EUROPEAN COMMISSION Brussels, 15.7.2015 COM(2015) 400 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A NEW START FOR JOBS AND GROWTH IN GREECE



Introduction: The Greek people have gone through extremely difficult times since the financial and economic crisis started six years ago. The causes of the crisis built up over many years before they became visible. Weak competitiveness, low productivity, rigid labour and product markets and very large public deficit and debt levels brought the Greek economy to the verge of an imminent default in 2010. Throughout these difficult times, the EU has stood by Greece, supporting it as a member of the EU family. In addition to EU financial assistance on very favourable lending terms, EU funds are the biggest source of foreign direct investment in Greece and a very tangible expression of European solidarity and support. The support and relief from which Greece has benefitted in recent years and will receive in coming years from the EU, Member States, other international parties and private investors amounts to more than EUR 400 billion. This represents more than 230% of Greek GDP in 2014 or around EUR 38 000 per Greek citizen. The amount of EU and international funds for Greece today already exceeds the US Marshall Plan devised for the whole of Europe after the Second World War. A lot of effort was put into modernising and reforming the country, and in making the best use of EU funds in support of the Greek priorities. This work paid off: public finances and the banking sector were stabilised and important reforms were made in areas such as social insurance, pensions, health-care and labour market policy. Greece returned to economic growth with real GDP growth of 0.8% in 2014 and this growth was expected to strengthen further until uncertainty kicked in. About 100 000 new jobs were created last year and unemployment had eventually started to decrease. Private consumption started to increase for the first time in five years, and increasing confidence in economic recovery was reflected in higher investment in equipment for the first time since 2008. The ingredients for achieving a lasting recovery are still largely there. The immediate obstacles to sustainable growth are tightening financing conditions, as well as the prevailing uncertainty over the Greek economic and political outlook. To return to the path of jobs and growth, Greece has to continue with reforms and tackle the structural challenges it still faces. Taken together, the level of support to Greece from the EU and international partners is unprecedented and can make a significant difference in the years to come. The decisions reached at the Euro Summit on 12 July 2015 testify to the willingness of the Euro area to support Greece provided it takes the necessary steps to restore trust and credibility and return to sustainability. The purpose of this Communication is to outline a renewed approach to the substantial means available from the EU budget to serve as a new start for jobs and growth in Greece. The Commission's intention to work with the Greek authorities to mobilise up to EUR 35 billion to fund investment and economic activity, including in SMEs, in Greece was highlighted by the Euro Summit on 12 July 2015. This Communication will complement the comprehensive set of reforms and commitments which Greece is in the process of implementing and which will underpin a stability support programme for Greece under the Treaty establishing a European Stability Mechanism. EU funding has been the primary source of public investment in Greece during the crisis.

For example the Athens metro, the General Hospital in Katerini, the Acropolis museum and the district heating system of Kozani were all financed largely from the EU budget. With the support of the Commission, Greece is expected to be able to receive more than

EUR 35 billion from the EU budget over the 2014-2020 financing period. EUR 20 billion from the European Structural and Investment Funds could be mobilised to create jobs and sustainable growth, and Greek farmers should continue to benefit from direct payments of over EUR 15 billion. Some first payments to Greece from these EU funds in 2014 and 2015 already amount to almost EUR 4.5 billion. If used to its full potential, wisely targeted and well spent, this funding will help the recovery and strengthen the foundations for sustainable jobs, growth and social cohesion. These funds can provide a powerful basis for the economic turnaround. They will pump investment directly into the real economy, creating jobs and supporting the necessary reforms to help transform the economy and raise living standards of citizens. Moreover, the Commission’s Investment Plan for Europe, including the entry into force of the European Fund for Strategic Investments, will play an important role in helping to mobilise private investments through the use of public money. This is not a given for Greece at this point in time. Tight financial conditions, uncertainty about the overall economic situation, hesitations about priorities and remaining administrative bottlenecks are disrupting the investment plans of many actors, and putting into question the ability of the authorities to make good and full use of the available EU funding. An important number of projects for cohesion policy are currently at risk of not being completed. Moreover, if the Greek authorities do not make full use of the EU funding which is still available under the 2007-2013 financing period by the end of 2015, an amount of nearly EUR 2 billion for cohesion policy, this unused funding would be lost. This would mean that initiated projects that have not yet been completed would require additional national funds as from 2016, if these projects cannot continue to be supported by 2014-2020 programmes. Moreover, for Greece to benefit from EU funding, it is also essential that basic legal requirements, in terms of respect of EU rules, sound financial management of the funds and accounting, are fully respected. Once confidence returns, the combination of public support through EU funds and of private initiatives should unleash a significant rebound in economic activity. Together with the pursuit of reforms making Greece an attractive location for inward investment, these should be the trigger for a sustained path towards jobs and growth. The Commission stands ready to work with Greece, the other Member States, international lenders and private investors to assist in this new start. 1. EU Funds to tackle unemployment and boost growth in Greece 1.1. How much money is available? Greece can benefit from EU Funds – mainly grants – subject to the conditions set out in the EU funding rules. Greece also benefits from EU programmes open to all Member States, where Greek businesses, researchers and citizens can present projects for funding.

