COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Follow-up to the Council Decision of 10 May 2010 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
Date: 2010-08-19
Institutions: European Commission
Subjects: Greece, anti-crisis plan, budget deficit, budget policy, budgetary control, economic recession

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EUROPEAN COMMISSION 

Brussels, 19.8.2010 
COM(2010) 439 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL  

Follow-up to the Council Decision of 10 May 2010 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

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL  

Follow-up to the Council Decision of 10 May 2010 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 

1. 

INTRODUCTION 

This  Communication  assesses  the  measures  implemented  by  end-June  2010  by  Greece  to 
comply with the Council Decision 2010/320/EU of 10 May 2010,1 on the basis of the report 
submitted  to  the  Council  and  the  Commission  by  Greece  on  6  August  2010.2  The  report 
submitted  by  Greece  discusses  not  only  the  fiscal  measures  that  aim  at  reducing  the 
government deficit ratio in 2010, but also the wide-ranging structural reforms that are being 
adopted and implemented by the Greek government.3  

2. 

THE COUNCIL DECISION OF 10 MAY 2010 

On 10 May 2010, the ECOFIN Council adopted Decision 2010/320/EU, under Articles 126(9) 
and  136  TFEU,  addressed  to  Greece,  with  a  view  to  reinforcing  and  deepening  the  fiscal 
surveillance and giving notice to take measures for the deficit reduction judged necessary to 
remedy the situation of excessive deficit.4 

The Council Decision requires Greece to adopt a number of measures before the deadlines of 
end  June  2010,  end  September  2010,  end  December  2010  and  end  March  2011.  The 
implementation of these measures shall aim at general government deficits not exceeding: 

•  EUR 18 508 million (8.0% of GDP, on the basis of the nominal GDP projected in May) in 

2010; 

•  EUR 17 065 million (7.6% of GDP) in 2011; 

•  EUR 14 916 million (6.5% of GDP) in 2012; 

•  EUR 11 399 million (4.9% of GDP) in 2013 and 

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OJ L 145, 11.6.2010, p. 6. 
The  Economic  Adjustment  Programme  for  Greece  –  Report  submitted  in  accordance  with  Council 
Decision  –  July  2010,  submitted  on  6  August  2010.  The  report  has  been  submitted  by  the  Greek 
government; it includes an annex on banking supervision provided by the Bank of Greece. 
This Communication and a companion Commission services' report prepared in liaison with the ECB 
(The  Economic  Adjustment  Programme  for  Greece  –  First  Review,  August),  also  contribute  to  the 
assessment  of  compliance  with  the  Memorandum  of  Understanding  on  Specific  Economic  Policy 
Conditionality of May, in the context of the loan facility agreement between Greece and the euro-area 
Member States. 
For a synopsis of the previous steps in the implementation of the excessive deficit procedure and the 
Stability and Growth Pact in Greece, see the Commission assessment of the Greek stability programme 
of January 2010 (SEC (2010) 94 final of 3 February 2010).  

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•  EUR 6 385 million (2.6% of GDP) in 2014.5 

3. 

ACTION  TAKEN  BY  GREECE  IN  RESPONSE  TO  THE  COUNCIL  DECISION  BY  END-
JUNE 2010 

In the course of 2010, Greece has adopted four packages of fiscal measures: 

•  in January, in the context of the stability programme; 

•  in February, just before the assessment by the Commission of the stability programme; 

•  in March, in response to the Council Decision of 16 February 2010 under Article 126(9),6 

and 

•  in May, in response to the Council Decision of 10 May 2010 and the conditionality criteria 
in  the  Memorandum  of  Economic  and  Financial  Policies  (MEFP),  the  Memorandum  of 
Understanding on Specific Economic Policy Conditionality (MoU).7  

This communication assesses the measures taken from May 2010 on.8  

On  6  May  2010,  Greece  adopted  Law  3845/2010,  on  the  policy  measures  relating  to  the 
conditionality criteria of the euro area/IMF financing package. The vast majority of the fiscal 
and structural measures included in the law were implemented with immediate effect. Among 
the revenue-side measures, there were increases in the VAT rates, increases in excise taxes on 
petrol,  tobacco  and  alcohol,  as  well  as  the  imposition  of  a  tax  on  advertisement.  On  the 
expenditure  side,  there  were  further  reductions  in  public  sector  wages,  and  reductions  in 
pensions paid by social security funds to public and private sector retirees. 

