COMMISSION STAFF WORKING DOCUMENT Country Report Greece 2019 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2019-02-27
Institutions: European Commission, Secretariat-General
Subjects: Greece, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2019  SWD(2019) 1007 final  COMMISSION STAFF WORKING DOCUMENT Country Report Greece 2019      Including an In-Depth Review on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2019) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Overall findings regarding imbalances, risks and adjustment issues 

3.  Reform priorities 

3.1.  Public finances and taxation*  

3.2.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Competitveness reforms and investment 

Annex A: Overview Table 

Annex B: Commission Debt Sustainability Analysis and fiscal risks 

Annex C: Standard Tables 

3 

7 

14 

19 

19 

24 

29 

43 

61 

62 

63 

Annex D: Investment Guidance on Cohesion Policy Funding 2021-2027 for Greece 

69 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators - Greece 

Table 2.1: 

MIP assessment matrix - Greece 2019 

Table 3.2.1: 

Financial stability indicators 

Table C.1: 

Financial market indicators 

Table C.2: 

Key Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1: 

Real GDP growth 

Graph 1.2:  Growth contributions and share of tradable sectors within the economy 

Graph 1.3: 

Employment and GDP levels compared to 2009 

1 

75 

13 

17 

25 

63 

64 

65 

66 

67 

68 

7 

7 

8 

 
 
 
 
Graph 1.4: 

Trend in competitiveness (left) and unit labour cost in Greece, grouped by 

components and benchmarked against the euro area (right) 

Graph 1.5: 

Current account, government lending (left); net international investment position by 

economic agents (right) 

Graph 1.6: 

Non-performing loan ratio in the EU (left) and savings and investments by economic 

agents in Greece 

Graph 1.7: 

Regional convergence within Greece and with respect to the rest of the EU 

Graph 3.1.1:  Underspending from the public investment budget*, 2012-2017 

Graph 3.1.2:  Drivers of changes in general government balance, 2019-2022 

Graph 3.1.3: 

"Old debt" collection and "new debt" added 

Graph 3.3.1: 

Total population change 

Graph 3.3.2:  Activity rate of women in Greece and the EU by age group, 2017 

Graph 3.3.3:  Education and labour market for youth 

Graph 3.3.4:  Europe 2020 poverty indicators for Greece 

Graph 3.4.1: 

Investments in Greece by type (left); building permits and residential investments in 

Greece (right) 

Graph 3.4.2:  Net foreign direct investments in Greece by economic sector 

Graph 3.4.3:  Structural and demographic business statistics Employment and productivity 

according to company size 

Graph 3.4.4:  Ease of doing business 2018 

Graph 3.4.5:  Components of the "Ease of doing business 2018" for Greece 

Graph 3.4.6:  Wage costs in public administration 

LIST OF BOXES 

Box 3.3.1: Social welfare reforms in Greece 

Box 3.3.2: Technical support by the Structural Reform Support Service 

Box 3.3.3: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.1: Investment challenges and reforms in Greece 

Box 3.4.2: EU funds and programmes contribute to addressing structural challenges and to fostering 

growth and competitiveness in Greece. 

9 

10 

11 

12 

20 

20 

21 

29 

30 

30 

33 

43 

44 

48 

49 

49 

55 

32 

41 

42 

47 

60 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

stability 

successfully  exited 

the  European 
Greece 
Stability  Mechanism 
support 
programme  on  21  August  2018,  marking  the 
beginning of a new era for the country. It is now 
included  in  the  European  Semester  for  economic 
policy  coordination,  while  being  subject  to  the 
enhanced  surveillance  procedure  (1).  Greece  has 
substantially  improved  its  budget  balance  and 
current account balance in recent  years. However, 
potential  growth  has 
large 
accumulated imbalances remain as a legacy of the 
economic  crisis.  These  concern    the  high  public 
debt,  the  negative  net  international  investment 
position, the high non-performing loans on banks’ 
balance  sheets  and  the  still  high  unemployment 
rate.  In  addition,  deep  institutional  and  structural 
reforms  initiated  in  recent  years  to  modernise  the 
economy  and  the  State,  require  many  years  of 
sustained  implementation  for  their  impact  to  fully 
unfold.  

suffered, 

and 

Potential growth remains low, burdened by the 
loss  of  physical  and  human  capital  due  to  the 
low  investment  rate  and  the  emigration  of 
skilled workers in the past decade. Unfavourable 
demographic  trends  are  expected  to  continue 
affecting    Greece's  growth  potential.  Structural 
reforms  are  starting  to  bear  fruit,  and  their 
continuation  and  completion  will  be  essential  for 
unlocking growth potential. 

The Greek economy has continued to recover in 
2018, in terms of both growth and employment. 
Real  GDP  growth  is  projected  to  gather  pace  in 
2019  and  2020.  Investment  is  set  to  become  the 
biggest  contributor  to  GDP  growth  while  the 
contribution  of  net  exports  is  expected  to  stall  as 
domestic  demand  strongly  relies  on  imports. 

(1)  This  report  assesses  Greece’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey published 
on 21 November 2018. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
European  economy  more  productive, 
resilient  and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  delivering  high-quality  investment, 
efforts  on  productivity  growth, 
reforms 
focusing 
inclusiveness  and 
institutional  quality  and  ensuring 
macroeconomic  stability  and  sound public  finance.  At  the 
same 
the  Alert 
the  Commission  published 
Mechanism  Report  (AMR)  that  initiated  the  eighth  round 
of  the  macroeconomic  imbalance  procedure.  The  AMR 
found that  Greece  warranted  an in-depth  review,  which  is 
presented in this report. 

time, 

Labour market conditions are expected to continue 
to  gradually  improve,  though  from  a  very  weak 
base.  Following  substantial  improvements  in  cost 
competitiveness  over  the  past  decade,  wage  rises 
are expected to remain moderate and aligned with 
productivity growth.  

Investment  as  a  share  of  GDP  bottomed  out  in 
2015  and  is  slowly  increasing;  but  at  less  than 
13% in 2018, it is still the lowest in the EU. Both 
private  and  public  investment  fell  significantly 
during  the  crisis  and  foreign  direct  investment  is 
the lowest in the EU. There have been substantial 
reforms  to  improve  the  business  climate  and  to 
unlock  private  investment.  While  reforms  are 
expected  to  bear fruit, they  need to continue for a 
investment 
long-lasting 
environment. 

improvement  of 

the 

Greece  has  successfully  restored  its  budget 
balance and is expected to maintain  it over the 
next  years.  The  headline  balance  has  been  in 
surplus  since  2016  and  the  primary  balance  (i.e. 
the  overall  balance  excluding  interest  payments) 
target  was  exceeded  for  the  fourth  consecutive 
year  in  2018.  The  2019  budget  is  projected  to 
ensure  that  the  primary  surplus  target  of  3.5 %  of 
GDP  in  2019  is  met.  In  the  coming  years,  any 
fiscal  space  emerging  above  the  target  should 
provide  an  opportunity  to  adopt  reforms  to  make 
public  finances  more  growth  friendly,  such  as 
measures  already legislated  for 2020 to  widen tax 
bases  while  lowering  tax  rates  on  companies  and 
labour.  

While the crisis strongly affected all of Greece’s 
regions,  disparities  between  them  significantly 
widened  in  the  past  decade.  The  gap  between 
peripheral  regions  and  Athens  has  not  been 
bridged  and  the  average  Greek  region  has  only 
60 %  of 
capita. 
Employment,  poverty  and  social  exclusion  also 
have large regional variations.  

capital’s  GDP  per 

the 

Several  years  of  underinvestment  have  led  to 
major investment gaps in Greece. Strengthening 
investment  will  be  instrumental  in  underpinning 
longer-term  growth.  Priority  areas  for  public  and 
private  sector  investment  include  transport  and 
logistics;  the  sustainable  regeneration  of  urban 
areas  and  the  most  disadvantaged  and  deprived 
infrastructures; 
areas;  energy  efficiency  and 
technologies; 
environmental  protection;  digital 

3 

 
 
                                                           
Executive summary 

findings  of 

The  main 
review 
contained  in  this  report  and  the  related  policy 
challenges are as follows:  

in-depth 

the 

Reducing  accumulated  imbalances  will  require 
many years of sustained implementation of deep 
institutional and structural  reforms initiated in 
recent years to modernise the economy and the 
State,  as  well  as  many  years  of  sustained 
growth.  This  should  also 
reduce  Greece’s 
vulnerability  to  international  developments  and 
increase  market  confidence.  Although  significant 
measures  were  adopted  at  the  Eurogroup  of  June 
2018  to  ensure  debt  sustainability,  interest  rate 
spreads  have  remained  high.  This  reflects  market 
concerns  about  the  commitment  of  policy  makers 
to  sound  economic  and 
in  Greece 
budgetary policies over the medium and long term. 
High interest rate  spreads impede bank lending to 
non-financial  businesses,  which  would  be  critical 
to support an investment-led recovery. 

to  stick 

The 
stock  of  government  debt  remains 
exceptionally  high,  but  the  debt  measures 
adopted in 2017 and agreed in June 2018 ensure 
that  the  annual  debt  burden  remains  at  a 
manageable  level.  The  debt  stock  stood  at  over 
180 %  of  GDP  at  the  end  of  2018,  the  highest  in 
the EU. Given the highly concessional terms of the 
debt, gross financing needs are projected to remain 
below  15 %  of  GDP  until  the  mid-2030s  thus 
limiting  the  risks  to  debt  servicing.  Positive 
assessments  of  reform  implementation  under  the 
enhanced  surveillance  framework  will  serve  as  a 
basis  for  Greece’s  European  partners  to  agree  on 
the  implementation  of  additional  debt  measures 
worth  about  0.7 %  of  GDP  per  year.  Private  debt 
stocks  (i.e.  the  liabilities  held  by  non-financial 
corporations  and  households)  remain  contained, 
although the fundamentals of the economy suggest 
that the debt capacity of both households and non-
financial companies in Greece is particularly low. 

the 

fiscal 

Ensuring the sustainability of government debt 
in  the  medium  and  long  term  will  require 
maintaining fiscal discipline and continuing and 
completing 
reforms 
initiated  in  recent  years.  It  will  involve  full 
implementation  of  the  2016  pension  reform  and 
reforms. 
completion 
Furthermore,  it  will  include  modernisation  of  the 
property  tax  system  and  usage  of  emerging  fiscal 
space  to  shift  towards  a  more  growth-friendly  tax 

structural 

health 

care 

the 

of 

employment,  skills,  education  and  training,  social 
inclusion  and  integration,  health  and  research  and 
development,  mainly  through  the  development  of 
smart  specialisation  strategies  in  sectors  such  as 
agro-food  and  tourism.  Annex  D  identifies  key 
priorities  for  support  by  the  European  Regional 
Development Fund, the European Social Fund Plus 
and  the  Cohesion  Fund  for  2021-2027  in  Greece, 
building  on  the  analysis  of  investment  needs  and 
challenges outlined in this report.  

Although  Greece  did  not  receive  country-
specific recommendations in 2018, it committed 
to  continue  and  complete  all  key  reforms 
adopted  under 
the  European  Stability 
Mechanism  programme,  and  it  made  well-
specified commitments to European partners in 
June 2018. Commitments concern the areas of (i) 
fiscal  and  fiscal  structural  reforms;  (ii)  social 
welfare reforms; (iii) financial stability; (iv) labour 
and  product  market  reforms;  (v)  State  asset 
management and privatisation; and (vi) reforms of 
the  public  administration  and 
justice.  The 
Commission  is  monitoring  these  commitments 
under  its  ‘enhanced  surveillance’  framework.  The 
second  quarterly  report  is  being  published  in 
parallel  to  this  country  report.  Greece’s  broader 
reform agenda is set out in the growth strategy of 
July 2018 and covers similar areas. 

On  the  national  targets  under  the  Europe  2020 
strategy,  Greece  is  performing  well  on  reducing 
the rate of early school leavers, increasing tertiary 
education  attainment  and  reducing  greenhouse 
emissions.  It  is  on  track  to  reach  its  targets  on 
research  and  development,  the  use  of  renewable 
energy  resources  and  energy  efficiency.  By 
contrast,  the  employment  rate  and  the  poverty 
reduction fall short of the target. 

Greece  faces  challenges  for  most  indicators  of 
the Social Scoreboard supporting the European 
Pillar of Social Rights. The rate of unemployment 
is among the highest in the EU, although there are 
signs  of  improvement.  The  effectiveness  and 
adequacy of social transfers remains a concern, but 
recent  reforms  in  the  social  welfare  system  are 
expected  to  improve  the  situation.  Measures  have 
been adopted in recent years to improve the quality 
of social dialogue, but there is still a need to ensure 
that  social  partners  are  properly  involved  in 
national policymaking. 

4 

 
 
structure, and further improving tax collection,  by 
enhanced  operational  independence  of  the  tax 
authority.  Finally,  it  will  address  arrears,  further 
improvement of public financial management, and 
continuation  of  improving  the  management  of 
State assets. 

In  spite  of 

Greece’s  net  international  investment  position 
remains  highly  negative. 
the 
substantial  improvement  in  the  current  account 
balance  during  the  crisis  and  strong  growth  in 
exports of goods and services in the past two years, 
part of the improvement is expected to be reversed 
as  the  economy  picks  up  and  domestic  demand 
increases.  Further 
reallocation  of  productive 
resources  to  tradable  sectors  and  a  reduction  of 
import dependence will be necessary.  

Wide-ranging  policy  measures 
to  ensure 
financial stability and strengthen the viability of 
the banking system have helped to stabilise the 
financial  sector.  Capital  buffers  have  increased, 
deposits  have  stabilised  and  reliance  on  central 
bank 
funding  has  decreased.  Yet,  banks’ 
profitability  remains  low.  Banks’  balance  sheets 
remain  burdened  by  very  high  share  of  non-
performing  loans  and  tackling  those  remains  the 
most  important  challenge  facing  the  financial 
sector in  the  near and  medium term. Ensuring the 
smooth 
legal 
framework and toolkit will be critical for banks to 
continue  meeting  revised  and  ambitious  targets. 
the  banking  system  has 
The  governance  of 
improved  following  an  overhaul  of  the  boards  of 
banks. 

functioning  of 

relevant 

the 

Reforms  of  wage  negotiations  and  of  other 
labour  market  institutions  have  helped  Greece 
to regain cost competitiveness, and maintaining 
these  gains  will  be  critical  to  help  increase 
employment  and  reduce  unemployment.  The 
government  has  increased  the  minimum  wage  by 
10.9  %  as  from  1  February  2019.  In  parallel,  the 
sub-minimum wage for people under 25 years old 
has been eliminated, leading to a 27 % increase in 
the  minimum  wage  for  this  age  group.  This 
increase  in  the  minimum  wage  leads  in  the 
medium 
risk  of  negative 
employment  effects,  especially  on  low-skilled, 
young  workers  and  workers  with  a  long  tenure. 
Looking  ahead,  social  partners  will  play  a  critical 
role,  in  the  context  of  collective  bargaining,  in 
ensuring that wage formation takes due account of 

to  higher 

term 

Executive summary 

the  need  to  protect  competitiveness  gains  and  has 
adequate scope to cater for the specific situation of 
firms,  many  of  which  remain  in  a  distressed 
financial  situation.  Other  key  structural  issues 
analysed  in  this  report,  which  point  to  particular 
challenges 
the 
following:  

for  Greece’s  economy,  are 

recent 

improvements, 

Despite 
youth 
unemployment  and  long-term  unemployment 
are  still  a  serious  concern.  Women’s  labour 
market  participation  also  lags  far  behind  the  EU 
average.  To  address  these  issues,  the  government 
has  started  to  implement  policies  to  improve 
labour  market 
employability  and  promoting 
participation.  In  parallel, 
is 
continuing  its  fight  against  undeclared  work. 
Putting  in  place  a  comprehensive  strategy  to 
improve  the  efficiency  of  the  education  and 
training  system  will  be  critical  for  reducing  skill 
employability, 
and 
mismatches 
especially that of younger people.  

the  government 

increasing 

Although  still  difficult,  the  social  situation  is 
expected  to  continue  to  improve  in  the  coming 
years,  thanks  to  the  combined  effect  of  the 
economic  recovery  and  the  social  welfare 
reform.  Major  steps  have  been  taken  to  improve 
the  efficiency,  effectiveness  and  adequacy  of  the 
social  welfare  system:  the  introduction  of  a 
guaranteed  minimum  income  scheme,  the  reform 
of  family  benefits  and  an  upcoming  new  means-
tested  housing  benefit.  The  completion  of  the 
reform  of  the  disability  benefit  system  and  the 
review  of  the  system  of  subsidies  for  local  public 
transport  could  further  improve  the  efficiency  of 
the welfare system. 

is  due 

The  significant  under-execution  of  the  public 
investment  budget  has  been  a  problem  for 
several  years.  This 
structural 
shortcomings in developing projects of investment 
grade  as  well  as  suboptimal  budgeting  practices. 
An 
investment 
review  of 
budgeting framework will recommend measures to 
tackle the shortcomings. 

independent 

the 

to 

Following  years  of  pronounced  contraction, 
bank  lending  to  the  private  sector  continues  to 
be  very  subdued,  though  there  are  slight  signs 
of  improvement  for  large  companies.  Access  to 
finance  remains  extremely  limited,  affecting  not 
only  small  and  medium-size  enterprises  but  also 

5 

 
 
Executive summary 

still 

system 

judicial 

The  Greek 
faces 
inefficiencies  and  reforms  in  this  area  are 
critical  to  the  smooth  functioning  of  the 
financial  system  and  to  unlocking  investment 
potential.  Despite  recent  improvements,  the  time 
to reach a decision is often too long and backlogs 
will  require  further  targeted  action.  Ongoing 
reforms aim at reducing the backlog of household 
insolvency  cases  and  implementing  a  three-year 
action  plan,  which  features  the  creation  of  an 
electronic justice system.  

start-ups and scale-ups, causing liquidity problems 
and constraining investments. 

reforms 

to 
increase 

in  the 
Continuing  the  structural  reforms 
product markets will be essential for improving 
the  business  climate  and  attracting  investment. 
reduce 
Despite  broad-based 
the 
competition, 
administrative  burden, 
simplify investment licensing procedures, alleviate 
disproportionate 
regulated 
restrictions 
professions,  set  up  a  cadastre  and  improve  spatial 
planning,  Greece  continues  to  lag  behind  EU  and 
global best practices. The authorities are putting in 
place  the  remaining  steps  of  the  investment 
licensing reform and setting up the comprehensive 
property  and  land  register.  Full  and  smooth 
is 
implementation  of 
expected to attract investors.  

the  privatisation  plan 

to 

Reforms  of  network  industries  such  as  energy 
and transport should reduce costs for customers 
and lead to improvements in infrastructure. The 
energy  market 
remains  characterised  by  a 
concentrated  structure,  relatively  high  wholesale 
prices and a reliance on fossil fuels. The transport 
system  is  largely  road-based,  dependent  on  oil-
based 
is  characterised  by  low 
productivity.  The  digital  transformation  of  the 
economy  and  society  remains  challenging,  with 
low access to high-speed broadband networks and 
digital skills well below the EU average.  

transport  and 

fully 

to  be 

through 

implemented 

low  administrative 
Weak  coordination  and 
capacity  in  the  public  administration  remain 
important  bottlenecks,  which  also  hamper 
business  and  investment.  The  national  strategy 
for  administrative  reform  aims  to  increase  the 
improved 
administration’s  efficiency 
processes 
for  managerial  appointments  and 
modern  human  resource  practices.  The  reforms 
need 
any 
the  appointments  of  senior 
shortcomings  on 
managers  properly  addressed.  Greece  has  updated 
its  national  anti-corruption  action  plan.  Thanks  to 
recent  reforms,  and  with  the  exception  of  a  slight 
decrease in 2018, Greece has steadily improved its 
scoring  in  the  Corruption  Perception  Index  over 
the  past  years.  Nevertheless,  the  score  remains 
relatively  low  and  issues  remain,  particularly  as 
regards  a  weak  coordination  mechanism  of 
corruption cases, complex immunity and generous 
statute of limitation regimes, as well as legislative 
gaps regarding whistle-blower protection. 

and 

6 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

point  to  a  low  debt-servicing  capacity  of  the 
private sector.  

Graph 1.2:  Growth contributions and share of tradable 
sectors within the economy 

GDP growth 

After  almost  a  decade  of  contraction  and 
stagnation,  Greece’s  economy  started  to  grow 
again in 2017 and expected to have accelerated 
in  2018.  Following  a  domestic-demand-led  real 
GDP growth of 1.5% in 2017, growth is forecast to 
have  reached  2%  in  2018.  Growth  is  projected  to 
exceed  2%  in  2019  and  2020.  Investment  is 
expected  to  drive  growth  in  the  next  years  thanks 
to  reforms  and  structural  adjustments  undertaken 
under  the  support  programme,  while  growth  in 
private  consumption  should  also  provide  a  steady 
support.  

further 

in  2018.  Although 

Private  consumption  was  a  major  driver  of 
growth  in  2018.  Private  consumption  started  to 
recover  already  in  2017  and  is  expected  to  have 
accelerated 
this 
improvement  is  supported  by  an  increase  in 
employment, 
though  with  real  wage  growth 
remaining  subdued,  households  are  still  financing 
part of their spending by drawing on their savings. 
Despite  an  improvement  since  mid-2017,  the 
saving rate of households remained negative — at 
around -4% in mid-2018.  

Graph 1.1: 

Real GDP growth 

Source: European Commission 

sector’s  gross  assets  are 
The  household 
depleting. While private debt stocks are below the 
EU  average  and  below  the  threshold  envisaged  in 
the  scoreboard  underpinning  the  macroeconomic 
imbalance  procedure  of  133 %  of  GDP,  the 
negative  savings  rate  coupled  with  negative  retail 
credit flows suggest that households are using their 
their  spending. 
assets 
to 
Moreover, 
the 
low 
economy, 
expected income growth, high public debt and the 
projected  increase  in  the  age-dependency  ratio, 

fundamental  aspects  of 
including  high  unemployment, 

finance  some  of 
the 

7 

Tradable sectors: agriculture, industry, trade, tourism, 
transportation. 
Growth contributions refer to the annual growth of gross 
value added. 
Source: Commission departments 

tourism 

in  2018  too.  The 

Exports  provided  a  major  contribution  to 
growth 
industry 
recorded  a  very  good  year  and  the  country’s 
increased  rapidly  as  well. 
exports  of  goods 
However,  import  growth  was  moderated  because 
of  the  subdued  domestic  investment  demand.  The 
tradable  sectors  have  steadily  increased  their 
shares  in  the  economy  and  generated  most  of  the 
growth  since  2017.  The  expansion  of  Greece’s 
export  capacities  is  expected  to  ease  the  pressure 
on  the  current  account  balance  as  demand  for 
imports increases with the economic recovery.  

The investment-to-GDP ratio is still very low in 
particular due to a weak investment appetite in 
the private sector. Investment used to account for 
more  than  25 %  of  GDP  in  the  pre-crisis  years 
while in 2018 it accounts for below 15 % of GDP, 
mostly  due  to  the  fall  in  housing  investments. 
Investment in the construction sector is increasing 
decreased 
but 
significantly  in  2018  compared  to  2017.  Both 
residential and non-residential construction activity 
increased in 2018, albeit from a very low base (see 
their  growth 
Section  3.4.1),  meaning 
contribution  is  limited.  Public  investment  is  also 
lagging  behind 
levels.  The 
investment-gap indicates that  there is ample room 

the  pre-crisis 

investment 

equipment 

that 

in 

-2.0-1.5-1.0-0.50.00.51.01.52.02.53.0201520162017201820192020%, pps.Private consumptionPublic consumptionInvestmentNet exportsChange in inventoriesGDPForecast3536373839404142434445-6-5-4-3-2-1012342013Q12013Q22013Q32013Q42014Q12014Q22014Q32014Q42015Q12015Q22015Q32015Q42016Q12016Q22016Q32016Q42017Q12017Q22017Q32017Q42018Q12018Q22018Q3%%Non-tradablesTradablesShar of tradable sector (rhs.) 
 
 
 
 
1. Economic situation and outlook 

headline  inflation  decreased  to  0.8 %.  Net  of  the 
tax  effects,  inflation  rose  moderately  in  2018, 
reaching  0.7 %,  up  from  0.3 %  in  2017.  This 
increase  is  mainly  due  to  an  increase  in  energy 
prices,  as  core  inflation  in  2018  reached  only 
0.5 %  thereby  remaining  under  its  2017  value  of 
0.6 %.  Inflation  is  expected  to  remain  subdued  in 
2019,  as  the  decline  in  energy  prices  are  to 
compensate  the  effect  of  rising  core  inflation. 
From  2020,  inflation  is  expected  to  increase  as 
energy  prices  stabilise  and  core  inflation  rises  in 
tandem with the economic recovery. Inflation is set 
to  increase  further  in  subsequent  years  and  reach 
nearly 2 % by 2023. 

to 

the 

the 

adopted 

improve 

reform  of 

for  recovery  if  the  business  climate  improves. 
Investment  recovery  is  expected  to  be  supported 
by 
investment-licensing 
the 
framework  and  by  numerous  other  reforms  that 
were 
business 
environment.  It  will  also  hinge  on  the  banking 
sector’s  ability  to  provide  companies  with  credit 
over  the  coming  years.  New  investments  through 
the  privatisation  programme  and  new  foreign 
direct  investment  could  support  the  economic 
recovery.  The  additional  income  and  productive 
capacity  associated  with  these  investments  could 
lead  to  higher  levels  of  employment,  income  and 
private spending. 

Potential growth 

Graph 1.3: 

Employment and GDP levels compared to 
2009 

Implementing  the  reforms  may  help  mitigate 
future  challenges.  Unfavourable  demographic 
trends  are  expected  to  weigh  on  Greece’s  growth 
potential. In the past years, the country faced a loss 
of  physical  and  human  capital  due  to  a  low 
investment rate and emigration of skilled workers. 
labour  and  product  market 
However,  recent 
the  Greek 
the  commitment  of 
reforms  and 
authorities  to  continue  with  the  reforms  initiated 
under 
the  European  Stability  Mechanism 
programme  –  which  are  also  reflected  in  their 
National  Growth  Strategy  –  have  the  potential  to 
raise future productivity by improving the business 
and 
reducing  prices 
through  increased  competition,  and  strengthening 
governance  and  the  justice  system.  The  resulting 
increase  in  domestic  and  foreign  investments, 
embedding  state-of-the-art  technologies  and  best 
practices,  could  thus  start  a  virtuous  circle  of 
development  attracting 
the 
country and providing opportunities for productive 
and rewarding jobs. 

regulatory  environment, 

talents  back 

into 

However,  the  measurement  and  assessment  of 
is 
potential  growth  based  on  recent 
particularly  uncertain  in  an  economy  that  is 
undergoing such a deep structural change as that of 
Greece. 

trends 

Inflation 

Inflation  decreased  in  2018.  Inflation,  measured 
in  terms  of  the  harmonised  index  of  consumer 
prices  (HICP),  reached  1.1 %  in  2017  and  was 
positively affected by increases in indirect taxes. In 
2018,  the  effect  of  the  tax  changes  dissipated  and 

8 

Source: Commission departments 

Labour market 

Labour market conditions are set to continue to 
gradually  improving  though  from  a  very  weak 
base. The recovery of employment levels started in 
2014,  ahead  of  the  recovery  in  the  country’s 
economic growth. This suggests that labour market 
impact.  The 
reforms  have  had  a  positive 
unemployment  rate  has  also  been  decreasing 
steadily,  from  its  peak  of  27.9 %  in  September 
2013,  down  to  18.5 %  (November  2018).  These 
positive  developments  are  expected  to  continue 
steadily  in  line  with  the  sustained  economic 
recovery. Employment growth is expected to reach 
1.8 %  in  2019  and  1.4 %  in  2020,  and  the 
unemployment  rate  is  projected  to  fall  to  around 
16 %  by  the  end  of  2020.  Despite  the  substantial 
improvement, Greece continues to have one of the 
highest  unemployment  rates  in  the  EU,  which 

707580859095100105index 2009=100EmploymentGDP 
 
1. Economic situation and outlook 

situation  started  to  improve  from  2017,  thanks  to 
the gradual labour market recovery and in light of 
the  reforms,  which  strengthened  the  Greek  social 
welfare  system  (with  flash  estimates  for  2018 
pointing to a further decline in the risk of poverty). 

to 

crisis 

during 

Wage  growth  is  expected  to  be  positive  but 
moderate,  as  the  still  very  high  unemployment 
is gradually reabsorbed. Following a strong wage 
adjustment 
regain 
the 
competitiveness, with compensation per employee 
decreasing by 19.4 % in nominal terms since 2009, 
the  wage  adjustments  came  to  a  halt  in  2017. 
Growth  in  nominal  compensation  per  employee 
(which stood at 0.5 % in 2017) is forecast to have 
remained just below 1 % in 2018, and to rise only 
very  gradually  afterwards  due  to  the  considerable 
slack  in  the  labour  market,  with  still  very  high 
unemployment and modest labour demand. At the 
same time, wage developments will depend on the 
collective  bargaining 
outcome  of 
negotiations  (with  sectoral  agreements  being  once 
again the predominant level of bargaining). Further 
upward pressures  may arise from policy decisions 
on  the  increase  of  the  minimum  wage,  and  in 
particular  with  the  abolition  of  the  sub-minimum 
wage for youth under 25 years of age. 

renewed 

exceeds the pre-crisis level by about 10 percentage 
points. Particularly worrying is the very high share 
of  long-term  and  very-long  term  unemployed 
(73 % have been unemployed for more than 1 year 
and  half  of  them  have  been  out  of  work  for  more 
than  4  years).  The  employment  rate  (59.3 %)  is 
very  low  and  significantly  below  the  EU  average 
(73.2%)  but  the  activity  rate,  which  remained 
rather  stable  during  the  crisis,  is  now  about  2 
percentage points higher than in 2008.  

