way, the law allows each firm to adjust 
remuneration conditions to their productivity, competitiveness and strategic decisions. The SFLCA may be signed by 
any firm, irrespective of their size and whether they are or  not members of the employers' organisations that signed 
the sectoral agreements. 
Some facets of the labour law may significantly reduce the effectiveness of the SFLCA . First, SFLCAs can only 
be concluded between employers and uni ons. Considering the strong incidence of negotiation and transaction costs 
for small firms and the possibility that small firms lack a firm-level unions as a counter part to sign the agreement, 
SFLCAs may not de facto be easily available to a subs tantial number of firms even  when both employers and a 
majority workers would be in favour. Second, the signature of an SFLCA requires a notification procedure to, and an 
opinion by, the Council of Social Oversight of the Labour Inspectorate (CSOLI). Although the CSOLI's opinion is 
not binding, it generates unnecessary red tape, and a negativ e opinion may create social a nd political stigma. The first 
(and only, so far) SFLCA agreement signed in Greece after the new law was passed received a negative opinion. 
Therefore, while the new law has a great potential to ensu ring wages are in line with productivity and the specific 
conditions of each firm, these facets may need to be revisited in the short term to ensure the SFLCA are effective.  
Other features included in this law refer to: 
• Collective dispute regulation procedures.  Practice revealed that the mediation and arbitration procedures in 
Greece were often a source of upward wage drift, as unions had privileged acess to arbitration. After the reforms 
adopted by the government, both employers and employee may request arbitration a nd mediation services. To 
ensure impartiality, the board of the Mediation and Ar bitration Organisation (OMED) has been reformed, freed 
from government influence – the governme nt has one observer in the OMED board  with no voting right –, 
ensuring paritary representation of employers and empl oyees and with the chairman chosen by unanimity. 
Moreover, to promote social dialogue, mediation a nd arbitration is limited to basic pay disputes. 
• Remuneration of part-time workers. Previous rules established the non-stan dard practice of a premium of 7.5 
percent to the hourly remuneration of part-time workers (of less than four hours per day). This premium has been 
abolished. The premium of 10 percent for part-time wo rkers working overtime has also been abolished.  
• Part-time shift work has been extended from six to nine months. 
4. Programme implementation and policy discussions 
v 
31 • The probationary period for staff joining firms was comparatively s hort (two months) and is now extended to 
one year.  This allows a longer period in the establishmen t of a longer-term trustful relationship between 
employers and employees, and effectively reduces hiring costs. 
• The maximum work period und er temporary working agencies  was short (12 months) and has bee raised to 3 
years.  
A third wave of labour reforms is now under preparation. Th is concerns fixed-term cont racts, rules on working-time 
arrangements and the restructuri ng of the Labour Inspectorate. 
• Although the conditions for fixed-term contracts  in Greece do not appear particularly strict, the costs for 
terminating these contracts before their term are substantia lly higher than elsewhere in the EU. Moreover, there is 
also the need to avoid firms from abusing the use of proba tionary periods (now longer than they used to be) as 
short-term fixed-contracts to cope with temporary needs. 
• Changes in working-time regulations  should enhance the adjustment of pay and working time at the firm level . 
• The procedure to create firm-level trade unions  is particularly long, extending in some case over more that 8 
months. The government intends to accelerate the proce dure to set up these unions, which would, inter-alia, 
facilitate the signing of SFLCA. 
• The Labour Inspectorate  should be strengthened and resourced with qualified staff, so as to ensure better 
controls and higher efficiency levels in tackling undeclared work. 
4.4.2 Closed professions 
46. The opening of closed profession s is a flagship reform of the wh ole programme and will test the 
government’s determination  vis-à-vis incumbents. The reform is expected to increase competition 
in a long list of professions (more than 150) which were subject to rules on numerus clausus , fixed or 
recommended prices, geographic restrictions or other rules which protect incumbents and hinder competition.  
• Procedure.  Given the myriad of restriction on closed professions, the government decided to 
adopt a two-pronged approach. For lawyers, notaries, engineers, architects, auditors and (in a 
specific act) pharmacists, the new legislation e xplicitly removes unwarran ted restrictions. For 
other professions, the new act establishes the principle of professional freedom rather than explicitly abrogating each of the unwarranted rest rictions in force. Moreover, the law to be 
adopted establishes a 4-month period during wh ich restrictions that are justified may be 
reinstated by decree. The governme nt is confident that this approach is the most effective in 
accelerating liberalisation. However, the mission ex pressed that this legislative technique may 
create legal uncertainty. Moreover, the mission wa s of the view that it was crucial that the 
professional restrictions to be reinstated should be limited to the strict minimum and only when public interest is overwhelming.  
• Contents. The draft law is heading in the right direction in areas such as the new way of 
calculating notaries' fees, abolishing fixed or minimum prices for the other professions. However, legal fees which will remain for tax an d social contribution reasons or in cases where 
there is no explicit agreement between client a nd provider of service may constitute coordination 
tools for providers and hinder price competition. Th e fact that the law keeps existing territorial 
restrictions to the practice of lawyers is a disa ppointment and reveals the strength of interest 
groups. In relation to the professions not explicitly addressed in the new law and in relation to which some restrictions may be reinstated, the missions encouraged the government to consult 
European Commission 
The economic adjustment programme for Greece 
 
 
32 widely and take into account the wider economic inte rest rather than to yi eld to specific interest 
groups. 
Box 8:  The reform of professional services  
There are valid reasons as to why regulation of professional services is needed . Regulations address market 
failures such as asymmetry of information between custom ers and service providers, whic h requires practitioners to 
possess the necessary skills. They also address externalities,  as some professional services might have an impact on 
third parties. In addition, some professional services produ ce public goods that are of value for the society in general, 
hence the need for regulation.  
Finding the amount of regulation that is commensurate wi th the protection of the general interest objectives at 
stake is challenging.  Restrictions on price setting, advertising, entry requirements, limits on multi-disciplinary 
activities, geographical or territorial limits to the exercise  of a profession, have in many instances adverse side 
effects.  Fixed minimum or maximum prices deprive serv ice providers of the possibility of competing on price or 
their price/quality ratio and render the establishment of  new competitors less attractive. Recommended prices also 
facilitate co-ordination between service providers and mislead consumer s about reasonable price levels. Restrictions 
based on quality concerns – such as a minimum amount of hours needed to provide a service – often fail to 
acknowledge that there are more effective ways to ensure good performance. Quantitative and geographical 
restrictions hinder the freedom of es tablishment, thereby limiting the overall number of service providers and curbing 
competition. Given the need to trade off public interest  with competition, a proportionality test is necessary. 
However, in many countries, the proportionality is often assessed by professional chambers that are biased and 
protect interest groups.   
Greece stands out in the group of developed count ries for imposing higher requirements on regulated 
professions . Indicator based evidence–e.g. the International Re gulation Database–shows that the degree of regulation 
of professional services in Greece is one of the highest in the OECD. To illustrate, Greek lawyers  are subject to a 
much higher degree of regulation relative to the OECD average: Greece has been one of the very few advanced 
economies with fixed minimum prices and with a comple te ban on advertising. There are also geographical 
restrictions: Greek lawyers are allowed to practice within a specific area only, not in the whole national territory. The 
most important restrictions on engineers and architects  concern minimum fees and the method of payment of fees. 
As in lawyers, current regulations provide for minimu m fees not subject to contractual agreement. Current 
regulations also prescribe a specific procedure whereby the Technical Chamber collects the fee owed by the client: 
clients are not entitled to pay fees directly to professionals. Greek auditors  are subject to minimum hours to conduct 
a statutory audit and to maximu m annual working hours. Lastly, notaries  are by far the most regulated profession. 
The profession is heavily regulated in term s of the access to and exercise of the profession. On access, there are strict 
requirements including nati onality, exams, and minimum and maximum age requirements to enter the profession.  In 
terms of market conduct, the professi on has all possible forms of restricti ons: on the number of notaries; ban on 
multidisciplinary activities; geographical restrictions; ba n on commercial communications; mandatory membership in 
a regional notaries association and heav ily regulated prices: curr ently among the highest in the EU countries with a 
Latin notary system.  
There is a wide scope of opportunity to lift restrictions in the Greek regulated professions without 
compromising quality and consumer protection . Evidence shows that in countries  with low degrees of regulation, 
there are proportionally higher numbers of practitioners gene rating a relatively higher ove rall turnover. Liberalisation 
also comes along with substantia l moderating effects on prices an d higher quality for consumers.   
4.4.2 Energy and transport 
47. Reforms to liberalise the wholesale electricity market are underway. After sluggish progress in 
recent years, the government is now taking severa l steps, although furthe r progress is needed: 
4. Programme implementation and policy discussions 
v 
33 • Measures to open up the lignite-fired  electricity sector are in progress.  The government 
proposed new instruments to open up the lignite -fired electricity market by means of sales of 
drawing rights arrangements in existing and future plants of the Public Power Corporation (PPC). The Commission's in-depth assessment of these measures, including market testing, is foreseen to be finalised by mid-February. A swift action by the government would allow the implementation of these measures to comme nce as foreseen by end-March 2011.  
• The awarding of hydro reserves manage ment needs to be further specified.  Access to hydro 
reserves for competitors is essential to achieve fair market conditions with regard to flexibility 
and competitive back-up capacity. The government intends to award the management of hydro 
reserves to an Independent Commission for Hydro Reserves Management under the envisaged independent transmission operator (ITO). However, the motivation for combining the 
management of hydro reserves with network operation functions still requires further discussion. 
Regarding the scenario of splitting the current Hellenic Transmission System Operator (HTSO) into a network operator and a market operator, it needs to be specified whether the hydro 
reserves management could be entrusted to the market operator. In relation to hydro reserves 
management, Greece also needs to take the nece ssary measures to comply with the Water 
Management Directive.   
• The government started to implement a new system of regulated tariffs.  The energy 
component of regulated tariffs is expected to be transformed gradually to reflect wholesale 
market prices, except for vulnerable customers. The government has adopted a revised definition 
of vulnerable customers and introduced a new social tariff for this category of consumers. As a 
next step, it is foreseen to abolish tariff regulation for non-residential customers by end-2011.  
• The unbundling of network activities is experiencing delays.  The government has submitted 
information on the related assets and personnel to prepare the unbundling of network from supply activities in the electricity sector; this is now being assessed by the European Commission. The government's proposal of the organisational design of the ITO remains open 
and requires further consultation.    
 
