COMMUNICATION FROM THE COMMISSION COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANKGrowth for Greece
Date: 2012-04-18
Institutions: European Commission
Subjects: EU aid, Greece, administrative reform, credit policy, economic growth, economic recession, economic reform, employment policy, judicial reform, public debt, small and medium-sized enterprises, tax reform, youth unemployment

EUROPEAN COMMISSION 

Strasbourg, 18.4.2012  
COM(2012) 183 final 

COMMUNICATION FROM THE COMMISSION 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE 
EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF 
THE REGIONS AND THE EUROPEAN INVESTMENT BANK 
Growth for Greece 

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COMMUNICATION FROM THE COMMISSION 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE 
EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF 
THE REGIONS AND THE EUROPEAN INVESTMENT BANK 
Growth for Greece 

1. 

INTRODUCTION 

Greece is going through an economic and social crisis which is unprecedented in Europe in 
modern  times.  To  get  through  it  and  to  rebuild  a  successful  economy  will  require  a  united 
national commitment by the population and their political leaders – only Greece can put itself 
on a different path for the future. The underlying causes of the crisis had been building up for 
several years and reversing these negative trends will take time. A crisis of such magnitude 
calls for far-reaching changes in Greece so that a new, dynamic, competitive Greek economy 
can  emerge,  one  that  is  capable  of  generating  sustainable  growth,  creating  jobs,  supporting 
social cohesion and delivering on the expectations of Greek citizens. 

Greece does not have to face this huge challenge on its own. It can draw strength and concrete 
support from its membership of the European Union and of the Euro area. Supporting Greece 
in  the  effort  that  lies  ahead  requires  long  term  solidarity  from  the  rest  of  the  EU.  Other 
Member  States  and  the  EU  institutions  have  made  clear  their  desire  to  help  Greece  and  to 
keep Greece in the Euro – by providing help on a scale that was unthinkable even a few years 
ago.  The  total  package  of  assistance  to  Greece,  including  loans  from  EU  and  financial 
institutions,  write-downs  on  private  sector  debt  holdings,  and  grants  from  the  EU  structural 
and other funds, adds up to about € 380 billion. This is equivalent to 177% of Greek GDP. 
This level of assistance is unprecedented (the US Marshall Plan for post-war reconstruction 
involved transfers equal to around 2.1% of GDP of recipient countries).  

Table 1. EU and international support to Greece in recent years 

Various forms of EU and international 
support ≈ € 380 bn 

The equivalent of: 
(2011 data) 

By comparison: 

Financial assistance (loans): € 240 bn 

Private sector involvement  
(debt write-downs): € 100 bn 

EU funding for the period 2007-2013 
(grants): > € 40 bn  
(including € 20 bn from EU structural and 
cohesion funds and € 20 bn under the 
Common Agricultural Policy) 

•  3% of EU GDP 

•  177%  of  Greek 

GDP 

•  € 33 600 per Greek 

inhabitant 

•   Total  US  Marshall 
plan 1948-1951: 

–  ≈  USD  13  bn  (85% 
grants, 15% loans) 

–  ≈ 5% of US GDP 

–  ≈  2.1%  of  GDP  of 
recipient countries 

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The crisis has underlined the interdependence of all EU Member States, and more particularly 
among those that share the same currency. Such an advanced degree of economic, social and 
political  integration  can  only  work  when  every  member  is  able  to  deliver  fully  on  its 
obligations.  Greece  needs  the  EU  to  get  through  this  crisis  –  and  the  EU  needs  a  well 
functioning and dynamic Greece to play its full role as a Member State, helping to make EU 
policies work across its full territory. 

Throughout the crisis, the Commission has been active in assisting Greece, delivering direct 
support  and  liaising  with  the  other  Member  States,  EU  institutions  and  the  international 
community  to  devise  unprecedented  solutions  and  to  deliver  lasting  results  on  the  ground. 
Across the Commission, teams have been mobilised to the full and are working actively with 
the Greek administration in Brussels and Athens. To provide the technical assistance required, 
the  Commission  also  set  up  a  dedicated  Taskforce  for  Greece  in  July  2011.  Moreover,  the 
Commission is tasked with enhanced monitoring of commitments and progress. As the annex 
to  this  Communication  shows,  tangible  results  are  beginning  to  emerge  and  promising 
avenues have been identified through this work. 

The Commission has decided to issue this Communication now because after many months of 
uncertainty  the  main  framework  for  recovery  in  Greece  is  in  place.  Greece  has  taken 
important  steps  to  reduce  its  public  sector  deficit  and  adopted  new  fiscal  and  economic 
policies. Agreement on the Second Economic Adjustment Programme and the success of the 
recent private sector debt reduction operation provide an opportunity to create a new dynamic 
to speed up the badly needed structural reforms.  

This Communication will be of interest to a wide range of readers: 

• 

• 

• 

To  the  people  of  Greece,  because  it  shows  that  a  more  fair,  socially  cohesive, 
trustworthy and efficient system can emerge from the current crisis. Greece has the 
capacity  to  change  and  many  valuable  assets  to  draw  on  –  but  all  of  the 
unprecedented  support  that  Greece  is  now  receiving  can  only  produce  results  if 
Greek citizens put their weight behind the programme and work to build a different 
future.  

To the democratic institutions of Greece, which have agreed to the Second Economic 
implementation.  This 
Adjustment  Programme  and  are  committed 
Communication  underlines  the  need  to  create  a  more  positive  atmosphere  by 
emphasising the rapid benefits that can be achieved by the full implementation of the 
early measures of the programme.  

its 

to 

To other EU Member States, the EU institutions and our international partners, who 
are  providing  unprecedented  support  to  Greece  and  who  will  want  reassurance  that 
their  contribution  is  being  put  to  good  use,  and  in  ways  that  avoid  recurrence  of 
problems. 

The  purpose  of  the  Communication  is  to  highlight  the  positive  impact  that  the  full  and 
effective  implementation  of  the  Second  Economic  Adjustment  Programme1  can  have  by 
laying  the  foundations  for  growth,  investment  and  social  renewal.  This  Communication 

1 

The full text of the Programme can be found at: 
http://ec.europa.eu/economy_finance/publications/occasional_paper/2012/pdf/ocp94_en.pdf  

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identifies  ways  to  maximise  the  impact  of  early  deliverables  through  swift  actions  and  EU 
support.2  

While Greece is faced with a long process of transformation and adjustment, implementation 
of these actions will start the recovery process. Broad public understanding of the programme 
and of the expected results of the major changes that will be made in the coming months will 
be  needed  to  convince  people  that  the  sacrifices  and  efforts  being  made  now  will  yield 
tangible results in the future.  

2. 

AN HISTORIC OPPORTUNITY TO BUILD A BRIGHTER FUTURE 

The full and timely implementation of the Second Economic Adjustment Programme must be 
the top priority for Greece. The reform measures it contains are designed to restore the growth 
and  job  creating  potential  of  the  Greek  economy  and  to  do  away  with  the  value-destroying 
rules  and  opportunities  for  corruption  and  bureaucracy  that  prevent  Greek  citizens  and 
businesses  from  engaging  in  productive  activities.  Currently,  over-regulation  and  a  poorly 
performing  public  administration  create  inefficiency  and  too  many  cases  of  rent-seeking 
behaviour. 

The removal of the most blatant obstacles to growth can significantly improve the situation of 
citizens and companies in a relatively short time-frame. In the medium term, more profound 
reforms  of  the  Greek  public  administration  and justice  system  are  required  to  ensure  faster, 
more efficient procedures, a substantially more effective and equitable tax collection system, 
less red tape and more legal certainty for investment and new business activities. 

The  reforms  agreed  under  the  Second  Economic  Adjustment  Programme  seek  to  create  a 
more equitable society – where all segments of the population bear a fair share of the burden 
of adjustment and will all enjoy the benefits of reform. The impact of the severe imbalances 
that have built up in the Greek economy has hit the less well-off particularly hard, making the 
need  for  reform  even  more  pressing.  Vested  interests,  both  inside  and  outside  the  public 
administration,  which  have  exploited  their  position  in  an  opaque  and  bureaucratic  system 
which lends itself to corruption, should no longer be tolerated. However, the whole population 
will benefit from these changes and deserve better governance. 

2.1. 

It can be done 

Greece  has  already  made  important  progress  in  substantially  reducing  its  public  deficit 
through expenditure and tax measures. The government deficit has been cut from almost 16 
percent of GDP in 2009 to 9.25 percent of GDP last year. The parliament has enacted a huge 
volume of new legislation and all of the prior actions which were needed before the Second 
Economic Adjustment Programme could enter into force were completed. As the recent past 
shows, when the entire system of government is concentrated on meeting clear goals, it can 
deliver. 

The  route  to  economic  renewal  is  clearly  marked  out  in  the  Second  Economic  Adjustment 
Programme. This programme will deliver an historic transformation, equipping Greece with a 
modern economy and governance structures to help it face the future with confidence. Greece 

2 

This Communication does not modify or add to the formal decisions regarding Greece adopted within 
the applicable Treaty procedures of economic policy coordination.  

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can  build  on  its  many  strengths  –  such  as  its  shipping  sector,  its  tourism  potential,  its 
universities  and  generally  well-educated  work  force  as  well  as  its  location  as  a  potential 
logistics and energy hub in South Eastern Europe. 

Early  implementation  of  a  number  of  headline  actions  will  make  a  decisive  contribution  to 
creating growth and jobs, boosting competitiveness and stimulating investment. Results will 
be  tangible  and  visible  to  citizens  and  businesses  within  a  relatively  short  period  of  time. 
Implementing  these  actions  will  create  momentum  in  the  reform  process  and  give  a  strong 
signal  that  Greece  is  committed  to  reform.  It  will  help  Greece  to  move  from  a  vicious  to  a 
virtuous  cycle  –  where  commitment  to  reform  is  rewarded  by  renewal  of  confidence  and 
growth, creating the incentives for further progress. 

While  the  Second  Economic  Adjustment  Programme  must  be  delivered  in  full,  in  this 
Communication the Commission highlights three broad areas where action taken by the Greek 
authorities during 2012 can already be expected to show promising results by the end of 2012.  
These are: 

• 

• 

• 

Getting  control  over  public  finances  and  revenues  so  that  public  finances  become 
sustainable over time; 

Getting lending flowing to the real economy by recapitalising the banks and helping 
SMEs to get affordable loans; 

Freeing business to drive growth - a major overhaul of the business environment and 
labour market is urgently needed so that Greece becomes once again a place where 
domestic and foreign investors have confidence to invest and create jobs.  

2.1.1.  Getting control over public finances - a precondition for growth and jobs 

The objective of the programme is to prepare the economy to be more dynamic and fairer in 
the  medium  term.  International  experience  shows that  attempts  to  generate  growth  and  jobs 
will be frustrated unless public debt is put back on to a sustainable path and competitiveness 
is  restored.  To  be  sustainable,  further  efforts  will  be  needed  in  2013  and  2014  to  enable 
Greece  to  reduce  its  debt  ratio  to  around  117%  of  GDP  by  2020.  Focusing  on  targeted 
expenditure  reductions  will  mitigate  the  short-term  impact  on  the  real  economy.  Moreover, 
the  reduction  in  the  deficit  will  improve  the  liquidity  of  Greek  firms  as  less  domestic  and 
foreign savings will be absorbed by the government. It will increase Greece's credibility in the 
markets  and  allow  it  to  finance  itself  at  affordable  cost  at  the  end  of  the  period  of  official 
financing, which will ease financing conditions for businesses. Reform of the tax system and 
tax administration, as spelled out below in section 2.3.2, is also crucial for getting control over 
public finances.  

Actions in 2012 (cf. §1 of the MoU): 

The Greek authorities will need to identify measures to close the existing fiscal gaps for 2013 
and 2014. These measures should focus on spending savings. 

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2.1.2.  Getting lending flowing to the real economy through bank recapitalisation and help 

for SMEs 

The Greek banking system has suffered huge deposit outflows, which has resulted in limited 
access to liquidity and caused a deterioration in the value of its assets. This has translated into 
a reduction of lending to the real economy. 

Tackling this problem and restoring the flow of liquidity to Greek businesses is a prerequisite 
for  economic  recovery.  The  Second  Economic  Adjustment  Programme  provides  financial 
resources to recapitalise the Greek banking system with a double objective: ensuring financial 
stability and allowing banks to finance the real economy. 

Greek SMEs are currently facing very challenging operating conditions: 6 out of 10 firms saw 
their earnings deteriorate in 2011 compared to 2010 and 150,000 jobs were lost. These stark 
figures  underline  the  need  for  quick  and  targeted  action  to  support  SMEs  –  EU  support  for 
their maintenance and development is described later in this Communication. 

To counter this threat it will be essential to deploy all available resources, notably from the 
EU  structural  funds,3  to  inject  liquidity  into  new  activities  to  support  jobs  and  sustainable 
in  liquidity  assistance  for  SMEs  from  the  EU 
growth.  Over  €  4  billion  is  already  available 
structural  funds,  in  the  form  of  financial  engineering  instruments  and  grants.  In  addition,  a 
new SME Guarantee Fund has been set up with € 500 million from the EU structural funds, 
which  could  be  multiplied  to  release  a  further  €  1  billion  in  loans  from  the  EIB  to  Greek 
banks, for on-lending to Greek SMEs. 

However, at present, this money is not reaching Greek SMEs because of reduced demand for 
investment,  the  high  risk  associated  with  loans  for  SMEs  in  the  present  circumstances  and 
consequently the difficulty SMEs have in securing the necessary co-financing from the banks. 
Changes to EU legislation to permit the co-financing of working capital for SMEs still need to 
be implemented by the Greek authorities. 

Removing these blockages is an immediate priority. In addition, there are several projects and 
schemes  co-funded  by  the  EU  structural  funds  which  are  designed  to  boost  entrepreneurial 
skills and provide support for business start-up, as well as access to micro-finance schemes. 

Actions in 2012:  

Bank  recapitalisation  should  be  completed  by  September  2012,  safeguarding  the  business 
autonomy of the banks.  

In  the  next  8  months  the  Greek  banking  sector  and  administration  should  speed  up 
disbursement of the € 4 billi on already available for SME funding. The change in EU rules to 
permit the co-financing of working capital should be implemented in Greek legislation.  

The EIB should disburse loans to SMEs backed by the SME Guarantee Fund with a target of 
€ 160 million in 2012, a further € 400 million by the end of 2013 and € 440 million before 
2015. Moreover, during the course of 2012, the EIB will provide an additional € 440 million 
to SMEs, guaranteed by the Greek authorities. 

3 

For more information on EU funding and liquidity for SMEs, see sections 2.2 and 3.2 in annex. 

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Increased financial support should also be given to entrepreneurship training (with a focus on 
new innovative products and services), including mentoring, coaching and consultancy.  

