EN   EN 
 
 
 EUROPEAN  
COMMISSION   
Brussels, 23.2.2022  
COM(2022) 78 final  
 
COMMUNICATION FROM THE COMMISSION  
Enhanced Surveillance Update - Greece, February 2022  
{SWD(2022)  50 final}   
 
1 
 BACKGROUND  
Economic developments and policies in Greece are monitored under the European 
Semester for economic policy co -ordination and under the  enhanced surveillance 
framework according to Articles 2 and 3 of Regulation (EU) No  472/2013  (1). The 
implementation of enhanced surveillance for Greece  (2) acknowledges the fact that Greece 
needs to continue implementing measures to address the sources o r potential sources of 
economic and financial difficulties, while implementing structural reforms to support a robust 
and sustainable economic growth.  
Enhanced surveillance provides a comprehensive framework for monitoring economic 
developments and the pu rsuit of policies needed to ensure a sustainable economic 
recovery.  It allows for a regular assessment of recent economic and financial developments in 
Greece, as well as for monitoring sovereign financing conditions and updates of the debt 
sustainability analysis. Enhanced surveillance also provides the framework for assessing the 
general commitment given by Greece to the Eurogroup of 22  June 2018, to continue and 
complete reforms adopted under the European Stability Mechanism programme and to ensure 
that the objectives of the important reforms adopted under the financial assistance programmes 
are safeguarded. In that context, enhanced surveillance monitors the implementation of specific 
commitments to complete key structural reforms started under the progr amme, in six key areas 
by agreed deadlines up to mid -2022, namely: (i) fiscal and fiscal -structural policies, (ii) social 
welfare, (iii) financial stability, (iv) labour and product markets, (v) Hellenic Corporation of 
Assets and Participations and privati sation, and (vi) the modernisation of public 
administration  (3). 
This is the thirteenth enhanced surveillance report for Greece.  The report is based on the 
findings of a mission held virtually  on 25  January 2022 and regular dialogue with the 
authorities. The mission was conducted by the European Commission in liaison with the 
European Central Bank  (4); the International Monetary Fund participated in the context of its 
Post Financing Assessment framework, while the European Stability Mechanism participated 
in the context of its Early Warning System and in line with the Memorandum of Understanding 
of 27  April 2018, on working relations between the European Commission and European 
Stability Mechani sm. The current report assesses the implementation of Greece’s commitments 
to the Eurogroup regarding reform completion due up to end -2021. This report is not linked to 
a release of the next set of policy -contingent debt measures, which – in line with the agreed 
biannual schedule – could take place on the basis of the fourteenth report. The fourteenth report 
is expected to be published in May  2022.  
                                                           
(1) Regulation (EU) No  472/2013 of the European Parliament and the Council of 21  May 2013 on the 
strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or 
threatened with serious difficulties with respect to their financial stability, OJ L140, 27.5.2013, p.  1. 
(2) Commission Implementing Decision (EU) 202 2/216 of 15 February  2022 on the prolongation of enhanced 
surveillance for Greece.  
(3) https://www.consiliu m.europa.eu/media/35749/z -councils -council -configurations -ecofin -eurogroup -2018 -
180621 -specific -commitments -to-ensure -the-continuity -and-completion -of-reforms -adopted -under -the-esm-
programme_2.pdf . 
(4) ECB staff participated in the review mission in accord ance with the ECB’s competences and thus provided 
expertise on financial sector policies and macro -critical issues, such as headline fiscal targets and sustainability 
and financing needs. The review mission was preceded by a technical mission, held remotel y, from 12 to 
17 January 2022.  
 
2 
 The commitments given by Greece to Eurogroup partners in June 2018, which are the 
basis for the release of add itional debt relief measures, were established up to mid -2022 
and thus Greece has entered the final year of this arrangement.  The authorities expressed 
an intention to focus their efforts on delivering on outstanding commitments by mid -2022. The 
decisions on the release of the remaining debt relief measures as well as the ending of enhanced 
surveillance will need to take account of the progress towards completion of commitments  as 
well as the wider economic policy environment .  
OVERALL ASSESSMENT  
Greece recovered swiftly from the pandemic  and the outlook remains strong, albeit 
subject to high uncertainty. The economy is currently expected to have reached a high GDP 
growth rate of 8.5% in 2021, driven by  domestic demand and the better -than-expected tourist 
season. The pre -pandemic level of economic activity was reached already in the third quarter 
of 2021. The outlook for 2022 remains strong, supported by the accommodative fiscal and 
monetary policy  and the strong boost from the recovery and resilience plan . The spread of the 
new omicron variant of the coronavirus is nevertheless likely to have weigh ed on growth in the 
last quarter of 2021, but this impact is expected to largely fade out during the first quarter of 
2022. Greece introduced mandatory vaccination for residents over age 60 from January 2022. 
Risks of additional disruptions  exist , although t hat impact is currently expected to be rather 
short -lived. The recent world market price developments in energy and , in particular , electricity 
prices  have  led to a surge in consumer prices and is an additional source of uncertainty for the 
economy at larg e. While most of the emergency support measures were phased out in 2021 as 
planned, the government responded swiftly to the outbreak of the new coronavirus variant and 
the higher -than-expected inflation with new targeted support . The general government deficit 
is expected to substantially narrow  in 2022 compared to the previous year  (5). Labour market 
developments remain favourable and unemployment , which stood at 14.1% in the third quarter 
of 2021 (down from 17.2% in the third quarter of 2020), is set t o decrease further in 2022.  The 
at-risk-of poverty rate stood at 17.7% in 2020, down from 17.9% in 2019.  
The authorities have successfully completed a further set of specific commitments:  
 In the area of public administration , the authorities have effectively completed the 
preparation of  job descriptions for public officials. Together with the digital 
organisation charts, which were put in place earlier in 2021, the job descriptions 
constitute a key element  in the establishment of an integrated huma n resources 
management system for the Greek public administration.  
 The authorities have completed the simplif ication of  investment licensing in the 
agreed sectors  by adopting the last piece of legislation for education activities.  These 
efforts build on and complement a major reform that w as initiated during the financial 
assistance  programme  by extending simplified investment licencing procedures to a 
number of additional economic activities  (6). 
                                                           
(5) The Commission’s autumn forecast projected that the primary deficit monitored under enhanced surveillance 
would reach 7.6% of GDP in 2021 and 1.2% of GDP in 2022.  
(6)  These were: transport -related services, social welfar e, tourism, physical well -being, personal and health 
services, leasing of maritime leisure equipment, lifeguard training, livestock installations, aquaculture, 
veterinary clinics and pet breeding and trading, in addition to education activities mentioned a bove.  
 