For the period 2007-2013, Greece has already received EUR 38 billion (17.5% of the average annual Greek GDP over that period) from the EU's cohesion, agricultural, rural and fisheries policies. The total allocation for the 2007-2013 programming period is almost EUR 42 billion. For cohesion policy, provided all the conditions are met, the Greek authorities can still continue to be reimbursed up to the regulatory 95% ceiling for eligible expenditure made on 2007-2013 programmes. Greece has already reached an absorption rate of more than 90% of the funds, therefore the maximum amount available for the reimbursement of the eligible expenditure claims under 2007-2013 programming period amounts up to the ceiling to nearly EUR 820 million. This amount will be complemented by final closure payments to Greece for the period 2007-2013 that can be made up to 2018-2019, representing up to 5% of the total EU allocation (approximately EUR 1 billion), provided eligible final claims and closure documents are submitted by the regulatory deadline of 31 March 2017. A speedy implementation on the ground will enable full use of EU funds up to the maximum amount available by 31 December 2015, within the final date of eligibility. For the period 2014-2020, more than EUR 35 billion of EU funds will become available to Greece through: The European Regional Development and the Cohesion Funds that provide support for investment by SMEs, for innovation and research activities, for digitalisation and for measures to improve the business environment; as well as for key infrastructure for sustainable transport, environmental protection and resource efficiency, low carbon economy and climate change; The European Social Fund that finances active labour market and social inclusion policies to give young people and long-term unemployed opportunities to find jobs, vocational training, and apprenticeships; The Youth Employment Initiative that helps young people to have first job experiences, better education, traineeships and vocational training; The Fund for European Aid to the Most Deprived that provides assistance, food, clothing, hygiene products and other essential items to those who need it most in order to alleviate hardship; The European Agricultural Guarantee Fund that provides direct payments to farmers in the form of income support and measures supporting key agricultural markets; The European Agricultural Fund for Rural Development that helps to make the agricultural sector competitive, promotes innovative farm technologies and sustainable forest management and promotes economic development and job creation in rural areas; The European Maritime and Fisheries Fund that supports coastal communities to diversify their local economies and helps in the transition to sustainable fishing. In addition, Greek projects will continue to benefit from financing provided by the thematic EU-wide programmes such as the Connecting Europe Facility (CEF) in the area of energy and transport, Horizon 2020 for research and innovation, the Programme for the Competitiveness of Enterprises and SMEs, or the LIFE programme for environment and climate action. These funds can support projects such as linking the ports of Igoumenitsa, Patras, Piraeus and Thessaloniki into the Trans-European network, rail connections between Athens/Piraeus and Thessaloniki and investment in renewable energy. 1.2. Does Greece get any special treatment? Greece currently enjoys preferential treatment given its very specific circumstances. Greek programmes financed with the EU funds under 2007-2013 programming period receive a higher proportion of EU financing – and hence Greece is required to co-finance less – than many other countries. This comes via a 10% "top up" of EU co-financing until mid-2016 – in many cases this means that the EU pays for 95% of the total investment cost under the 2007-2013 financing period (as opposed to the maximum of 85% otherwise applicable). Lately, the lack of availability of public funds has made it difficult for local and regional as well as national authorities to take forward much needed investments. As an exceptional measure and given the unique situation of Greece, for investments still to be funded in the 2007-2013 programming period, the Commission will make a number of proposals to improve immediate liquidity so that investments can be made now, with their beneficial impact on growth and jobs. These will include early release of the last 5% of remaining EU payments normally retained until the closure of the programmes and applying a 100% co-financing rate for the 2007-2013 period. This must be conditional on the Greek authorities establishing a mechanism to ensure that additional amounts made available by these measures are fully used for the beneficiaries and operations under the programmes. This would translate into immediate additional liquidity of some EUR 500 million and a saving for the Greek budget of around EUR 2 billion which will be available to resume financing for investments supporting growth and jobs. The Commission will also propose to increase the rate of initial pre-financing for programmes for 2014-2020 in Greece by 7 percentage points. This extra pre-financing can make an additional EUR 1 billion available to be used only for the launch of the projects co-financed under the cohesion policy in full compliance with Article 81 (2) of the Common Provision Regulation. The increased pre-financing will help relieve the liquidity problems currently holding back investments and will help to deliver faster results on the ground in terms of business impact and job creation. This expression of exceptional solidarity with Greece will be coupled with robust measures ensuring sound financial management and regularity of expenditure. All these measures will be implemented within the country allocations agreed in the current multi-financial framework for 2014-2020. To speed up the implementation of EU Funds and facilitate the work of the authorities,