The budgetary impact on 2010 accounts of the measures adopted by Greece on 6 May 2010 is 
estimated  to  amount  to  2.5%  of  GDP.  Those  measures  consisted  of  permanent  revenue 
enhancing measures (½% of GDP or EUR 1.25 billion) and permanent expenditure cuts (1.9% 
of GDP or EUR 4.55 billion). Moreover, those  measures will have deficit-decreasing carry-
overs effects on the 2011 accounts of 1.1% of GDP. 

The sum of the four fiscal packages adopted by Greece, adds to the initial 2010 budget which 
had  been  put  forward  by  the  Government  in  October  2009  and  adopted  by  the  Greek 
Parliament in late December 2009. These four packages of measures are quantified at around 

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The  adjustment  path  established  by  the  Decision  requires  that  the  annual  change  in  the  general 
government  consolidated  gross  debt  shall  not  exceed:  EUR  34  058  million  (with  a  total  debt-to-GDP 
ratio of 133.2%) in 2010;  EUR 17 365 million (with a total debt-to-GDP ratio of 145.2%) in 2011;EUR 
15 016 million (with a total debt-to-GDP ratio of 148.8%) in 2012; EUR 11 599 million (with a total 
debt-to-GDP  ratio  of  149.6%)  in  2013  and  EUR  7  885  million  (with  a  total  debt-to-GDP  ratio  of 
148.4% of GDP) in 2014. 
OJ L 83, 30.3.2010, p. 13. 
These memoranda were agreed in the context of the decision by the euro-area Member States to provide 
financial assistance to Greece, in conjunction with a stand-by arrangement (SBA) with the IMF. 
For  an  assessment  of  the  measures  of  January,  February  and  March,  see  the  Commission 
Communication of 9.3.2010 (COM (2010) 91 final). 

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8% of GDP (excluding deficit-decreasing carry-overs to 2011) and are expected to reduce the 
government deficit from 13.6% of GDP in 2009 to 8% in 2010.9  

Annex I summarizes the specific measures requested by the Council Decision of 10 May 2010 
to be adopted by end-June 2010. Annex II elaborates on the measures that, according to the 
Council Decision have a deadline in September 2010.10 

3. 

THE BUDGETARY EXECUTION UP TO END-JUNE 2010 

State budgetary developments over the first half of 2010 have been positive with the deficit 
declining  faster  than  planned.11  However  a  number  of  risks,  as  discussed  below  need  to  be 
considered. 

According  to  the  cash  data  through  end  June  published  by  the  General  Accounting  Office 
(GAO), the state cash deficit has shrunk by some 46%, as compared to the respective period 
in 2009. The targeted annual contraction for that deficit is 40% (see Table 1). This reduction 
in the deficit beyond plans was mainly the result of lower-than-expected expenditure, which 
compensated for revenue collection that has been less dynamic than expected.  

Total  state  cash  outflows  were  reduced  by  16.9%  compared  to  the  first  half  of  2009.  (The 
official  target  reduction  of  expenditures  for  the  year  as  a  whole  is  5.3%.)  State  primary 
spending has been EUR 5.6 billion below plans of May 2010. This contraction mainly reflects 
primary  expenditure  cuts  (including  public  wages),  but  also  capital  expenditure.  Note, 
however,  that  some  of  the  expenditure  savings  decided  in  May  (for  example  the  cuts  in 
Christmas bonuses paid to civil servants and pensioners) have not been fully reflected in the 
available data. Interest expenditure (on a cash basis) remains below budgeted targets, because 
of peculiarities in the calendar of interest payments this year and should return to normal in 
the coming months.  

Total cash receipts increased by 5.9% in the first half while an annual increase of 15.6% is 
targeted  for  the  year  as  whole.  A  considerable  pick-up  in  receipts  can  be  expected  in  the 
second half, as the full effect of the VAT and excise increases will feed through. In particular 
the latest VAT increase – effective on 1 July 2010 – has not yet been reflected in the available 
data. However, even if those factors are taken into account, tax receipts will most likely stay 
below the projections of May 2010 in the context of the economic adjustment programme that 
underlies the euro area and IMF financing. The revenue shortfalls are not fully consistent with 
higher-than-projected  nominal  GDP  growth  on  the  back  of  higher-than-expected  inflation12 
and  relatively  tax-favourable  growth  composition.  This  may  suggest  that  some  of  the 