Social development 

the 

strong 

recent 

increase 

improvements, 

indicators.  The 

Despite 
social 
consequences  of  the  crisis  are  still  visible  in  all 
social 
in 
unemployment  and  the  limited  capacity  of  the 
Greek  welfare  system  to  protect  against  poverty 
had  led  to  a  strong  reduction  in  households’ 
disposable  incomes  and  to  a  sharp  increase  in 
poverty.  In  particular,  in  2016  severe  material 
deprivation had reached a peak of 22.4 %, up from 
11 % in 2009, amongst the highest rates in the EU 
and  about  3  times  the  EU  average.  However,  the 
social  situation  2017  improved  in  2017  with  the 
indicator  of  deprivation  dropping  to  21.1%.  The 
reduction  in  incomes  was  broadly  proportional 
across the income distribution. Therefore, over the 
inequality,  which  was 
same  period 
amongst  the  highest  in  the  EU  already  before  the 
crisis,  did  not  evolve  substantially.  The  social 

income 

Graph 1.4: 

Trend in competitiveness (left) and unit labour cost in Greece, grouped by components and benchmarked 
against the euro area (right) 

The real effective exchange rate (REER) is the weighted average of a country's competitiveness level in relation to an index. 
Among other methodologies, it can be measured in terms of unit labour costs (’REER — ULC’) or price levels (’REER — HICP’). 
’TFP’ is total factor productivity, estimated empirically  for the purposes of this table as the difference of the output increase 
that can be attributed to simple factor accumulation and the observed increase in output.’CoE per hour’ is the 
compensation of employees per hour worked. 
Source: Commission services 

9 

95100105110115120125130135200120022003200420052006200720082009201020112012201320142015201620172001= 100REER - ULCREER - HICP-15-10-505102003200420052006200720082009201020112012201320142015201620172018*2019*2020*investmentTFPlabour (hours worked)nominal CoE per hournominal ULC growthULC in the euro area% 
 
1. Economic situation and outlook 

Competitiveness 

Following  a  substantial  adjustment  in  unit 
labour  costs  (ULC)  since  the  beginning  of  the 
crisis, they have broadly stabilised since 2016. A 
moderate  increase  is  expected  in  2018  as  hourly 
wage  is  expected  to  start  to  rise.  Given  the 
persistently  low  investment  rate,  capital  depletion 
is expected to continue to negatively affect the unit 
labour cost in 2018. The modest overall increase in 
2017 and 2018 is still below  the euro area’s (EA-
19) growth rate. This increase should not erode the 
competitiveness  gains  of  the  past  years.  Increases 
in  total  factor  productivity  and  in  the  investment 
rate  are  predicted  to  be  high  enough  to  offset  the 
emerging trends of nominal hourly wage increases 
and  reductions  in  working  hours  and  to  maintain 
the recent gains in competitiveness by keeping any 
raises  in  unit  labour  costs  in  line  with  euro  area 
developments. 

External position 

There has been a major adjustment in Greece’s 
external  position  since  the  beginning  of  the 
crisis,  as  its  current  account  balance  swung 
from  deficits  above  15 %  of  GDP  in  2008/2009 
to  small  surpluses  in  2015/2016.  The  legacy  of 
these large past deficits is currently reflected in the 
very negative net international investment position 
(NIIP), which hovers around 140 % of GDP in the 
second  quarter  of  2018  and  is  still  significantly 
higher  than  the  prudential  thresholds  (2)  and  the 

favourable 

level  that  would  be  in  line  with  the  fundamentals 
of  the  economy  (3).  While  the  composition  of  the 
net  international  investment  position  stock  is 
terms  of  short-term 
in 
generally 
sustainability, as most liabilities are in the form of 
public debt obtained at concessionary terms during 
the  assistance  programmes,  further  adjustment 
efforts would be needed to ensure sustainability in 
the  medium  and  long  term.  Taking  into  account 
that  demand  for  imports  is  muted  due  to  the 
relatively 
and 
consumption  at  present,  the  cyclically  adjusted 
current  account  would  still  show  a  significant 
deficit  of  5 %  of  GDP.  This  implies  that  future 
increases  in  investment  and  living  standards  will 
necessitate  comparatively 
in 
exports  to  keep  the  current  account  balance  in 
check.  To  ensure  that  the  economy  is  resilient  to 
future  shocks,  the  net  international  investment 
position  should  converge  towards  the  prudential 
level  compatible  with  the  characteristics  of  the 
Greek economy.  

investment 

increases 

levels 

larger 

low 

of 

(3)  The  current  account  'norm'  benchmark  for  Greece  is  48% 
and  it  is  derived  from  regressions  capturing  the  main 
fundamental determinants of the saving-investment balance 
(e.g.  demographics,  resources),  as  well  as  policy  factors 
and  global  financial  conditions.  For  details  regarding  the 
estimation of current accounts based on fundamentals, see 
Coutinho et al. (2018). 

(2)  Country-specific  prudential  thresholds  denote  the  NIIP 
Graph 1.5:  Current account, government lending (left); net international investment position by economic agents (right) 
level beyond which an external crisis becomes likely. The 
NIIP  level  explained by  fundamentals  represents  the  NIIP 
that  would  result  if  a  country  had  run  its  CA  in  line  with 
fundamentals  since  1995.  For  details  on  the  estimation  of 
NIIP benchmarks see Turrini and Zeugner (forthcoming).  

CA = current account; MFI = monetary financial institutions which are resident credit and financial institutions whose business 
is to receive deposits and/or close substitutes for deposits from entities other than MFIs. "NIIP" stands for "net international 
investment position", which is a nation’s stock of foreign assets minus its foreign liabilities. 
Source: Commission services 

10 

-16-14-12-10-8-6-4-20220092010-2014average2015201620172018% of GDPCyclically adjusted CA as % of GDPNet general government lending as %of GDPCurrent account as % of GDP-200-150-100-50050100Private sectorGeneral GovernmentMFI (excl central bank)Central Bank (incl reserves)NIIP% of GDP 
                                                           
                                                           
 
1. Economic situation and outlook 

Graph 1.6:  Non-performing loan ratio in the EU (left) and savings and investments by economic agents in Greece 

Source:  European Central Bank and Commission services 

Such  convergence  could  be  achieved  in  full  with 
an annual current account surplus of 6.4 % for 10 
years.  Half  of  the  gap  could  be  filled  in  10  years 
with annual current account surplus of 1.8 %. 

Public finances 

Greece  is  expected  to  meet  its  fiscal  targets  in 
2018  and  2019.  Taking  into  account  the  package 
of measures incorporated into the 2019 budget, the 
headline  balance  is  forecast  to  reach  a  surplus  of 
0.6 % of GDP in 2018 and 0.2 % of GDP in 2019. 
In  terms  of  the  primary  surplus  monitored  under 
the 
this 
corresponds to a primary surplus of 3.7 % of GDP 
in 2018 and 3.5 % of GDP in 2019(4). Public debt 
is forecast to have peaked in 2018 and is expected 
to decrease swiftly in the near future supported by 
economic  recovery  and  the  projected  surpluses  in 
the general government balance. 

surveillance 

framework, 

enhanced 

Financial sector 

The Greek financial sector still suffers from the 
highest  ratio  of  non-performing  loans  (NPLs) 
on total exposures in the European Union. Even 
though the ratio has begun slowly decreasing since 
its peak in 2016 Q4, sustained efforts are needed to 
speed up its reduction. High non-performing loans 
ratios  weigh  considerably  on  bank  performance 
and tie up significant amounts human and financial 
resources,  thus  reducing  lending  capacity  and  the 

(4)  See  Commission  Opinion  on  the  Draft  Budgetary  Plan  of 

Greece, C (2018)8016. 

capacity  of  businesses  to  invest.  A  number  of 
initiatives  has  also  been  introduced  to  tackle  this 
issue, as discussed in Section 3.4.2. The need for a 
healthy  and  liquid  banking  sector  is  even  greater 
considering 
increasingly 
that  households  are 
drawing  on  their  savings  to  consume,  which 
reduces  the  amount  of  domestic  resources  to 
finance  investments.  This  factor  is  only  partly 
offset by higher corporate and public savings.  

Regional disparities 

Insufficient  convergence  is  observed  between 
peripheral regions and Athens, with the average 
Greek  region  having  on  average  only  60 %  of 
the capital's GDP per capita. The average annual 
improvement in the gap is negligible, at just 0.2 % 
of  GDP,  implying  that  at  this  pace  it  would  take 
more than 200 years for the average Greek region 
to reach the income level of the capital region. The 
crisis hit all parts of Greece to a similar extent and 
did  not  contribute  to  reduce  territorial  disparities 
within  the  country.  In  fact,  while  the  GDP  per 
capita  in  the  greater  Athens  area  fell  from  124 % 
of  the  EU  average  in  2009  to  92 %  in  2016, 
following  the  adjustment  in  sectors  such  as 
construction, 
and  public 
administration,  the  other  regions  in  Greece  also 
contracted,  to  a  lesser  extent  but  starting  from  a 
lower base.  

financial 

services 

11 

05101520253035404550ELCYPTITBGHRIESIPLHULVROESSKMTLTFRATDKBECZNLEEDEUKSEFILU2016-Q22018-Q2%-30-20-1001020302003200420052006200720082009201020112012201320142015201620172018% of GDPHouseholds savingHouseholds investmentGovernment savingGovernment investmentCorporations savingCorporations investment 
                                                           
 
 
1. Economic situation and outlook 

Graph 1.7: 

Regional convergence within Greece and with respect to the rest of the EU 

See the left pane for convergence in PPP GDP per capita of Greek regions with Athens in the period 2009-2016. The horizontal 
axis reports the NUTS2 regional income as a share of per capita income in Attica in 2009. The vertical axis shows the change 
between2009 and 2016. The dashed line is the interpolation of the data points, showing the unconditional beta convergence 
parameter over the seven-year period as its slope (see Monfort, 2009; Persyn and Algoed, 2011, for a discussion of the 
concept of beta convergence). "PPP GDP" is the Purchasing Power Parity Gross Domestic Product, correcting the region's 
income level by the local price level. NUTS2 is the second level of disaggregation of the "Nomenclature of Territorial Units for 
Statistics". It generally covers the 273 basic regions of the EU identified for the application of regional policies. 
Source: NUTS2 regional data are retrieved from Eurostat, data code 'nama_10r_2gdp', variable 'PPS_HAB_EU - Purchasing 
power standard (PPS) per inhabitant in percentage of the EU average'. The maps are drawn using a software application 
developed by the Regional Modelling team of European Commission's Joint Research Centre, Territorial Development unit. 

12 

EL51 -Anatoliki Makedonia, ThrakiEL52 -Kentriki MakedoniaEL53 -Dytiki MakedoniaEL54 -IpeirosEL61 -ThessaliaEL62 -Ionia NisiaEL63 -Dytiki ElladaEL64 -Sterea ElladaEL65 -PeloponnisosEL41 -Voreio AigaioEL42 -Notio AigaioEL43 -Kritiy = -0.032x + 0.02-5%-4%-3%-2%-1%0%1%2%3%4%50%55%60%65%70%75%80%09-16 chage in % of Attica GDP PPP2009 Initial ratio of regional GDPtoAttica, PPPGDP per capita as % of EU average (2016,PPP)Changein GDP per capita 2009-2016 (PPP) 
 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators - Greece 

(1) NIIP excluding direct investment and portfolio equity shares         
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches.         
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation.        
Source: Eurostat and ECB as of 31-1-2019, where available; European Commission for forecast figures (Winter forecast 2019 for 
real GDP and HICP, Autumn forecast 2018 otherwise) 

13 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)3.6-5.4-1.0-0.21.52.02.22.3Potential growth (y-o-y)2.8-1.1-2.3-1.5-1.0-0.8-0.30.0Private consumption (y-o-y)3.4-4.6-0.70.00.9...Public consumption (y-o-y)5.1-3.6-2.1-0.7-0.4...Gross fixed capital formation (y-o-y)5.8-17.1-4.24.79.1...Exports of goods and services (y-o-y)9.3-2.24.1-1.86.8...Imports of goods and services (y-o-y) 8.3-8.51.80.37.1...Contribution to GDP growth:Domestic demand (y-o-y)4.6-7.3-1.50.41.6...Inventories (y-o-y)-0.3-0.4-0.20.10.0...Net exports (y-o-y)-0.82.30.6-0.7-0.1...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.5-0.1-0.4-0.3-0.1-0.2-0.1-0.1Capital accumulation (y-o-y)1.00.1-0.5-0.4-0.3-0.3-0.10.0Total factor productivity (y-o-y)1.4-1.2-1.4-0.7-0.5-0.3-0.10.1Output gap3.5-5.5-13.7-10.8-8.6-6.0-3.8-1.9Unemployment rate9.514.526.323.621.519.618.216.9GDP deflator (y-o-y)3.11.6-1.5-0.20.60.51.11.2Harmonised index of consumer prices (HICP, y-o-y)3.22.9-1.10.01.10.80.71.3Nominal compensation per employee (y-o-y)5.1-0.5-4.0-0.90.50.91.32.0Labour productivity (real, person employed, y-o-y)2.0-2.4-0.7-0.70.0...Unit labour costs (ULC, whole economy, y-o-y)3.12.0-3.4-0.30.60.60.91.2Real unit labour costs (y-o-y)0.00.4-1.90.00.00.1-0.2-0.1Real effective exchange rate (ULC, y-o-y)1.6-0.6-4.0-1.21.51.0-1.8-1.5Real effective exchange rate (HICP, y-o-y)0.2-0.2-1.91.20.72.0-1.8-1.7Savings rate of households (net saving as percentage of net disposable income)-0.7-6.3-15.2-17.0-16.9...Private credit flow, consolidated (% of GDP)14.51.6-3.5-2.1-0.8...Private sector debt, consolidated (% of GDP)88.3123.9128.8124.0116.4...of which household debt, consolidated (% of GDP)37.758.263.460.056.2...of which non-financial corporate debt, consolidated (% of GDP)50.765.765.464.060.2...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)........Corporations, net lending (+) or net borrowing (-) (% of GDP)5.17.512.96.56.17.86.86.4Corporations, gross operating surplus (% of GDP)19.018.519.418.218.418.518.618.8Households, net lending (+) or net borrowing (-) (% of GDP)-7.9-5.5-4.8-6.7-6.9-7.4-6.4-5.5Deflated house price index (y-o-y)4.6-7.0-5.9-1.7-1.6...Residential investment (% of GDP)9.95.51.30.60.6...Current account balance (% of GDP), balance of payments-10.8-10.5-1.5-1.7-1.8-0.2-0.20.3Trade balance (% of GDP), balance of payments-9.1-7.8-1.7-0.7-0.5...Terms of trade of goods and services (y-o-y)-0.1-0.72.7-0.4-0.4-0.6-0.30.2Capital account balance (% of GDP)1.41.21.40.60.5...Net international investment position (% of GDP)-79.7-93.4-132.6-137.8-140.5...NIIP excluding non-defaultable instruments (% of GDP) (1).-95.3-128.7-127.2-126.4...IIP liabilities excluding non-defaultable instruments (% of GDP) (1).188.2242.5244.6223.5...Export performance vs. advanced countries (% change over 5 years)13.6-3.6-15.9-21.2-5.7...Export market share, goods and services (y-o-y)..-3.8-4.55.6...Net FDI flows (% of GDP)0.1-0.1-0.4-2.3-1.5...General government balance (% of GDP)-6.9-11.1-7.40.50.80.60.60.6Structural budget balance (% of GDP)..3.45.55.04.32.51.6General government gross debt (% of GDP)104.2142.8177.4178.5176.1182.5174.9167.4Tax-to-GDP ratio (%) (3)32.935.139.041.841.841.239.939.4Tax rate for a single person earning the average wage (%)18.021.224.925.4....Tax rate for a single person earning 50% of the average wage (%)16.017.016.015.8....forecast 
 
  
 
 
 
2.  OVERALL FINDINGS REGARDING IMBALANCES, RISKS AND 

ADJUSTMENT ISSUES 

Introduction 

The  2019  Alert  Mechanism  Report  concluded 
that  a  new  in-depth  review  (IDR)  should  be 
undertaken  for  Greece  to  examine  the  possible 
existence of imbalances (European Commission, 
2019d).  An  IDR  was  not  prepared  for  Greece  in 
2018  (5). This  chapter  summarises  the  findings  of 
the  analyses  in  the  context  of  the  macroeconomic 
imbalance procedure (MIP) in-depth review that is 
contained in various sections in this report (6). 

Imbalances and their gravity 

Greece  currently  has  large  debt  stocks,  which 
are  slowly  unwinding.  High  levels  of  public  and 
external debt, combined with high non-performing 
loans  (NPLs)  in  the  banking  system,  expose  the 
country to adverse shocks with potentially harmful 
implications  for 
the  real  economy.  Subdued 
nominal  growth  in  recent  years  also  reduced  the 
scope for passive deleveraging. 

Greece has the  highest gross public debt  in the 
EU.  Public  debt  stood  at  176.1 %  of  GDP  at  the 
end  of  2017  and  it  is  expected  to  have  further 
increased in 2018, due to the large disbursement at 
the  end  of  the  European  Stability  Mechanism 
programme.  Despite  the  high  stock  of  debt, 
refinancing  or  debt  servicing  risks  in  the  coming 
years  are  limited,  as  most  of  this  debt  was 
attributed at  highly concessional terms and  with a 
delayed repayment schedule.   

Greece  also  has  a  very  large  stock  of  external 
liabilities,  which  is  primarily  driven  by  foreign 
sovereign  indebtedness.  Greece's  net  investment 
position (NIIP) stood at -140.5 % of GDP in 2017, 
the second highest in the EU. This stock is mainly 
composed of debt instruments, primarily related to 

(5)  Greece was not in MIP and European Semester until 2018 
in  light  of  the  presence  of  a  macroeconomic  adjustment 
programme linked to financial assistance, Regulation (EU) 
472/2013. 

(6)  Relevant  analyses  can  be  found in  the  following  sections: 
Public  finances  and  taxation  are  covered  in  Section  3.1; 
financial  sector:  banking  sector,  access 
to  finance, 
indebtedness,  non-performing  loans  in  Section  3.2;  labour 
productivity  in  Section  3.3;  and  investment:  external 
competitiveness,  private  and  public  investment,  business 
environment are covered in Section 3.4. 

public  debt  (see  Section  1).  Such  vast  liabilities 
expose  Greece  to  adverse  external  shocks  and 
sentiment shifts. 

The  external  flow  balances  have  substantially 
improved  but  the  external  position  remains 
weak,  rendering  the  economy  vulnerable  to 
shocks.  Although  the  current  account  balance  in 
2017  recorded  a  mere  1 %  deficit,  the  cyclically 
adjusted current account shows a deficit of 5.5 %, 
which  is  higher  than  what  is  required  to  keep  the 
net international investment position at least stable 
in the next 10 years. 

loans,  which  affects 

The banking sector is burdened by a high stock 
of  non-performing 
the 
profitability of banks. Although private debt stocks 
are  contained,  the  fundamentals  of  the  economy, 
including  currently  high  unemployment,  public 
debt,  and  the  projected  increase  in  the  age-
dependency  ratio,  imply  that  the  debt  capacity  of 
both households and non-financial  corporations in 
Greece is particularly low (see Section 3.2.1). 

Potential  growth  has  been  significantly  limited 
by  the  ageing  population,  migration  and  the 
depletion  of  capital  stock.  The  protracted  crisis 
has weighed heavily on Greece’s growth potential, 
which  is  also  reflected  in  decreasing  labour 
productivity. Structural reforms implemented over 
the past years are expected to impact positively on 
productivity  in  the  years  to  come  (see  Section 
3.4.2).  Low  potential  growth  may  represent  a 
strong constraint on the deleveraging process. 

the 

rate  and 

The labour  market has been performing better 
than  expected,  but  there  is  still  a  large  gap 
compared with the pre-crisis situation and with 
the  rest  of  the  EU.  Greece  continues  to  have  the 
lowest 
highest  unemployment 
employment rate in the EU. Youth unemployment 
and  long-term  unemployment  still  need  attention. 
In addition, due to its geographic position, Greece 
is  highly  affected  by  migration  flows.  However, 
Greece is no longer a pure transit country but  has 
also become a settlement country as shown by the 
rising  proportion  of  non-EU-born  people  in  its 
population  (8.4 %).  This  development  brings  a 
number  of  challenges,  particularly  in  the  area  of 
employment and social policies (see Section 3.3). 

14 

 
 
                                                           
2. Overall findings regarding imbalances, risks and adjustment issues 

thereby 

The  economy  is  undergoing  both  a  structural 
change and a strengthening recovery, and both 
affect  the  prospects  of  the  current  account 
recovery  may  generate 
development.  The 
increased import demand for investments and final 
consumption, 
the  current 
account  deficit.  However,  the  increasing  share  of 
the  tradeable  sector  in  the  Greek  economy  may 
improve 
the  debt 
the  balance.  In  addition, 
measures  agreed  at  the  Eurogroup  in  June  2018 
that  resulted  in  moderate  foreign  debt  servicing 
costs,  help  Greece  keep  a  lower  current  account 
deficit. 

increasing 

Public  debt  is  expected  to  decline  gradually 
over  the  coming  years  and  the  pace  of  this 
decline  will  depend  on  compliance  with  fiscal 
targets.  Given  the  composition  of  the  debt  stock, 
vulnerability  to  higher  financing  costs  will  only 
increase  in  the  long  term,  while  gross  financing 
needs  are  projected  to  remain  below  12 %  until 
2033  (8).  Greece's  sovereign  long-term  credit 
ratings  have 
improved,  but  are  still  below 
investment  grade  for  all  major  rating  agencies. 
Maintaining  the  downward  adjustment  in  public 
debt  through  fiscal  prudency  is  also  crucial  to 
improve  external  sustainability,  given  the  large 
share of public debt in total foreign liabilities. 

The  high  stock  of  non-performing 
loans 
remains a key weakness in the financial system. 
After  peaking  in  2016  and  2017  for  corporations 
and households, the ratio of non–performing loans 
to total credit is slowly decreasing, but is still one 
of  the  highest  in  the  EU  (as  described  in  Section 
3.2.1). Restructuring plans are being implemented 
by  the  four  systemic  banks  to  tackle  the  problem 
faster.  These  restructuring  plans  are  supported  by 
Greece's  implementation  in  recent  years  of  wide-
ranging  policy  measures  to  safeguard  financial 
stability and strengthen the viability of the banking 
system. 

Potential growth and productivity are expected 
to  increase  in  the  medium  term  if  reforms  are 
implemented  and  the  economic  environment 
remains favourable. The ageing and shrinking of 
capital stock due to low investment is expected to 

(8)  Note  that  the  debt  measures  granted  in  June  2018  ensure 
medium term sustainability, and the Eurogroup committed 
to  the  possibility  further  debt  measures  to  be  assessed  in 
2032, when current deferrals end. 

Evolution and prospects 

The  current  account  deficit  has 
improved 
during the crisis. Before and during the first years 
of the crisis, Greece's current account deficits were 
in double digits (more than 15 % of GDP in 2007 
and  2008).  By  2017,  the  current  account  balance 
adjusted to reach a deficit of 1 % of GDP (7).  

in 

Even though part of the adjustment is due to a 
cyclical  contraction  in  domestic  demand,  past 
improvements  in  external  competitiveness  are 
starting  to  bear  fruit.  In  addition  to  significant 
price  adjustments 
terms  of  real  effective 
exchange  rates  (see  Section  1),  a  number  of 
reforms have been put in place under the European 
Stability  Mechanism  programme  to  open  up  the 
Greek  economy  and  improve  the  efficiency  of 
product and labour markets. The new framework is 
expected to: (i) ease the administrative burden; (ii) 
increase  competition  in  key  sectors;  (iii)  simplify 
investment  licencing  procedures:  (iv)  alleviate 
disproportionate 
regulated 
restrictions 
professions; (v) open up the energy market, (vi) set 
up  a  cadastre  and  improve  spatial  planning;  and 
(vii)  ensure  a  better  functioning  labour  market  in 
the context of a modern social safety net.  

to 

Greece’s  goods  exports  recovered  significantly 
in 2017-2018, reaching historically high levels in 
2018.  Tourism  also  recorded  double-digit  growth 
for two  years in a row (2017 and 2018). Yet, this 
favourable  development  indicates  that,  barring 
massive investment, there may be limited potential 
left for growth in this sector. Nevertheless, in 2018 
Greece  managed  to  reverse  its  decade-long  trend 
of  falling  world  export  shares  and  is  currently 
enjoying  a  broad-based  expansion,  in  terms  of 
destination  markets  and  economic  sectors.  Greece 
is also receiving a historically high level of foreign 
direct  investments,  albeit  from  a  very  low  base 
(see Section 3.4.1). Given the limited  fiscal  space 
and  reduced  capacity  of  the  private  sector  to 
leverage 
direct 
investments  could  be  crucial  to  the  adjustment 
process. 

attracting 

further, 

foreign 

(7)  This  figure  does  not  yet  take  into  consideration  the 
November 2018 revision of the Balance of Payments data, 
which  will  be  officially  incorporated  by  ELSTAT  in  the 
September 2019 scheduled benchmark revision. As a result 
of  the  revision,  the  current  account  deficit  would  be 
somewhat larger. 

15 

 
                                                           
                                                           
2. Overall findings regarding imbalances, risks and adjustment issues 

preforming  loans.  Public  debt  is  expected  to 
decrease steadily in the next years, benefiting from 
favourable  economic  conditions  and  the  projected 
developments in the fiscal balance. Two areas that 
are  the  slowest  to  adjust  are  the  net  external 
position, where the pace of improvement has been 
weak, and productivity, which is yet to pick up. 

Stock  imbalances  are  still  high  despite  positive 
flows.  Although  all  the  main  indicators  point  to 
stocks of imbalances moving in the right direction, 
they  still  fall  significantly  short  of  the  relevant 
benchmarks. The main vulnerabilities relate to the 
high  stock  of  public  debt  and  external  liabilities. 
The recent reduction in  non-performing loans and 
unemployment  are  slowly  helping  reduce  the 
balance  of  risks.  The  main  challenges  are  now 
concentrated  on  the  implementation  of  reforms 
legislated  during  the  programme  years  in  order  to 
enhance  investment  and  boost  productivity  in  a 
sustainable way. 

Effectively  implementing  and  deepening  the 
policy  measures  in  place  is  essential  to  further 
reduce the imbalances. Notable progress has been 
made  in  some  areas  of  business  environment  and 
administrative  burden,  such  as 
the  smooth 
implementation  of  electronic  one-stop  shops  for 
business  registration  and  the  reform  of  licensing 
and  inspection  procedures.  However,  some  issues 
such  as  the  overlapping  of  multiple  nuisance 
classifications  for  business  establishment  still 
discourage 
hinder 
investments.  Product  and  labour  market  reforms 
were put in place during the programme years and 
their implementation is being monitored as part of 
the 
surveillance. 
Compliance with fiscal targets is expected to foster 
the sustainability of public debt in the medium-to-
long term, while wide-ranging measures have been 
taken to support the stability and efficiency of the 
financial sector.         

entrepreneurship 

post-programme 

enhanced 

and 

in 

thanks 

improvements 

to  go  down  as  wages  and 

be  reversed 
the 
to 
business  environment  and  the  increase  in  foreign 
direct  investments.  The  outflow  of  skilled  and 
unskilled  workers  due  to  decreasing  nominal 
wages  and  high  unemployment  rates  is  also 
expected 
labour 
productivity  increase,  unemployment  decreases 
and employment rates rise. In addition, the reduced 
administrative burden to set up a company and the 
product  and  labour  market  reforms  are  also 
expected  to  stimulate  competition  and  business 
innovation,  bringing  new  competitors 
the 
market.  As  a  result  of  these  factors,  potential 
growth  and  productivity  are  expected  to  increase 
accordingly in the future.  

to 

Employment  growth  turned  positive  already  in 
2014  and  gained  further  traction  in  2017-2018, 
but the level of employment is still considerably 
below  the  pre-crisis  levels.  The  unemployment 
rate  has  steadily  decreased  since  the  end  of  2014, 
reaching 18.6 % in September 2018 from the peak 
of 27.5 % in 2013. 

