COMMUNICATION FROM THE COMMISSION Enhanced Surveillance - Greece, February 2019
Date: 2019-02-27
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Euro Group (euro area), Greece, economic recovery, gross domestic product, macroeconomics, multilateral surveillance, public debt, stability programme, structural adjustment, sustainable development

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  EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2019  COM(2019) 201 final  COMMUNICATION FROM THE COMMISSION Enhanced Surveillance - Greece, February 2019 {SWD(2019) 201 final}  
 
 
Background 

Greece  has  been  integrated  into  the  European  Semester  for  economic  policy  coordination 
following the completion of the ESM stability support programme. To cater for the specific needs 
and challenges facing Greece, the Commission also activated enhanced surveillance under Regulation 
(EU)  No  472/2013,1    effective  from  21  August  2018  and  extended  for  a  further  six  months  by  a 
Commission Decision of 20 February 20192.   

Enhanced  surveillance  provides  a  comprehensive  framework  for  monitoring  economic 
developments  and  the  pursuit  of  policies  needed  to  ensure  a  sustainable  economic  recovery.  It 
provides for a regular  assessment of recent economic and financial developments in Greece, as well as 
for  monitoring  sovereign  financing  conditions  and  updates  of  the  debt  sustainability  analysis. 
Enhanced surveillance also provides the basis for assessing the general commitment given by Greece 
to the Eurogroup of 22 June 2018 to continue and complete reforms adopted under the ESM stability 
support programme and to safeguard the objectives of the reforms adopted under that programme and 
its  predecessors.  In  that  context,  it  provides  the  basis  for  monitoring  the  implementation  of  specific 
reform commitments annexed to the Eurogroup statement of 22 June 2018 in the areas of (i) fiscal and 
fiscal-structural policies, (ii) social welfare, (iii) financial stability, (iv) labour and product markets, (v) 
privatisation and (vi) public administration.3 

This  is  the  second  enhanced  surveillance  report  for  Greece  and  it  is  adopted  alongside  the 
European  Semester  country  report  for  Greece.  In  the  context  of  enhanced  surveillance,  the 
Commission,  in  liaison  with  the  European  Central  Bank  (ECB)4  and,  where  appropriate,  the 
International Monetary Fund (IMF), conducts regular review missions to verify the progress made; the 
ESM participates both in the context of its Early Warning System and in line with the Memorandum 
of  Understanding  of  27  April  2018  on  working  relations  between  the  Commission  and  ESM.  In 
preparation of that report, a joint mission to Athens took place on 21 to 25 January 2019. 

This report could serve as a basis for the Eurogroup to decide on the release of the first set of 
policy-contingent debt measures worth EUR 970 million. The Eurogroup of 22 June 2018 agreed 
that the package of debt relief measures for Greece should include incentives to ensure a strong and 
continuous  implementation  of  the  reform  measures  agreed  in  the  programme.  To  that  end,  certain 
policy-contingent debt measures are made available to Greece on a semi-annual basis up to mid-2022, 
subject to compliance with its commitments on reform continuity and completion, based on positive 
reports under enhanced surveillance. Those debt measures include: (i) the return of income equivalent 
amounts  stemming  from  central  banks'  holdings  of  Greek  government  bonds  under  the  Securities 
Markets  Programme  and  the  Agreement  on  Net  Financial  Assets  and  (ii)  a  waiver  of  the  step-up 
interest rate margin for certain loans provided by the European Financial Stability Facility. 

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4

 The Commission published its first assessment under enhanced surveillance on Greece on 21 November 2018. See Enhanced Surveillance 
Report – Greece, November 2018, Institutional Paper 90, November 2018.  
 The Commission activated enhanced surveillance for Greece under Regulation (EU) No 472/2013 (OJ L 140, 27.5.2013, p. 1), effective as 
from 21 August 2018 for a duration of six months (Commission Implementing Decision (EU) 2018/1192 of 11 July 2018 on the activation 
of  enhanced  surveillance  for  Greece,  OJ  L  211,  22.8.2018,  p.  1).  Enhanced  surveillance  was  prolonged  for  further  six  months  on  20 
February 2019 (Commission Implementing Decision (EU) 2019/1481 of 20 February 2019 on the prolongation of enhanced surveillance 
for Greece). 
  https://www.consilium.europa.eu/media/35749/z-councils-council-configurations-ecofin-eurogroup-2018-180621-specific-commitments-
to-ensure-the-continuity-and-completion-of-reforms-adopted-under-the-esm-programme_2.pdf  
  ECB  staff  participated  in  the  review  mission,  and  in  accordance  with  the  ECB’s  competences,  provided  expertise  on  financial  sector 
policies and macro-critical issues, such as headline fiscal targets and sustainability and financing needs. 

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Economic outlook 

The Commission expects real GDP to grow at a rate of 2% in 2018 and to accelerate to around 
2.2% and 2.3% in 2019 and 2020, respectively.5 Domestic drivers of growth (private consumption 
and investment) should strengthen, while contributions from the external sector may moderate because 
of the EU’s projected economic slowdown and increasing imports. 

Labour  market  conditions  continued  improving  in  the  second  half  of  2018.  The  unemployment 
rate dropped to 18.5% in November 2018, down from its peak of 27.9% in mid-2013 and from 20.8% 
at the end of 2017. However, long-term unemployment (13.5% in the third quarter of 2018) and youth 
unemployment  (39.1%  in  November  2018)  remain  high.  Wage  developments  so  far  have  been 
subdued.  

Overall,  the  balance  of  risks  is  tilted  to  the  downside.  Consumption  growth  may  be  higher  than 
expected in 2019, should the recent increase in the minimum wage translate into higher consumption 
spending.  However,  downside  risks  dominate  the  forecast.  Possible  wage  pressures  pose  downside 
risks both on investment recovery and on export performance due to losses in competitiveness. Risks 
to investment are exacerbated by the high level of non-performing loans which continues to weigh on 
the  intermediation  capacity  of  banks.  Finally,  the  global  and  in  particular  the  EU  slowdown,  may 
further hamper Greece's recovery. 

Fiscal and fiscal structural policies  

Greece is likely to have over-achieved the primary surplus target of 3.5% of GDP in 2018, which 
would be the fourth year in a row when targets have been exceeded. This takes account of wage 
refunds  paid  to  uniformed  personnel  and  other  public  officials  following  a  court  ruling  and  the 
payment of a means-tested transfer (‘social dividend’), both implemented at the end of 2018. Based on 
latest  available  information,  the  primary  surplus  may  exceed  the  level  of  3.7%  projected  in  the 
Commission’s Autumn 2018 forecast. Outturn data for 2018 will be available in April 2019, and the 
scale of the overshooting relative to the primary surplus will, inter alia, depend on the underspending 
on the public investment budget, a trend which is undesirable as it holds back growth potential.  