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Note that Eurostat has not yet validated the 2009 government deficit and debt data notified by Greece. 
On  22 April  2010,  Eurostat  informed  that, following  completion of  the investigations that  Eurostat  is 
undertaking in cooperation with EL.STAT on several issues (in particular, the sectoral classification of 
a  number  of  public  enterprises  and  the  accounting  of  off-market  swaps,  as  well  as  the  need  of  more 
detailed  and  accurate  date  on  social  security  revenue  and  expenditure),  the  2009  government  deficit 
ratio could be revised upwards by 0.3 to 0.5% of GDP, and the debt by 5 to 7% of GDP. See Eurostat 
News Release N° 55/2010. 
The report submitted by Greece on 6 August 2010 provides a more complete list of measures adopted. 
As the companion report elaborates in detail, the several fiscal performance criteria in the context of the 
loan facility agreement (euro area) and stand-by arrangement (IMF) have been fulfilled. 
In July 2010, the HICP annual inflation was 5.5%. 

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measures to increase the efficiency of tax collection, fight tax evasion and to improve the tax 
administration have not yet given tangible results and may need to be strengthened. 

Table 1: State budget execution  

on cash basis 
(million euro) 

Total revenue 

Revenue before refunds 

Tax refunds 

Capital revenue 

Total expenditure 

Primary expenditure 

Interest 

Capital expenditure 

Other 

2009 

2010 

Jan. - June 

Jan. - June 

% 
change 

2009 

Outcome 

2010 
Official 
estimates 

% change 

22831 

24639 

2450 

642 

40697 

27945 

6612 

6140 

0 

24180 

26062 

5.9% 

5.8% 

2266 

-7.5% 

384 

-40.2% 

33824 

-16.9% 

24398 

-12.7% 

5731 

-13.3% 

3695 

-39.8% 

0 

50509 

53420 

4952 

2041 

81390 

57975 

12325 

9588 

1502 

58382 

60224 

5100 

3258 

77073 

54611 

13017 

9200 

245 

15.6% 

12.7% 

3.0% 

59.6% 

-5.3% 

-5.8% 

5.6% 

-4.0% 

-83.7% 

-39.5% 

State Budget balance 

-17866 

-9644 

-46.0% 

-30881 

-18691 

Source: General Accounting Office – Greece. 

The (available) general government cash balance – that is state, local government and social 
security  funds,  including  public  hospitals  –  lies  broadly  on  track  so  far,  due  to  the 
overachievement  of  state-level  cash-basis  targets.  According  to  monetary  statistics-derived 
data provided by the Bank of Greece for the first half of the year, (i) local government cash 
balance shows a surplus (EUR 183 million) that is slightly smaller than expected; while (ii) 
social security funds' cash balance shows a deficit (EUR 239 million), instead of a surplus. 

There is no hard infra-annual data on the transition from (available) general government cash 
balance  to  ESA  accounts  in  real  time.  This  adjustment  should  take  into  account  deficit-
increasing adjustments, such as on expenditure pending payment, guarantees called, and the 
deficit of extra-budgetary funds, as well as a number of deficit-reducing adjustments, such as 
delays  in  collection  of  taxes  and  lags  in  the  payment  by  the  EU  budget  of  structural  funds. 
The overall adjustment for the year as a whole is expected to be deficit increasing and amount 
to around EUR 1 300 million. 

4. 

ASSESSMENT OF RISKS TO THE 2010 DEFICIT TARGET 

Although fiscal consolidation seems to be on track in the first half of 2010, there are a number 
of  pressure  points  that  need  to  be  considered  in  the  budgetary  execution  over  the  coming 
months. 

In particular:  

•  State  revenue:  Tax  revenue  has  been  performing  below  targets  over  the  first  half  of  the 
year,  although  the  efforts  to  improve  tax  compliance  and  fight  tax  evasion  have  been 
intensified. Tax revenue in the second half of the year is expected to recover on the back of 
the full implementation of the revenue- enhancing measures already legislated, such as the 
VAT  rate  increase  implemented  from  1  July  on.  Nevertheless,  with  the  recession 

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deepening in the second half of the year, the anticipated recovery might not be sufficient 
for the annual state revenue to meet the projections of May 2010.13  

•  Accounts  payable  and  arrears:  The  cash  balance  for  the  general  government,  which  has 
been  over-performing  in  the  previous  months  may  have  been  distorted  by  expenditure 
pending payment (including expenditure past their due date: arrears). As in the past, risks 
for the accumulation of arrears concern mainly health care-related spending. Moreover, the 
relative performance of the several government sectors (state, social security funds, local 
government  and  extra  budgetary  funds)  may  also  be  distorted  by  delays  in  transfers 
amongst government entities. 