Wages  have  started  to  rise  only  recently.  The 
nominal wage growth resumed in 2017 and has so 
far  developed  in  line  with  productivity,  inflation 
and  unemployment.  Compensation  of  employees 
per  hour  worked  is  significantly  below  the  EU 
average,  reflecting  relatively  low  productivity 
levels.  Wage-setting  and  employment  protection 
arrangements were fundamentally reformed during 
the  crisis  years  to  facilitate  adjustment  by  firms, 
better  align  wages  and  productivity  and  thus 
restore  competitiveness.  Following  the  end  of  the 
European Stability Mechanism programme, sectors 
are  expected  to  become  again  the  main  level  of 
the 
bargaining  with 
possibility  of  extensions  and  the  favourability 
principle,  and  a  new  procedure  for  setting  the 
minimum  wage  will  be  applied  for  the  first  time. 
These  developments  merit  close  attention,  as 
strong  wage  increases  could  hamper  job  creation 
for the most vulnerable groups. 

reintroduction  of 

the 

Overall assessment 

Greece  faces several sources of  macroeconomic 
imbalances and adjustment is ongoing. Progress 
has been achieved in a number of areas, including 
the  current  account,  labour  market  and  external 
competitiveness. Deleveraging in the private sector 
is  progressing  and  banks  are  reducing  their  non-

16 

 
 
2. Overall findings regarding imbalances, risks and adjustment issues 

Table 2.1: 

MIP assessment matrix - Greece 2019 

(Continued on the next page) 

17 

 Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risks) External sustainability and competiveness Greece has a high stock of net external liabilities (-141% of GDP in 2017), mainly composed of debt instruments. In spite of the high proportion of public debt, this exposes Greece to adverse shocks or shifts in market sentiment. The current account balance stood in 2017 at -0.9% of GDP, which in cyclically adjusted terms represents a balance of -4.8%. This cyclically adjusted balance is only about what is required to stabilize the NIIP at its current level. The current account balance has improved significantly since its trough of -15.8% in 2008, but has never reached a positive balance. In cyclically adjusted terms the current account balance remains below what can be explained by fundamentals and below what is required to halve the gap between Greece's NIIP and its prudential threshold. Net export growth has been subdued due to a high import content of exports and investment. The growth rate of exports has been below world export growth, implying declining market shares in 2015 and 2016, but the trend has been reversed in 2017. There have been important gains in cost competitiveness since 2011 but nominal unit labour cost growth was again positive in 2017 at 0.9%, mostly due to negative labour productivity growth and inflation. Corporations (financial and non-financial) contributed most to support net savings, while household savings remain low. (see Section 1) Measures have been taken during the ESM programme to restore competitiveness, including sweeping business environment and administrative burden reforms. In addition, product and labour market reforms have been enacted during the ESM programme to support cost competitiveness gains while favouring enterpreneurship and productivity gains looking forward. Public debt Greece has a high level of public debt, amounting to 178.6% in 2017. According to the Commission Spring Forecast it is projected to drop to 177.8% and 170.3% of GDP in 2018 and 2019, respectively (see Section 3.1). A large stock of public debt is a burden on the economy and makes Greece vulnerable to changes in financial or economic conditions and increasing financing costs in the long run. However, given the unique composition of Greece's public debt and the debt measures agreed at the Eurogroup, Greece's gross financing needs are expected to remain below 12% of GDP until 2033 (see Section 3.1).  The public debt ratio declined in 2017 from its peak of 180.8%, as a result of the budget surpluses achieved in 2016 and 2017.  Standard debt sustainability analysis indicates that without further consolidation measures, debt would still be above 125% in 2027 (see Box 3.1.2). Greece has committed to achieving primary surplus targets of 3.5% of GDP until 2022, which together with the debt relief measures agreed by the June 2018 Eurogroup, will be instrumental to setting the debt-to-GDP ratio on a declining path.   
 
 
 
 
2. Overall findings regarding imbalances, risks and adjustment issues 

Table (continued) 

Source: European Commission 

18 

Financial sector The banking sector is burdened by a high stock of NPLs (53.9% for NFCs loans and 46.3% for household loans in 2016) and provisions weigh on the profitability of banks, which is still negative in 2018. Bank average capitalisation is slightly below 16% as of 2018Q2, although the quality of the capital remains weak. Private debt stocks are below the scoreboard threshold of 133%, but the fundamentals of the economy imply that the debt repayment capacity of both households and NFCs in Greece is particularly low. Household debt in particular is above both prudential and fundamentals-based benchmarks (see Section 1).  NFCs have overall undertaken sufficient deleveraging, however, the high stock of NFCs NPLs indicates that some reallocation of resources within the sector needs to take place. The NPL ratio for NFCs has peaked in 2016 Q4 and has since started to slowly decline. For household loans the NPL ratio peaked in 2017 Q3. Both ratios remain high and are declining at a relatively slow pace. Households continue to actively deleverage, with nominal growth providing only a very limited support to the deleveraging process. Deleveraging needs of the household sector are assessed to be still relatively high, in view of the country's specific characteristics, including high unemployment, high government debt and low potential growth (see Section 3.2.3). The reduction of non-performing loans continue to be hampered by poor contract enforcement, inefficiencies in the judicial system, bottlenecks in the implementation of the foreclosure and insolvency legislation and lack of reliable information on borrowers. Wide-ranging measures were taken under the programme to enhance the framework for NPL resolution (see Section 3.2), including quantitative targets for reductions. In addition, the process will be facilitated by recent reforms of the judicial system, foreclosure and insolvency legislation and improvements in the collection and analysis of information on borrowers. These measures should have a positive impact on NPLs, as well as access to finance. Potential growth and productivity Ageing population and dismal labour productivity indicate low potential growth, in the absence of strong effects from structural reforms.  Nominal growth, that would help to mechanically reduce debt-to-GDP ratios, is also not favoured by the still low inflation rate, which is expected to moderately increase from 0.7% in 2017 to 1.3% in 2019 (GDP deflator growth). Potential growth is set to increase to around 1% in the long term, contingent on sustained implementation of sound policies. Investment has increased in 2017 by 9.6% but from a very low level. Investment growth is forecast to increase further in 2018 and 2019 to 10.3% and 12.1%, respectively. Productivity growth has been negative since 2008, in a context of depleting human and physical capital due to skilled migration and lack of investments. However, in 2017 and 2018 productivity turned positive again (see Section 1) and investments and human capital will benefit from the economic stabilisation. In addition to measures to enhance sustainability and competitiveness, an increase of competition in product markets due to recent reforms is expected to improve the productivity prospects for the future (see Section 3.4). To this end, strong commitment to sustain reform is indicated in the National Growth Strategy. Furthermore, the on-going simplification of procedures to set up enterprises, such as one-stop-shops for business registration, should support the entry of new competitors. Adjustment issues Labour market and unemployment Unemployment in 2017 was 21.5%, the highest in the EU, with a long-term component of 72.6%. Youth unemployment is also the highest in the EU (43.6%) and the activity rate is relatively low (68.3%). High unemployment and subdued wage growth curb consumption growth, impair the deleveraging process, and limit the room for human capital investment. Unemployment is declining at a healthy rate, but remains very high, especially for the youth and long-term unemployed. The recovery of cost competitive-ness and reduction of unit labour costs during the programme should ensure that strong job creation will continue in the years to come. Employment growth is expected to reach 1.6% in 2019 and 1.2% in 2020. (See also section 3.3) Significant measures have been taken during the programme period to improve the efficiency of labour and product markets and to regain external competitiveness. Future deviations from such policies would risk hindering the recovery process. Conclusions from IDR analysis  Greece faces important challenges in the form of a weak financial sector, combined with high unemployment, large stocks of external debt and an unfavourable net international investment position. The high ratio of non-performing loans in the domestic banking system constrains deleveraging and banks' profitability, reducing the amount of credit that can be channelled to the economy, which suffers from underinvestment and slow productivity growth.  While unemployment and public debt are expected to decrease in coming years, the net international investment position appears to be on a less sustainable path due to the reliance of the current account adjustment on the compression of demand. As domestic consumption and investments will pick up, corresponding increases in productivity and exports will be needed to ensure that the current account and NIIP do not worsen again. To that end, further reforming efforts are needed in the areas of business environment, investment licensing, trade facilitation, labour and product markets. In addition, investments are recovering slowly because the private sector is deleveraging and the reduction of non-performing loans continue to be hampered by poor contract enforcement, inefficiencies in the judicial system, bottlenecks in the implementation of the foreclosure and insolvency legislation and lack of reliable information on borrowers.  Wide-ranging measures have been taken during the ESM programme to improve the business environment, the foreclosure and insolvency legislation, the credit and companies' registries, prop the efficiency of the judiciary, and allow for the sale of non-performing loans. For the post-programme phase, a series of action plans have been agreed to ensure continuity and deepening of the reforms in these areas. Combined with the improvements in cost competitiveness, the effective implementation of reforms has the potential to jumpstart the economy, spurring the creation of productive, rewarding and sustainable jobs   
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION* (9) 

prepared  and  implemented  by  the  Ministry  of 
Economy.  This  means  that  the  optimal  allocation 
of  limited  resources  is  established  separately  for 
the  ordinary  and  investment  budgets,  whereas  a 
reallocation  between  the  two  could  represent  a 
better  outcome  with  respect  to  reaching  the 
authorities’ policy objectives. Greater involvement 
of  fiscal  experts  in  the  investment  budgeting 
process would be useful. It could help structure the 
discussion  over  the  draft  budget,  reveal  weak 
points among competing proposals and potentially 
expand  the  options  for  finding  the  optimum 
outcome.  The  authorities  committed  to  improving 
their public investment budgeting practices and to 
implementing these improvements in early 2019. 

fiscal 

targets 

achievement 

implemented  under 

The 
is 
of 
underpinned  by  yields  of  the  already  legislated 
fiscal  consolidation  measures  and  the  ongoing 
economic recovery which translates into higher 
revenue.  Greece  is  predicted  to  meet  the  primary 
surplus  target  in  the  medium  term  (see  European 
Commission,  2019a).  Notably  the  pension  system 
reforms 
economic 
adjustment  programmes  should  continue  to  lower 
the proportion of social expenditure in GDP,  with 
a  positive  impact  on  the  general  government 
balance.  As 
the 
achievement  of  the  targets  is  likely  to  be  further 
supported by a solid growth in households’ income 
and spending, which augurs well for the dynamics 
of taxes in coming years, and policy commitments 
that  limit  expenditure  growth,  in  particular  in 
public employment and in health care. 

in  Graph  3.1.2, 

shown 

the 

taxation, 

This  section  looks  at  fiscal  policy  and  fiscal 
tax  administration  and 
frameworks, 
compliance  and  public  financial  management  and 
public  procurement.  The  long-term  sustainability 
of  public  finances  is  discussed  in  the  Fiscal 
(European 
Sustainability 
Commission,  2019b)  and  in  the  second  enhanced 
surveillance  report  published  in  parallel  to  this 
country report (European Commission, 2019a).  

Report 

2018 

Fiscal policy and fiscal frameworks 

In  recent  years,  Greece  has  consistently 
exceeded  its fiscal targets.  Greece’s  fiscal policy 
framework  is  anchored  by  the  nominal  primary 
surplus  target  of  3.5  %  of  GDP  and  requirements 
of the preventive arm of the  Stability and Growth 
Pact 
(EU) 
2017/1226 of 30 June 2017, OJ L 174, 7.7.2017, p. 
22). The primary surplus targets were exceeded in 
all  years  of  the  European  Stability  Mechanism 
programme, in some years by a substantial margin.  

Implementing  Decision 

(Council 

in  2012-2017.  This 

The  main  driver  of 
the  recurrent  over-
performance  was  underspending  as  compared 
with the initial budget ceilings, in particular on 
investment.  On  average,  only  83  %  of  the  public 
investment  budget  ceilings  allocated  to  ministries 
was  actually  spent 
is 
problematic  for  two  reasons.  Firstly,  although 
public  investment  has  partly  recovered  from  the 
downturn  during 
the  country’s 
investment  needs  are  still  large  and  investment  in 
sectors  such  as  health  care  remains  deeply  below 
the  euro  area  average  (Greece:  0.05  %  of  GDP, 
euro area: 0.18 % of GDP in 2016). Secondly, the 
unspent  resources  could  have  been  re-directed  to 
other useful purposes, had the underspending been 
detected early enough in the year. 

the  crisis, 

the  public 
The  budgeting  framework  for 
investment 
an 
budget 
independent  review  with  a  view  to  addressing 
the  recurrent  underspending.  The  Ministry  of 
Finance  exercises  only  limited  surveillance  over 
the  public  investment  budget,  which  is  instead 

undergoing 

is 

(9)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 2 for an overall summary of main findings). 

19 

 
 
                                                           
3.1. Public finances and taxation 

(i.e. 

corrective  mechanisms 

sectoral 
local 
government,  health  care,  extra-budgetary  funds 
and  State-owned  businesses).  The  Hellenic  Fiscal 
Council has made major progress in rolling out its 
activities since it became operational in late 2015. 
It  has  also  published  its  mandatory  semi-annual 
reports  on  the  annual  and  medium-term  fiscal 
plans and on compliance with domestic numerical 
rules. 

Taxation 

In  the  context  of  the  financial  assistance 
programmes,  Greece 
implemented  major 
reforms  of  the  tax  system.  This  included  in 
earlier adjustment programmes the introduction of 
new  income  tax  and  tax  accounting  codes  that 
modernised the personal income tax and corporate 
income tax, the introduction of the unified property 
tax  (ENFIA)  and  a  major  reform  of  the  criminal 
justice system for tax evasion and fraud.  

Under 
the  European  Stability  Mechanism 
stability  support  programme,  a  major  value 
added tax (VAT) reform was implemented and 
the  personal  income  tax  (PIT)  system  was 
further simplified. Concerning VAT, Greece had 
the  second  (29.2  %)  highest  VAT  gap  (10)  in  the 
EU in 2016, significantly above the EU average of 
12.3 %. Greece’s VAT gap has remained relatively 
stable  over  the  past  few  years  (0.4  pp  reduction 
since 2012). The VAT reform adopted in 2015-16 
therefore  considerably  broadened  the  VAT  base 
through  limiting  the  scope  of  reduced  rates  and 
exemptions,  reduced  market  distortions,  and  has 
stabilised  compliance  rates.  The  special  VAT 
regime  for five  Aegean islands has been extended 
the 
its  elimination  made  contingent  on 
and 
reduction  of  migration  flows.  The  PIT  reform  of 
2016 broadened the tax base, integrated the former 
solidarity  surcharge  into  the  income  tax  system, 
and reduced the scope for tax avoidance. 

A  major  reform  of  property  tax  zonal  values 
has been initiated to update and align tax values 
with  market  prices  by  2020.  This  will  improve 
the  efficiency  and  fairness  of  the  unified  property 
tax.  Other  pending  reforms  include  inter  alia  the 

(10)  The  VAT  gap  is  the  difference  between  the  amount 
actually collected and the theoretical net total VAT liability 
for the economy under its current VAT system. 

Graph 3.1.1:  Underspending from the public investment 

budget*, 2012-2017 

* Planned and actual expenditure from the public 
investment component of the state budget net of grants to 
general government. 
Source: European Commission 

Graph 3.1.2:  Drivers of changes in general government 

balance, 2019-2022 

Source: European Commission 

a 

has 

Greece 
rule-based 
established 
comprehensive fiscal governance framework, in 
line  with  the  relevant  European  legislation 
(Budgetary  Frameworks  Directive,  Two-pack, 
and  Fiscal  Compact).  The  country  introduced  a 
medium-term  fiscal  strategy  and  strengthened 
expenditure  procedures  and  fiscal  reporting  to 
safeguard fiscal accountability. A structural budget 
balance  rule  was  laid  down  coupled  with  an 
automatic  correction  mechanism  and  specific 

20 

-0.6-0.1-0.6-0.1-0.2-0.8-1.5-0.80.00.81.52.33.0201220132014201520162017PlanOutcomeDifference% of GDP-3-2-101234RevenueExpenditure% of GDPbalance improvingbalance worseningOperationalMacroRevenue mesuresNon-tax revenueOther adjustmentsSocialtransfersInvestmentOther exp.Wages 
 
 
 
                                                           
3.1. Public finances and taxation 

customs  efficiency  and  reinforce  the  fight  against 
smuggling  have  been  taken.  As  part  of  the  2016 
pension  reform,  a  single  social  security  fund 
(EFKA)  was  established.  This  fund  is  responsible 
for collecting of social security contributions of all 
insured 
the 
collection of social security debt (KEAO) has also 
been  set  up  and  has  become  part  of  the  single 
social security fund. 

individuals.  A  single  centre  for 

Key  performance  indicators  measuring  IAPR's 
performance have been largely met. This shows 
that  the  measures  introduced  to  increase  tax 
collection  are  proving  to  be  both  relevant  and 
useful.  As  the  graph  below  shows  (Graph  3.1.4), 
whereas  the collection of "old debts" continues to 
increase,  less  "new  debt"  is  being  added  to  the 
books.  Notwithstanding  in  2018,  the  decreasing 
trend  on  new  debt  has  decelerated  for  certain 
groups  (in  particular  self-employed),  which  may 
be  related  to  the  increased  tax  burden  having 
affected  their  ability  to  pay  on  time.  As  concerns 
the social security contributions, although the debt 
collection  continues  to  overall  exceed  the  set 
targets,  there  is  still  an  upward  trend  as  concerns 
the  overall  debt  accrued  mainly  relating  to  the 
surcharges (incl. interest) added. 

Graph 3.1.3:  "Old debt" collection and "new debt" added 

* Old debt is defined as debt accrued before the end of 
November of the previous year (deducting collections and 
write-offs). 
** New debt is defined as overdue balance standing this 
current year (without deductions of collections and write-
offs).  
*** Figures up until to November 2018. 
Source: IAPR 

Notwithstanding the positive developments both 
in  terms  of  reinforcing  the  institutional  set-up 
and  in  providing  new  collection  tools  and 

simplification  of  the  VAT  code,  the  reform  of 
Stamp  duty,  and  the  reform  of  the  tonnage  tax 
regime  including  the  extension  of  the  "voluntary 
tonnage tax" regime. 

tax-to-GDP 

The 
in  Greece  has 
ratio 
significantly increased during the crisis and has 
converged with the average 41.2 % ratio of the 
euro  area.  The  share  of 
taxes  and  social 
contributions in GDP in Greece stood at 41.6 % in 
2017,  a  substantial  increase  from  the  pre-crisis 
ratio  of  32.8  %  in  2009.  Partly  reflecting  this 
increase  in  taxation,  investment  surveys  show  tax 
instability  as  a  negative  factor  for  investment. 
Indirect  taxes,  environmental  taxes,  and  property 
taxes have relatively high shares compared to other 
EU Member States. 

in 

Corporate  and  personal  tax  rates  and  the 
implicit  tax  rate  on  labour  (including  social 
security  contributions)  remain  high  in  Greece 
compared  to  other  EU  member  states.  The 
corporate tax rate of 29 % and the top personal tax 
rate of 55 % are above most other Member States. 
the  personal 
The  pre-legislated  reduction 
income  tax  credit  in  January  2020  is  projected  to 
raise  some  1  %  of  GDP  in  additional  revenue 
through  broadening  the  PIT  tax  base  and  will 
rate 
and 
facilitate  personal 
reductions.  Moreover,  Greece  continues  to  have  a 
very  high  debt  bias  in  corporate  taxation  (3rd 
highest in the EU in 2017) (European Commission, 
2018h)  that  could  limit  investments  by  young, 
innovative  and  high-risk  companies  that  rely  on 
equity financing. 

corporate 

tax 

Tax administration and compliance 

and 

collection 

Greece has undertaken major reforms in recent 
years  to  remedy  its  longstanding  weakness  in 
tax 
compliance.  Reforms 
implemented under subsequent financial assistance 
programmes,  covered  the  collection  of  taxes, 
custom  duties  and  social  security  contributions. 
Major  institutional  reforms  aimed  to  increase  the 
transparency,  accountability  and  efficiency  of  the 
system.  The  establishment  of  an  Independent 
Authority  of  Public  Revenue  (IAPR)  as  from  1 
January 2017 has consolidated the various reforms 
up to that point. More importantly, it has provided 
a  coherent  institutional  framework  for  improving 
revenue  collection.  As  part  of  improving  the 
revenue  administration,  measures  to  strengthen 

21 

02468101214161820142015201620172018***EUR bn"Old" debt collection*"New" debt added ** 
 
 
3.1. Public finances and taxation 

arrears;  the  goal  of  full  clearance  has  not  been 
achieved.   

In order to address the structural weaknesses of 
the  public  administration 
in  dealing  with 
arrears clearance, the authorities have recently 
adopted  detailed  action  plans.  The  action  plans 
build  on  the  recommendations  issued  by  the 
Hellenic  Court  of  Auditors.  Moreover, 
the 
Ministry  of  Finance  has  altered  the  information 
recorded in the commitment registers and collected 
via 
the  central  and  general 
government entities. Tackling the  structural issues 
that lead to the accumulation of arrears should also 
ease  Greece’s  compliance  with  the  Late  Payment 
Directive, which remains problematic, particularly 
in the health sector.  

the  e-portal  by 

sets  out 

resources,  much  remains  to  be  done  in  these 
areas. The IAPR still needs to be fully staffed and 
the  development  of  an  integrated  IT  system  still 
needs to be developed. In this context, the adoption 
of the IAPR Reform Action Plan ("Blueprint") for 
2019-2021,  a  key  strategic  document,  has  been 
specific 
delayed.  The  "Blueprint" 
the 
investments, 
and 
measures 
development  of  the  IT  system  and  tools  that  will 
be  required  to  continue  transforming  IAPR  into  a 
modern, 
flexible  and  effective  organisation. 
Similarly,  the  adoption  of  the  IAPR's  human 
resources reform, which will introduce tailored job 
descriptions, 
and 
performance  assessment  has  also  been  delayed. 
The reform is vital for improving IAPR's prospects 
to attract and keep highly-qualified staff.  

remuneration 

including 

grading, 

tax  evasion 

include  measures 

Specific reforms to improve tax compliance and 
to 
combat 
timely 
increase  electronic  payments  and 
submission  of  tax  returns.  A  number  of  further 
measures  are  in  the  pipeline  that  should  facilitate 
and  enhance  revenue  collection.  These  include  (i) 
automating  VAT  declarations  and  simplifying 
declaring 
administrative 
uncollectible 
data 
sharing/management  between  IAPR  and  other 
government  services;  and  (iii)  reinforcing  liability 
provisions  for  revenue  administration  officials  to 
enable  modern  and  effective  working/collection 
methods to be widely implemented. 

procedures 
(ii) 

improving 

taxes; 

for 

financial  management  and  public 

Public 
procurement 

Various  reforms  since  the  beginning  of  the 
crisis  aim  to  improve  Greece’s  public  financial 
management  system.  The  reform  efforts  focused 
particularly  on: 
the  planning, 
i)  modernising 
execution  and  control  of  the  budget,  also  by 
ii) 
introducing  a  new  budget  classification, 
ensuring  prompt  arrear  payments  and 
iii) 
improving liquidity management. 

substantial  efforts 
The  authorities  made 
towards  the  full  clearance  of  the  outstanding 
arrears  by  the  public  administration.  The 
European  Stability  Mechanism 
programme 
provided  for  significant  financing  to  clear  arrears, 
which resulted in a large reduction in the stock of 
net 
structural 
bottlenecks  have  slowed  down  the  clearance  of 

arrears.  However, 

remaining 

their 

fiscal 

improve 

reporting  and 

To 
cash 
management  functions  and  to  move  towards 
more result-based policies, the government is in 
the process of implementing a new government 
budget  classification  structure  and  Chart  of 
Accounts  (referred  together  as  CoA).  The 
information 
authorities  have  updated 
technology  system  and  have  adopted  the  new 
economic  and  administrative  classifications  in  the 
2019 State budget. The authorities are working on 
the remaining segments also to advance towards a 
new  performance  budgeting  framework.  The 
adoption of the new CoA prepares also the grounds 
for supporting the new cash management functions 
as designed in the new Treasury Accounts System 
(see 
functional 
classifications  for  the  central  government  are 
expected  to  be  implemented  as  from  2021  State 
budget. In parallel, the general government entities 
are  expected  to  adopt  the  new  classifications  in 
their  budgeting  and  accounting  as  of  1  January 
2023.  

below).  The 

fund 

and 

Further  progress  is  being  made  in  improving 
the 
fragmented  cash  management  system, 
ensuring  transfers  of  cash  reserves  to  the 
treasury accounts system in the Bank of Greece. 
A  new  legal  framework  for  the  cash  management 
system  was  adopted  in  June  2018.  It  requires  that 
all  central  administration  entities  mandatorily 
maintain their accounts within the Treasury Single 
Account in the Bank of Greece. The  other central 
government  entities  and  the  entities  belonging  to 
the  general  government  must  participate  in  the 
Treasury  Accounts  System  by  transferring  their 

22 

 
3.1. Public finances and taxation 

professionalising procurement staff and promoting 
central purchasing. In the long term, the country’s 
public  procurement  framework  will  need  to  be 
rendered  more  efficient,  which,  in  turn,  will 
contribute to more sustainable and efficient use of 
public resources.  Regarding the public  investment 
budget,  applying  the  rules  of  the  EU  co-financed 
components  to  the  purely  national  component 
would be advisable. 

surplus cash reserves daily to the Bank of Greece. 
The concentration of surplus reserves is deemed to 
make  government's  liquidity  management  more 
efficient while strengthening the debt management.  

progress 

authorities 

have  made 

The  legal  framework  for  State  guarantees  has 
been  modernised  and 
the  administrative 
procedures  governing  the  process  streamlined. 
The 
in 
implementing the  recently designed action plan to 
improve  the  management  of  State  guarantees 
issued  to  individuals  and  enterprises  for  proven 
damages  as  a  result  of  natural  disasters  or  to 
private  enterprises operating  at geographical areas 
characterized  by  exceptionally 
low  economic 
activity.  The  action  plan  aims  to  streamline  the 
bureaucratic  burden  of  processing  claims  by:  i) 
creating  an  electronic  repository  of  borrowers,  ii) 
agreeing on settlement schemes and iii) improving 
interoperability  with 
tax  offices.  The 
legislative framework was also modernised.  

local 

and 

reforms 

Reforms  have  been  carried  out  to  further 
enhance  the  efficiency  of  public  procurement. 
Over  the  last  years,  Greece  has  carried  out 
the  area  of  public 
in 
significant 
procurement: 
simplified 
consolidated 
legislation, a new prejudicial remedies system, use 
of  electronic  procurement,  new  centralised 
procurement scheme and adoption of the National 
Strategy on Public procurement including a set of 
actions  to  improve  administrative  capacity.  These 
to  address  persistent 
reforms  are  expected 
deficiencies  of  the  Greek  public  procurement 
market  such  as  a  high  number  of  single  bid 
procedures  (34%  in  2018,  as  opposed  to  23%  on 
average  at  EU  level);  lengthy  award  procedures 
(236  days,  compared  with  a  European  average  of 
83  days);  a  high  number  of  contracts  awarded 
exclusively  based  on  the  lowest  price    (90  %  in 
2018,  compared  with  63  %  at  European  level) 
often with excessively high discounts, and contrary 
to  the  best  practice  favouring  the  use  of  more 
quality-based criteria.  

in 

improvements 

administrative 
Further 
capacity and the full implementation of the new 
centralised  procurement  scheme  is  needed  to 
achieve  economies  of  scale  and  rationalise 
public  expenditure.  In  the  short  term,  priority 
needs to be given to measures such as streamlining 
electronic  procurement  facilities,  systematically 
bids, 
checking 

excessively 

low 

on 

23 

 
 
 
 
3.2.  FINANCIAL SECTOR 

3.2.1  Financial  sector  overview  and  financial 
stability assessment* (11) 

the  second 

While  not  at  the  origin  of  financial  stress,  the 
domestic banking sector was adversely affected 
during  the  protracted  crisis  in  Greece.  In  the 
run-up  to  the  crisis,  rising  concerns  about  the 
creditworthiness of the Greek sovereign adversely 
affected  the  banking  sector  and  led  to  deposit 
withdrawals. Between 2010 and 2012, capital and 
liquidity  deteriorated  further,  bank  deposits  fell 
sharply  and  banks’  access  to  capital  and  money 
lost.  The  banking  sector  was 
markets  was 
recapitalised in 2013 and at the beginning of 2014 
as  part  of 
financial  assistance 
programme.  The  sector  also  received  substantial 
emergency  liquidity  assistance  from  the  European 
Central Bank. The subsequent nascent recovery in 
the  Greek  banking  sector  was  halted  by  the 
confidence  crisis  in  2015.  Large  amounts  of 
deposits were withdrawn from the banking sector, 
which  led  to  the  imposition  of  capital  controls. 
Non-performing exposures increased further on the 
back  of  the  protracted  recession  and  deteriorated 
payment culture. In December 2015, the European 
Stability Mechanism disbursed EUR 5.4 billion for 
the  recapitalisation  of  Piraeus  Bank  and  the 
National Bank of Greece. 

strengthening 

and 
the  high 

Over  the  past  several  years,  Greece  has 
introduced  wide-ranging  policy  measures  to 
safeguard financial stability and strengthen the 
viability of its banking system. These focused on: 
(i)  gradually  normalising  liquidity  and  payment 
conditions 
(ii) 
addressing 
level  of  non-performing 
exposures  (NPEs)  on  banks’  balance  sheets;  and 
(iii)  improving  the  governance  of  both  banks  and 
the  Hellenic  Financial  Stability  Fund  (HFSF).(12) 
Progress  has  been  made  in  these  financial  sector 
policy areas, but strong efforts are still needed, as 
the  gap  with  EU  peers  has  widened  in  respect  of 
asset  quality  (NPE  ratio),  capital  (fully-loaded 

capital; 

(11)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 3 for an overall summary of main findings). 

