COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Follow-up to the Council Decision 2011/734/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 (March 2012)
Date: 2012-03-09
Institutions: European Commission
Subjects: Greece, budget deficit, budgetary control, debt reduction, financial aid, gross domestic product, public debt, structural adjustment

EUROPEAN COMMISSION 

Brussels, 9.3.2012  
COM(2012) 117 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Follow-up to the Council Decision 2011/734/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  

(March 2012) 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Follow-up to the Council Decision 2011/734/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  

(March 2012) 

1. 

INTRODUCTION 

This quarterly Communication assesses the measures implemented and planned by Greece to 
comply  with  Council  Decision  2011/734/EU  of  12  July  20111.  The  action  taken  until  end-
September 2011 was assessed in the Communication dated 26 October 20112. Together with 
the  Commission  staff's  Compliance  Report,  prepared  in  liaison  with  the  ECB3,  the 
Communication  also  contributes  to  the  assessment  of  compliance  with  the  MEFP  and  the 
MoU4,  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  the  Commission 
services together with IMF and ECB staff on 18 January-10 February 2012 in the context of 
the  economic  adjustment  programme  and  the  quarterly  report  transmitted  by  the  Greek 
Ministry of Finance on 2 March 2012.  

2. 

THE COUNCIL DECISION OF 12 JULY 2011 

On  12  July  2011,  the  Council  adopted  a  Decision,  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 Decision5, 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  (7.9  percent  of  GDP  on  the  basis  of  the  currently  available  GDP 

estimates) in 2011; 

•  EUR  14 916  million  (7.3  percent  of  GDP,  on  the  basis  of  the  latest  GDP  forecasts)  in 

2012; 

1 
2 
3 

4 

5 

OJ L 296, 15.11.2011, p. 38.  
COM(2011) 705 final. 
‘The  Economic  Adjustment  Programme  for  Greece  –  March  2012,’  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 31 October 2011. 
Council Decision 2010/320/EU (OJ L 145, 11.6.2010). 

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•  EUR 11 399 million (5.6 percent of GDP) in 2013 and 

•  EUR 6 385 million (3.1 percent of GDP) in 2014.6,7 
The  Decision  was  then  amended  on  8  November  20118.  However,  the  aforementioned 
nominal ceilings for the general government deficit were kept unchanged.  

3. 

BUDGETARY EXECUTION UNTIL DECEMBER 2011 

In the  context  of the economic adjustment programme, Greece committed to meet quarterly 
performance criteria on the state primary expenditure, the general government cash balance, 
the stock of central government debt and on the privatisation receipts, as well as an indicative 
criterion on the accumulation of arrears to suppliers9.  

The performance by end-September 2011 was mixed. The criteria for state primary spending 
(actual data: EUR 42.0 billion; criterion: EUR 44.5 billion), central government debt (actual 
data: 360.4 EUR billion; criterion: EUR 394.0 billion) were met. However, the target for the 
primary  balance  of  the  general  government  was  missed  by  a  small  margin  (actual  data: 
EUR -5.2  billion;  criterion:  EUR  -5.0  billion),  as  the  collection  of  taxes  and  social 
contributions was below plans. The target for privatisation receipts was missed (actual data: 
EUR  0.39  billion;  criterion:  EUR  1.7  billion).  The  indicative  criterion  on  the  non-
accumulation  of  arrears  was  failed,  as  accumulated  arrears  from  1  January  2011  to  end-
September 2011 were EUR 1.1 billion.  

The available data for end-December 2011 show that the targets for the primary cash balance 
for the general government (actual data: EUR -4.8 billion; criterion: EUR -5.1 billion), state 
budget  primary  spending  (actual  data:  EUR  58.9  billion;  criterion:  EUR  60.8  billion)  and 
stock  of  central  government  debt  (actual  data:  EUR  378.1  billion;  criterion:  EUR 394.0 
billion)  were  met.  Despite  significant  headwinds  from  a  sharper-than-expected  economic 
contraction,  and  political  and  social  instability,  the  targets  were  achieved  by  cutbacks  in 
capital  spending  and  other  discretionary  expenditures,  which  more  than  offset  shortfalls  in 
taxes  and  social  contributions  and  overruns  in  pharmaceutical  spending.  Receipts  from 
structural funds, including those related to the increase in the cofinancing rate from 75 to 85 
percent and the additional payment facility of 10 percent10 also contributed to keep the cash 
balance within its ceiling, however at the expense of a standstill in the government investment 
activity. 