3 
  In the area of social welfare reforms, the authorities have completed the administrative 
reorganisation of the Single Pension Fund, following the setting up and 
operationalisation of all required local offices , while making steady progress on the 
improving its IT infrastructure.  The reform completes the efforts to consolidate the  
previously  fragmented pension system, while moving towards a full digitalisation of 
pension system data : it thus constitutes an important step for enhancing the efficiency 
of the Greek pension system .  
In addition, reform implementation has progressed well across a broad range of specific 
commitments . In particular:  
 In the area of public financial management , the work on further refinements of the 
functional budgetary classification (part of the chart of accounts  reform ) is progress ing 
according to plan and is expected to be completed by April 2022 and published in the 
annual update of the Medium Term Fiscal Strategy  in May 2022 . 
 The authorities have made progress as regards the clearance of arrears  of the  general 
government towards the private sector . The stock of pension arrears has been reduced 
in line with what was envisaged in the action plan adopted in autumn  2021 and t he 
authorities confirmed that it would be fully clear ed by June 2022 . After several  months 
of stagnation,  the stock of non -pensions arrears decreased  markedly on the back of 
actions adopted by the government t o bring clearance back on track.  While  the stock  
currently  remains somewhat above the target set in March 2021 , the authorities expect 
the stock of non -pension arrears to be materially cleared by February 2022. The 
implementation of the recommendations made by the Hellenic Court of Auditors and 
the simplification of fiscal procedures proceed according to plan.  
 The ENFIA property ta x reform  has reached a final stage of preparation. An 
agreement has been reached on the detailed tax rate structure and fiscal cost of the 
reform based on the new market -related property tax values , which  will widen the tax 
base and improve the fairness an d economic efficiency of the property tax. This  will be 
legislated in February 2022  to allow for the tax assessment and first payments to take 
place , with a minor delay , in April  2022 . 
 As regards health care , collection of clawback s (i.e. spending over and above the 
legislated ceiling for public spending on pharmaceuticals and other healthcare services 
that is due to be collected back from pharmaceutical suppliers and healthcare 
providers ), is progressing according to schedule for both  pharmaceuticals and other 
services, which is welcome. Procurement activities are on track to reach  the mid -2022 
target of  a 40% share of centralised procurement in total hospital expenditure  for which 
the Centralised Health Procurement Authority is mandat ed to issue tenders . 
 The authorities are advancing on the preparation of the disability  reform , with the 
secondary legislation  for disability determination based on both medical and functional 
assessment being prepared and expected to be adopted by the end  of March 2022.  The 
new assessment framework will inform in-kind benefit decisions  for the provision of 
personal assistance to persons with disabilities.  
 The General Assembly of the  Hellenic Corporation of Assets and Participations  has 
approved the  update d Strategic Plan  prepared by the Corporation , which sets out the 
top-level key performance indicators by which the Corporation will track its 
 
4 
 performance, as well as detailed actions for the Corporation to act as an investor and a 
reformer in the state -owned enterprises in its portfolio.  Work has progressed well on 
the implementation of the Coordination Mechanism, including  the approval of the first-
ever performance contract for the Athens Urban Transport Organisation. The 
authorities are prepar ing a first draft of a law for the modernisation of the institutional 
framework for state -owned enterprises, covering indirect subsidiaries of the 
Corporation and other public companies outside of the Corporation’s portfolio. The 
Council of State ruled in February 202 2 the transfer of the stakes in the water utilities 
of Athens and Thessaloniki to the Corporation in 2018 unconstitutional. The 
implications of this decision are under examination.   
 There has been  overall good progress with privatisation transactions  over the  past 
months. The tender process for the Public Gas Corporation (DEPA) Infrastructure has 
progressed towards a final stage, and its financial closure is expected shortly. The 
tenders for a number of important regional ports and ‘Gournes Heraklion’  (development 
of part of the former American military base on Crete)  are in progress , and the tender 
process for the award of a concession agreement for the Athens Ring Road ( Attiki 
Odos ) has been  launched . The authorities have progressed further with the construction 
works on the Egnatia motorway, paving the way to the activation of the concession 
agreement expected by end -2022.  
 The cadastral mapping  and the transition to the full establishment of the new Hellenic 
Cadastre have continued to progress in the  past three months. The ratification of the 
forest maps , which is currently suspended in view of the prolongation of the period for 
raising objections, is set to restart in May 2022.  The period for raising objections was 
prolonged due to the impact of the wild fires of summer 2021. The authorities expect it 
to be substantially completed by July 2022, broadly in line with what was noted in the 
previous report.  
 Work on the codification of labour legislation  continues in close collaboration with 
the Central Codification Committee, with a first draft of the revised legislation to be 
presented in March 2022. The authorities committed to adopting the codified laws in 
May 2022.  
 Implementation of mandatory e -filing in administrative courts is advancing and is 
expected to be concluded by April 2022. An e -docket platform , used to allow 
stakeholders to register and monitor the progress of cases through the courts,  has been 
launched in Athens and its functionality wil l gradually extend across the ter ritory of 
Greece, and the e -divorce procedure is now fully functional.  
 The authorities continued working towards implementation of the remaining 
recommendations for the fight against corruption  from the fourth evaluation round of 
the Group of States against Corruption (GRECO). A large part of these 
recommendations  is conditional on the adoption of the Code for the Organisation of 
Justice and the Status of Officers of the Courts, which is delayed (see bel ow). The 
recommendations concerning bribery of public officials were successfully implemented 
at the end of 2021 . 
Nevertheless, some specific commitments and other key policies have seen delays 
compared with the timelines agreed in the context of the 12th report. Notably:  
 