(12)  The  HFSF  is  a  body  fully  owned  by  the  Greek  state, 
through  which  the  four  Greek  systemic  banks  have  been 
recapitalized  in  the  past  years  and  it currently  has  a 2.4  – 
40.4 % ownership stake in these banks. As per its mission, 
the HFSF contributes to the stability of  the Greek banking 
system  for  the  sake  of  public  interest.  In  June  2018,  the 
HFSF's mandate was extended until the end of 2022. 

common equity tier 1 (CET1) ratios) and quality of 
capital.  Profitability  is  still  negative  and  while 
emergency  liquidity  assistance  and  Eurosystem 
funding  have  decreased  significantly,  liquidity 
regulatory gaps are still in place (e.g. with respect 
to the liquidity coverage ratio). 

Banks have built up capital buffers and private 
sector deposits are stable. Banks’ average CET 1 
ratio  was  slightly  below  16 %  during  the  second 
quarter of 2018, thus ensuring that banks are above 
capital requirements (see Table 3.2.1). Profitability 
remained  negative,  as  provisioning  and  write-offs 
of  NPEs  continued.  The  cost-cutting  efforts  to 
reduce  the  number  of  bank  staff  and  branches 
could  offer  some  further  relief  in  the  future.  The 
increased  as 
provisioning  coverage  ratio  has 
compared  to  the  previous  year,  reaching  49 %  in 
the second quarter of 2018. Private sector deposits 
have remained stable since the end of the European 
Stability Mechanism programme in August 2018.  

Most  recently,  banks’  reliance  on  central  bank 
funding  has  further  decreased  and  capital 
controls have been gradually eased. Greek banks 
managed  to  significantly  reduce  their  reliance  on 
Eurosystem  funding.  Two  of  the  systemic  banks 
have repaid emergency liquidity assistance entirely 
and the other two are expected to follow  in 2019. 
The  emergency  liquidity  assistance  ceiling  was 
reduced  from  EUR 90.4 billion  in  August  2015  to 
EUR 4.9 billion  in  early  November  2018.  An 
improved  liquidity  situation  of  Greek  banks  and 
greater  confidence  of  depositors  allowed  capital 
controls  to  be  further  loosened  from  1  October 
2018.  This  enabled  unlimited  cash  withdrawals 
from credit institutions in Greece and increased the 
limits  on  cash  withdrawals  and  transfer  of  cash 
abroad.  Cross-border  business  activities  — 
particularly 
investment  —  should  be  further 
supported  by  the  these  recent  provisions  that  
increased the limit to the amount of funds that can 
be  transferred  abroad  and  provided  the  possibility 
to  repatriate  capital  gains  and  dividends    up  to 
100 % of the invested funds in Greece per year. 

24 

 
 
                                                           
3.2. Financial sector 

in 

through 

particular 

implementing 
from 

Reforms  have  been  adopted  to  improve  banks' 
governance, 
the 
reconstitution  of  bank  boards,  in  line  with  the 
provisions  in  the  Hellenic  Financial  Stability 
Fund (HFSF) law. The four systemic banks have 
the  HFSF's 
been  working  on 
recommendations 
the  2017 
resulting 
governance  review.  Acknowledging  significant 
improvements, the review identified that additional 
actions  are  needed  in  the  areas  of  risk  culture, 
compliance  and  internal  control  framework  and 
substantial time and effort is needed to implement 
the  recommendations  in  full  and  especially  until 
they  become  organic  parts  of  the  respective 
corporate 
these 
recommendations  has  already  been  addressed, 
while work on others is still in progress.  

cultures.  A 

part 

of 

the 

Three  of 
four  systemic  banks  have 
implemented  their  restructuring  plans  by  the 
end of 2018. This is likely to entail certain changes 
in  their  operational  framework  with  the  HFSF, 
starting  most likely  from January early 2019, as a 
substantial  part  of  the  HFSF's  special  rights  is 
linked to the monitoring of the restructuring plans. 

The HFSF will work on selling its stakes in the 
systemic  banks  in  the  coming  years,  in  line  with 
its  divestment  strategy  that  the  HFSF  adopted  in 
November 2018. 

Non-performing  exposures  (NPE)  resolution 
remains a  key challenge for the banking  sector 
in  Greece.  Greece  still  faces  the  major  task  of 
cleaning  up  banks’  balance  sheets.  This  will 
require  major  efforts 
the  post-programme 
in 
period.  As  of  June  2018,  banks  are  reducing  the 
NPE stock in line  with supervisory targets. While 
these  targets are going to become  more  ambitious 
over time, there is no simple solution to accelerate 
the  pace  of  reduction.  According  to  the  targets 
agreed,  the  NPE  ratio  will  be  35 %  at  end-2019 
and  banks  have  indicated  that  they  expect  to 
reduce  the  ratio  to  around  20 %  by  end-2021. 
These  efforts  are  supported  by  several  major 
reforms  related  to  the  out-of-court  debt  workout 
mechanism, 
for 
insolvency 
households and corporations, the  enforceability of 
collateral  through  electronic  online  auctions,  as 
well  as  the  activation  of  a  secondary  market  for 
NPEs.  

framework 

the 

While banks meet the capital requirements, the 
quality  of  the  capital  remains  weak.  In  this 
context,  it  is  important  to  note  the  high  level  of 
deferred tax assets (DTAs) that are  eligible  to be 
converted into deferred tax credits (DTCs),  which 
banks do not have to deduct from their regulatory 
capital(13).  According  to  the  latest  data  available, 
the  amount  of  the  eligible  DTAs  to  be  converted 
into  DTCs  by  the  four  systemic  Greek  banks  is 
EUR  15.9  billion  as  of  June  2018,  which  is 
equivalent  to  around  59 %  of  their  Common 
Equity Tier 1 Capital.  

(13)  However the DTC amortises over 20 years. 

Table 3.2.1: 

Financial stability indicators 

(1) Annualised data 
Source: ECB - CBD2 - Consolidate Banking data, Commission services 

25 

2014Q42015Q42016Q22016Q32016Q42017Q12017Q22017Q32017Q42018Q12018Q2Non-performing loans39,746,847,247,446,346,646,946,745,045,444,9o/w NFC & HH sectors41,849,550,150,350,450,350,650,449,449,248,4o/w NFC sector44,752,553,253,953,953,453,352,651,451,149,4o/w HH sector38,545,946,546,246,346,847,547,947,147,047,3Coverage ratio43,548,548,148,248,248,147,447,246,749,549,0Return on equity(1)-10,6-24,2-15,8-9,9-7,51,3-0,4-0,3-1,30,7-2,4Return on assets(1)-1,0-2,8-1,9-1,2-0,90,1-0,10,0-0,20,1-0,3Total capital ratio14,116,518,018,217,016,817,217,217,116,416,4CET 1 ratio13,816,317,818,116,916,717,117,217,015,815,8Tier 1 ratio13,816,317,818,116,916,717,117,217,015,815,8Loan to deposit ratio79,172,374,575,575,977,278,281,883,578,878,4 
                                                           
 
 
 
3.2. Financial sector 

satisfactory, 

not  been  uniformly 
there  are 
encouraging  signs  in  the  areas  of  sales  and 
securitisations.  However,  sustainable  restructuring 
solutions,  either  directly  by  the  bank  or  by  the 
servicer/acquirer of NPEs are not yet evident. 

In  the  NPE  secondary  market,  the  two  first 
NPE  sales  by  Greek  banks  occurred  in  the 
second  half  of  2017  and  the  first  quarter  of 
2018,  involving  highly  provisioned  unsecured 
loan portfolios, with a focus on consumer loans. 
Several  additional  NPE  transactions  have  been 
closed  in  the  second  and  third  quarter  of  2018  or 
are  currently  under  way.  Completion  of  already 
transactions 
conducted  and  currently  planned 
would  bring 
loans 
the 
transferred by the country’s four systemic banks to 
around EUR 20 billion.  

total  face  value  of 

Regarding corporate insolvency, despite a recent 
major  reform  of  the  Corporate  Insolvency  Code 
and  the  introduction  of  the  new  profession  of 
Insolvency Administrator, there was no observable 
increase in the number of stakeholders making use 
of the  new  framework  up to  the end of 2018. For 
instance,  only  35  new  cases  were  reported  as 
having been filed with the relevant division of the 
Athens first instance court in the first half of 2018. 
However, there is scope for an accelerated uptake 
as  the  impact  of  the  numerous  improvements  and 
procedural  streamlining  becomes  clear,  enabling 
bona fide individual debtors to obtain discharge  3 
years  after  the  declaration  of  bankruptcy  and 
further  simplifying  and  accelerating  insolvency 
proceedings for small and medium enterprises. 

Regarding  the  performance  of  the  regulatory 
framework  for  household  insolvency  and  its 
application  by  the  courts,  accelerated  progress 
in processing backlogs is expected following the 
latest  reform.  Notably,  the  reform  introduced 
measures  for  filtering  out  strategic  defaulters,  in 
particular by requiring applicants to consent to the 
lifting of their banking secrecy, and for expediting 
proceedings. A comprehensive action plan aims to 
eliminate  the  backlog  of  cases,  including  the 
processing  of  pending  applications,  by  the  end  of 
2021.  The  authorities  have  started  to  implement 
the plan but the pace of reduction needs to increase 
to  attain  that  objective  by  the  end  of  2021.  In 
addition,  financial  training  is  being  provided  to 
judges 
the 
processing  of  household  insolvency  and  non-

throughout  Greece 

facilitate 

to 

Asset quality in the banking sector 

Non-performing  exposures(14) 
(NPEs)  have 
been  gradually  decreasing,  but  remain  high, 
amounting  to  EUR  88.6  billion  at  the  end  of 
June  2018,  just  below  48 %  of  total  exposures,  
compared with the peak of EUR 107.2 billion of 
March 2016. The reduction of NPEs through sales 
accelerated over the past quarters while e-auctions 
appear to have produced some first results. Write-
offs  remain  an  important  driver  of  the  reduction 
followed  by  liquidations  and  collections.  In  terms 
of  flows,  in  the  second  quarter  the  default  rate 
exceeded  the  cure  rate  again.  The  default  rate  is 
driven  by  re-defaults  on  previously  cured  NPEs, 
implying  that  banks  are  still  struggling  to  put  in 
place  viable  long-term  restructuring  solutions. 
Looking  at  types  of  loans,  e  small  and  medium-
size  enterprises  (SMEs)  and  corporate  portfolios 
perform  better.  The  NPEs  in  the  mortgage  book 
recorded  a  very  slight  annual  reduction.  The 
percentage  of  NPEs  under  the  legal  protection  of 
the  Household  Insolvency  law  is  still  significant 
(14.4 %  of  NPEs  and  30 %  of  non-performing 
mortgage loans at the end of June 2018).  

included 

regulatory, 

The  strategy  adopted  under  the  European 
Stability  Mechanism  programme  for  tackling 
judicial, 
NPEs  has 
supervisory and other measures. These included: 
(i)  creating  an  active  NPE  servicing  and  sales 
market; (ii) applying the Code of Conduct adopted 
by the Bank of Greece; (iii) revising the Household 
law;  (iv)  reforming 
Insolvency 
the  corporate 
insolvency 
law;  (v)  creating  an  out-of-court 
workout  mechanism;  and  (vi)  undertaking  an 
extended  reform  of  the  Greek  Code  of  Civil 
Procedure  which  included  adopting  an  electronic 
auctions  system  to  liquidate  assets  following 
executory  enforcement.  Greece  also  committed  to 
strengthening the capacity of its courts to increase 
their  efficiency  in  managing  and  accelerating  the 
processing of their considerable backlogs of NPE-
related  cases  and  in  swiftly  resolving  new  ones. 
While 
these 
in 
strategies and/or measures by the end of 2018 has 

the  progress 

implementing 

(14)  Non-performing  exposures 

(NPEs)  have  a  broader 
definition  of  non-performing  loans.  They  include  loans 
more  than  90  days  past  due  and  loans  whose  debtor  is 
assessed  as  unlikely  to  pay  its  credit  obligations  in  full 
without realization of collateral, regardless of the existence 
of any past due amount or of the number of days past due. 

26 

 
                                                           
3.2. Financial sector 

the  resuming  of 

contested conduct of physical auctions, has been 
a  success  in  terms  of  its  performance.  It  has 
allowed  for 
liquidations  of 
collateral,  after  a  long  moratorium  followed  by  a 
de facto blockage of physical auctions by activists 
throughout Greece. By 31 December 2018, 17.223 
properties  were  auctioned.  Future  prospects  look 
positive.  One  point  of  concern  is  that  four  out  of 
five  successful  auctions  conducted  since 
the 
platform  was  activated  led  to  the  purchase  of  the 
collateral by the bank. The owner and operator of 
the platform is therefore investigating how to make 
it 
the  platform  more  user-friendly  so 
encourages 
non-specialist 
participation 
prospective purchasers. 

that 

by 

Finally, in its efforts to increase the value of its 
participations,  the  HFSF  closely  monitors  the 
banks'  progress  on  NPE  resolution  and 
supports  the  banks  in  their  efforts  to  reduce 
NPEs,  including,  among  others,  challenging  the 
banks  with  respect  to  their  NPE  strategies  and 
taking  part  as  an  observer  in  the  interbank  NPE 
Coordination Committee. Over the past months, as 
an  addition  to  the  NPE  resolution  toolkit,  the 
HFSF has also been exploring the possibility of an 
Asset Protection Scheme and is currently working 
with the Greek authorities on setting up a workable 
structure.  In  order  to  assess  the  scope  of  both 
proposals for creating a workable structure, several 
elements  still need to be elaborated and consulted 
with relevant stakeholders. 

Private sector access to finance 

Following  years  of  pronounced  contraction, 
bank lending remains very subdued, with slight 
signs  of  improvement  for  companies.  Since 
2016, the annual growth rate  of loans extended to 
non-financial  corporations  has  hovered  around 
zero. The  growth rate  for loans  to households has 
been  progressively  becoming  less  negative  since 
July 2016. Factors that supported new credit to the 
private  sector  include  the  recent  modest  recovery 
in  economic  activity  and  a  slight  reduction  in 
lending  rates.  On  the  downside,  the  burden  of  a 
NPE  stock  has  been  inhibiting  new  lending  by 
banks.  On  average,  in  January-July  2018  new 
gross loans to households remained broadly stable 
as  compared  to  the  previous  year,  while  higher 
volumes 
non-financial 
corporations  were  recorded.  In  2018,  for  the  first 

loans 

new 

of 

to 

taken 

to  address 

performing exposures-related cases. Action is also 
being 
specific  problems 
experienced by Magistrate’s courts. The authorities 
report that they are in the process of    elaborating 
secondary  legislation    to  improve  the  application 
of  the  Household  Insolvency  law,  including  the 
State  subsidies  to  protect  vulnerable  households. 
The  codification  of  the  legislative  and  normative 
framework on household insolvency, implemented 
at  the  end  of  2018,  is  expected  to  facilitate  its 
interpretation and implementation. More generally, 
to further increase the case-processing capacity of 
courts,  the  Greek  authorities  are  progressing  with 
the  gradual  appointment  of  successful  candidates 
to the public competition conducted in 2017 to hire 
courthouse support staff. 

The  protection  of  primary  residences  was 
extended  by  two  months  and  is  expected  to  be 
adjusted  after  that.  The  protection  on  primary 
residences  under  the  Household  Insolvency  law 
was  set  to  expire  on  31 December  2018.  On 
31 December  2018, 
the  government  issued  a 
Cabinet  Act  extending  the  protection  of  primary 
residences  under  the  Household  Insolvency  law 
until  28 February 2019(15).  The  Greek  authorities 
have indicated that they intend to proceed with the 
the  protection  on  primary 
adjustment  of 
the  Hellenic 
residences, 
Banking Association.  

in  consultation  with 

for 

submitting 

The  Out-of-Court  Workout  mechanism  got  off 
to  a  slow  start  in  August  2017  when  the 
electronic  platform 
and 
processing  applications  became  operational. 
While  volume  and 
turnover  remain  modest, 
regulatory and technical  measures are being taken 
to  improve  the  system’s  performance.  On  the 
technical  aspect, 
the  electronic  platform  was 
upgraded during the last quarter of 2018, to enable 
the  collection of data  relevant to  key performance 
indicators and the monitoring of  statistics relevant 
to  public  and  private  creditors.  The  platform 
should  be  updated  regularly  to  address  any  future 
stakeholders’ needs.  

The  electronic  platform  for  carrying  out  e-
auctions that was first put into use in November 
2017 
for  and 
eventually  replace  the  highly  problematic  and 

to  provide  an  alternative 

(15)  Published in the OJ A-221/31.12.2018. 

27 

 
                                                           
3.2. Financial sector 

time in many years banks reported some easing in 
credit standards for all types of new loans.   

recent  positive  trend  in  banks’  regarding  the 
willingness to lend to SMEs. 

in 

rates 

lending 

Lending rates to non-financial corporations are 
decreasing,  while  interest  rates  on  mortgage 
and consumer loans are increasing. The gradual 
decline 
to  non-financial 
corporations has continued during 2018, driven by 
lower  credit  risk  and  the  favourable  effect  of  the 
financing  instruments  available  to  SME  (e.g.  by 
the  Hellenic  Fund  for  Entrepreneurship  and 
Development, 
for 
the 
Reconstruction 
European  Investment  Bank  Group).  By  contrast, 
lending rates to households have been following an 
upward trend for the past 4 years, mainly reflecting 
credit  risk  developments,  as  the  NPE  ratio  for 
consumer  loans  is  particularly  high  and  the  NPE 
ratio  for  mortgage  loans  has  been  deteriorating 
recently as compared to other loan categories.  

the 
and  Development 

Bank 
and 

European 

financing 

taking  advantage  of 

At the sectoral level, non-financial corporations 
are 
from 
alternative  sources  other  than  domestic  banks, 
but important broader financial sector elements 
are  still  underdeveloped.  The  combined  stock 
from the foreign intercompany and bank sources of 
funds (excluding corporate  bond issues abroad) in 
2018 represented around 13 % of outstanding bank 
credit  to  non-financial  corporations.  Leasing/hire 
purchase  and  factoring 
transactions  currently 
stands at around 7 % of outstanding bank credit to 
non-financial  corporations.  Survey  data  point  to 
the significance of trade credit from suppliers as a 
relevant alternative source for financing for Greek 
SMEs.  Greek  capital  markets  are  still  affected  by 
the  deep  and  prolonged  crisis  and  dominated  by 
the 
trade 
meaningful  funding  alternatives  to  non-financial 
corporations,  except  for  some  large  corporations. 
Overall, raising capital from bond markets was and 
remains a difficult task for the average Greek non-
financial  corporation,  due  to  country  risk,  low 
profitability and a shallow domestic investor base. 

in  banks'  securities, 

limiting 

thus 

to 

continue 

in  Greece 

be 
SMEs 
disproportionately affected by the lack of access 
to  finance.  On  average,  17 %  of  SMEs  mention 
access to finance as their most important problem, 
well  above  euro  area  averages.  The  demand  for 
external  financing  in  Greece  continued  to  be  the 
strongest  in  the  euro  area.  However,  there  is  a 

28 

 
 
 
 
 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  LABOUR MARKET* (16) 

level  of  3.7  million  people 

Although the Greek labour market still feels the 
effects  of  the  crisis,  major  improvements  have 
taken  place.  During  the  crisis,  employment  in 
Greece  dropped  by  a  sharp  19 %.  Employment 
levels  stabilised  in  2014  and  started  rising  more 
markedly from 2017, while the unemployment rate 
has  been  steadily  decreasing  from  its  peak  of 
27.9 % in July 2013 to 18.5 % by November 2018. 
The  current 
in 
employment  (age  group  20-64)  still  falls  short  of 
the  2008  level  (4.5  million  in  employment)  and 
almost  900 000  individuals  are  looking  for  a  job 
(19  %  of  the  active  population).  Of  these,  almost 
three out of four have been without a job for more 
than 1 year, and more than one third for more than 
4 years. The overall population has been in decline 
since  2010  as  a  result  of  the  combined  effect  of 
out-migration  (with  net  migration  turning  positive 
only  in  2016,  mostly  due  to  the  large  inflow  of 
refugees)  and  a  negative  and  deteriorating 
demographic balance. 

Graph 3.3.1:  Total population change 

Source: Eurostat 

The  more pronounced  recovery in employment 
that has been taking place since the end of 2016 
has  been  broad-based.  There  has  been  job 
creation in all sectors of the economy,  with larger 
absolute  gains  in  the  tradable  services  sector 
(which  accounts  for  one  third  of  the  Greek 

(16)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 3 for an overall summary of main findings). 

the 

economy),  but  a  relatively  stronger  growth  in 
industry  and  construction,  i.e.  the  sectors  which 
had registered the largest job losses throughout the 
jobs  created  have  been 
crisis.  Most  of 
permanent  ones,  with  the  share  of  temporary 
employment remaining  stable at around 11.3 % of 
total  employment  in  2017  (below  the  EU  average 
of  13.4 %).  Although  the  proportion  of  part-time 
employment  has  increased  (from  around  5 % 
before the crisis to close to 10 % in 2017), it is still 
very  low  when  compared  with  other  EU  Member 
States  and  the  EU  average  of  19 %.  Yet,  70 %  of 
part-time workers (one of the highest percentage in 
the EU) would prefer to work more, but have been 
unable to find a full-time job. At the same time, the 
social security system does not cover all people in 
employment;  sub-groups  of  the  self-employed  do 
not have formal coverage to sickness benefits. 

Women’s  participation  in  the  labour  market  is 
extremely  low.  At  48 %,  the  employment  rate  of 
women  in  Greece  is  19.7  percentage  points  lower 
than  that  of  men  and  is  one  of  the  lowest  in  the 
EU. This already very wide gap between men and 
women  (among  the  largest  in  the  EU)  has  been 
widening  in  recent  years,  as  the  employment  rate 
of  women  has  been  rising  at  a  slower  pace  than 
that of men. This is matched by a very low level of 
labour participation among women in younger (15-
24)  and  older  (50-64)  age  groups  (see  Graph 
3.3.2).  With  respect  to  work-life  balance,  caring 
responsibilities  are  less  cited  as  a  reason  for 
women’s inactivity in Greece than the EU average, 
and parenthood does not currently seem to have a 
significant  impact  on  the  employment  rate  of 
women.  At  the  same  time,  flexible  working 
arrangements  are  very  limited,  parental  leave 
arrangements  are  unequal  between  the  public  and 
private  sector,  and  childcare  enrolment  rates  are 
among  the  lowest  in  the  EU  and  have  been 
decreasing  in  recent  years,  raising  concerns  with 
respect  to  the  Social  Pillar  principle  on  childcare 
and support to children. The proportion of children 
under  three  in  formal  childcare  is  8.9 %  (against 
the  EU  average  of  32.9 %),  and  the  proportion  of 
children aged between three and mandatory school 
age  is  55.6 %  (EU  average:  86.3 %).  Mandatory 
enrolment  of  four  year-olds  in  kindergarten  is 
being  gradually  implemented  and  should  apply  in 
all  municipalities  by  2021.  A  considerable 
demand-supply  gap  remains, 
to 
obstacles in the system of subsidies to low-income 
families.  This  calls  for  further  investment,  as  it 

leading  also 

29 

- 100- 80- 60- 40- 20 0 20 40 6020012002200320042005200620072008200920102011201220132014201520162017'000Natural change of populationNet migration plus statisticaladjustmentTotal population change 
 
 
                                                           
3.3. Labour market, education and social policies 

rate  is  structurally  lower  than  that  of  Greek 
nationals.  This  gap  is  mainly  due  to  the  low 
employment 
levels  of  non-EU  born  women 
(42.4 %,  compared  to  48.5 %  for  Greek  women). 
In  addition,  people  born  in  Greece  with  foreign-
born  parents  have  worse  employment  outcomes 
than  natives  with  Greek  parents  (17).  The  large 
migration  experienced  by  Greece  since  2015  has 
not  yet  modified  the  size  of  the  non-EU  born 
population, as only a relatively small proportion of 
the  people  who  entered  through  Greece  in  2015-
2016 
the  country.  Nevertheless, 
considering the backlog of the asylum system, the 
integration of people benefiting from international 
protection  into  Greek  society  and  the  labour 
market  will  continue  to  be  a  major  challenge  for 
Greece in the coming years. 

settled 

in 

Graph 3.3.3:  Education and labour market for youth 

Source: Eurostat 

Ensuring  that  the  long-term  unemployed  are 
not  left  behind  in  the  recovery,  is  the  main 
challenge  for  Greece  and  one  that  will  need 
further  investment.  This  can  be  achieved  by 
ensuring: (i) that the overall framework conditions 
continue to be conducive to sustainable growth and 
job creation; and (ii) that policies aimed directly at 
improving  employability  prospects  and  promoting 
labour  market  participation  are  commensurate  to 
the  process  of 
the  challenge.  Greece 
modernising  its  public  employment  service,  with 
new  tools  and  structures  being  put  in  place  to 
improve  the  level  of  services  provided  to  both 

in 

is 

(17)  In  2017,  the  employment  rate  of  15-34  years  old  natives 
with  two  native  parents  was  54.6  %,  while  this  rate  was 
only 38.8  % for natives with two foreign-born parents. 

could  become  an 
to  a  possible 
increase  in  female  employment  as  the  economy 
continues to recover. 

impediment 

Although  still  very  difficult,  the  labour  market 
situation for young people has been improving. 
Youth unemployment has fallen considerably from 
its  peak  of  almost  60 %  in  mid-2013  although,  at 
39.1 %  in November 2018, it continues to be one 
of the highest in the EU. As reported in the Social 
Scoreboard, the proportion of  young people (aged 
15-24)  not  in  employment,  education  or  training 
(NEET)  remains  particularly  high  (15.3  %  in 
2017,  compared  to  an  EU  average  of  10.9  %). 
While  the  share  of  young  unemployed  (NEETs) 
has  declined  in  line  with  the  reduction  in  youth 
unemployment, the number of inactive youth  (i.e. 
NEETs  not  seeking  employment)  has  remained 
stable.  Meanwhile, 
in  youth 
the 
unemployment has not been driven so much by an 
increase  in  youth  employment,  but  rather  by  an 
increased  participation  in  education  (see  Graph 
3.3.3).  The  EU  has  been  supporting  the  fight 
against  youth  unemployment  though  the  Youth 
Employment  Initiative.  Over  EUR 250  million 
have been allocated to Greece since 2014, reaching 
over  57 000  unemployed  youth  (NEETs  18-29 
years old) but further investment is needed. 

reduction 

Graph 3.3.2:  Activity rate of women in Greece and the EU 

by age group, 2017 

Source: Eurostat 

The labour market integration of people with a 
migrant  background  is  also  a  challenge.  Non-
EU  nationals 
in  Greece 
represented 5.6 % of the population in 2017 (above 
the  EU  average  of  4.2 %),  and  their  employment 

residing 

legally 

30 

0102030405060708090GreeceEU%0102030405005101520253020072008200920102011201220132014201520162017%%Tertiary education 30-34 (rhs)NEET 15-24Early school leavers 18-24Employment rate 
 
 
                                                           
3.3. Labour market, education and social policies 

22 %) by a government decision, seniority top-ups 
were  frozen  and  a  sub-minimum  wage  rate  for 
people under 25 was introduced. 