6 

7 

8 
9 

10 

The ratios to GDP are indicative. In the Council Decision of 12 July 2011, 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.  
Council Decision 2011/791/EU (OJ L 320, 11.6.2010, p. 8). 
There are also performance  criteria on 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. 
Regulation (EC) No 1311/2011 of the European Parliament and of the Council of 11 December 2011 
amending the Council Regulation (EC) No 1083/2006 as regards certain provisions relating to financial 
management in certain Member States experiencing or threatened with serious difficulties with respect 
to their financial stability (OJ L 337, 20.12.2011, p. 5).  

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The revised privatisation target for end-2011 (actual data: EUR 1.6 billion; criterion: EUR 1.7 
billion)  was  missed  but  by  a  smaller  margin  than  in  September,  as  the  gaming  and  mobile 
telephone  licence  extensions  went  ahead.  The  stock  of  domestic  arrears  remained  very  high 
(arrears accumulated from January 2011 to December 2011: EUR 220 million, with an overall 
stock of EUR 5.6 billion by end-year), but the Government still managed to reduce arrears by 
EUR 900 million in the last quarter of 2011. 

The  2011  general  government  deficit,  compiled  on  an  ESA  basis,  is  currently  estimated  at 
EUR  20.2  billion  (9.4  percent  of  GDP).  This  exceeds  the  ceiling  of  EUR  17.1  billion  (7.9 
percent  of  GDP)  established  in  the  Council  Decision,  as  already  anticipated  in  the  previous 
Communication.  The  2011  deficit  estimate  is  now  only  slightly  above  previous  projections, 
despite the significant deterioration in the macroeconomic environment. 

Table  1  contains  detailed  information  on  the  budget  implementation  in  January-December 
2011 for both the state, and the general government, on a cash basis, and compared with the 
projections by the Commission services of June and October 2011. The table shows that the 
compression in ordinary state expenditure in the last months more than offset the shortfall in 
revenue. However, the social security accounts recorded a large deviation compared to plans. 

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Table 1: Budget implementation in January-September and January-December 2011 
(cash basis) 

September

December

EC proj. 
June. 2011

Actual

Difference

EC proj. 
Oct. 2011

Actual

Difference

STATE REVENUE TOTAL (i+..+v-vi+vii)

37,153

36,858

STATE REVENUE TOTAL (i+..+v-vi) excl. Capital revenues
          Recuring revenues(i+…+iv)
                 Direct taxes (i)
                 Indirect taxes (ii)
                 Drawings From the EU (iii)
                 Other Non - Tax Revenue (iv)
          Non Recurring Revenue (v)
          Tax refunds (vi)
          Capital revenue (vii)
          Additional measure: collective implementation risk

34,996
37,609
14,315
20,614
135
2,544
1,328
3,365
2,156
0

34,981
37,596
14,313
20,617
137
2,529
1,327
3,942
1,877
0

STATE EXPENDITURE TOTAL (i+…+ix)

56,275

55,805

STATE EXPENDITURE TOTAL (i+…+ix) excl. capital expenditure
          Wages & pensions (i)
          Grants to SSF & Social Protection (ii)
          Operational and Other Expenditures (iii)
          Earmarked revenue (OTA) (iv)
          Reserve(v)
          Payments in exchange of claims of DEH Fund (vi)
          Subsidies to hospitals for settlement of part of past debt (vii)
          Interest Payments (viii)
          Capital expenditure (ix)