48. Transport liberalisation has a great growth-enhancing potential. Moreover, reforms in the state-
owned transport sector are also an important element of the fiscal consolidation strategy.  Since the 
summer 2010, a number of laws have been approved in relation to road freight, railways and urban transport. However, in some of these areas, there have been delays or transition periods that reduce 
the effectiveness of the measures. With regards to th e long-due railway restructuring, state aid issues 
are still pending, while the respective business plan lacks a solid and credible mechanism to promptly correct deviations from the plan. Tourism passe nger transport services  (buses, coaches and 
limousines) have been a closed sector with no new entrants for several years. The government has committed to remove restrictions in the concession of new licenses.  
4.4.3 Investment, export and R&D promotion 
49. The new investment law has been passed but its impl ementation and fiscal implications need to 
be monitored. The law consists of an incentive framework for general entrepreneurship, 
technological development, regional cohesion and large-scale investments. The main instruments are tax credits, favourable loans, leasing of capital investment and limited investment grants, 
differentiating between various cla sses of investment according to re gions and company size. The law 
aims at supporting private investments and the adoption of new technologies by companies while defining a new framework for regional catchin g-up and development. Th e effectiveness of the 
law in particular regarding the additionality of inve stment and the type of investments/sectors which 
will get financial support will depend on implementing decrees not yet adopted. The mission has 
European Commission 
The economic adjustment programme for Greece 
 
 
34 insisted that, while the investment law may contribute to growth and investment in coming years, its 
implementation will have to avoid distorting investment incentives and creating sector privileges. The fiscal incentives also need to comply with the medium-term fiscal consolidation strategy. 
50. The new law on fast-track licensing procedures is underway. The aim of the law is to speed up and 
facilitate licensing procedures for technical professions, manufacturing activities and business parks. This may be achieved through tight mandatory deadlines for the completion of the approval procedure and tacit approval in case of deadlines not being adhered to. Although the law is complex, it is 
innovative and addresses the right issues. However, the effectiveness of the measures will hinge on 
well-specified implementing acts to be adopted in the next months. 
51. The promotion of exports comprises new marketin g strategies and should be complemented by 
anti-red tape measure. The government presented a national export strategy to improve the external 
marketing of Greek products, including the development of a national brand and an improved information network for exporters. A strategy to accelerate the bureaucratic bu rden for exporters is 
not yet visible, though this should be tackled in legislation that the government committed to adopt in Q2 2011, with the aim of simplifying th e process of clear exports and imports.  
52. The government needs to give priority to a comprehensive strategy of promoting R&D and 
innovation.   Action in this area, which ought to be an important pillar in any growth-oriented policy 
framework, has been slow over recent months. It is therefore important that the government gives renewed impetus to R&D policies by finalising an evaluation of all R&D and innovation related actions and presenting an action plan aiming at enhancing the quality of, and better utilising the synergies between, public and private R&D and innovation activities.     
4.4.4 Other reforms to improve business en vironment and strengthen competition  
53. Progress to comply with the competition-enhancing Services  Directive has been mixed. The 
required legislative changes have been adopted only partially and important acts are still pending, 
such as the legislation on retail stores or cross-borde r services in tourism. Work is particularly delayed 
in the wholesale sector which seems to still require sc reening for restrictions c overed by the Directive. 
The government has presented a list of priority sectors where legislation is expected to be adopted by the end of the second quarter 2011. In respect of the point of single of contact (PSC) – a tool to simplify licensing procedures – a significant amount of information has been made available to new service providers. However, the adoption of the necessary acts that allow the completion of all the 
required procedures online is lagging behind. The mission expressed concern in respect of the use of online procedures related to the recognition of prof essional qualifications, the distinction between 
established providers and those providing services cr oss-border as well as the required simplification 
of procedures. 
54. Progress in the land and commerci al registries has been slow . The absence of a proper functioning 
land registry has often been an obstacle to investment and the uniform collection of property taxes. In the case of state-owned properties, legal disputes of  land and real estate property also constitute a 
barrier to privatisation. So far, only an estimated 18 percent (6.5 million) of land rights have been registered in Greece. The government is, however, increasing resour ces into the land re gistry, so that 
until 2015, another 8 million rights will be digitised and the entire project is finalised by 2020. The 
General Commercial Registry (GEMI) is foreseen to become operational in April 2011, as soon as 
outstanding technical arrangements within the government and with the Hellenic Union of Chambers will be put in place. 
55. Studies on sectoral growth drivers and an action  plan to remove restricti ons to business need to 
be made operational. The government presented preliminary results of studies on the contribution of 
4. Programme implementation and policy discussions 
v 
35 the tourism and retail sectors to growth and jobs. The results need to be further specified as to propose 
concrete policy measures to overcome the identified legislative, administrative and other obstacles for 
competition and market entry in these sectors. The government is working on an action plan to remove 30 of the most important remaining barriers to business activity, investment and innovation. This plan, which includes several measures in add ition to those already addressed in the adjustment 
programme and covers both short-term and longer-term action, is planned to be fianlised and made public by end-February. 
56. The Government has tabled a law to refo rm and strengthen the Greek Competition 
Commission. The new law establishes a new method of appointment of the President and Vice-
President by Parliament, and mandates that are d ecoupled from the electora l cycle. The draft law 
provides for the staggering of the HCC board’s mandates as a way of reconciling continuity and the need to rotate and replace the board members. It also  sets more realistic deadlines for the investigation 
and issuance of decisions, as complex and important cases require detailed investigation. It empowers the HCC to reject complaints and set priorities to increase its efficiency. While the mission supported the intentions of the new law, it expressed concerns that the premature termination of the current mandate of the President and other full-time board members is in contradiction with HCC as an 
independent agency and may effec tively defeat the stated objective of strengthening HCC's level of 
independence.  
4.4.5 Education 
57. An independent taskforce of education policy experts is being set up. So far, education has not 
been tackled by the adjustment programme. Nonetheless, the system has been costly without providing a good quality service to the Greek society. The education sector has a critical role to play in terms of increasing the medium- to long-term growth. While the Ministry of Education has often stated its intention to recruit several thousands of teachers (primary and secondary) and professors 
(tertiary), such an intention should fit in the overall recruitment restrictions (1-to-5), without 
undermining the importance of quality, efficiency and effectiveness of the system. Available indicators show that Greek teach ers and professors have a much  lighter workload and teach 
substantially less hours than in other EU countries.  
 
 
36 Annex 1: Assessment of compliance with required action for the third review 
 
Table A-1: Fiscal consolidation 
Actions in the Memorandum of understanding  on specific policy conditionality (MoU) 
(actions by end-December 2010) Comments 
Partially observed. 
Criterion Reference value Outcome Comments 
ESA-based 
government deficit  EUR 18.0 billion 
(Council Decision)  EUR 22 billion 
(estimate - complete 
data will be reported by ELSTAT by end March 
and validated and 
published by Eurostat on 22 April.)
 Failed.  
Government primary 
balance (cash basis) EUR -5.7 billion EUR -5.5 Met. 
State primary 
payments  EUR 67 billion EUR 61.1 billion Met. 
Central government 
debt  EUR 342 billion. EUR 340 billion Met. 
Annual increase in 
the general 
government 
consolidated gross 
debt EUR 34.1 billion 
(Council Decision)  EUR 29 billion Met. 
Guarantees EUR 2 billion 
(indicative) EUR 1.3 billion Met. Government achieves the quantitative performan ce criteria for 2010 and endeavours to reach 
the government deficit targ et on an ESA95 basis. 
Payment arrears EUR 0 (indicative) EUR 3 billion. Failed.  
 
37 Parliament adopts the final budget for 2011 targeting a further reduction in the general 
government deficit, which in ESA95-based terms will not exceed EUR 17 065 million. 
The final 2011 budget provides information and projections on the entire general government 
sector. Observed. 
The final budget includes the following measures: 
Carryovers into 2011 of measures adopted in May 2010:  
Expenditure cuts: 
wage bill (seasonal bonuses and allowances): at least EUR 400 million;  
pensions (seasonal bonuses): EUR 500 million;  
specific reduction in highest pensions: EUR 150 million;  
Revenue increases: VAT: at least EUR 750 million;  
excises on fuel: at least EUR 250 million;  
excises on tobacco: at least EUR 250 million;  
excises on alcohol: at least EUR 50 million;  
luxury good tax: at least EUR 50 million  
incentives to regularise land-use violations ( Ηµι-υπαίθριοι ), yielding at least EUR 150 million 
and increased amounts in 2012 and 2013.  Observed.  
All these measures were legislated and implemented in the course of 2010. 
New estimates for: - cuts in wage bill (seasonal bonuses and allowances): EUR 460 million; 
- specific reduction in highest pensions: EUR 310 million 
- luxury goods tax: EUR 20 million; 
- incentives to regularise land-use violations: EUR 250 million.  
 
 
 
 
38 Measures previously agreed and legislated:  
Expenditure cuts:  
reduction in intermediate consumption by at least EUR 300 million compared to the actual 
2010 level, on top of savings envisaged in the context of  reforming public administration and the reorganisation of local government;  
implement legislation reforming public administration and reorganising local government 
with the aim of reducing costs in comparison to current levels by at least EUR 1 500 million 
in 2013, of which at least EUR 500 million in 2011;  
reduction in domestically-financed spending in investment by at least EUR 500 million 
compared to the actual 2010 level, while increasing revenue by giving priority to investment projects financed by EU structural and cohesion funds;  
freeze in the indexation of pensions, with th e aim of saving at least EUR 100 million;  
reduction in the wage bill through fraud-reducing measures and the establishment of the 
single payment authority by at least EUR 100 million;  
reduction in pharmaceutical expe nditure by social security f unds by EUR 500 million owing 
to a reduction in pre-tax drug prices; and by hospitals by at least EUR 350 million.  Observed. 
All these measures were legislated and implemented in the course of 2010.  
New estimates for: 
- reduction in intermediate consumption: EUR 350 million 
- reduction in the wage bill through fraud reducing measures: EUR 0. 
 