Wages  are  expected  to  recover,  following  a 
sizable increase in the minimum wage and with 
collective  bargaining  once  again  playing  a 
stronger  role  in  wage  formation.  Following  the 
end  of 
the  European  Stability  Mechanism 
programme  and  a  gradual  economic  recovery,  the 
sectoral level  has returned to be the  main level of 
collective  bargaining  negotiations.  Representative 
sectoral agreements can again be extended, and the 
‘favourability principle’ has been re-instated. Since 
September  2018,  ten  sectoral  agreements  have 
been  extended,  resulting  in  the  same  minimum 
standards  of  employment  being  applied  in  the 
respective  sectors  throughout  the  country.  This 
could imply some  wage increases  for  workers  not 
previously  covered  by  the  collective  agreements, 
and  the  possible  impact  on  competitiveness  and 
employment is being monitored by the authorities. 
Furthermore, 
the 
the  government 
minimum  wage  by  10.9 %  on  1  February  2019, 
the  sub-minimum  wage  for 
eliminating  also 
workers  under  25  years  of  age.18  This  increase  in 
the  minimum  wage  leads  in  the  medium  term  to 
higher  risk  of  negative  employment  effects, 
especially  on  low-skilled,  young  workers  and 
workers with a long tenure. With regard to overall 
wage  developments,  it  will  be  for  the  social 
partners 
the  still  very  high 
that 
unemployment  and  fragile  financial  situation  of 
many  Greek  companies  are  properly  taken  into 
account  when 
collective 
negotiating 
agreements.  

to  ensure 

increased 

new 

involvement  of  social  partners 

in 
Proper 
national  policymaking  needs  to  be  ensured. 
During the crisis, social dialogue was characterised 
by  very  tense  relations,  with  the  government  and 
social  partners  being  unable  to  reach  consensual 
solutions  on  how  to  help  the  country  weather  the 
recession.  An  attempt  was  made  to  improve  the 
quality  of  social  dialogue  under  the  European 
Stability  Mechanism  programme  between  2015 
and  2018.  In  particular,  the  government  was 
encouraged  to  actively  involve  social  partners  in 

18  A  more  in  depth  discussion  of  the  possible  impact  of  the 
minimum  wage  increase  can  be  found  in  the  second 
enhanced  surveillance  report  for  Greece,  published  in 
parallel to this Country Report. 

facilitating 

jobseekers  and  employers,  offering  a  more 
individualised  approach  and 
job 
matching.  In  addition  to  the  reorganisation  of  the 
public  employment  service  (which  has  also  been 
reinforced  with  the  hiring  of  additional  qualified 
staff),  the  Greek  authorities  are  reshaping  the 
broader  system  of  active  labour  market  policies 
to  an  open-
(ALMPs).  This  entails  a  shift 
framework  delivery  model,  where  a  menu  of 
labour  market  policies 
(ALMPs)  would  be 
available on a continuous basis to the unemployed, 
and the setting up of a continuous monitoring and 
evaluation system to inform on its future design. 

Steps  have  been  taken  to  reduce  the  extent  of 
undeclared  work.  Undeclared  work  has  always 
been  a  significant  feature  of  the  Greek  economy, 
characterised  by  a  relatively  high  level  of  self-
employment and a large share of micro- and small 
businesses.  Addressing  undeclared  work  is  a 
complex  task,  particularly  for  a  country  in  a 
difficult  socioeconomic  situation  marked  by  high 
unemployment, a poor business environment and a 
high  tax  burden.  In  October  2016,  a  roadmap  for 
in 
fighting  undeclared  work  was  produced 
consultation  with  the  social  partners,  outlining  a 
comprehensive 
the 
phenomenon  and  promote  a  transition  to  the 
formal  economy.  To  carry  out  this  strategy,  the 
Greek  authorities  adopted  a  detailed  three-year 
action  plan,  which  is  now  in  its  final  year  of 
implementation. 

strategy 

address 

to 

Greece  experienced  a  strong  wage  adjustment 
during  the  crisis,  which  helped  rebalance  the 
economy, but at a high cost for workers. In the 
public  sector,  salaries  were  cut  to  achieve  the 
necessary  fiscal  savings.  In  the  private  sector, 
which  was  suffering  from  an  unprecedented 
collapse of economic activity and a dramatic surge 
in  unemployment,  a  number  of  measures  were 
adopted  to  increase  the  margins  of  flexibility  and 
allow  firms  to  adapt  to  the  new  economic  reality. 
In  particular,  firm-level  negotiations  were  made 
the  predominant  level  of  wage  bargaining,  by 
suspending  the  ‘favourability  principle’  (where 
firm-level  agreements  can  only  improve  upon  the 
terms  set  in  higher-level  agreements),  setting  a 
time  limit  to  the  validity  of  sectoral  agreements, 
and no longer allowing them to be extended to the 
entire  sector.  In  addition,  the  minimum  wage 
(which  used  to  be  set  autonomously  by  social 
partners) was made statutory, its level lowered (by 

31 

 
                                                           
3.3. Labour market, education and social policies 

limited  capacity  of  the  Greek  welfare  system  to 
provide  adequate  protection  against  poverty  (22), 
with 
In 
the  exception  of  old-age  poverty. 
particular,  in  2016,  social  transfers  (other  than 
pensions)  were  able  to  reduce  the  ‘at  risk  of 
poverty’  level  by  about  four  percentage  points, 
while the average EU poverty reduction effect was 
double. 

Major steps have been taken in recent  years to 
improve 
the  efficiency,  effectiveness  and 
adequacy  of  the  Greek  social  welfare  system 
[see Box 3.3.1]. In particular: (i) a new guaranteed 
minimum income scheme was introduced in 2017; 
(ii)  the  system  of  family  benefits  was  deeply 
reformed  in  2018  to  better  address  child  poverty; 
and  (iii)  a  new  means-tested  housing  benefit  is 
expected  to  be  introduced  in  the  course  of  2019. 
The  first  signs  of  improvement  became  visible  in 
2017: (i) the decline in median disposable income 
to  a  halt;  (ii)  severe  material 
finally  came 
deprivation  decreased;  and  (iii)  at  risk  of  poverty 
to  decline.  The 
or  social  exclusion  started 
completion  of 
initiated  disability 
the  already 
benefit  reform  and  the  review  of  the  system  of 
subsidies for local public transport are expected to 
further improve the efficiency of the social welfare 
system. 

to other EU Member States. See the benchmarking exercise 
in  the  area  of  unemployment  benefits  and  active  labour 
market  policies  conducted  within 
the  Employment 
Committee  and  presented  in  the  Draft  Joint  Employment 
Report 2019, European Commission, 2018. 

(22)  According  to  the  benchmarking  exercise  in  the  area  of 
minimum  income  schemes  conducted  within  the  Social 
Protection  Committee.  See  the  draft  Joint  Employment 
Report 2019, European Commission, 2018 for details. 

it  was  confirmed  as 

the  design  and  implementation  of  labour  market 
policies. A welcome step was the revamping of the 
Supreme  Labour  Council’s  role.  The  Supreme 
Labour  Council  is  a  tripartite  body  established  to 
deal  specifically  with  labour  market  policies.  In 
2017, 
the  main  body 
responsible  for  monitoring  collective  dismissals 
under  the  new  procedure,  and  for  overseeing  the 
action plan to tackle undeclared work. Currently, it 
is also responsible for verifying whether collective 
agreements 
representativeness 
requirement  for  extension.  However,  there  seems 
to  be  ample  room  to  improve  the  social  dialogue 
climate.  For 
instance,  social  partners  have 
complained that they are given insufficient time to 
provide reasoned opinions, while the Trade Union 
Confederation  recently  refused  to  take  part  in  the 
consultation  process  for 
the 
minimum wage. 

the  revision  of 

fulfil 

the 

3.3.2.  SOCIAL POLICIES 

Though still difficult, the social situation should 
continue to improve in the coming years, thanks 
to the combined effect of the economic recovery 
and the full rollout of the social welfare reform. 
living  conditions  deteriorated 
Incomes  and 
the  crisis.  The  median 
considerably  with 
equivalised  disposable  income  (19)  dropped  by 
35 %  between  2009  and  2016  (from  EUR 11 500 
to  EUR 7 500  per  year),  causing  a  sharp  increase 
in  absolute  poverty,  with  the  proportion  of  severe 
material  deprivation  (20)  doubling  from  11 %  to 
22 % of the Greek population, compared to the EU 
average  of  6.9 %  (European  Commission  2018g). 
This  was  caused  by  the  increase  in  long-term 
in  wages,  as 
the 
unemployment  and 
unemployed  people  did  not  receive  any  form  of 
income  support  after  their  unemployment  benefits 
(which  last  12  months)  expired  (21),  and  by  the 

fall 

(19)  The equivalised disposable income is the total income of a 
household, after tax and other deductions, that is available 
for  spending  or  saving,  divided  by  the  number  of 
household  members  converted 
into  equalised  adults; 
household  members  are  equalised  or  made  equivalent  by 
weighting  each  according  to  their  age,  using  the  modified 
OECD equivalence scale. 

(20)  Severe  material  deprivation  is  an  EU-SILC  indicator 
defined  as  the  enforced  inability  to  pay  for  some  items 
considered  by  most  people  to  be  desirable  or  even 
necessary to lead an adequate life. 

(21)  In  Greece,  unemployment  insurance benefits  last up to 12 
month, which is a relatively high duration when compared 

32 

 
                                                           
 
                                                                                   
3.3. Labour market, education and social policies 

Graph 3.3.4:  Europe 2020 poverty indicators for Greece 

Source: Eurostat 

Greece is facing high income inequality, mainly 
due  to  the  low  redistributive  power  of  the  tax 
and  benefit  system.  Income  inequality  has  long 
been  relatively  high  in  Greece,  and  it  remained 
stable  during  the  crisis  as  the  fall  in  incomes 
broadly  affected  the  entire  population.  In  2017 % 
the  disposable  income  of  20 %  of  the  population 
with  the  highest  income  (top  quintile)  was  6.1 
times  that  of  the  bottom  20 %  of  the  population 
(bottom  quintile),  much  above  the  EU  average  of 
5.1.  This  is  linked  to  a  weak  effect  of  taxes  and 
benefits  in  reducing  income  inequality.  In  2017, 
benefits  reduced  income  inequality  by  only  20 %, 
as against an EU average of 40 %, while taxes had 
no inequality reducing effect. However, this should 
improve following the latest welfare reforms. 

social 

administration 

Greece  has  taken  major  steps  to  improve  the 
provision  of 
services,  but  major 
challenges  remain.  A  network  of  ‘community 
centres’ —  one-stop-shops where social assistance 
beneficiaries  are  offered  access  to  various  social 
services —  has been set up at the local level (with 
the support of the European Social Fund), with the 
central 
proper 
coordination  and  monitoring.  Such  an  integrated 
model of providing social services is considered in 
international  literature  to  be  highly  effective. 
However,  more  investment  would  be  needed  to 
improve  the  level  and  quality  of  the  services 
provided.  De-institutionalisation  also  remains  a 
key challenge. Significant shortcomings have been 
found  with  respect  to  residential  care  for  children 
with disabilities, the lack of policies for alternative 
care  settings,  and  the  lack  of  suitable  care  for 

ensuring 

children  and  teenagers  with  mental  health  and 
behavioural problems. The procedures and criteria 
to  determine  the  degree  of  disability  are  being 
reformed  to  reduce  bureaucracy  and  align  them 
more closely to the actual conditions of individuals 
with disabilities. However, a broader assessment is 
needed  of  the  effectiveness  of  disability  benefit 
policies in keeping individuals with disabilities out 
of  poverty  and  ensuring 
required 
services — including  facilitating  access  to  the 
labour market — are available and accessible. 

that 

the 

or 

in-work 

deprivation 

The social inclusion of migrants continues to be 
a  challenge.  Social  indicators  show  huge  gaps 
between  Greek  born  and  non-EU  born.  43.1 %  of 
non-EU  born  were  at  risk  of  poverty  in  2017 
against  17.4 %  for  Greek  natives,  a  figure  well 
above  the  EU  average  for  non-EU  born  (30.8 %). 
A  similar picture emerges  when looking at severe 
material 
poverty. 
Unaccompanied minors form a large proportion of 
beneficiaries  of  international  protection.  There 
were  more  than  3 000  unaccompanied  minors  in 
Greece  on  30 September  2018;  2 000  applied  for 
asylum  in  2016  and  2 500  in  2017.  The  Greek 
government is making efforts to address the needs 
of these children. For example, several ministerial 
decisions  were  adopted  to  increase  educational 
the  age  assessment 
support  and  harmonise 
procedure  in  reception  and  identification  and 
asylum  procedures.  A  new  law  on  guardianship 
intended  to  provide  a  legal  guardian  to  every 
unaccompanied minor, has been adopted but is not 
yet operational. Adequate housing remains a major 
challenge and it is estimated that there are twice as 
many unaccompanied minors awaiting a place in a 
shelter as places currently available. 

the 
from 

In July 2018, the  Greek government  adopted a 
integration  strategy.  The  strategy 
national 
focuses  on 
those  people 
integration  of 
international  protection  and 
benefiting 
requesting  such  protection  who  are  staying 
temporarily in the country and/or will remain after 
the recognition of protection status. It also aims to 
facilitate  the  return  to  legality  of  migrants  who, 
due  to  the  economic  crisis  are  unable  to  maintain 
their  legal  status.  The  role  of  local  authorities  at 
regional  and  municipal  level  should  also  be 
strengthened.  To  put  the  integration  strategy  in 
motion,  most  of  the  measures  will  need  EU 
funding,  notably  from  the  Asylum,  Migration  and 
the  Structural  Funds. 
Integration  Fund  and 

33 

051015202530354020072008200920102011201220132014201520162017% of populationAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material deprivationPeople living in low work intensity households 
 
3.3. Labour market, education and social policies 

Investment priorities include financing the housing 
and  accommodation  needs  of  beneficiaries  of 
international  protection,  their  access  to  social 
welfare, to healthcare and vocational training with 
a view to effectively exiting the reception system. 

34 

 
3.3. Labour market, education and social policies 

Box 3.3.1: Social welfare reforms in Greece 

Over the last four years, Greece embarked in a comprehensive reform process to modernise and improve the 
functioning and effectiveness of its social welfare system. This process entailed the introduction of new benefit 
schemes  and  the  consolidation  and  complete  re-design  of  a  number  of  existing  ones.  The  measures  taken  are 
considered to have improved significantly the capacity of the Greek welfare system to address poverty, inequality 
and social exclusion. In particular, the new guaranteed minimum income scheme (the Social Solidarity Income  – 
SSI)  introduced  in  2017  provides  a  basic  income  support  to  the  poorest  households.  The  2018  reform  of  child 
benefits  improved  targeting  and  generosity  thereby  reducing  child  poverty.  Finally,  a  new  housing  benefit  to  be 
introduced in 2019 provides additional support to poor households who are paying rents. 

The direct impact of these measures on poverty and inequality can quantified by means of microsimulation 
models. Graph 1 shows the estimated impact of policy changes (legislated to enter into effect in 2017-2019) to the 
income  distribution  and  on  the  risk  of  poverty,  according  to  EUROMOD (23)  simulations  performed  by  the 
European Commission Joint Research Centre. The simulations suggest that the changes both to the tax system and 
to  the  benefit  system  were  overall  progressive,  reducing  inequality.  In  particular,  the  incomes  of  the  poorest 
households  (those  in  the  first  decile  of  the  income  distribution)  are  increased  considerably,  mostly  thanks  to  the 
SSI.  At  the  same  time,  given  that  the  income  guaranteed  by  the  SSI  is  in  general  below  the  at-risk-of-poverty 
threshold, its impact on the risk of poverty is smaller compared to that of the reformed child benefit and of the new 
housing benefit which is to be introduced in 2019 (as both these benefits accrue to many households up to the 4th 
and 5th decile). Changes to the tax system and to social security contributions have also contributed to a reduction 
in both poverty and inequality. Finally, the negative contribution to the risk of poverty coming from the category of 
“other benefits” stems primarily from changes to old-age related welfare benefits, notably the gradual phasing out 
of a means-tested benefit for pensioners. 

Graph 1:    Effect of social welfare reforms on incomes, poverty and inequality 

Source: European Commission Joint Research Centre, calculations based on the EUROMOD model / EU-SILC. 

(23)  EUROMOD is the tax-benefit microsimulation model for the EU. It simulates individuals' and households' benefit entitlements 
and tax liabilities (including social security contributions) according to the rules in place in each Member State. Simulations are 
based on representative survey data from the 2016 European Statistics on Income and Living Conditions (EU-SILC) and cover 
the main elements of direct taxation, social contributions and non-contributory benefits. Incomes reported in the EU-SILC of 
2016 refer to 2015 and are uprated with 2018 uprating factors. 

35 

 
 
 
                                                           
3.3. Labour market, education and social policies 

3.3.3.  PENSIONS 

the  start  of 

The  Greek  authorities  adopted  an  extensive 
pension  reform  in  spring  2016  building  upon 
the 
reforms  undertaken  at 
European  Stability  Mechanism  programme  in 
August  2015.  This  pension  reform  was  necessary 
for  many  reasons.  It  helped  improve  actuarial 
fairness and strengthen incentives to declare  work 
and  pay  social  contributions  and  work  for  longer, 
where  appropriate.  Reforms  ensured  the  pension 
system’s  sustainability  while  reducing  waste  and 
inequalities.  Finally,  the  reforms  helped  to  create 
the  fiscal  space  to  rebalance  social  spending  and 
introduce policy measures targeted at those groups 
most  at  risk  of  experiencing  poverty,  namely  the 
young  and  unemployed,  on  whom  spending 
remains lower than in other EU countries. 

The  reform  is  already  being  fully  applied  for 
the  calculation  of  benefits  of  new  pensioners. 
Current  pensioners  have  also  had  their  pension 
benefits  recalculated.  Electronic  insurance  records 
are being created with priority given to those who 
are  retiring  in  the  near  future.  The  authorities  are 
focusing  on  widening  the  coverage  of  these 
records  and  automating  the  creation  of  new 
records. 

In  October  2018,  the  authorities  updated  their 
action  plan  for  completing  the  functional  and 
administrative  set-up  of  the  unified  main 
pension fund (EFKA) by mid-2020. This reform 
is  also  receiving  financial  and  technical  support 
from the EU. 

The  2016  pension  reform  helped  restore  the 
sustainability  of  the  pension  system.  According 
to  projections  (24)  that  have  been  reviewed  by  the 
Economic Policy Committee’s Working Group on 
Ageing Populations and Sustainability, the reform 
is projected to reduce public spending on pensions 
from 17 % of GDP in 2016 to just below 13 % by 
2030, which is the euro area average. The freezing 

(24)  European Commission (DG ECFIN) and Economic Policy 
Committee  (Ageing  Working  Group)  (2018):  ‘The  2018 
Ageing  Report:  Economic  and  Budgetary  Projections  for 
the EU Member States (2016-2070) ‘, European Economy, 
Institutional papers, No 079, May 2018. 

of  all  pensions  until  2022  is  projected  to  further 
reduce pension spending in the long term by some 
0.5 pp. of GDP (25). 

The  reform  also  includes  a  very  ambitious  and 
comprehensive overhaul of the past fragmented 
system.  It  improves  intra-  and  intergenerational 
equity.  The  harmonisation  of  pension  benefit  and 
contribution  rules  leads  to  the  equal  treatment  of 
all  insured  people  across  different  categories  and 
guarantees  equality  between  the  generations.  The 
non-pro  rata  application  of  the  new  pension  rules 
(a unique feature of the Greek reform compared to 
reforms  in  other  EU  countries)  assures  that  the 
overly generous rules from the past will no longer 
be applied to new retirees. Furthermore, adjusting 
current  pensions  via  the  recalibration  process 
means that, over time, current beneficiaries will be 
treated  the  same  as  those  that  will  retire  in  the 
future  As  such,  the  reform  strongly  increases 
intergenerational equity. 

While  the  reform  was  clearly  and  urgently 
needed,  it  was  designed  to  limit  any  negative 
impact  on  a  society  already  strained  by  the 
prolonged  crisis.  A  significant  consideration  has 
been the  fact that in  many  households receiving a 
pension, the pension is the main or only source of 
income for a number of people, including those of 
younger generations (sometimes more than one). 

3.3.4.  HEALTH CARE 

Greece scores well in all main health indicators. 
Life expectancy in Greece is 81.5 years, just above 
the  EU  average.  The  same  applies  to  healthy  life 
years,  which  at  64.2  still  above  the  EU  average. 
Disparities  in  self-reported  health  across  different 
socioeconomic  groups  are  not  that  large,  with  the 
income  group  displaying  a  moderate 
lower 
improvement.  

(25)  The  freezing  of  pensions  in  2019-2022  was  pre-legislated 
on  18 May  2017.  The  other  pre-legislated  pension 
measures  will  not  be  implemented  see  section  3.1.2 
European  Commission  (DG  ECFIN)  (2018):  ‘Enhanced 
surveillance  report  —  Greece  2018  November’,  European 
Economy,  Institutional  papers,  No  090,  November  2018, 
page 242424. 

36 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

goods,  while  it  is  among  the  lowest  in  outpatient 
and preventive care. 

Pharmaceutical spending is very high due to an 
overconsumption  of  pharmaceutical  products. 
Pharmaceutical  spending  was  extremely  high  in 
Greece  one  decade  ago,  with  EUR  5  billion  in 
2009,  by  far  the  highest  share  of  GDP  spent  on 
pharmaceuticals  in  the  EU  (above  2 %  of  GDP). 
While improvements were recorded over the years, 
the  pattern  of  overconsumption  has  not  yet  been 
fully  resolved.  Greece  has  one  of  the  highest 
antibiotic  use  and  one  of  the  highest  rate  of 
antimicrobial  resistance  in  the  EU.  Therapeutic 
protocols  and  the  tools  to  assess  pharmaceuticals 
based on affordability and cost-effectiveness, such 
are 
as 
underdeveloped.  Also  due  to  lack  of  such  tools, 
Greece introduced high-cost innovative drugs into 
the reimbursement list, exceeding affordability and 
disregarding  cost-effectiveness,  causing  hospital 
(and  general)  pharmaceutical  expenditure 
to 
remain higher than otherwise possible. 

technology 

assessment 

health 

Greater  efficiency  should  be  achieved  with  the 
ongoing  reform  of  the  primary  health  sector. 
The  reform  of  the  primary  health  care  sector 
introduces a new and improved system that covers 
the  whole  population.  The  system  is  underpinned 
by  multidisciplinary  teams,  built  around  general 
practitioners  and  paediatricians  in  primary  health 
care  units  (TOMYs').  The  aim  is  for  the  whole 
population  to  eventually  be  registered  with  a 
primary  health  care  units  (TOMY)  or  family 
doctors. Both of these are expected to become the 
first  point  of  contact,  acting  as  a  health 
consultant/adviser  for  patients  and  navigates  them 
in  the  health  care  system.  However,  the  low 
number  of  general  practitioners  and  nurses  pose 
challenges. Conditional on its full implementation, 
currently  supported  by  EU  funds,  this  system  can 
improve efficiency and generate savings, reducing 
the  excessive  reliance  on  costly  hospital  services, 
countering  the  effect  of  supply-induced  demand, 
reducing  avoidable  hospital  admissions  and 
unwarranted use of emergency care services. 

strengthened  by 

Measures  to  increase  the  cost-effectiveness  of 
hospitals are being introduced. Efficiency should 
improving  governance, 
be 
ensuring  that  hospital  managers  are  well  trained 
highly  qualified  and  supported  by  modern 
management  control  tools,  and  by  reviewing 

Despite an oversupply of medical specialists, the 
perception  of  unmet  needs  for  medical  care  is 
high.  In  the  Social  Scoreboard  (see  Box  3),  self-
reported unmet need for  medical examination due 
to  cost  was  one  of  the  highest  in  the  EU  in  2017 
(8.2 % vs an EU average of 1 % on) (26). At around 
34 % in 2016, household out-of-pocket payment as 
a  proportion  of  total  current  health  expenditure 
was amongst also among the highest in the EU %. 
However,  both  indicators  decreased  between2015 
and  2016  with  the  introduction  of  universal 
coverage  as  from  2016,  the  uninsured  and  those 
belonging  to  vulnerable  social  groups  have  the 
right  to  free  access  to  public  healthcare  facilities. 
In  addition,  a  far-reaching  reform  of  the  Primary 
Healthcare System was initiated in 2017. 

expenditure.  Total 

Ageing  will  likely  pose  a  challenge  to  ensuring 
the  medium  and  long-term  fiscal  sustainability 
of  healthcare 
current 
healthcare spending in 2016 amounted to 8.5 % of 
GDP  and  public  spending  to  5.2 %  of  GDP 
(compared to the respective EU averages of 8.4 % 
and 6.2 % of GDP). However, due to the impact of 
the expenditure ceilings, this figure does not reflect 
the  full  extent  of  government  spending  (27). 
Moreover,  health-care  spending  is  projected  to 
increase by 1.2 % of GDP by 2070 (compared with 
a projected EU average increase of 0.9 % of GDP). 
If  non-demographic  drivers  are 
in 
addition  to  demographic  driver,  the  increase  in 
health care expenditure is expected to reach 2.0 % 
of GDP by 2070 (1.6 % for the EU)(28).  

included 

Spending efficiency in Greece is low The country 
is  among  the  highest  in  the  EU  in  terms  of 
expenditure 
on 
inpatient 
pharmaceuticals  and  other  medical  non-durable 

care 

and 

on 

(26)  As  the  level  remains  above  average  even  for  the  4th 
quintile (i.e. the second wealthiest), this may partly reflect 
a  cultural  bias,  but  overall  this  is  clearly  linked  to  the 
consequences  of  loss  of  insurance  coverage  in  a  system 
previously without universal coverage and to the impact of 
the  crisis  on  households'  finances  and  the  affordability  of 
previous  standards  in  terms  of  health  care  goods  and 
services. 

(27)  Statistics  only  account  for  the  level  of  spending  based  on 
the  expenditure  ceilings.  However,  in  Greece  the  value  of 
public  provision  normally  exceeds  the  legislated  ceilings, 
though  this  does  not  result  in  public  spending  but  in 
payback from providers. 

(28)  Respectively,  according  to  the  Ageing  Working  Group 
Reference  Scenario  and  Ageing  Working  Group  Risk 
Scenario. 

37 

 
                                                           
3.3. Labour market, education and social policies 

social  mobility.  Providing  the  skilled  labour 
necessary  for  the  economic  recovery,  reducing 
youth  unemployment  and  addressing  weaknesses 
in  children’s  educational  performance  are  key 
priorities. Greece lags behind other Member States 
in terms of its Programme for International Student 
Assessment  (PISA)  scores  and  in  terms  of  timely 
completion  of  first  tertiary  degrees.  The  OECD 
published  a  review  of  the  Greek  educational 
system 
2018b). 
2018 
Implementing  the  OECD’s  recommendations  for 
improvement  should  help  remedy  the  situation. 
However, no specific steps have been taken so far. 

in  April 

(OECD, 

The  education  system  is  hampered  by  low  and 
inefficient spending. At 4.3 % in 2016, education 
spending as a share of GDP remained the same as 
in  2015  and  below  the  EU  average  (4.7 %).  The 
ageing  population  and  the  projected  reduction  in 
the  number  of  children  over  the  next  decades 
highlight the need to improve the use of resources 
in  the  education  system  and  provide  lifelong 
learning  opportunities  to  adapt  to  the  changing 
composition  of  society.  The  monitoring  of 
expenditure  is  currently  insufficient.  It  could 
improve  by  consolidated  budgets  and  consistent 
data  collection  (OECD,  2018  b).  To  achieve  the 
latter,  the  Ministry  of  Education,  Research  and 
Religious  Affairs  has  signed  a  memorandum  with 
the Hellenic Statistical Authority (ELSTAT). 

Improving educational outcomes while ensuring 
inclusive  education  remains  a  challenge.  The 
2015  results  of  the  Programme  for  International 
Students  Assessment  (PISA)  show  a  significant 
underachievement  in  basic  skills  overall  and  a 
wide performance gap between native and foreign-
born  students.  Students  with  special  needs  are 
mostly  included  in  mainstream  schools,  but  long 
waiting  times  —  up  to  three  years  —  for  needs 
diagnosis  leave  many  children  without  timely 
therapeutic and/or learning support. To remedy the 
situation,  new  Centres 
for  Educational  and 
Counselling Support have been provided for under 
Law 4547/2018, with the hiring of additional staff. 

Negative effects on school education include low 
levels  of  autonomy  and  accountability  and  a 
lack  of  long-term  planning.  While  evidence 
suggests  that  students’  performance  improves  in 
line  with  increased  school  autonomy,  including  a 
school’s  autonomy  over  resources  and  curriculum 
(OECD,  2018c).  Greece  has  one  of  the  most 

hospital  reimbursement.  The  latter  would  involve 
adopting a proper diagnosis related groups system 
(a  methodology  for  activity-based  costing  for 
hospital  services)  (29).  Health  procurement  has 
many  deficiencies  (30)  and  would  benefit  from 
more and more targeted centralised purchasing. To 
this  end,  Greece  has  adopted  a  national  public 
procurement  strategy  and  set  up,  in  2017,  an 
independent central purchasing authority for health 
(EKAPY) 
centralised 
procurement.  This  aims  at  increasing  efficiency 
and  cost-effectiveness,  strengthening 
technical 
expertise  and  tackling  the  issue  of  corruption  and 
waste.  The  areas  of  capacity  building  (diagnosis 
centralised 
related 
system 
groups 
procurement)  may  benefit 
additional 
technology 
information 
in 
investment 
infrastructure or human resources. 

and 
from 

introducing 

and 

is 

issue 

responsibility 

for  Greece  and 

Developing  long-term  care  services  is  a  long-
further 
standing 
investments  are  needed.  In  2016,  the  proportion 
of  dependent  (31)  people  above  65  years  old  was 
among the highest in EU, yet long-term care is an 
underdeveloped  policy  area.  No  comprehensive 
formal long-term care services are in place and the 
primary 
financial  and 
practical  support  rests  on  the  dependent  person’s 
family.  The  proportion  of  the  population  using 
professional  care  in  Greece  was  below  the  EU 
average,  mainly  for  financial  reasons  (63.3 %  vs 
32.2 %  EU  average).  There  is  a  geographically 
uneven  development  of  services  and  strict 
eligibility  criteria.  In  2014,  Greece  allocated  only 
2 %  of  overall  health  spending  to  long-term  care, 
far lower than the EU-27 average of 15 %. 

the 

for 

3.3.5.  EDUCATION AND SKILLS 

Education is crucial to income and employment 
growth  potential,  future  competitiveness  and 

(29)  The  KEN  (Κλειστά  Ενοποιημένα  Νοσήλεια),  the  current 
Greek  version  of  DRGs,  is  currently  based  on  the 
Australian  Diagnosis  Related  Groups  system,  but  has  not 
been  accurately  adjusted  to  the  Greek  cost  structure,  and 
may be creating perverse incentives to providers. 