2.1.3.  Freeing business to drive growth 

A  permanent  exit  from  the  crisis  will  require  growth  in  Greece's  productive  sector.  It  is 
estimated that reform of product and service markets could add up to 13.5% to Greek GDP 
over  the  long  term.4  Freeing  business  from  bureaucracy  and  corruption  can  unleash  pent-up 
growth  potential  in  sectors  such  as  tourism,  port  services  and  food  processing  among  many 
others.  It  will  facilitate  the  rebalancing  of  the  economy  towards  stronger  investment  and 
export performance and can trigger a decisive shift towards higher value-added activities. In 
this section eight areas for action are highlighted where progress should be made before the 
end of 2012.5 

• 

Restoring cost competitiveness 

As part of the modernisation efforts of the Greek labour market, measures are needed to foster 
a  rapid  adjustment  of  unit  labour  costs  to  fight  unemployment  and  restore  the  cost-
competitiveness  of  the  Greek  economy.  As  agreed  in  the  Second  Economic  Adjustment 
Programme, measures to foster a rapid adjustment of labour costs to fight unemployment and 
restore cost competitiveness should aim, together with measures that have already been taken, 
at reducing nominal unit labour costs in the business economy by 15 percent in 2012-2014. 
Such measures should take account of the outcome of the social dialogue and go hand-in-hand 
with broader efforts at strengthening labour market institutions, smoothing wage bargaining at 
all levels and fighting undeclared work.  

Actions in 2012 (cf. § 4.1 of the MoU): 

A timetable for an overhaul of the national collective agreement for the wage-setting system 
should  be  prepared  by  end  July  2012,  in  consultation  with  social  partners.  The  Greek 
authorities should also enact measures to reduce social contributions weighing on the cost of 
labour in a budget-neutral way. 

• 

Facilitating exports 

It takes an average of 20 days to complete export clearance and customs formalities in Greece 
–  compared  to  an  EU  average  of  10  days.  This  is  estimated  to  result  in  total  export  value 
which  is  around  10%  less  than  it  would  otherwise  be.6  Disproportionate  and  often 
unnecessary documentary or procedural requirements should be eliminated. 

Actions in 2012 (cf. §4.2 of the MoU): 

A  systematic  review  of  export  clearance  and  customs  formalities  should  be  completed, 
stripping away excessive controls and aligning control systems on practices in the rest of the 
single market. Once simplification is underway, its benefits can be maximised by developing 
migrating  procedures  to  ICT  solutions.  Efforts  should  also  focus  on  equipping  exporters  to 
identify opportunities in promising markets. 

4 
5 
6 

Foundation of Economic and Industrial Research, Quarterly Bulletin 2/10, 2010 
For more information on these areas, see section 3 in annex. 
Source: Trading on Time: World Bank Policy Research Working Paper 3909 

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• 

Stimulating new investment 

Investment in new facilities or projects is subject to delays and costs resulting from regulatory 
and administrative barriers involving many authorities. Land-use planning and environmental 
licensing rules are often cited as obstacles to investment. Companies operating in the energy 
sector,  distribution  and  logistics  and  transport  sectors  are  the  worst  affected.  Problems  are 
compounded in the event of disputes because of the suspensive effect of many administrative 
and  legal  actions,  lack  of  staff  or  competence  in  key  services  of  the  administration.  The 
completion  of  the  land  registry  will  also  facilitate  investment  by  protecting  investors  from 
litigation  over  ownership  of  land.  Access  to  skills  is  also  a  problem  for  research  and 
innovation  intensive  foreign  investors,  due  to  the  mismatch  between  the  public  education 
system and the needs of a knowledge-based economy.  

Actions in 2012 (cf. §4.2 of the MoU): 

Recently adopted laws to fast track certain licensing procedures for certain professions and 
manufacturing  activities,  and  for  environmental  licensing  of  projects  and  activities  should 
now be fully activated. 

Further steps should be taken to make it easier to set up a new company – the EU target set 
out in the Small Business Act is 3 days at a cost of no more than € 100. Greece should also 
complete the point of single contact as required by the Services Directive. 

• 

Modernising public procurement 

Public procurement accounts for 12% of Greek GDP. Bidders for Greek public contracts wait 
for twice as long as the EU average for contracts to be awarded (nearly 1 year). Procedures 
are inefficient and resource-consuming: the public sector invests twice as many person-days 
in  running  procedures.  On  average,  each  procedure  triggers  two  appeals.  This  situation 
penalises  suppliers  to  the  public  sector  and  increases  costs.  It  prevents  the  acquisition  of 
supplies  and  services  needed  to  perform  public  services,  and  prevents  the  completion  of 
works funded by the EU funds. 

Actions in 2012 (cf. § 2.6 of the MoU): 

Public procurement legislation should be radically overhauled by the end of the year, and the 
newly created single procurement authority should become fully operational. A blue-print for 
more  professional  and  transparent  procurement  administration  should  be  developed  and 
implemented in a number of large spending Ministries before rolling out successful practices 
to  other  parts  of  government.  In  addition,  the  development  of  e-procurement,  steps  to 
aggregate public procurement through central purchasing bodies and wider use of framework 
contracts for standard supplies and services could yield important savings. 

• 

Unleashing competition and freeing prices 

Prices have remained high in many sectors of the  Greek economy throughout the  economic 
contraction  –  adding  to  the  economic  pain  felt  by  consumers  and  businesses  on  shrinking 
incomes. There is a need for determined action  to remove  the many  regulatory barriers that 
impede  competition  and  new  entry.  This  includes  continued  efforts  to  change  existing 
regulations  that  create  protected  income  streams  or  shelter  regulated  professions  from 
competition. Increased competition and flexibility in prices is also necessary to ensure that the 

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reduction in labour costs is translated into a reduction in prices, thereby mitigating the impact 
on  disposable  income  and  ensuring  that  the  reduction  in  production  costs  benefits  Greek 
society as a whole. 

Actions in 2012 (cf. §4.2 of the MoU): 

The full implementation of the 2011 law on regulated professions should be finalised before 
the end of the year, combined with the additional liberalising measures included in the MoU. 
Effective implementation of EU rules on the recognition of professional qualifications is also 
needed.  A  health  check  of  the  regulatory  environment  in  selected  economic  sectors  will  be 
completed  by  the  autumn  and  will  be  the  basis  for  the  repeal  of  anti-competitive  and 
unnecessarily burdensome legislation. 

• 

A competitive energy sector 

Greece  is  highly  dependent  on  fossil  fuels  (lignite  accounts  for  the  bulk  of  its  electricity 
generation).  Most  islands  remain  isolated  and  are  reliant  on  diesel  generators  and  oil-fired 
plants. The overall efficiency of electricity production is amongst the lowest in Europe. The 
energy sector is dominated by a few state-owned enterprises with low productivity and which 
still have a quasi-monopoly position in the market. Transmission system operators still need 
to be fully unbundled. Industrial customers complain that their competitiveness is jeopardised 
by having to pay some of the highest energy prices in Europe.  

Electricity  and  gas  grids  need  to  be  modernised.  Improvements  in  gas  storage  and  pipeline 
networks,  as  well  as  investments  in  new  pipeline  projects  that  diversify  gas  sources,  will 
enable Greece to exploit its strategic geographic position providing a gateway to the European 
gas  market.  Electricity  grid  interconnection  of  the  larger  islands  with  the  mainland  and 
between  smaller  islands  is  a  prerequisite  for  the  large-scale  deployment  of  wind  and 
photovoltaic installations.  

Reinforcement  of  the  mainland  transmission  grid  is  also  essential  to  integrate  renewable 
energy installations for the domestic market and to enable important electricity exports to the 
rest of Europe. Greece is a natural passage for much of the gas originating in the Caspian and 
Eastern Mediterranean basins. The TEN-E programme and the proposed Connecting Europe 
Facility can play a major role in focusing and funding efforts in this area. Ensuring an open 
and functioning energy sector and ensuring non-discriminatory access to its infrastructure and 
networks, is a prerequisite to help attract private finance for such investment. Projects such as 
Helios  could  be  the  springboard  to  a  truly  integrated  European  market  for  energy  from 
renewable sources, while simultaneously helping the Greek economy to recover. 

Actions in 2012 (cf. §4.2 of the MoU): 

Privatisation  of  public  gas  and  electricity  companies  this  year  will  provide  private  sector 
investors with the opportunity to enter a huge new market, and increase the scope for major 
cost savings from efficiency gains in the former public companies.  

The  separation  of  gas  and  electricity  transmission  system  operation  from  generation  and 
supply  activities  will  increase  the  transparency  of  the  sector,  and  facilitate  competition 
through the entry of new market players.  

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Technical  assistance  will  help  reform  Greek  support  schemes  for  renewable  energy,  to 
improve  the  investment  climate  for  developing  Greece's  plentiful  solar  and  wind  energy 
resources.  

• 

Efficient transport services 

The  Greek  transport  sector  has  undergone  important  changes,  with  the  creation  of  a  rail 
regulator, the opening of road haulage and the liberalisation of the occasional coach passenger 
transport. 

Much,  however,  remains  to  be  done.  Administrative  barriers  and  poor  management  prevent 
the efficient exploitation of ports and airports, having a negative impact on two of the most 
important sectors of the economy: the logistics industry and the tourism sector. In the case of 
airports  and  of  air  traffic  management,  significant  additional  capacity  and  lower  costs  to 
operators could be made available in a short time, which would boost the inflow of tourists. 
Rail operations could be improved by creating the framework for EU passenger operators to 
enter the Greek market and by facilitating procedures for international freight traffic. 

Actions in 2012 (cf. §4.2 of the MoU): 

The  Transport  Policy  Paper  (due  date  June  2012)  that  will  set  out  the  strategic  and 
regulatory framework for the entire transport sector should be finalised. The regulatory and 
operational  functions  of  the  Hellenic  Civil  Aviation  Authority  should  be  separated  and 
funding  provided  for  modern  air  traffic  control  equipment,  the  recruitment  of  qualified  air 
traffic controllers and the contracting of modern slot allocation software. The establishment 
of  independent  award  authorities  for  rail  passenger  services  should  be  completed.  Border 
crossing  procedures  and  agreements  to  facilitate  freight  flows  on  corridor  X  should  be 
reviewed and border closures abandoned. 

• 

Making a success of the privatisation programme 

The  €  50  billion  privatisation  plan  set  out  in   the  Second  Economic  Adjustment  Programme 
should  provide  a  platform  to  attract  foreign  direct  investment,  bring  new  players  into  the 
market  and  increase  competition,  as  well  as  helping  with  the  repayment  of  public  debt.  It 
should also pave the way for more efficient management of key enterprises in the economy 
which are currently state owned if implemented with a long-term strategic vision. 

Railways, ports and airports need a more coherent regulatory framework while they are being 
prepared  for  privatisation.  The  framework  should  clarify  the  respective  roles  of  public 
authorities  and 
the  facilities  without 
discrimination,  facilitate  infrastructure  development  as  part  of  a  coherent  transport  system, 
and  ensure  the  efficient  use  of  structural  and  cohesion  funds  and  the  implementation  of  the 
TEN-T priorities. 

infrastructure  managers,  guarantee  access 

to 

Actions in 2012 (cf. §2.1 of the MoU): 

A  sound  regulatory  and  institutional  framework  for  infrastructure-related  assets  should  be 
established,  the  sale  of  which  has  been  delayed  by  technical  barriers  and  uncertainty 
regarding the conditions under which they can be exploited. The full inventory of state-owned 
real  estate  assets  should  be  completed.  State  land  registration  should  also  be  accelerated. 
There is a need to ensure that the planned receipts are achieved to avoid financing gaps in 

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fiscal  accounts  and  to  strengthen  the  credibility  of  privatisation  as  a  tool  for  debt 
sustainability.  

2.2. 

Tackling the social impact of the crisis 

In  addition  to  the  three  action  areas  outlined  above,  the  rapid  deterioration  of  the  social 
situation  in  Greece  requires  an  urgent  response.  Unemployment,  particularly  among  young 
people,  has  increased  dramatically  since  the  onset  of  the  crisis  and  poverty  levels  are 
unacceptably  high.  The  Economic  Adjustment  Programmes  have  been  designed  to  turn  this 
around by reforming the economy so that the benefits of future growth and employment are 
enjoyed by all. 

Further  progress  to  reduce  labour  costs  and  to  improve  productivity  to  help  restore  the 
competitiveness  of  the  Greek  economy  is  essential.  These  necessary  steps  must  be 
accompanied by robust measures to ensure social justice and help the most vulnerable.  

These  considerations  have  been  reflected  in  the  design  of  the  programme,  for  example  by 
reviewing social programmes to make sure that they target beneficiaries better and protect the 
vulnerable  effectively;  by  ensuring  that  reductions  in  pensions  are  targeted  and  protect  the 
lowest  pensions;  by  fighting  fraud  in  social  benefits;  by  reducing  the  costs  of  health  care 
without endangering the quality of care; by increasing the fairness of the tax system; and by 
fighting tax evasion. 

2.2.1.  Promoting youth employment and training 

The  Commission  is  working  actively  with  the  Greek  authorities  on  ways  of  tackling  the 
extremely high levels of youth unemployment. This includes taking a fresh look at the use of 
EU structural funds in Greece and at how to help the Greek authorities to reallocate them to 
projects that will make the biggest difference to growth and jobs in the shortest time.  

An action plan is being defined to focus on clear priority target groups and policy objectives. 
A re-orientation of EU funding of around € 200- 250 million from the European Social Fund 
could be allocated under existing EU structural fund programmes to support measures which 
can deliver immediate results for the young people who are failing to find work.  

These  measures  could  include  support  for  the  acquisition  of  first  work  experience  or  short-
term job placements in the private sector or in local communities; expanding apprenticeship 
or traineeship opportunities for students and graduates; promoting re-skilling or up-skilling as 
part  of  a  growth  and  development  pathway;  boosting  entrepreneurship,  including  social 
entrepreneurship; and study or training periods abroad, for instance through the Leonardo and 
Erasmus programmes. 

Actions in 2012: 

An  action  plan 
through 
to  promote  youth  employment, 
entrepreneurship, should be finalised and implemented before the end of 2012. 

including 

training  and 

2.2.2.  Active labour market policy 

Public employment services should be strengthened to offer better, more individually tailored 
services to the rising number of unemployed. More effective and targeted investment in active 

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labour  market  policies  is  needed  to  support  a  job-rich  recovery  and  a  more  systematic 
evaluation  of  the  effectiveness  of  active  labour  market  measures  should  be  undertaken. 
Priority should be given to the most vulnerable groups (low-skilled unemployed, early school 
leavers, older workers, long-term unemployed, migrants and minorities, etc). Efforts at skills 
development should be geared towards identifying and responding to the needs of the sectors 
and clusters which can become the key drivers of future growth.  

The  EU  structural  funds  can  support  various  schemes  for  short-term  recruitment  especially 
focused on the needs of disadvantaged groups. These can provide temporary economic relief 
and an opportunity to those most affected by the crisis to develop their skills and remain in the 
labour market.  