52,786
16,237
13,285
4,570
3,755
68
487
434
13,950
3,489

52,273
16,269
13,076
4,403
3,517
0
542
434
14,032
3,532

-295

-15
-13
-2
3
2
-15
-1
577
-279
0

-470

-513
32
-209
-167
-238
-68
55
0
82
43

54,218

53,761

50,918
54,104
20,627
29,150
186
4,140
1,926
4,124
3,300
-412

49,991
53,214
20,156
28,587
273
4,198
1,920
5,143
3,770
0

75,707

74,919

68,157
21,531
16,684
7,302
5,057
270
600
450
16,263
7,550

68,311
21,816
17,114
6,998
5,000
0
600
435
16,348
6,608

-457

-927
-890
-471
-563
87
58
-6
1,019
470
412

-788

154
285
430
-304
-57
-270
0
-15
85
-942

STATE BUDGET BALANCE

-19,122

-18,947

175

-21,489

-21,158

331

Military spending and NATO

LG balances

SSF balances

EBF balances - ETERPS

SOE balances

Change in total arrears

170

359

246

513

-373

448

182

435

-516

581

-304

236

12

76

-762

68

69

-212

1,140

-35

767

584

-497

-700

375

284

-765

319

-1,014

-1,781

1,031

-263

-517

447

234

183

GENERAL GOVERNMENT CASH PRIMARY BALANCE

-5,000

-5,169

-169

-5,100

-4,821

279

GENERAL GOVERNMENT CASH PRIMARY SPENDING

44,500

42,045

-2,455

60,800

58,863

-1,937

4. 

PROSPECTS FOR 2012 AND 2013-2014  

The fiscal outlook for 2012 has worsened considerably since the publication of the previous 
Communication.  The  fiscal  deterioration  results  from  the  weaker  starting  point  (the  2011 
accounts), and a larger economic setback than expected: real GDP in 2012 is now projected to 
contract  by  4.7  percent  instead  of  2.8  percent,  as  previously  forecast.  There  were  also 
continued slippages in the implementation of measures in 2011 with implications for the 2012 
accounts. Moreover, the implementation of an ambitious package of labour market  reforms, 
including  cuts  in  private-sector  minimum  wages  (for  more  details,  see  the  Compliance 
Report) with the objective of restoring competitiveness, has a negative short-term impact on 
domestic demand and on fiscal accounts for 2012. At the same time, interest expenditure in 
2012 will be significantly revised downwards, thanks to the debt exchange operation carried 
out  by  Greece,  in  line  with  the  euro-area  summit  of  26  October  2011  and  the  Eurogroup 
statement of 21 February 2012. 

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Given this, the Commission is recommending the Council to amend the target for the Greek 
fiscal accounts for the period 2012-14, which should be defined on the basis of the primary 
balance  in  nominal  terms.  According  to  the  Commission  Recommendation  for  a  Council 
Decision amending Decision 2011/734/EU (COM(2012) 116), Greece should reach a primary 
deficit  not  exceeding  EUR  2  037  million  in  2012 (1.0 percent of GDP). Greece would then 
aim at reaching primary surplus of EUR 3 652 million (1.8 percent of GDP) and EUR 9 356 
million  (4.5  percent  of  GDP)  in  2013  and  2014,  respectively.  When  expressed  as  overall 
government deficit, the above targets are: EUR 14 811 million (7.3% of GDP) in 2012, EUR 
9 462 million (4.7% of GDP) in 2013 and EUR 4 499 million (2.2% of GDP) in 2014. 

The new target for the 2014 primary surplus is consistent with the correction of the excessive 
deficit in 2014, as required by the Council Decision. 

The Commission services, in liaison with the ECB and IMF staff, have estimated that without 
additional  measures,  the  2012  primary  deficit  would  be  2.5  percent  of  GDP  in  2012, 
compared with a small primary surplus expected at the time the previous Comunication was 
published. Therefore to be on track to reach the revised target Greece had to prepare measures 
amounting  to  EUR  3  billion  (or  1.5  percent  of  GDP).  The  measures  announced  by  Greece 
were as follows: 

•  Reduction  in  pharmaceutical  expenditure  by  at  least  EUR  1 076  million,  by  reducing 
medicine  prices  (generics,  off-patent  and  branded  medicines),  optimising  co-payments, 
reducing  pharmacists'  and  wholesalers'  trade  margins,  application  of  compulsory  e-
prescription by active substance and protocols, the update of the positive list of medicines 
and the implementation of a mechanism of quarterly rebates (automatic claw-back) to be 
paid by the pharmaceutical industry. 

