COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Follow-up to the Council Decision 2011/xxx/EU of 12 July 2011 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 (October 2011)
Date: 2011-10-26
Institutions: European Commission
Subjects: Greece, budget deficit, budgetary control, debt reduction, financial aid, gross domestic product, public debt, structural adjustment

EUROPEAN COMMISSION 

Brussels, 26.10.2011 
COM(2011) 705 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Follow-up to the Council Decision 2011/xxx/EU of 12 July 2011 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  

(October 2011) 

 
 
 
 
  
 
 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Follow-up to the Council Decision 2011/xxx/EU of 12 July 2011 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  

(October 2011) 

1. 

INTRODUCTION 

This quarterly Communication assesses the measures implemented and planned by Greece to 
comply  with  Council  Decision  of  12  July  2011.  Action  taken  until  end-June  2011  was 
assessed  in  the  Communication  dated  1  July  2011.1  Together  with  the  Commission  staff's 
Compliance Report, prepared in liaison with the ECB,2 the Communication also contributes to 
the assessment of compliance with the MEFP and the MoU,3 in the context of the loan facility 
agreement  between  Greece  and  other  euro-area  Member  States.This  assessment  is  based  on 
the mission conducted by European Commission staff together with IMF and ECB staff in the 
context  of  the  economic  adjustment  programme  and  the  quarterly  report  transmitted  by  the 
Greek Ministry of Finance on 19 August 2011.  

2. 

THE COUNCIL DECISION OF 12 JULY 

On  12  July  2011,  the  Council  adopted  a  Decision4,  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 by 2014. This Decision recasted the May 2010 Decision, which 
had been amended several times. 

The Decision required Greece to adopt a number of specific measures with the aim of keeping 
the general government deficit below the following ceilings: 

•  EUR 17 065 million (7.8 percent of GDP on the basis of the latest forecasts) in 2011; 

•  EUR 14 916 million (7.0 percent of GDP) in 2012; 

•  EUR 11 399 million (5.3 percent of GDP) in 2013 and 

1 
2 

3 

4 

COM (2011) 422 final. 
‘The  Economic  Adjustment  Programme  for  Greece  –  Fifth  Review,’  European  Economy–Occasional 
Paper,.  The  reader  is  referred  to  that  document  for  a  more  detailed  assessment  of  macroeconomic, 
financial, fiscal and structural reform developments. 
Memorandum  of  Economic  and  Financial  Policies,  and  Memorandum  of  Understanding  of  Specific 
Economic Policy Conditionality of 3 May, updated 2 July 2011. 
Not yet published in the Official Journal.  

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•  EUR 6 385 million (2.9 percent of GDP) in 2014.5,6 

The  Decision  clarifies  that  privatisation  proceeds  are  not  considered  in  the  effort  to  comply 
with ceilings. These ceilings for the general government deficit were kept unchanged in the 
recasted decision. 

3. 

BUDGETARY EXECUTION UNTIL SEPTEMBER 2011 

In the  context  of the economic adjustment programme, Greece committed to meet quarterly 
performance  criteria  on  the  general  government  cash  balance  and  the  state  primary 
expenditure and and indicative criterion on accumulation of arrears to suppliers.7 

The  performance  criteria  for  end-July  were met.  The  state  primary  spending  was  EUR  33.5 
billion against a criterion of EUR 34.7 billion. The general government primary cash balance 
was  -4.9  billion  against  a  criterion  on  EUR  -5.1  billion.  The  indicative  criterion  on  the 
accumulation of arrears has been failed, as arrears accumulated by end-July 2011 were EUR 
6.5 bilion.  

There  are  not  yet  complete  data  for  the  period  up  to  September.  However,  the  available 
information suggests that the target for the primary cash balance for the general government 
was missed by a small margin. The criterion is EUR -5.0 billion. The indicative target on non-
accumulation of domestic arrears is also likely to have been exceeded as there are indications 
that arrears owed by the state and public hospitals keep on increasing. The criterion on state 
primary expenditure (EUR 44.5 billion) has been met.  

Tables  1A  and  1B  contain  detailed  information  on  the  budget  implementation  in  January 
through July 2011, and also data on the state budget execution for September 2011. 

5 

6 

7 

The ratios to GDP are indicative. In the Council Decision, the ratios-to-GDP refer to the nominal GDP 
figures available in July 2011: 7.6, 6.5, 4.8 and 2.6 percent of GDP for 2011 to 2014, respectively.  
The Decision also requires that the annual increase in the general government consolidated gross debt 
does  not  exceed  EUR  17  365  million  in  2011;  EUR  15  016  million  in  2012;  EUR  11  599  million  in 
2013 and EUR 7 885 million in 2014.  
There are also performance criteria on privatisation receipts, guarantees granted by central government, 
central  government  debt  and  arrears  in  external  debt.  These  are  not  discussed  in  this  communication. 
See the above-mentioned Compliance Report. 