5 
  The new  IT collection system for the Independent Authority for Public Revenue 
has encountered delays. This is due to delays in submit ting the final complete version 
of the end -to-end IT collection system  by the contractor , which is now scheduled for 
June 2022. As a result, t he full operationalisation of this new IT system , which was 
planned for end-April 2022 , is now expected by end-September 2022 . However, the 
Independent Authority still plans that its central  and decentralised  services , including 
the directorate of collection and refund and the collection operation unit , will start using 
some function alitie s of this system by April 2022 . 
 The reform of primary health care  has seen limited progress . Alongside a final draft 
of the primary legislation , the authorities have now prepared draft secondary legislation, 
which spell s out the main features of patient registration and  of the gatekeeping function 
of general practitioners , although some key parameters of the system are still under 
definition . The authorities are encouraged to put in place in a timely manner sufficient 
incentives to contain  self-referrals, while ensuring equal access to healthcare , and 
implement ing compulsory patient registration as provided for in the existing legal  
framework . The authorities committed to launch public consultation on the legislation 
at the end of February  or the beginning of March  2022 , with adoption to follow shortly 
thereafter  by the time of the 14th report . Implementation of the reform will start  
thereafter and will continue to be closely monitored.   
 Completion of the reform of the inspections framework  for the supervision of 
economic activities and product markets remains pending. Secondary legislation in the 
last remaining area of environmental protection has not been finalised in time for this 
review due to the necessary consultations to ensure constitutional conformity of the 
reform. The consultations have now been completed and the legislation is exp ected to 
be adopted shortly. This legislation will elaborate on the enforcement management 
model to facilitate a harmonised approach in the application of the enforcement system.  
 The authorities adopted two pieces of secondary legislation critical for the 
implementation the new public procurement law , while the final one remains pending . 
The two adopted joint ministerial decisions concern the establishment of a certification 
framework for private -sector engineers for public works and studies. However, the 
adoption of the third pending joint ministerial decision, which concerns the set -up of a 
new legal entity to develop and maintain a new integrated IT system, has been delayed 
and is now expected shortly.  
 The launch of the call for bids for the integrated ca se management system for civil 
and criminal court cases  has been further delayed and is due to be launched in March 
2022. The European institutions reiterated their concern about the delay and encouraged 
the authorities to ensure the efficient and unhinder ed conduct of the process going 
forward.  
 Adoption of the new Code for the Organisation of Justice and the Status of Officers 
of the Courts  has accumulated a considerable delay. The Code was initially due to 
enter into force by September 2021 but was then d elayed to January 2022 . Currently, 
the authorities plan to table the Code to Parliament by the end of  April 2022 . The 
authorities attribute the additional delay to redrafting and consultation constraints. 
Among other things, the Code is expected to contribute  to alleviating the challenges 
faced with dealing with personal insolvency backlogs monitored under the financial 
 
6 
 policy commitment , in the sense that its revised disciplinary and promotion rules will 
foster a culture of strict er adherence to  high professional standards amongst the 
members of the judicia ry. Its adoption is also a precondition for addressing a significant 
part of the commitment to fight corruption. The authorities are strongly encouraged to 
proceed swiftly with the finalisation of the Code, given its fundamental importance for 
the efficient functioning of the justice system.  
 The requisite secondary legislation  for the operationalisation of the JustStat unit of 
the Ministry of Justice  is expected to be adopted with a nine -month delay, by end -
March 2022 . The mandate of this specialised department is to collect and process data 
with a view to measuring and improving the performance of the judicial system.  
In addition to the progress with specific commitments, the report welcomes th at the 
authorities advanced on a number of broader structural reforms initiated in the context 
of enhanced surveillance. Notably : 
 A list identifying deviations from the unified wage grid has been finalised  as part of the 
authorities’ efforts  to strengthen central control of hiring and salary provisions in the 
public administration.  Legal provisions addressing the identified weaknesses are 
planned to be adopted by April 2022.  A needs assessment of permanent and temporary 
teachers in the medium - to long -term will also be completed by April 2022.  
 The authorities have  successfully completed the set -up of the single digital (Gov.gr) 
portal  backed by relevant initiatives to ensure system interoperability and robustness, 
in line with the guidelines and priorities set out in the National Digital Transformation 
Strategy and the urgent needs arising from the evolution of the pandemic.  
 The authorities are continuing the preparatory work on the Higher Education Act , 
following previous welcome reforms of the education sector, but its adoption is being 
delayed  due to the challenges presented by the pandemic . The authorities have  
committed to launching the public consultation in March 2022 an d the adoption is 
currently expected in May 2022.  
The reduction of non -performing loans by the banking sector  – mainly through the 
Hercules scheme  – has continued  but vulnerabilities remain  as net inflows  (7) of non -
performing loans continue , albeit so far  at a limited rate . The non -performing loans ratio 
stood at 15% on a solo basis in September 2021, having declined strongly from 30.1% at end -
2020 and 40.6% at end -2019  (8), but remains the highest in the euro area . Net inflows of non -
performing loans continued but remain below initial expectations.  The securitisations under 
the Hercules scheme will allow banks to reduce their cost -of-risk going forward and free up 
space in their balance sheets for new lending. While recent securitisation transactions u nder 
the Hercules scheme result in increased provisioning needs, t heir impact on banks’  capital 
                                                           
(7) The term ‘net inflows’ refers to the difference between the volume of new non -performing loans and the 
volume of previously generated non -performing loans that have been cured or whose collateral has been 
liquidated in a given period of time. The  overall stock of non -performing loans can decrease even if net inflows 
are positive, if for instance some non -performing loans are removed from the stock due to securitisation 
transactions or outright sales.  
(8)  Source: Bank of Greece.  
 