•  Reduction in overtime pay for doctors in hospitals by at least EUR 50 million. 

•  Reduction  in  the  procurement  of  military  material  by  EUR  300  million  (cash  and 

deliveries). 

•  Reduction  in  the  central  government's  operational  expenditure,  and  election-related 
spending, by at least EUR 370 million (compared to the 2012 budget), of which at least 
EUR 100 million in military-related operational expenditure, and at least EUR 70 million 
in electoral spending. 

•  Reduction in operational expenditure by local governments, with the aim of saving at least 

EUR 50 million. 

•  Frontloading  cuts  in  subsidies  to  residents  in  remote  areas,  and  cuts  in  grants  to  several 
entities supervised by the several ministries, with the aim of reducing expenditure in 2012 
by at least EUR 190 million. 

•  Reduction  in  the  public  investment  budget  (PIB)  by  EUR  400  million:  this  cut  will  be 
implemented  through  cuts  in  subsidies  to  private  investments  and  nationally-financed 
investment projects. The reduction in the PIB budget will not have any impact on projects 
that  are  co-financed  by  structural  funds  (uncompleted  project  financed  by  the  2000-06 
operational  programmes,  cohesion  fund  (2000-06)  projects,  2007-13  operational 
programmes, and non-eligible expenditure related to the above projects including TEN-T 
projects). 

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•  Changes in supplementary pension funds and pension funds with high average pensions or 
which  receive  high  subsidies  from  the  budget  and  cuts  in  other  high  pensions,  with  the 
aim of saving at least EUR 450 million (net after taking into account the impact on taxes 
and social contributions).  

•  Cuts  in  family  allowances  for  high-income  households,  with  the  aim  of  saving  EUR  43 

million. 

•  An average reduction by 12 percent in the so-called 'special wages' of the public sector, to 
which the new wage grid does not apply. This will apply after 1 June 2012 and it should 
deliver savings of at least EUR 205 million (net after considering the impact on taxes and 
social contributions). 

None of these measures is of a tax nature. They are all on the spending side of the budget: this 
enhances the growth-friendly nature of these measures and their design minimises any social 
impact. If these measures are fully implemented, Greece is, under the current macroeconomic 
projection, on track to respect the target of a primary deficit of 1.0 percent of GDP in 2012. 
However,  the  risk  for  implementation  of  envisaged  measures  and  further  deterioration  in 
economic conditions is high. Moreover, the available projections for 2013 and 2014 reveal a 
large  fiscal  gap  vis-à-vis  the  revised  targets  for  these  years  (see  Table  2).  Therefore, 
substantial additional fiscal measures will have to be announced and adopted by Greece in the 
coming  months,  in  particular  when  Greece  updates  its  medium-term  budget  (medium-term 
fiscal strategy or MTFS) in May 2012. In order  to prepare  these measures, the Government 
has  initiated  a  review  of  public  spending  programmes.  The  review  is  drawing  on  external 
technical assistance and is focusing on pensions and social transfers (while preserving basic 
social  protection;  defence  spending  without  prejudice  to  the  national  defence  capacity;  and 
restructuring of central and local administrations. A further rationalization of pharmaceutical 
spending  and  operational  spending  of  hospitals,  and  welfare  cash  benefits  will  also  be 
specified in the coming months. 