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Table 1A: Budget implementation 
(January-July 2011) 

cash basis 
(EUR million) 

Total revenue 

Revenue before refunds 

Tax refunds 

Capital revenue 

NATO expenses 

Total expenditure 

Primary expenditure 

Past-debts of hospitals 
Military payments and 
NATO 
Guarantees called (off 
general government) 

Interest 

Capital expenditure 

State budget balance 

Change in arrears 

State primary spending 

Local government balance 
(*) 

Social security balance (*) 

Other 

2010 

2011 

Jan - July 

% change 
Jan-July 

29 947 

28 020 

31 356 

29 940 

2 688 

1 276 

3 

3 113 

1 173 

20 

42 396 

43 588 

28 784 

30 173 

190 

228 

80 

434 

118 

25 

8 913 

10 218 

4 201 

2 620 

- 12 449 

-15 568 

 - 

84

-6.4% 

-4.5% 

15.8% 

-8.1% 

2.8% 

4.8% 

-68.8% 

14.6% 

-37.6% 

25.1% 

33 483 

33 454 

-0.1% 

 - 

 - 

 - 

622 

-101 

-24 

 - 

 - 

 - 

 - 

-15 155 

General government 
(modified) balance 
General government 
(modified) primary 
balance (**) 
 - 
Source: General Accounting Office, Ministry of Finance of Greece and own 
calculations. 
(*) On the basis of Bank of Greece’s banking statistics. 
(**) Excludes State-owned enterprises and most extra-budgetary funds. 

-4 937 

-  

 - 

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Table 1B: Budget implementation 
(January-September 2011) 

2010 

2011 

cash basis 
(EUR million) 

Total revenue 

Jan - September 

37 855 

36 856 

Revenue before refunds 

39 758 

38 898 

Tax refunds 

3 259 

3 942 

Capital revenue 

1 348 

1 877 

NATO expenses 

8 

23 

Total expenditure 

54 506 

56 020 

Primary expenditure 

36 757 

37 807 

Past-debts of hospitals 

Military payments and NATO 
Guarantees called (off general 
government) 

300 

255 

104 

434 

182 

32 

Interest 

11 652 

14 033 

% change 
Jan-Sept 

-2.6% 

-2.2% 

21.0% 

39.2% 

2.8% 

2.9% 

-69.2% 

20.4% 

Capital expenditure 

5 438 

3 532 

-35.0% 

State budget balance 

- 16 651 

- 19 164 

State primary spending  

42 854 

41 987 

15.1% 

-2.0% 

Source: General Accounting Office, Ministry of Finance of Greece, and own 
calculations 

4. 

PROSPECTS FOR 2011 AS A WHOLE AND 2012-14 

In  the  framework  of  the  Medium-Term  Fiscal  Strategy  (MTFS)  adopted  in  June,  the 
government  planned  additional  deficit-reducing  measures  of  almost  3%  of  GDP  in  2011  on 
top  of  the  measures  of  close  to  3%  of  GDP  already  included  in  the  budget  for  2011.  The 
additional measures became necessary as a result of projections showing that the 2011 deficit 
target could be missed by a large margin, due mainly to revenues falling significantly short of 
plans  but  also  some  expenditure  categories  overshooting  budgetary  ceiling.  While  in  June 
these  measures  were  considered  to  be  sufficient  to  ensure  that  the  2011  deficit  will  be  on 
target,  projections  by  the  Commission,  the  IMF  and  ECB  staff  in  the  context  of  the  fifth 
review mission of the economic adjustment programme revealed yet again a large gap of for 
the deficit in 2011. The projections also showed large gaps for 2012 through 2014.  

Several factors were behind this renewed opening of a gap. The contraction of the economy 
will be deeper than projected in June. For 2011, the Commission services' current estimate is 
5.5 percent of contraction of real GDP compared with 3.8% in the previous review. For 2012, 
the  economy  is  now  expected  to  contract  further  as  against  earlier  projetions  of  moderate 
positive growth. Moreover, some measures previously agreed within the framework of MTFS 

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have  not  been  implemented  or  delays  in  their  implementation  have  resulted  in  a  downward 
revision of expected yields for 2011 and 2012.  

Table 2 summarises th several measures adopted or announced by Greece to comply with the 
deficit  ceilings.  Table  3  quantifies  the  implementation  defficiencies  by  areas  for  2011  and 
2012, as a result of the monitoring carried out during the mission. 