 
39 Revenue increases: 
temporary crisis levies on highly profitable firms, yielding at least EUR 1 000 million per 
year in 2011, 2012 and 2013;  
enforce the presumptive taxation of professionals, with a yield of at least EUR 700 million in 
2011 and increasing returns in 2012 and 2013;  
start phasing in a green tax, with a yield of at least EUR 150 million in 2011;  
expand the base of the real estate tax by updating asset values to yield at least EUR 270 
million additional revenue;  
collect revenue from the licensing of gaming: at least EUR 500 million in sales of licences 
and EUR 200 in annual royalties;  
increase taxation of wages in kind, including by  taxing car lease payments: at least EUR 150 
million;  
introduce book specification of income for tax purposes yielding at least EUR 50 million;  
initiate the collection of a special tax on unauthorised establishments ( Αυθαίρετα ) (at least 
EUR 300 million per year).  Observed. 
All these measures were legislated and implemented in the course of 2010. 
New estimates for the expansion of the base of the real estate tax by updating assets 
values: EUR 135 million. 
 
 
 
40 New measures:  
Expenditure cuts:   
further reduction in operational expenditure by at least 5 percent yielding savings of at least 
EUR 100 million;  
further reduction in transfers yielding savings fo r the government as a whole of at least EUR 
100 million. The beneficiary public entities will ensure the concomitant reduction in expenditure so that there is  no accumulation of arrears;  Observed. 
means-testing of family allowances from January 2011 on yielding savings of at least EUR 
150 million (after deduction of the respective administrative costs) ;  Observed.  
reduction in deliveries of military equipment by  at least EUR 500 million compared to the 
actual 2010 level;  Planned. 
To be assessed by end-year. 
further reduction in pharmaceutical expenditure by social security funds by EUR 900 million 
owing to a further reduction in drug prices and new procurement procedures and by hospitals 
(also including expenditure in equipment) by at least EUR 350 million;  Observed.  
changes in the management, pricing and wages of public enterprises yielding savings of at 
least EUR 800 million;  Observed. 
New estimate: EUR 500 million. 
 
41 Revenue increases: 
equalisation of taxation on heating oil and diesel oil from 15 October 2011 on, with the aim of 
fighting fraud and yielding at least EUR 400 mi llion in 2011 net of specific measures to 
protect the less prosperous population strata;  Not yet applicable. 
The act to equalise the taxation of heating oil and diesel oil have not yet been 
legislated. The specific tax benefit to heating oil to be revoked applies only in autumn 
and winter (from 15 October to April); a delay in the adoption the act until now has no material impact on tax revenue and tax expenditure. 
increase in the reduced rates of VAT from 5.5 to 6.5 percent and 11 to 13 percent, yielding at 
least EUR 880 million; and reduction in the VAT rate applicable to medicines and hotel accommodation from 11 to 6.5 percent with a cost not exceeding EUR 250 million;  
intensification of the fight against smuggling on fuel (at least EUR 190 million);  
increase in court trial fees (at least EUR 100 million);  
the implementation of an action plan to acceler ate the collection of tax arrears (at least EUR 
200 million);  
speeding up tax penalty collection (at least EUR 400 million);  
collection of revenue that results from the new framework of tax disputes and trials (at least 
EUR 300 million);  
revenue from the renewal of telecommunication licences that are about to expire (at least 
EUR 350 million);  
revenue from concession licences (at least EUR 250 million).  Observed. 
New estimates for: 
- increase in the reduced rates of VAT: EUR 480 million  
The measures against tax evasion and reforming the tax administration are included 
in the tax bill, which is expected to be adopted by Parliament by end-February. The one-off measures, namely the telecomm unication licences and the concessions 
licences, are expected to yield according to the estimates in November.    
 
 
42 The final budget contains: 
detailed expenditure ceilings for each line minist ry, local governments, and social security 
funds consistent with the general government deficit target. For the medium-term fiscal 
framework for 2012-14, this will be specified in the March 2011 strategy paper; 
information on monthly revenue per category, and expenditure per Ministry. Updated figures 
will be regularly made available online. 
 Observed. 
 
 
43 Table A-2: Structur al fiscal reforms 
Actions in the Memorandum of understanding  on specific policy conditionality (MoU) 
(actions by end-December 2010) Comments 
Fighting waste in public enterprises:  
Government adopts a restructuring plan for the Athens transport network (OASA). The 
objective of the plan is to reduce operational losses of the company an d make it economically 
viable. State subsidies shall not exceed 40 percent of operational cost in  conformity with EU 
practices. The plan includes cuts in operational expenditure of the company and tariffs 
increases. The required actions ar e implemented by end March 2011. Ongoing, delayed . 
A plan has been circulated for comments to the EC/IMF/ECB. There are still 
shortcomings in terms of fiscal impact  and enforcement mech anisms. The law on 
OASA's restructuring has been submitted to Parliament in mid-February. 
 
Government adopts an act that limits recruitment in the whole general government to a rule of 
not more than 1 recruitment for 5 exits, withou t sectoral exceptions. Government prepares a 
human resource plan in line with this rule. Th e rule also applies to staff transferred from 
public enterprises under restructuring to government entities. Observed  
Law 3899/2010 establishes that government recruitments in the course of 2011-13 
need to fit in the rule of not more than 1 recruitment for 5 exits. 
However, there is no comprehensive human resource plan yet. Also the absence of 
regular and timely compilation of staff movements (entries, exits and transfers) means that the enforcem ent of the rule cannot be monitored.  
Government prepares a detailed privatization plan for the divestment of state assets and 
enterprises with the aim of raising at least EUR 7 billion during the period 2011-2013, of 
which at least EUR 1 billion in 2011. The re structuring and privatization programme will 
span the state’s holdings in rail, road transp ort, airports, ports, utilities, the gaming industry 
and real estate. Proceeds from privatisation are to be used to redeem debt and do not 
substitute fiscal consolidation efforts. Observed  
The government has announced the assets it intends to privatise in the course of 
2011-13. This list is to be revised given the more ambitious privatisation plans.  
Accounting and control:  
Government ensures that the centr al registry for public enterprises is operational, and that 
public enterprises' financial statements are available on the website of the Ministry of 
Finance. Partially observed.  
The central registry has been created by a circular of 10 November 2010 sent to all 
public enterprises and entities, but is not yet fully operational. 
Public enterprises' financial statements have been made published, since September 
2010.  
 
 
44 Government centralises the financial supervision of public enterprises at the Ministry of 
Finance – Special Secretariat for Public Enterprises. Operational supervision of public 
enterprises is ensured by the relevant ministries. Observed. 
Military spending:  
The new EMPAE (National Medium-Term Military  Procurement Programme), to be adopted 
by Government, plans for a reduction in expenditure in the medium term that durably 
contributes to fiscal consolidation, without prejudice to national defence capability. Not yet applicable  as the National Medium-Term Mi litary Procurement Programme 
has not yet been adopted . 
To improve the fiscal framework:  
Government implements legislation to strengthen the fiscal framework. The following 
elements should be part of the reform: intr oduce a medium-term fiscal framework based on 
rolling three-year expenditure ceilings for central government, social security and local 
governments; strengthen the position of the Finance minister vis-à-vis line ministries in both budget preparation and execution phases (giving him/her veto power on spending decisions 
and execution); introduce a compulsory contingency reserve in the budget, corresponding to 5  
percent of total appropriations of government departments other than wages, pensions and 
interest; the use of the contingency reserve will be decided by the Finance Minister; 
Parliament does not modify the overall size of the budget at the approval stage, and focuses 
on the composition of public expenditure and revenue, and reliability of projections for 
expenditure and revenue; introduce stronger expenditure monitoring mechanisms, particularly 
by implementing an appropriate control of spending commitments, through which spending entities (line ministries, local authorities, social  security funds, hospitals and other legal 
entities,) will report on a monthly basis to the Treasury on their outstanding expenditure 
commitments against their authorised appropriations in the budget law. To this end, the General Secretariat of Information Systems star ts developing a special information system, to 
be complete by June 2011, interconnecting all public entities with the General Accounting 
Office (GAO), to provide real-time data; introduce a revenue rule for the general government, according to which the allocation of higher-tha n-expected revenues should be specified ex 
ante in the budget; creation of a budget office attached to Parliament providing independent 
advice and expert scrutiny on fiscal issues, and reporting publicly on the budgetary plans and execution of the spending entities of the general government, and on macroeconomic 
assumptions used in the budget. Partially observed. 
 
 
45 To complete the pension reform:   
The National Actuarial Authority provides by 15 December 2010 interim long-term 
projections of pension expenditure up to 2060 under the July 2010 legislation covering the 
main pension schemes (IKA, OGA, OAEE and OPAD). Observed.  
Long-term projections have been provided by the NAA for IKA, OGA and OAEE (in 
December 2010) and OPAD  (in January 2011). 
These projections will now be scrutinised by the Commission services and peer-
reviewed by the EU Economic Policy Committee (EPC) 
To modernise the healthcare system: 
Government adopts a comprehensive reform of the healthcare system and modifies the 
allocation of health-related tasks among ministries. 
The overarching objective is to keep public health expenditure at or below 6 percent of GDP, 
while maintaining universal access and improving the quality of care delivery. 
In the short-term, the main focus should be on macro-level discipline and cost-control.  Ongoing . 
Parliament has adopted a first package of  reforms proposed by the government in 
February 2011. Policies cover a number  of areas including: pharmaceuticals 
reimbursement, reduction of profit margin of wholesalers and pharmacies, new population criteria for the establishment of pharmacies and working hours of pharmacies, public procurement of medical supplies and medicines merging of most of the existing health fund (under the ne w Health Agency EOPYY), allocation of 
healthcare tasks to the Ministry of Health. 
Regarding pharmaceuticals, the go vernment implements measures yielding savings of at least 
EUR 2 billion relative to the 2010 level, at l east EUR 1 billion of which would materialise 
already in 2011. This would bring average pu blic spending on outpatient pharmaceuticals to 
about 1 percent of GDP (in line with the EU average) by the end of 2012. 
More specifically, the following measur es are implemented by end of 2010:  Ongoing. 
See below. 
ensure full implementation of a uniform e-pr escribing system, by extending the system 
currently used by OAEE to al l the social security funds providing health insurance; Ongoing . 
There is progress but not yet a full implementation of a uniform and fully integrated 
e-prescribing system for medicines by the so cial security funds and health facilities. 
IKA is monitoring e-prescribing through s canning prescriptions . In the NHS, 60 
hospitals have electronic patient prescription. 
define (through EOF) and publish prescription guidelines for physicians on the basis of 
international prescription guidelines;  Ongoing . 
EOF has proposed 30 guidelines to the relevant Ministry and until end March EOF 
will have produced about 100. 
 