In addition, Greece could use the currently untapped potential of the social economy], through 
the  support  of  the  European  Social  Fund,  which  provides  an  important  support  for  new  job 
creation and can address the growing need for social services 

Actions in 2012: 

More  effective  use  of  the  available  European  Social  Fund  resources  to  put  in  place  a  fully 
functioning framework to support the social economy and social enterprises as well as the key 
drivers  for  a  job  rich  recovery  and  to  address  the  multi-faceted  integration  needs  of 
vulnerable groups.  

2.2.3. 

Invest in education and training  

In order to enable growth to resume and to fully exploit Greece's competitive advantages, the 
relevance,  quality  and  attractiveness  of  initial  vocational  education  and  training  should  be 
improved. Cooperation between business and educational institutions should be encouraged to 
ensure  that  young  people  leaving  education  and  training  have  the  skills  and  competences 
required by the economy – in terms of both employability and entrepreneurship. This should 
also  involve  the  creation  of  flexible  pathways  between  general  and  vocational  tracks,  and 
from initial vocational education and training into further learning and into higher education. 

2.3. 

Building a modern public administration 

The reform of Greece has to begin with the modernisation of the Greek public administration. 
Currently  Greece  suffers  from  a  lack  of  capacity  to  implement  policy,  manage  public 
finances,  collect  taxes,  open  markets  to  competition,  make  public  procurement  work 
efficiently  and  innovatively,  pay  suppliers,  or  offer  timely  judicial  review  to  its  citizens. 
Complexity  and  opacity  at  all  levels  create  opportunities  for  corruption  that  undermine 
citizens' confidence in the system and corrode its effectiveness. Getting these elements right 
will create a basis for re-establishing a social contract between Greek citizens and the state, 
based  on  transparency,  trust  and  solidarity.  The  re-establishment  of  confidence  in  official 
statistics is an integral part of this social contract. 

2.3.1.  Public administration reform 

The structures and working methods of the Greek public service need root and branch reform. 
There  is  a  need  for  clear  assignment  of  lead  policy  responsibilities,  in  order  to  ensure 
accountability  and  overcome  inertia  and  to  end  the  current  dispersion  of  responsibility  for 
different  aspects  of  a  policy  across  different  Ministries  and  agencies.  A  strong  inter-

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Ministerial coordination capacity is needed to implement complex reform processes. Reforms 
are  also  needed  to  improve  the  functioning  and  organisation  of  individual  Greek  Ministries 
and public services. All the principles of coherence and efficiency set up by the reform of the 
administration at the central level must be translated at the regional and local levels.  

The  EU  is  tangibly  supporting  the  administrative  reform  agenda  in  Greece,  in  particular 
through  the  European  Social  Fund  with  a  budget  of  €  505  million.  Reform  of  the  public 
administration is also a central aspect of the Second Economic Adjustment Programme.7 

Actions in 2012 (cf. §2.6 of the MoU): 

The  high  level  steering  group,  set  up  in  early  2012  to  supervise  and  monitor  the 
implementation  of  administrative  reforms,  should  start  operating  as  soon  as  possible  under 
the Prime Minister's authority. A stable structure for inter-ministerial coordination should be 
established.  Horizontal  structures  should  be  created  in  each  Ministry,  implementing  the 
relevant  procedures  with  Budget/Finance  Audit,  Internal  Control  or  Human  Resource 
Management, acting under common rules.  

A roadmap and actions for administrative reform at the regional and local levels should be 
decided  and  implemented  with  a  high  degree  of  urgency.  The  acceleration  of  the 
implementation  of  the  ESF-funded  "Administrative  Reform"  programme  is  crucial  to 
achieving timely results. 

2.3.2.  Tax reform, tax administration and public financial management 

The Greek tax system is in urgent need of an overhaul. The design of both direct and indirect 
–  including  property  –  taxes  could  be  improved  to  support  stability  and  growth.  Extensive 
exemptions, special rules and preferential regimes in addition to reducing the size of the tax 
base  have  made  the  system  complex  and  difficult  to  administer  and  to  comply  with.  By 
adding  complexity,  these  exemptions  and  exceptions  also  create  potential  for  extensive 
avoidance and abuse and also lend themselves to tax evasion and corruption resulting in huge 
revenue losses to the state and threatening the viability of businesses. Tax reform should thus 
also  improve  the  quality  of  tax  legislation,  tax  administration  and  the  degree  of  tax 
compliance. 

Greek tax  administration must be the focus of relentless efforts to strengthen its capacity to 
collect taxes owed by all sections of society. Effective measures should be taken to improve 
the governance framework and independence of the tax administration. Progress in improving 
national  budgetary  accounting  must  be  sustained.  Weaknesses  on  these  fronts  were  critical 
factors  in  the  deterioration  of  the  Greek  fiscal  situation.  Improving  tax  administration  and 
curbing  tax  evasion  is  also  important  so  as  to ensure  that  the  burden  of  adjustment  is  fairly 
distributed. 

Conversely, the Greek tax administration must urgently refund up to € 700 million in advance 
VAT tax payments paid by export companies. It is deeply damaging for struggling companies 
to  delay  these  payments  subject  to  performance  of  discretionary  audits  by  individual  tax 
officers. 

7 

For more information on the reform of public administration, see section 3.6 in annex. 

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Capacity in relation to the transparent management of public funds, and in fighting fraud and 
corruption must also be increased.  

Actions in 2012 (cf. §2.3 and §2.4 of the MoU): 

The  comprehensive  reform  of  the  tax  system  should  be  carefully  prepared  in  the  coming 
months in order to enhance its efficiency and growth-friendliness. 

Efforts  on  tax  debt  collection  should  be  stepped  up  as  well  as  on  the  audit  of  high-wealth 
individuals,  while  at  the  same  time  making  efforts  to  fundamentally  simplify  the  legal  and 
procedural taxation framework, drawing on the technical assistance that is being provided 

An antifraud strategy, covering public revenues and public expenditures, should be adopted. 

2.3.3.  Healthcare and pension system reform 

To  maintain  universal  access  and  improve  the  quality  of  healthcare  delivery  within  a 
framework of much greater budgetary discipline, Greece must find ways to contain the costs 
of inputs and increase the overall efficiency of the system. This must be done with a view to 
enhancing  the  the  overall  quality  of  public  healthcare  services,  including  by  addressing 
inequalities in coverage and reducing the fragmentation in the governance and administration 
of the system.  

More responsible consumption of healthcare services and products will help, in particular by 
reducing  outlays  and  waste  on  medical  equipment  and  pharmaceuticals.  This  can  be  done 
through  more  transparent  and  professional  prescriptions  systems  and  health  procurement 
(Greece  is  implementing  e-prescription  and  has  recently  held  a  first  e-auction  for 
pharmaceuticals).  Balancing  long-term  human  resource  needs  with  a  focus  in  particular  on 
training  and  retention  of  primary  care  healthcare  professionals  and  nurses  will  be  important 
for the sustainability of the healthcare system. 

In 2010 Greece adopted one of the most ambitious pension reforms in the EU. These reforms 
will underpin the long term sustainability of the Greek pension system.  

As  life  expectancy  at  birth  significantly  improved  over  the  last  decade  -  in  2010  it  reached 
78.4 years for men and 82.8 years for women (respective EU-27 rates for 2008: 76.4 and 82.4 
years) - the impact of ageing on health and pension system should feature prominently in the 
reform process.  

Actions in 2012 (cf. §2.7 and 2.8 of the MoU):  

Greece  should  work  towards  a  comprehensive  set  of  measures  to:  i)  strengthen  the 
governance  of  the  health  system  while  reducing  fragmentation  and  administrative  costs;  ii) 
reduce pharmaceutical spending through changes in pricing, prescription and reimbursement 
of medicines, as well as via the promotion of generic medicines; iii) centralise procurement; 
iv)  develop  a  comprehensive  and  uniform  e-health  system  to  improve  the  monitoring, 
transparency  and  the  efficiency  of  the  healthcare  system;  and  v)  present  a  human  resource 
planning instrument to outline long-term health workforce needs. These are necessary steps 
towards a truly national health service guaranteeing fairness, equity, efficiency and quality of 
services and expenditures. 

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The  reform  of  the  pension  system  should  be  finalised  through  the  reform  of  secondary  and 
supplementary pension schemes and fighting fraud in disability pensions. 

2.3.4. 

Judicial reform 

The  Greek  judicial  administration  is  also  in  need  of  reform  as  it  is  highly  inefficient  by 
international  standards.  People  and  businesses  need  to  have  confidence  that  the  judicial 
system will provide effective solutions and uphold their rights. It is characterised by complex 
procedures  resulting  in  excessive  delays  in  the  resolution  of  cases  (well  above  the  OECD 
average) with a significant case backlog despite a relatively large number of courts and judges 
relative  to  the  size  of  the  Greek  population.  The  judicial  reform  measures  set  out  in  the 
Second  Economic  Adjustment  Programme  can  make  an  important  contribution  to  economic 
investment  and  domestic 
recovery  by 
entrepreneurship.  

stimulating  private  consumption, 

foreign 

Actions in 2012 (cfr. §4.5 of the MoU): 

Greece should work towards i) clearing the existing case backlog in courts (for tax, civil and 
commercial  cases);  ii)  encouraging  private  individuals  and  businesses  to  use  alternative 
modes  of  dispute  resolution,  such  as  mediation,  so  as  to  reduce  the  work  load  of  court 
officials;  iii)  introducing  new  e-justice  applications;  iv)  reviewing  the  Greek  Code  of  Civil 
Procedure; and v) adopting and implementing an anti-corruption strategy. 

2.3.5. 

Improving internal coordination 

The  Second  Economic  Adjustment  Programme  sets  out a  full  agenda to be implemented  by 
the Greek authorities. It also constitutes the "critical mass" needed to put structural reform in 
Greece on a self-perpetuating path. 

However,  there  is  currently  no  "nerve  centre"  for  coordinating  and  monitoring  the  reform 
process inside the Greek government. Such a mechanism will be needed to keep the reform 
process  on  track,  and  facilitate  transparent  and  effective  government  control  of  the  overall 
process.  This  would  provide  the  basis  for  governmental  and  Parliamentary  scrutiny  of  the 
process and to help correct any slippages. It would also help to create an autonomous capacity 
to frame and implement structural reforms. 

Technical  assistance  is  also  being  provided  to  enhance  the  quality  of  official  statistics,  for 
which the Joint Overall Statistical Greek Action Plan (JOSGAP) has been put in place.  

Actions in 2012 (cf. §5 of the MoU): 

A mechanism for the monitoring and coordination of structural reforms should be created and 
be fully operational by mid-2012.  

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3. 

THE EUROPEAN UNION CAN HELP 

3.1.1.  Putting the EU funds to work 

The resources available through EU funds represent significant economic fire-power.8 Over € 
20 billion has been allocated for the period 2007-2013 under structural and cohesion funding 
and a further € 21 billion thr ough the Common Agricultural Policy. However, less than half of 
the structural and cohesion fund allocation has been spent and there is room for improvement 
in  the  absorption  of  rural  development  funds.  This  implies  significant  unused  capacity  to 
boost  demand  and  investment  and  create  employment  in  the  short  term,  while  laying  the 
foundations for sustainable growth in the future.  

Together  with  the  Greek  authorities,  the  Commission  has  identified  a  number  of  priority 
projects  that  can  give  an  immediate  boost  to  growth  and  jobs.  The  Commission  has  also 
proposed  a  Risk  Sharing  Instrument  to  boost  private  investment  in  major  infrastructure 
projects. This instrument will provide a vital catalyst for key projects such as the motorway 
concessions and major waste management investments. 

Actions in 2012 (cf. §4.3 of the MoU): 

Greece should continue working towards meeting the targets for absorption of structural and 
cohesion  funds,  for  the  submission  of  major  project  applications  and  for  the  gradual 
reduction  in  the  use  of  non-targeted  de  minimis  State  aid.  Simplification  efforts  in  the 
management of EU funds should be pursued by removing unnecessary administrative burden, 
while ensuring stability in the framework for implementation. 

Technical  preparations  for  the  Risk  Sharing  Instrument  should  proceed  swiftly  so  that  the 
instrument  can  be  activated  as  soon  as  possible  after  political  agreement  is  reached  by  the 
European Parliament and the Council. 

Greece should finalise agreement on the necessary restructuring of the motorway concessions 
to ensure their economic viability. 

The  number  of  contracted  projects  -  and  in  particular  the  181  priority  projects  -  should 
increase substantially and faster so as to ensure their completion before the end of 2015.  

3.1.2.  Technical assistance / the Taskforce for Greece 

The European Commission, through the specially-created Taskforce for Greece which reports 
to  President  Barroso,  will  continue  to  support  Greece  in  framing  and  mobilising  technical 
assistance needed to implement these challenging reforms.  

The  Taskforce  is  already  working  closely  with  Greek  authorities  to  identify  needs,  and 
mobilise  expertise  from  other  Member  States  and  international  organisations  in  the  areas  of 
structural  fund  absorption,  tax  administration  /  public  financial  management,  including  the 
fight  against  fraud,  smuggling  and  corruption,  the  reform  of  the  public  administration, 
business  environment,  judicial  reform  and  healthcare  reform.  Many  Member  States  are 
playing their part in making leading specialists available to advise the Greek authorities.  

8 

For more information on EU funding, see sections 2.2 and 2.3 in annex. 

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The  Commission  will  make  regular  reports  on  the  implementation  of  the  Second  Economic 
Adjustment Programme and on the work of the dedicated Taskforce for Greece.  

4. 

CONCLUSION 

The economic transformation of Greece will not be completed overnight, but significant steps 
can be expected already in 2012. Deep structural reform and the correction of imbalances that 
have built up over many years will take time but actions spelled out in this Communication 
should  pave  the  way  for  recovery  and  lead  to  a  more  dynamic,  modern,  innovative, 
sustainable and fair Greece. 

The challenges are many. Greece needs to remodel large parts of its public administration and 
to make the country an attractive place to invest and to do business. It needs to implement a 
profound  rebalancing  of  its  economy  –  towards  more  productive  activities  based  on 
competition and high value added innovative products and services. The Greek labour market 
must  be  reformed  to  mobilise  and  upgrade  human  capital,  provide  more  and  better 
employment  opportunities  and  restore  competitiveness.  Preserving  the  conditions  for  an 
effective and meaningful social dialogue should also contribute to the successful outcome of 
the reform process. 