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

EUR million

% of GDP

2009 deficit (outcome)

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

2010 deficit (outcome)

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

2011 deficit (estimate)

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

2012 deficit (projection)

primary deficit drift in 2013
change in interest expenditure
measures identified for 2013 1/
measures to be identified in 2013
impact on ratio of nominal GDP growth

2013 deficit (target)

primary deficit drift in 2014
change in interest expenditure
measures identified for 2014 1/
measures to be identified for 2014
impact on ratio of nominal GDP growth

2014 deficit (target)

36624

6274
266
19074
--

24090

10579
2206
16680
--

20196

9804
-2005
13191
--

14804

-4077
319
1584
7157
--

9462

-2640
741
3065
4238
--

4499

15.6

2.8
0.1
8.4
0.5

10.6

4.9
1.0
7.7
0.6

9.4

4.8
-1.0
6.5
0.5

7.3

-2.0
0.2
0.8
3.5
3.6

4.7

-1.3
0.4
1.5
2.0
1.9

2.2

Note:  Deficit in year t = Deficit in year t-1 plus  primary deficit drift plus  change in 
interest expenditure minus  measures (and for the GDP ratios: plus  impact on debt 
ratio of nominal GDP growth). 

1/ Including carry-overs.

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Table 3: Macro and fiscal indicators 2011-14 (in EUR billions, unless otherwise noted)

Real GDP growth (in %)

ESA 95 general government primary balance 
(projections at unchanged policies)

% of GDP

General government primary balance target

% of GDP

ESA 95 general government balance  (projections 
at unchanged policies)

% of GDP

ESA 95 general government balance (consistent 
with primary targets)

% of GDP

2011

-6.8

-5.3
-2.5

…
…

-20.1
-9.3

…
…

2012

-4.7

-2.0
-1.0

-2.0
-1.0

-14.8
-7.3

-14.8
-7.3

2013

0.0

-3.7
-1.8

3.7
1.8

2014

2.5

-2.3
-1.1

9.4
4.5

-16.9
-8.3

-16.2
-7.8

-9.5
-4.7

-4.5
-2.2

5. 

TAX ADMINISTRATION AND EXPENDITURE CONTROL  

Other  than  the  measures  to  increase  tax  rates,  widen  tax  bases,  or  reducing  expenditure, 
progress in fiscal consolidation requires improvements in tax administration and fight against 
tax evasion, as well as in expenditure control. Although there has been some progress in these 
areas, in most cases this has been much slower than planned. 

Since  the  beginning  of  the  programme  in  2010,  reforms  of  tax  administration  have  focused 
mainly on improving legislation to enhance the efficiency of tax administration and controls; 
putting  in  place  an  effective  project  management;  and  designing  an  anti-evasion  strategy  to 
restore  tax  discipline  and  improve  compliance.  The  focus  has  now  shifted  towards 
implementation: the Government is in the process of hiring new auditors. Improvements are 
also  expected  in  the  quantity  and  the  quality  of  tax  audits.  The  strengthening  of  incentive 
structures  in  the  tax  administration  and  of  headquarter  functions  are  also  required.  The 
government  has  also  initiated  the  process  of  merging  local  tax  offices,  which  should  be 
completed by end-2012.  

Reforms to strengthen public expenditure management are also in place. Timely provision of 
fiscal  data  has  been  improved  with  the  application  of  e-portals  reporting  by  line  ministries, 
local governments and legal entities. However, progress is still needed to extend the system to 
social  security  funds  and  to  the  public  investment  budget.  Expenditure  control  has  also 
improved  with  the  adoption  of  commitment  registries  in  ministries  and  other  entities. 
However,  the  commitment  registers  are  yet  to  be  effective  in  controlling  overcommitments 
and  arrears  for  the  ordinary  budget  and  the  system  is  yet  to  be  extended  to  the  investment 
budget. The Ministry of Finance's General Accounting Office has established a coordination 
committee  to  monitor  and  strengthen  the  implementation  of  commitment  controls,  so  as  to 
prevent further accumulation of arrears.  

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6. 

PRIVATISATION 

The Greek privatisation fund (Hellenic Republic Asset Development Fund, HRADF) is fully 
operational since early autumn 2011. It has hired the financial, legal and technical advisors for 
most transactions planned for 2012-14 and it has identified a comprehensive strategy for the 
deployment of the privatisation plan. However, due to the current negative market conditions 
and lengthy technical preparations, receipts collected so far have been below plans (see table).  