 
46 social security funds es tablish a process to regularly assess the information obtained through 
the e-prescribing system and vis-à-vis pres cription guidelines. Assessment will be done 
through a common dedicated unit under the authority of Health Benefit Coordination Council 
(SYSPY) with support of IDIK A. Relevant sanctions and penalties will be enforced as a 
follow up to the assessment and as foreseen by existing rules and legislation;  Ongoing . 
OPAD, IKA and OAEE have each  their own unit to assess information and elaborate 
reports.  
a yearly report on medicine prescription is  published and feedback is provided to each 
physician on a regular basis (at least annually). The report and feedback analysis look at 
prescription behaviour with reference to the most costly and mostly used medicines.  Ongoing . 
OPAD, OAEE and IKA are providing individual reports to physicians. The medical 
prescription is monitored only in 60 out of 130 NHS hospitals. 
publish the complete price list for the medicines in the market, using the new pricing 
mechanism. This list will be published by December 2010 and replace the partial list 
introduced in September. It will be updated quarterly.  Delayed. 
The December update of the new price list for medicines is still due. Postponed to 
March 2011. 
announce that caps to the price reductions used when the price list was first introduced in 
September 2010 will be lifted by March 2011.  Not yet applicable. 
Still planned for March 2011. 
apply the negative list of non-reimbursed medicines and the list of over-the-counter medicines 
prepared by the EOF.  Observed . 
The negative price list of non-reimbursed medicines is to be published shortly. 
finalise the new positive list of reimbursed medicines using the new reference price system.   Ongoing, delayed . 
Technical work on the positive list of reimbursed medicines and the full reference 
price system has finished. However, until the price list is published (in March –see 
above), the reference price system can not be applied.  
using the information made available through e-prescribing and scanning, Government collect 
the agreed rebate from pharmaceutical companies;  Ongoing . 
Pharmaceutical companies have only paid a small amount of the total rebate due to 
social security funds. They brought a le gal case against the government to deem 
illegal the request of the government to collect unpaid rebates over the last five years.  
introduces a monitoring mechanism allowing for developments in pharmaceutical expenditure 
to be assessed on a monthly basis.  Observed . 
The system to compile monthly data on NHS revenues, expenditure (including on 
pharmaceuticals) and activity has been finali sed. Information is  provided by 106 (out 
of 130) hospitals. 
 
47 If the implementation of the above measures is insufficient to achieve the targeted savings, 
both in 2011 and for the medium term, the government will implement additional measures, 
following discussions with the European Commission, the ECB and the IMF staff. 
An assessment of the impact of measures will be made in the context of programme reviews Not yet applicable. 
Government enforces the payment of existing co-payments for regular outpatient services in 
all public hospitals and health centres and ex tends the 'all day' functioning of hospitals 
(afternoon shift) in order to develop and improve healthcare services and increase revenue. 
Government increases and enforces the co-payment of outpatient services from EUR 3 to EUR 5 and extends co-payments to unwarranted visits to emergency departments.  Observed.  
Government ensures greater budgetary and ope rational oversight of healthcare spending by 
the Finance Minister, and the publication of a udited accounts for hospitals and health centres  Ongoing. 
The Ministry of Health has launched a web-based platform (esy.net) for gathering 
and assessing monthly data from NHS’s hospitals. By mid-February, more than 80 
out of 130 NHS hospitals are publishing detailed financial accounts, including the 
payment obligations generated in 2011.   
Government creates an independent task force of health policy experts whose task is to 
produce, by end May 2011, a detailed report ( blue print ) for an overall reform of the health 
system to improve effici ency and effectiveness in  the health system (both public and private). 
This task force has access to all available in formation and receives adequate administrative 
support. It will produce an interim report by March 2011. Observed.  
The Government has created an 11-member ta sk force. It is chaired by Prof. Elias 
Mossialos. It has started working.  
 
 
 
48 Table A-3: Financial sector regulation and supervision 
Actions in the Memorandum of understanding  on specific policy conditionality (MoU) 
(actions by end-December 2010) Comments 
The Hellenic Financial Stability Fund is fully operational and adequately staffed (by end 
January 2011). Staff is recruited under the fa stest and most flexible  existing recruitment 
procedure. Partially observed. 
There are still delays in staff recruitment. 
Government ensures that the EUR 25-billion extension of the government-guarantees on bank 
bonds is available by the end of November 2010. Observed.  
ATE announces a rights issue before end-November 2010. Observed. 
The Bank of Greece commits to reduce remuneration of its staff in light of the overall effort 
of fiscal consolidation.  No information available.  
This item was initially included under actions until end September 2010. 
 
 
49 Table A-4: Other structural reforms 
Actions in the Memorandum of understanding  on specific policy conditionality (MoU) 
(actions by end-December 2010) Comments 
To strengthen labour market institutions: 
Government reforms the mechan ism for collective bargaining at the firm level in close 
cooperation with social partners. The new law es tablishes that firm-lev el agreements prevail 
over those under sector and occupational agreements without undue restrictions (for this 
purpose, Law 1876/1990, Article 10 is amended). The conclusion of firm-level collective 
agreements should not be restricted by law, notably by requirements regarding the minimum size of firms entitled to engage in collective bargaining (for this purpose Law 1876/1990, 
Article 6.1.b is amended). Observed . 
Law 3899/2010 establishes that firms and their employees may sign special firm-
level collective agreements (SFLCA) that deviate in peius from from sector 
agreements.  
SFLCAs may be signed by any firm irrespective of their size. SFLCAs are notified to the Council of Social  Oversight of the La bour Inspectorate, 
(CSOLI) which provides a non-binding opinion. The CSOLI opinion on the first 
SFLCA was negative. 
Government amends Law 1876/1990 (Articles 11.2 and 11.3) to eliminate the extension of 
sector and occupational agreements to parties not represented in negotiations. Not observed . 
If the sector and occupational agreements are systematically extended to all firms in 
the sector, the incentives to bargaining par ties are distorted and defeat the purpose of 
SFLCA. 
Government adopts an act, in line with Article 73 of Law 3863/2010, revising the mediation 
and arbitration system and introd ucing symmetric access to arbitra tion if parties disagree with 
the proposal of the mediator without exceptions. The Mediation and Arbitration Organisation (OMED) shall be free from government influence; this shall be reflected in the composition 
of the board of directors. It s Chairman is elected by una nimity by the employers and 
employees representatives. The new act indicat es that mediators and arbitrators pay due 
attention to cost competitiveness. Observed . 
The new OMED board is in the process of being constituted. 
Government amends legislation to extend the probationary period for new jobs to one year 
(Law 3863/2010, Article 74.2). 
Government eliminates temporal limits in the use of temporary workin g agencies. For this 
purpose, relevant laws are amended.  Observed . 
Government adopts legislation to remove impediments for greater use of fixed-term contracts. Not observed . 
 
 
50 Government eliminates the provision that establishes higher hourly remuneration to part-time 
workers. For this purpose Law 1892/1990, Article 38 is further amended. Observed. 
Government amends current legislation (Law 3846/2010, Article 7) to allow for a more 
flexible working-time management, … Not observed . 
… including part-time shift work (Article 2.3). Observed. 
To reform and modernise public administration:  
Functional reviews  
Government proceeds with two independent functional reviews of the public administration 
at central level and of all existing social progr ammes, which will be conducted by the OECD.  
The first review on public administration will be coordinated by the Ministry of Interior. The second review on social programmes will be coordinated by the Ministry of Labour. The 
review of the central administration involves all ministries (first phase) and key subordinated 
public entities (second phase). The review of  all existing social programmes will be 
comprehensive and will affect all relevant minist ries. The terms of refe rence of both reviews, 
and a precise time schedule for the second phase of the central administration review, will be 
agreed between both ministries and the OE CD after consultation with the European 
Commission, IMF and ECB staff. 
The review on central administration will be merged with the Ministry of Interior’s own 
reorganisation programme. The review will: take stock of the resource use (human resources 
and procurement) to carry out government functions; identify actions to rationalise the several departments, ensure efficiency and generate productivity gains, and quantify savings. 
 
The review of existing social programmes w ill: assess the effectiveness and appropriateness 
of existing social and welfare programmes; id entify the least effec tive programmes, and  
quantify savings.  
Ongoing, delayed .  
 Agreement on the terms of reference between Greece and the OECD (contractor) has 
been delayed, due to legal fine-tuning. The separate contracts for the two functional 
reviews are expected to be signed in late February. Meanwhile, the government has launched the process with the creation of the appropriate mapping teams and 
steering/coordination committ ees for the review of the central administration.  
 
 
51 Local administration 
Government adopts the required decrees for the entry into force of th e local administration 
reform ( Kallikrates reform). The reform yields savings of EUR 500 million in 2011 and 
additional EUR 500 million per year in 2012 and 2013 for the general government as a 
whole. 
Government adopts a decree disallowing local governments to run deficits at least until 2014. 
To ensure that savings contribute to the reduction in the government deficit. Government reduces transfers to local government in line with planned savings and transfers of 
competences to local government.  Observed.  
Public sector wages and human resource management  
The Ministry of Finance together with the Ministry of Interior complete the establishment of 
a Single Payment Authority for the payment of wa ges in the public sector. The Ministry of 
Finance prepares a report (to be published by end January 2011), in collaboration with the 
Single Payment Authority, on the structure and levels of remuneration and the volume and 
dynamics of employment in the general government. The report presents plans for the allocation of human resources in the public sector for the period up to 20 13. It specifies plans 
to reallocate qualified staff to the tax administ ration, GAO, the labour inspectorate, regulators 
and Hellenic Competition Commission. Partially observed. 
The draft report includes a diagnosis on wages and employment data in the public 
sector. 
It does not contain plans for the allocation of  human resources in the public sector for 
the period up to 2013.  
Government establishes a process to simplify the remuneration system in the public sector. It shall apply to all public sector employees. This should lead to a system where remuneration 
reflects productivity and tasks. Government ensures that there is no increase in the wage bill 
in the public sector as a result of the reform. Not observed . 
ASEP accelerates staff selection-related procedur es for the areas which are a priority in the 
implementation of this memorandum.  Observed.  
Public procurement  
Government provides timetable and details for the development of e-procurement and signs 
the respective contract for the provision of IT platform. Not observed. 
The contract for the provision of the IT pl atform has not been signed; the timetable 
for the development of e-procurement will only be defined after the signature of the contract.  
 