Greece  has  already  made  important  progress  in  substantially  reducing  its  fiscal  imbalances, 
reining  in  expenditure  and  increasing  tax  revenue.  The  Second  Economic  Adjustment 
Programme  provides  the  right  framework  for  this  transformation  to  continue.  It  will  allow 
Greece  to  turn  the  page  on  years  of  unsustainable  policies  and  declining  competitiveness 
through decisive steps to return the public deficit and debt to a sustainable path and to unlock 
the  potential  of  the  Greek  economy.  The  full  implementation  of  the  programme,  including 
through  the  mobilisation  of  existing  EU  support  instruments,  will  lay  the  foundations  for 
future  growth,  employment  and  social  cohesion,  rebuild  confidence  in  Greece  at  home  and 
abroad and pave the way for a fairer society for those who have suffered the most from the 
crisis. The success of this process ultimately depends on Greece. The solidarity shown by the 
rest of the EU and the European institutions throughout the crisis is expressed in very concrete 
terms through the considerable financial support and expertise that is being made available to 
support this process of transformation. This Communication highlights key actions to be taken 
in the coming weeks and months to show that a negative situation can be turned around and 
that real change can follow for the benefit of all Greek citizens.  

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ANNEX 

In this annex the Commission sets out in more detail the extent of the support available 
from the EU level: 

– 

– 

– 

Section 1 outlines the impact of the crisis on Greece. 

Section 2 gives details of financial support from the EU budget and explains how the 
general rules have been tailored to the specific situation of Greece.  

Section  3  explains  how  key  EU  policies  can  help  to  support  growth  and  jobs  in 
Greece and outlines what Greece has to do to tap into their potential. Results in all of 
these  areas  will  be  enhanced  as  the  structural  reforms  of  the  Second  Economic 
Adjustment Programme are implemented and start to bring change to the economy. 

1. 

IMPACT OF THE CRISIS IN GREECE 

Looking back, it is now clear that Greece's strong GDP growth of an average of 4% per year 
in the decade before the crisis was unsustainable. It was built on real wage increases out of 
step with productivity, excessive credit growth, low real interest rates and loose fiscal policy. 
Short-term  performance  masked  the  many  serious  weaknesses  in  the  Greek  economy,  in 
particular low competitiveness and productivity, an unfavourable business environment, weak 
investment  by  the  private  and  public  sectors,  a  complex  and  outdated  tax  system  and  an 
inefficient judicial system. 

Dangerous  imbalances  built  up  over  this  period.  The  demand  boom  coupled  with  weak 
external  competitiveness  led  to  a  rapid  increase  in  external  imbalances.  Competitiveness 
deteriorated by 10-20 percent from 2000 to 2009. The current account deficit had climbed to 
14  percent  of  GDP  by  2008.  Fiscal  imbalances  grew  and  remained  persistently  high,  as 
excessive  spending  was  not  compensated  by  higher  revenues.  The  government  deficit 
consistently  exceeded  3%  of  GDP  since  the  adoption  of  the  euro  and  in  2009  the  deficit 
soared to almost 16% of GDP. 

These imbalances left the country very exposed to the global economic downturn and led to a 
very significant increase in government debt, threatening the financing capacity of the Greek 
economy.  Government  debt  increased  to  129  percent  of  GDP  in  2009  from  around  100 
percent in 2000. Bond spreads surged to record levels as markets lost confidence in the ability 
of the Greek economy and government to pay its debts, triggering the sovereign debt crisis. 

The  problems  were  compounded  and  a  corrective  response  was  delayed  by  the  fact  that 
government budgetary forecasts and official Greek statistics did not reveal the true extent of 
the  problem.  In  2009,  when  the  scale  of  the  problem  was  officially  acknowledged  by  the 
government which took office in October, the government deficit forecasts were revised up by 
6 percentage points of GDP. 

Faced with the consequences of a rapid economic adjustment, Greece is now in the midst of a 
very deep recession. GDP has fallen by more than 11 percent since the beginning of the crisis 
and is expected to continue to contract in 2012. Part of this contraction in economic activity 
was unavoidable given the unsustainable growth prior to the crisis. However, external demand 
has  been  weaker  than  expected  and  insufficient  implementation  of  structural  reforms  and 

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political and social instability, together with liquidity shortages relating to capital flight have 
also  deepened  the  economic  crisis.  A  possible  return  to  positive  growth  by  2014  depends 
critically on the measures taken in the weeks and months to come. 

The social impact of this crisis has been severe. Unemployment has risen dramatically over 
the  last  two  years,  currently  standing  at  17.7%  (annual  average  for  2011).  Recent  forecasts 
indicate  that  unemployment  may  rise  above  20%  in  2012  and  2013  before  declining.  Long 
term unemployment has increased to 9.1% of the labour force and is unlikely to have reached 
its peak. Greece has experienced one of the strongest recent increases in the number of jobless 
households  in  Europe.  Young  people  have  been  hit  especially  hard.  Youth  unemployment 
stood at 48% in November 2011, twice as high as two years previously. In the third quarter of 
2011, some 45% of the unemployed aged 15 to 24 were long-term unemployed, against 30% 
two years earlier. 

Prior to the crisis, Greece already suffered from one of the highest poverty rates in the EU and 
the deep economic downturn has increased levels of poverty and social and housing exclusion 
and has hit disposable income. Homelessness is increasing among families with children and 
young people, as well as among the rising numbers of irregular migrants, which have further 
exacerbated the pressures. 

2. 

HOW IS THE EU SUPPORTING GREECE? 

2.1. 

The  First  and  Second  Economic  Adjustment  Programmes  –  programmes  for 
economic reform 

The EU and the international community stepped in quickly to help Greece in 2010 once the 
true  scale  of  the  crisis  became  apparent.  Support  has  come  in  the  form  of  two  ambitious 
economic  adjustment  programmes,  providing  massive  financial  aid  on  condition  that 
comprehensive  and  lasting  action  is  taken  to  stabilise  public  finances,  to  restore  financial 
stability and to implement growth-enhancing structural reforms.  

The First Economic Adjustment Programme was launched in May 2010 and committed a 
loan  package  of  €  110  billion,  of  which  €  73  billion  was  di sbursed.  The  Second  Economic 
Adjustment  Programme  was  agreed  in  March  2012  with  a  loan  package  of  €  130  billion  in 
addition to the amounts not disbursed from the first programme. 

The  First  Economic  Adjustment  Programme  has  already  brought  about  a  very  significant 
fiscal consolidation. Measures implemented since the start of the crisis amount in total to over 
20 percent of GDP, one of the largest fiscal adjustments ever experienced by an EU country. 
This  required  tough  but  necessary  measures  scaling  back  public  sector  wages  and  pensions, 
increased  taxes  as  well  as  labour  market  reforms,  including  the  introduction  of  sub-minima 
wages for the young and long-term unemployed.  

Progress  towards  the  ambitious  targets  of  the  First  Economic  Adjustment  Programme  has 
been mixed although important efforts have been made. The government deficit has been cut 
from almost 16 percent of GDP in 2009 to 9.25 percent of GDP last year, while the current 
account deficit fell by 4 percentage points between 2009 and 2011 to just above 10% of GDP.  

In this context, State aid to the banking sector in Greece - together with the interventions of 
the European Central Bank and the National Central Bank - has contributed to stabilising the 

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Greek  economy,  ensuring  that  the  system  continues  to  function  and  avoiding  a  financial 
meltdown that would further endanger the wider economy, including depositors. 

Agreement  was  reached  in  February  2012  on  a  new  and  ambitious  Second  Economic 
Adjustment  Programme  for  Greece.  Over  2013-2014,  a  further  fiscal  adjustment  of  about 
5.5 percent of GDP will be needed to bring the public debt onto a more sustainable trajectory. 
Fiscal adjustment will mainly involve reductions on the expenditure side of the budget to limit 
the  negative  impact  on  the  potential  growth  of  the  Greek  economy.  Savings  will  primarily 
come  from  streamlining  and  better  targeting  welfare  benefits,  while  preserving  basic  social 
protection of the most vulnerable.  

The Second Economic Adjustment Programme gives greater prominence to growth enhancing 
structural reforms. A growth friendly tax reform – to be prepared in the coming months - will 
make the tax system simpler and more efficient, reducing compliance costs for businesses and 
individuals and eliminating exemptions and preferential regimes. The reform will concern all 
areas of direct and indirect taxation (personal income, corporate, VAT and property taxes, as 
well as employers' social contributions). By broadening the tax bases, the reform would allow 
for a reduction of the high marginal tax rates on labour . This is one of the key areas where the 
Commission,  working  with  the  IMF  and  several  Member  States,  is  providing  technical 
assistance to help the Greek authorities overhaul an outdated system and replace it by a highly 
performing, modern tax system.  

Once  the  fight  against  tax  evasion  and  a  fairer  tax  system  start  producing  results,  they  will 
help  to  build  broader  social  acceptance  of  the  adjustment  programme.  Social  equity  has 
always  featured  strongly  in  the  design  of  the  programmes.  This  is  reflected  in  reforms  of 
pensions, other social programmes, labour market, and health care and in the fight against tax 
evasion, where particular efforts have been made to protect the most vulnerable parts of the 
population.  

The programme is designed to ensure debt sustainability and to build a new Greek economy. 
The goal is to help Greece regain competitiveness in the coming years and to respond quickly 
to  the  unacceptably  high  levels  of  unemployment  by  cutting  labour  costs  from  the  current 
unsustainable levels and creating a more modern, flexible labour market. Product and service 
markets will also be overhauled so as to increase competition and price flexibility and to help 
ensure  that  lower  costs  feed  through  into  higher  economic  growth  to  the  benefit  of  all.  The 
programme  will  also  transform  the  business  environment,  improving  framework  conditions 
for  entrepreneurship  and  innovative  projects,  a  prerequisite  for  the  future  dynamism  of  the 
Greek economy. 

2.2. 

Support from the EU budget 

Over  the  period  from  2007  to  2013,  Greece  has  and  will  continue  to  receive  extensive 
financial  support  from  the  EU  budget.  EU  funds  are  helping  to  drive  economic  renewal  in 
many sectors of the economy and to get citizens back into work. In total, over € 20 billion is 
available  from  the  EU  structural  funds:  this  represents  a  major  investment  fund  for  growth 
and jobs in Greece. 

Table: How EU funding is helping the Greek economy and society 

Source of funding from EU budget 

Amounts available and paid 

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Structural and cohesion funds 

€ 20.2 billion allocated;  

€ 8.4 billion already paid 

Agriculture: 

Direct 
interventions 

payments 

and 

market 

Around € 2.4 billion annually; € 17 billion over 
the period 

Rural development 

€ 3.9 billion allocated; €  1.7 billion already paid 

European Fisheries Fund 

Research Framework Programme 

€  210  million  allocated;  €  70  million  already 
paid 

Up  to  €  1  billion  may  be  granted  to  Greek 
organisations following calls for proposals over 
the period 

Competitiveness 
Programme 

and 

Innovation 

€ 14 million paid to Greek beneficiaries so far 

Lifelong Learning and Youth in Action 

€ 188 million allocated,  ≈ € 108 million paid 

Solidarity 
Migration Flows (SOLID) 

and  Management 

of 

€ 228 million allocated, ,  ≈ € 70 million paid 

European 
Facility (Progress Microfinance) 

Progress  Microfinance 

€  8.75  million  allocated  for  a  senior  loan  and 
€ 0.8  million  allocated  for  a  guarantee  to  a 
Greek microcredit provider 

Action to date 

While there is no shortage of EU funding available to support growth-enhancing projects in 
Greece, the full benefits of the structural funds are not yet being fully realised. This is due to a 
variety of administrative  bottlenecks which  prevent  financial support from reaching the real 
economy where it is needed. 

To  address  this,  the  Commission  has  proposed  a  number  of  concrete  steps  to  simplify  and 
streamline the management of structural funds and to accelerate their absorption so as to boost 
investment.  Many  of  these  measures  have  already  been  put  into  practice  and  are  delivering 
results in Greece. 

Box: how has the Commission helped Greece make the most of EU structural funding? 

The Commission has made a range of proposals to simplify the implementation of cohesion 
policy and to make it more flexible. These changes have removed administrative barriers to 
investment  and  made  it  easier  to  reprogramme  funds  to  support  the  top  growth  priorities. 
Proposed in 2008, entered into force 2009. 

The  Commission  also  proposed  to  increase  pre-financing  by  raising  advance  payments  for 
programmes supported by the EU structural funds. This has allowed money to flow to priority 

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projects  much  more  quickly  -  total  advance  payments  to  Greece  amount  to  around  €  1.5 
billion. Implemented in 2009. 

The threshold for projects requiring prior approval from the Commission was raised from € 
25 million to € 50 million, making it easier to get  projects off the ground while still ensuring 
that the funds are spent properly. Implemented in June 2010. 

Following  an  earlier  increase  to  85%,  the  Commission  proposed  to  increase  the  EU  co-
financing rate of structural funding in Greece by a further 10%. This change means that key 
projects  get  more  support  from  the  EU  budget  and  will  not  be  delayed  due  to  the  ongoing 
fiscal consolidation in Greece. The combined impact of the increased co-financing and of the 
top-up  is  very  significant:  around  €  958  million 
for  all  structural  funds.  Proposed  August 
2011, entered into force December 2011. 

The  Commission  modified  EU  rules  to  allow  the  co-financing  of  working  capital  for 
businesses,  thus  providing  a  vital  boost  to  SMEs.  Implemented  in  November  2011:  this 
legislation now has to be fully implemented by the Greek administration. 

The  Commission  is  working  closely  with  the  European  Investment  Bank  to  unblock  a 
number of financial instruments supported by the structural funds which aim to provide much-
needed credit to Greek SMEs, including JEREMIE, the ETEAN Entrepreneurship Fund and 
the European Progress Microfinance Facility. 

A Guarantee Fund for SMEs has recently been created with the support of the Commission, 
backed by € 500 million from the structural funds. Once operational, this will provide banks 
with  up  to  €  1  billion  in  additional  liquidity  to  lend  to  SMEs.  Making  this  Guarantee  Fund 
operational and working with the EIB to get liquidity flowing to the real economy is an urgent 
priority. Proposed in 2011, signed in March 2012. 

The  Commission  has  proposed  to  create  a  Risk  Sharing  Instrument  to  support  large  scale 
infrastructure  projects  in  the  transport,  energy  and  environmental  sectors.  Loans  backed  by 
the Risk Sharing Instrument will allow existing investment projects to be completed and will 
help  to  get  new  projects  up  and  running.  Critical  projects  such  as  the  major  motorway 
concessions  –  which  cover  1400  km  of  the  Trans  European  Network  –  and  essential  waste 
management  projects  could  be  supported  in  this  way.  Proposed  in  October  2011;  political 
agreement expected in May 2012. 

Next steps 

Working  with  the  Greek  authorities,  the  Commission  has  compiled  a  list  of  181  co-funded 
priority projects of high investment value in important sectors. These projects total some € 
11.5 billion from the EU structural funds. The aim is to produce visible results and boost the 
economy, competitiveness and employment.  

A dedicated Action Team is working with the Greek government to identify opportunities to 
reallocate funds to support priority projects, for example to combat youth unemployment 
and support SMEs. 

Several  hundred  important  projects  from  the  2000-2006  programming  period  remain 
uncompleted, with the consequent risk that funds allocated to these projects may have to be 

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repaid  to  the  EU  budget.  Urgent  action  is  needed  from  the  Greek  authorities  to  ensure  that 
these projects are completed within the agreed deadlines. 

