Proposal for a COUNCIL IMPLEMENTING DECISION amending Council Implementing Decision 2015/1411/EU on approving the macroeconomic adjustment programme of Greece
Date: 2017-06-02
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Euro Group (euro area), Greece, economic recovery, economic stabilisation, gross domestic product, macroeconomics, multilateral surveillance, public debt, stability programme, structural adjustment

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   EUROPEAN COMMISSION  Brussels, 2.6.2017  COM(2017) 314 final 2017/0129 (NLE)   Proposal for a COUNCIL IMPLEMENTING DECISION amending Council Implementing Decision 2015/1411/EU on approving the macroeconomic adjustment programme of Greece   
 
 
EXPLANATORY MEMORANDUM 

In response to a request of 8 July 2015 from the Hellenic Republic to the Chairperson of the 
Board of Governors of the European Stability Mechanism (ESM) for stability support in the 
form  of  a  loan  with  an  availability  period  of  three  years,  the  ESM  Board  of  Governors  
requested  the  European  Commission,  in  liaison  with  the    European  Central  Bank,  together 
with the International Monetary Fund, to agree on a Memorandum of Understanding detailing 
the  conditionality  for  a  financial  assistance  facility  covering  the  period  2015-2018  in 
accordance  with  Article  13(3)  of  the  ESM  Treaty  and  on  a  macroeconomic  adjustment 
programme  for  Greece.  The  programme  was  prepared  in  accordance  with  the  procedure 
provided for under Article 7(1) of Regulation (EU) No 472/2013.  On 11 August 2015, those 
institutions  reached  an  agreement  at  technical  level  on  a  macroeconomic  adjustment 
programme (the "Programme") with the Greek government. 

On  a  proposal  by 
the  Commission, 
2015/1411/EU approving the Programme. 

the  Council  adopted  Implementing  Decision 

In accordance with Article 1(2) of Decision 2015/1411/EU, the Commission, in liaison with 
the  European  Central  Bank  (ECB)  and,  where  appropriate,  with  the  International  Monetary 
Fund (IMF), has conducted a second review to assess the progress with the implementation of 
the  agreed  measures  as  well  as  their  effectiveness  and  economic  and  social  impact.  As  a 
consequence  of  that  review,  an  update  has  been  made  to  the  existing  macroeconomic 
adjustment programme, reflecting the steps taken by the Greek authorities by the end of the 
first quarter of 2017. 

Following  discussions  between  those  institutions  and  the  Greek  government,  in  accordance 
with the procedure provided for under Article 7(5) of Regulation (EU) No 472/2013 and the 
definition of the conditionality underpinning the Programme, the Commission has adopted a 
proposal  for  a  Council  Implementing  Decision  amending  Implementing  Decision 
2015/1411/EU  on  approving  the  macroeconomic  adjustment  programme  of  Greece  under 
Regulation (EU) No 472/2013. 

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2017/0129 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Council Implementing Decision 2015/1411/EU on approving the 
macroeconomic adjustment programme of Greece 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Regulation  (EU)  No  472/2013  of  the  European  Parliament  and  of  the 
Council  of  21  May  2013  on  the  strengthening  of  economic  and  budgetary  surveillance  of 
Member  States  in  the  euro  area  experiencing  or  threatened  with  serious  difficulties  with 
respect to their financial stability1, and in particular Article 7(5) thereof,  

Having regard to the proposal from the European Commission,  

Whereas:  

(1) 

(2) 

(3) 

(4) 

1 
2 

On  16  July  2015,  the  European  Stability  Mechanism  ('ESM')  Board  of  Governors 
invited the Commission, in liaison with the European Central Bank ('ECB'), the ESM, 
the  Greek  authorities,  and,  where  appropriate,  the  International  Monetary  Fund 
('IMF'), to agree on a macroeconomic adjustment programme for Greece in the form of 
a loan. The programme  was prepared in  accordance with  the procedure provided for 
under  Article  7(1)  of  Regulation  (EU)  No  472/2013.  On  11  August  2015,  those 
institutions  reached  an  agreement  at  technical  level  on  a  macroeconomic  adjustment 
programme  (the  'Programme')  with  the  Greek  government.  On  a  proposal  by  the 
Commission,  the  Programme  was  adopted  by  the  Council  in  the  form  of  a  Council 
Implementing decision (2).  

Following  that  agreement,  Greece  adopted  a  comprehensive  policy  package,  to  be 
implemented  in  a  three-year  ESM  macroeconomic  adjustment  programme,  which 
would span from the third quarter of 2015 to the third quarter of 2018.  