 
52 To strengthen competition in open markets   
Services directive   
Government ensures that the point of single contact (PSC): provides relevant information on 
all sector-specific and cross-cutting formalitie s and procedures (such as company/trade 
registration and permits relating to the providers ' premises); distinguishes between procedures 
applicable to service providers established in  Greece and those applicable to cross-border 
providers (in particular for the regulated professions). 
Government: ensures adequate links between the PSC and other relevant authorities 
(including professional associations); allows the online completion of procedures covering at 
least, the procedures in the distribution services, tourism, education and construction sectors; 
allows for payment of administrative fees at a distance Ongoing. 
Acts for the completion of all the required procedures online are pending. Concerns 
persist in respect of the use of online procedures related to the recognition of 
professional qualifications, the distinction between established providers and those 
providing services cross-border as well as the simplification of procedures.  
Government carries out a risk assessment of pr ocedures focusing on pr iority service sectors 
with a view to adopting solutions for electro nic identification, el ectronic signature and 
electronic documents in conformity with Commission Decision 2009/767/EC. 
Government presents a progress report outlining available online procedures, steps to be 
taken over the next two quarters to finalise the electronic completion of procedures, setting 
clear deadlines by servi ce sector and procedure. Observed. 
Government adopts changes to existing (sectoral)  legislation in key services sectors such as 
tourism, retail and private education services. New legislation should: facilitate establishment 
by abolishing or amending requirements which are prohibited by the Services Directive and significantly reducing requirements, including those relating to quantitative and territorial 
restrictions, legal form requirements, shareholding requirements, fixed minimum and/or 
maximum tariffs and restrictions to multidisciplinary activities; facilitate the provision of 
cross-border services, so that pr oviders of cross-border services  are required to comply with 
specific requirements of the Greek legislation only in exceptional cases (when admitted by Articles 16 or 17 of the Services Directive); provide legal certainty for providers of cross-
border services  by setting out in the respec tive (sectoral) legislation which requirements can 
and which requirements cannot be ap plied to cross-border services. Ongoing with delay .  
The legislative changes have been partially adopted. As of 1 February 2011, the Joint 
Ministerial Decision on outdoor trade, open markets and retail stores was about to be published in the official gazette. However, other acts were still pending, such as the 
legislation on cross border se rvices in tourism. Work is particularly delayed in the 
wholesale sector which requires screening for restrictions covered by the Services 
Directive. 
 
53 Government specifies, for priority service sect ors that are key for growth, a timetable for 
adopting sectoral legislation by end Q2 2011 that ensures compliance with the requirements 
of the Services Directive. Observed. 
The Government has selected the following pr iority areas: i) agri culture; ii) transport 
services not excluded by the directive; iii) employment; iv) technical services; v) 
sanitary facilities; vi) welfare and vii) other services. 
Restricted professions   
Government proposes legislation to remove restrictions to competition, business and trade in 
restricted professions including: the legal profession, to remove unnecessary restrictions on fixed minimum tariffs, the effective ban on advertising, territorial restrictions on where 
lawyers can practice; the pharmacy profession, to promote more flexible opening hours and 
reduce minimum profit margins (see also measures  to modernise the healthcare system); the 
notary profession, to reduce fixed tariffs and increase the number of notaries; architects, 
covering fixed minimum tariffs; engineers, covering fixed minimum tariffs; auditing services, 
covering fixed tariffs. Partially observed. 
On 31 December 2010, the government submitted draft legislation on closed 
professions. The draft was broadly in complia nce with the requirement; restrictions to 
multidisciplinary activities and to commercial communications are expected to be 
regulated by Presidential Decree in the first quarter of 2011.  
The law as voted by Parliament on 17 February still requires assessment, as it 
deviates in some respects from, and is less ambitious than, the draft tabled by 
government. 
On pharmacies the Parliament adopted on 9 February 2011, legislation that: 
i) reduces the minimum number of inhabitants for the establishment of a pharmacy; 
ii) increases the number of pharmacies open on Saturday morning, Monday and 
Wednesday afternoon in urban areas and 
iii) indirectly reduces the profit margin of pharmacies by an average of 3.5 percent 
down to 20 percent from th e current 23.5 percent.  
Government requests the Hellenic Competition Commission to issue an opinion on the 
proposed legislation. Observed. 
Government ensures the effective implementation of EU rules on recognition of professional 
qualifications and compliance with ECJ rulings (including those related to franchised diplomas). It presents to the European Commission a list of pending applications and a 
timetable for dealing with these applications. In particular, pending applications for 
recognition of professional qualifications (in particular those related to franchised diplomas) should be immediately processed, with the first decisions on those applications to be 
submitted to the European Commission by the end of 2010. Ongoing. 
On 30 December 2010 the government info rmed the Commission that there were a 
total of 825 pending applications for recognition, of which, 314 had been examined 
by the Council for the Recognition of Qualifications. Of those, 222 applications 
concerned franchised diplomas. 
Detailed information on pending applications (e.g., professions covered, time needed 
to issue a decision, etc.) is needed to fully comply with the requirement.  
 
 
54 Transport  
Building on the recently adopted railway reform law (Law 3891 /2010), Government adopts a 
business plan on the restructuring of the railways sector in a viable manner. By implementing the business plan, the train operator (TRAIN OSE) and infrastructure manager (OSE) break 
even. 
The restructuring measures envisaged in the business plan imply state aid in favour of OSE 
Group and TRAINOSE, which will be notified to the Commission by the end of 2010. The 
business plan will be adapted to ensure compliance with State aid rules. The next review will 
report on adaptations brought to the business plan to ensure its compatibility with State aid rules. 
The business plan provides an overall fiscal im pact analysis, including investment and debt 
and establishes monitoring and enforcement m echanisms that ensure prompt correction of 
deviations vis-à-vis the plan. Ongoing .  
State aid issues not yet cleared. 
Sectoral growth drivers 
Government presents a report analysing the potential contribution of the tourism sector to 
growth and jobs. It should identify legislative, administrative and other obstacles hindering 
competition and market entry to the realisation of sector potential. 
Government presents a report analysing the potential contribution of the retail sector to price flexibility, growth and jobs. It should identify legislative, administrative and other obstacles 
hindering competition and market entry to the realisation of sector potential. Ongoing. 
Preliminary results of these studies were  presented to the EC/IMF/ECB staff on 9 
February. The studies are expected to be made public in April.   
 
55 Business environment   
Government adopts legislation to simplify and accelerate the process of licensing enterprises, 
industrial activities and professions. For this purpose, it revises inter alia  Law 3325/2005, and 
makes the spatial plan and Law 3333/05 for busi ness areas operational, with the subsequent 
issuance of the required ministerial decisi ons and presidential decrees in Q1-2011. Ongoing. 
The draft licensing law is in inter-minist erial consultation. Its effectiveness will 
depend on the implementing regulations.  
Requirements to make the spatial plan and Law 3333/05 operational have been met.. 
Government adopts an action plan for a busi ness-friendly Greece with a timetable for the 
removal of 30 of the most important remaining restrictions to business activity, investment and innovation. Ongoing. 
The government is finalising an action plan to remove 30 of the most important 
barriers to business activity, investment and innovation. The plan, which includes 
several actions in addition to those in the MoU, is divided in two sections depending 
on their timeline: short-term and longer-term actions.   
Government adopts a law modifying the existing institutional framework of the Hellenic 
Competition Commission (HCC) with the aim of abolishing the notification system for all 
agreements falling within the scope of Article 1 of Law 703/1977, to give the HCC the power 
to reject complaints, to increase the inde pendence of HCC members, and to establish 
reasonable deadlines for the inves tigation and issuance of decisions. Ongoing.  A draft acts has been assessed by the Commission services and is expected 
to be passed by Parliament before end March.. 
Government makes the General Commercial Registry (GEMI) operational. (*). 
(*) By end December 2010: the data migration from the chambers' registries to the GEMI 
database is finalised; the joint ministerial decisions on procedures, conditions and technical modalities are adopted; the one-stop-shop serv ices are provided by  KEP's chambers of 
commerce and notaries. Any other required steps, including the automatisation of one-stop-
shop services, are fi nalised by March 2011. Delayed.  
The GEMI is foreseen to become operational in April 2011.  
Government accelerates the land registry and prepares a progress report and an action plan. Observed. 
 
 
56 Energy   
Government presents its detailed plans for the liberalisation of the energy market, including 
opening up lignite-fired electricity generatio n to third parties in line with EU law. 
Government adopts a plan for phased transitory  cost-based access to lignite-fired generation, 
taking into account the decommissioning of the power plants scheduled under the 
Government's Energy Plan to meet the 20-20- 20 target. This access w ill remain in place until 
effective implementation of the liberalisation has taken place. Observed. 
The government has been discussing a lternative measures with the European 
Commission (DG Competition) to address the lignite case as Greece requested a 
review of the 2009 Commission Decision. Public Power Corporation (PPC) would 
grant the requested access of 40 percent of lignite-fired capacity to competitors by 
drawing rights. These measures would includ e transitory mechanis ms and subject to a 
market test/consultation until end February 2011.  
Government adopts a plan to either award the hydro reserves management to an independent 
body or to assign this role to the independent system operator. Ongoing. 
The government intends to award the hydro reserves to the independent transmission 
operator.  
Government adopts a mechanism to ensure that the energy component of regulated tariffs 
reflects, gradually and at the latest by June  2013, wholesale market prices, except for 
vulnerable consumers. Government adopts a revised definition of vulnerable consumers and a tariff for this category of consumers. Observed.  
To ensure that network activities are unbundled  from supply activities, as foreseen in the 
second and third energy liberalisation packag es, Government identifies the assets and 
personnel associated with the electricity tran smission system and the electricity distribution 
system. Ongoing. 
The government has submitted information to the Commission on 2 February 2011 
which now requires an in-depth assessment. 
To promote investments and exports:  
Government carries out an in-depth evaluation of all R&D and innovation actions, including 
in various operational programmes, in order to adjust the national strategy and limit the use of 
government subsidies and guarantees. Not observed.    
Government creates an external  advisory council, to consider how to foster innovation, 
strengthen links between public research and Greek industries and the development of 
regional industrial clusters. Observed. 
The government has created a National Council for Research and Technology, with 
10 members from academia. 
 