Table 2: Deficit accounting: from the deficit in one year to the next 

EUR million

cumulative measures
2010-2014

% of GDP 
cumulative measures

2010-2014 

2009 deficit

nominal deficit drift in 2010 
change in interest expenditure 
measures in 2010 1/ 
impact on ratio of nominal GDP growth

2010 deficit

primary deficit drift in 2011 
change in interest expenditure 
measures in 2011 1/ 
impact on ratio of nominal GDP growth

2011 deficit

primary deficit drift in 2012 
change in interest expenditure 
measures in 2012 1/ 
impact on ratio of nominal GDP growth

2012 deficit 

nominal deficit drift in 2013 
change in interest expenditure 
measures in 2013 1/ 2/
impact on ratio of nominal GDP growth

2013 deficit 

nominal deficit drift in 2014 
change in interest expenditure 
measures in 2014 1/ 2/
impact on ratio of nominal GDP growth

2014 deficit 

36150

6149
266
18372
--

24193

12724
1997
19514
--

19400

6808
509
11801
--

14916

1045
509
5071
--

11399

1307
800
7121
--

6385

18372

37886

49687

54758

61879

1/ Including carry-overs. 
2/ Including measures which still require further specifications.

15.4

2.7
0.1
8.1
0.5

10.6

5.8
0.9
9.0
0.5

8.9

3.2
0.2
5.6
0.2

7.0

0.5
0.2
2.4
-0.1

5.3

0.6
0.4
3.2
-0.1

2.9

8.1 

16.8 

21.8 

23.3 

25.5 

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Table 3. Implementation monitoring: 
Effective yield of measures agreed in June 2011 

4th review (July 2011)

5th review (Oct. 2011)

Difference (*) 

Total measures 
% of GDP

Wage bill 

% of GDP

Operational expenses

% of GDP

Extra-budgetary funds 

% of GDP

State-owned enterprises 

% of GDP
Health care 
% of GDP

Pharmaceutical spending 

% of GDP
Social benefits 
% of GDP

Investment spending

% of GDP

Other expenditure 

% of GDP

Tax policy

% of GDP

2011

6744
3.0

770
0.3

190
0.1

540
0.2

0
0.0

60
0.0

250
0.1

1188
0.5

950
0.4

150
0.1

2646
1.2

2012

13641
6.0

1370
0.6

282
0.1

690
0.3

414
0.2

264
0.1

743
0.3

2286
1.0

504
0.2

505
0.2

6583
2.9

2011

5834
2.7

2012

11279
5.3

642
0.3

180
0.1

304
0.1

0
0.0

53
0.0

372
0.2

748
0.3

800
0.4

150
0.1

2584
1.2

960
0.5

262
0.1

396
0.2

414
0.2

267
0.1

601
0.3

1664
0.8

804
0.4

250
0.1

5661
2.7

2011

910
0.4

128
0.1
10 
0.0

236
0.1
0 
0.0
7 
0.0
-122 
-0.1

440
0.2

150
0.1
0 
0.0
62 
0.0

2012

2362
1.1

410
0.2

20
0.0

294
0.1

0
0.0

-3
0.0

142
0.1

622
0.3

-300
-0.1

255
0.1

922
0.4

(*) Ratios to GDP in this column are calculated on the basis of the latest GDP figures. 
Source: Commission services 

In view of these slippages and given the late moment of the year, the achievement of the fiscal 
target  for  2011  is  no  longer  realistic.  However,  the  government  is  committed  to  adopt 
measures which should keep the deficit for 2011 within a range of 0.7 and 1.5 percent of GDP 
above the target. For 2012, the fiscal slippages will be corrected to achieve the target.  

More  specifically,  with  the  aim  of  minimising  any  deficit  in  excess  of  the  deficit  ceiling  of 
EUR 17 065 million in 2011, and to reduce the 2012 deficit to below EUR 14 916 million, the 
Greek Government is committed to adopt and implement the following measures prior to the 
sixth disbursement: 

A reduction in tax exemptions, in particular the tax-free personal income thresholds, 

- 
with the aim of increasing revenue by at least EUR 2 831 million in 2012;  

A  permanent  levy  on  real  estate,  collected  through  the  electricity  invoices,  with  the 
- 
aim of collecting at least EUR 1 667 million in 2011, and increasing amounts in subsequent 
years; 

- 
An  immediate  implementation  of  the  revised  wage  grid  for  civil  servants,  which 
contribute to reduce expenditure by at least EUR 101 million in 2011, and with a carry over of 