The  comprehensive  policy  package,  laid  down  in  an  ESM  Memorandum  of 
Understanding  on  Specific  Economic  Policy  Conditionality  (the  'Memorandum  of 
Understanding') of 19 August 2015, aims at restoring financial market confidence, re-
establishing  sound  macroeconomic  balances  and  enabling  the  economy  to  return  to 
sustainable  growth.  It  is  structured  on  four  pillars:  restoring  fiscal  sustainability, 
safeguarding  financial  stability,  enhancing  competitiveness  and  growth,  and 
modernising the State and the public administration. 

After  a  first  review  of  the  Programme  was  completed  and  following  the  Eurogroup 
statement of 25 May 2016, a positive assessment by the Commission and ECB of the 
implementation  of  the  Programme  and  the  approval  of  the  ESM,  on  16  June  2016 

OJ L 140, 27.5.2013, p. 1. 
Council  Implementing  Decision  (EU)  2015/1411  of  20  August  2015  approving  the  macroeconomic 
adjustment programme of Greece (OJ L 219, 20.8.2015, p. 12). 

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(5) 

(6) 

(7) 

(8) 

(9) 

Greece  and  the  Commission  on  behalf  of  the  ESM  signed  a  Supplementary 
Memorandum of Understanding. The Supplementary Memorandum of Understanding 
updates the policy conditions set out in the Memorandum of Understanding to reflect 
the progress achieved in the implementation of the Programme. 

The  Eurogroup  on  25  May  2016  also  considered  the  sustainability  of  Greek  debt.  It 
agreed on a package of debt measures to be phased in progressively, as necessary to 
meet  the  agreed  benchmark  on  gross  financing  needs.  It  agreed  that  the  first  set  of 
measures would be implemented in the short term, that is, after the closure of the first 
review  and  up  to  the  end  of  the  Programme.  On  23  January  2017,  the  Boards  of 
Directors  of  the  ESM  and  European  Financial  Stability  Facility  adopted  the  rules 
implementing 
the 
implementation of which has begun. The Eurogroup of 25 May 2016 also agreed that 
after  the  successful  implementation  of  the  Programme  by  mid-2018,  the  Eurogroup 
expected  the  implementation  of  a  possible  second  set  of  measures  if  needed  to  meet 
the agreed debt sustainability benchmarks.  

the  set  of  short-term  debt  relief  measures  for  Greece, 

On  25  May  2016  the  Eurogroup  welcomed  the  intention  of  the  IMF  management  to 
recommend  to  the  Fund's  Executive  Board  to  approve  a  financial  arrangement  for 
Greece.  The  Eurogroup  confirmed  that  position  on  5  December  2016  and  it  also 
stressed  the  need  for  shared  conditionality,  agreed  between  all  the  institutions  and 
Greece3.  On  5  December  2016  the  Eurogroup  also  called  upon  the  institutions  and 
Greece  to  swiftly  resume  negotiations  in  order  to  reach  a  staff  level  agreement  (as 
soon  as  possible,  based  on  such  shared  conditionality  and  mandated  the  Eurogroup 
Working  Group  to  assess  that  staff  level  agreement.  That  conditionality  includes  the 
adoption of a pre-legislated fiscal package to help ensure a primary surplus of 3,5% of 
GDP over the medium term.   

The  Greek  economy  has  shown  a  high  degree  of  resilience  to  the  environment  of 
elevated uncertainty and the imposition of capital  controls, with  GDP contracting by 
only  0,2%  in  2015.  In  2016,  the  Greek  economy  stagnated,  as  nascent  growth  in 
private  consumption  was  offset  by  a  decline  in  public  consumption  and  net  exports. 
The Commission Spring 2017 forecast projects the Greek economy to grow by 2,1% 
and  2.5%  in  2017  and  2018  respectively,  on  the  back  of  improving  economic 
sentiment supporting investment and consumption. 

Under that forecast, the debt-to-GDP ratio would amount to 179,0% in 2016, 178,8% 
in 2017, 174,6% in 2018 and 165,2% in 2019. The debt-to-GDP ratio would therefore 
move to a declining path as from 2017. Greece achieved primary surpluses of 0,5% of 
GDP  in  2015  and  4,2%  of  GDP  in  2016,  outperforming  its  Programme  targets  of  -
0,25% and 0,5% of GDP, respectively. The Greek authorities will pursue a fiscal path 
premised  on  primary  surplus  targets  of  1,75%  of  GDP  in  2017  and  3,5%  of  GDP  in 
2018 and over the medium term. The trajectory of the fiscal targets is consistent with 
expected growth rates of the Greek economy as it recovers from its deepest recorded 
recession. 