It  has,  in  the  meantime,  become  clear  that  the  target  of  collecting  EUR  50  billion  of 
privatisation  receipts  will not be  met by  2015, but over  a longer  period.  As a  result,  annual 
revenue  targets  have  been  revised:  at  least  EUR  5 200  million  by  end-2012,  EUR  9 200 
million by end-2013 and, EUR 14 000 million by end-2014.  

Table 4: Privatisation plan: transactions so far  

Assets 

Date of deal 

Sold 
stake 

Remaining 
stakes owned 
by the Greek 
Government 

Proceeds  
(cash, EUR 
million) 

Cumulative in 
year 
(EUR million) 

OTE 

July 2011 

10% 

4% 

OPAP 1  
(license 
extension 2020-
30) 
OPAP 2  
(sale of new 
license for 
VLTs) 
Mobile 
Telephony 
(auction of 
spectrum) 

October 2011 

October 2011 

December 2011 

- 

- 

- 

7. 

CONCLUSION  

- 

- 

- 

Delayed 
payment 

- 

85 
(by Q4-2013) 

392 

375 

392 

767 

475 

1,242 

85 
(by Q42013) 

380 

1,622 

- 

As expected when the previous Communication was adopted, the government deficit (ESA95 
basis)  ceiling  for  2011  established  by  the  Council  Decision  has  been  exceeded.  Greece  is 
estimated  to  have  recorded  a  government  deficit  of  EUR  20 200  million,  or  9.4  percent  of 
GDP, against a target of EUR 17 065 million, or 7.9 percent of GDP. 

The Commission is recommending the Council to revise the fiscal targets that Greece should 
respect in 2012-14. These targets should be defined on the basis of the primary deficit/surplus 
in  nominal  terms:  for  2012  the  primary  deficit  should  not  exceed  EUR  2  037  million  (1 
percent  of  GDP)  and  for  2013  and  2014  the  primary  surplus  should  be  at  least  EUR  3 652 
million  (1.8  percent  of  GDP)  and  EUR  9 356  million  (4.5  percent  of  GDP),  respectively. 
These targets are consistent with correcting the excessive deficit by 2014, as required by the 
Decision,  as  the  corresponding  targets  for  the  overall  deficit  will  be  7.3  percent  of  GDP  in 
2012, 4.7 percent of GDP in 2013 and 2.2 percent of GDP in 2014. 

While  the  measures  that  were  recently  announced  by  the  Greek  Government  are  consistent 
with  achieving  the  2012  target,  the  implementation  risks  are  very  high.  Moreover,  further 
significant  fiscal  consolidation  measures  will  have  to  be  implemented  in  2013-14  to  correct 
the situation of excessive deficit by 2014, as required by the Council Decision. 

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ANNEX :  MEASURES REQUIRED BY THE COUNCIL DECISION 

Article 1(2): "The adjustment path towards the correction of the excessive deficit shall aim to achieve a 
general government deficit not exceeding (…) EUR 17 065 million (7,6 % of GDP) in 2011 (…). 

Not observed. 

Article 1(3). The adjustment path referred to in paragraph 2 requires that the annual change in the general 
government consolidated gross debt does not exceed EUR 34 058 million in 2010, EUR 17 365 million in 
2011 (…) 

Not observed. 

Article 2 (6a) "Greece shall adopt and implement the following measures without delay: 

(a) 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; 

Observed. 

(b) a permanent levy on real estate, collected through electricity invoices, with the aim of collecting at 
least EUR 1 667 million in 2011, and EUR 1 750 million per annum from 2012 onwards;  

(c) an immediate implementation of the revised wage grid for civil servants, thereby contributing to a 
reduction in expenditure of at least EUR 101 million in 2011, and with a carry-over of at least EUR 552 
million for 2012, additional to savings provided in the MTFS through 2015. This reform shall cover all 
general government employees, except those covered by special wage regimes. These net savings take 
into account the impact of this measure on income tax and social contributions, as well as bonuses to be 
paid to specific employee categories;  

(d) a cut in main and supplementary pensions, as well as in 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 provided for in the MTFS;  

(e) capping at 5 % of its deposits spending by the Green Fund, with the aim of saving EUR 360 million in 
2012;  