7 
 positions was partly offset by successful capital enhancing actions . Still, banks’  capital position 
remains one of the lowest in the euro area and entails a high share of deferred tax credits.  
The implementation of agreed policy actions in the financial sector has advanced , 
however several policy actions remain  behind schedule . Regarding the insolvency code 
implementation, all procedures (OCW, rehabilitation, regular and simplified insolvency 
proceedings and early warning mechanism) are operational, along with the corresponding e -
platforms. The assignment of new hearing dates for  pending  household insolvency cases is 
picking up , according to the updates provided by the authorities,  but clearance of the backlog  
still falls short of expectations  and is not envisaged before end -2023 . The authorities have taken 
steps to increase the processing capacity at courts  and expect the provisions of the Code for the 
Organisation of Justice/Judges to further enhance the process . The conduct of electronic  
auctions continues to increase since its resumption in September 2021, while work is ongoin g 
regarding the introduction of further enhancements. The authorities remain committed to meet 
the agreed  final targets concerning the processing and clearance of the entire backlog of called 
state guarantees  by mid-2023 and mid-2024 , respectively . The processing of claims has 
accelerated  but this is only partially reflected in payments. M eeting the targets set for 2022  will 
require a further significant  increase in the processing of claims and payments.  The call for the 
expression of interest for the sa le-and-lease -back entity is expected to be  launched in February  
2022 . An interim support scheme for vulnerable debtors with primary residences is considered 
by the authorities to ensure a smooth transition until the sale -and-lease -back entity commences 
operations , which is currently not expected before end-March 2023 . The authorities are 
encouraged to put in place strong safeguards to counter unintended use of the scheme  and 
mitigate legal risks  and proceed swiftly with establishing the sale -and-lease -back entity so as 
to ensure a timely phase -out of the interim scheme . Discussions o n the future of the Hellenic 
Financial Stability Fund have progressed well and the relevant amendment is expected to be 
adopted by April 2022.  
The authori ties announced the ir intention to implement  on 1 May 2022 an increase in the 
statutory  minimum wage, in consultation with social partners, with a view to alleviating 
the negative impact of the price increase s on low -income workers . This increase would 
follow a modest increase of 2% , decided in July 2021 and  implemented in January 2022 
following a two -year freeze of the minimum wage (as a result of the pandemic) , which reflected  
developments in wages and productivity, as well as other indicators based on  data up to the 
first half of 2021 . While accelerating the regular procedure  of updating the minimum wage  to 
mitigate the impact of the high inflation on low -income workers , the authorities committed to 
follow the process established in law 4172/13 for determin ing the minimum wage . The 
authorities  also indicated that  the potential minimum wage adjustment in May will safeguard 
competitiveness  and have a limited fiscal cost , including as regards the public sector wage bill . 
The minimum wage  increase resulting from these consultations is expected to be announced in 
April 2022 and implemented from the following month . 
Overall, this report concludes that Greece has taken the necessary actions to achieve its 
specific commitments, despite the cha llenging circumstances that continue to be posed by 
the pandemic . The Greek authorities have also outlined  a credible path leading to further 
substantial progress on its commitments by the time of the 14th enhanced surveillance 
report to be published in May 2022 . The authorities delivered on specific commitments 
across various areas, notably  as regards enhancing the efficiency of public administration, 
 
8 
 completing the administrative reorganisation of the Single Pension Fund and the simplification 
of investment licensing in the agreed sectors . Greece also advanc ed on wider structural reforms , 
including in particular in the area of digitalisat ion, and embarked on the implementation of its 
recovery and resilience plan  (9). The European institutions welco me the authorities’ close and 
constructive engagement in all areas and encourage the authorities to keep up the momentum 
and, where necessary, reinforce the efforts to remedy the delays partly caused by the pandemic, 
in particular as concerns reforms in th e are a of financial sector policy , primary health care , the 
business environment and justice , and reach the agreed targets for the clearance of arrears . 
MACROECONOMIC DEVELO PMENTS  
The economy sustained its growth momentum in the third quarter of 2021  on account of 
strong export performance and private consumption.  Growth in the third quarter of 2021 
(2.7% quarter -on-quarter) was also supported by a quick recovery in tourist receipts and the 
goods exports remained resilient, despite the bottlenecks in the value chain s. Investment also 
contributed positively , although from a relatively low base. The recent emergence of omicron 
variant and the related sharpening of the containment measures in December  2021 , are 
expected to have weigh ed on growth in the last quarter of 2021,  but this impact is expected to 
largely fade out during the first quarter of 2022. Overall, real GDP is projected to have 
rebounded by 8.5% in 2021 , with the economy reaching its pre -pandemic level of activity 
already in the third quarter o f 2021 .  
Growth  in 2022  is forecast to be domestically driven , supported by the stimulus from the 
implementation of the investments and reforms under the Recovery and Resilience 
Facility . The external environment is forecast to remain supportive , as tourism is expected to 
recover a significant part of its losses during the pandemic, while goods exports are to extend 
their strong performance from last year.  For the year as a whole , real GDP growth is estimated 
to reach  4.9% in 2022 . In the third q uarter  of 2021 , employment increased by 4.9%, up from 
1.9% in the second quarter. While employment has almost  reached its pre -pandemic level s, the 
losses in active labour force endured during the pandemic have not been fully recovered yet . 
Households’ real disposable income is expected to rebound strongly in 2021 and continue 
growing in 2022.  Rising oil and gas prices drove the noticeable increase in inflation over the 
second half of 2021, but these pressures  are expected to ease later in  2022 as international 
prices moderate.  The Commission ’s winter  interim forecast  expects inflation to peak in 2022, 
reaching 3.1%. 
The above -mentioned announcement to increase the minimum wage in May 2022 comes 
in this context of rising inflation  and strong recovery . According to law 4172/ 13, which  sets 
out the minimum wage revision process, the level of the statutory minimum wage should be 
determined by  taking i nto account the sta te of the economy and the evolution of growth 
prospects, notably developments in productivity, inflation, competitiveness, employment, 
                                                           