Making the SME Guarantee Fund fully operational is an urgent priority so as to get liquidity 
flowing to the real economy.  

More  must  also  be  done  to  unblock  funds  that  have  already  been  disbursed  to  the  banking 
system but have not yet been on-lent to SMEs. Completing the ongoing bank recapitalisation 
will help in this regard. 

Preparations  for  using  the  Risk  Sharing  Instrument  should  start  as  soon  as  possible 
following the formal agreement foreseen in May. Funding will need to be provided within the 
existing structural fund allocations, which should be leveraged significantly. The Instrument 
will  be  managed  by  the  EIB  and  the  Commission  is  committed  to  finalising  the  operating 
arrangements as soon as possible in the form of a cooperation agreement with the EIB. 

In  addition,  Greece  also  benefits  from  the  European  Progress  Microfinance  Facility.  An 
agreement  has  been  recently  reached  for  a  provision  of  a  guarantee  under  Progress 
Microfinance  to  a  Greek  microcredit  provider,  the  Pancretan  Cooperative  Bank  Ltd  (PCB) 
which will allow PCB to offer up to € 6 million  of microloans to Greek micro-entrepreneurs 
(focus  on  financing  start-ups  and  new  borrowers).  A  further  senior  loan  up  to  EUR  8.75 
million is expected to allow PCB to meet the demand of numerous micro-enterprises facing 
difficulties  in  accessing  finance  due  to  the  credit  crunch  and  the  stricter  eligibility 
requirements applied  by the  Greek banking sector. With a leverage of 1.5 times, this senior 
loan is expected to generate up to € 13  million microloans to micro-enterprises. 

Steps have been taken to simplify procedures in the Greek administration and to accelerate 
project  selection  and  implementation.  For  example,  procedures  for  issuing  archaeological 
permits  and  environmental  licenses  have  been  streamlined  and  shortened  in  line  with  the 
MoU.  

However,  much  more  can  be  done  to  accelerate  the  absorption  of  structural  funds  and 
maximise  their  impact  by  removing  administrative  obstacles  and  streamlining  management, 
while  pursuing  improved  co-ordination  and  synergy  between  all  related  EU  co-funded 
interventions. The adoption of the necessary legislation to shorten and simplify procedures on 
contract awards and land expropriation will speed up the implementation of EU co-financed 
projects.  A  number  of  further  procedural  simplifications,  including  speeding  up  the 
implementation  of  new  projects  and  the  streamlining  of  the  payments  process,  have  already 
been agreed. The revised procedures will be introduced from April. 

2.3. 

Other support for Greece from the EU budget 

Support  for  growth  and  jobs  in  Greece  from  the  EU  budget  is  not  limited  to  the  structural 
funds. A wide range of other EU programmes are playing their part in modernising the Greek 
economy, creating job opportunities and improving competitiveness. 

Agriculture, rural development and fisheries 

Greece  receives  around  €  2.4  billion  annually  in  direct  payments  to  farmers,  plus 
approximately € 70 million in market-related expenditure.  

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is  available  to  support  development  in  rural  areas.  As  for  the 
In  addition,  €  3.9  billion 
structural funds, the co-financing rate for the EAFRD has been increased by 10% on the basis 
of a Commission proposal. This will result in national budget savings of around € 567 million. 

By December 2011, € 1.7 billion in rural developm ent funding had already been paid, helping 
over 8,000 young men and women to set-up as farmers in rural areas of Greece. These funds 
have been used to support economic growth in rural areas through direct investments in the 
agricultural  sector  as  well  as  in  the  processing  and  marketing  of  agricultural  products.  The 
funds  also  support  the  necessary  diversification  of  the  rural  economy,  for  example  by 
promoting tourism, small businesses and environmental protection. 

The European Fisheries Fund contributes to the creation of new jobs, mainly in aquaculture 
and  processing.  It  supports  the  implementation  of  local  development  strategies  both  in  the 
islands  and  in  coastal  areas  of  mainland  Greece,  in  particular  in  remote  areas  where 
unemployment is high. EU funds help maintain and develop jobs by supporting diversification 
of  economic  activities  and  promoting  the  quality  of  the  coastal  environment,  for  example 
through support for eco-tourism and the preservation of natural and architectural heritage. 

Research, innovation and entrepreneurship 

EU support to Greece in the area of research and technological development takes the form 
of  contributions  to  costs  incurred  by  Greek  organisations  participating  in  the  Seventh 
Framework  programme  for  Research  and  Technological  Development.  A  total  of  €  622 
million  has  been  granted  to  Greek  organisations  during  the  period  from  2007  to  2011,  and 
several hundred million more may be granted in the forthcoming calls for proposals by 2013. 

Greek  organisations  have  been  particularly  successful  in  the  field  of  Information  and 
Communication Technologies, which accounts for around € 211 million of the funds awarded 
to Greek organisations. This funding will support cutting edge research that will help build the 
competitiveness of the Greek economy in technologically advanced sectors. Greek researchers 
have also received around € 50 million from th e 'Marie Curie' programme. This has allowed 
Greek  researchers  to  collaborate  with  their  counterparts  elsewhere  in  the  Union  and  has 
attracted top researchers to Greece. 

From 2007 to 2011 Greek beneficiaries have also received over € 14 million in grants from 
the  Entrepreneurship  and  Innovation  Programme.  These  funds  have  been  used  to  create 
hubs  for  the  Enterprise  Europe  Network  in  Greece,  which  offer  free  of  charge  services  for 
businesses  in  Greece,  and  to  support  a  variety  of  projects  to  unlock  the  growth  potential  of 
eco-innovations. 

The  Intelligent  Energy-Europe  II  Programme  provided  Greek  beneficiaries  with 
€ 10 million  of  grant  financing  for  projects  removing  the  barriers  to  market  uptake  of 
renewable energy and energy efficiency. Furthermore, Greek project promoters have access to 
the  financing  products  offered  by  the  European  Energy  Efficiency  Fund,  for  energy 
efficiency and renewable energy investment projects in cities and regions. 

Education 

The  reform  of  the  Greek  education  system  and  the  fight  against  youth  unemployment  have 
been buttressed by the large-scale support provided by the European Social Fund as well as 
by extensive assistance for Greek organisations and citizens through the European Lifelong 

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Learning Programme. Greek organisations will receive around € 165 million over the period 
and  grants  worth  over  €  94  million  have  already  been  made  to  help  students,  teachers  and 
trainers study and develop skills in other countries. In 2009-10 alone, nearly 8,000 students 
and teachers participated in the programme. The programme has also facilitated cooperation 
between  Greek  education  and  training  institutions  and  those  in  other  Member  States,  which 
will  help  the  Greek  education  system  to  develop.  Several  thousand  young  people  have 
participated  in  projects  funded  by  the  Youth  in  Action  programme,  helping  to  boost  their 
employability  and  mobility.  Around  €  23  million  will  be  available  to  Greece  through  this 
programme over the period of which € 13.6 million has already been paid 

Home affairs 

The  Commission  has  provided  considerable  financial  support  for  asylum,  migration  and 
border management systems and to address the humanitarian consequences of the pressure 
generated by high numbers of irregular migrants and asylum seekers. Greece has adopted two 
plans in this area, an Action Plan on Migration and Asylum Management, identifying concrete 
actions to address shortcomings in asylum and return; and a "Schengen-Greece" Action Plan" 
identifying  concrete  actions  to  address  shortcomings  in  border  management.  Progress  has 
been  made,  though  uneven,  in  all  the  areas  concerned.  It  is  now  important  to  make  more 
progress,  building  on  what  has  been  achieved.  Sound  and  efficient  migration  and  asylum 
policies in Greece are in the interest of all EU countries. 

Greece is one of the main beneficiaries of the programme for Solidarity and Management of 
Migration Flows (SOLID). A total of € 228 million was allocated for the period 2010-2012 
to  help  Greece  in  the  implementation  of  effective  control  at  external  borders,  returns  of 
irregular  migrants  and  the  establishment  of  credible  asylum  policy.  Steps  are  under 
consideration to help improve the absorption of this funding inter alia through an increase in 
the co-financing rate. 

2.4. 

Technical Assistance – the Taskforce for Greece (TFGR) 

In addition to financial support from the EU budget, the EU also provides extensive technical 
assistance to the Greek authorities. In July 2011, at the request of the Greek government, the 
Commission  set  up  a  dedicated  Taskforce  to  provide  technical  assistance  to  the  Greek 
authorities to help them implement the Economic Adjustment Programmes and to support the 
modernisation of the Greek administration, as well as the absorption of EU funds.9 

The  Taskforce  supports  Greece  by  mobilising  relevant  expertise  from  Member  States  and 
European or international organisations. Since its creation, the Taskforce has been involved in 
setting-up  and  launching  technical  assistance  work-streams.  It  is  currently  working  with  the 
Greek authorities on over 20 technical assistance projects in 9 different policy domains. Some 
of  these  work-streams  are  already  active;  a  number  are  ripe  for  launch.  In  addition, 
exploratory discussions are underway on a number of other projects.  

During  the  first  months  of  its  operation,  the  TFGR  coordinated  inter  alia  a  total  of  200 
person/days  of  short-term  experts  from  national  tax  administrations  in  Athens  for  the 
provision  of  technical  assistance,  trainings  and  seminars,  including  about  20  meetings  in 
different areas of tax administration. The Commission also concluded an agreement with the 

9 

MEX/11/0720 'Commission appoints Task Force for Greece' 

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IMF  for  reinforced  TA  in  the  area  of  Public  Financial  Management  and  Revenue 
Administration, which contributes to the financing of three resident advisors (2 in the field of 
revenue administration / 1 in the field of public financial management) until December 2013 
and about 900 days of short term missions. 

This technical assistance will focus on several areas crucial for the success of the programme. 
It  will  promote  a  sound  and  sustainable  regulatory  environment  that  supports  enterprise-led 
growth and address market failures in a proportionate and consistent manner. This programme 
of  technical  assistance  also  aims  to  improve  the  ability  to  implement  legislative  or 
administrative  requirements  effectively  and  equitably  and  to  support  the  reform  of  the  tax 
administration and fight against tax evasion and fraud, public financial management, and the 
reform of the public administration. 

The  EU  is  also  helping  Greece  to  create  an  independent  and  reinforced  National  Statistical 
Authority,  with  priority  on  high  quality  public  finance  statistics  through  a  dedicated  action 
plan  (JOSGAP).  The  plan  also  contains  support  in  a  variety  of  other  statistical  domains  as 
well  as  in  re-establishing  the  organisation  of  the  National  Statistical  Authority.  A  resident 
high level advisor has been appointed and sustained technical assistance organised by experts, 
on  a  permanent  basis  in  public  finance,  and  as  appropriate  in  national  accounts  and  other 
statistical  areas.  These  improvements,  facilitated  by  the  new  governance  of  the  National 
Statistical  Authority,  have  already  yielded  positive  results,  with  three  successive  deficit  and 
debt notifications validated by Eurostat. This progress needs to be sustained and the capacity 
of Greek statisticians enhanced. 

3. 

HARNESSING KEY POLICIES TO DELIVER GROWTH AND JOBS  

3.1. 

Structural reforms to support enterprise and investment 

Realising the potential of Greek product and service markets will require sustained efforts and 
strong political commitment to remove a tangled web of complex legislation and ineffective 
administrative structures. Overly prescriptive rules and disproportionate and intrusive controls 
contribute  to  closed  markets  and  sclerotic  competition.  These  factors  help  to  explain  why 
Greece consistently scores so poorly in international rankings on the ease of doing business 
and corruption. 

To succeed, the Greek government should champion the cause of business and see business as 
a  partner  rather  than  a  source  of  risk.  Business  for  its  part  must  repay  this  trust  through 
compliance with regulatory and fiscal requirements.  

There are many obvious - albeit not easy - steps that the Greek authorities can take to improve 
the  difficult  conditions  in  which  Greek  businesses  currently  operate.  Some  of  these  reforms 
will  take  time  to  deliver.  However,  early  and  decisive  action  will  send  a  clear  signal  that 
Greece is committed to providing a more hospitable environment for business. 

The  commitments  contained  in  the  revised  MoU  constitute  a  good  template  for  this  reform 
which  will  require  a  wholesale  re-engineering  of  the  public  administration  so  that  it  helps 
rather than hinders Greek business. The reform process can continue with areas that urgently 
need reform – such as exports, customs and public procurement. 

Export facilitation and promotion 

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The Greek economy has traditionally been less open than that of many other similarly-sized 
economies,  importing  (33%  of  GDP)  more  than  it  exports  (22%  of  GDP)  and  financing  the 
gap  through  borrowing.  It  must  now  take  steps  to  rebalance  its  economy,  and  support  the 
emergence of a successful export sector.  

Removing  administrative  procedures  and  barriers  that  make  it  unnecessarily  hard  to  ship 
goods  to  other  countries  can  be  done  quickly.  The  current  organisation  of  export  clearance 
and customs formalities represents a significant hurdle for enterprises – and almost certainly 
deters many smaller potential exporters from exploring overseas markets. 

Exports clearance involves a paper-chase of unnecessary certificates and documents, required 
by a large number of different Ministries and agencies. It takes on average 20 days for product 
shipments to complete customs clearance in Greece compared to an EU average of 10 days. 
90% of Greek export shipments are subject to physical or documentary control compared to 
an EU average of 5%. 

The  speedy  removal  of  unproductive  documentary  requirements  and  a  re-engineering  of 
customs procedures can eliminate much of these 'pure costs'. Efforts, supported by technical 
assistance,  are  underway  to  streamline  and  automate  exports  clearance  and  customs 
formalities. This work should be completed as a matter of urgency.  

These  efforts  should  be  supported  by  a  government  strategy,  and  reform/coordination  of  all 
relevant  Ministries  /  agencies,  to  assist  exporters  wishing  to  broaden  their  sales  strategy 
towards  overseas  markets.  Efforts  should  in  particular  focus  on  equipping  new  exporters  to 
find opportunities in promising markets. 

While exports of goods and manufacturing products is a short-term priority, linked to the fact 
that,  traditionally,  Greece  is  an  SME-based  economy  and  based  on  transformation  activities 
from  agricultural  productions;  further  medium  term  initiatives  should  aim  at  enhancing  the 
export of services and improve the country's potential in the tourism industry. 

Competition and market access 

More  competitive  markets  and  less  discretionary  public  support  will  benefit  Greece.  For 
instance,  more  competition  in  energy  markets  will  help  consumers,  improve  security  of 
supply  and  will  help  achieve  environmental  targets.  Similarly,  in  the  pharmaceutical  sector, 
more  competition  is  needed  in  the  off  patent  medicines  market  in  order  to  obtain  cheaper 
generic products which can help keep the health budget under control. 