•  Called  Guarantees:  In  2009  guarantees  called  (and,  therefore,  recorded  as  deficit 
increasing)  amounted  to  EUR  700  million.  Those  guarantees  concerned  mainly  public-
enterprises debts. As the economy deepens in recession, and a number of public enterprises 
(e.g.  the  over  indebted  railway  company)  may  have  difficulty  in  rolling  over  their 
liabilities,  the  guarantees  called  may  substantially  increase.  While  guarantees  called 
through end June amount to EUR 300 million, one may expect them to increase up to EUR 
1 500 million until the end of the year.  

•  Local governments, social security funds and extra-budgetary funds: So far, the financial 
performance  of  local  governments  has  fallen  short  of  programme  projections.  The  same 
applies to social security funds. Upcoming local elections and deepening recession might 
induce  further  slippage.  Note,  however,  that available  data  concern  the  local  government 
and  social  security  balance,  and  not  their  respective  revenue  and  expenditure,  as  the 
balance is derived from monetary statistics provided by the Bank of Greece.14 Therefore a 
more  detailed  analysis  is  not  possible  for  the  time  being.  Moreover,  part  of  the  less 
favourable performance by those entities may be related to delays in transfers to be paid by 
the state budget. So far, there are no data on fiscal execution by the extra-budgetary funds. 

•  Catch-up spending. Catch up spending in the second half is anticipated, given the reduction 
in expenditure in the first half and some delays in payments. While monthly spending has 
been  much  lower  than  planned  in  the  first  half  of  2010,  on  the  back  of  the  restraining 
expenditure  efforts  by  the  government  and  further  controls  by  the  Ministry  of  Finance, 
there  are  obligations  generated  that  will  lead  to  cash  outflows  in  the  second  half  of  the 
year. Maintaining the under-execution of expenditures during the second half of the year 
will  be  challenging,  as  ministries  can  be  expected  to  catch  up  with  their  annual  budget 
appropriations. 

•  Public  enterprises:  Government  needs  to  speed  up  efforts  to  establish  cost  recovery  in 
public enterprises, to reduce the risk of increased subsidies or other transfers with negative 
fiscal impact.15  

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On  the  basis  or  currently  available  information,  the  Commission  services  estimate  that  there  will  be 
shortfalls for the year as whole, compared to the projections prepared in early May, of up to EUR 1 500 
million (or 0.6% of GDP). 
There is also some incomplete information on revenue and expenditure for a number of social security 
funds. 
See above footnote 9 on the possible reclassification of public companies (like the railways OSE). 

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5. 

PROGRESS WITH STRUCTURAL REFORMS  

Significant progress has been achieved in structural fiscal reforms, such as the preparation of 
the  new  organic  budget  law,  measures  against  tax  evasion,  a  census  of  civil  servants16  and 
steps forward in setting up a single payment authority for public wages. Progress with pension 
reform  and  public  administration  at  local  level  has  been  made  ahead  of  schedule.  Some 
further adjustments in the pension laws are planned for 2011.17 Preparations are less advanced 
in  the  implementation  of  a  system  to  monitor  and  control  expenditure  commitments  at  the 
several  government  layers.  Efforts  need  to  be  intensified  to  improve  the  collection  and 
processing of data which are essential for budgetary control.  

Beyond fiscal-related issues, important steps forward have also been made with the ambitious 
broader  structural  reform  agenda.  Business  environment  reforms,  measures  to  accelerate 
absorption  of  structural  and  cohesion  funds  and  horizontal  legislation  to  implement  the 
services  directive  are  on  track;  ambitious  labour  market  laws  have  been  adopted  ahead  of 
schedule though requiring further actions at a later stage. The privatisation and restructuring 
of state-owned companies – in particular in the areas of rail transport and energy – need to be 
speeded up. 

In relation to structural reforms in the financial sector, the Financial Stability Fund has been 
established and the Bank of Greece is in the process of strengthening banking supervision. 

6. 