The  2019  budget  adopted  in  December  2018  is  projected  to  ensure  the  achievement  of  the 
primary surplus target of 3.5% of GDP, thus completing an end-2018 specific commitment. The 
impact  of  measures  taken  since  the  adoption  of  the  2019  budget  will  need  to  be  factored  into  the 
Medium-Term Fiscal Strategy (MTFS) to be updated in May 2019, which will be assessed as part of 
the  third  enhanced  surveillance  report.  While  the  legislated  increase  in  the  minimum  wage  as  of 
February 2019 raises some concerns in terms of its broader impact on the economy, it is expected to 
have  a  short-term  positive  net  fiscal  impact  in  2019.  In  contrast,  the  authorities  extended  the  VAT 
discount on five Aegean islands hosting refugee centres, linking its future elimination to the easing of 
migration pressures. While the elimination of the discount was an ESM programme commitment, the 
fiscal cost of the extension is limited at just over EUR 50 million. Moreover, there are signs of upward 
pressures on the public sector wage bill through excess hirings, which need to be addressed.  

 The government has informed the European institutions that they do not intend to proceed in 
the near future with revisions to instalment schemes for tax debt and social security debt, as they 
need to undertake further technical analysis and reflection. It is important to avoid negative risks 

5

  The  Commission’s  most  recent  forecast  was  published  on  7  February  2019:  European  Economic  Forecast,  Winter  2019  (Interim), 
Institutional Paper 096, February 2019.  https://ec.europa.eu/info/publications/european-economic-forecast-winter-2019_en  

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to public revenues and to safeguard the payment culture, as these were core objectives of the reforms 
in public revenue collection enacted during the financial assistance programmes. 

The Greek authorities have initiated preparatory work on assessing the fiscal impact and risks 
stemming  from  court  rulings  on  reforms  enacted  under  the  financial  assistance  programmes. 
Based on information provided by the authorities, the 2015 Council of State ruling against important 
elements of the 2012 pension reform implies negligible fiscal cost in view of the very small number of 
eligible  claimants;  however,  the  question  is  not  yet  finally  settled  as  some  lower  courts  have  ruled 
against  the  restricted  eligibility  for  the  compensatory  payments  and  the  final  ruling  on  the  key 
elements  of  the  2016  pension  reform  is  still  pending.  Another  important  ruling  related  to  the 
restoration  of  seasonal  wage  bonuses  to  civil  servants  is  also  still  pending  at  the  Council  of  State. 
Should the Council of State rule in favour of the restoration, this could result in a significant fiscal cost 
amounting  to  1.3%  of  GDP,  of  which  1.1%  of  GDP  relates  to  the  retroactive  liability  and  0.2%  of 
GDP  to  recurrent  costs.  Notwithstanding  the  welcome  recent  efforts  by  the  Greek  authorities, 
continued efforts and vigilance are required. The Greek authorities should continue to monitor fiscal 
risks,  including  court  rulings,  and  are  invited  to  take  offsetting  measures  as  needed  to  meet  the 
medium-term fiscal targets in the context of the Medium-Term Fiscal Strategy (MTFS) and its annual 
updates. In the event of court rulings overturning key structural elements of reforms agreed under the 
programme,  the  recurrent  fiscal  implications  of  such  rulings  would  need  to  be  largely  addressed  by 
reforms/actions within the same policy field.  

Greece  has  continued  to  make  progress  in  the  reform  of  the  unified  property  tax  (ENFIA) 
valuation in line with its mid-2019 specific commitment. The legal framework for the new system 
of  property  valuation  has been established, a  Property  Tax Valuation  Unit  has been set  up,  and  two 
key  IT  projects  have  been  initiated  to  map  electronically  zonal  boundaries  and  to  systemise  the 
collection of real estate data. 

Although  the  end-2018  specific  commitment  to  reach  a  staffing  level  of  12,000  permanent 
employees at the Independent Authority for Public Revenue (IAPR) has not been reached, there 
is scope for further recruitments of staff in the next months.  Overall staffing levels in the IAPR 
decreased during 2018, from 11,682 to 11,492. The reasons for the shortfall include delays in ongoing 
recruitment of tax/customs officials and higher than expected exits (mainly through retirements), but 
also  due  to  a  relatively  high  rejection  rate  of  offers  extended  by  IAPR  to  successful  candidates.  In 
addition,  the  recently  established  mobility  scheme  has  not  yet  resulted  in  the  expected  number  of 
transfers to IAPR. The authorities have provided assurances on specific actions to be taken to ensure 
that  the  end-2019  specific  commitment  for  12,500  permanent  employees  is  reached.  They  include 
measures to further facilitate the transfers of staff to IAPR from the mobility scheme and proceeding 
to finalise the human resources reform that will allow for IAPR to attract and maintain its staff. 

In  order  to  ensure  that  the  staffing  commitment  will  be  met,  the  broader  reform  of  revenue 
collection is further strengthened and with a view to enhancing the overall operational capacity 
and efficiency of the IAPR across a number of dimensions, the authorities have adopted a set of 
complementary measures: 

  The  IAPR  has  adopted  its  reform  action  plan  ("Blueprint")  for  the  period  2019-2021.  The 
Blueprint  sets  out  specific  measures  and  investment  that  will  be  required  to  continue  the 
transformation of the IAPR into a modern, flexible and effective organisation. The authorities 
committed  to  cover  the  additional  funds  needed  for  all  actions  to  be  delivered  (a  lump  sum 
EUR 75 million and EUR 5 million as an annual recurring cost). 

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  The  General  Secretariat  of  Information  Systems  (part  of  the  Ministry  of  Finance)  and  the 
IAPR  have  reached  an  agreement  on  an  annual  envelope  (EUR  5  million  in  2019)  for 
procuring IT infrastructure/tools for IAPR. 