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at least EUR 552 million for 2012, additional to savings provided in the MTFS (medium-term 
fiscal strategy through 2015, of June 2011). This reform should cover all general government 
employees,  except  those  covered  by  special  wage  regimes  (military  and  police,  judges  and 
political  personnel,  university  staff  and  doctors).  These  net  savings  take  into  account  the 
impact of this measure on income tax and social security collection, as well as bonuses to be 
paid to specific employee categories; 

A cut in main, and supplementary, pensions, as well as lump sums paid on retirement, 
- 
with the aim of saving at least EUR 219 million in 2011 with a carry over of EUR 446 million 
in 2012 additional to savings previously provided for in the MTFS; 

Spending  by  the  Green  Fund,  which  is  financed  by  fines  on  unauthorised 
- 
establishments and settlements of planning, is capped with the aim of saving EUR 360 million 
in 2012; 

Moreover, the Government also adopts and implement the following measures which were included in 
the MTFS: 

Ministerial decisions or circulars concerning the measures on excise on natural gas, heating oil 

- 
and vehicle taxes provided for in the MTFS 

Ministerial Decisions to uniformly regulate health benefits for also social security funds, and 

- 
increase the core and supplementary pension contributions for ETAA beneficiaries; 

- 

Legislation for the collection of the so-called 'solidarity surcharge' through withholding; 

Ministerial  Decisions  to  make  the  labour  reserve  effective,  extend  the  scheme  to  include  all 

- 
general government employees, and issue letters to employees to be transferred to the labour reserve; 

- 
Ministerial  decisions  that  initiate  closing,  merging  or  substantially  downsizing  entities  is 
adopted.  This  affects  KED,  ETA,  ODDY,  National  Youth  Institute,  EOMEX,  IGME,  OSK, 
DEPANOM, THEMIS, ETHYAGE and ERT; 

Ministerial  Decision  specifying  the  disability  criteria  consistent  with  achieving  the  MTFS 

- 
saving objectives; 

Adoption of the positive list for pharmaceuticals that establish prices charged to social security 

- 
funds. 

6. 

PROGRESS WITH STRUCTURAL REFORMS  

Progress  has  been  made  in  the  area  of  structural  fiscal  reforms,  though  in  some  cases  more 
slowly  than  planned.  Reforms  in  the  tax  administration  area  are  gaining  momentum  with 
several actions ongoing. Action taken so far by the government concerns mainly legislation to 
improve the efficiency of tax administration and controls, putting in place an effective project 
management and implementing an anti-evasion strategy to restore tax discipline and improve 
compliance.  

Budgetary  institution  reforms  are  progressing  with  the  reorganisation  of  the  General 
Accounting Office. Progress has also been made in ensuring a timely provision of fiscal data, 

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although  quality  and  scope  need  to  improve  further.  Fiscal  management  on  the  expenditure 
side of the budget also needs to improve, in particular with the commitments registry in each 
ministry  and  other-than-state  entities.  While  publication  of  data  on  arrears  is  now  an 
established feature of the fiscal statistics in Greece, improvements in the timeliness of data are 
necessary.  

7. 

PRIVATISATION 

Important  steps  have  been  made  in  implementing  the  privatisation  programme  with  the 
creation  of  a  professionally  managed  privatisation  fund.  However,  due  to  delays  in  the 
preparation  of  the  assets  for  privatisation,  and  to  some  extent  worse  market  conditions, 
revenues  in  2011  will  be  lower  than  expected.  The  government  remains  committed  to  the 
revenue target of EUR 35 billion by the end of 2014 and EUR 50 billion by end-2015.  

Sticking  to  the  fiscal  consolidation  and  privatisation  plans  will  contribute  to  bringing  the 
government debt-ratio-to-GDP to a sustainable path. Although Greece will have to persevere 
in fiscal austerity and the reduction in the debt ratio will extend for many years, the inflexion 
in  the  debt-to-GDP  ratio  should  contribute  to  improve  the  market  confidence  in  the  Greek 
economy. 

Table 4: Privatisation plan: transactions so far  

Assets 

Date of deal 

Sold 
stake  

Remaining 
stakes 
owned by 
the Greek 
Government 

Collected 

(EUR 
million) 

OTE 

July 2011 

10% 

4% 

392  

OPAP 1  

(license 
extension 
2020-30) 

OPAP 2  

(sale of new 
license for 
VLTs) 

October 2011 

- 

- 

0 

October 2011 

- 

- 

0 

To be collected 

(EUR million) 

-- 

375 

(by end-November) 

+ 

5  percent  on  gross  gaming 
the  extension 
revenue  during 
period (present value estimated at 
EUR 86 million). 