 
57 Government takes measures to facilitate FDI and investment in innovation in strategic sectors 
(green industries, ICT, etc.) as well as measur es to promote exports. These actions focus on 
removing rigidities and administrative constraints and must be in line with the fiscal 
consolidation requirements. Observed 
The Investment law was adopted by Parliament on 21 January 2011.  
Export promotion measures were presented on 28/01/2011 but no clear strategy to 
alleviate the administrative burden for exporters is visible so far.   
To raise the absorption rates of structural and cohesion funds  
Observed . 
Payment claims in the absorption of structural funds in 2010 
(EUR million)  
Fund Reference 
value Outcome Comment 
European Regional and Cohesion 
Funds 2330 2372.4 Met. 
European Social Fund 420 447.6 Met. Government meets targets for payment claims in  the absorption of stru ctural and cohesion 
funds set down in the table below. Compliance with the targets shall be measured by certified data.  
Total 2720 2820.0 Met. 
In addition, Government achieves an annual target of submitting 10 major projects 
applications to the Commission. In meeting absorption rate targets, recourse to non-targeted de minimis  state aid measures should be gradually reduced. Observed. 
12 applications for major projects have been submitted in 2010. 
Non-targeted de minimis  state aid measures are progressively reduced. 
 
Government presents a report on the activities of the task force assessing progress in ensuring 
the rapid implementation and absorption of structural funds, and proposing improvements when necessary. Observed.  
 
 
58 Without prejudice to the Greek Constitution, Government adopts legislation to tackle delays 
in the implementation of public works and investment projects in general. Legislation should:  
shorten and simplify judicial procedures challenging contract awards or land expropriation 
decisions;  shorten deadlines to get permits by the Central Archaeological Council in Athens;  
simplify and shorten procedures to complete st udies on environmental impact and to get the 
approval of environmental terms for infrastructure projects.  Partially observed, delayed. 
A draft bill to tackle delays in judicial pr ocedures challenging contract awards or land 
expropriation decisions is under consultation and expected to be adopted in the 
course of February 2011.  
Law 3905/2010 of 23 December 2010 includes provisions on the signature of a 
protocol between the ministries of Culture and Infrastructure for each co-funded 
major project.  
A draft bill on studies for environmental impact and approval of environmental terms 
is under preparation and expected to be adopted before end March.. 
 
59 Annex 2: Provision of data 
This table assesses the provision of data that are specifically re quired in the MoU. It does not cover data that are regularly transmitted and published by 
Greece under the European statistical syst em transmission programme, like annual and quarterly GDP accounts, inflation data, or  other macroeconomic 
statistics.  
To be provided by the Ministry of Finance 
  Comment 
Preliminary monthly data on the state 
budget execution (including breakdown by 
main categories of revenue and expenditure 
and by line ministry). 
(Data compiled by the Ministry of Finance)  Monthly, 15 days after 
the end of each month; 
these data should also 
be included in 
subsequent 
transmissions in case 
of revision. Observed . 
Updated monthly plans for the state budget 
execution for the remainder of the year, 
including breakdown by main categories of 
revenue and expenditure and by line 
ministry. 
(Data compiled by the Ministry of Finance)  Monthly, 30 days after 
the end of each month. Not observed. 
 
 
 
60 Preliminary monthly cash data on general 
government entities other than the state. 
(Data compiled by the Ministry of Finance)  Monthly, 30 days after 
the end of each month, 
these data should also be included in 
subsequent 
transmissions in case of revision. Partially observed. 
Monthly data on the public wage bill (of 
general government, including a 
breakdown in nominal wage and 
allowances paid to government employees 
per line ministry and public entity), number 
of employees (including a breakdown per ministry and public entities outside the 
central government) and average wage 
(including the relative shares of the base wage, allowances and bonuses).  
(Data compiled by the Ministries of 
Interior and Finance)  Monthly, 30 days after 
the end of each month 
(starting in June 2010). Not observed 
Weekly information on the Government's 
cash position with indication of sources 
and uses as well of number of days 
covered. 
(Data compiled by the Ministry of Finance)  Weekly on Friday, 
reporting on the 
previous Thursday. Observed. 
 
61 Data on below-the-line financing for the 
general government. 
(Data compiled by the Ministry of Finance)  Monthly, no later than 
15 days after the end 
of each month; these data should also be 
included in subsequent 
transmissions in case of revision. Observed. 
Data on expenditure pending payment 
(including arrears) of the general 
government, including the State, local 
government, social security, hospitals and 
legal entities. 
(Data compiled by the Ministry of Finance 
on the basis of basic data from the several 
line ministries )  Quarterly, within 55 
days after the end of 
each quarter.  Observed , but quality issues remain. 
Data on public debt and new guarantees 
issued by the general government to public enterprises and the private sector. 
(Data compiled by the Ministry of Finance)  Monthly, within one 
month. Observed . 
Data on public enterprises: revenue, costs, 
payroll, number of employees 
(Data compiled by the Ministry of Finance)  Monthly, within three 
weeks of the end of each month for the ten 
largest enterprises. 
Quarterly within three weeks of the end of 
each quarter for the 
other enterprises. Partially observed . 
Number of employees, not available. 
 
 
62 Monthly statement of the transactions 
through off-budget accounts. 
(Data compiled by the Ministries of 
Finance and Education)  Monthly, at the end of 
each month. Not observed . 
Monthly statements of the operations on 
the special accounts. 
(Data compiled by the Ministry of Finance)  Monthly, at the end of 
each month. Observed. 
Report on progress with fulfilment of 
policy conditionality. 
(Report prepared by the Ministry of 
Finance)  Quarterly before the 
respective review starts. Observed . 
Report transmitted after the review. 
Monthly data on healthcare expenditure by the social security funds with a lag of three 
weeks after the end of the respective 
quarter. 
(Data compiled by the Ministries of Labour 
and Health) Monthly, within three 
weeks of the end of 
each month. Staring 
with data for January 2011 for IKA, OAEE, 
OGA and OPAD, and 
from April 2011 on for the other funds Not yet applicable.  
 
63 To be provided by the Bank of Greece 
Assets and liabilities of the Bank of 
Greece.  Weekly, next working 
day. 
Assets and liabilities of the Greek banking 
system - aggregate monetary balance sheet 
of credit institutions. Monthly, 30 days after 
the end of each month.  Observed. 
Evolution of the external funding provided 
by Greek banks to their subsidiaries 
abroad. Monthly, 15 days after 
the end of each month. Partially observed.  
Frequency not respected 
External funding flows for the banking, 
corporate and government sector, including 
also expected developments in the 12 
months ahead. Monthly, 30 days after 
the end of each month. Partially observed. 
Forward looking element missing.  
Report on banking sector liquidity 
situation. Weekly, next working 
day. 
Report on the evolution of financial stability indicators. Quarterly, 15 days 
after the end of each 
quarter depending on 
data availability. 
Report on results from the regular quarterly solvency stress tests. Quarterly, 15 days 
after the end of each 
quarter depending on 
data availability. Observed. 
Detailed report on the balance sheet of the 
Financial Stability Fund with indication 
and explanation of chan ges in the accounts. Weekly, next working 
day. Not observed. 
 
 64 Annex 3: Macroeconomic forecast 
 
Annual % change 2009 2010 2011 2012 2013 2014
1. Private consumption expenditure -1.8 -4.1 -4.6 0.5 1.1 1.2
2. Government consumption expenditure 7.6 -9.0 -8.5 -6.0 -1.0 -0.33. Gross fixed capital formation -10.4 -17.4 -7.5 -2.6 1.1 1.2
4. Final domestic demand -2.0 -7.1 -5.7 -1.0 0.8 1.0
5. Change in inventories + net acquisitions of 
    valuables -0.5 -0.5 -0.5 -0.2 -0.2 -0.2
6. Domestic demand -4.1 -7.2 -5.6 -0.7 0.7 1.0
7. Exports of goods and services -20.1 0.6 6.3 5.9 7.3 6.7
7a.  - of which goods -18.0 2.0 6.5 6.4 6.5 6.1
7b.  - of which services -21.6 -0.5 6.1 5.6 8.0 7.2
8. Final demand -6.9 -6.1 -3.7 0.5 2.0 2.1
9. Imports of goods and services -18.6 -12.0 -6.0 -1.5 1.5 2.1
9a.  - of which goods -18.5 -15.8 -7.4 -1.5 1.5 2.1
9b.  - of which services -18.9 4.3 -1.2 -1.5 1.3 2.0
10. Gross domestic product at market prices -2.4 -4.2 -3.0 1.1 2.1 2.1
Contribution to change in GDP
11. Fi nal  domesti c demand -2.3 -8.0 -6.2 -1.0 0.8 1.0
12. Change in inventories + net acq. of valuables -2.4 -0.1 0.1 0.3 0.0 0.013. External balance of goods and services 2.2 3.9 3.1 1.8 1.4 1.1
Annual % change 2009 2010 2011 2012 2013 2014
1. Private consumption expenditure -0.7 0.4 -2.4 0.9 1.7 2.3
2. Government consumption expenditure 9.8 -12.9 -8.9 -5.7 0.0 0.93. Gross fixed capital formation -11.4 -15.2 -6.6 -1.1 0.2 2.9
4. Final domestic demand -0.9 -4.3 -4.0 -0.4 0.0 2.2
5. Change in inventories + net acquisition of valuables
6. Domestic demand -2.9 -4.5 -4.1 0.0 1.6 2.3
7. Exports of goods and services -20.2 5.7 7.5 7.0 9.2 8.6
7a.  - of which, goods -18.9 7.6 7.7 7.7 8.2 7.8
7a.  - of which, services -21.2 4.3 7.4 6.6 10.0 9.2
 8. Final demand -5.9 -3.0 -2.3 1.3 3.1 3.5
 9. Imports of goods and services -19.1 -8.4 -5.0 0.3 3.5 4.2
9a.  - of which goods -20.2 -12.1 -6.5 0.3 3.6 4.29a.  - of which, services -13.9 7.7 0.2 0.2 3.2 4.0
10. Gross domestic product at market prices -1.1 -1.3 -1.5 1.5 2.9 3.3
11. - of wich, external balance of goods and services
12. Balance of primary income with rest of the world 0.5 -0.1 -0.1 0.0 0.0 0.0
13. Gross national income -0.6 -1.4 -1.6 1.5 2.9 3.3
14. Compensation of employees 1.3 -4.7 -2.9 0.2 0.4 1.1
15. Gross operating surplus and mixed income -0.9 -3.3 -3.4 1.4 5.3 5.5
16. Gross value added at basic prices 0.0 -3.9 -3.2 0.9 3.3 3.7
16a. - of which, labour costs, including self-employed 1.6 -4.7 -2.7 0.2 1.0 1.5
17. Taxes net of subsidies (18-19) -9.3 19.4 9.5 4.7 0.6 0.618. - taxes on products -9.0 19.0 9.4 4.7 0.7 0.6
19. - subsidies on products 14.0 -15.7 2.6 2.6 2.6 2.6
20. Gross domestic product at market prices -1.1 -1.3 -1.5 1.5 2.9 3.3Table A1: USE AND SUPPLY OF GOODS AND SERVICES (volume)
Table A2: USE AND SUPPLY OF GOODS AND SERVICES (value)
 