COMPLETENESS OF REQUIRED INFORMATION 

The  report  submitted  by  Greece  includes  most  of  the  information  and  data  required  by  the 
Council Decision. In particular, the report contains detailed information on concrete measures 
implemented  (and  to  be  implemented)  in  order  to  comply  with  the  Decision  and  their 
respective  budgetary  impact.  Data  on  the  monthly  state  budget  execution  have  been  timely 
provided by the General Accounting Office. The report also contains the required information 
in relation to debt issuance and reimbursements, and information on the financial situation of 
the largest public enterprises. However, data on the infra-annual budgetary implementation by 
social  security  funds,  local  government  and  extra  budgetary  funds,  information  on  public 
sector employment, expenditure pending of payment (including arrears) are still incomplete. 

Moreover,  the  report  contains  a  wealth  of  information  concerning  the  implementation  of 
structural reforms in response to the Council Recommendation of 16 February 2010,18 and to 
comply with the MEFP and MoU. 

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According to the recently released data on the public employment census, there are about 768 thousand 
civil  servants  (state,  local  government,  social  security  and  extra-budgetary  funds).  This  represents  17 
percent of the overall working population in Greece. 
In the absence of complete long-term projections, it is not yet possible to have a complete assessment of 
the  pension  reform.  The  main  pension  parameters  will  have  to  be  adjusted  in  the  course  of  2011  to 
ensure that the long-term evolution of pension expenditure (2009-2060) does not exceed 2.5 percentage 
points of GDP. This adjustment will be based on long-term projections to be provided by the National 
Actuarial Authority and validated by the EU Economic Policy Committee 
Council  Recommendation  (2010/190/EU)  to  Greece  of  16  February  2010  with  a  view  to  ending  the 
inconsistency  with  the  broad  guidelines  of  the  economic  policies  in  Greece  and  removing  the  risk  of 
jeopardising the proper functioning of the economic and monetary union (OJ L 83, 30.3.2010, p. 63). 

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7. 

CONCLUSION  

Greece is satisfactorily complying with the Council Decision of 10 May 2010, responding to 
the Council Recommendation of 16 February 2010 and implementing the measures outlined 
in the MEFP and MoU of 3 May 2010. 

According  to  the  Council  Decision  (Article  4(3)),  “the  Commission  may  indicate  the 
measures  needed  to  respect  the  adjustment  set  by  [the]  Decision  for  the  correction  of  the 
excessive  deficit.”  Against  available  information,  the  fiscal  measures  adopted  by  Greece  so 
far  appear  sufficient  to  reach  the  2010  budgetary  deficit  ceiling  targets  provided  in  the 
Council  Decision  of  10  May  2010,  provided  that  expenditure  control  remains  very  tight 
leading to total state expenditure of EUR 4 billion below plans to offset revenue shortfall and 
expenditure  slippages  in  other  government  sectors.  The  under-execution  of  state  budget 
expenditures  will  also  need  to  cover  the  projected  difference  between  the  available  cash 
deficit and the ESA95-based balance. 

Provided  that  the  planned  measures  are  duly  implemented  in  a  timely  manner,  and  if  the 
macroeconomic  scenario  unfolds  according  to  expectations,  available  forecasts  suggest  that 
government deficit and debt ceiling for 2011-2014, with a correction of excessive deficit by 
2014, are within reach.  

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ANNEX I:  MEASURES REQUIRED BY THE COUNCIL DECISION, TO BE ADOPTED BY END-JUNE 2010 

State of progress  

Measures (as required by Article 2(1) of the Council Decision) 
“Greece shall adopt the following measures before the end of June 2010: 
(a)  a  law  introducing  a  progressive  tax  scale  for  all  sources  of 
income  and  a  horizontally  unified  treatment  of  income  generated 
by labour and capital assets; 
(b)  a  law  abrogating  all  exemptions  and  autonomous  taxation 
provisions  in  the  tax  system,  including  income  from  special 
allowances paid to civil servants; 
(c)  the  cancellation  of  the  budgetary  appropriations  in  the 
contingency reserve, with the aim of saving EUR 700 million; 
(d)  an  abolition  of  most  of  the  budgetary  appropriation  for  the 
solidarity allowance (except a part for poverty relief) with the aim 
of saving EUR 400 million; 
(e) a reduction in the highest pensions with the aim of saving EUR 
500 million for a full year (EUR 350 million for 2010); 
(f) the reduction of the Easter, summer and Christmas bonuses and 
allowances paid to civil servants with the aim of saving EUR 1500 
million for a full year (EUR 1100 million in 2010);  
(g) the abolition of the Easter, summer and Christmas bonuses paid 
to pensioners, though protecting those receiving low pensions, with 
the  aim  of  saving  EUR  1900  million  for  a  full  year  (EUR  1500 
million in 2010); 
(h)  an  increase  in  VAT  rate,  with  a  yield  of  at  least  EUR  1800 
million for a full year (EUR 800 million in 2010);19 
(i) an increase in excises for fuel, tobacco and alcohol, with a yield 
of  at  least  EUR 1050  million  for  a  full  year  (EUR  450  million  in 
2010); 