474 

(by end-November) 

+ 

86 

(by Q4-2013) 

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Table 5: Planned privatisation receipts 

By end of: 

Privatisation 
receipts 

(EUR million) 

2011 Q4

1 700 

2012 Q1

Q2

Q3

Q4

2013 Q1

Q2

Q3

Q4

2014

2015

5 000 

7 000 

9 000 

11 000 

15 000 

17 000 

18 000 

20 000 

35 000 

50 000 

Note: Reprivatisation of banks' shares 
that the state or the HFSF may acquire in 
the context of recapitalisations are not 
included in the planned privatisation 
receipts.  

8. 

CONCLUSION  

The government deficit (ESA95 basis) ceiling for 2011 established by the Council Decision 
will, most likely, be missed.  

For 2012, the government has elaborated a pre-budget aimed at sticking to the target set in the 
Council  decision  and  has  adopted  measures  which  would  ensure  a  further  reduction  to  the 
deficit in subsequent years.  

All  in  all,  despite  the  2011  fiscal  slippage,  Greece  is  taking  the  necessary  actions  to 
implement the required policies and to remain on track, with a view of putting an end to the 
excessive deficit by 2014, as required by the Council Decision. 

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ANNEX I:  MEASURES REQUIRED BY THE COUNCIL DECISION, TO BE ADOPTED BY END-SEPTEMBER 2011. 

Measures (as required by Article 2(5) of the Council Decision)  

State of progress 

“Greece shall adopt the following measures by the end of July 2011: 

(a) introduces to Parliament a streamlined and unified public sector wage grid to apply to the state sector, 
local  authorities  and  other  agencies,  phased  in  over  3  years,  with  remunerations  reflecting  productivity 
and tasks; 

Observed  with  delay.  The  bill  on  the  unified  wage  grid  was 
tabled in Parliament at the beginning of October. 

(b) a medium-term staffing plan for the period up to 2015 in line with the rule of 1 recruitment for 5 exits 
(1 for 10 in 2011). The plan shall include tighter rules for temporary staff, cancellation of vacant job post 
and reallocation of qualified staff to priority areas and take into account the extension of working hours in 
the public sector; 

(c) a detailed action plan with a timeline to complete and implement the simplified remuneration system, 
in line with private sector wages, achieving a reduction in the total wage bill. This plan shall be based on 
the  results  of  the  report  published  by  the  Ministry  of  Finance  and  the  Single  Payment  Authority.  The 
legislation  for a  simplified  remuneration  system  shall  be  phased  in  over  3  years. Wages  of  state-owned 
enterprises employees shall be in line with the new wage grid for the public sector. 

Not observed. 

The  rule  of  1  recruitment  for  5  exits  (1  for  10  in  2011)  is  the 
official  government  policy  and  it  was  enshrined  by  law. 
However,  the  staffing  plans  that  should  contribute  to  the 
preparation of the reallocation of staff have not been prepared. 

Given  the  number  of  exits  in  2010  (53 336),  the  1-for-10  rule 
would  allow  5 333 recruitments  during  the whole  year  of 2011. 
However,  in  the  first  and  second  quarters  2011,  the  number  of 
hidings is estimated to have been 10 862. 

Partially observed, with some delay. 

The  bill  implementing  the  simplified  remuneration  scheme  has 
been  tabled  in  Parliament  at  the  beginning  of  October  and  is 
expected to be adopted shortly. 

(d) a reinforcement of the labour inspectorate, which shall be fully resourced with qualified staff and have 
quantitative targets on the number of controls to be carried out; 

Not observed. 

The economic pilot study has not yet been prepared. 

(e) an act revising the main parameters of the pension system in order to limit the increase in public sector 
spending on pensions over the period 2009-2060 to less than 2.5 % of GDP, if long-term projections show 
that  the  projected  increase  in  public  pension  expenditure  would  exceed  this  amount.  The  National 
Actuarial Authority (NAA) shall continue the submission of long-term projections of pension expenditure 
up to 2060 under the adopted reform. The projections shall encompass the main supplementary (auxiliary) 
schemes (ETEAM, TEADY, MTPY), based on comprehensive data collected and elaborated by the NAA; 

Ongoing. 