(30)  These  include  a  lack  of  specialised  personnel  in  all 
contracting  authorities  to  carry  out  procedures,  inefficient 
programming  of  purchases  and 
the 
technical  specifications  of  award  procedures  and  a  very 
low  rate  of  publication  of  contract  notices  for  health 
procurement. 

irregularities 

in 

(31)  People  with  severe  limitation  and  difficulties  in  personal 

care activities.  

38 

 
                                                           
3.3. Labour market, education and social policies 

education  institutions  will  serve  to  improve  the 
fragmented higher education landscape. 

training 

frameworks 

Major  reforms  have  been  adopted  to  upgrade 
the  Vocational  Education  and  Training  (VET) 
system in Greece, but its attractiveness remains 
low  and  further  investment  is  needed.  The 
in  upper  secondary 
proportion  of  students 
vocational  education  and 
in  Greece 
remains stable at around 30 %, which is far below 
the  EU  average  (47.3 %)  and  drop-out  levels  are 
higher than in general education. In 2017, common 
for  apprenticeships  and 
quality 
vocational  education  and  training  curricula  were 
prepared and new  governance bodies  were  set up. 
A  European  Social  Fund  programme  (‘New 
beginning  for  EPAL’)  to  improve  the  role  and 
image of vocational education in Greece, has been 
extended to all upper secondary vocational schools 
(EPAL).  The  apprenticeship  system  has  been 
of 
but 
further 
number 
the 
the  private  sector 
apprenticeships  offered 
remains 
labour  market 
relevance,  systematic  partnerships  and  strategic 
cooperation with all stakeholders at local, regional 
and  national  level  are  required.  An  overarching 
system  for  diagnosing  labour  market  needs  is  in 
place,  but  outputs  are  insufficiently  reflected  in 
the 
training 
unemployed.  High  quality  standards  of  inputs 
(curricula)  and  outputs  (graduates)  for  training 
provision are warranted. 

low.  To  strengthen 

programmes, 

expanded, 

including 

for 

in 

Despite the need for improving workers’ skills, 
participation  in  adult  learning  remains  very 
low.  At  4.5 %  in  2017,  participation  in  adult 
learning  was  well  below 
the  EU  average 
(10.9 %). (32) In 2015, 21.7 % of Greek companies 
provided  vocational  training  to  their  employees 
(EU  average:  72.6 %)  and  only  18.5 %  of 
employees  participated 
training  (EU 
average:  40.8 %)  —  the  lowest  rate  in  the  EU, 
calling for further investment. 

this 

in 

3.3.6.  INVESTMENT 

centralised  education  systems  within  the  OECD 
(OECD  2018a).  Accountability  and  monitoring 
which  feeds  back  into  policy  design  are  largely 
missing.  Reliance  on  tutorial  schools  (frontistiria) 
and  private  tuition  is  high  and  teacher  initial 
training,  especially  at  secondary  level,  does  not 
sufficiently 
incorporate  pedagogical  education. 
Legislation  passed  in  July  2018  introduced  the 
evaluation  of  administrative  executives  in  the 
education sector and self-evaluation for schools as 
measures  to  achieve  more  accountability  in  the 
system.  However,  it  abolished  teacher  evaluation. 
A  strong  reliance  on  temporary  non-renewable 
contracts  for  teachers  undermines  continuity  in 
schools.  As  of  2019,  15 000  permanent  teachers 
are  expected  to  be  hired  over  a  three-year  period, 
among them 4 500 special needs teachers.   

Substantial efforts have been made to integrate 
recently  arrived  migrants  into  education,  but 
major  challenges  remain.  Close  to  60 %  of  the 
24 000  migrant  and  refugee  children  who  were  in 
Greece  in  October  2018  have  been  integrated  in 
education in the 2018/2019 school year. Sustained 
efforts and investments will be needed to improve 
this ratio and the quality of education provided. 

of 

employability 

Tertiary  educational  attainment  has  risen 
recent 
further,  while 
graduates,  strong  outward  mobility  and  skills 
mismatches remain a challenge. Greece is above 
the EU average for tertiary education attainment in 
2017  (43.7 %  vs  39.9 %).  With  more  than  30 000 
students enrolled in a degree programme abroad in 
2014/2015. Greece is fourth in the EU for outward 
mobility  in  absolute  numbers  after  Germany, 
France  and  Italy  (European  Commission,  2018d). 
The  employment  rate  for  recent  tertiary  graduates 
rose  by  8.1  percentage  points  in  2014-2017 
reaching  52.1 %  in  2017.  However,  this  was  still 
well  below  the  EU  average  (79 %).  Greece  ranks 
very  low  on  the  European  skills  index  with 
pronounced  skills  mismatches,  particularly  as 
regards  tertiary  graduates  working  in  jobs  that  do 
not require higher education (Cedefop, 2018).  

focus  on  applied 

Mergers  between  technical  education  institutions 
(TEIs),  which 
sciences, 
technology  and  art  and  universities  have 
commenced in 2018. However, given the lack of a 
strategic plan or a comprehensive prior evaluation, 
it  is  unclear  how  the  upgrading  of  technical 

Increased 
to  support  employment, 
skills,  education  and  training  and  social  inclusion 

investment 

(32)  According  to  the  benchmarking  exercise  in  the  area  of 
adult skills conducted within the Employment Committee. 
See European Commission (2018a) for details. 

39 

 
                                                           
3.3. Labour market, education and social policies 

in  social  inclusion,  strengthening  the  capacity  of 
the  public  employment  service  and  increasing  the 
long-term  care 
availability  of  childcare  and 
to  any  geographic 
services,  paying  attention 
disparities  in  their  availability.  In  view  of  the 
rising  number  of  non-EU  nationals  settling  in 
Greece,  EU 
the 
implementation of the national integration strategy 
adopted in 2018 by the Greek government. 

support 

should 

funds 

is important for Greece to improve its productivity 
and  long-term  inclusive  growth.  Skills  shortages 
and  mismatches  are  among  the  obstacles  to  job 
creation,  especially  in  innovative  sectors  that 
provide  quality  employment.  This,  points  to  the 
need 
training  education 
infrastructure  and 
to  better  align  education 
curricula with labour market needs. Harnessing the 
full labour potential also requires more investment 

invest  more 

in 

to 

40 

 
3.3. Labour market, education and social policies 

Box 3.3.2: Technical support by the Structural Reform Support Service 

The Commission can provide tailor-made technical support upon a Member State's request via the Structural 
Reform  Support  Programme  to  help  Member  States  implement  growth-sustaining  reforms  to  address 
challenges identified in the European Semester process or other national reforms. The technical support for 
structural reforms in Greece was initiated in July 2011, when the Commission set up a special Task Force 
for  Greece,  at  the  request  of  the  Greek  authorities  to  help  the  country  undertake  a  series  of  reforms, 
stemming  from  obligations  under  the  financial  assistance  programmes,  and  to  increase  the  absorption  of 
European Structural and Investment Funds. From July 2015 onwards, this technical support continued to be 
carried out under the Structural Reform Support Service. To date, more than 90 technical support projects 
have  been  implemented  or  are  ongoing  and  more  than  40  are  in  the  pipeline.  While  Greece  exited  the 
European  Stability  Mechanism  stability  support  programme  in  August  2018,  the  authorities  continue 
implementing and completing key reforms.  

In  the  area  of  revenue  administration,  tax  policy  and  public  financial  management,  the  Commission  is 
assisting Greece with reforming its tax policies and revenue administration, as well as with its management 
of public finances. In that context, Greece received support in setting up a new Independent Authority for 
Public  Revenue,  ensuring  efficient  collection  of  taxes.  Support  is  also  provided  for  actions  to  remove 
bottlenecks  to  arrears  clearance,  for  the  introduction  of  a  state-of-the-art  government  budget  classification 
structure and for a spending review, helping to redirect resources to socially important causes. 

In  the  area  of  finance  and  access  to  finance,  the  Commission  is  assisting  Greece  in  improving  access  to 
finance  for  companies,  increasing  financial  supervisory  capacity  and  ensuring  an  efficient  allocation  of 
capital.  For  example,  Greece  has  received  support  for  the  introduction  of  an  out-of-court  workout 
mechanism for the settlement of debt by Greek enterprises to reduce non-performing loans. The authorities 
have  also  benefitted  from  support  for  setting  up  a  new  electronic  auctions  platform  for  the  collection  of 
private debt collaterals, allowing private claims to be settled without recourse to a court.   

In the area of the labour market, education, health and social services, support has been provided to improve 
the  Greek  social  welfare,  labour,  pension,  health  and  education  systems.  For  example,  Greece  benefitted 
from support for the introduction of a national guaranteed minimum income (the social solidarity income), 
which provides a basic level of protection against extreme poverty. Support was also provided to Greece to 
consolidate a large number of pension funds into a single social security  fund (EFKA), leading to  a  more 
robust  and  well  managed  social  security  system,  as  well  as  to  significantly  reform  and  improve  the 
effectiveness  of  activation  policies.  As  regards  health,  the  Commission  supported  the  Greek  authorities  in 
the establishment of a Centralised Procurement Agency for the Health sector. 

In  the  area  of  growth  and  business  environment,  the  Commission  has  supported  Greece  in  boosting 
competitiveness and innovation for businesses and in building a strong and green economy. In that respect, 
Greece  received  support  for  simplifying  the  procedures  for  setting-up  and  running  a  business  through  the 
introduction of  a  new  investment  licensing  system,  to  further  enhance  the  simplification  of  administrative 
burden on business, and for the setting up of an entrepreneurship observatory. Support was provided also in 
the field of energy, to develop the national electricity and gas markets according to EU standards and for the 
implementation  of  extensive  OECD  recommendations  (Toolkits) to  improve  competition.  Greece  has  also 
benefitted  from  support  to  set  up  and  complete  the  national  cadastre  with  the  aim  of  clarifying  property 
rights.  

In the area of governance and public administration, technical support was provided to modernise the Greek 
public sector at both central and local levels. Greece has been supported e.g. in the improvement of human 
resources management, in the digitisation of its public sector and in the definition and implementation of the 
National  Digital  Strategy,  a  basic  pillar  supporting  almost  any  other  reform.  Greece  has  also  received 
support  for  reforming  its  judicial  system,  including  the  introduction  of  alternative  dispute  resolution 
mechanisms,  aimed  at  speeding  up  the  hearing  of  cases  and  proceedings  and  eliminating  backlogs  in  the 
treatment of court cases and focusing on digital justice.  

41 

 
3.3. Labour market, education and social policies 

Box 3.3.3: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is designed as a compass for a renewed process of upward convergence 
towards better working and living conditions in the European Union.(1) It sets out twenty essential principles 
and rights in the areas of equal opportunities and access to the labour market; fair working conditions; and 
social protection and inclusion.  

Greece faces challenges with regard to most of the 
indicators  of  the  Social  Scoreboard  supporting  
the European Pillar of Social Rights. Although the 
situation in the labour market has been improving, as 
illustrated  by  a  decreasing  unemployment  and  long-
term  unemployment  rates,  there  are  still  challenges 
related  to  equal  opportunities,  access  to  the  labour 
market  and  social  protection  and  inclusion.  In 
particular,  labour  market  participation  is  chronically 
low,  in  particular  for  youth,  women,  older  workers 
and  people  with  disabilities.  Such  negative 
performance  reflects  the  legacy  of  the  8-year  long 
economic crisis, but also structural barriers to labour 
market participation. As also illustrated by the Social 
Scoreboard,  Greece  performs  well  only  in  terms  of 
educational  attainment,  with  a  lower-than-average 
share  of  early  leavers  from  education  and  training. 
This as well can be related to the crisis, as the lack of 
job 
and 
increases 
their 
students 
attractiveness 
education. At the same time, the system of vocational 
education and training is still underdeveloped.Due to 
time  lags,  the  effects  of  recent  reforms  to  the 
Greek  social  welfare  system  are  not  yet  captured 
by  the  statistics.  Although  the  impact  of  social 
transfers on poverty reduction in Greece is one of the 
lowest  in  the  EU,  recent  reforms  (such  as  the 
introduction  of  a  guaranteed  minimum 
income 
scheme,  more  generous  and  better  targeted  child 
benefits, and a new rent subsidy) are expected to have a positive impact in reducing  material deprivation, 
child poverty, income inequality and housing cost overburden.   

value 
to  complete 

opportunities 
for 

the 

The provision and availability of social services remains limited. Further sustained investments would be 
required  to  improve  the  availability  of  formal  childcare  arrangements,  the  provision  of  long-term  care 
services, and tackle the high self-reported unmet needs for medical care.  

(1)  The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council 
and  the  European  Commission.  https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-
union/european-pillar-social-rights/european-pillar-social-rights-20-principles_en 

42 

 
 
3.4. COMPETITVENESS REFORMS AND INVESTMENT 

3.4.1.  PRODUCTIVITY AND INVESTMENT* (33) 

years 

economy.  Strengthening 

Several 
of  underinvestment  have 
generated  significant  investment  needs  in  the 
Greek 
investment 
activity  will  be  instrumental  in  underpinning 
longer-term growth. Key public and private sector 
sectoral investment priorities include transport and 
logistics,  sustainable  regeneration  of  urban  and 
most  disadvantaged  and  deprived  areas,  energy 
infrastructures,  environmental 
efficiency  and 
protection,  digital 
technologies,  employment, 
skills, education and training, social inclusion and 
integration  (see  Section  3.3.6),  health  and  R&D, 
mainly 
smart 
specialisation  strategies  in  sectors  such  as  agro-
food and tourism. 

the  development  of 

through 

The  Greek  economy  is  currently  characterised 
by  relatively  low  productivity  because  of  both 
cyclical and structural factors. Greece still needs 
to  redress  imbalances  and  complete  its  external 
adjustment  process  by 
realigning  productive 
capacity  and  living  standards.  After  a  sharp 
contraction in consumption in the recent years, the 
remaining  part  of  the  adjustment  should  come 
from  the  supply  side  of  the  economy,  through 
higher  productivity  and  exports.  The  reduction  of 
investments,  emigration  of  skilled  workers  and  
high long-term unemployment since the beginning 
of  the  crisis,  caused  a  deterioration  of  human  and 
physical capital, thus resulting in low productivity. 

(33)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 3 for an overall summary of main findings). 

losses, 

Productivity  growth  was  stagnant  even  before 
the  crisis  (see  Graph  1.4),  indicating  structural 
problems in the allocation of productive factors 
that  predate  the  crisis.  While  the  economic 
recovery should address the cyclical component of 
improved  business 
an 
productivity 
environment  is  needed  to  tackle  the  structural 
component  of  sluggish  productivity  growth.  Such 
an  environment  would  favour  the  creation  and 
expansion  of  competitive 
firms  and  allow 
productive firms to thrive and gain market shares. 
Such  reforms  would  attract  domestic  and  foreign 
productive investments  which could then result in 
more rewarding and rewarded jobs, drawing talent 
and  providing  valuable  inputs  to  other  firms  and 
products  to  consumers  at  home  and  abroad,  thus 
activating  a  virtuous  circle  of  shared  and 
sustainable growth. 

Greece  has  undertaken  numerous  reforms  to 
improve 
increase 
its  business  environment, 
competition,  simplify  investment  licensing  and 
reduce  excessive  regulatory  burden.  However, 
despite  a progress in  various  areas,  much remains 
to  be  done  and  the  attraction  of  investment  and 
deployment of high-quality human capital continue 
to  be  hindered  by  a  relatively  unfavourable 
business  environment.  Administrative  burden  on 
firms remains a major issue despite the significant 
progress made over the past decade in reducing the 
time,  cost  and  number  of  procedures  and 
regulatory  restrictions  to  start  a  business.  An 
excessive  administrative  burden  can  also  give  the 
perception  of  unfair  practices  and  leave  room  for 

Graph 3.4.1:  Investments in Greece by type (left); building permits and residential investments in Greece (right) 

Source: Commission services 

43 

-5515252003200420052006200720082009201020112012201320142015201620172018% GDPInventories and valuablesOther investmentEquipmentConstruction0246810120100200300400500200120032005200720092011201320152017% of GDP2010=100Building Permits(2010=100)ResidentialInvestment (% ofGDP, right axis) 
 
                                                           
 
 
3.4. Competitveness reforms and investment 

Thessaloniki port can increase freight turnover by 
one  third  and  result  in  some  EUR  400  million  in 
additional  investments  over  10  years.  The  same 
organisation estimates the forthcoming Hellenikon 
investment in Athens, which will increase GDP by 
2  percentage  points  and  create  90 000  jobs  over 
15-20 years. 

Graph 3.4.2:  Net foreign direct investments in Greece by 

economic sector 

Source: Bank of Greece 

funds 

such  as 

European 
the  European 
Structural and Investment Funds are by far the 
main  source  of  public  investment  in  Greece. 
Also the European Fund for Strategic Investments 
from  the  so-called  'Juncker  plan'  has  made  an 
excellent  start  in  Greece.  As  of  December  2018, 
Greece  ranks  first  in  the  EU  in  terms  of  total 
expected investment under the European Fund for 
Strategic  Investments,  in  comparison  to  the  GDP. 
Operations  approved  in  Greece  under  the  Juncker 
Plan’s  European  Fund  for  Strategic  Investments 
now  represent  a  total  financing  volume  of  EUR 
2.7billion.  This  is  expected  to  trigger  EUR  11 
billion in total investments. 

into 

information 

Investments 
and 
communication  technology  (ICT)  and  energy 
infrastructures  are  particularly  needed  for 
Greece to catch up with the other EU countries 
and  make  up  for  the  investment  slump  during 
the  crisis.  Insufficient  higher-speed  broadband 
connectivity creates major bottlenecks for dynamic 
export-oriented 
businesses.  Underdeveloped 
energy  infrastructures  increase  energy  costs  for 
businesses and households. Innovation and human 
capital  investments  are  insufficient  for  sustaining 

corruption, thus discouraging entrepreneurship. To 
tackle  these  issues,  continuous  efforts  are  needed 
to  simplify  and  digitise  administrative  procedure, 
to  ensure  a  stable  and  predictable  legislative 
framework and combat corruption. In addition, the 
implementation of the simplification reforms at the 
peripheral level is still incomplete and the benefits 
do  not  always  reach  businesses  and  citizens  in 
Greece,  who  according  to  Eurobarometer  surveys 
have 
of 
administrative burden in the EU.  

the  most 

perception 

negative 

The  ratio  of  investment  over  GDP  reached  its 
lowest  point  in  2015,  and  is  slowly  recovering 
since  then.  However,  in  2018  it  remains  one  of 
the  lowest  in  the  EU,  still  far  from  pre-crisis 
levels and from the EU average of 21 %. Private 
investment  remains  constrained  in  a  context  of 
deleveraging  in  the  banking  sector  and  high 
indebtedness.  Residential  investments  completely 
dried  up,  deteriorating  the  existing  capital  stock 
and  disrupting  supply  chains  in  the  construction 
sector, where investments need to be restarted, for 
example  to  support  urban  regeneration  projects  in 
the  neighbourhoods  most  affected  by  the  crisis. 
Access to finance remains highly limited for small 
and  medium-sized  enterprises  (SMEs),  causing 
liquidity  problems  and  constraining  investments 
(European  Commission, 
(see  Section  3.2.3) 
2018e).  Public  investments  also  decreased  and 
hence  did  not  compensate  for  the  decrease  in 
private  investments.  Public  investment  is  also 
hampered  by  lack  of  prioritisation  and  poor 
complementarity  with 
the  private  sector.  In 
addition,  the  rate  of  foreign  direct  investments  is 
the lowest in the EU, although it has slowly picked 
up  in  recent  years  mostly  thanks  to  the  ongoing 
privatisation programme. 

to 

is  key 

Privatisation  contributes  to  the  public  budget, 
and 
stimulating  new  private 
investment  and  increasing  economic  efficiency. 
For example, private sector involvement in Piraeus 
port  has  quadrupled  freight  traffic  since  2009  and 
will  result  in  new  investment  totalling  EUR  290 
million  by  2020.  In  addition,  the  regional  airports 
concession to Fraport is expected to result in some 
EUR 400 million  in  new  investments  by  2021, 
which  will  substantially  increase  airport  capacity 
in  Thessaloniki  and  in  the  Aegean  islands.  An 
impact assessment by the Foundation for Industrial 
and Economic Research (IOBE, 2016a and 2016b) 
recent  privatisation  of 
estimates 

that 

the 

44 

0500100015002000250030003500Average2004-2014201520162017EUR mnPrimary sectorsManufacturingEnergyConstructionLogisticsAccomodation and foodFinance and insuranceRest of services 
 
3.4. Competitveness reforms and investment 

reindustrialisation  of 

has  the  potential  to  stimulate  a  sustainable  and 
organised 
the  country. 
However,  it  is  important  to  pass  the  relevant 
secondary  legislation  for  the  rationalisation  of 
nuisance 
ensure 
implementation based on a clear action plan and an 
inclusive consultation process. 

categories 

swiftly, 

to 

As  regards  export  performance,  the  efforts 
undertaken  to  regain  external  competitiveness 
by  internal  devaluation  seem  to  be  paying  off, 
resulting  in  strong  exports  in  2017  and  2018. 
Export  growth  is  not  only  robust  in  general,  but 
also  broad-based  and  balanced  in  geographic  and 
sectoral  terms,  and  is  therefore  resilient  to  future 
external  shocks.  However,  Greece  was  starting 
from  a  low  base  and  compared  to  the  rest  of  the 
EU,  its  exports  are  directed  towards  primary 
products  and  goods  with  low  value  added  and  a 
low innovation component. Greece is also the least 
open  country  in  the  EU  in  terms  of  investments 
and trade flows, which is even more striking given 
its small size and favourable geographic position.  

Tourism  is  a  key  contributor  to  exports  and  a 
vital  driver  for  the  Greek  economy.  In  2017,  it 
directly  accounted  for  10.3 %  of  GDP,  while  the 
sum  of  its  direct  and  indirect  contribution  is 
estimated at between 22.6 and 27.3 % of GDP. In 
2005-2017, the number of tourist arrivals grew by 
89 % – up to 27.2 million in 2017, while overnight 
stays  rose  by  36.8 %,  to  209.8  million  in  2017. 
increased  by 
Overall, 
32.4 %,  to  EUR  14.2  billion  in  2017  (INSETE, 
2018). 

subsequently 

revenue 

attainable, 

considering 
cost 

In 
the 
its  National  Growth  Strategy, 
government set an ambitious target for exports, 
namely  50 %  of  GDP.  This  target  is  ambitious, 
yet 
recent 
improvements 
competitiveness, 
and 
privatisations, 
business  environment  legislation  (35).,  A  series  of 
roadmaps  have  been  prepared  to  promote  export 
and  streamline  export  procedures.  Yet,  they  are 
still  complex  to  navigate  for  most  firms,  which  is 
and 
discouraging 

infrastructures 

exporting 

logistics 

them 

from 

the 

in 

(35)  Following  the  Council  Recommendation  2016/C  349/01, 
Greece  is  in  the  process  of  appointing  the  Centre  of 
Planning  and  Economic  Research  (KEPE)  as  National 
Productivity Board. 

productivity  growth  and  the  lack  of  digital  skills 
among 
hinders 
employability  and  the  development  of  innovative 
businesses. 

population 

large 

the 

at 

Start-ups  and  scale-ups  can  play  a  pivotal  role 
in  Greece’s  economic  recovery,  but  their  full 
potential is still untapped. Greece presents some 
key conditions for start-up activity and investment, 
including a favourable geographical location and a 
high number of graduates. Yet Greece continues to 
perform  below 
the  EU  average  on  most 
entrepreneurship indicators, including education to 
entrepreneurship, media attention and the share of 
high  growth  businesses.  In  2017  and  the  first 
quarter of 2018, several significant measures were 
adopted to support innovation. These included tax 
exemptions for innovative companies; a regulatory 
framework  for  mediation  principle  in  civil  and 
commercial  cases; 
stronger  enforcement  of 
intellectual property rights; and a licensing system 
for  essential  patents  though  the  operation  of  the 
Industrial Property Organisation. 

The  lack  of  sufficient  intangible  investments 
contributes  negatively  to  Greek  productivity 
growth.  The  reduction  in  the  stock  of  intangible 
capital  stems  from  low  investment  rates  in  R&D 
and  other  intangibles  as  recorded  in  national 
accounting  and  from  economic  competencies  and 
intangibles  not  captured  in  national  accounts  (34). 
Greece 
to 
increase  productivity  if  it  implements  policies  to 
identify  and  remove 
investment  barriers  for 
different types of intangibles. 

therefore  has  a  good  opportunity 

The swift completion of the cadastre and forest 
maps financially supported by EU funds should 
increase  legal  certainty  and  simplify  licensing 
procedures,  stimulating  investments  in  sectors 
such  as  tourism,  manufacturing,  aquaculture 
and  mineral  and  natural  resources.  The 
government  has  developed  a  road  map  for  fully 
completing  these  projects  by  mid-2021  and  is 
implementing  law  4447/2016  on  spatial  planning. 
the  streamlining  of  nuisance 
Together  with 
categories 
land  use  and  environmental 
for 
classifications, legislated in July 2018, this reform 

(34)  Analysis  by  DG  Joint  Research  Centre  –  Knowledge  for 
Finance, Innovation and Growth Unit  – based on INTAN-
INVEST data (http://www.intan-invest.net/)  

45 

 
                                                           
 
                                                           
3.4. Competitveness reforms and investment 

weaknesses  and  some  of 
the  most  pressing 
challenges  in  the  research  and  innovation  system. 
Various  co-financed  projects  have  recently  been 
set  up  to  boost  research  and  innovation  activities, 
such  as  the  Research-Create-Innovate  initiative 
with an allocated budget of EUR 543 million. For 
instance, the set-up of an equity fund supported by 
EU  funds  has  been  set  up  to  inject  liquidity  in 
start-ups and innovative businesses. 

Research  and  innovation  strategies  for  'smart 
specialisation'  have  been  developed  at  national 
and  regional  levels  in  line  with  international 
practice. These have led to the identification of 
key  growth  sectors  such  as  agro-food,  tourism, 
health, 
communication 
technology,  energy  and  sustainable  development, 
transport  and  logistics.  However,  the  national 
priority  areas  have  not  yet  benefited  from  smart 
specialisation strategies with concrete time-limited 
deliverables aimed at stimulating new investments. 

information 

and 

Digital economy 

to  operate 

The  digital 
the  Greek 
transformation  of 
economy  and  society  remains  one  of  the  most 
challenging  areas.  Effective  investment  in  fast 
and  ultrafast  broadband  is  urgently  needed  for 
Greece 
a  global  business 
in 
environment.  Currently,  Greece  lags  considerably 
behind  the  targets  set  in  the  national  digital 
strategy  adopted  by  the  government  in  2016. 
Broadband  access  at  home  and  internet  use  are 
well below the level of the rest of the EU, with the 
only positive exception of the region of Attica.  

A  stable  regulatory  and  legislative  framework 
must    be  put  in  place,  and  barriers  to  entry 
must  be  eliminated  to  create  conditions  for 
lower  prices.  Support  measures  to  boost  demand 
from small and medium enterprises and the general 
public  may  also  be  needed.  Further  efforts  are 
needed  to  encourage  the  use  of  e-commerce  by 
small  and  medium  enterprises.  EU  funds  cover 
market  failures  to  close  the  connectivity  gap 
between urban areas and rural, sparsely populated, 
island, mountainous and remote areas.  

participating  in  international  supply  chains,  from 
which Greece is virtually absent. 

Research and development 

The  economic  crisis  had  a  limited  impact  on 
research  and  development  (R&D)  expenditure, 
but  the  overall  levels  remain  low,  negatively 
affecting  Greece's  growth  potential.  Investment 
in R&D has increased in nominal terms from EUR 
1.6  billion  in  2008  to  EUR  2  billion  in  2017. 
However,  it  remains  low  compared  with  other 
countries (1.1 % of GDP against the EU average of 
2.1 % of GDP). The business sector is for the first 
time the largest R&D investor in Greece, followed 
by  the  higher  education  and  the  public  sector 
(Amanatidou et al., 2018).  

increase 

the  recent  significant 

Despite 
in 
business R&D, in 2017 it was still well below the 
EU  average  (0.6 %  of  GDP  vs  1.4 %).  The 
science-business 
remain  weak  as 
links  also 
evidenced  by  the  drop  in  the  number  of  public-
private scientific co-publications as a proportion of 
In  addition,  overall 
total  publications 
technological  development  remains  low  as  also 
reflected  in  the  very  low  number  of  patents 
compared  with  other  countries  (37).  Therefore, 
investments are necessary in the short and medium 
term to tackle these problems. 