the European Commission will continue to support Greece in making the best use of the Funds. In mid-March 2015, it set up a joint High Level Group with the Greek authorities to work intensively on two fronts: to help Greece ensure that all the money available from the 2007-2013 programming period is used in time before it expires at the end of this year, and to help Greece meet the necessary requirements to access all the EU Funds available to it in the current programming period of 2014-2020. In 2016, the Commission will review the allocation of cohesion policy funding to all Member States for the years 2017 to 2020 to take account of the latest GDP statistics. This exercise is also likely to increase further the amount of EU funding available for investment in Greece. 1.3. What can the money be used for? Investment In the period 2015-2017, in addition to EU Funds in the form of grants, Greece can benefit from the Commission's EUR 315 billion Investment Plan for Europe. The funding of the newly established European Fund for Strategic Investments (EFSI) is not earmarked by country or by sector but like all other countries, public and private investors in Greece will be able to use enhanced technical assistance provided by the "European Investment Advisory Hub" to help them present high quality and economically viable projects. Investors will also be able to benefit from additional technical assistance to develop their projects. A good option to provide fast access to EFSI financing would be a partnership between the Institution for Growth (IfG) in Greece and the EFSI.

The European Investment Bank (EIB) actively supports the Greek economy. Since 2007,

it has provided loan funding for investment of over EUR 11 billion. This funding has been concentrated on energy, transport, industry, SMEs and environment projects. Investment projects in Greece could benefit further from the lending opportunities offered by the International Financial Institutions (IFIs), of which Greece is a member. The European Bank for Reconstruction and Development (EBRD) has granted Greece the status of an EBRD country of operations until end-2020, the status required to make a country eligible for EBRD support. The EBRD will soon open a Resident Office in Greece and start its activities with an estimated annual investment volume of around EUR 500 million. The EBRD Board has approved a first round of trade facilitation projects, worth EUR 30 million. The International Finance Corporation (IFC) may re-engage in Greece through selected high-impact projects in the financial sector and in infrastructure. Fighting unemployment, poverty and poor social conditions EU funding is aimed at developing human resources, investing in education and lifelong learning. It also helps to cushion the negative consequences of unforeseen local or sectoral crises in the labour market. Within the overall envelope of EUR 20 billion of European Structural and Investment Funds available to Greece for 2014-2020, around EUR 3.9 billion will be available to Greece to help boost employment, reduce poverty as well as social exclusion. The Greek authorities estimate that at least 250 000 unemployed people should receive support, together with 180 000 who are already employed and can benefit from training, as well as around 30 000 migrants and Roma, 33 000 living in jobless homes, 10 000 disabled people and 80 000 other disadvantaged people. EU funds help to create better jobs and fairer opportunities for all. They work by investing in the skills, experience and education of workers, young people and all those seeking a job. Concretely these investments contribute to a spirit of entrepreneurship and job creation, improve the education and vocational training systems and modernise public administration. For example, childcare services for around 300 000 children have been provided, improving the employment opportunities of around 250 000 mothers. Significant financial support for the reform of Public Employment Services (OAED) will help job seekers to find employment. EU funds also support the most vulnerable people in society by helping them get better access to public services. If effectively used, they will boost social inclusion and be a means to combat poverty, especially for those most in need in Greece. More than 149 000 young Greeks below the age of 25 (>50%) were unemployed at the start of this year. EU funding for a "Youth Guarantee" aims to help 45,000 young people to get work experience and training. More than EUR 170 million has been allocated to Greece under the Youth Employment Initiative (YEI). This funding will help young people who are not currently in work, education or training. More than 100 000 young people are expected to benefit from schemes supported by the YEI providing apprenticeships, traineeships and vocational training and promoting entrepreneurship. Moreover, in the period 2014-2020, more than EUR 280 million is available to Greece from the Fund for European Aid to the Most Deprived. This money will go towards the fight against poverty in the form of providing basic necessities (such as food, shoes and hygiene products) as well as by helping with social inclusion. Research, innovation and education Building a more knowledge-intensive economy requires increased cooperation between public-sector research and businesses. It also requires policy to focus on a limited number of research and innovation priorities that play to Greece's strengths and are backed by adequate funding. However, the funding of research and innovation activities remains low in Greece and EU funds therefore make a crucial contribution. Within the overall envelope of