In light of the updated forecasts of the Commission services and of the results of the 
second  review  conducted  by  the  Commission,  in  liaison  with  the  ECB  and,  where 
appropriate,  with  the  IMF,  an  update  should  be  made  to  the  existing  Programme, 
reflecting  the  reforms  undertaken  by  the  Greek  authorities  by  the  end  of  the  first 
quarter of 2017. On that basis, the updated conditionality should outline the range of 

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policies needed for a successful implementation of the Programme in the future, with 
the aim to return the Greek economy to sustainable growth. It is, therefore, appropriate 
to modify Council Implementing Decision (EU) 2015/1411. 

(10)  Any form of financial assistance received by Greece to help it implement the policies 
under its Programme should be in line with the legal requirements and policies of the 
Union, in particular the Union’s economic governance framework and the Charter of 
Fundamental  Rights.  To  the  extent  that  any  of  the  measures  envisaged  in  the 
macroeconomic  adjustment  programme  limit  the  exercise  of  the  rights  and  freedoms 
recognised by the Charter of Fundamental Rights, those limitations are in conformity 
with Article 52(1) thereof. Any intervention in support of financial institutions should 
be carried out in accordance with the Union’s rules on competition. The Commission 
should ensure that any measures laid down in a Memorandum of Understanding in the 
context of requested ESM financial assistance is fully consistent with this Decision, 

HAS ADOPTED THIS DECISION:  

Article 2 of Council Implementing Decision (EU) 2015/1411 is replaced by the following: 

Article 1 

1. 

2. 

Greece  shall  pursue  fiscal  consolidation  by  means  of  high-quality  permanent 
measures  while  minimising  the  impact  on  disadvantaged  people.  The  Greek 
authorities  commit  to  ensuring  sustainable  public  finances  and  achieving  sizeable 
and sustainable primary surpluses over the medium-term that will reduce the debt-to-
GDP  ratio  steadily.  Greece  shall  accordingly  pursue  a  fiscal  path  premised  on 
primary surplus targets of 1,75% of GDP in 2017 and 3,5% of GDP as of 2018 and 
over  the  medium-term.  The  authorities  commit  to  take  further  structural  measures 
yielding 0,3% of GDP by 2018 in order to secure the targeted primary surplus path. 
Measures to achieve those primary surplus targets, and agreed as part of the second 
review  of  the  Programme,  shall  include:  the  streamlining  of  welfare  benefits  and 
abolition  of  tax  expenditures  based  on  the  recommendations  of  the  World  Bank's 
Social Welfare Review; rationalization of healthcare spending through widening the 
scope  of  the  closed  budget  framework  and  the reduction  of  claw-back  ceilings;  the 
introduction  of  a  tax  on  short-term  tourist  accommodation  rentals;  and  the 
rationalization of certain performance incentives and allowances in the public sector. 

In  support  of 
toward  more  growth-friendly  and 
distributionally fair policies, while ensuring that medium-term fiscal targets are met, 
the authorities shall legislate the following actions:  

the  budget 

rebalancing 

i. 

ii 

iii 

medium-term  fiscal  strategy  for  2018-2021  in  line  with  agreed  medium-term 
targets, which should be reached without growth-detrimental measures; 

pension  reform  delivering  net  savings  of  1%  of  GDP  over  the  medium  term 
and a personal income tax reform to be implemented and delivering net savings 
of 1% of GDP in 2020 and over the medium term;   

growth-enhancing  tax  package  matching,  in  net  terms,  the  yield  from  the 
personal income tax reform encompassing: (i) a reduction in  personal income 
tax  rates  and  the  solidarity  surcharge  with  a  medium-term  fiscal  impact  of 
0,8%  of  GDP;  (ii)  a  reduction  in  corporate  income  tax  rates  with  a  medium-