However, the authorities need to complete the remaining complementary measures to strengthen 
the IAPR: 

  The introduction of grading, remuneration and performance assessment tailored to the IAPR is 
seen as essential in order to enhance IAPR's prospects to attract highly-qualified staff and to 
allow for their development and progression. Currently intensive discussions are ongoing with 
the  authorities.  Provided  that  these  are  successful  concluded,  a  legislative  amendment  to 
IAPR's enabling legislation is expected to be adopted by the Parliament by early March 2019. 
Subsequently, that amendment will allow the adoption of secondary legislation to introduce a 
new  grading  scheme  directly  linked  with  the  job  descriptions.  The  final  step  to  introduce  a 
specific  remuneration  scheme  for  IAPR  will  require  primary  legislation  setting  out  the 
provisions for a supplementary wage grid and should be adopted by end-2019. This reform is 
closely connected to the public administration reform area, and in particular the appointment 
of senior managers in the public sectors. 

  Legislative amendments on liability protection and facilitating mobility have been agreed and 

will be adopted by early March 2019. 

  A Joint Ministerial Decision on the procurement of fuel markers is expected to be adopted by 

early March, which will provide an important tool in the fight against smuggling. 

Greece  has  continued  to  reduce  its  stock  of  net  arrears  since  the  end  of  the  ESM  stability 
support programme (the non-accumulation of arrears is a continuous specific commitment), but 
the pace of reduction has slowed significantly and new arrears continue to be created. The end-
December  2018  stock  of  net  arrears stood  at  EUR  1.4  billion,  thus    EUR  0.3  billion lower  than  the 
end-August 2018 stock of arrears, which is the benchmark  for the assessment of the non-accumulation 
of  arrears in  net  terms.  Programme  financing  and  own  resources  have  been  utilised to  clear  arrears. 
However, the original ESM programme objective of full clearance was not achieved by the end of the 
programme  and  new  arrears  have  continued  to  be  created  since  August  2018,  slowing  down  the 
progress in the clearance of the stock. Although reforms to address the structural bottlenecks of arrears 
management  and  clearance  are  progressing,  efforts  need  to continue  in  strengthening  the system  for 
arrears clearance, while tackling the causes behind the creation of arrears. 

A modern and sustainable social welfare system: progress with reform commitments 

The  rollout  of  the  primary  health  care  system  is  progressing,  despite  the  pace  being  slightly 
slower than envisaged. Based on the latest reports, around 112 primary health care units (TOMYs) 
were opened across the territory, just below the nominal target of 120 which is an  end-2018 specific 
commitment.  This  represents  significant  progress  in  what  is  a  critical  but  very  complex  reform;  the 
slight shortfall is not material and is largely due to the need to address difficulties and concerns raised 
by external stakeholders. The authorities are maintaining efforts towards further rolling out TOMYs 
across the country, including by addressing the need to recruit additional family doctors. 

Centralised procurement activity has resumed as, in line with the end-2018 specific commitment, 
the main body responsible for central procurement, EKAPY, is operational, though it remains to 
be fully staffed. Based on available information, the authorities have achieved the first results in terms 

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of  savings,  albeit  by  completing  old  tenders  from  2014.  Measures  are  being  taken  to  enhance  the 
staffing  level  and  the  capacity  of  EKAPY  with  a  view  to  meeting  its  procurement  targets  for  the 
coming years.  

Progress on other aspects of health care reform is uneven, as the authorities have revised some 
measures adopted under the ESM stability support programme, with an uncertain impact on the 
efficiency of the system. These concern the frequency and design of pharmaceutical repricing, which 
may  reduce  the  efficiency  of  the  framework  to  contain  prices  and  an  amendment  to  the  clawback 
scheme  for past  years,  which  risks  reducing  the  efficiency  of  clawback  collection.  As  spending  still 
considerably  exceeds  the  legislated  ceilings,  late  collection  of  the  excess  in  the  form  of  revenues 
through the clawback may deteriorate the liquidity of the national health insurance, EOPYY. 

The reform of social safety nets has continued. The review of the system of disability benefits (a 
specific commitment for mid-2019) is progressing, albeit with some delays with the implementation of 
the  pilot  project  due  to  some  initial  bottlenecks  which  had  to  be  overcome.  The  Social  Solidarity 
Income (SSI) scheme is reaching its maturity, with progress being made in the implementation of its 
social  inclusion  and  labour  market  (re-)integration  elements,  to  be  achieved  by  end-2019  (specific 
commitment). The design of the housing benefit has been revised compared to original plans, to only 
cover  rental  subsidies.  A  separate  subsidy  to  support  mortgage-holders  in  difficulty  is  being 
considered under a new household insolvency protection framework. Although its design has not yet 
been  specified,  from  preliminary  discussions  it  seems  that  such  subsidy  would  target  only  non-
performing mortgages. This would penalise low-income households who still manage to service their 
mortgage, possibly creating disincentives for regular loan servicing. 

The financial sector 

Despite progress made in the context of the financial assistance programmes and the improved 
liquidity situation of Greek banks, Greece’s financial system still faces important challenges, in 
particular the very high levels of non-performing loans (NPLs). Taking into account inter alia the 
high level of deferred tax assets on bank balance sheets, the sovereign-bank nexus remains strong and 
capital  controls  are  still  in  place,  though  they  have  been  gradually  relaxed  (implementation  of  the 
agreed  roadmap  is  a  continuous  commitment,  which  has  been  met).  Financial  sector  reforms  are  a 
dominant focus  of  enhanced  surveillance  given  its  critical  role  in  creating  the conditions  needed for 
sustainable growth. 

The  reduction  of  NPLs  has  continued,  although  the  take-up  of  tools  for  their  resolution  lags 
behind  expectations.  The  stock  of  NPLs  has  been  gradually  decreasing,  but  remains  elevated  and 
according to the latest available data amounted to EUR 85 billion or some 47% of total exposures  in 
September 2018. Banks meet their NPL reduction targets, which will become increasingly challenging 
over the next years. At the same time, banks’ profitability is under pressure and, combined with the 
high  level  of  deferred  tax  credits  on  their  balance  sheet,  constrains  the  pace  of  NPL  reduction.  The 
number of e-auctions continued to rise in the fourth quarter of 2018 and the coverage of the territory is 
almost complete; however, the failure rate of the auctions remains high and a large share of successful 
auctions still leads to the purchase of the asset by the bank that launched the auction. Further efforts 
are  needed  in  order  to  address  these  shortcomings,  as  part  of  the  measures  to  fulfil  the  end-2018 
specific commitment to support the resolution of NPLs. Further progress in addressing impediments 
which  may  include  both  legislative  measures  and  operational  improvements  of  the  system  will  be 
essential in this respect. Moreover, the recent major reform of the corporate insolvency law has not yet 
contributed to the expected increase in take-up by stakeholders. Given their importance in the efforts 

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of banks to accelerate NPL reduction, it would be warranted for the authorities to further investigate 
the need to improve legal clarity and certainty regarding the scope of each of the NPL servicing/sales 
and securitisation laws and to facilitate a wider take-up of these tools. 