EUR 20 billion of European Structural and Investment Funds available to Greece for 2014-2020, EUR 1.3 billion has been earmarked for investments in research and innovation. This will help more than 2 000 SMEs to cooperate with research institutes and boost their future competitiveness. Greek organisations are coordinating 43 large European research projects and participating in a total of 312 projects. Under Horizon 2020 Greece can benefit from the Policy Support Facility to access expertise to implement effective reforms to its research and innovation systems. EU funds will also support the adoption of low-carbon technologies in Greece. EU funds can help to boost skills and employability, as well as to modernise education, training, and youth work. More and better skills and qualifications are crucial to provide the workforce with the competences that the economy needs. EU funds support projects that aim to reduce the number of school drop-outs, increase the take-up of apprenticeship opportunities and lifelong learning, and improve tertiary education. The EU provides financing for mobility of pupils, students and teachers so that they can study, train or teach abroad. In 2014, the EU funded 440 education mobility projects in Greece with about EUR 36 million allowing almost 15 000 students, teachers, vocational learners and other participants to study and learn in another country. For 2015, 1 200 Greek projects have been submitted, covering up to 30 000 individuals. Greece may also benefit from EU funds for the construction or renovation of schools, universities and early childhood and care centres. In the 2014-2020 period, resources are available to upgrade and build new infrastructure for tertiary (EUR 87 million), professional (EUR 20 million), primary and secondary education (EUR 150 million) as well as for early childhood and care (EUR 29 million). Agriculture and fisheries Agricultural and fisheries sectors have enormous potential for improving the country’s competitiveness. Up to 2020, Greece can benefit from almost EUR 20 billion for its farming sector and rural areas. This includes around EUR 4.7 billion from the European Agricultural Fund for Rural Development within the overall envelope of EUR 20 billion of European Structural and Investment Funds available to Greece for 2014-2020 and around EUR 15 billion in direct payments that will help bolster farmers’ and producers’ income. In 2013 such payments reached more than 700 000 farmers. Income-support schemes are available for the currently active farmers, while young farmers will get support to set up small businesses. The EU also makes available resources to help farmers better market their products with support for fruit and vegetables, olive oil, wine, dairy products and honey. The EUR 4.7 billion is reserved for initiatives which will improve the competitiveness of the Greek agricultural sector while preserving ecosystems and ensuring an efficient use of natural resources. Such initiatives open up employment opportunities in rural areas and promote innovation. In the maritime and fisheries sector, EU funds available for Greece within the overall envelope of EUR 20 billion of European Structural and Investment Funds amount to almost EUR 400 million. They can help support the diversification of coastal and island economies, as well as the transition to sustainable fishing. The funds can also be used to enhance the competitiveness of SMEs, of the fisheries, aquaculture (one of the main food exporting sectors of Greece) and the processing sector, as well as to support the shift towards a low-carbon economy. This includes promoting resource efficiency and a sustainable territorial development which focuses on employment and jobs creation. Energy, transport and environment Up to 2020, around EUR 900 million is available to finance investment in energy from the EUR 20 billion European Structural and Investment Funds. The energy sector is also seen as one with the greatest potential for improving the country’s competitiveness. Almost EUR 500 million is available to be spent to improve energy efficiency in public and residential buildings and in SMEs, as well as for high-efficiency cogeneration and district heating in Greece. Such investments are expected to lead to a better classification in terms of energy consumption for around 26 000 households and a decrease of around 97 047 000 kWh per year of primary energy consumption for public buildings. EUR 285 million is available for smart energy storage and transmission systems, and another EUR 46 million for smart electricity distribution grids. Thanks to these investments, around 200 000 additional users could be connected to smart grids. Also, EUR 94 million is available for investment in renewable energy. In addition to funding from the EU's cohesion policy, the EU also funds specific energy infrastructure projects. Up to now Greek energy infrastructure projects receiving EUR 8.5 million EU support have already been selected since 2014. Within the overall envelope of EUR 20 billion of European Structural and Investment Funds available to Greece for 2014-2020, almost EUR 3 billion will be available to support the move towards an energy-efficient and decarbonised transport sector, financing construction of new railway, tram and metro lines, upgrading existing railway lines and constructing new roads. The EU also finances transport infrastructure projects crucial to the core transport network of the EU.