(f) ministerial decisions or circulars concerning the measures on excise on natural gas, heating oil and 
vehicle taxes provided for in the MTFS;  

(g) ministerial decisions to uniformly regulate health benefits provided by the several social security 
funds;  

(h) legislation for the collection of the solidarity surcharge through withholding tax;  

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(i) ministerial decisions that initiate the closure, merging or substantial downsizing of entities. This affects 
KED, ETA, ODDY, National Youth Institute, EOMEX, IGME, OSK, DEPANOM, THEMIS, ETHYAGE 
and ERT, and 35 other smaller entities;  

Observed 

(j) a ministerial Decision specifying the disability criteria on the attribution of disability pensions, 
consistent with achieving the MTFS saving objectives;  

(k) a law to freeze the indexation of main and supplementary pensions through 2015;  

(l) finalisation of the positive list for pharmaceuticals that establish prices charged to social security funds; 

(m) transferring to the privatisation fund "Hellenic Republic Asset Development Fund" (HRADF) the 
following assets: Alpha Bank (0,619 % of shares); National Bank of Greece (1,234 % of shares); Piraeus 
Bank (1,308 % of shares); Piraeus Port Authority (23,1 % of shares); Thessaloniki Port Authority (23,3 % 
of shares); Elefsina, Lavrio, Igoumenitsa, Alexandroupolis, Volos, Kavala, Corfu, Patras, Rafina, 
Heraklion port authorities (100 %); Athens Water and Sewerage Company (27,3 %); Thessaloniki Water 
and Sewerage Company (40 %); Regional state airports (transfer of concession rights); off-shore natural 
gas storage facility "South Kavala" (transfer of rights of current and future concessions); Hellenic 
motorways (transfer of economic rights of current and future concessions); Egnatia odos (100 %); 
Hellenic Post (90 %); OPAP, SA (29 %); four state buildings; 

(n) appointing the legal, technical and financial advisors for at least 14 of the privatisations that are 
planned until end-2012;  

(o) based on a dialogue with social partners and taking into account the objective of creating and 
preserving jobs and improving firms’ competitiveness, adopting further measures to allow the adaptation 
of wages to economic conditions. In particular: the extension of occupational and sectoral collective 
agreements and the so-called favourability principle shall be suspended during the period of application of 
the MTFS in such a manner that firm-level agreements take precedence over sectoral and occupational 
agreements; firm-level collective contracts may be signed either by trade unions or, when there is no firm-
level union, by work councils or other employees’ representations, irrespective of the firms’ size.’; 

Article 2(7): “Greece shall adopt the following measures by the end of December 2011: 

(a) a budget for 2012 in line with the MTFS targets and the deficit ceilings set out in this Decision; update 
and publish information on the several measures provided for in the MTFS; and the tax and expenditure 
legislative acts that are necessary to implement the budget at the same time of the budget; 

Observed. 

(b) a reinforcement of the managerial capacity of all managing authorities and intermediate bodies of 
operational programmes under the framework of the national strategy reference framework 2007-2013 
and their ISO 9001:2008 (quality management) certification; 

Largely observed. 

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(c) a hospital case-based costing system to be used for budgeting purposes from 2013 on; 

(d) assessment of the results of the first phase of the independent functional review of central 
administration which will result in an action plan for the implementation of operational policy 
recommendations. These recommendations shall determine how to achieve a more streamlined and 
effective public service, to define clear responsibilities and command lines of ministerial departments, 
eliminating overlapping competences, and to improve inter- and intra-ministerial mobility; finalisation of 
the ongoing functional review of existing social programmes; 

Ongoing. 

On the basis of ESY.net a basic set of financial and activity 
indicators is now compiled for all NHS hospitals. A first report is 
due by March 2012. 

Ongoing. 

A OECD Report on central administration reforms was published 
in December 2011. The recommendations of this report are being 
considered by the Government. A road map has been identified 
to implement these reforms throughout 2012. A draft law is 
being prepared. A joint OECD-IMF Technical Assistance team 
has collected data on social programmes from all line ministries: 
a final report is expected to be ready by end-March. The second 
phase will be merged with the functional review and the final 
report is expected to be ready by end-March 2012. 