The  NAA  is  producing  long-term  projections  for  the  main 
supplementary  pensions.  The  actuarial 
for  all 
supplementary  pensions  and  Pension  projections  for  main  and 
supplementary pension funds are to be submitted to the AWG by 
October 25 2011 to be peer reviewed in November. 

studies 

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(f) a revision of the list of heavy and arduous professions to reduce its coverage to no more than 10 % of 
employment;  the  new  list  of  difficult  and  hazardous  occupations  shall  apply  with  effect  from  1  August 
2011 to all current and future employees; 

(g) legislation to establish the Single Public Procurement Authority (SPPA) with the mandate, objectives, 
competences, powers and schedule for entry into force, in line with the Action Plan; 

(h)  additional  measures  to  promote  the  use  of  generic  medicines  through:  compulsory  e-prescription  by 
active  substance  and of  less expensive generics  when available;  associating  a  lower cost-sharing  rate  to 
generic medicines that have a significantly lower price than the reference price (lower than 60 percent of 
the reference price) on the basis of the experience of other EU Member States; setting the maximum price 
of generics to 60 percent of the branded medicine with similar active substance; 

Ongoing with some delay.  

A Committee has analysed the criteria by other EU countries to 
classify  professions  as  hazardous  and  has  reviewed  the  current 
list in Greece proposing the removal of various professions from 
the  list.  The  first  part  of  the  new  list  is  to  be  published  by 
October  2011.  Authorities  indicated  that  the  list  of  hazardous 
professions would correspond to less than 9% of employment. 

Observed.  

Law  4013/2011  setting  up  the  Central  Public  Procurement 
Authority  was  adopted  by  Parliament  on  6  September  and 
published in the Official Journal of the Hellenic Republic n° 204 
on 15/9/2011.  

Not  yet  done  although  generic  prices  are  now  at  63%  of  the 
originator drug and a new policy sets the price of originator off 
patent drugs to 75% of the patent price.  

(i) publication of an inventory of state-owned assets, including stakes in listed and non-listed enterprises 
and commercially viable real estate and land; a General Secretariat of Real Estate Development shall be 
established with the aims of improving management of real estate assets, clearing them of encumbrances 
and preparing them for privatisation; 

An  inventory  of  state-owned  assets  is  being  compiled.  The 
secretariat has been legally established (Law 3965/2011) but no 
terms of reference have been sent on the operational role of this 
new body. Its exact role still needs fine-tuning. 

Partially observed. 

(j)  the  medium-term  fiscal  strategy  (hereinafter  MTFS)  through  2015  as  described  in  Annex  I  to  this 
Decision  and  respective  implementing  bills.  The  MTFS  shall  elaborate  on  the  permanent  fiscal 
consolidation  measures  which  ensure  that  the  deficit  ceiling  for  2011-15  as  established  by  the  Council 
Decision are not exceeded, and that the debt-to-GDP ratio is put on a sustainable downward path; 

Partially observed. 

(k) privatisation of assets worth at least EUR 390 million; adoption of a privatisation programme with the 
aim of collecting at least EUR 15 billion by end-2012, EUR 22 billion by end-2013, EUR 35 billion by 
end-2014 and at least EUR 50 billion by end-2015; proceeds from the privatisation of assets (real estate, 

Not observed. 

The target for the collection of privatisation proceeds until end-
July  has  been  achieved  through  the  sale  of  10  percent  of  the 

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concessions and financial assets) shall be used to redeem debt and will not reduce the fiscal consolidation 
efforts to comply with the deficit ceilings in Article 1(2); 

share capital of OTE, the telecommunications company. 

However,  the  performance  criterion  for  end-September  has  not 
been  met,  and  projections  suggest  that  the  end-December  2011 
target (EUR 5 billion) will not be met either. 

Observed. 

(l) establishment of a privatisation fund with sound governance to accelerate the privatisation process and 
guarantee  its  irreversibility  and  professional  management.  The  Fund  obtains  the  legal  ownership  of  the 
assets  to  privatise.  The  Fund  cannot  pledge  its  assets  in  a  way  that  would  frustrate  its  purpose,  i.e. 
privatisation of assets; 

The  Hellenic  Republic  Asset  Development  Fund  (HRADF)  has 
been established by Law 3986/2011 and has been operational for 
almost two months. 

(m) tables legislation to close, merge and downsize non-viable entities; 

Partially observed.  

The Government has effectively adopted legislation that will lead 
to the closure, merger or downsizing of these entities.  

Nonetheless,  the  savings  that  are  expected  from  this  reform  are 
less than projected in the MTFS. 

(n) measures to strengthen expenditure control: a decision specifying the qualification and responsibilities 
of  accounting  officers  to  be  appointed  in  all  line  ministries  with  the  responsibility  to  ensure  sound 
financial controls;. 

Observed. 

(o)  new  criteria  and  terms  for  the  conclusions  of  contracts  by  social  security  funds  with  all  healthcare 
providers, with the aim of achieving the targeted reduction in spending; initiates joint purchase of medical 
services and goods to achieve substantial expenditure reduction of at least 25 percent compared to 2010 
through price-volume agreements; 

Ongoing. 