Waste management, illegal landfilling and the protection of water resources remain key issues of concern for Greece. Up to 2020, EUR 2.5 billion will be available to improve the protection of the environment and help finance the shift towards an environmentally friendly economy. Of this amount around EUR 950 million is available for waste management investments. The EU also funds environmental projects through EU wide programmes. Since 2014 Greek beneficiaries – local authorities, universities and NGOs – have received EUR 12 million for this purpose. 2. Support for reform and implementation of EU funds In September 2011, the Commission established the Task Force for Greece (TFGR).

Its mandate was to set out and implement a comprehensive programme of technical assistance for Greece to support the delivery of the EU/IMF adjustment programme and to accelerate the absorption of EU funds. Profound reform efforts undertaken by Greece have been steered, accompanied and stepped up through the assistance and support provided by the TFGR. Reforms included improving the functioning of the public administration; fighting corruption, money laundering and fraud; improving health-care; designing a scheme to provide a generalised minimum income; and facilitating trade. Technical assistance was instrumental in re-launching economically important highway projects. Greece has significantly improved its absorption of structural funds – while in 2011 it was still ranked in 18th place in terms of the use of the funds, at the end of 2014 it was in 6th place. Given the reform challenges ahead in several Member States including Greece,

the Commission has decided to create a Structural Reform Support Service – a permanent but very flexible capacity to provide tailor-made support to Member States in certain policy areas. As of July this year, such support will not only be for Member States in macro-economic assistance programmes. It will provide more general support for the preparation and implementation of growth-enhancing administrative and structural reforms, in particular in the context of economic governance processes, including through assistance for the efficient and effective use of EU structural funds. It will offer support in such areas like revenue management and public financial management, improving business environment, labour market policies, reforms of health-care systems, development of efficient and service-oriented public administration, effective rule of law and combatting corruption. This new service is under the coordination of Vice-President of the Commission Valdis Dombrovskis, who is already coordinating the work of the High Level Working Group on the best use of the structural funds in Greece to catalyse further public and private investments to get the Greek economy back on track, including through financial instruments. If requested by Greece, the Commission is ready to continue its support in designing and/or implementing structural and institutional reforms within this new technical assistance framework. The new proposed technical assistance of the Commission would steer and coordinate support organised in cooperation with other Commission services, other Member States and/or international organisations. One immediate task would be to support Greece in maximising its absorption of EU funds, ensuring the fastest possible take-off of investment and ensuring that sound financial management requirements and relevant deadlines are met. Within the EU Funds under the 2014-2020 programming period, nearly half a billion euro is available for technical assistance in the area of cohesion policy to strengthen the management and control systems and administrative capacities in support of the effective implementation and delivery of EU funds. The effectiveness of the technical assistance would crucially depend on the existence of a well-functioning coordination structure within the Greek administration and targeted work, in close cooperation with the Commission and its new Structural Reform Support Service. The Commission is also setting up a pilot Technical Assistance Trust-Fund of

EUR 1.5 million, which is expected to be managed by the European Bank for Reconstruction and Development (EBRD). This would support the preparation and implementation of priority projects in Greece that could be (co)financed by the EBRD and the International Finance Corporation (IFC). 3. Conclusions The Commission has stood by Greece throughout the crisis, both with financial support and technical assistance. It will continue to do so to relaunch growth and create badly needed jobs for the benefit of the Greek people. Reaching a deal that provides clarity and predictability is essential for this. The full mobilisation of EU funds will catalyse recovery. It is now essential that Greece returns to financial stability quickly so that it can make full use of the substantial EU support available in the form of grants, loans and technical assistance to build a secure future. At a time of pressure on national funding, this support can make a real difference to building the foundations for sustainable jobs, growth and social cohesion. Greece must do its part. This Communication will complement the comprehensive set of reforms and commitments which Greece is in the process of implementing and which will underpin a stability support programme for Greece under the Treaty establishing a European Stability Mechanism. These reforms together with new investments must be delivered quickly because they are a crucial part of restoring the health of the economy. The effectiveness of the EU Funds depends on the stable and favourable macroeconomic environment based on sound fiscal and economic policies. Greece also needs to tackle some serious weaknesses in its administrative capacity to be able to draw down all of the available funding described in this Communication. The Commission is ready to continue to provide technical support within its new technical assistance framework and to make further proposals to the EU legislator to increase the pre-financing available to Greece.