Fulfilled. Law 3842/2010 was adopted by Parliament in April 2010. 

Fulfilled. Ministerial Decision. 

Fulfilled. Law 3845/2010 was adopted by Parliament in May 2010. 

Fulfilled. Laws 3863/2010 and 3865/2010 were adopted by Parliament in May 2010. 

Fulfilled. Law 3845/2010 was adopted by Parliament in May 2010. 

Fulfilled. Law 3845/2010 was adopted by Parliament in May 2010. New VAT rates applicable from 1 July on; 
new excise rates applicable from 3 May on. 

(j) legislation implementing the services directive; 

(k)  a  law  reforming  and  simplifying  public  administration  at  the 
local level with the aim of reducing operating costs; 

Fulfilled. The horizontal legislation (Law 3844/2010) has been adopted; work is ongoing on the point of single 
contact. 
Fulfilled. Law 3852/2010 was adopted by Parliament on 27 May 2010. A series of implementing decrees are 
pending adoption. 

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The report of 6 August indicates that this measure could bring additional revenue of EUR 900 million in 2010, instead of EUR 800 million. 

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(l)  the  establishment  of  a  task  force  aiming  at  improving  the 
absorption rate of structural and cohesion funds; 

(m) a law to simplify the start-up of new businesses; 
(n) a reduction of public investment by EUR 500 million compared 
to plans; 
(o)  the  channelling  of  the  budgetary  appropriations  for  the  co-
financing  of  structural  and  cohesion  funds  to  a  special  central 
account that cannot be used for any other purpose; 
(p)  the  establishment  of  an  independent financial  stability  fund  to 
deal  with  potential  capital  shortfalls  and  preserve  the  financial 
sector soundness, by providing equity support to banks as needed; 

(q)  the  reinforced  supervision  of  banks,  with  increased  human 
resources, more frequent reporting and quarterly stress tests.” 

Ongoing.  The  formal  establishment  and  staffing  of  a  task  force  which  will  be  chaired  by  the  Deputy  Prime 
Minister is pending. On 30 June 2010, the Greek government passed a ministerial decision to fast track project 
production. 
Fulfilled. Law 3853/2010 was adopted by Parliament on 17 June 2010. 

Ongoing (Ministerial Decision 24687/DE2947). A complete assessment is not possible before end of year.  

Fulfilled. The bank account at the Bank of Greece was created on 30 June 2010.  

Fulfilled after the deadline. Law 3864/2010 was adopted by Parliament on 12 July 2010. 

Ongoing. The Bank of Greece has intensified its work relating to banking supervision. There are now regular 
meetings with the auditors of the banks and with the important internal committees of all the major banks (risk 
management,  internal  control,  etc).  Banks  are  now  required  to  provide  certain  supervisory  data  on  a  higher 
frequency. 

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ANNEX II:  MEASURES REQUIRED BY THE COUNCIL DECISION, TO BE ADOPTED BY END-SEPTEMBER 2010 