 
   
 
 
% change in implicit price deflator 2009 2010 2011 2012 2013 2014
1. Private consumption expenditure 1.1 4.6 2.4 0.3 0.6 1.1
2. Government consumption expenditure 2.1 -4.3 -0.4 0.4 1.2 1.23. Gross fixed capital formation -1.1 2.7 1.0 1.6 1.7 1.63a.  - of which, construction 0.5 3.3 1.0 1.8 1.6 1.83b.  - of which, equipment -0.4 3.1 0.9 1.4 2.0 1.7
4. Final domestic demand 1.1 3.0 1.8 0.6 0.9 1.2
- -----
6. Domestic demand 1.2 3.0 1.6 0.7 0.9 1.3
7. Exports of goods and services -0.2 5.0 1.2 1.1 1.8 1.8
7a.  - of which, goods -1.1 5.5 1.1 1.2 1.6 1.67b.  - of which, services 0.5 4.8 1.3 1.0 1.8 1.9
8. Final demand 1.0 3.3 1.5 0.7 1.1 1.4
9. Imports of goods and services -0.6 4.0 1.0 1.8 2.0 2.1
9a.  - of which, goods -2.1 4.5 1.0 1.8 2.1 2.1
9a.  - of which, services 6.2 3.3 1.4 1.7 1.8 1.9
10. Gross domestic product at market prices 1.3 3.0 1.6 0.4 0.8 1.2
11. Terms of trade of goods and services 0.4 1.0 0.2 -0.7 -0.3 -0.2
11a. - of which, terms of trade of goods 1.0 1.0 0.1 -0.6 -0.5 -0.511b. - of which, terms of trade of services -5.3 1.4 -0.1 -0.8 0.0 0.0
12. HICP 1.3 4.7 2.2 0.5 0.7 1.0
Annual % change 2009 2010 2011 2012 2013 2014
1. Gross value added at 1995 basic prices -1.8 -3.7 -2.2 0.0 1.3 1.5
2. Employment ('000) -0.7 -2.8 -2.7 0.1 0.9 1.23. GVA per occupi ed person -1.1 -0.7 0.3 -0.1 0.4 0.3
4. Compensation of employees (per employee) 2.3 -1.8 -0.2 0.1 0.1 0.3
5. Unit labour costs (1995=100) 3.4 -1.1 -0.5 0.2 -0.3 0.0
6. Total  population 0.2 0.2 0.2 0.2 0.2 0.2
7. Population of working age (15-64 years) -0.1 -0.1 0.4 0.4 0.4 0.48. Total  l abour force 1.2 0.6 0.2 0.2 0.2 0.2
-0.7 -2.8 -2.7 0.1 0.9 1.2
11. Total employment -0.7 -2.8 -2.7 0.1 0.9 1.2
11a. - of which, employees -0.9 -3.0 -2.7 0.1 0.3 0.8
11b. - of which, self-employed -0.2 -2.4 -2.6 0.0 2.0 1.8
13. Unemployment 24.7 34.8 21.3 1.3 -3.5 -5.2Table A4: LABOUR MARKET AND LABOUR COSTTable A3: COSTS AND PRICES
 
 
 
 66 levels 2009 2010 2011 2012 2013 2014
1. Private consumption expenditure 174.4 175.1 170.9 172.4 175.3 179.3
2. Government consumption expenditure 45.4 39.6 36.1 34.0 34.1 34.43. Gross fixed capital formation 40.1 34.0 31.7 31.4 32.3 33.2
4. Final domestic demand (1+2+3) 259.9 248.7 238.7 237.8 241.7 246.9
5. C hange in inventories + net acquisition of valuables as % of GDP 
6. Domestic demand (4+5) 258.3 246.8 236.6 236.7 240.6 246.0
7. Exports of goods and services 44.3 46.8 50.3 53.9 58.8 63.9
7a.  - of which, goods 18.5 19.9 21.5 23.1 25.0 27.0
7a.  - of which, services 25.8 26.9 28.9 30.8 33.8 37.0
8. Final demand (6+7) 302.6 293.6 287.0 290.5 299.4 309.9
9. Imports of goods and services 69.5 63.6 60.4 60.6 62.7 65.3
9a.  - of which goods 56.8 50.0 46.7 46.9 48.6 50.6
9a.  - of which, services 12.7 13.7 13.7 13.7 14.1 14.7
10. Gross domestic product at market prices ( 8-9 ) 233.1 230.0 226.5 230.0 236.7 244.6
11. - of wich, external balance of goods and services
12. Balance of primary income with rest of the world -6.4 -6.5 -6.7 -6.9 -7.1 -7.3
13. Gross national income at market prices (10+12) 226.7 223.4 219.8 223.0 229.6 237.2
14. Compensation of employees 87.3 83.1 80.7 80.9 81.2 82.1
15. Gross operating surplus and mixed income 122.6 118.6 114.6 116.2 122.3 129.0
16. Gross value added at basic prices ( 14 + 15 ) 209.9 201.7 195.3 197.1 203.5 211.1
16a. - of which, labour costs, including self-employed 134.1 127.7 124.4 124.6 125.8 127.6
17. Taxes net of subsidies (18-19) 25.7 30.7 33.6 35.2 35.4 35.7
18. - taxes on products 26.1 31.0 33.9 35.5 35.8 36.0
19. - subsidies on products 0.3 0.3 0.3 0.3 0.3 0.3
 20. Gross domestic product at market prices ( 16 + 17 ) 233.1 230.0 226.5 230.0 236.7 244.6
levels 2009 2010 2011 2012 2013 2014
1. Gross value added at 1995 basic prices 159.1 153.2 149.9 149.9 151.8 154.1
2. Employment ('000) 4757.7 4625.0 4501.6 4504.5 4544.9 4597.4
3. GVA per occupied person (1:2) 33.4 33.2 33.3 33.3 33.4 33.5
4. Compensation of employees (per employee) 28.2 27.7 27.6 27.7 27.7 27.85. Unit labour costs (4:3) (1995=100) 84.3 83.4 83.0 83.1 82.9 82.8
6. Total population 11260.4 11282.9 11305.5 11328.1 11350.7 11373.4
7. Population of working age (15-64 years) 7222.1 7214.9 7243.8 7272.7 7301.8 7331.0
8. Total labour force 5228.8 5260.2 5272.3 5285.5 5298.7 5311.9
9. Calculated activity rate (%) (3:2) 72.4 72.9 72.8 72.7 72.6 72.5
10. Total employment 4757.7 4625.0 4501.6 4504.5 4544.9 4597.4
11. Total employment 4757.7 4625.0 4501.6 4504.5 4544.9 4597.4
11a. - of which, employees 3096.0 3003.1 2922.0 2925.0 2933.7 2957.2
11b. - of which, self-employed 1661.7 1621.9 1579.6 1579.6 1611.1 1640.2
12. Calculated employment rate (6:2) 65.9 64.1 62.1 61.9 62.2 62.7
13. Unemployment (8 - 11) 471.1 635.2 770.7 781.0 753.8 714.6
  13a. Calculated unemployment rate (%) (8:5) 9.0 12.1 14.6 14.8 14.2 13.5Table B2: LABOUR M ARKET AND LABOUR COST (in EUR billion unless otherwise stated)Table B1: USE AND SUPPLY OF GOODS AND SERVICES (value, in EUR b illion)
 
 
 