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(p) publication of binding prescription guidelines for physicians on the basis of 
international prescription guidelines to ensure a cost-effective use of medicines; 
publication and continuous update of the positive list of reimbursed medicines; 

Ongoing with some delay.  

A  large  number  of  prescription  guidelines  have  been  developed 
and  await  final  agreement  by  the  National  Health  Council. 
However, they have not been published and they are not binding. 
This could jeopardise their effectiveness. 

After  some  delay  and  following  several  rounds  of  consultation 
and changes, the criteria for the positive price list and reference 
price system for reimbursement has been published in September 
2011.  The 
list 
implementation are due to follow. 

reference  price 

and  positive 

system 

(q) preparation of a plan for the reorganisation and restructuring of hospitals for the short 
and medium term with a view to reducing existing inefficiencies, utilising economies 
of scale and scope, and improving quality of care for patients. The aim is to reduce 
hospital costs by at least 10 percent in 2011 and by an additional 5 percent in 2012 in 
addition to the previous year. 

Ongoing.  

Joint management of hospitals has been introduced reducing the 
number of hospital boards down to 81. Joint management is the 
first step in hospital restructuring and reorganisation. Authorities 
need  now  to  start  concentrating  and  specialising  NHS  hospitals 
and  departments, 
including  emergency  departments  and 
reviewing  and  ensuring  mobility  of  staff  in  order  to  produce 
more  substantial  savings.  This  has  only  started  and  needs  to  be 
fully  implemented  in  the  coming  year,  possibly  using  a  plan 
proposed by a dedicated task force. 

Measures (as required by Article 2(6) of the Council Decision)  

State of progress 

“Greece shall adopt the following measures by the end of September 2011: 

(a) a budget for 2012 in line with the MTFS and the objective of respecting the deficit ceilings established 
in Article 1(2); 

Observed [since they submitted a draft budget] 

(b) a mitigation of tax obstacles to mergers and acquisitions; 

Not observed.  

In  the  October  2011  MoU  this  requirement  is  subject  to  the 

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(c) a simplification of the custom clearing process for exports and imports; 

(d) a further increase in the absorption rates of structural and cohesion funds; 

(e)  the  full  implementation  of  the  Better  Regulation  agenda  with  a  view  to  reducing  administrative 
burdens by 20 % (compared with 2008); 

(f) legislation to close, merge and downsize large non-viable entities; 

quantification of its fiscal implications. 

In progress.  

The  government  has  passed  a  Ministerial  Decision  for  the 
(National  Gazette 
simplification  of  exports  procedures 
1868/B/24-08-2011). In addition, as of the first week of October 
2011, a Ministerial Decision on the terms and conditions for the 
implementation  of  simplified  procedures  for 
imports  was 
pending for publication. 

Partially observed. 

The semi annual target of submitting 5 major project applications 
was  met.  However,  the  semi-annual  target  in  the  absorption  of 
EU  structural  and  cohesion  funds  was  missed  by  EUR  478 
million.  Nevertheless,  it  is  expected  that  the  annual  absorption 
target of EUR 3.35 billion could still be reached, partly aided by 
the increase in the co-financing rate. Information on expenditure 
for  non-targeted  de  minimis  state  aid  measures  was  also 
provided.  The  payment  claims  submitted  to  the  EU  structural 
funds in the first half of 2011 were below target. 

Observed.  

As  of  the  first  week  of  October  2011,  the  draft  law  was 
introduced  in  Parliament.  The  draft  law  assessed  by  the 
Commission  services  does  not  include  recast  of  legislation  as  a 
better  regulation  tool,  nor  does  it  provide  for  the  publication  of 
an annual report on better regulation. On impact assessments, the 
draft  law  does  not  provide  for  an  evaluation  of  the  impact 
assessment  by  an  independent  authority.  Otherwise,  the  draft  is 
broadly in compliance with the MoU requirements.  

Partially observed.  

Government  has  effectively adopted  legislation  that  will  lead  to 
the closure, merger or downsizing of these entities.  

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(g)  measures  enabling  a  reduction  in  procurement  and  third  party  costs  in  state-owned  enterprises, 
updating  tariffs,  and  creating  new  business  lines,  and  reduce  personnel  costs  by  completing  and 
implementing an employment retrenchment plan. Excess staff that cannot be removed by the hiring rule of 
1 recruitment for 5 exits (1 for 10 in 2011) shall be dealt with through non-voluntary redundancies and 
furlough (labour reserve). This rule is without sectoral exceptions; it shall also apply to staff transferred 
from  public  enterprises  to  other  government  entities  after  screening  of  professional  qualifications  by 
ASEP under its regular evaluation criteria. Staff in the labour reserve shall be paid at 60 percent of their 
wage for not more than 12 months, after which they shall be dismissed. 