A targeted state aid policy can support the recovery of the Greek economy while at the same 
time minimizing the burden of aid on public resources, provided public spending is directed to 
areas  which  enhance  long-term  growth  and  foster  job  creation.  The  Greek  government  has 
agreed  to  set  up  a  central  unit  for  controlling  and  verifying  state  aid  prior  to  notification  of 
potential  aid  measures  to  the  Commission.  The  Commission  can  provide  the  necessary 
technical assistance to the Greek authorities in order to help them implement this objective. 

Important  initiatives  are  underway  to  improve  access  to  markets,  spur  competition  and 
encourage  more  competitive  pricing.  The  full  application  of  the  2011  law  on  regulated 
professions  (law  3919/2011)  can  strike  down  many  restrictive  provisions  on  the  right  to  or 
way  in  which  a  profession  could  be  practiced.  This  law  is  now  being  implemented,  and 
proposals  to  introduce  'public  interest'  restrictions  are  subject  to  careful  vetting.  The 

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Taskforce  is  coordinating  technical  assistance,  providing  the  Greek  authorities  with  legal 
expertise  to  adapt  secondary  legislation  which  supports  the  liberalisation  of  regulated 
professions,  analyse  the  impacts  of  these  measures  and  review  the  organisation  of  certain 
legal professions, notably lawyers. 

A  rigorous  health-check  of  the  policy  framework  in  a  number  of  key  sectors  should  be 
completed in the autumn. This should pave the way for legislative action to scrap regulatory 
provisions that prevent competition and price flexibility in early 2013. 

Transparent and efficient public procurement markets 

Greek procurement markets are hugely inefficient to the detriment of both public purchasers, 
who  cannot  buy  the  inputs  needed  to  deliver  public  services,  and  suppliers.  The  award  of 
contracts  is  slow,  costly,  opaque  and  leads  to  poor  procurement  outcomes.  Procedures  are 
often  suspended  due  to  litigation.  Public  procurement  is  dispersed  across  large  numbers  of 
small contracts organised by myriad purchasing entities that lack the capacity to define their 
needs and organise procedures effectively. 

The  Greek  government  has  undertaken  to  implement  a  coherent  and  ambitious  agenda  to 
overhaul  Greek  procurement  legislation,  structures  and  practices.  This  will  involve 
simplification  of  the  rules,  creation  of  a  procurement  oversight  body,  greater  use  of 
specialised  purchasing  bodies  and  framework  contracts,  a  wider  use  of  new  procurement 
techniques, as well as the creation of a portal for all public procurement tenders, building e-
procurement solutions and increased attention to conflict of interests. The Greek government 
has undertaken to publish a road-map for comprehensive reform of its procurement legislation 
and  administration  by  mid  2012.  The  European  Commission  will  support  this  important 
project though technical assistance. 

Reduce administrative burdens and implement 'better regulation' practices 

Greek  legislation  is  often  developed  on  a  sectoral  basis,  without  sufficient  regard  for  the 
overall impact on stakeholders and businesses. Greek businesses cite numerous examples of 
regulations or administrative practices that give rise to disproportionate costs or restrictions. 
The soon-to-be-adopted better regulation law will ensure that greater discipline is brought to 
new rule-making by tackling administrative burdens that hinder commercial transactions, and 
applying 'better regulation' methods to new legislative initiatives. 

The commitment to create a Directorate in the Finance Ministry with overall responsibility for 
planning, management and monitoring of structural reforms provides an opportunity to place 
business  and  enterprise  at  the  heart  of  a  new  growth  strategy.  This  can  serve  as  the  'nerve 
centre' for the entire reform process. This reform management capacity urgently needs to be 
created and nurtured. 

Facilitate new investment 

Investment in new facilities or projects is subject to delays and costs resulting from regulatory 
and administrative barriers involving many authorities. Land-use planning and environmental 
licensing rules are often cited as obstacles to investment. Companies operating in the energy 
(and  especially  renewable  energy),  distribution  and  logistics  and  transport  sectors  are  the 
worst  affected.  Problems  are  compounded  in  the  case  of  disputes  both  in  the  administrative 

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but also in the judicial phase due to the suspensive effect of many legal actions, lack of staff 
or competence in key services of the administration etc.  

The  Greek  government  has  undertaken  to  implement  a  number  of  recent  laws  to  fast  track 
certain  licensing  procedures  for  certain  professions  and  manufacturing  activities,  and  for 
environmental  licensing  of  projects  and  activities.  The  expropriation  processes,  which  were 
subject  to  complex  administrative  and  judiciary  proceedings  are  also  about  to  be  revised. 
Developments  related  to  judicial  reform  will  accelerate  judicial  procedures  and  reduce  / 
eliminate the existing case backlog. 

The  Greek  government  has  also  taken  steps  to  make  it  easier  to  set  up  a  new  company. 
However, there is scope to rationalise further these procedures.  

The  completion  of  the  land  register  will  also  help  to  stimulate  investment.  €  83  million  has 
already been provided  through  the EU structural funds  to  create  an  IT infrastructure  for the 
digital  registration  of  active  property  rights  and  validation  of  state  ownership  claims, 
including the delimitation of forests and the digitisation of active property rights retained on 
paper  by  the  mortgage  offices  in  urban  areas.  The  MoU  concerning  the  Land  register 
stipulates  specific  objectives  and  provides  for  the  establishment  of  a  complete  cadastral 
register and exclusively operating cadastral offices nationwide by 2020. The Commission will 
support the efforts of the Greek authorities to respect the above timetable in order to complete 
the land register which provides security and can help in attracting investment. 

While  a  number  of  disparate  actions  are  underway  or  planned  to  remove  administrative 
obstacles to investment, there is scope for a systematic and concerted project to tackle these 
barriers. 

Helping business through tax reform 

Progress in reforming the tax administration and necessary reforms of tax legislation would 
also  greatly  improve  the  business  environment  in  Greece.  The  fight  against  tax  evasion  is 
essential to level the playing field in favour of those  economic actors  who comply with  tax 
regulation and who suffer from unfair competition from tax and social security contribution 
evaders.  The  Memorandum  of  Understanding  for  the  Second  Economic  Adjustment 
Programme  contains  a  number  of  provisions  aimed  at  creating  a  modern,  responsive  and 
efficient tax administration. 

This  effort  will  be  helped  by  technical  assistance  provided  within  the  framework  of  an 
IMF/EU  action  plan,  covering  nine  areas  identified  with  the  Greek  authorities  (audit,  debt 
collection,  dispute  resolution,  large  taxpayers,  high  wealth  individuals  and  high  income  self 
employed,  risk  and  revenue  analysis,  taxpayer  services,  registration,  filing  and  payment 
enforcement, organization and management). 

The simplification of tax legislation will also play a crucial part in the success of the overall 
effort.  In  this  field,  efforts  can  build  on  the  decision  taken  under  the  MoU  of  the  First 
Economic Adjustment Programme to repeal the Code of Books and Records and to replace it 
with  substantially  simpler  legislation  as  current  rules  render  compliance  difficult,  hamper 
entrepreneurship and act as a strong deterrent to foreign investment in Greece. 

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The streamlining of the tax administration should also speed up due VAT refunds and would 
thus  help  in  particular  SMEs  and  Greek  exporters  by  removing  administrative  burdens  on 
their liquidity. 

Finally, in the context of ongoing efforts to combat tax evasion, the Commission is ready to 
assist  Greece  in  negotiating  a  tax  agreement  with  Switzerland  which  could  help  it  recoup 
taxes  owed  by  its  citizens.  Such  an  agreement  would  need  to  be  fully  consistent  with  the 
relevant requirements of EU law. 

3.2. 

Increasing liquidity for SMEs 

SMEs are key drivers for economic growth and employment in Greece. They represent 99.9 
% of all companies in Greece, with micro-enterprises representing 96.5%. SMEs face serious 
survival problems: 6 out of 10 firms saw deterioration in their earnings in 2011 compared to 
2010. 150,000 jobs were lost in SMEs in 2011. A recent survey commissioned by the Greek 
association for SMEs estimated that in 2012, 60,000 small- and medium-sized firms will close 
their doors and a further 240,000 jobs will be lost. 

As described in section 2 of this annex, the EU structural funds provide extensive support for 
SMEs. More than € 4 billion is available to  provide liquidity, working capital and guarantees 
for  lending  to  SMEs  and  a  further  €  1  billi on  will  be  made  available  through  the  newly-
created  SME  Guarantee  Fund.  Yet  this  funding  is  not  always  finding  its  way  to  the  real 
economy. The Greek authorities and Greek banks should undertake stronger efforts to monitor 
the disbursement of existing  schemes and overcome together the obstacles to their effective 
implementation.  

In  particular,  greater  efforts  are  needed  to  accelerate  processes  and  remove  administrative 
bottlenecks  in  the  approval  of  grants  (notably  intensive  monitoring  of  disbursements, 
simplification  of  contracts  and  approval  processes,  reduction  of  approval  deadlines  and 
number  of  actors  intervening  in  the  process  etc).  Moreover  the  relevant  legislation  and 
contracts for grants needs urgent adjustment to provide for the lending of working capital. In 
addition,  early  implementation  of  the  Late  Payments  Directive  would  be  of  great  benefit  to 
Greek SMEs. 

3.3. 

Using  privatisation  to  improve  the  functioning  of  important  sectors  of  the 
economy 

Privatisation  is  a  crucial  part  of  the  reform  process.  The  most  compelling  reason  for 
privatisation  in  Greece  is  that  assets  may  be  better  utilised  in  the  private  sector,  thus 
enhancing  the  competitiveness  of  the  real  economy.  In  addition,  successfully  privatised  and 
better managed firms will act as "role models", generating additional positive externalities.  

The  Hellenic  Republic  Asset  Development  Fund  (HRADF)  has  been  set  up  to  dispose  of 
state-owned assets. It invites submissions of interest for state-owned assets on a regular basis 
including recent tenders for real estate assets and the sale of the gas utility. This development 
points in the right direction in terms of sustainability and anchoring the privatisation process 
on a growing variety of asset classes. 

However,  for  many  assets,  current  market  conditions  and  the  technical  barriers  existing  in 
Greece  are  not  yet  conducive  to  advancing  privatisation  on  a  large  scale.  This  uncertainty 
stems, inter alia, from current difficulties in arriving at reasonable valuations of state-owned 

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assets. Moreover, there are a number of challenges to be addressed by the Greek authorities, 
the HRADF and the European Commission. These include, inter alia the existence of 'golden 
share'  regulations  in  a  post-privatisation  environment  and  the  need  for  ex  ante  clearance  of 
state aid measures for state-owned enterprises. Other issues which need to be resolved are the 
acceleration of state land ownership registration, the legal status of land titles, the provision of 
economic  information  on  individual  property  titles  or  the  mapping/zoning  capacity  through 
the land registry. 

Assets need to be appropriately 'prepared' prior to sale. The pre-privatisation process includes 
the  establishment  of  properly  audited  accounts,  restructuring  roadmaps,  personnel  changes, 
financial  engineering  etc.  Taking  these  factors  into  account  suggests  that  the  value 
enhancement of assets should normally take place prior to their privatisation. In addition, the 
successful  ownership  transfer  of  public  assets  requires  the  development  of  a  suitable 
regulatory framework and a clear long-term strategy. Such frameworks define public policy 
priorities in order to avoid the creation of unregulated private monopolies.  

The  Commission  is  in  close  contact  with  both  the  HRADF  and  the  Ministry  of  Finance,  to 
make the privatisation programme a success and to help design measures in compliance with 
state  aid  rules.  In  this  regard,  the  Commission  has  provided  a  guidance  paper  on  the 
application of State aid rules when restructuring and/or privatising State-owned enterprises.  

In some well-defined cases and without taking away from the priority projects mentioned in 
section 3.4, the EU structural funds may be able to play a role in supporting the privatisation 
programme through technical assistance or by supporting physical investment in areas such as 
energy  or  transport  to  help  prepare  state  owned  assets  for  sale  by  first  improving  their 
operations,  thereby  delivering  better  results  to  users  and  enhancing  the  potential  value 
creation of these assets. 

3.4. 

Growth and jobs through boosting infrastructure investment 

The  lack  of  suitable  infrastructure  in  Greece  is  a  major  obstacle  to  growth.  Well  targeted 
infrastructure investment can make an important contribution to growth and employment. The 
EU  structural  funds  can  make  an  important  contribution  in  this  area.  The  Risk  Sharing 
Instrument, once agreed, will help to attract essential private investment. 

Among  the  181  priority  projects  for  growth  and  employment  identified  by  the  Greek 
authorities and the Commission in November 2011 were numerous infrastructure projects in 
the field of transport, waste management or energy. Some are in the phase of implementation 
while  others  are  in  preparation  to  be  implemented.  A  number  are  experiencing  serious 
blockages that need to be promptly addressed.  

Their  full  implementation  at  the  latest  by  2015  should  improve  the  competitiveness  of  the 
Greek economy, have a positive impact on other sectors like tourism and improve quality of 
life.  The  resources  mobilised  through  the  structural  funds  should  be  complemented  by 
additional  public  resources  and  private  investments.  Obstacles  to  the  full  implementation  of 
these projects should be removed. 

In terms of size and impact, the most important projects are five motorway concessions (1,400 
km of the Trans-European-Network) which currently account for €3.2 billion of national and 
EU  expenditure.  If  completed,  they  may  represent  up  to  an  estimated  30,000  direct  and 
indirect  jobs  and  inject  a  much-needed  boost  to  investment  and  employment.  Four  of  these 

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projects  are  currently  blocked  and  need  to  be  restarted  without  further  delay.  The 
implementation of these networks can contribute to the modernisation of infrastructures which 
remains a crucial factor for boosting the development of the country. It will also strengthen 
the position of Greece in South-Eastern Europe by completing the main corridors linking the 
country with other Member States and candidate and potential candidate countries. It will also 
contribute to better road safety. 

Transport networks 

More than in other Member States, the economy and living standards in Greece depend on the 
quality and efficiency of port services and maritime connections. Ports handle more than 85% 
of  the  external  freight  trade  of  Greece  and  ensure  the  security  of  supply  of  the  islands. 
Passenger traffic through Greek ports accounts for 22% of the total number of sea passengers 
in  the  whole  EU.  Greek  ports  also  have  the  potential  to  capture  a  large  part  of  the 
intercontinental trade flows to Eastern Europe. 

Greek  ports  have  three  main  problems:  poor  equipment  and  low  capital  expenditure  on 
infrastructure; very poor connections with the hinterland (railways, road) and administrative 
and operational deficiencies. Often, port developments have been made on a local or regional 
basis, without considering strategic priorities at the national level. 

The  tourism  sector  accounts  for  15%  of  the  Greek  economy  –  when  the  indirect  impact  on 
other  economic  sectors  is  taken  into  account  -  and  relies  fundamentally  on  affordable  and 
efficient travel connections. Air connections to Greece, particularly to regional airports, suffer 
from  a  lack  of  modern  Air  Traffic  Management,  inefficient  airport  operations  (limited 
operation time, etc) and costly airport fees. The lack of adequate infrastructure – for example 
marinas and cruise embarkation points – also negatively affects the quality of tourism.  