 
2009 2010 2011 2012 2013 2014
Total revenue 37.79 40.18 41.92 41.45 40.87 39.85
Indirect taxes 11.10 12.95 13.63 14.19 13.99 13.81
Direct taxes 8.17 7.79 8.36 8.16 8.29 7.54
Social contributions 13.10 12.81 12.54 12.16 11.89 11.67Sales 1.72 1.87 1.88 1.85 1.80 1.74
Other current resources 2.37 2.66 3.59 3.24 3.08 3.28
Capital transfers received 1.33 2.10 1.92 1.86 1.83 1.81
Total expenditure 53.16 49.68 50.15 49.51 49.39 48.32
Intermediate consumption 7.11 5.24 4.62 4.69 4.86 4.94
Compensation of employees 13.51 12.37 12.36 12.00 11.45 10.89
Social transfers other than in kind 20.85 20.39 21.22 20.92 20.73 19.32
Interest 5.28 6.42 6.48 7.36 7.93 8.09Subsidies 0.15 0.10 0.13 0.13 0.13 0.12
Other current expenditure 1.73 1.59 1.56 1.82 1.47 1.63
Gross fixed capital formation 3.38 2.69 2.63 2.34 2.46 2.44Other capital expenditure 1.14 0.90 1.14 0.25 0.38 0.89
General Government balance (ESA 95) -15.4 -9.5 -8.2 -8.1 -8.5 -8.5
Measures identified in May 2010, to be revised - 1.5 0.1 -0.4
Unidentified fiscal cosnolidation measures 0.8 1.6 3.7 5.9
General Government balance (Targets) -7.5 -6.4 -4.8 -2.6
Total revenue 88.82 93.17 95.75 96.11 97.53 98.24
Indirect taxes 26.09 30.03 31.13 32.90 33.38 34.05
Direct taxes 19.20 18.07 19.09 18.93 19.79 18.59Social contributions 30.79 29.71 28.64 28.18 28.37 28.76
Sales 4.03 4.33 4.28 4.29 4.29 4.29
Other current resources 5.58 6.17 8.20 7.50 7.35 8.08Capital transfers received 3.13 4.86 4.39 4.31 4.36 4.47
Total expenditure 124.94 115.20 114.55 114.80 117.86 119.13
Intermediate consumption 16.71 12.14 10.54 10.88 11.61 12.19
Compensation of employees 31.76 28.68 28.23 27.83 27.31 26.84
Social transfers other than in kind 49.01 47.27 48.47 48.50 49.46 47.63Interest 12.42 14.89 14.81 17.07 18.92 19.94
Subsidies 0.34 0.23 0.30 0.30 0.30 0.30
Other current expenditure 4.07 3.69 3.57 4.22 3.50 4.01Gross fixed capital formation 7.94 6.23 6.01 5.43 5.86 6.02
Other capital expenditure 2.69 2.08 2.61 0.57 0.90 2.20
General Government balance (EDP) -36.15 -22.03 -18.81 -18.69 -20.33 -20.89
Measures identified in May 2010, to be revised - 3.38 0.34 -1.00
Unidentified fiscal cosnolidation measures 1.741 3.770 8.930 14.503
General Government balance (Targets) -17.07 -14.92 -11.40 -6.39C1: FISCAL ACCOUNTS AND FORECAST
% GDP
Levels (in EUR billion)
 
 
 
 68 2009 2010 2011 2012 2013 2014
Government def icit (level) -36.2 -22.0 -18.8 -14.9 -11.4 -6.4
Gross debt (level) 298.0 327.1 350.1 365.4 377.0 383.6
Change in gross debt 36.6 29.0 23.0 15.3 11.6 6.6
Stock-f low adj ustment 0.5 7.0 4.2 0.4 0.2 0.2
Gross debt ratio 126.8 141.0 153.3 157.6 158.0 155.6
Change in the ratio 16.5 14.2 12.2 4.3 0.4 -2.4
Contributions:
Primary balance (+ is a deficit) 10.1 3.1 1.7 -0.9 -3.2 -5.5
“Snow-ball” effect 6.2 8.1 8.6 5.1 3.5 3.0
Of whi ch:
Interest expenditure 5.3 6.4 6.5 7.4 7.9 8.1
Real growth effect 2.7 5.4 4.4 -1.6 -3.2 -3.3
Inflation effect -1.7 -3.6 -2.2 -0.7 -1.2 -1.8
Stock-f low adj ustment 0.2 3.0 1.8 0.2 0.1 0.1C2: GROSS DEBT
levels (EUR billion)
% GDP
 
 
 
69 Annex 4: Financing needs and sources 1 
SUM 2010 2011 2012 2013
1 0 Q 2 - 1 3 Q 2 M a y - J u nQ 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2
G overnment deficit (cash basis) and net SOE's borrowing 58,1 3,7 7,1 3,9 5,4 6,8 7,2 2,9 3,7 3,9 5,1 2,1 3,1 3,1
Debt amortization (bonds & T-bills) 171,1 11,4 4,1 5,4 16,1 13,9 16,0 13,3 22,2 14,7 16,3 12,3 9,8 15,6
of which short-term debt 84,3 2,1 3,3 5,0 6,4 4,8 8,9 10,2 7,5 5,0 8,0 10,0 8,0 5,0
of which long-term debt 291,8 9,3 0,8 0,4 9,7 9,1 7,1 3,1 14,7 9,7 8,3 2,3 5,8 11,6
Public sector financing need 229,2 15,2 11,2 9,4 21,5 20,7 23,2 16,2 25,9 18,6 21,4 14,4 12,9 18,7
Rollover of short-term debt 107% 0% 198% 78% 106% 167% 109% 78% 67% 200% 113% 80% 100% 100%
Rollover of long-term debt 48% 0% 0% 0% 0% 0% 0% 0% 74% 76% 76% 89% 100% 100%
Gross gov ernment debt issuance 129,0 2,0 6,5 4,0 6,8 8,0 9,7 8,0 15,9 17,4 15,3 10,1 9,8 15,6
of which short-term borrowing 390,0 2,0 6,5 4,0 6,8 8,0 9,7 8,0 5,0 10,0 9,0 8,0 8,0 5,0
of which long-term borrowing 44,1 0,0 0,0 0,0 0,0 0,0 0,0 0,0 10,9 7,4 6,3 2,1 5,8 11,6
Privatisation receipts41 , 0 ----- 1 , 0 -------
Bank support scheme 5 10,0 0,0 0,0 1,5 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 0,5 0,0
      Financial Stability Fund 1,5 0,0 0,0 1,5 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
      Dedicated account 8,5 0,0 0,0 0,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 0,5 0,0
Financing gap 109,2 13,1 4,7 7,0 15,7 13,7 13,5 9,2 11,0 2,2 7,1 5,3 3,6 3,1
Loan d isb ursements 110,0 20,0 9,0 9,0 15,0 12,0 8,0 5,0 10,0 6,0 6,0 2,0 6,0 2,0
of which IMF 30,0 5,5 2,5 2,5 4,1 3,3 2,2 1,4 2,7 1,6 1,6 0,5 1,6 0,5
  of which EU 80,0 14,5 6,5 0,0 17,5 8,7 5,8 3,6 7,3 4,4 4,4 1,5 4,4 1,5
Source:  G AO, Com m i ssion services.
1. Data in this table are subject to revision.
2. Adjusted for buy-backs conducted by the Public Debt Management Agency and settlement of arrears via bond issuance.3. Tentative schedule is based under conservative assumptions that only 3 and 6 months securities will be issued, which increas es the roll-over needs. 
4. Financing plan conservatively includes EUR 1 bn of privatisation proceeds. Plan will be revised to reflect the new commitmen t by the G reek authorities to upscale privatisation proceeds.
5. Disbursements to bank support scheme are subject to developments in financial sector.
 
 
70 Annex 5: Statement by the European Commission, the ECB and IMF on 
the Third Review Mission to Greece 
 
 Staff teams from the European Commission (EC), European Central Bank (ECB), and International 
Monetary Fund (IMF) visited Athens during January 27 to February 11 for the third review of the government’s economic program, which is being supported by a EUR 80 billion loan from Euro area countries and a EUR 30 billion Stan d-By Arrangement with the Fund. 
The objectives underpinning the program are to restore fiscal sustainability, safeguard financial sector 
stability, and boost competitiveness—to create the conditions for sustained growth and employment. Maintaining social fairness in shouldering the burden of adjustment in the program also remains of paramount concern and this will continue to guide the direction of policies in the period ahead. 
Our overall assessment  is that the program has made further progress toward its objectives. While 
there have been delays in some areas, the underlying fiscal and broader reforms necessary to deliver the program’s medium-term objectives are being put in place. However, major reforms still need to be designed and implemented to build a critical mass necessary to secure fiscal sustainability and economic recovery. 
Regarding the outlook , the recession has to date been clos e to what was anticipated. Underlying 
inflation has remained low in the face of rising commodity prices. Downward movement of unit labor costs should support gains in comp etitiveness. Encouragingly, expo rts have performed well recently. 
We continue to expect the economy to stabilize late in 2011. 
In the fiscal area , against the sharp macro headwinds, the authorities delivered a 6 percent of GDP 
fiscal adjustment in 2010, reducing the deficit to about 9½ percent of GDP. This is an impressive 
achievement, but some tensions were evident in budget implementation, in particular shortfalls in revenue collections, and problems with spending control. The program has been designed to address these problems, and the work is progressing. 
The government has begun to specify a medium term budget strategy, which will define time-bound 
actions to realize the full fiscal  adjustment through 2014. The re forms are complex and cover among 
other issues taxation, health, public employment, and state enterprise reforms. The government is appropriately allowing time for consultation with social partners before moving beyond the design phase to begin implementation. The government’s full commitment to this complicated process of institutional change, not least determination to resist  vested interests, will be critical to success. 
Concerning financing , the government continues to work toward securing a gradual return to bond 
markets at affordable interest rates. Strong progra m implementation, with financial support from the 
international community, remains key to achieving this. It is equally important that the government notably scales up its privatization program, and more generally realizes better returns from its extensive portfolio of assets. Work is proceed ing to establish a comprehensive in ventory of the government’s real 
estate assets, and to define a phased action plan. 
As to the financial sector , tight liquidity and rising non-performing loans are putting strains on the 
banking system and credit is cont racting. Encouragingly, private banks have recently enjoyed some 
success in raising capital. It is essential that th e government makes progress in addressing the stability 
and efficiency of the banks under its control. The Eurosystem has been a key source of liquidity support for the system, and this is allowing banks to gradually move towards a sustainable medium-term funding model. The Financial Stability Fund is  available to provide support to banks in the 
system, if needed. 
 
 71Structural reforms  are making progress. Legislation covering aspects of the labor market, the 
liberalization of closed professions, healthcare reform, licensing, and the competition authority has either been passed, or soon will be. The authorities’  focus must now be on implementing these laws, to 
make sure the new frameworks are ef fective as soon as possible. To secure economic recovery, early 
progress on structural reforms remains critical. The government must ensure that reforms are 
sufficiently ambitious and comprehensive to tackle th e deep seated structural challenges facing Greece. 
The next steps will focus on, among other things, reviving the tourist industry, removing administrative barriers to exports, and strengthening public procurement. 
Next Steps . Approval of the conclusion of the third re view will allow the di sbursement of EUR 15 
billion (EUR 10.9 billion by the euro area Member  States, and EUR 4.1 billion by the IMF). The 
mission for the next program review is scheduled for May, 2011.