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iv 

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term  fiscal  impact  of  0,1%  of  GDP,  and  (iii)  a  reduction  in  property  tax 
(ENFIA) with an impact of 0,1% of GDP;  

targeted  spending  package matching, in  net terms,  the yield  from the pension 
reform  composed  of:  (i)  an  increase  in  spending  on  targeted  welfare  benefits 
(housing  allowance;  child  benefits;  school  meals;  early  childhood  education 
and  care/pre-school  education;  means-tested  reduction  in  health  co-payments) 
of 0,7% of GDP, (ii) high-quality public infrastructure investment of 0,15% of 
GDP, and (iii) active labour market policies of 0,15% of GDP;  

the personal income tax measures will be implemented in 2019 if, based on a 
forward-looking  assessment  in  the  context  of  the  final  programme  review,  a 
frontloaded  implementation  is  needed  in  order  to  reach  the  agreed  3,5%  of 
GDP  primary  surplus  fiscal  target  in  2019,  which  should  be  reached  without 
growth-detrimental measures;  

the expansionary package will be implemented starting in 2019, contingent on 
an  assessment  and  agreement  in  the  final  programme  review,  following  a 
transparent  process,  with  the  amount  to  be  implemented  in  line  with  the 
institutions’  projected  over-performance  relative  to  the  agreed  medium-term 
targets in order to ensure that these are achieved. 

The authorities shall complete the framework needed for the full implementation of 
the  Independent  Authority  of  Public  Revenue  and  for  its  effective  operation.  They 
shall take further measures to improve tax compliance, including legislation for the 
promotion and facilitation of the use of electronic payments. Measures to strengthen 
the  fight  against  tax  evasion  shall,  inter  alia,  aim  at  improving  the  model  of 
cooperation between the justice and tax administrations.   

The  authorities  shall  take  measures  to  further  strengthen  the  budget  process  and 
public  financial  management.  They  shall  ensure  that  national  legislation  is  fully  in 
line with the Treaty on Stability, Coordination and Governance in the Economic and 
Monetary Union (Fiscal Compact). The authorities shall also present a medium-term 
action  plan  to  ensure  that  payments  are  made  in  compliance  with  Directive 
2011/7/EU of 16 February  2011 of the European Parliament  and  of the Council on 
combating  late  payment  in  commercial  transactions.4  They  shall  strengthen  the 
public procurement framework, including by fostering central procurement. 

The  authorities  shall  fully  implement  the  new  legislative  provisions  of  the 
comprehensive pension reform of 2016. To rationalize public health expenditure, the 
authorities shall take structural measures focusing on improving efficiency, including 
a  closed  budget  (clawback  ceiling)  to  cover  items  previously  not  under  clawback. 
They shall publish an updated price bulletin to reduce pharmaceutical prices, update 
and publish on a  regular basis the positive and the negative lists, and adopt  further 
measures to improve generics penetration. 

The  authorities  shall  ensure  the  smooth  roll-out  and  implementation  of  the  new 
Social Solidarity Income scheme. They shall undertake a major reform of the welfare 
system,  based  on  the  relevant  recommendations  of  the  Social  Welfare  Review 
provided by the World Bank. That reform shall aim at streamlining the system and 
better  targeting  the  needs  of  the  most  vulnerable,  including  the  re-direction  of 
resources to the financing of the national roll-out of the new Social Solidarity Income 
scheme.  

3. 

4. 

5. 

6. 

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OJ L 48, 23.2.2011, p. 1. 

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7. 

8. 

9. 

10. 

To  safeguard  financial  stability,  the  authorities  shall  publish  a  roadmap  for  the 
relaxation of capital controls, avoiding undue delays without compromising financial 
stability.  They  shall  assess  and  address  impediments  to  the  secondary  market  for 
non-performing  loans  identified  in  the  report  on  the  review  of  implementation  of 
Law  4354/2015,  in  order  to  streamline  the  licencing  process  for  servicers  of  non-
performing loans. The authorities shall establish an out-of-court workout scheme for 
non-performing loans and ensure its smooth implementation, allowing for both large 
and smaller debtors with a debt above a minimum threshold into the mechanism, and 
subjecting  all  elements  of  debt,  including  private  and  public  debt,  excluding  social 
security contributions and withheld taxes, to the debt-restructuring mechanism. The 
authorities  shall  also  modernise  the  corporate  insolvency  framework  and  ensure  its 
effective implementation, with a key focus on the role of insolvency administrators. 
They shall review the Code of Civil Procedure, with a view to bringing it in line with 
Union best practices. 

To promote growth, competitiveness and investment, the authorities shall continue to 
design  and  implement  a  wide  range  of  reforms  in  product  markets  that  aim  at 
achieving  Union  best  practices.  Reforms  shall  include:  further  implementation  of 
OECD  Toolkit  recommendations  to  remove  impediments  to  competition  across  a 
wide  range  of  sectors;  reforms  to  liberalise  investment  licensing  and  reduce  the 
administrative  burden  of  starting  a  business;  further  steps  in  the  liberalisation  of 
regulated  professions;  reforms  to  modernise  the  framework  for  land  use,  including 
spatial planning and cadastre; and measures to enhance the functioning of the water 
and transport sectors.    