(9) The plan was adopted by the Council on 13 July 2021 and includes reforms and investments worth 
EUR  17.8 billion in grants and EUR  12.7 billion in loans. The European Commission disbursed EUR  4 billion 
to Greece on 9  August 2021 in pre -financing, equivalent to 13% of th e country’s grant and loan allocation 
under the Recovery and Resilience Facility. On 29  December 2021, Greece submitted a request to the 
Commission for a disbursement of EUR  4.1 billion in financial support, assessment of which is ongoing. 
Greece was among  the first countries to submit such a request.  
 
9 
 unemployment, incomes and wages . Competitiveness, as measured by unit labour cost  (10), had 
improved since 2018 , largely on the back of a decrease in real compensation per employee , as 
real wages remained in check while employment increased . The temporary shock due to the 
pandemic in 2020  triggered a strong increase in  unit labour cost  as compensation per employees 
remained broadly unaffected due to the emergency support measures put in place by th e 
authorities. In 2021, productivity is expected to have nearly fully recovered  and its growth rate 
is expected to remain high,  also supported by the investments implemented under Greece’s 
Recovery and Resilience Plan . As shown in Graph  1, Greece has overall recorded significant 
gains in competitiveness since 2018 . Despite these improvements, Greece’s export base 
remains focused on products with a low level of technological sophistication and the exports -
to-GDP ratio is low, despite recent improvements . Furthermore, its current account in 
cyclically adjusted terms  (11) was in deep deficit in 202 0 (-11.8% of GDP in national accounts 
terms ) and remains well below the required level to reach a prudent net international investment 
position. The nominal minim um wage increased in a majority of euro area Member States 
(11 out of 15 Member States that have established a collective bargaining process ) in 2021 , 
ranging from 0.3% in the Netherlands to 16.3% in Latvia.   
Graph  1: Real effective exchange rate based on unit labour cost  (19 trading partners – euro 
area)  (2017Q 1 = 100)   
 
Source:  European Commission  
Note:  The real effective exchange rate based on unit labour cost  is defined as the ratio of the real 
effective exchange rate (value of currency against the weighted average of the euro area trade 
partners) divided by the unit labour cost. This indicator captures the drivers of persistent changes 
in cost competitiveness of each Member State relative to its major trading partners.  
 
The risks to the forecast remain elevated . Despite  the better -than-expected economic outturn  
in the first three quarters of 2021 , the evolution of the pandemic  at both domestic and 
international levels represents a continuous source of uncertainty, for both  tourist arrivals  and 
potential further prolong ation  of the supply -side bottlenecks , and vulnerabilities remain . In 
addition, the projection expects  only a limited negative impact on production  from the notable 
pick-up in input costs , in line with  the current reading of forward -looking indicators of 
                                                           
(10) The unit labour cost (ULC) is defined as the ratio of the nominal compensation per employee to the real GDP 
per person employed.  
(11) The cyclically adjusted current account balance is defined as the curren t account balance adjusted for the level 
of the output gap in the domestic economy and its most important trade partners.  

 
10 
 producers’ sentiment . On the upside, the stock of savings accumulated by households during 
the pandemic  could facilitate a stronger realisation of part of the purchases delayed from the 
previous periods, as spending opportunities for households improve.  The strong performance 
of goods exports since the third  quarter of 202 0, could be indicative of structural improvements 
in the export base , as also evidenced by the continuous gains in export market shares. This 
could be a source of additional upside risks.   
Table  1: Summary of main macroeconomic variables (%)  
 
Source:  European Commission  
FISCAL DEVELOPMENTS  
The e arly reading of the fiscal and economic data augurs well for the fiscal outturn for 
2021 as a whole . To recall, t he Commission autumn forecast projected a primary deficit (as 
monitored under enhanced surveillance ) of 7.6% of GDP for 2021  and 1.2% of GDP for 2022, 
and a primary surplus of 1.5% of GDP in 2023 . Regarding the developments on the expenditure  
side in 2021 , the implementation of some of the emergency support measures have been more 
gradual than assumed in the autumn forecast and thus payments worth around 0.1% of GDP 
have been shifted from 2021  to 2022 . Furthermore, some measures had lower fiscal cost than 
anticipated , reducing  the total cost for the measures in 2021  by another 0.1% of GDP . At the 
same time , state revenues in 202 1 were higher than expected  in the Commission autumn 
forecast by close to 1.2% of GDP . This was  mostly due to high corporate income tax recei pts, 
as the decline in corporate profitability in 2020 , which determines the clearance of the 2020 
tax liability du e in 2021,  was less severe than initially  expected. Also other income taxes and 
VAT revenues had a higher yield than expected, mostly reflecting of the better -than-forecast 
macroeconomic growth. These factors were partly offset by the cost of a subsidy of EUR 250 
per person to low income elderly and those receiving disability benefits provided by the 
government to counter the impact of increased inflation.  
The vast majority of the emergency measures have been phased out  by the end of 2021 . 
In line with prev ious plans, only a limited set of temporary and targeted pandemic -related 
emergency measures will continue to support households and businesses  in 2022 , with a fiscal 
cost of about 1.7% of GDP . However, in view of the recent emergence of omicron variant some 
measures have been prolonged, such as labour contract suspensions, short term works scheme 
and hiring subsidy scheme. The health care system will also continue to receive increased 
support, which increases the fisca l costs for 2022 by an additional 0.15% of GDP . The 
repayment of the refundable advance was to start in January 2022, but due to delays in setting 
up the IT system repayments are expected only from the middle of 2022. This delay has a very 
limited fiscal i mpact for 2022  of about EUR  40 million . Finally , the authorities also plan to 
adopt a reform of the ENFIA property income tax, with a permanent fiscal cost of about 0.1% 
of GDP.  
In response to the increased electricity prices the authorities have designed a new 
automatic  support mechanism to alleviate cost increases to households and businesses. 
The scheme replaces  a temporary  subsidy  scheme introduced in 2021  and provides a subsidy 
2020 2021 2022 2023
Real GDP growth -9.0 8.5 4.9 3.5
HICP growth -1.3 0.6 3.1 1.1
 