The new TEN-T strategy includes the ports of Igoumenitsa, Patras, Piraeus and Thessaloniki 
in  the  core  European  transport  network. The  crucial  rail  connection  between  Piraeus  and 
Thessaloniki and the motorway of the seas between Athens/Piraeus and Limassol are part of 
one of the transport corridors included in the proposed Connecting Europe Facility. 

The transport system in Greece could be modernised by: 

– 

– 

– 

Opening  passenger  transport  services  by  coach  and  taxis  by  removing  remaining 
restrictions. 

Establishing single window administrative services for vessel related reporting. Ships 
are now subject to a number of obligatory formalities which cause delays for cargo 
and  passengers.  These  formalities  also  absorb  resources  from  the  shipping  industry 
and the state. 

Providing  a  suitable  governance  model  and  a  framework  for  privatisation  of  ports 
and airports that avoids the creation of private monopolies and does not discriminate 
between  users  and  imposes  full  transparency  of  accounts  and  adequate  supervision 
by public authorities. New  owners or concessionaires should be required to respect 
the commitments taken in relation to projects that have been granted EU support.  

Rail operations could be improved by: 

– 

Leasing passenger rolling stock that is not needed by the incumbent; 

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– 

– 

Creating  a  framework  for  EU  passenger  operators  to  start  new  business  in  fair 
competition with the incumbent; 

Reviewing border crossing procedures and agreements to facilitate freight flows on 
Corridor X and abandon border closures. 

The  Commission  can  organise  technical  assistance  to  help  the  Greek  authorities  to  adapt  to 
best  practice  in  cooperation  with  their  counterparts  in  other  Member  States.  It  can  also 
provide  technical  assistance  for  Air  Traffic  Management  and possibly  financing  for  modern 
equipment. 

Shipping 

Shipping has traditionally been a main pillar of the Greek economy. A combination of factors 
(low freight rates, abolition of a dedicated Ministry) have influenced shipowners' decisions to 
flag-out  their  vessels.  If  this  trend  continues,  apart  from  employment  on-board  and  tax 
revenues, it  may  also  affect employment  in shore-based shipping  companies. The  economic 
crisis has affected the Greek coastal shipping industry. Companies are operating at marginal 
or no profit, even where they have public service contracts. In some cases this has affected the 
network  coverage  and  quality  of  services  especially  (but  not  exclusively)  towards  smaller 
islands  which  see  their  growth  opportunities  undermined.  In  order  to  make  full  use  of  its 
maritime potential and exploit the opportunities for maritime growth, Greece needs to develop 
a more appropriate administrative structure in the shipping industry overall. 

ICT and broadband infrastructure 

Greece is still lagging behind the EU average in broadband penetration, mainly due to the lack 
of development of e-services. Efforts should be concentrated on the completion of projects of 
national importance in order to extend the broadband network to more towns and to provide 
high-speed  broadband  connections  (optical  fibre)  to  additional  public  buildings  to  deliver 
savings on public telecom expenditure, and to citizens.  

An  increase  in  broadband  penetration  depends  on  broadening  the  offer  of  e-services. 
Emphasis should be given to sectors highlighted in the MoU. The use of ICT is expected to 
bring considerable benefits both to citizens and to public finances in areas such as healthcare 
(e.g. e-prescription, interoperability between Ministry of Health and public hospitals), the land 
registry  (e.g.  further  digitisation  of  the  real  property  rights)  and  public  procurement  (e.g.  e-
procurement). In the corporate sector, the opportunities afforded by digital services should be 
exploited to the full, for example by helping SMEs to take advantage of the internet to access 
international markets. 

3.5. 

Sources of future growth 

3.5.1.  Harnessing the potential of the energy sector for growth and jobs 

Energy policy in Greece has the potential to make a significant contribution to the country's 
economic  recovery.  In  addition,  the  development  of  energy  infrastructures  interconnected 
with the rest of the region will help to boost the competitiveness and the productivity of the 
energy sector in Greece. 

In the energy area Greece faces huge challenges. It is highly dependent on fossil fuels (lignite 
accounts for the bulk of its electricity generation). Most islands remain isolated and are reliant 

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on  diesel  generators  or  oil-fired  plants.  The  overall  efficiency  of  electricity  production  is 
amongst  the  lowest  in  Europe.  The  energy  sector  is  dominated  by  a  few  state-owned 
enterprises with low productivity and still to be unbundled. Industrial customers complain that 
their  competitiveness  is  jeopardised  by  having  to  pay  some  of  the  highest  energy  prices  in 
Europe.  Especially  in  the  building  sector  there  is  considerable  scope  to  improve  energy 
efficiency. 

Greece  has  the  opportunity  to  be  at  the  vanguard  of  sustainable  energy  production.  Few 
European countries benefit from such a variety of renewable energy sources: abundant wind 
and  sunshine  but  also  hydro,  geothermal  and  biomass  offer  the  potential  of  moving  to  the 
forefront of green electricity production. Greece’s strategic geographic position as well as the 
exploration  of  off-shore  hydrocarbon  reserves  provides  the  opportunity  of  developing  the 
country  into  a  gas  hub.  The  implementation  of  EU  liberalisation  measures  and  privatisation 
efforts should lead to a more competitive industry. 

In  order  to  achieve  this  potential,  for  the  benefit  of  Greek  energy  consumers  but  also  in 
support  of  EU  targets  on  supply  security  and  climate,  the  following  actions  will  need  to  be 
pursued. 

The  privatisation  of  the  gas  and  electricity  sector  provides  an  opportunity  to  enhance  their 
efficiency. The privatisation process must be finalised swiftly whilst at the same time creating 
a framework for competitive markets to develop in the near future. With a well-functioning 
framework,  including  the  proper  unbundling  and  the  full  opening  up  of  both  the  electricity 
and  gas  markets,  new  investment  opportunities  arise  for  large  and  small  energy  producers. 
This  will  ensure  that  the  Greek  energy  sector  will  become  a  dynamic,  competitive  sector, 
yielding economic benefits to all other sectors of the economy. 

Electricity  and  gas  grids  need  to  be  modernised.  Improvements  in  gas  storage  and  pipeline 
networks will enable Greece to exploit its strategic geographic position providing a gateway 
to  the  European  gas  market.  Electricity  grid  interconnection  of  the  larger  islands  with  the 
mainland and between smaller islands is a prerequisite for the large-scale deployment of wind 
and  photovoltaic  installations.  Reinforcement  of  the  mainland  transmission  grid  is  also 
essential  to  integrate  renewable  energy  installations  for  the  domestic  market  and  to  enable 
massive electricity exports to the rest of Europe. Greece is a natural passage for much of the 
gas originating in the Caspian and Eastern Mediterranean basins.  

The  TEN-E  programme  and  the  new  Connecting  Europe  Facility  can  play  a  major  role  in 
focusing and funding efforts in this area. Clear signals that the energy sector is an open and 
functional  sector  of  the  Greek  economy,  and  access  to  its  infrastructure  is  based  on  non-
discriminatory network access, will also help attract private finance for such investment. 

The widespread deployment of renewable energy sources requires a comprehensive reform 
of the support scheme. To attract the necessary investment the framework will have to adhere 
to  the  principles  of  cost-efficiency  and  financial  stability.  To  exploit  its  comparative 
advantage  Greece  is  placing  special  emphasis  on  the  development  of  solar  and  wind 
resources.  With  investor  confidence  restored,  a  competitive  renewable  energy  sector  can 
develop across the value chain. The contribution of the sector to economic growth could be 
additionally increased by the HELIOS initiative. It should start by launching a few large-scale 
photovoltaic installations, initially for domestic consumption, but as the project scales up and 
as transmission capacity becomes available exports to the rest of Europe should be pursued, 
helping other Member States to achieve their 2020 goals cost-efficiently. 

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Public  and  private  building  renovation  is  critical  to  achieving  energy  efficiency  goals  but 
also  creates  jobs.  The  funding  available  for  households  under  the  “Exoikonomo”  scheme  is 
not used to its full effect and should be made available to SMEs. Additional instruments are 
required to support efforts in public buildings, urban transport and local energy infrastructure. 
In this respect, the proposed risk-sharing instrument could help de-risk the investments in the 
building retrofits sector and as such boost jobs and local growth. 

3.5.2.  Promoting sustainable growth - environment and waste management 

Solid  waste  management  can  make  a  significant  contribution  to  the  quality  of  life  of  Greek 
citizens  and  in  the  development  of  economic  activity.  Full  implementation  of  the  existing 
legislation could create thousands of jobs in Greece and increase the annual turnover of the 
waste  sector  substantially.  Progress  with  solid  waste  management  will  also  facilitate 
compliance  with  EU  environmental  legislation,  and  avoid  potentially  costly  infringement 
procedures. 

Even  though  Greece  has  already  benefited  massively  from  the  EU  structural  funds  for  its 
basic infrastructure in this sector, it is still lagging behind, in particular as regards solid and 
waste  water  management.  Perhaps  more  than  in  any other sector, there is an urgent need to 
work towards respecting the EU acquis in order to create the necessary infrastructure in line 
with EU standards.  

In order to comply with its obligations under EU law and with judgements of the European 
Court of Justice, Greece needs to urgently:  

(a) 

(b) 

build waste facilities (i.e. mechanical-biological treatment plants, landfills) and close 
and rehabilitate all remaining illegal and uncontrolled dumping sites (as regards the 
rehabilitation process, co-financing is available); and  

build several UWWT plants (with special attention needing to be paid to the Attica 
region, but also other major urban agglomerations like Thessaloniki, Patras, etc).  

In  addition,  full  compliance  with  two  Court  rulings  (one  concerning  the  construction  of  an 
urban waste water treatment plant in Western Attica, in the area of Thriassio Pedio, a project 
which is co-financed by the EU structural funds and one concerning the absence of collection 
and treatment of Urban Waste Water in five Eastern Attica agglomerations) must be ensured. 

Legal clarity on producer responsibility (currently absent from Greek legislation) can provide 
Greece  with  the  instruments  to  collect  the  resources  needed  for  implementing  schemes  on 
separate  collection  and  recycling.  Progress  in  establishing  land-fill  taxes  or  pricing  can  also 
contribute  to  enhance  resource  efficiency  as  would  the  application  of  incentive  systems  to 
favour prevention and participation to separate collection ('pay-as-you-throw' schemes). 

As mentioned above, the new EIA (environmental impact assessment) legislation for Greece 
should  lead  to  streamlined  and  more  effective  procedures.  A  new  law  on  environmental 
permits was included in the MoU and the Medium-Term Fiscal Strategy Framework. This law 
was adopted in September 2011 and implementing decisions will be adopted in 2012 (the first 
was adopted in January 2012 and is related to the categorisation of projects to be subject to an 
environmental  assessment/permit).  The  new  law  is  expected  to  reduce  the  time  needed  for 
issuing permits, mainly because it introduces specific deadlines for each of the administrative 

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steps and milestones of the authorisation process. This practice is based on experience in other 
Member States. 

The  EAFRD  supports  the  sustainable  development  of  rural  areas  across  the  whole  Greek 
territory  through  a  variety  of  agri-environmental  measures.  €  720  million  has  already  been 
disbursed for this purpose. 

3.5.3.  Building an innovative, knowledge-based economy 

In  the  last  decade,  R&D  intensity  in  Greece  has  stagnated  at  0.6%  of  GDP  (2007)  and  is 
marked by a very low private R&D intensity, which increased slightly from 0.15% in 2000 to 
0.17%  in  2007,  according  to  the  latest  official  data  available.  In  absolute  terms,  however, 
overall R&D investment grew significantly during the years 2001-2007. 

support  measures.  The 

The main engine behind the Greek research and innovation system is EU cohesion policy. For 
the  current  programming  period  2007-2013and  in  addition  to  the  main  national  operational 
programme,  several  regional  programmes  include  research,  innovation  and  business 
competitiveness 
and 
Entrepreneurship" has a total budget of € 1.5 m illion of which EU cohesion policy provides € 
1.3 million. The Operational Programme has 3 strategic objectives for the period 2007-2013, 
with Research and Innovation as one of the major intervention areas. However, the take-up of 
EU  structural  funds  for  research  is  low  and  the  incentives  for  the  use  of  the  funds  in  the 
private  sector,  in  order  to  encourage  the  transformation  of  the  economy,  are  currently 
insufficient. 

core  programme 

"Competitiveness 

The private sector has a low share in total R&D expenditure, reflecting the weak demand for 
research-based knowledge from the business sector. Also, the low absorptive capacity of the 
business sector is both a cause and effect of the low demand for knowledge. Restricted access 
to  capital,  especially  for  new  firms,  due  to  the  reluctance  of  the  financial  system  to  finance 
innovation and risky investments is among the factors hindering mobilisation of resources for 
R&D. 

Based  on  the  Innovation  Union  Scoreboard  2011,  Greece  ranks  among  the  moderate 
innovators and its performance is below average. Its relative strengths are in human resources, 
linkages  and  entrepreneurship  and  innovators  and  relative  weaknesses  are  in  finance  and 
support,  firm  investments  and  intellectual  assets.  High  growth  is  observed  for  Community 
designs while a relatively strong decline is observed for non-R&D innovation expenditure and 
knowledge-intensive services exports. 

Technological  collaboration  as  expressed  through  co-patenting  applications  is  very  modest 
when compared with the EU average. More than 65% of the total patent applications are made 
by a single inventor and thus less than 35% in collaboration. From these, 7.4% are co-patents 
involving  a  non-EU  country,  a  low  figure  evidencing  the  need  for  a  higher  degree  of 
collaboration and internationalisation of the research and innovation activities. 

Looking ahead, the main challenges are to: 

– 

Ensure adequate and effective R&I public investment and increase the efficiency of 
the  use  of  EU  structural  funds,  through  focussing  on  a  range  of  clusters  and 
technology platforms.  

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– 

– 

Finalise the development of an integrated legal framework for R&D performers and 
implement  it.  This  should  include  the  setting  of  a  Europe  2020  headline  target  for 
R&D investment, associated with multi-annual budgetary programming; 

Ensure  a  much  more  effective  and  growth-enhancing  use  of  structural  funds  by 
promoting private investment in R&I in support of a smart specialisation strategy.  

3.5.4.  Exploiting Greece's potential as a tourist and cultural destination 

Greece  has  a  comparative  advantage  in  culture  and  tourism,  both  of  which  bring  important 
growth  and  job-creating  potential.  Monuments  and  archaeological  sites  are  poles  around 
which economic activities can now be developed. It is important to design rapidly a strategy 
to explore and develop more synergies among culture, tourism, entrepreneurship, education, 
medical  and  gastronomy  sectors  and  to  invest  in  new  technology  (use  of  ICT  to  promote 
Greece cultural treasures) with a view to improving value-for-money and positioning Greece 
as a high-quality tourist destination while focusing on environmentally-friendly tourism. 