(h)  a  legal  framework  enabling  fast  assignment  of  land  use  and  accelerates  state  land  ownership 
registration. 

(i) an act enabling the promotion of investment in the tourism sector (tourist resorts and secondary tourist 
housing), with a view to, together with the bill on land use, allow for accelerating the privatisation process 
of land plots managed by the Greek Tourist Real Estate Agency (ETA). 

(j) finalisation of the functional review of existing social programmes; assessment by the government of 
the results of the second and final phase of the independent functional review of central administration; 
legislation  and  measures  to  implement  the  operational  recommendations  of  the  first  phase  of  the 
functional  review  of  public  administration  at  central  level  and  of  the  full  review  of  existing  social 
programmes; 

(k)  an  in-depth  revision  of  the  functioning  of  secondary/supplementary  public  pension  funds,  including 
welfare  funds  and  lump-sum  schemes.  The  aim  of  the  revision  is  to  stabilise  pension  expenditure, 
guarantee the budgetary neutrality of these schemes, and ensure medium- and long-term sustainability of 
the system. The revision shall achieve: a further reduction in the number of existing funds; the elimination 
of  imbalances  in  those  funds  with  deficits;  the  stabilisation  of  the  current  spending  at  sustainable  level, 
through  appropriate  adjustments  to  be  made  from  1  January  2012;  the  long-term  sustainability  of 
secondary schemes through a strict link between contributions and benefits. 

(l) identification of the schemes for which lump sums paid on retirement are out of line with contributions 
paid with the aim of adjusting payment by the end of December 2011. 

However, the savings that are expected from this reform are less 
than projected in the MTFS. 

Ongoing  

The  law  that  establishes  the  labour  reserve  has  been  adopted  in 
Parliament. However, so far, no public entity has released staff to 
the labour reserve. 

Ongoing. 

Observed. 

The act was included in the Second Implementation Bill, adopted 
in August 2011. 

Delayed. 

The report prepared by the OECD is available. The assessment of 
the results is ongoing, through the preparation of an action plan. 

Ongoing with some delay. 

The  government  is  waiting  for  the  completion  of  the  actuarial 
studies  for  the  supplementary  pension  funds  to  start  the 
legislative  process  of 
reforming  supplementary  pensions 
according to the MoU. The legislative process is to be finalised 
by the end of the year and new rules should be in place from 1st 
January2012.  In  the  meantime,  the  government  is  introducing 
cuts in the main, auxiliary and lump sum pensions, 

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(m)  Further  measures  to  extend  in  a  cost-effective  way  the  e-prescribing  of  medicines,  diagnostics  and 
doctors'  referrals  to  all  social  security  funds,  health  centres  and  hospitals.  In  compliance  with  EU 
procurement  rules,  the  government  shall  conduct  the  necessary  tendering  procedures  to  implement  a 
comprehensive and uniform health care information system (e-health system). 

Ongoing. 

Some  e-health  project  proposals  have  been  approved  by  the 
Digital  Convergence  Programme  to  be  launched  in  the  coming 
months. Next review will verify if these have been launched. 

(n) further measures to ensure that at least 30 percent of the volume of medicines used by public hospitals 
is composed of generics with a price below that of similar branded products and off-patent medicines, in 
particular  by  making  it  compulsory  that  all  public  hospitals  procure  pharmaceutical  products  by  active 
substance. 

Ongoing. 

Generic use in hospitals is increasing and constitutes 17% of the 
whole expenditure on pharmaceuticals in hospitals. There is still 
a  very  large  variation  across  hospitals  (between  less  than  10% 
and  more  than  60%).  The  government  has  launched  the  first  e-
tender  for  drugs  by  active  substance  and  which  can  lead  to 
potential large savings and increased use of generics in hospitals 

(o)  decisions  to  provide  for  the  institution and  establishment  of  positions  for  the  SPPA's  (Single  Public 
Procurement Authority) personnel, as well as for the organization of human resources and services of the 
Authority in accordance with the provisions of the law on the SPPA; to appoint the members of the SPPA. 

Ongoing.  

The  Greek  Government  has  communicated  that  drafts  of  these 
Ministerial Decisions should be ready by end-October 2011. 

(p) Publication of monthly data on staff movements (entries, exits, transfers among entities) of the several 
government departments; 

Partially observed. 

Quarterly data on staff movements are available. 

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