The use of the out-of-court workout (OCW) mechanism is showing signs of progress after a slow 
start.  The  infrastructure  is  being  upgraded  to  ensure  an  unhindered  and  increasingly  automated 
operation.  In  December  2018,  the  authorities  prolonged  the  OCW  law  by  one  year,  until  end-2019. 
While  this  prolongation  is  welcome,  the  authorities  have  also  adopted  some  amendments  to  the 
framework  which  raise  concerns  as  regards  their  impact  on  multilateral  restructuring  and  on  the 
duration of public-sector restructuring procedures and which would need to be reassessed.  

The  low  processing  rate  of  called  State  guarantees  related  to  bank  loans  is  in  urgent  need  of 
improvement.  The  backlog  in  processing  guarantees  puts  a  significant  burden  on  the  banks.  The 
authorities have acknowledged the issue and should take concrete actions to speed-up the processing 
and  repayment.  The  authorities  have  also  passed  a  legislative  provision  to  remove  uncertainty  as 
regards the enforceability of guarantees; the provision is currently under assessment.  

The  expected  expiry  of  primary  residence  protection  under  the  household  insolvency  law  and 
speculations about possible new debtor protection schemes led to a sharp increase of new filings 
of applications in the fourth quarter of 2018. While the rate of processing cases also increased, the 
spike  in  applications  implied  that  the  backlog  of  cases  did  not  materially  diminish  in  the  fourth 
quarter.  This  is  bound  to  adversely  affect  the  pace  of  processing  pending  cases  by  courts.  In  that 
respect,  the  action  plan  to  reduce  the  number  of  pending  cases  in  the  context  of  the  household 
insolvency law would need to be further updated and specified with concrete elements which would 
support the credibility of a well-identified trajectory leading to the elimination of the backlog by end-
2021,  as  included  in  Greece’s  post-programme  commitments.  At  the  same  time,  some  progress  has 
been made in enhancing the case-processing capacities of courts through new staff appointments and 
through the financial training of judges, the latter being a specific commitment for end-2018). 

The authorities shared their legislative proposals for a new scheme for the protection of primary 
residences,  but  a  large  number  of  important  open  issues  remain.  The  protection  of  primary 
residences  under  the  household  insolvency  framework  was  agreed  to  be  a  temporary  crisis  measure 
ending  end-2018.  However,  the  protection  was  unilaterally  extended  in  December  2018  by  two 
months, during which the authorities presented a new protection scheme that also offers a limited state 
subsidy  component  to  the  borrower.  Based  on  a  preliminary  assessment,  the  proposal  raises  serious 
concerns regarding its impact on the payment culture and bank balance sheets and its overall design 
could  enable  strategic  defaults.  In  particular:  (i)  the  proposed  eligibility  perimeter  would  be 
significantly wider than under the current primary residence protection, including business loans; (ii) 
the proposal would create an additional protection scheme that would apply in parallel to the existing 
household insolvency law; (iii) the replacement scheme appears to require banks to accept mandatory 
pre-defined  debt  restructurings  for  a  large  group  of  eligible  borrowers;  (iv)  the  proposal  is  not 
sufficiently targeted to the most vulnerable and interacts directly with several other proceedings, such 
as bankruptcy/special administration, OCW, concluded NPL sales and securitisations; (v) the proposal 
risks  creating  further  delays  for  debtors  with  pending  applications  under  the  existing  protection 
scheme and who apply for the new scheme, as all pending proceedings would be suspended until the 
new  restructuring  procedure  is  completed;  (vi)  no  impact  assessment  of  the  new  proposal  has  been 
provided, for example on the potential impact on the capital base of banks; (vii) the wide scope puts 
the authorities’ commitment to eliminate the backlog of all household insolvency applications by end 
2021 at risk; (viii) new stays on enforcement introduced by the proposal would be expected to affect 
future  auctioning  and  foreclosure  proceedings;  (ix)  additional  clarity  on  the  fiscal  aspects  of  the 

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scheme  is  required.  Discussions  with  the  institutions  are  ongoing  with  a  view  to  address  the  open 
issues. The authorities have also launched a formal consultation of the ECB on their legal proposal, 
while any new scheme will require State aid approval by the Commission. 

There has been progress with regard to the work of the Hellenic Financial Stability Fund. More 
specifically  and  in  line  with  the  end-2018  specific  commitment,  the  HFSF  has  developed  its  exit 
strategy for the sale of its shares in the four systemic banks. While the strategy will be implemented by 
the HFSF as an independent institution, the potential involvement of the authorities in the final stage 
of the divestment is still subject to consideration. The authorities have clarified that in their view the 
alignment  of  the  mandate  of  the  selection  panel  with  that  of  the  HFSF  (end-2018  specific 
commitment)  does  not require  a legislative  amendment; this  is  subject to  confirmation  by  the  Legal 
Council of State. In line with the HFSF law, the Minister of Finance should complete the appointment 
of the Deputy CEO of the HFSF and the vacant General Council position on the basis of the shortlist 
produced  by  the  Selection  Panel. The  setting  up  of  the  four  systemic  banks’  operational  framework 
following their restructuring plans and the exit strategy are closely intertwined, and the HFSF has been 
working on those two issues in parallel.  

The  Greek  authorities  are  exploring  additional  initiatives  to  support  NPL  reduction  efforts, 
working with stakeholders including the HFSF and the Bank of Greece. The authorities recently 
sent a draft proposal to the Commission services with a proposal for a type of asset protection scheme 
which aims at accelerating the ongoing NPL resolution efforts. The proposal will need to be assessed 
from a State aid perspective.   

Labour and product market reforms 

Reforms of labour market institutions and the wage bargaining framework in recent years have 
helped Greece regain cost competitiveness and are contributing to increasing employment rates 
and  falling  levels  of  unemployment.  The  implementation  of  those  reforms  over  the  long  run  is 
critical  to  Greece  achieving  sustainable  economic  growth.  The  functioning  of  the  labour  market  is 
being supported by the implementation of an action plan on undeclared work and ongoing efforts to 
strengthen active labour market policies. 