Tourism is one of the key sectors in the Greek economy, both in terms of economic growth 
and employment. The direct contribution of the Travel and Tourism industry to the country's 
GDP was €12.6 billion in 2011 (5.6 % of total GDP, the figure for EU is 2.9%). Travel and 
Tourism supported directly 332,000 jobs or 8.0% of the country's total employment (3.2% in 
the  EU),  and  768,000  jobs  or  18.4%  of  total  employment  if  indirectly  supported  jobs  are 
added  (8.4%  in  the  EU).  Yet  Greece  has  had  limited  success  in  attracting  visitors  from 
emerging  markets.  The  tourist  season  is  concentrated  in  the  summer  months  and  tourists 
spend relatively less money in Greece than tourists visiting competing destinations. 

The Greek tourist industry can be developed in a variety of ways, including: 

– 

– 

– 

– 

Increasing demand for tourism: The primary objectives of actions taken in this field 
focus on extending the tourism season, empowering people to go on holiday as well 
as  increasing  the  number  of  tourists  (mainly  from  outside  the  EU).  With  a  mild 
climate  year  round,  Greece  is  very  well  placed  to  benefit  from  receiving  tourists 
outside the core season. The main initiatives aiming at boosting tourism demand in 
the  EU  include  the  Calypso  social  tourism  initiative,  50,000  tourists  or  low  season 
initiative (aimed at combating seasonality) and a web portal to attract visitors from 
outside of the EU. 

Raising  awareness  and  promoting  destinations:  The  main  actions  include  European 
tourism 
Destinations  of  Excellence 
development of small emerging destinations, development of thematic cultural routes 
(i.e. olive tree route) and raising awareness of cycling tourism in the EU. 

(EDEN),  which  promotes  sustainable 

Providing  a  platform  for  exchange  of  best  practices:  The  Tourism  Advisory 
Committee (TAC) constitutes a discussion forum for tourism policy representatives 
from  EU  Member  States.  Greece  can  benefit  from  best  practices  of  other  Member 
States 

The  extension  of  the  tourism  season,  the  diversification  of  tourist  products  and  the 
improvement of the quality of the services offered, to attract higher income tourists, 
should be the main drivers of development of the Greek tourism industry. 

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3.6. 

Strengthening public administration and the judicial system 

3.6.1.  A modern public administration for a new economy 

The  Greek  public  administration  currently  lacks  the  stable,  coordinated  and  empowered 
structures that would provide the necessary ownership and accountability for the reforms set 
out in the Second Economic Adjustment Programme and described in this Communication. It 
is caught up in a very complex legal framework, which has detrimental impacts on all aspects 
of the public service and the economy. The approach of the administration is too focused on 
producing laws rather than on their implementation. 

The  EU  is  supporting  the  administrative  reform  agenda  in  Greece  among  others  through  a 
European Social Fund programme with a budget of € 505 million. The main objective of this 
programme  is  to  enhance  the  quality  of  public  policies  through  the  modernisation  of  the 
regulatory  framework  and  the  reform  of  structures  and  procedures.  The  planned  operations 
include  among  others  flagship  projects  for  the  establishment,  organisation  and  operation  of 
"Units  for  Planning  and  Budgeting"  in  line  ministries,  the  reorganisation  of  the  tax  and 
customs  administration,  the  reorganisation  of  the  General  Accounting  Office  of  Greece  and 
the standardisation of the implementing procedures of the New Civil Servants’ Code. 

To  ensure  that  Greece  has  a  modern  administration  capable  of  supporting  a  revitalised  and 
dynamic economy there is a need to improve the effectiveness, accountability and integrity of 
the administration and to simplify the administration's decision making processes. The MoU 
provides for the modernisation of the public administration by December 2012, by setting up, 
inter  alia,  a  high-level  transformation  steering  group  (created  in  February  2012),  chaired  by 
the  Prime  Minister,  which  will  supervise  the  implementation  of  administrative  reforms.  In 
January 2012, France and Greece, in collaboration with the Taskforce, signed a memorandum 
of understanding paving the way for the implementation of the central administrative reform. 
The German government has started to provide technical assistance for administrative reform 
at the local and regional levels. 

A strong centre of decision making with real inter-ministerial coordination is required - under 
the  MoU  of  the  Second  Economic  Adjustment  Programme  this  has  to  be  delivered  by  May 
2012.  It  will  provide  better  guidance  and  a  more  strategic  vision  across  the  central 
government  by  improving  and  speeding  coordination  among  Ministries,  breaking  the 
currently  vertical  and  intra-Ministry  attitude,  and  by  arbitrating  on  ongoing  inter-ministerial 
issues. This structure will be crucial for the implementation of all reform processes towards 
growth and jobs and of the decisions issued by the High Level transformation steering group.  

Greece  also  needs  to  create  the  necessary  structures  in  each  line  Ministry  for  effective 
monitoring  of  administrative  procedures  (including  expenditure,  internal  control  and  audit, 
Human  Resource  Management  and  ICT)  with  a  view  to  applying  common  rules  and 
harmonised procedures before end 2012.  

All the principles of coherence and efficiency underlying the reform of the administration at 
the  central  level  will  have  to  be  replicated  at  regional/local  level  with  a  view  to  supporting 
growth  and  jobs  at  all  levels  of  the  economy.  In  April  2012,  Germany  and  Greece,  in 
collaboration  with  the  Taskforce,  signed  a  memorandum  of  understanding,  including  a 
roadmap to implement reform in areas such as as improving the supervision and effectiveness 
of  municipalities  and  regions  in  urban  planning,  rural  development  and  strengthening  the 

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capacity of local government to effectively plan, design, implement and monitor investment 
programmes. 

In order to make sure that these funds can be used as effectively as possible, and in order to 
increase transparency of the economy, fighting fraud and corruption is essential. Greece, with 
the  support  of  the  Commission  should  prepare  an  antifraud  strategy  covering  all  aspects  of 
public revenues and expenditures, and including the protection of the financial interests of the 
EU. This will help restoring confidence and establishing a fair and equal level playing field. 
At the same time, an effective fight against fraud and corruption, including the fight against 
smuggling at the borders, will contribute to stabilising Greece's revenue further. 

Government use of IT in Greece is currently very low.. Improving the situation would help to 
speed-up  procedures,  streamline  processes  and  increase  transparency  for  the  administration 
and  business.  The  Greek  authorities  have  started  the  implementation  of  projects  in  several 
major e-government fields, namely Enterprise Resource Planning (ERP) (Finance and HRM), 
Citizen Relationship Management and e-Procurement. The Greek Authorities intend to deploy 
these  projects  in  the  priority  sectors  of  finance,  administrative  reform  and  health.  The 
deployment of e-Government will have to be done in coordination and as a complement to the 
reform of the administrative procedures. 

The restoration of the credibility of official statistics is an essential part of the social contract 
that  will  allow  the  stabilisation  of  Greece.  While  significant  progress  has  been  made  since 
2009, statistics remain a divisive issue in Greek society. The reestablishment of confidence in 
statistics  will  require  the  full  implementation  of  the  action  plan  included  in  the  recent 
Commitment on Confidence in statistics, signed on 29 February by the Greek government, the 
Commission  and  approved  by  the  Parliament.  This  implies  the  review  of  the  Statistical  law 
and  the  provision  of  the  necessary  financial  and  human  resources  to  the  National  Statistical 
Authority. 

3.6.2.  Restoring confidence in the judicial system 

A dysfunctional judiciary is an obstacle to economic development  and undermines  Greece's 
social fabric. It is a system that allows debtors - including unwilling tax payers - of all kinds 
to abscond at will, knowing that none but the most determined of creditors will pursue them 
through  court  and  enforcement  action.  A  backlog  of  hundreds  of  thousands  of  cases  in  the 
courts  and  long  delays  in  obtaining  a  hearing  date  are  the  most  visible  signs  of  the 
malfunctioning  of  the  Greek  justice  system.  This  has  led  to  a  general  feeling  of  ‘injustice’ 
amongst Greek people. The Greek authorities have shown a clear willingness to change this 
situation and to make important efforts to create an efficient and citizen- and business-friendly 
judiciary.  A  comprehensive  and  much-needed  review  of  the  judicial  system  is  underway. 
These reforms are designed to re-establish trust in the functioning of the Greek State and its 
institutions and support economic recovery. 

The  Greek  government  has  committed  to  meet  a  series  of  targets  for  the  elimination  of  the 
backlog of tax cases before the administrative courts and for the reduction of the backlog in 
civil cases. It has also undertaken to promote alternative dispute resolution methods to free-up 
resources in courts and help to develop a non litigious culture and find more economic ways 
of resolving problems and conflicts. The Commission is working with the Greek authorities 
and stakeholders in this area. 

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As long as potential investors do not believe that the Greek judiciary is efficient and fair and 
will  uphold  their  rights,  they  are  unlikely  to  take  important  investment  decisions.  Taking 
further measures to find efficient ways of recovering debt owed to the State and streamlining 
the  legal  framework  for  transactions  in  immovable  property  will  boost  investor  confidence 
and  at  the  same  time  increase  state  revenue.  Building  a  modern  e-justice  system  will  make 
justice swifter and more transparent with substantial gains in time and efficiency likely to be 
felt  by  users  of  the  justice  system  and  improved  performance  of  judicial  officials. 
Rationalisation and reorganisation of the magistrates’ courts will not only lead to cost savings 
but also bring justice closer to the citizen by establishing these courts as a one-stop gateway to 
justice  for  most  of  the  common  justice  issues  with  which  citizens  are  confronted  (e.g. 
authentication of documents, family law and inheritance matters etc.). 

A modern insolvency regime is key to facilitating both the orderly market exit of inefficient 
companies  and  the  restructuring  of  viable  companies.  Insolvency  reform  is  one  of  the  areas 
for close attention and the Commission stands ready to work with the Greek government in 
this regard. 

3.7. 

Tackling the social impact of the crisis 

Prior to the crisis, Greece already suffered from one of the highest poverty rates in the EU. 
The overall at-risk-of-poverty or social exclusion rate for the total population stood at 27.7 % 
in 2010, higher than the EU average of 23.5%. The in-work poverty rate in Greece was the 
second  highest  in  the  EU  in  2010.  The  deep  economic  downturn  has  increased  levels  of 
poverty and social and housing exclusion and has hit disposable income (down 9.3% in 2010). 
Homelessness is increasing among families with children and young people, as well as among 
the rising numbers of irregular migrants, which have further exacerbated the pressures. Urgent 
action is needed to address these problems.  

The Commission is working with the Greek authorities to tackle the unacceptably high levels 
of youth unemployment. In order to focus financial support where it is needed most, funding 
could  be  redirected  to  boost  measures  supporting  youth  employment.  These  measures 
currently  include  actions  supporting  the  acquisition  of  first  work  experience;  subsidising 
short-term  job  placements  in  the  private  section  or  in  local  communities;  expanding 
apprenticeship  or  traineeship  opportunities  for students  and  graduates;  promoting  re-skilling 
or up-skilling; boosting entrepreneurship, including social entrepreneurship; and study periods 
abroad. 

An  additional  €200-250  million  could  be  availabl e  for  reallocation  in  this  way,  potentially 
leading to the creation of thousands of jobs. 

There  are  a  number  of  other  short-term  priorities  where  immediate  action  is  necessary.  The 
European Social Fund can help to improve the functioning of the labour  market,  strengthen 
the links between education/training and the labour market, enhance human capital and tackle 
widespread  undeclared  labour.  Public  employment  services  should  be  strengthened  to  offer 
better services to the rising number of unemployed. More effective and targeted investment in 
active labour market policies is needed and a more systematic evaluation of the effectiveness 
of active labour market measures should be undertaken. Priority should be given to the most 
vulnerable  groups  (low-skilled  unemployed,  early  school  leavers,  older  workers,  long-term 
unemployed, migrants and minorities, etc).  

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EU  structural  funds  could  also  be  mobilised  to  set  up  and  finance  an  integrated  urban 
regeneration strategy to fight against poverty and social exclusion. 

In order to prevent social marginalisation and provide members of vulnerable groups with the 
skills  required  for  entering  or  re-entering  the  labour  market,  the  national  lifelong  learning 
strategy announced in 2011 should be implemented. This should include widening the access 
to  education  and  training  to  non  traditional  learners  by  involving  regional  and  local 
communities as well as higher education institutions. 

Improved  access  to  employment,  notably  through  the  increased  financial  support  to 
entrepreneurship (with focus on new innovative products and services) and the wider use of 
wage subsidies for short-term recruitment especially focused on disadvantaged groups, should 
be considered to provide temporary economic relief and an opportunity to those most affected 
by the crisis to remain in the labour market. The development of the social economy will also 
create  new  employment  opportunities  led  by  social  entrepreneurs  and  innovators  in  key 
sectors such as social care, services for the unemployed, local and community development, 
food production and distribution and energy efficiency. 

3.8.  Managing migration and asylum  

Greek membership of the Schengen area provides freedom of movement for Greek citizens to 
other  countries  and  for  travellers  to  Greece.  This  underpins  travel,  tourism  and  business 
relations,  which  are  beneficial  to  the  economy.  However,  the  strong,  irregular  migratory 
pressures faced by Greece in recent years, coupled with the current economic crisis, is having 
a  negative  social  and  economic  impact,  and  endangering  the  smooth  functioning  of  the 
Schengen  area.  The  humanitarian  situation  faced  on  occasions  by  migrants  and  asylum 
seekers is tarnishing the image of Greece and is not in line with its long standing human rights 
and hospitable tradition. 

In  order  to  tackle  this  issue,  Greece  needs  to  continue  to  reform  its  asylum  and  migration 
policies and to efficiently manage its external borders. The frameworks for action, namely the 
Action Plan on Migration and Asylum Management and the Action Plan "Schengen-Greece" 
are  already  in  place.  They  must  now  be  implemented  including  through  the  adoption  and 
implementation  of  standards  in  the  field  of  migration  and  asylum  which  are  in  conformity 
with  existing  EU  law  and  Greece's  international  obligations.  Greece  needs  to  improve  the 
humanitarian situation of migrants and asylum seekers in the Greek/Turkish border region and 
in Athens and to enhance reception capacity for both irregular migrants and asylum seekers, 
with  a  particular  focus  on  vulnerable  groups.  It  should  also  build  capacity  in  the  field  of 
voluntary  return,  in  full  respect  of  fundamental  rights.  There  is  considerable  untapped 
potential, as many migrants find themselves trapped in Greece, with no real opportunities for 
integration and would be interested to return to their countries of origin.  

The  EU  has  provided  significant  financial  support  for  asylum,  migration  and  border 
management systems and to address the humanitarian consequences of the pressure generated 
by  high  numbers  of  irregular  migrants  and  asylum  seekers.  Greece  is  one  of  the  main 
beneficiaries of the Solidarity and Management of Migration Flows (SOLID) programme. 

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