(36). 

The Public Research and Innovation system has 
benefited  from  stable  levels  of  funding  in  the 
past  decade.  However,  the  low  level  of  public 
R&D  intensity  (38)  coupled  with  the  absence  of  a 
performance-based  funding  system,  has  a  further 
negative impact on already relatively low levels of 
scientific  excellence  (39).  The  government 
is 
adopting  a  series  of  measures  to  tackle  persistent 

(36)  Compound Annual Growth Rate 2010-2017: -4.8 %. 
(37)  11 PCT patents per population in 2014 vs. EU average  of 

102. 

(38)  0.6 % of GDP in comparison with the EU average of 0.7 % 

in 2017. 

(39)  8.6 %  of  highly  cited  publications  in  comparison  with  the 

EU average of 11.1 % in 2017 

46 

 
 
                                                           
3.4. Competitveness reforms and investment 

Box 3.4.1: Investment challenges and reforms in Greece 

Macroeconomic perspective 

The investment rate in Greece reached 12.9 % of GDP in 2017, still significantly lower than the EU average 
investment rate of around 21 % of GDP. This will amount to an investment gap compared to pre-crisis of 
slightly  more  than  EUR  15  billion  per  annum.  Eurobarometer  surveys  show  that  many  factors  hinder 
investments, including a lack of demand, administrative barriers, slow justice system, access to finance and 
high  tax  rates.  Given  the  insufficient  level  of  domestic  savings  and  the  on-going  deleveraging  in  the 
financial  sector,  external  financing  will  be  needed  for  further  investments.  Public  investments  have  been 
excessively focussed on transport infrastructures. A key challenge is the need to develop complementarities 
between public and private investments. 

Assessment of barriers to investment and ongoing reforms 

In  addition  to  macroeconomic  constraints,  the  overall  business  environment  in  Greece  does  not  appear  to 
facilitate  investments,  notably  due  to  high  corporate  tax  rates,  difficult  access  to  finance,  weak 
administrative capacity and contract enforcement as well as regulatory barriers. A National Growth Strategy 
and specific action plans have been drafted to reduce the administrative burden and improve the licensing 
framework,  but  implementation  challenges  persist. Privatisation can  significantly  contribute  to  attract  new 
investment and management expertise.  

Main barriers to investment and priority actions underway 

1. 

 Securing macroeconomic, fiscal and financial sector stability is crucial for the recovery of investment. 
Continued fiscal stability, tackling non-performing loans, strengthening the domestic capital market, and 
reducing corporate tax rates are crucial to restart private sector investment. 

2.  The  continuation  and  completion  of  on-going  microeconomic  reforms  to  improve  the  business 
environment,  public  administration,  and  the  justice  system  are  crucial  to  provide  the  right  framework 
conditions for firms to scale up and invest. That includes the peripheral public entities involved in the 
investment licensing and inspection activities.  

3.  Continued  progress  on  privatisation  and  long-term  concession  agreements  are  key  to  attract  new 
investment  and  create  new  jobs  in  major  investment  projects.  Improving  the  governance  of  public 
investment  and  strengthening  its  complementarity  with  private  investments,  especially  providing 
essential  infrastructure,  encouraging  small  and  medium  sized  enterprises’    investments,  and  promoting 
skills-development are crucial to support this process and achieve social integration.  

Key  public  and  private  sector  sectoral  investment  priorities  include  transport  and  logistics,  sustainable 
regeneration  of  urban  and  most  disadvantaged  and  deprived  areas,  energy  efficiency  and  infrastructures, 
environmental protection, digital technologies, employment, skills, education and training, social inclusion 
and integration, health, and research and innovation, mainly through the development of smart specialisation 
strategies in sectors such as agro-food and tourism. 

The  Greek  authorities  are  currently  working  on  a  feasibility  study  for  the  setup  of  the  new  Hellenic 
Development  Bank  (HDB).  The  feasibility  study  will  design  the  implementation  process  from  the 
development bank's scope until its implementation roadmap (including among others identifying the scope, 
governance, legal framework, and strategic and business plans as per the best international standards). The 
development  bank  is  envisaged  to  support  enterprises  and  to  promote  the  economy  and  the  business 
environment  by  supporting  small  and  medium-sized  enterprises,  fostering  innovation,  facilitating 
investments in infrastructure and encouraging equity investments and other alternative financing sources.  

Improving  digital  skills  and  increasing  the 
proportion  of  information  and  communication 
technologies  employment  remains  a  challenge. 

Improving  digital  skills  among  young  adults  is 
crucial  given 
the  digital 
transformation  of  the  economy  and  society.  In 

the  urgency  of 

47 

 
3.4. Competitveness reforms and investment 

2017, 54 % of Greeks aged 16-74 did not  have at 
least basic digital skills, putting Greece well below 
the EU average. The proportion of information and 
communication  technology  (ICT)  specialists  in 
total  employment  also  remains  very  low  (1.4 %) 
with  a  significant  gender  gap  (40).  In  schools, 
digital education is not sufficiently  integrated into 
curricula, and infrastructure appears insufficient. 

and  large  firms)  also  play  an  important  role 
(OECD, 2017).  

Graph 3.4.3:  Structural and demographic business statistics 

Employment and productivity according to 
company size 

The National Growth Strategy launched in July 
2018  addresses  some  of  the  key  challenges 
identified to reap the benefits of an increasingly 
digitised  society  and  global  economy.  The 
national  digital  strategy  adopted  in  2016  already 
envisaged  investments  in  all  categories  of  the 
digital  economy.  It  will  require  additional  efforts 
to  effectively  implement  it  at  all  levels  of  public 
administration and extend its effects to individuals. 
The  agreed  roadmap  and  new  framework  for 
creating 
communication 
technologies  projects  should  mark  a  new  era  for 
digital  governance.  Reforms  undertaken  with  EU 
funds  (e-government,  e-justice,  and  e-health) 
should be completed. Online digital public services 
to  citizens  and  the  business  community,  digital 
document  management 
remote  digital 
signature and e-commerce, need further expansion. 
Additional efforts are needed to encourage the use 
of  e-commerce  by  small  and  medium-sized 
enterprises. 

information 

and 

and 

3.4.2.  (SINGLE) MARKET INTEGRATION* (41) 

Greece's  growth  potential  has  been  hampered 
by its peculiar economic structure. Greek labour 
productivity  per  hour  worked  in  2017  was  just 
64.4 % of the EU average. Part of the lag with the 
rest of the EU is due to a less favourable  sectoral 
specialisation  of  the  economy  (with  more  than 
10 %  of  the  workforce  employed  in  primary 
sectors  in  Greece  against  less  than  5 %  in  the 
EU28).  Firm  size  distribution  (with  60 %  of  total 
Greek  employment  in  micro  firms  of  up  to  10 
employees)  and  the  efficiency  differentials  across 
firms  (micro  firms  of  less  than  nine  employees 
being 70 % less productive in Greece than medium 

(40)  In  Greece,  only  12.7 %  of  persons  employed  with  ICT 

specialists skills are women 

(41)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 3 for an overall summary of main findings). 

*Labour productivity: Value added per person employed, 
index 250+=100, 2014. 
Employment: Percentage of total business economy 
employment. 
Source: OECD, "Entrepreneurship at glance 2017" 

to 

the 

competition, 

Thanks to its broad structural reforms, Greece 
has  managed  to  improve  its  'doing  business' 
indicators  since  the  beginning  of  the  crisis. 
However, this builds on a weak starting point and 
therefore  stronger  efforts  are  needed  to  keep  up 
with  competitors.  Since  2010,  Greece  has 
undertaken  an  extensive  legislative  reform  to 
rationalise 
reduce  barriers 
administrative  procedures  to  start  a  business  and 
streamline 
legal  framework  of  regulated 
professions.  Yet,  it  is  still  far  from  global  best 
practices. In the latest World Bank Doing Business 
report (World Bank, 2018a), Greece ranked 72 out 
of 190 economies in 'ease of doing business'. This 
is  a  significant  improvement  on  2009,  when  it 
ranked  109th,  but  it  is  still  far  from  its  peak 
performance  in  2015,  when  it  ranked  58th.  The 
most  problematic 
registering 
areas 
property, enforcing contracts and  accessing credit. 
Sector-specific  product  market 
reforms  have 
progressed but public administration inefficiencies 
and red tape continue to be an obstacle for firms to 
grow. 

include 

48 

02550751001-9 persons10-19persons20-49persons50-249persons250 personsor more*Labour productivity (manufacturing andservices)Employment (business economy) 
                                                           
 
3.4. Competitveness reforms and investment 

Graph 3.4.4:  Ease of doing business 2018 

Graph 3.4.5:  Components of the "Ease of doing business 

2018" for Greece 

Source: World Bank Group, "Doing Business Report 2019" 

in  2015 

One area where progress has been more visible 
is  the  procedure  to  establish  and  register  new 
and  2016 
companies.  Reforms 
substantially  lowered  the  cost  of  setting  up  a 
company.  In  addition,  the  procedures  to  register 
new companies have been simplified and digitised 
through  electronic  one-stop  shops.  The  general 
and 
investment 
framework 
inspections  and  controls  was  also  updated  and 
simplified  recently,  moving  from  a  system  of  ex-
ante authorisations to a system of notification and 
ex-post controls.  

licensing 

for 

economy. 

collaborative 

There appears to be strong growth potential in 
the 
However, 
government  policies  have  not  been  clearly 
supportive  of 
that  area.  Recent  national 
regulations  introduced  restrictive  requirements  on 
platforms  intermediating  transport  services.  While 
enabling legislation is still to be passed, it remains 
unclear  how  restrictively  the  law  would  apply  to 
pure  intermediation  services.  There  also  remains 
scope  to  improve  digital  public  services  (see 
Section 3.4.4). 

The score measures the distance from the best global 
performer (the higher the better, max = 100) 
Source: World Bank Group, "Doing Business Report 2019" 

three 

assessment 

competition 

Many measures have been introduced to reduce 
unjustified  restrictions  to  regulated  professions 
and barriers to entry. These reforms were based 
on 
reviews 
conducted  between  2013  and  2016  by  the  OECD 
and  the  Hellenic  Competition  Commission  to 
improve the overall regulatory framework. Most of 
the  773  recommendations  in  14  economic  sectors 
to  reduce  entry  barriers  and  increase  competition 
have  been  legislated  and  are  being  implemented. 
Notwithstanding recent reforms, Greece still needs 
to develop an integrated and transparent process to 
assess  the  proportionality,  appropriateness  and 
necessity  of  professional  regulations,  taking  into 
account  the  cumulative  effects  of  their  multiple 
requirements. Greece still has relatively high entry 
barriers 
important 
professions  such  as  lawyers  and  civil  engineers 
(42),  compared  with  the  EU  and  the  OECD 
average.  Ongoing  reforms  aim  to  ease  entry  to 
some  regulated  professions,  but  transparency  in 
preparatory  steps  needs  to  improve  in  order  to 
make  regulatory  proposals  more  objective,  fit  for 
purpose and streamlined. 

several  economically 

for 

Improvements in the business environment and 
administrative 
increase 
trust,  which  was  harmed  by 
consumer 

practices 

should 

(42)  Communication on reform recommendations for regulation 
in  professional  services  COM(2016)  820  final  and 
SWD(2016) 436 final. 

49 

0102030405060708090DenmarkUnited KingdomSwedenLithuaniaEstoniaFinlandLatviaIrelandGermanyAustriaSpainFrancePolandPortugalCzech RepublicNetherlandsSloveniaSlovak RepublicBelgiumItalyRomaniaHungaryCyprusCroatiaBulgariaLuxembourgGreeceMaltaglobal rank0204060801001201401601802000102030405060708090100ScoreGlobal rank (rhs.) 
 
 
 
                                                           
3.4. Competitveness reforms and investment 

widespread  unfair  commercial  practices.  The 
proportion  of  consumers  experiencing  unfair 
commercial  practices  (36 %)  and  other  illicit 
practices  (21 %)  by  domestic  retailers  increased 
(43) and has become the highest and second highest 
in  the  EU  respectively.  In  addition,  a  sizeable 
proportion  of  consumers  (44)  choose  not  to  file  a 
complaint  when  they  experience  problems.  This 
could  be 
low  and  decreasing 
the 
knowledge  of  consumer  rights  (at  25 %,  Greece 
has one of the lowest rates in the EU), and to the 
low  participation  of  Greek  retailers  in  Alternative 
Dispute  Resolution  mechanisms  (21 %),  which 
remains well below the EU average. 

linked 

to 

The  remainder  of  this  section  will  focus  on 
industries, 
selected  key  sectors  of  network 
agriculture and environment. 

Energy 

(PPC) 

relatively 

structure, 

The Greek energy market is characterised by a 
concentrated 
high 
wholesale  prices  and  a  reliance  on  fossil  fuels, 
particularly lignite for electricity generation, as 
well  as  imported  oil  and  gas.  The  incumbent 
Public  Power  Corporation 
remains 
responsible  for  the  majority  of  generation  and 
supply.  Prices  were  liberalised  in  July  2013  and 
only  social  tariffs  for  those  in  need  are  still  in 
place,  though  market  distortions  keep  the  link 
between wholesale and retail electricity weak. This 
the  competitiveness  of  the 
negatively  affects 
economy,  the  climate  and  local  environment.  It 
also places the financial burden on consumers (45), 
which, combined with the poor economic situation 
of  Greece  and  the  related  low  level  of  household 
incomes,  has  resulted  in  an  increase  of  energy 
poverty. Greece  has  started to carry out a number 
of  key  reforms  moving  towards  a  more  modern 
market  model,  but 
the  correct  and  prompt 
completion  of  these  urgently  needed  reforms  will 
be crucial.  

(43)  Since  2016,  there  has  been  an  increase  by  3  and  9 
percentage  points  respectively  (European  Commission, 
forthcoming).  

(44)  41.5 % of those who experience problems do not complain 
(highest  percentage  in  the  EU)  (European  Commission, 
forthcoming). 

(45)  Greek  consumers  have  assessed  the  market  for  electricity 
services in the last position out of all 25 services markets in 
Greece,  with  no  improvement  since  2016  (European 
Commission, forthcoming). 

as 

such 

the  NOME 

Competition  levels  in  the  electricity  market 
remain  low.  Although  competition  has  increased 
in  recent  years,  the  public  corporation  (PPC)  still 
holds an 80 % share of the retail market as of June 
2018  (down  from  89.9 %  in  January  2017). 
Measures 
(Nouvelle 
Organisation  du  Marché  de  l'Electricité)  auctions 
help  alternative  suppliers  to  increase  their  market 
share.  Supplier  switching  in  the  market  is  still 
rather limited in Greece, indicating that consumers 
may  not  be 
the  benefits  of 
liberalisation.  Smart  meters  will  aid  consumers’ 
increased  engagement  in  the  market.  They  enable 
them  to  participate  in  and  benefit  from  energy 
efficiency, 
response/flexibility 
demand 
schemes.  However,  no  date  has  been  set  for  their 
large-scale  deployment,  and  current  plans  involve 
only  pilot 
installations.  Regarding  gas,  since 
January 2018 all customers have the right to switch 
suppliers.   

reaping 

fully 

and 

One  major  concern  to  be  addressed  in  the 
electricity  market  is  the  issue  of  arrears.  Many 
customers  of  the  public  power  corporation  are 
their  payment  obligations  and 
behind  on 
collection,  and  improving  is  still  slow.  This  issue 
puts a strain on the public power company (PPC’s) 
overall 
its 
investment.  

financial  situation  and  hampers 

The  implementation  of  the  Target  Model  is 
advancing,  although  with  delays.  Greece  is 
aiming  to  couple  with  the  Italian  and  Bulgarian 
markets  by  2019.  Ensuring  that  the  component 
markets  (forward,  day  ahead, 
intra-day  and 
balancing) are compliant with the network codes is 
critical  to  allow  effective  coupling  with  regional 
markets.   

for 

electricity, 

While  mainland  Greece  has  a  high  level  of 
interconnection 
additional 
investments are needed. In particular, to complete 
the  interconnections  with  the  Cyclades  islands, 
already  financed  from  EU  funds  and  to  create 
interconnections  with  Crete.  The  public  service 
obligation to equalise prices on islands with those 
in the mainland costs more than 0.3 % of GDP per 
year, funded  mainly by consumer  fees. The effect 
of interconnecting the islands and mainland into a 
system  based  on  the  Target  Model,  coupled  with 
regional  markets  could  allow  for  better  uptake  of 
renewable energy, the discontinuation of polluting 
and  inefficient  diesel-based  generation  on  islands 

50 

 
                                                           
3.4. Competitveness reforms and investment 

(which  is  currently  needed  as  baseline  load  for 
those  non-interconnected  islands),  and  also  more 
responsive pricing, thus encouraging investment.  

installation  of  renewable  energy  sources  and 
energy-saving measures. 

The  privatisations  in  the  energy  sector  are 
advancing. Greece has completed the sale of 66 % 
of 
the  gas  Transmissions  System  Operator 
(DESFA)  to  private  investors.  The  restructuring 
and  privatisation  of  the  gas  incumbent  (DEPA)  is 
on track, with the tender for its commercial part to 
be  launched  shortly.  By  contrast,  the  tender 
process to sell three of Public Power Corporation’s 
lignite  plants  has  not  been  finalized  and  the 
divesture  is  still  ongoing.  These  privatisations  are 
much needed, as they constitute an important step 
to increase competition in the energy markets, and 
are expected to attract investment.  

for  deploying  energy 

The  potential 
from 
renewable  energy  sources  (RES)  is  very  high 
across  all  sectors.  After  a  period  of  rapid 
deployment fostered by a generous support scheme 
introduced  in  2014,  investments  in  renewables 
slowed following changes to the scheme. With the 
establishment of the new renewable energy sources 
support scheme, and the focus under the European 
Stability  Mechanism  programme  on  keeping  its 
special  account 
framework 
conditions  for  new  investments  in  the  Greek 
renewable energy sources sector have considerably 
improved.  Moreover, 
the  domestic  renewable 
energy  sources  sector  has  responded  positively  to 
regulatory 
the 
environment. This allowed the authorities to phase 
out  the  supplier  surcharge  sooner  than  initially 
planned.  

establishment  of 

this  new 

surplus, 

the 

in 

in  Greece 

consumption 

slightly 
Energy 
increased  in  2016,  putting  the  achievement  of 
the 2020 energy efficiency target at risk. On the 
requirement for achieving new savings of 1.5 % of 
the  annual  energy  sales  to  final  customers  under 
Article  7  of  the  Energy  Efficiency  Directive, 
reported  cumulative  savings  for  2014-2016  were 
less  than  55 %  of  the  estimated  amount.  Greece 
should make additional efforts to help meet the EU 
energy  efficiency  target.  An  energy  efficiency 
programme  co-funded  by  the  EU  ('Energy  Saving 
at Home’ – 'Εξοικονόμηση Κατ' Οίκον ΙΙ') was re-
initiated in 2018. The programme aims to improve 
the energy performance of residential buildings by 
providing  interest-free  loans  and  subsidies  for  the 

infrastructure 

projects  with 

Greece has huge potential to become a regional 
energy  hub,  both  for  gas  and  electricity, 
however,  this  requires  the  development  of 
major 
its 
neighbouring  countries.  The  gas  Interconnector 
with  Bulgaria  (IGB)  will  connect  the  region’s 
markets  to  additional  sources  of  gas,  notably 
Caspian  gas  through  the  soon-to-be  operational 
Trans-Adriatic  Pipeline  (TAP).  At  the  same  time, 
key  electricity  projects,  which  may  develop  as 
Projects  of  Common  Interest  (PCIs),  such  as  a 
Bulgaria-Greece  power  interconnection  and  the 
EuroAsia Interconnector will address major energy 
issues,  such  as  low  interconnectivity  levels  and 
Cyprus’ energy isolation while also contributing to 
further  renewable  energy  sources 
integration. 
Other  relevant  common  projects  are  the  Eastern 
Mediterranean  Natural  Gas  Pipeline,  the  liquefied 
natural gas (LNG) terminal in Alexandroupolis and 
the hydro-pumped storage in Amfilochia. It should 
be  noted  that  these  projects  of  a  common  interest 
are eligible to apply for (or have already received) 
grants for studies or works through the Connecting 
Europe  Facility  Program.  In  its  National  Energy 
and  Climate  Plan  to  be  adopted  by  31  December 
the 
2019, 
Governance  of  the  Energy  Union  and  Climate 
Action (46), Greece will provide an overview of its 
investment  needs  until  2030  for  the  different 
dimensions  of  the  Energy  Union.  This  includes 
renewable  energy,  energy  efficiency,  security  of 
supply, and climate mitigation and adaptation. The 
information  provided,  including  in  the  draft  plan 
submitted  on  25  January  2019,  will  further 
contribute  to  the  identification  and  assessment  of 
energy  and  climate-related  investment  needs  for 
Greece. 

the  Regulation  on 

line  with 

in 

(46)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
and  of  the  Council  of  11  December  2018  on  the 
Governance  of  the  Energy  Union  and  Climate  Action, 
amending  Regulations  (EC)  No  663/2009  and  (EC)  No 
715/2009  of  the  European  Parliament  and  of  the  Council, 
Directives  94/22/EC,  98/70/EC,  2009/31/EC,  2009/73/EC, 
2010/31/EU, 2012/27/EU and 2013/30/EU of the European 
Parliament  and  of 
the  Council,  Council  Directives 
2009/119/EC and (EU) 2015/652 and repealing Regulation 
(EU)  No  525/2013  of  the  European Parliament and  of  the 
Council (Text with EEA relevance.) 

51 

 
                                                           
3.4. Competitveness reforms and investment 

conditions for socially inclusive growth and urban 
regeneration.  

In  the  rail  sector,  the  share  of  freight  in  rail 
transport  remains  low  due  to  the  sparse  rail 
network,  the  non-developed  market  and  the 
missing links with the  main seaports. Similarly, 
the share of rail passengers in land transport is one 
of  the  lowest  in  the  EU.  The  low  capacity  of  the 
railway  lines  imposes  an  additional  limitation  on 
the  number  of  high-speed  trains  that  can  operate. 
Despite the sizeable investment from the EU funds 
in  the  modernisation  of  railway  infrastructures,  in 
excess of EUR 3 billion over the last 20 years, the 
country’s  principal  railway  axis  Patras-Athens-
Thessalonica  remains  uncompleted.  This  hampers 
the  multimodality  of  the  transport  system,  and 
impacts negatively mobility and transport costs for 
goods  and  people,  and  ultimately  on  Greece's 
position  in  international  trade.  The  electrification 
of the Piraeus-Thessalonica section of the railway 
line,  the  implementation  of  the  logistics  strategy 
and 
the  operation  of  Thriasio  Pedio  freight 
complex  are  enabling  conditions  for  developing 
rail freight transport and major new investments.  

in 

the 

transport 

Increasing trade between Europe, the Far  East 
and  Africa  strongly  favours  the  growth  of 
Eastern 
maritime 
Mediterranean  and  the  Aegean  Sea,  where 
Greece  could  exploit  competitive  advantages 
implied  by 
its  geographical  position.  As 
demonstrated by considerable foreign investments, 
Piraeus  and  Thessaloniki  have  the  potential  to 
evolve into gateway ports to Southeast and Central 
Europe, 
railway 
connections  are  established  and  that  the  country’s 
seaports  system  is  further  developed  to  improve 
the competitiveness of the domestic economy.  

long  distance 

reliable 

if 

In the road sector, Greece has one of the highest 
road  fatality  rates  in  the  EU.  The  situation  of 
vulnerable  road  users  is  of  special  concern,  in 
the  high  number  of  motorcyclists. 
particular 
Effectiveness  of 
is 
low.  Seat-belt  and  helmet 
assessed  as  quite 
wearing  rates  are  lower  than  the  EU  average. 
Greece  needs  to  step  up  its  efforts  to  enforce  the 
rules  on  driving  and  resting  times  of  drivers  and 
the use of tachographs in vehicles. 

law  enforcement 

traffic 

A  Strategic  Transport  Master  Plan  for  Greece 
rail, 
transport  modes 
covering  all 

(road, 

Swiftly  continuing  to  carry  out  the  agreed 
reforms will ensure that the growth potential of 
the  energy  sector  is  unlocked.  There  reforms 
introducing  of  more  efficient  and 
include 
environment friendly technologies for lignite-fired 
power plants and developing innovative renewable 
energy sources technologies in non-interconnected 
islands. These reforms would also allow Greece to 
take  full advantage of its comparative advantages, 
such  as  its  sizeable  renewable  energy  sources 
potential  and  its  strategic  geographic  location, 
particularly 
terms  of  current  and  future 
interconnection networks. This is expected to have 
a  positive  effect  on  all  sectors  through  reduced 
production costs.  

in 

Transport and Logistics 

The  Greek  transport  system  is  largely  road-
based  with  all  main  connections  rotating 
around the Athens – Thessalonica axis. Previous 
investments financed by the EU funds have created 
an  extensive  2200  km  long  motorway  network 
linked to some excellent assets: the Port of Piraeus 
and Athens International Airport, and contributing 
to  Greece's  growth  and  competitiveness 
in 
international markets. However, transport costs are 
still  higher  than  in  competing  countries  such  as 
Turkey,  Bulgaria,  Romania,  or  in  big  economies 
like  Germany,  France  and  Italy  (World  Bank, 
2018b). With an ageing fleet of private cars, lorries 
and public buses, the  Greek transport sector lacks 
low  on  carbon 
competitiveness  and  scores 
emissions, road safety and service quality. Finally, 
the  penetration  of  intelligent  transport  systems  is 
poor,  reflecting  the  generally  low  scores  for 
Greece  in  the  digital  economy.  A  structural  shift 
from  the  current  practices  is  needed  to  achieve  a 
gradual decarbonisation of the Greek economy. 

New  investments  need  to  emphasise  alternative 
modes  of  transport  and  promote  regional  and 
urban  development.  The  privatisation  of  14 
regional  airports  is  expected  to  support  tourism 
development.  The  privatisation  of  the  Port  of 
Thessaloniki  creates  the  opportunity  for  Northern 
Greece  to  become  a  major  logistics  and  industrial 
hub, serving neighbouring countries. This requires 
close  coordination  of  new  port  investments  with 
other public  sector investment schemes (e.g. local 
road access) and the modernisation of cross-border 
rail  linkages.  Supportive  planning  policies  and 
the 
investment 

in  human  capital  can  create 

52 

 
3.4. Competitveness reforms and investment 

examination  of 
the  current  difficulties  and 
possibilities has led to the conclusion that the  key 
strategic  objective  for  the  agro-food  sector  is  to 
focus  on  gradually  shifting  the  production  model 
towards  quality  products  and  products  with  an 
identity, whose prices are higher and where Greek 
products can compete favourably.  

Against this background, the Greek authorities 
have  produced  a  comprehensive  Agriculture 
and  Rural  Development  strategy  that  was 
updated  in  2017.  The  strategy  had  fed  into  the 
National Growth Strategy. The challenge now is its 
implementation.  

Environment 

Environmental  legislation  in  Greece  suffers 
from 
low  quality  non-codified  regulations, 
incomplete  implementation,  delays  and  limited 
efforts to make information available to citizens 
and  investors  (WWF,  2018).  There  is  a  genuine 
(citizens,  public 
difficulty 
administration  and  prospective 
to 
investors) 
navigate  through  the  Greek  corpus  of  legislation 
and  administrative  decisions  and 
impact 
investments. 

the  public 

this 

for 

in 

The management of solid waste continues to be 
a  major  structural  challenge.  Greece  still  relies 
heavily  on  landfilling  (82 %  compared  to  an 
average  24 % 
the  EU)  and  mechanical-
biological  treatment  as  opposed  to  more  modern 
techniques. It runs a high risk of not being able to 
meet  the  revised  EU  prevention  and  recycling 
targets (50 % by 2020), as only 17 % of municipal 
waste  is  currently  recycled  against  an  average 
46 % in the EU (European Commission, 2018f). In 
spite of improvement in recent years, there are still 
some illegal landfills in operation, resulting in two 
costly infringement procedures for non-compliance 
with  EU  law  on  illegal  landfills  and  hazardous 
waste  management.  Approximately EUR 1 billion 
of  EU  Funds  is  available  to  effectively  tackle  the 
waste management.  

Progress has been made regarding the legal and 
institutional  steps  taken  to 
increase  waste 
recycling  and  the  expansion  of  Extended 
Producer’s  Responsibility  (EPR)  schemes.  The 
strategic framework for waste management is now 
in  place,  with  the  adoption  of  the  national  and 
regional  Waste  Management  Plans.  However,  the 

maritime, air, and multi-modal, including logistics) 
and with a time horizon of 2017-2037 is currently 
under elaboration by the services of the competent 
Greek  ministries.  This  Master  Plan  will  help 
identify  and  prioritise 
investments  and  soft 
measures necessary to improve the performance of 
the  Greek  Transport 
Investments 
considered for the future priorities could be: (i) the 
completion  of 
the  rail 
network,  (ii)  increased  multi-modality  for  freight 
transport  by  improving  rail  connections  to  Trans-
European  Networks  ports,  (iii)  logistics  platforms 
and  industrial  zones,  (iv)  road  safety  investments, 
and (v) redesign of the coastal shipping network to 
create regional nodes that will allow faster transfer 
to smaller ports and islands across the Aegean sea. 

the  modernisation  of 

system. 