The government has increased the statutory minimum wage by 10.9%, effective as of 1 February 
2019, and abolished the sub-minimum wage for persons aged under 25 (implying an increase of 
27% for this group). In making the revision, the authorities formally followed the procedure (an end-
2018  specific  commitment)  laid  down  in  Article  103  of  Law  4172/2013  which  consists  in  the 
gathering  of  analysis  by  different  institutions,  a  consultation  with  the  social  partners,  and  the 
publication  of  a  report  with  recommendations  by  a  committee  of  independent  experts  specifically 
appointed for  this  purpose.  The  Commission  nonetheless  considers  that important  lessons  should  be 
drawn  for  the  next  revision  of  the  minimum  wage  due  in  June  2020.  The  quality  of  dialogue  with 
social  partners  could  be  improved,  and  the  committee  of  experts  would  need  to  take  on  board  the 
concerns of the institutions as regards significant analytical shortcomings on the estimate of the share 
of minimum wage workers. Moreover, the transparency and credibility of the process would be further 
improved if explanations were to be provided in case that the final increase decided by the government 
deviates from the recommendation issued by the committee of experts. 

The double-digit percentage increase raises concerns as regards the medium-term implications 
for growth and competitiveness. Some increase in the statutory minimum wage was to be expected 
and is indeed welcome as its level had been frozen since 2012. In the near term, the increase may have 
positive effects in terms of increased disposable income and consumption. However, the employment 

7 

 
 
prospects of specific groups may be negatively affected, and the medium term implications warranted 
very careful consideration for several reasons: 

  Even  prior  to  the  large  legislated  increase,  the  level  of  the  minimum  wage  in  Greece  was 
already  at  the  levels  seen  in  many  euro  area  countries,  both  in  absolute  terms  and  as  a 
proportion of the median wage. An increase of almost 11% is well above the projected rate of 
productivity  growth  for  Greece  in  the  coming  years,  and  thus  will  entail  a  material  loss  in 
relative cost competitiveness compared to euro area and other peer countries. 

  Although estimates differ across economic studies, the magnitude of the increase, combined 
with  the  fact  that  a  relatively  large  share  of  workers  earn  the  minimum  wage  in  Greece, 
increases  the  risk  of  negative  employment  effects,  especially  on  low-skilled  and  young 
workers.  It  is  worth  recalling  that  Greece  has  lower  employment  rates  and  much  higher 
(youth) unemployment rates than other euro area countries, and that other former programme 
countries  have  adopted  a  more  prudent  and  gradual  approach  to  revising  the  level  of  their 
minimum  wage  shortly  after  programme  exit.The  increase  in  the  minimum  wage  has  the 
potential  to  raise  the  incidence  of  undeclared  and  under-declared  work,  which  is  still 
considered to be widespread in Greece.   

  A  critical  issue  is  the  extent  to  which  the  minimum  wage  hike  has  spill-over  effects  on  the 
wider wage distribution, in particular through collective wage negotiations and the extension 
of sectoral collective agreements. It would be important for the government to assess the direct 
consequences of the minimum wage increase on the labour market, while also monitoring the 
broader  evolution  of  collectively  bargained  wages.  This  includes  both  the  signing  of  new 
sectoral  agreements  that  could  then  be  extended,  as  well  as  the  outcomes  of  arbitration 
decisions.  

Product  market  reforms  have  progressed.  Under  the  investment  licensing  reform,  the  enabling 
legislation  on  installation  and  operation  licensing  procedures  for  environmental  infrastructures  has 
been adopted with the issuance of a joint ministerial decision, thus completing the  end-2018 specific 
commitment.  The  authorities  have  proceeded  with  preparatory  work  for  the  commitments  with 
deadlines in the outer years. Work is progressing well on the cadastre and the forest maps. However, 
the  establishment  of  the  new  Hellenic  Cadastre  agency  has  seen  some  delay  as  regards  managerial 
appointments and the integration of the mortgage offices. More efforts would need to be devoted to 
those  actions  (which  are  specific  commitments  for  outer  years).  More  broadly,  there  would  also  be 
scope for more ambition on wider product market reforms with a view to improve Greece’s standing 
in doing business and attract investment.  

The reform of the energy market has progressed, albeit at a slow pace and with some open issues 
remaining. The divestment of the Public Power Corporation (specific commitment for end-2018) has 
been  delayed  as  the  tender  process  did  not  yield  any  successful  bids.  Steps  to  remedy  this  situation 
need to be agreed with the Commission, and the authorities have signalled their intention to submit a 
new  proposal  by  early  March  2019.  The  Commission  invites  the  authorities  to  ensure  that  the  new 
proposal  is  sufficiently  detailed  so  as  to  enable  an  informed  assessment  to  be  made  as  to  whether 
adequate  progress  is  being  made  towards  complying  with  the  antitrust  remedies  and  the  end-2018 
specific commitment. The government made important first steps towards the implementation of the 
Target  Model  for  electricity  (specific  commitment  mid-2019)  with  the  publication  of  the  spot  (day-
ahead  and  intraday)  and  balancing  market  rulebooks.  While  the  project  has  experienced  delays 
compared  to  original  plans  agreed  in  June  2018,  the  Target  Model  appears  on  track  to  go  live  by 
October 2019, with the full  launch of the intra-day, day-ahead and balancing market. Further delays 
should be avoided. Electricity (NOME) auctions are proceeding in line with the adopted mechanism 

8 

 
 
for  the  correction  of  quantities  to  be  auctioned.  Given  the  close  link  of  the  correction  of  auctioned 
quantities to the lignite divestment, the scheduled joint assessment will start later than planned, and the 
potential need for alternative policy or structural measures will be considered in that context. 

HCAP and privatisation 

The  implementation  of  the  strategic  plan  of  the  Hellenic  Corporation  of  Assets  and 
Participations’  (HCAP)  has  proceeded  as  planned  (continuous  specific  commitment).  HCAP 
proceeded  in  December  2018  to  the  preparation  of  its  business  plan  for  the  period  2019-2021, 
implementing the strategic plan and setting quantitative and qualitative key performance indicators for 
its direct subsidiaries and the other non-listed subsidiaries. HCAP also continued making progress on 
its  asset  portfolios  and  the  restructuring  of  its  subsidiaries.  The  restructuring  of  the  real-estate 
subsidiary (ETAD), which was a specific commitment for end-2018, has been completed according to 
plan.  