Measures (as required by Article 2(2) of the Council Decision) 
“Greece shall adopt the following measures before the end of September 2010: 
(a) inclusion in the draft budget for 2011 of fiscal consolidation measures amounting to at 
least  3%  of  GDP  (4,1  %  of  GDP  if  carryovers  from  measures  implemented  in  2010  are 
considered).  The  budget  shall,  in  particular,  include  the  following  measures  (or  in 
exceptional  circumstances,  measures  yielding  comparable  savings):  a  reduction  in 
intermediate  consumption  of  the  general  government  by  at  least  EUR  300  million 
compared to the 2010 level (in addition to savings stemming from the reform, referred to in 
this  paragraph,  of  public  administration  and  of  local  government);  a  freeze  in  the 
indexation of pensions (with the aim of saving EUR 100 million); a temporary crisis levy 
on highly profitable firms (yielding at least EUR 600 million in additional revenue per year 
in 2011, 2012 and 2013); the presumptive taxation of professionals (with a yield of at least 
EUR  400  million  in 2011  and  increasing  returns  in  2012 and 2013);  a  broadening  of  the 
VAT base to include certain services currently exempted and moving 30 % of goods and 
services from the reduced rate to the main rate (with a yield of EUR 1 billion); a phased-in 
green  tax  on  CO2  emissions  (with  a  yield  of  at  least  EUR  300  million  in  2011);  the 
implementation  by  the  Greek  Government  of  legislation  reforming  public  administration 
and  reorganising  local  government  (with  the  aim  of  reducing  costs  by  at  least  EUR  500 
million in 2011, and 500 additional EUR million each year in 2012 and 2013); a reduction 
in  domestically-financed  investments  (by  at  least  EUR  1  billion)  by  giving  priority  to 
investment  projects  financed  by  EU  structural  funds;  incentives  to  regularise  land-use 
violations (yielding at least EUR 1 500 million from 2011 to 2013, of which at least EUR 
500 million in 2011); a collection of revenue from the licensing of gaming (at least EUR 
500 million in sales of licences and EUR 200 million in royalties); a broadening of the real 
estate  tax  base  by  updating  asset  values  (to  yield  at  least  EUR  500  million  additional 
revenue); an increased taxation of wages in kind, including by taxing car lease payments 
(by at least EUR 150 million); an increased taxation of luxury goods (by at least EUR 100 
million);  a  special  tax  on unauthorised  establishments  (to  yield  at  least  EUR  800  million 
per  year);  and  a  replacement  of  only  20  %  of  retiring  employees  in  the  public  sector 
(central  government,  municipalities,  public  companies,  local  governments,  state  agencies 
and other public institutions);  

State of progress 

Planned.  2011  budget  is  expected  to  be  submitted  to  Parliament  in  the  first 
week of October. 

Partially fulfilled ahead of deadline. A number of measures required by the 
Council Decision to be adopted in the context of the 2011 budget have already 
been legislated. These include in particular: 
(i)  temporary  crisis  levies  on  highly  profitable  firms  (EUR  600  million  per 
year; Law 3845/2010); 
(ii)  the  increase  in  taxes  on  luxury  goods  (applicable  from  3  May  2010  on; 
EUR 100 million per year; idem);20 
(iii)  the  presumptive  taxation  of  professionals  (EUR  400  million  in  2011  and 
increasing returns in 2012 and 2013; Law 3842/2010); 
(iv)  the  increase  of  taxation  of  wages  in  kind,  including  by  taxing  car  lease 
payments (EUR 150 million; idem). 

20 

EN 

The report of 6 August indicates that this measure could bring additional revenue of EUR 120 million in 2010, instead of EUR 100 million. 

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(b) a law reforming the pension system with a view to ensuring its medium and long-term 
sustainability. The law should, in particular, introduce: a unified statutory retirement age of 
65 years (including for women); a merger of the existing pension funds in three funds and a 
unified  new  pension  system  for  all  current  and  future  employees  (applicable  as  of  1 
January  2013);  a  reduction  of  the  upper  limit  on  pensions;  a  gradual  increase  in  the 
minimum  contributory  period  for  retirement  on  a  full  benefit  from  37  to  40  years  (by 
2015); a minimum retirement age of 60 years by 1 January 2011 (including for workers in 
heavy and arduous professions and those with 40 years of contributions); the abolition of 
the  special  rules  applicable  to  persons  insured  before  1993  (while  retaining  acquired 
rights); a substantial narrowing of the list of heavy and arduous professions; a reduction of 
pension benefits (by 6 % per year) for people entering retirement between the ages of 60 
and  65  with  a  contributory  period  of  less  than  40  years;  the  creation  of  an  automatic 
adjustment mechanism linking the retirement age with the increase in life expectancy (as of 
2020);  the  creation  of  a  means-tested  minimum  guaranteed  income  for  elderly  people 
above  the  statutory  retirement  age;  stricter  conditions  and  the  regular  re-examination  of 
eligibility  for  disability  pensions;  an  amendment  of  the  pension  award  formula  in  the 
contributory based scheme to strengthen the link between contributions paid and benefits 
received (with accrual rate limited to an average annual rate of 1,2 %); and an extension of 
the  calculation  of  the  pensionable  earnings  to  entire  lifetime  earnings  (while  retaining 
acquired rights). The implementation of this law should reduce the projected increase in the 
pension expenditure to GDP ratio to below the euro area average over the next decades and 
should limit the increase of public sector spending on pensions over the period 2010-2060 
to less than 2.5 % of GDP; 