11 
 linked to the excess of current electricity prices over a given threshold. Households are eligible 
for this subsidy only for their first residence . The subsidy will cover 80% of the increase above 
the threshold for the first 150 KWh  consumed monthly  and 60% o f the increase for the next 
150 KWh . Vulnerable households will benefit from a larger subsidy covering 90% of the 
increase for the first 300  KWh. For  enterprises, a single subsidy is planned for all categories 
covering 50% and 30% of the price increase  in the first and the second quarter of 20 22, 
respectively . Based on the projection of wholesale electricity prices of the Renewable Energy 
Sources Operator, the total volume of the subsidies might reach EUR  1 billion until July 2022  
(0.5% of GDP) . The subsid y scheme was calibrated to be fiscally neutral as its cost  will be 
covered by the estimated increased revenues from the emissions trading system . The additional 
revenues from the emission trading system are also expected to cover the cost of a heating  
subsidy to alleviate the imp act of the sharp increase in natural gas prices.  The subsidies appear 
in line with the guidance provided in  the Commission Communication  on Tackling Rising 
Energy Prices (12), as they are temporary and will be re-assessed every month .  
Fiscal risks remain high . Uncertainty about the evolution of the pandemic remains the main 
short -term risk factor , notably , as regards the need for further support measures  and the possible 
activation of the state guarantees provided during the pandemic . The new electricity subsid y 
scheme will require close monitor ing in view of its large size, in particular as regards the 
adequacy of the assigned  revenue flows  expected to cover these subsidies , while at the same 
time ensur ing that the account of renewable energy sources will not turn into deficit . Further 
risks remain unchanged compared to the previous report, in particular the recent or planned 
financial policy arrangements, including the sale and lease -back scheme for properties owned 
by vulnerable debtors, may entail a def icit- and debt -increasing impact depending on their final 
statistical classification. Additional uncertainty is related to  pending legal cases including on 
retroactive compensation for pension cuts and litigation cases against the Public Real Estate 
Compan y (ETAD).  On the upside, the better than expected state revenues are likely to carry 
over for 2022 as they possibly reflect that the tax base was less affected by the crisis than 
initially assumed.  
SOVEREIGN FINANCING  
Yield spreads have increased  but remain below the average levels reached in 2019 before 
the pandemic . In December  2021 , the Governing Council of the European C entral Bank 
decided  (13) to discontinue net asset purchases under its pandemic emergency purchase 
programme at the end of March 2022 and to reinvest the principal payments from maturing 
securities purchased under this programme until at least the end of 2024. In this context, the 
Governing Council clarified that in the event of renewed market fragmentation related to the 
pand emic, reinvestments can be adjusted flexibly across time, as set classes and jurisdictions at 
any time and could include purchasing bonds issued by Greece  over and above rollovers of 
redemptions.  Despite the ongoing asset purchases of Greek government bonds  by the European 
Central Bank, and reflecting increased risk aversion in financial markets  against the backdrop 
of increasing uncertainty about the economic and inflation outlook , yield spreads over the 
                                                           
(12) Commission Communication on Tackling rising energy prices: a toolbox for action and support, 
COM(2021)  660.  
(13) Combined monetary  policy decisions and statement, 16 December 2021.   
https://www.ecb.europa.eu/press/pressconf/shared/pdf/ecb.ds211216.en.pdf  
 
12 
 German Bund have been increasing , moving above 200 basis points on the 10 -year maturity in 
early February 2022.  
Greece conducted a successful liquidity management exercise  in 2021 . After the previous 
bond exchange concerning the so -called ‘step -bonds’ conducted in 2017, Greece now managed 
to exchange EUR  3 billion of the remaining EUR  4 billion worth of step -bonds. With this 
exchange the weighted average maturity of these liabilities increased from eight years to 
thirteen years. As some of the bond holders received cash in return for their bonds, the genera l 
government debt has been reduced by around EUR  1 billion.  
New bond issuances contribute to high c ash reserves. In line with the expectations based on 
the seasonality of budgetary revenues and expenditure and the debt amortisation schedule, cash 
reserves declined in the last quarter of 2021 and stood at EUR  31.6 billion in December  (14). 
This is slightly higher than the level observed a year earlier.  The Public Debt Management 
agency published its funding strategy for 2022. Based on the plan, Greece expects  to raise 
EUR  12 billion on the open market in 2022 , which is slightly lower than the amount raised in 
2021.  In January 2022 the implementation of this plan started by the successful issuance of a 
10-year bond with the amount of EUR 3 billion, reaching a yield of 1.8%.  
DEBT SUSTAINABILITY ANALYSIS  
The update of the debt sustainability analysis indicates that risks remained unchanged 
compared to the 12th report but uncertainty remains high.  The current  analysis is a partial 
update of the one published in the 12th report. The update includes the data on the recent 
liquidity management exercise and the latest bond issuance while the macroeconomic, financial 
and fiscal variables continue to be based on the  Commission 2021 autumn forecast. Short -term 
risks to debt sustainability remain contained, whereas risks are more significant over the longer 
run in the alternative scenarios . In the baseline scenario, debt decreases from 203% of GDP in 
2021 to around 5 5% of GDP in 2060, while gross financing needs remain below 15% of GDP 
in the long run. In the higher risk premium scenario, debt decreases to 90% of GDP by 2060, 
and gross financing needs hover around 18% of GDP from the 2030s. In the low growth 
scenario, t he debt level does not stabilise, and gross financing needs permanently surpass 20% 
of GDP as of 2050. The alternative scenarios show that potential increases in the interest  rates 
over the medium -term and weaker economic growth could negatively affect debt sustainability. 
A full update, including macroeconomic, financial and fiscal assumptions will be presented in 
the next enhanced surveillance report.  
                                                           
(14) The cash buffer account balance remained at EUR  15.7 billion. The cash buffer account was built also through 
disbursements unde r the third financial assistance programme and is dedicated to debt service. Greece may 
use this amount for other purposes as well, following an approval of the European Stability Mechanism’s 
governing bodies.  
 