HCAP  continues  its  work  on  the  governance  of  State-owned  enterprises  (SOEs),  in  particular 
regarding  the  review  (and  replacement,  if  needed)  of  the  boards  of  the  SOEs,  and  improving 
internal and external audit capabilities. The implementation of the Coordination Mechanism setting 
out  the  procedures  and  deliverables  for  interaction  between  the  State,  HCAP  and  SOEs  has  been 
launched. The authorities have agreed to address the legislative cap on the remuneration of SOE board 
members  that  leads  to  obstacles  in  attracting  applicants  through  the  adoption  of  a  legislative 
amendment  in  time  for  the  third  enhanced  surveillance  report.  The  transfer  of  the  Olympic  Centre, 
OAKA (an end-2018 specific commitment), however, will take significantly longer to complete than 
initially  planned:  this  is  partly  due  to  the  complexity  of  the  project  and  partly  to  delays  within  the 
control of the government. The authorities have developed a roadmap for specific actions to be taken 
during 2019 to address the open technical issues, which appears appropriate in light of the complexity 
of the project. 

The authorities continued implementing the asset development plan (ADP), and there has been 
good  progress  with  the  transactions  scheduled  as  specific  commitments  for  completion  by  the 
end of 2018. The ADP was updated in December 2018 as foreseen. The transaction of the Natural Gas 
Transmission System Operator (DESFA) and the concession of the Athens International Airport have 
been  successfully  concluded,  generating  combined  privatisation  proceeds  of  some  EUR  1.4  billion. 
The  authorities  have  continued  their  efforts  to  complete  conditions  precedent  for  the  transfer  of 
Hellinikon  shares  to  the  developer.  Nonetheless,  the  project  has  encountered  some  delays  due  to 
factors beyond the control of the government, such as delays on the casino licencing process and on 
the  approval  of  certain  urban  planning  and  environmental  studies.  As  key  intermediate  steps,  the 
request  for  proposals  for  the  casino  license  has  been  launched  and  the  urban  planning  and 
environmental studies by the investor have been submitted. 

Progress on some privatisation transactions that are due to be completed by the end of 2019 is 
welcome,  but  the  overall  picture  is  clouded  by  recurrent  delays  on  other  transactions. 
Satisfactory  progress  has  been  made  in  the  tender  for  the  long-term  concession  of  the  marina  of 
Alimos  and  further  steps  have  been  taken  to  prepare  the  joint  sale  (along  with  the  other  strategic 
shareholder, PanEuropean Oil and Industrial Holdings S.A.) of a majority stake in Hellenic Petroleum. 
In  addition,  obstacles  to  the  privatisation  of  regional  ports,  that  were  reported  in  the  first  enhanced 
surveillance  report,  have  been  resolved.  By  contrast,  the  concession  of  the  Egnatia  motorway 
continues to face recurrent obstacles: in January 2019, the authorities agreed to a number of actions to 
be  swiftly  implemented  by  the  authorities  and  Egnatia  S.A.  in  order  to  deal  with  these  obstacles. 

9 

 
 
However,  to  date  only  a  limited  number  of  these  actions  have  been  implemented,  while  a  range  of 
substantial  actions  to  remove  obstacles  remains  to  be  completed,  notably  with  a  view  to  providing 
adequate financial and staff resources to Egnatia S.A. 

Public administration and the justice system 

Progress with advancing public administration reforms has been uneven. As regards the end-2018 
specific  commitment  on  the  recruitment  of  senior  managers  in  the  public  administration,  the 
appointment  cycle  for  90 Directors-General  has  been  completed.  However,  none  of the  expected  69 
appointments  of  Administrative  Secretaries  has  been  made  to  date.  In  view  of  this  very  significant 
shortfall to  target, the  authorities  have  adopted a  series  of  complementary  measures  which  have  the 
aim  of  ensuring  that  the  core  objectives  of  the  reform  remain  on  track.  These  measures  include  the 
adoption of a critically needed law to introduce more long-term recruitment planning and to closely 
link it with the medium-term financial strategy (MTFS). Further, the authorities have firmed up on the 
modalities of the independent assessment of the selection process that is planned to be completed by 
mid-2019  with  recommendations  to  be  followed  up  on  by  September  2019.  The  third  cycle  of  the 
mobility scheme was launched in August 2018 with a view to be completed as a specific commitment 
by mid-2019, while the fourth mobility cycle is planned to be launched by the end of February 2019. 
While the use of the mobility scheme has been steadily increasing, the transfers related to the previous 
two  cycles  are  still  to  be  finalised.  The  authorities  have  continued  their  solid  progress  towards 
establishing an integrated Human Resource Management System which is a specific commitment for 
the end of 2019). Finally, the authorities are progressing with an important HR reform relating to the 
public revenue administration that initiated the implementation of linking grading to job descriptions. 
This  will  act  as  the  first-stage  implementation  of  a  pilot  for  a  wider  public  administration  reform 
linking skills and tasks to a supplementary remuneration system. 

Recent hiring announcements by the authorities raise concerns regarding the achievement of the 
authorities’  staffing  and  wage  bill  targets.  The  hiring  ceilings  for  permanent  staff  set  by  the  1:3 
attrition rule in 2018 were slightly exceeded by around 1,000 staff. While the small deviation reflected 
unforeseen developments (mainly fewer-than-expected retirements) and could be absorbed over time, 
announcements  by  the  authorities  on  the  hiring  of  permanent  staff  in  2019,  if  fully  implemented, 
would lead to a further breach of the attrition rule by close to 1,800 staff. The increase in temporary 
staff  has  been  more  significant,  with  the  ceiling  for  2018  exceeded  by  1,500  posts,  while  other 
categories not accounted as part of the ceiling, most notably public entities of private law, have seen a 
considerable increase of staff since 2016. It will therefore be key for the authorities to continue paying 
close  attention  to  the  evolution  of  the  public  sector  headcount,  keeping  within  the  replacement  rule 
(1:1  from  2019  onwards)  for  permanent  hiring  but  also  reining  in the  trend of increasing  temporary 
staff, so as to avoid a return to the pre-crisis excessive number of public servants and corresponding 
pressure on fiscal targets. 

There has been mixed progress in the efforts to increase the efficiency of the judicial system. The 
first  phase  of  the  Integrated  Judicial  Case  Management  System  (OSDDY/PP),  an  end-2018  specific 
commitment,  was  completed  on  time  and  the  second  phase  will  follow.  However,  setbacks  to  the 
operation  of  the  new  framework  of  out-of-court  mediation,  an  important  reform  adopted  under  the 
ESM stability support programme, need to be remedied as soon as possible. It is also critical to ensure 
that efforts are deployed towards the speedy and thorough implementation of all actions of the project, 
and more broadly, of the ongoing three-year strategic plan for Justice.  