Regarding  labour  markets,  Greece  shall  adopt  legislation  to  clarify  that  the  2011 
collective bargaining reforms will be extended until the end of the Programme. The 
authorities  shall  replace  the  current  administrative  framework  for  collective 
dismissals  with  a  notification  procedure  of  no  more  than  three  months  which  shall 
not involve ex-ante approval, and shall amend legislation on industrial action. They 
shall  also  take  further  steps  to  combat  undeclared  work,  strengthen  vocational 
education and training, and implement the three-year action plan on education. 

The  authorities  shall  continue  the  implementation  of  wide-ranging  reforms  in  the 
energy markets, to bring them in line with Union legislation and policies, make them 
more modern and competitive, reduce monopolistic rents and inefficiencies, promote 
innovation, favour the wider adoption of renewables and gas, and ensure the transfer 
of  benefits  of  all  those  changes  to  consumers.  In  the  electricity  market,  in  order  to 
bring  the  market  share  of  the  incumbent  to  the  agreed  targets,  the  authorities  shall 
continue  the  implementation  of  electricity  auctions,  and  propose  unconditional 
structural measures to divest a share of the generation capacity of the incumbent, in 
line with the relevant Decisions of the European Commission5. The authorities shall 
also  continue  the  process  leading  to  the  full  ownership  unbundling  of  the 
transmission  system  operator  from  the  incumbent,  continue  the  implementation  of 
the  reform  of 
timely 
implementation  of  other  market 
the  gas  market,  continued 
reforms. 
implementation  of    the  existing  reforms  shall,  inter  alia,  lead  to  full  eligibility  to 
switch  supplier  for  all  customers  by 2018,  as  scheduled.  The  authorities  shall  take 
further  action  to  remove  remaining  obstacles  to  effective  competition  in  the 

incentives  for  renewable  energies,  and  ensure 

the 

In 

5 
Decisions C(2008) 824 final and C(2009) 6244 final, which were upheld by Judgments of the General 
Court  of  the  European  Union  of  15  December  2016  in  Case  T-169/08  RENV  and  Case  T-421/09  RENV 
respectively. 

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11. 

12. 

wholesale  and  retail  gas  markets,  and  to  promote  interconnections,  as  well  as  the 
diversification of the sources of supply.  

The  authorities  shall  continue  to  implement  an  ambitious  privatisation  programme 
and  policies  that  support  investment.  The  authorities  commit  to  facilitate  the 
privatisation process and complete all needed government actions to allow tenders to 
be  executed  successfully.  In  that  respect  the  authorities  shall  complete  all  actions 
needed  as  agreed  on  a  quarterly  basis  between  the  Hellenic  Republic  Asset 
Development  Fund  (‘HRADF’),  the  institutions  and  the  government.  The  List  of 
Government  Pending  Actions  has  been  approved  by  the  Board  of  Directors  of  the 
HRADF.  Following  the  establishment  of  the  Hellenic  Corporation  for  Assets  and 
Participations (HCAP), which shall have in its possession valuable Greek assets, the 
authorities  shall  ensure  that  the  management  and  internal  rules  of  HCAP  complies 
with  international  standards  and  best  practices,  including  the  OECD  Guidelines  on 
Governance  of  State-Owned  Enterprises.  The  overarching  objective  of  HCAP  is  to 
manage valuable Greek assets;  and to  protect, create and ultimately maximise their 
value which it shall monetise through privatisations and other means. 

A modern State and public administration shall continue to be a key priority of the 
Programme.  The  authorities  shall  pay  particular  attention  to  the  implementation  of 
the  measures  already  taken  under  the  Programme  to  increase  the  efficiency  of  the 
public  sector  in  the  delivery  of  essential  public  goods  and  services,  with  special 
reference  to  the  recruitment  and  de-politicisation  of  managers,  performance 
evaluations,  and  mobility.  Measures  shall  be  taken  to  enhance  the  effectiveness  of 
the  judicial  system,  including  by  allowing  for  the  implementation  of  electronic 
auctions,  and  to  upgrade  the  fight  against  corruption.  The  institutional  and 
operational independence of key institutions, such as the revenue administration and 
the statistics institute (Elstat), shall be strengthened through further implementation 
of adopted reforms.' 

This Decision is addressed to the Hellenic Republic.  

Article 2 

Done at Brussels, 

For the Council 
The President 

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