13 
 Table  2: Main assumptions of the baseline scen ario  
 
Source:  Commission services  
 
Table  3: Main assumptions of the scenarios  
 
Source:  Commission services  
 
Graph  2: Results of the debt sustainability analysis (% of GDP)  
  
 
Source:  European Commission  
 
 
FINANCIAL SECTOR DEV ELOPMENTS  
The reduction of non -performing loans in the banking sector has continued  but 
vulnerabilities remain  and a large amount of this debt remains in the economy , burdening 
the private sector . The non -performing loans ratio stood at 15% on a solo basis in September 
2021, having declined strongly from 30.1% at end -2020 and 40.6% at end -2019 , mainly thanks 
to securitisation transactions under the Hercules scheme . Nonetheless, it remains the highest  in 
the euro area. This corresponds to a reduction in the stock of non -performing loans on a solo 

 
14 
 basis from EUR  68.5 billion at end -2019 and EUR  47.2 billion at end -2020 to EUR  20.9 billion 
in September 2021 (15). It amounts to an 80.5% reduction compared to its peak level in end -
March 2016 (EUR  107.2 billion). All four systemic banks are so far on track to meet the target 
of single -digit non -performing loans ratios at the latest by the end of 2022, with three non -
performing loan securitisations of circa EUR  9.3 billion already concluded in the fourth quarter 
of 2021 (16). Further, more limited securitisation transactions and outright non -performing loan 
sales are anticipated in 2022 to support these efforts. As a r esult of this unprecedented 
transaction activity, a large amount of non -performing debt has exited the banks’ balance sheets 
but remains in the hands of specialised non -bank financial institutions , which own ed EUR  72.2 
billion of predominantly non-performing loans as of end -September 2021.  These institutions 
will try to maximize recoveries from these loans through a combination of restructurings and 
liquidations, using their previous experience with managing non -performing loans.  
Graph  3: Evolut ion of the stock of gross non -performing loans and the non -performing loan ratio 
of Greek banks  
 
Source:  Bank of Greece  
Note : Gross non -performing loans as a share of total customer loans, for on -balance -sheet loans in 
accordance with European Banking Authority’s definitions.  
Net inflows of non -performing loans continued albeit so far at a limited rate but risks 
persist. Banks are currently reporting a limited increase in the re -default rate for loans after 
exiting moratoria, below initial expectations . However, net inflows (17) of non -performing 
loans continued in the third quarter of 2021, at similar levels  as in the first half of the year . 
There is a material part of the banks’ loan book that still benefits from some form of support, 
mainly via two temporary instalment subsidy schemes set up by the authorities for performing 
or restructured coronavirus -affected debtors (the “Gefyra” and “Gefyra II” schemes) (18) and, 
to a lesser degree, via banks’ ‘step up’ products offered to viable customers facing temporary 
                                                           
(15)  Source: Bank of Greece.  
(16) Gross book va lues of the underlying loan portfolios.  
(17) The term ‘net inflows’ refers to the difference between the amount of new non -performing loans and the 
volume of previously generated non -performing loans that have been cured or whose collateral has been 
liquida ted in a given period of time. It does not take into account the much larger reductions of non -performing 
loans due to other means, such as the securitisations under the Hercules scheme, which explains the o verall 
decrease in the stock.  
(18) As of end -Decem ber 2021, the Gefyra I scheme covers 101  562 eligible debtors, corresponding to EUR  8.5 
billion of loans, predominantly performing (83.1%). For Gefyra 2, the equivalent figures are 13 888 eligible 
debtors, corresponding to EUR  6.8 billion of loans, mostly (81.4%) performing.  

 
15 
 difficulties and the remaining payment moratoria granted to the hospitality sector. As a result, 
the full impact of the pandemic on the banks’ asset quality is expected to materialise only in 
2022.  
Going forward, banks’ management of loans in or at risk of default and their ability to 
offer viable long -term solutions is expected to gain importance, as the potential  for 
securitisations and sales is gradually being exhausted. The swift deleveraging of denounced 
loans by Greek banks is changing the structure of their non -performing loan portfolios, with 
unlikely -to-pay loans representing an increasing share of the portfolio (33.7% as of end -June 
2021 as opposed to 29.4% at end -December 2020). As a result , banks’ internal credit risk 
management and their capacity to offer viable long -term restructurings, tailored to the specific 
needs of this type of loans, are expected to become a crucial element to sustain an adequate 
pace of non -performing loan curings (19). At the same time , effective collateral recovery will 
be crucial when successful restructuring is not feasible. The challenge for banks to rely more 
on viable restructuring solutions is illustrated  by the fact that, out of the total amount of 
EUR  22.8 billion of restructured (i.e. forborne) loans in the banks’ loan book at end -June 2021, 
17.7% had re -defaulted and were in arrears for more than 90 days (20), while the percentage of 
re-defaulted long -term modifications within a 1 -year horizon stood at rela tively high levels.  
The continued efforts to clean up banks’ balance sheets negatively impact their 
profitability  in the short term but open the way for profitable new lending . Higher 
provisioning needs due to securitisations of non -performing loans have adversely affected two 
significant banks.  As a result, the banking sector has continued to show aggregate losses in the 
first nine months of 2021 with only two of the four systemic banks achieving positive results. 
Nevertheless, according to banks’ own cal culations, all recurring operations have been 
profitable , which indicates a gradual return to profitabi lity, when excluding the one -off effects 
of efforts  to move  non-performing loan s off the banks’ balance sheets . Interest revenues will 
be affected by  the completion of further non -performing loans securitisations  (21) coupled with 
the low interest rate environment. On the cost side,  the need for further debt issuances in order 
to meet the minimum requirement for own funds and eligible liabilities (MREL)  (22) as per the 
EU legislation will put further pressure on the banks’ cost of funding. The banks plan to  
counterbalance  these costs  by the implementation of business plans , which take into account  
the expected increased financing needs  of the economy  and the prospects for new lending , the 
reduced impairments following recent efforts to reduce non -performing loans, and the 
development of alternative sources of revenue  by accelerating the banks’ digital 
transformation.   
The impact of the clean -up of the  banks’ balance sheets on the ir capital position  was 
partly offset  by certain  successful capital enhancing actions. Banks’ average Common 
                                                           