10 

 
 
The authorities have continued their efforts to fight corruption on a number of areas included in 
the National  Anti-corruption Action Plan for 2018-2021. The authorities are finalising legislative 
proposals, to be submitted to Parliament over the next three months, related to (i) establishing a legal 
framework to protect whistle-blowers in the public and private sectors; (ii) internal auditing across the 
public administration; and (iii) an update of the mandate of the General Secretariat of Anti-Corruption. 
The  setting  up  of  a  coordination  mechanism  for  corruption  cases  will  warrant particular attention  in 
the coming months. 

The  Commission  has  continued  monitoring  developments  in  relation  to  the  legal  proceedings 
against the members of the Committee of Experts (CoEx) of TAIPED and the former President 
and  senior  staff  of  the  Hellenic  Statistical  Authority,  ELSTAT,  in  line  with  the  request  of  the 
Eurogroup of 22 June 2018.  Regarding the CoEx, the Supreme Court Council admitted the appeal 
against a ruling referring the case to a public trial, and referred it back to the council of the Court of 
Appeal. In January 2019, the latter’s prosecutor submitted his proposal to the council, concluding in 
favour of a dismissal of the charges against the defendants. The case is currently pending before the 
Court of Appeal. In the case against former ELSTAT President Georgiou related to the publication of 
fiscal  statistics,  there  have  been  no  further  developments  in  comparison  to  those  described  in  the 
previous enhanced surveillance report. The case continues to raise serious concerns, and underscores 
the importance of providing adequate protection for officials in charge of statistical reports to underpin 
confidence  in  the  integrity  of  statistical  data.  The  Commission  will  continue  to  closely  monitor 
developments in both procedures and to report back in the context of enhanced surveillance.  

Overall assessment on progress with reform commitments  

Greece has made considerable progress in completing the implementation of the specific reform 
commitments annexed to the Eurogroup statement of 22 June 2018 which were to be completed 
by end-2018. More specifically:  

  The  following  specific  commitments  for  end-2018  can  be  considered  as  having  been 
achieved: (i) the adoption of a budget for 2019 which should reach a primary surplus target of 
3.5%  of  GDP;  (ii)  the  non-accumulation  of  net  arrears,  though  additional  efforts  are  still 
needed to clear the backlog and avoid the build-up of new arrears; (iii) the opening of a critical 
mass of primary health care centres (TOMYs); (iv) the completion of important steps to ensure 
centralised  health  care  procurement;  (v)  the  relaxation  of  capital  controls  in  line  with  the 
agreed  roadmap;  (vi)  the  definition  and  adoption  of  the  HFSF  divestment  strategy,  with  the 
potential  involvement  of  the  authorities  in  the  final  stage  of  the  divestments  still  under 
consideration;  (vii)  the  adoption  of  enabling  legislation  for  investment  licensing;  (viii)  the 
revision  of  the  minimum  wage  formally  in  line  with  the  legislated  procedure,  although  the 
magnitude  of  the  increase  raises  risks  for  employment  and  competitiveness;  (ix)  the 
completion of phase I of the e-justice project; (x) the implementation of the HCAP strategic 
plan;  (xi)  the  restructuring  of  ETAD  and  launch  of  the  implementation  of  the  coordination 
mechanism  for  SOEs  falling  under  HCAP  in  light  of  delays  in  the  transfer  of  the  Olympic 
Centre (OAKA); (xii), the updating of the Asset Development Plan of the privatisation agency 
(TAIPED), the completion of key privatisation tenders including the gas transmission network 
(DESFA) and the extension of the concession for Athens International Airport, as well as the 
completion of key steps related to the Hellinikon project; and (xiii) the authorities have agreed 
with  the  Commission  on  the  modalities  to  carry  out  an  independent  assessment  of  the 
appointment  process  for  the  Administrative  Secretaries  and  Director  Generals  by  mid-2019, 

11 

 
 
and  have  adopted  key  legislation  to  improve  recruitment  planning  in  the  public  sector  and 
linking the multi-annual hiring plan with the MTFS.  

  There is a broad understanding on the actions required to complete the following specific 
commitments  for  end-2018:  however,  these  reforms  will  only  be  considered  as  fully 
completed  once  all  of  the  agreed  measures  are  enacted:  (i)  the  adoption  of  legislation 
related to the corporate restructuring of DEPA; (ii) the completion of all agreed measures to 
keep  the  Egnatia transaction  on track  for  completion in  2019 in line  with  the  updated  Asset 
Development  Plan  of  TAIPED,  and  (iii)  the  appointment  of  the  Deputy  CEO  and  vacant 
General Council position at the HFSF and confirmation on the mandate of the Selection Panel 
by the Legal Council of State. 

Intensive  discussions  are  still  underway  between  the  Greek  authorities  and  the  European 
institutions on the following end-2018 specific reform commitments and it is urgent to reach an 
agreement in the near future. More specifically:  

  The commitment to implement reforms aimed at restoring the health of the banking system is 
currently not met. Discussions are still ongoing regarding a proposal of the Greek for a new 
system  of  protection  of  primary  residences  to  replace  current  protections  under  the 
Household  Insolvency  (Katseli)  law  (expiring  at  the  end  of  February  2019).  The  European 
institutions have shared their observations and concerns. There are a large number of design 
and  technical  details  which  need  to  be  settled  so  as  to  ensure  that  the  scheme  is  genuinely 
temporary,  properly  targeted  to  protect  the  most  vulnerable  households  and  does  not 
encourage  strategic  defaults.  Further  analysis  is  required  to  fully  understand  the  potential 
impact  on  the  banks'  balance  sheet  and  to  quantify  the  fiscal  impact.  The  authorities  sent  a 
request for a legal opinion to the ECB on 19 February 2019, and any new scheme will require 
State aid approval by the Commission. The European institutions are committed to work with 
the  Greek  authorities  to  find  an  agreement  on  a  scheme  that  does  not  give  rise  to  serious 
concerns,  which  requires  significant  changes  on  several  key  parameters.  Secondly, 
shortcomings in legal frameworks relevant to NPL resolution should be addressed. The action 
plan to reduce the number of pending case under the household insolvency law would need to 
sufficiently specify how the target of the elimination of the backlog of cases by 2021 could be 
reached,  and  how  the  newly  proposed  scheme  for  protecting  primary  residences  will  affect 
progress. Impediments to the successful conduct of e-auctions should be addressed. Also the 
current  action  plan  on  State  guaranteed-loans  needs  to  be  updated  and  made  sufficiently 
ambitious.  