(e) starting of operations of the Single Public Procurement Authority with the necessary resources to fulfil 
its mandate, objectives, competences and powers as defined in the Action Plan; 

Not observed. 

(f) review of fees for medical services outsourced to private providers with the aim of reducing related 
costs by at least 15 % in 2011, and by an additional 15 % in 2012; 

Ongoing with delay. 

There has been some reduction in the price of services contracted 
to private providers. 

(g) measures to simplify the tax system, broaden bases and reduce tax rates in a fiscally-neutral manner, in 
relation to the personal income tax, corporate income tax and VAT; 

To ensure a high-quality reform, this deadline had to be 
postponed in agreement with the Commission. 

(h) further measures to ensure that at least 50 % 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 compulsory that all public hospitals procure pharmaceutical products by active 
substance. 

Ongoing. 

About 30 percent of the expenditure on pharmaceuticals in 
hospitals is made of generics and this can still go up. 

(i) appointment of advisors for the other privatisation transactions planned for 2012 and not included in 
point (n) of paragraph 6a; acceleration of state land ownership registration and secondary legislation on 
tourism housing and on land use; establishment and operation of a new General Secretariat of Public 

Partially observed. 

The  merged  ETA/KED  (now  called  ETAD)  still  needs  to 
appoint its BoD, after consultation with the HRADF.  

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Property working together with the newly merged ETA/KED (real estate management and tourism real 
estate institutions, respectively), which are to prepare real estate for privatisation of commercial and 
tradable assets. The aim is to improve the management of real estate assets, clear them of encumbrances 
and prepare them for privatisation; creation of six real estate portfolios by the HRDAF; adoption of the 
legal act on the transfer to the State of the mobile and immobile assets of entities that are closed; 

(j) the reform of revenue administration, through: the activation of a large-taxpayers unit; the removal of 
barriers to effective tax administration by implementing the key reforms of the new tax law, including 
replacing managers who do not meet performance targets, reassessing tax auditors’ qualifications; the 
operation of the newly created fast-track administrative dispute resolution body to deal rapidly with large 
dispute cases (i.e. within 90 days); the centralisation of the functions of, and the merging of, at least 31 tax 
offices; 

(k) to strengthen expenditure control: appointment of permanent financial accounting officers in all 
Ministries; 

(l) publication of a medium-term staffing plan for the period up to 2015 in line with the rule of 1 
recruitment for 5 exits which applies to general government as a whole without sectorial exceptions; 
transfer of about 15 000 staff currently employed by various government entities to the labour reserve, and 
placement of about 15 000 in pre- retirement. Staff in the labour reserve, and in pre- retirement, are to be 
paid at 60 % of their basic wage (excluding overtime and other extra payments) for not more than 12 
months. This period of 12 months may be extended up to 24 months for staff close to retirement. 
Payments to staff while in the labour reserve are part of their severance pay; 

Partially observed. 

Several actions are ongoing although with delays. Several small 
and inefficient tax offices have been closed or merged (with 
difficulties yet to be resolved as to the operational aspects of the 
merger) and key functions are in the process of being 
consolidated. Performance-based contracts for auditors have 
been approved while reassessment of tax auditors’ qualifications 
is ongoing. The large taxpayer unit has been established, but not 
yet fully staffed and not yet working in line with international 
best practice. 

Observed 

Not observed. 

Medium-term staffing plans identifying the recruitment needs of 
each ministry have not yet been published. 

Approximately, 10 000 employees left the public sector under a 
pre-retirement scheme. As a result of merges and closers, 630 
employees were shifted in the labour reserve. 

(m) revision of the list of heavy and arduous professions and reduction in its coverage to less than 10 % of 
employment. An in-depth revision of the functioning of secondary/supplementary public pension funds, 
including welfare funds and lump-sum schemes, with the aim of stabilising pension expenditure, 
guaranteeing the budgetary neutrality of these schemes, and ensuring 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; and the long- term 
sustainability of secondary schemes through a strict link between contributions and benefits.'; 

Observed. 

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