Partially fulfilled ahead of deadline. Important progress has been made in the 
area  of  pension  reform  ahead  of  the  September  2010  deadline.  Parliament 
adopted Laws 3863/2010 and 3865/2010 on 8 and 16 July 2010 (for the private 
and  public  sectors,  respectively),  including  a  number  of  the  specific  reform 
parameters required by the Council Decision.  
In the absence of complete long-term projections, it is not yet possible to have 
complete  assessment  of  the  reform.  The  pension  reform  law  will  have  to  be 
adjusted to ensure that the long-term evolution of pension expenditure (2009-
60)  does  not  exceed  2.5  percentage  points  of  GDP.  This  adjustment  will  be 
based  on  long-term  projections  to  be  provided  by  the  National  Actuarial 
Authority and validated by the EU Economic Policy Committee. 

EN 

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(c)  a  reinforcement  of  the  role  and  resources  of  the  general  accounting  office  and  the 
establishment  of  safeguards against  possible  political  interferences  in data  projection  and 
accounting; 

(d) a draft reform of wage legislation in the public sector, including notably the creation of 
a  Single  Payment  Authority  for  the  payment  of  wages,  the  introduction  of  unified 
principles and timetable to establish a streamlined unified public sector wage grid to apply 
to the State sector, local authorities and other agencies; 

(e) a legislation improving the efficiency of the tax administration and controls; 

Ongoing  in  the  context  of  the  Fiscal  Management  and  Responsibility  Act, 
which was submitted to Parliament on 30 June 2010. 

Ongoing. The government has proceeded with the set up of the single payment 
authority  ahead  schedule.  It  already  covers  wages  paid  to  almost  80%  of  the 
total number of the civil servants in central government. 
The census of public employment will contribute to widen the coverage to the 
whole general government by the end of the year. 
Ongoing. Several initiatives have been taken to improve the efficiency of the 
tax  administration,  to  fight  tax  evasion  and  improve  tax  compliance.  The 
government  has  put  in  place  the  new  tax  law  which  introduces  stronger 
enforcement of income and VAT filling and payment processes, widens the tax 
base by cancelling deductions and exemptions and introduces the presumptive 
taxation.  The  government  has  started  developing  a  compliance  risk 
management framework and building strategic management capacity in tax and 
customs  authorities,  through  the  reorganization  of  the  relevant  services.  The 
set-up  of  five  specialist  task  forces  in  the  Ministry  of  Finance  and  the  tax 
administration has also been launched. 

(f) the launch of an independent review of the public administration and of existing social 
programmes; 

Planned. Kick-off meetings planned for September. 

(g)  the  publication  of  monthly  statistics  (on  a  cash  basis)  on  revenue,  expenditure, 
financing and spending arrears for the available general government and its sub entities; 

(h)  an  action  plan  to  improve  collection  and  processing  of  general  government  data, 
notably  by  enhancing  the  control  mechanisms  of  statistical  authorities  and  the  General 
accounting office and ensuring effective personal responsibility for cases of misreporting, 
in order to ensure the prompt supply of high quality general government data required by 
regulations  (EC)  2223/96,  264/2000,  1221/2002,  501/2004,  1222/2004,  1161/2005, 
223/2009 and 479/2009; 
(i) a regular publication of information on the financial situation in public enterprises and 
other  public  entities  not  classified  in  the  general  government  (including  detailed  income 
statements, balance sheets and data on employment and the wage bill).” 

Partially fulfilled. In 2010, Greece has been regularly publishing detailed cash 
data  on  revenue,  expenditure  and  financing  of  the  state.  Data  on  spending 
pending payment is not yet available. The legal obligation has been included in 
the  draft  bill  on  fiscal  management  and  responsibility  which  has  been 
submitted to Parliament on 30.06.2010. 
Law  3861/2010  requires  online  publication  of  all  decisions  involving 
commitments of funds in general government. 

Ongoing. Implementation of the action plan agreed with Eurostat. 

Partially fulfilled. Some data included in the report of 6 August. 

EN 

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EN 

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