  Further steps are needed to complete the complementary measures to address the shortfall on 
staffing levels of the Independent Agency for Public Revenue. In particular, the authorities 
need  to  adopt  a  legislative  amendment  to  IAPR's  enabling  legislation.  This  would  also 
contribute to the wider public administration reform agenda, where the commitment to appoint 
Administrative Secretaries is significantly delayed.  

  The  commitment  related  to  the  divestiture  of  lignite  plants  has  not  been  completed, 
following  a  failed  auction  process.  Discussions  between  the  Greek  authorities,  PPC  and  the 
Commission are still underway to find an acceptable remedy to the antitrust case in line with 
the  requirements  of  EU  law.  This  is  an  important  setback  to  the  achievement  of  a  critical 
investment,  raise 
structural  reform,  which  aims 
competitiveness and thus support potential growth. 

introduce  competition,  attract 

to 

12 

 
 
Beyond the completion of specific reform commitments due for the end of 2018, and taking into 
account the general commitment to continue and complete reforms, developments in some areas 
raise  concerns  about  reform  delivery  and  continuity,  including  with  a  view  to  risks  to  the 
medium-term outlook. This relates to several of the end-2018 specific commitments as well as the 
general  commitment  to  safeguard  key  reforms  enacted  under  the  programme.  Concerns  arise  in 
particular on:  

  The  level  of  ambition  in  tackling  remaining  structural  fiscal  challenges  and  avoiding  the 
creation  of  new  fiscal  risks  including  on  recruitments  in  the  public  sector:  While  no  new 
arrears have been accumulated in net terms, progress with bringing arrears closer to zero has 
slowed  down,  and  structural  obstacles  impeding  a  solution  to  arrears  creation  remain  to  be 
tackled  with  a  higher  level  of  ambition.  With  a  view  to  avoiding  fiscal  risks,  possible 
proposals on instalment schemes need to be considered with great caution; if poorly designed, 
such schemes could undermine public revenue collection and the payment culture. The level 
of permanent staff in the public sector at the end 2018 was somewhat above the authorities’ 
one-to-three replacement rule, and the numbers of some categories of temporary staff are also 
on the rise. Whilst the authorities have indicated their general intention to make the necessary 
adjustment  to  the  recruitments  of  permanent  staff  in  2019  so  as  to  keep  the  public  sector 
headcount stable, this does not appear to be  consistent with other announcements of planned 
recruitments: it would be important from both a fiscal and a structural perspective to respect 
existing commitments on the size of the public sector. Finally, the authorities have sent mixed 
signals  on  their  intentions  to  proceed  with  major  growth-friendly  tax  reforms  in  2020 
involving the widening of tax bases and the lowering of tax rates on corporates and labour.  

  The  pace  of  progress  and  degree  of  priority  attached  to  measures  needed  to  restore  the 
banking  sector  to  robust  health.  The  authorities  have  indicated  that  they  recognise  the 
importance  of  addressing  the  challenges  in  areas  such  as  e-auctions,  out-of-court  workout, 
household  insolvency  backlogs  and  State  guarantees.  Work  on  systemic  instruments  to 
achieve a faster pace of NPL reduction is welcome, though its pace has so far been relatively 
slow and lacking a clear orientation to markets. Coordination across government departments 
and  vis-à-vis  relevant  stakeholders,  such  as  the  Bank  of  Greece  and  HFSF,  should  be 
improved  so  as  to  ensure  the  design  and  implementation  of  coherent  polies  commensurate 
with the challenges and risks facing the Greek banking sector. More generally, it will be key 
for the authorities to resist pressures to address problems of indebtedness through across-the 
board solutions which, by protecting strategic defaulters, exacerbate risks of moral hazard and 
further undermine payment culture.  

  The commitment to safeguard wage competitiveness over the medium term and to establish an 
environment  which  is  genuinely  business  and  investment-friendly.  A  possible  short-term 
positive impact on economic activity from the legislated significant increase in the minimum 
wage risks coming at the potential costs of lower employment growth and a sustained loss of 
competitiveness.  Higher  wages  can  be  justified  if  supported  by  underlying  productivity 
growth. More generally, while the authorities have made welcome progress in the completion 
of some privatisation tenders and some structural reforms (e.g. cadastre) that are important for 
the  business/investment  climate,  Greece  continues 
international 
competitiveness  indicators  and  investment  activity  remains  subpar.  Delays  in  certain  key 
privatisations (e.g. Egnatia) and the persistent failure to achieve material structural change in 
energy  markets  linked  to  the  dominant  position  of  PPC  are  not  conducive  to  a  compelling 

lag  behind 

to 

in 

13 

 
 
 
 
reform strategy that supports investment and potential growth, which is a key priority for the 
Greek economy going forward.  

Sovereign financing and debt sustainability analysis 

Greece raised EUR 2.5 billion by issuing a 5-year government bond at the end of January 2019, 
the first bond issuance since February 2018, i.e. also since the end of the ESM programme. The 
transaction attracted demand over four times in excess of the issued amount. This allowed the yield to 
be  3.6%,  lower  than  the  originally  planned  range  of  3.75-3.85%.  While  this  has  been  a  positive 
development,  it  also  shows  that  Greece’s  yield  spreads  remain  elevated  and  sensitive  not  only  to 
external market conditions but importantly also to domestic factors. 

Greece’ sovereign financing profile remains favourable in the medium term. There have been no 
significant changes in the roll-over risks of Greece’s public debt since the enhanced surveillance report 
published in November. Greece still benefits from a debt structure with extremely long maturities and 
favourable interest rates. Medium and long-term amortisations remain moderate. Greece also benefits 
from a large amount of State deposits, which stood at EUR 26.8 billion at the end of 2018 and which, 
driven by amortisation and without new issuances, is projected to reach EUR 16.1 billion by the end of 
2019. 

A  technical  update  of  the  debt  sustainability  analysis  (DSA)  shows  that  the  assessment  of  the 
sustainability  of  Greece's  debt  has  remained  broadly  unchanged  from  the  last  DSA  update 
published  in  November  2018.  Under  the  baseline  assumptions,  Greece’s  gross  financing  needs 
(GFN)  will  hover  around  10%  of  GDP  until  2032.  Later,  GFN  starts  to  increase  slowly,  but  is 
projected to remain sustainable at around 18% of GDP by 2060. 

14