(19) I.e. the return of previously defaulted loan balances back to performing loan status.  
(20) Source: Bank of Greece, Financial Stability Report, December 2021.  
(21) Securitisations of non -performing loans lead to a recurrent loss of net interest income, as they result in the loss 
of the accrued interest income from the transferred non -performing loan portfolios. However, as accrued 
interest income is interest income earned but yet to be received, the average quality of the bank’s recu rrent net 
interest income will improve once the offloaded non -performing loans are replaced with profitable new 
lending.  
(22) Binding MREL targets are established by the resolution authorities on a bank -by-bank basis on the basis of 
the provisions of the Ba nk Recovery and Resolution Directive (2014/59/EU) and the Single Resolution 
Mechanism Regulation (806/2014/EU) and their subsequent amendments.  
 
16 
 Equity Tier 1 and Total Capital ratios stood at the end of the third quarter of 2021 at 12. 5% and 
15% of risk -weighted  assets on a consolidated basis, respectively (23), virtually unchanged 
compared to the previous quarter (12.5% and 15% respectively). However, their capital 
position was still lower than a year ago (14.6% and 16.3% respectively in September 2020), 
reflecti ng the cost of non -performing loan deleveraging and the phasing out of transitional 
prudential adjustments  (24). The quality of the regulatory capital continue s to be a concern, as 
deferred tax credits account for EUR  14.4 billion or 62% of total regulatory own funds in 
September 2021, which is an increase from 53% in December 2020. The capital position of the 
banks has been strengthened  by two banks’ successful  share capital increases, which were 
concluded in 2021  (25). Further upcoming capital enhancing actions took place in the last 
quarter of 2021 and are expected to materialize in 2022, in order to provide support for the 
capital position of the four systemic banks, enabling them to continue with their ambitious non -
performing loan reduction plans. While the outlook of increasing capital buffers and cleaning 
balance sheets seems positive, the capital position remains  one of the lowest in the EU.  
Provision  of credit to the non-financial corporate sector  has registered  a mild  recover y in 
recent months . In net terms, it has reached 3. 8% in December 2021  compared to a year ago . 
This is a positive turn after continuous net credit growth deceleration which fell to 2.8% y ear-
on-year in September 2021 from 6.7% in April and 10.0% in December 2020. The earlier  
decreasing trend was mainly driven by less net credit to large corporates mainly on the back of 
muted credit demand, as companies make use of precautionary liquidity buffers buil t up over 
previous quarters.  Moreover, the largest non -financial corporations are partially substituting 
bank lending with cheaper funding through corporate bond issuances. At the same time, credit 
growth to small and medium enterprises continues to decele rate. Growth of c redit to 
households remained negative but the decline was marginally smaller in December 2021  (-
2.4%) due to a milder contraction  in consumer loans. The weighted cost of credit to non -
financial corporations decreased to 2. 9% in December  2021 from 3.3% a year earlier and 
remains at historically low levels, substantially less than the cost of credit for unincorporated 
businesses or households (4. 6% and 4.7% respectively ). The Hellenic Development Bank 
launched five new financing schemes in 2021, mainly targeted to support small and medium -
sized enterprises  but they are significantly smaller  in size compared to COVID -19 enterprise 
guarantee fund and TEPIX II schemes, whic h are almost  exhausted. In 2022 and beyond, a 
large support for credit expansion to non -financial corporations is expected to come from 
projects financed by Greece’s recovery  and resilience plan . 
Discussions progressed well on the future of the Hellenic Financial Stability Fund . The 
reform of the Fund’s legal framework is expected to focus on the duration, governance, 
divestment strategy and special rights of the Fund. Adoption of the legal amendment is now 
expected to take place in the coming months  and will be reported on in the 14th report . The 
Hellenic Financial Stability Fund has also participated in the share capital increase of a less -
significant institution where it already had a majority stake , which was a result of the 
                                                           
(23) Source: European Central Bank Consolidated Banking Data  
(24) These transitional arrangements refer to the phasing in of the new accounting standards on impairments of 
financial assets and the implementation of new rules leading banks to more quickly write down non -
performing exposures, according to Regulation (EU) 2019/630 amending Regulation (EU) No 575/2013 and 
relevant supervisory guidance.  
(25)  Share capital increases were concluded by two systemic banks in early May and early July. Third quarter 
figures do not reflect yet a share capital increase undertaken by a less -significant bank in December 2021.  
 
17 
 implementation of the Greek  legislation for deferred tax assets . The bank has successfully 
performed a share capital increase, which aims to be the first step in the bank’s  transformation  
and development . The Fund has reduced its previous shareholding to allow the participation of 
private investors and has entered, for the first time, into a shareholder agreement with private 
investors on the terms concerning the operations and the business plan of the bank  as well as 
its implementation.