Agriculture and Rural Development 

Agriculture  in  Greece  is  based  on  small-sized, 
family-owned  dispersed  units,  while  the  extent 
of  cooperative  organisation  stays  at 
low 
comparative  levels,  in  spite  of  all  efforts  that 
have  been  made  in  this  direction  over  the  last 
thirty years. The small size offers opportunities to 
develop  variety  and  product  differentiation  and  in 
some  mountainous  regions,  it  is  the  only  feasible 
structure.  Greek  agriculture  employs  about 
500,000  farmers,  corresponding  to  12 %  of  the 
total  labour  force.  The  Greek  agricultural  sector 
ranks  ninth  among  the  EU  Member  States.  EU 
funding  of  agricultural  policy  in  Greece  amounts 
to  approximately  EUR  2.7  billion  per  year.  This 
includes  support  to  the  Greek  Rural  Development 
Programme  of  EUR 4.7  billion  for  the  period 
2014-2020.  

The  agricultural  sector  in  Greece  has  been  in 
crisis since mid-2000s, i.e. prior to the economic 
crisis,  but  demonstrated  resilience  during  the 
crisis  years.  The  benefit  of  the  Greek  food 
processing industry is one of the lowest in Europe. 
Greece's  penetration  of  core  European  export 
markets  is  very  low  (less  than  2 %  share)  and  the 
country  needs  a  holistic  and  focused  product  and 
export strategy. 

The  largest  gains  in  economies  of  scale  in  the 
agro-food  sector  may  come  mostly 
from 
downstream  and  upstream  farm  production. 
The  logistics  and  distribution  system,  processing, 
as well as farm inputs and research, are operations 
large  economies  of  scale.  An 
that  exhibit 

53 

 
3.4. Competitveness reforms and investment 

Northwestern  Greece  are  by  now  closer  to  their 
Balkan EU neighbours than to their Mediterranean 
EU peers.   

Large disparities exist at regional level in terms 
of  social  and  labour  market  conditions.  The 
level  of  economic  development  and  social 
conditions displays strong variation across regions. 
The  lowest  levels  of  unemployment  are  found  in 
the South Aegean (16 % in 2017), a region which 
has benefited from the strong growth of tourism in 
recent  years.  Yet,  in  Eastern  Macedonia,  the 
unemployment rate  was still  29 % in 2017. While 
the  rate  in  the  South  Aegean  is  comparable  with 
those observed currently in other European regions 
(in  Member  States  such  as  Italy  but  also  Spain, 
France or Belgium), unemployment and long-term 
unemployment  rates 
in  other  Greek  regions 
represent  by  far  the  highest  rates  in  Europe.  Like 
GDP  and  unemployment,  poverty  and  social 
exclusion have important regional dimensions. The 
population at risk of poverty or social exclusion for 
Attica stands at 15.5 % but for Northern Greece at 
22.3 %, Central Greece at 24.2 % and the  Aegean 
islands  and  Crete  at  21.6 %.  In  urban  areas, 
poverty  often  occurs  in  the  form  of  pockets  of 
poverty and deprived neighbourhoods. 

and 

increasing 

intra-regional 
Significant 
disparities  persist  in  a  number  of  regions, 
notably  insular  and  mountainous  ones.  For 
example, the South  Aegean region  has the second 
highest  GDP  per  capita  level  in  Greece  as  it 
includes some of the most prosperous places in the 
country;  but  it  also  includes  islands  where  basic 
public  services,  such  as  continuous  provision  of 
electricity and drinking water, are still an issue. A 
similar  observation  can  be  made  for  mountainous 
areas, in particular the remote ones on the northern 
borders. 

The  multi-variable  analysis  proposed  in  the 
2016  Regional  Competitiveness  Index  (RCI), 
makes  clear  that  regional  disparities  in  Greece 
have many and highly varied dimensions, going 
beyond  the  GDP,  unemployment  and  poverty 
parameters.  The  regional  competitiveness  index 
covers  the  components  “institutions”,  “macro-
economic  stability”,  “infrastructure”,  “health”, 
“basic  education”,  “higher  education”,  “labour 
market  efficiency”,  “market  size”,  “technological 
readiness”, 
and 
“innovation”.  On  all  but  two  components,  Greece 

sophistication” 

“business 

use  of  economic 
incentivise 
prevention, reuse and recycling  is insufficient and 
the existing schemes are performing poorly.  

instruments 

to 

Management  plans  and  associated  legal  tools 
have  been  developed  for  a  number  of  nature 
protection sites, in most cases supported by EU 
funds,  but  very  few  are  formally  adopted  and 
implemented  to  date.  A  major  challenge  for  the 
effective protection and management of the Natura 
2000  is  the  absence  of  an  efficient  national 
governance  system,  which  recent  legislation  is 
addressing  by  attributing  individual  management 
bodies to all Natura 2000 sites. 

the 

Concerning 
treatment  of  urban  and 
industrial  wastewater,  investments  are  needed 
to  improve  water  treatment  in  line  with  the 
guidelines  of 
the  Urban  Waste  Water 
Treatment Directive for which currently EUR 1 
billion  of  EU  Funds  is  available.  Only  about 
90 %  of  the  generated  load  is  connected  to 
collecting systems, representing slightly more than 
half of the Greek agglomerations. The treatment of 
the rest needs upgrading. Moreover, the necessary 
information 
the 
directive  in  these  systems  is  missing,  reflecting  a 
general lack of data availability in the water sector. 
to  fully 
investments  are  required 
Significant 
comply  with  the  Water  Framework  Directive  and 
the  Floods  Directive  in  order  to  proceed  with 
important actions against the salinization of ground 
waters,  the  re-naturalisation  of  the  flow  of  rivers, 
and measures for flood prevention and mitigation.  

to  analyse  compliance  with 

3.4.3.  TERRITORIAL AND REGIONAL DISPARITIES 

While  the  crisis  hit  all  parts  of  Greece  heavily, 
disparities  between  Greek  regions  and  rest  of 
the  EU  have  widened  significantly  since  2009. 
The  greater  Athens  area,  home  to  close  to  half  of 
the  Greek  population,  is  more  than  ever  the  only 
part of the country which relatively keeps up with 
the  developed  areas  of  the  EU,  with  a  GDP  per 
capita  at  92 %  of  the  EU  average  in  2016 
(however,  down  from  124 %  in  2009).  All  other 
regions  lag  behind  and  mostly  even  far  behind, 
with 2016 GDP per capita levels having decreased 
to as low as 47- 48 % of the EU average in Eastern 
Macedonia & Thrace and in Epirus, and with three 
more  regions  being  at  or  very  close  to  the  50 % 
mark.  In  terms  of  GDP  per  capita,  Northern  and 

54 

 
3.4. Competitveness reforms and investment 

business in the Global Competitiveness Index 2017 
(World Economic Forum, 2017). 
Graph 3.4.6:  Wage costs in public administration 

Note: imputed social contributions are not included for the 
Euro euro Areaarea. 
Sources: Apografi database, Eurostat 

Further improvement and modernisation of the 
public  administration  remains  a  key  challenge 
for  the  future.  A  clear  sign  of  the  government's 
commitment  to  the  public  administration  reform 
agenda  was  the  publication  of  the  ‘National 
Strategy  for  Administrative  Reform  2017-2019' 
(Ministry of Administrative Reconstruction, 2017). 
The  strategy  sets  out  the  public  administration's 
main chronic weaknesses, such as its low capacity 
to  properly  design  and  implement  public  policies 
and its lack of coordination. It goes on to present a 
comprehensive  action  plan  with  concrete  steps, 
including 
public 
administration's  operational  capabilities.  The 
government  has  already  started  implementing  the 
strategy as well as initiated the work to update the 
strategy  beyond  2019.  However,  further  efforts 
will  be  needed,  particularly 
the 
regulatory environment, which is still burdened by 
an excess of laws that are frequently contradicting.  

strengthening 

improve 

the 

on 

to 

of  highly 

codification 

The 
fragmented 
legislation  and  coordination  within  the  public 
sector  remain  on  the  reform  agenda.  Following 
the recent adoption of a  national strategy on legal 
codification,  the  implementation  of  the  strategy 
will require continued efforts. Coordination within 
the  public  administration  also  needs 
to  be 
improved  and  the  adoption  of  an  inter-ministerial 
manual  on  coordination  Procedures  (General 
Secretariat of the Government, 2018) is a first step 

lags  significantly  behind  the  EU  average  scores, 
the  two  exceptions  being  “health”  and  “higher 
education”.  At  regional  level,  only  Attica  scores 
better than the overall 2016 Greek average, and on 
the  “business  sophistication”  component  it  does 
even  much  better  than  the  EU  average.  Central 
Macedonia  is  on  most  components  closest  to  the 
Greek average. All other regions lag far behind EU 
and Greek averages on most component scores.  

3.4.4.  INSTITUTIONAL QUALITY AND 

GOVERNANCE 

Public administration 

remain. 

The  Greek 

A well-functioning public  sector is essential for 
the  proper  functioning  of  the  economy  and 
although  steps  have  been  taken  to  modernise 
the  public  administration  a  number  of 
public 
weaknesses 
administration was substantially downsized during 
the first years of the crisis to reach the EU average 
in  terms  of  cost  (see  Graph  3.4.6).  Downsizing 
measures were accompanied by the introduction of 
a  uniform  wage  grid  to  ensure  staff  with  similar 
qualifications  and  experience  received  the  same 
salary across the public sector. A key challenge for 
the  public 
the 
administration's  size  broadly  stable  at  its  current 
level  and  to  maintain  the  integrity  of  the  uniform 
wage grid.  

future  will  be 

to  keep 

increasing 

the  effectiveness  of 

More recent reform efforts under the European 
Stability  Mechanism  support  programme  have 
the  efficiency  and 
focused  on 
improving 
the  public 
low  administrative 
administration.  However, 
capacity remains a key challenge to providing high 
quality public services  to the  citizens as  well as a 
major obstacle to investment. This is demonstrated 
by  Greece  being  in  the  bottom  quintile  in  the  EU 
as concerns  the overall assessment of  government 
performance  (Thijs  et  al.,  2018),  which  takes  into 
in 
account  four 
public 
government; 
administration  over 
(iii)  government 
effectiveness;  and  (iv)  public  sector  performance. 
More  specifically,  as  concerns  public  sector 
inefficient 
performance, 
government  bureaucracy  is  listed  as  the  second 
most problematic factor (after tax rates) for doing 

indicators,  namely:  (i) 
of 
improvement 
(ii) 

indicative 

time; 

trust 

that 

is 

it 

55 

8,08,59,09,510,010,511,011,5200920102011201220132014201520162017%of GDPGreece's wage billEuro Area compensation ofemployees 
 
3.4. Competitveness reforms and investment 

position/job description and census/single payment 
authority);  (ii)  a  mobility  scheme;  and  (iii) 
performance  assessment  (including  goal  setting  to 
be  developed).  Further  efforts  are  needed  to 
improve  the  recruitment  planning  and  selection 
process,  although  an 
this 
direction  would  be  the  government's  plan  for  a 
new  law  to  strengthen  the  Supreme  Council  for 
Civil Personnel Selection (ASEP). 

important  step 

in 

include 

common 

an 
registries, 

Some  progress  has  been  made  on  digital 
reforms,  but  to  set  up  a  comprehensive  and 
well-functioning  e-government  system,  early 
steps  will  need  to  be  followed  up  through  the 
development  and  integration  of  basic  digital 
tools.  These 
interoperability 
e-
infrastructure,  basic 
authentication  for  all  public  services  and  e-
payments  to  the  State.  Such  reforms  will  set  up  a 
secure  interoperability  system  and  improve  public 
service delivery. Finally, Law Cleisthenes I, which 
was adopted in the summer of 2018, provides for a 
solid  base  for  reforms  of  local  and  regional 
government.  The  improvements  in  allocation  of 
the  state  funds,  the  autonomy  and  local  strategic 
planning,  transparency  in  fiscal  planning  and 
improvement  of  civil  participation  are  all 
considered  to  be  important  steps  towards  a  more 
self-sustaining regional and local government. 

Administrative  capacity  to  manage  European 
Structural and Investment Funds 

has 

been 

almost 
Greece 
allocated 
EUR 37 billion  under  various  EU 
funding 
programmes  for  the  period  2014-2020.  Most  of 
these funds originate from the European Structural 
and Investment Funds (ESIF). To help the country 
get out of the crisis, the European Commission has 
also  agreed  to  exceptional  measures  for  Greece, 
such  as  an  annual  payment  of  additional  pre-
financing  of  3.5 %  of  total  European  funds  (2015 
and  2016)  and  a  higher  co-financing  rate.  For 
Greece  to  make  use  of  these  funds'  full  potential 
and  deliver  on  the  needed  investments,  the  funds 
must  be  used  in  the  most  efficient  and  effective 
way. Significant measures have already been taken 
in  this  regard  in  recent  years.  These  included  (i) 
setting up of an electronic platform to manage state 
aid  under  all  European  Structural  and  Investment 
Funds  programmes;  (ii)  introducing  a  simplified 
payment 
to 
beneficiaries  are  made  on  time;  (iii)  adopting  a 

payments 

ensure 

circuit 

to 

in  this  direction.  For  the  manual  to  have  a  real 
impact, it now needs to be fully implemented. This 
will  entail  strengthening  and  streamlining  the 
government's  coordination  services,  linking  the 
annual  plans  of  each  Ministry  with  the  budget 
cycle 
assessments, 
reporting  cycles  and  ex-post  evaluations  of 
regulations  to  facilitate  a  more  consistent  policy 
and legislative framework. 

integrating 

impact 

and 

improve 

Measures  have  been  introduced  to  simplify  of 
administrative  procedures  for  businesses  and 
increase  the  government's 
citizens  and  to 
accountability.  Reducing  red  tape  for  businesses 
is  key  for  unlocking  investment  potential  given 
that  simplification  measures  are  expected 
to 
increase  transparency,  reduce  the  operating  costs 
of  administrative 
service 
services, 
delivery  and 
increase  entrepreneurship.  Such 
measures  could  usefully  be  extended  to  services 
provided  to  the  general  public.  Initial  steps  have 
been  taken  for  a  more  open  and  participatory 
government, 
introduction  of 
procedures to curb favouritism at the top levels of 
the  civil  service  where  Greece  continues  to  score 
relatively  poorly  (47), 
the 
depoliticisation  of  the  public  administration.  In 
parallel,  the  number  of  political  appointees  has 
increased  since  2015  reaching  close  to  60 %  (48). 
The 
be 
strengthened 
implementation  of 
internal control and audit processes throughout the 
public  administration.  Several  of  these  challenges 
are being addressed in the growth  strategy,  which 
includes  specific  complementary  measures 
to 
modernise the public administration. 

accountability 
the 

thereby  supporting 

government's 

including 

through 

can 

the 

A  major  reform  is  underway  to  establish  an 
integrated  human 
resource  management 
strategy 
to  align  Greek  practices  with 
international  best  practices.  The  most  important 
elements of the reform include the introduction of 
(i) 
job 
descriptions  (including  the  streamlining  of  the 
existing  complex  job  qualification  system  (i.e. 
'klados) and linking each jobholder with a specific 

organisational 

digital 

charts 

and 

(47)  Greece  scored  2.6  out  of  7  on  the  favouritism  sub-
component  of  the  Global  Competitiveness  Index  (World 
Economic Forum, 2017). This scoring places Greece at the 
bottom quartile of EU-28. 

(48)  Staff  figures  from  Apografi.gr  shows  that  the  number  of 
political appointees is currently (September 2018) 2495. 

56 

 
                                                           
3.4. Competitveness reforms and investment 

unified  and  simplified  legislative  framework  to 
streamline 
the  expropriation  procedures;  (iv) 
simplifying  the  procedures  and  legal  codification 
related to archaeological works; and (v) extending 
the principles of good public administration also to 
the  structures  responsible  for  managing  European 
Structural  and  Investment  Funds  (e.g.  selection 
procedures  for  managers,  performance  assessment 
and the mobility scheme).  

Nevertheless,  the  management  of  European 
Structural  and  Investment  Funds  projects  is  still 
hampered by various inefficiencies and capacity 
problems,  notably 
certain  groups  of 
for 
beneficiaries  (e.g.  small  municipalities,  utilities 
local  beneficiaries)  are  frequently 
and  other 
significant 
although 
observed.  Furthermore, 
resources  are  allocated  to  central  administration 
services  (compared  to  the  resources  available  to 
managing  authorities),  there  is  still  a  lack  of 
coordination  due  to  overlapping  responsibilities 
and  proliferation  of  structures.  To  improve  the 
public  administration's  capacity  to  manage  ESIFs, 
a more streamlined system needs to be in place for 
thematic  policy  coordination  and  monitoring, 
including  a  central  coordination  mechanism  that 
and 
avoids 
further 
empowerment 
regional  managing 
the 
authorities.  Very  importantly,  tailored  technical, 
to  specific 
legal  and  organisational  support 
beneficiary  groups  should  be  provided, 
for 
example  through  establishing  services  or  units 
within, or next to existing regional services or even 
at sub-regional level. 

overlaps 
of 

provides 

Justice 

The  overall  effectiveness  of  the  Greek  justice 
system  has been showing signs of progress, but 
challenges  related  to  its  efficiency  and  quality 
remain.  Safeguarding  its  independence  will  also 
contribute to encourage an attractive  business and 
investment  climate.  With  longstanding  challenges 
as  regards  its  overall  effectiveness,  the  Greek 
justice system was in need of a thorough reform at 
the  beginning  of  the  crisis  in  2010.  Since  then, 
significant  reforms  have  been  implemented  under 
the  financial  assistance  programmes.  Efforts  to 
improve  the  overall  effectiveness  of  the  justice 
system  focused  on:  (i)  organisational  changes  to 
courts;  (ii)  operational  and  procedural  issues;  (iii) 
speeding  up  case  processing;  (iv)  enabling  and 
alternative  dispute 
to 
facilitating 

recourse 

resolution  mechanisms; 
the 
adoption  of  information  technology;  (vi)  revising 
outdated 
conducting 
consolidation and codification projects. 

(v)  encouraging 

legislation; 

(vii) 

and 

tax 

increasingly 

standardized 

litigation).  Productivity 

While challenges remain, the justice system has 
started  to  become  more  efficient  since  the 
overly  fragmented  court  network  has  been 
rationalised.  Courts  are  increasingly  able  to  cope 
with  their  workload,  as  evidenced  by  shorter 
disposition  times,  clearance  rates  and  a  reduction 
of  backlogs,  particularly  in  administrative  justice. 
These  efforts  should  continue,  so  that  the  above 
challenges  may  be 
addressed 
throughout  Greece’s  territory;  special  attention 
should  be  given  to  producing  reliable  court 
collection, 
statistics  based  on 
processing  and  presentation  methods.  Reforms 
targeting  these  weaknesses  are  bearing  fruit.  A 
reduction in disposition times, improved clearance 
rates  and  decreasing  backlogs  can  be  seen  across 
the  board,  particularly  in  the  courts  located  in 
Athens which deal with the vast majority of cases, 
either  civil  and  commercial  or  administrative 
of 
(including 
Magistrate  courts  (responsible,  among  others,  for 
dealing with household insolvency litigation cases 
that  represent  a  substantial  proportion  of  the  non-
the  banking 
performing  exposures  afflicting 
their 
system)  has  also 
reduction 
the 
appointment of new judicial and clerical personnel. 
remains 
However, 
excessively  long,  backlogs  will  require  further 
targeted  action,  and  the  accumulation  of  new 
backlogs  needs 
that 
litigation  levels  are  on  the  rise.  This  will  require 
further scrutinising the judicial map.  
Major  reforms  have  been  initiated  to  improve 
the  quality  of  the  justice  system,  particularly 
the  roll-out  of 
integrated  electronic  case 
management  systems  in  courts  and  judicial 
statistics.  The  first  phase  of  the  Integrated  Civil 
and  Criminal  Court  Case  Management  System 
(OSDDY-PP)  in  the  courts  of  Athens,  Piraeus, 
Thessaloniki  and  Chalkida  has  been  completed, 
and the nation-wide rollout (second phase) is set to 
follow  in  2019,  with  the  aim  to  be  completed  by 
2021.  The  availability,  quality  and  reliability  of 
court  statistics  has  improved,  although  challenges 
remain, particularly in smaller courts. Centralizing 
the process and the full use of electronic collection 
tools  could  help  further.  Courts’  and  lawyers’  the 

to  154  courts  from  301  and 

to  be  prevented  given 

disposition 

improved, 

following 

often 

time 

57 

 
3.4. Competitveness reforms and investment 

the review and appointment of the boards of direct 
subsidiaries  (TAIPED  -  the  privatisation  agency 
and ETAD - the Public Properties Company), (iii) 
the initiation of the review and appointment of the 
boards  of  the  other  subsidiaries  (SOEs),  (iv)  the 
adoption  of  a  Strategic  Plan  of  the  Hellenic 
Corporation  of  Assets  and  Participations  and  its 
subsidiaries,  (v)  the  submission  by  the  unlisted 
state  owned  enterprises  of  updated  business  plans 
in 
to  Hellenic 
the  Strategic  Plan 
Corporation  of  Assets  and  Participations  in  April 
2018, (vi) the establishment of monitoring systems 
of the subsidiaries, and (vii) the re-organization of 
the  real  estate  subsidiary  (ETAD),  with  a  view  to 
significantly 
the 
management of real estate assets.  

its  effectiveness 

line  with 

increase 

in 

The  on-going  process  of  privatisation  aims  at 
making 
the  economy  more  efficient  and 
providing financial resources to the State. Greek 
authorities have committed to a continuation of the 
implementation  of  the  privatisation  programme  as 
reflected  in  the  Asset  Development  Plan  of  the 
privatisation agency (TAIPED). Progress has been 
observed  as  regards  the  privatisation  transactions 
scheduled  to  be  completed  by  the  end  of  2018, 
however the progress for the other transactions due 
to be completed  in 2019 is relatively limited. The 
finalisation  of  major  privatisation  projects  –  such 
as  the  site  of  the  former  international  airport  of 
Athens,  Hellinikon  –  is  expected  to  lead  to 
important 
in 
in 
addition,  to  give  an  important  positive  signal  to 
potential future investors. 

the  assets  and, 

investments 

Fight against corruption 

the 

committed  under 

As  part  of  the  modernisation  of  the  State, 
Greece 
successive 
programmes  to  implement  measures  to  fight 
corruption.  A  national  anti-corruption  strategy 
was  first  prepared  in  2013  and  then  updated  in 
2015  as  a  national  anti-corruption  action  plan 
(NACAP).  In  2018,  a  thorough  revision  of  this 
plan  took  place.  The  new  national  anti-corruption 
action  plan  is  in  force  since  July  2018  till  mid-
2021. The implementation of the plan is monitored 
and  coordinated  by  the  General  Secretariat  for 
Anti-Corruption  (GSAC),  established  by  law  in 
2015.  The  authorities  plan  to  implement  the 
outstanding  reforms  set  out  in  the  action  plan  as 

use of information and communication technology 
by  courts  and  lawyers  is  still  the  exception  rather 
than  the  norm.  Experience  in  other  sectors  shows 
submission  of 
the  electronic 
that  making 
documents  mandatory  could  increase  efficiency 
gains  and  accelerate  modernisation.  Alternative 
dispute  resolution  methods  are  still  being  under 
the 
used  and 
implementation  of 
for 
mandatory  mediation  until  September  2019  is 
disappointing.  Legal  aid  in  Greece  is  still  facing 
challenges, as only a fraction of the approved and 
increased  budget  for  legal  aid  in  2017  was  made 
available,  while  access  to  legal  aid  is  of  crucial 
importance to vulnerable groups. 

the  partial  postponement  of 
framework 

the  new 

The  independence  of  the  Greek  judiciary  is  a 
regular topic of public discussion in Greece and 
as  such  affects  the  business  and  investment 
climate. While the necessary structural safeguards 
are  in  place,  the  general  public’s  perception  of 
independence  has  decreased  after  years  of 
improvement  (49);  conversely,  the  perception  of 
independence 
companies  has  been 
improving. 

among 

Management of public assets 

of  Assets 

context  of 

To improve the management of public assets, in 
the 
the  European  Stability 
Mechanism  programme,  the  Greek  authorities 
have  established  a  new  entity,  called  the 
and 
Hellenic  Corporation 
Participations S.A. (HCAP). This holding gathers 
under  a  single  institutional  structure  a  significant 
portfolio  of  assets  and  shareholdings  in  state 
owned  enterprises 
(SOEs).  The  overarching 
objective of the company is to effectively manage 
these  assets,  preserve,  develop  and  ultimately 
maximise their value, and to maximise the quality 
of  the  services  provided  to  the  Greek  people  as 
well  as  to  contribute  to  reducing  the  financial 
obligations  of  Greece.  Since  its  establishment,  a 
number of key steps have been taken to enable the 
company  to  create  value  in  its  portfolio.  Key 
achievements  of  Hellenic  Corporation  of  Assets 
and  Participations 
the 
establishment of the organization and staffing,  (ii) 

include: 

far 

(i) 

so 

(49)  See  Flash  Eurobarometer 

judicial 
ranks  78/140 
(January  2019).  Greece 
independence 
(compared  to  71/137  previously);  see  World  Economic 
Forum (2018).  

perceived 

on 

58 

 
                                                           
well  as  of  all  GRECO's  (Group  of  States  against 
Corruption  (50)  recommendations  by  mid-2021. 
Updates  of  the  strategy  accompanied  by  progress 
reports  on  the  Action  Plan  are  foreseen  on  a 
biannual  basis.  Specific  anti-fraud  and  anti-
corruption  measures  were  developed  to  cover  EU 
co-funded  programmes,  such  as  the  Anti-Fraud 
Coordination  Service  (AFCOS)  to  handle  and 
follow-up  complaints  about  the  misuse  of  EU 
funds,  and  the  State  Aid  Information  System 
(PSKE) to ensure sound management of state aids. 

While  several  anti-corruption  reforms  were 
adopted  during 
the  programme  period, 
reinforcing  these  will  be  critical  for  achieving 
lasting improvement. Progress has been made, for 
example  through  the  major  reforms  of  the  asset 
declaration system and party financing law, which 
are  currently  being  implemented  (51),  and  is 
reflected  by  Greece's  improved  scoring  in  the 
Corruption  Perception  Index  (52)  (Transparency 
International,  2018).  Whereas  Greece  scored  36 
(out of 100) in 2012, thanks to the various reforms, 
its  score  increased  to  48  in  2017,  although  it  has 
slightly  dropped  in  2018  (46  points).  This  places 
Greece in joint 26th position in the EU with the EU 
positive 
average 
developments  were 
the 
institutional  set-up,  the  establishment  of  General 
Secretariat  for  Anti-Corruption,  an  operation 
to  coordinate  all  agencies  (ministries, 
centre 
customs  authorities,  and  police) 
in 
fighting  smuggling,  and  the  recent  establishment 
by  the  Ministry  of  Finance  of  a  service  for 
investigating  tax  crimes.  However,  the  setting  up 
of  a  coordination  mechanism  for  corruption  cases 
is  still  pending.  Moreover,  criminal  investigations 

65.  Other 
the  strengthening  of 

involved 

being 

score 

(50)  Established  in  1999  by  the  Council  of  Europe  to  monitor 
States’  compliance  with  the  organisation’s  anti-corruption 
standards. 

(51)  The  asset  declaration  system  is  currently  ongoing  a  new 
legal  adjustment  following  the  Council  of  State  ruling  in 
December 2017. 

(52)  The  Corruption  Perception  Index  is  calculated  using  13 
different  data  sources  from  12  different  institutions  that 
capture perceptions of corruption. 

3.4. Competitveness reforms and investment 

review 

took  up 

into  allegations  of  high-level  corruption  are 
hampered  as  a  result  of  a  complex  immunity 
regime,  notably  as  regards  ministers  and  former 
ministers.  In  addition,  ministers  and  former 
ministers also benefit from an extensive statute of 
limitations  regime,  which  in  combination  with 
lengthy  proceedings,  may  pose 
significant 
problems  for  prosecuting  corruption  in  Greece. 
The  Parliamentary  committee  responsible  for  the 
ongoing  constitutional 
the 
provisions  concerning  the  immunity  regime  for 
ministers  and  former  ministers  (Article  86)  and 
the 
suggested  changes  that  would  streamline 
immunity  to  strictly  relate  to  issues  of  the 
ministers'  specific  portfolio,  with  the  aim  of 
bringing  the  reformed  immunity  regime  in  line 
with  the  recommendations  of  Group  of  States 
against  Corruption  (GRECO).  However,  it  still 
requires  that  the  current  Parliament  as  well  as  the 
next  Parliament  to  be  formed  after  this  year's 
national  elections  to  adopt  the  suggested  changes 
for  these  to  come  into  effect.  Lobbying  also 
remains 
further 
largely  unregulated.  Finally, 
attention  is  needed  to  address  a  number  of 
legislative  gaps,  for  example  relating  to  whistle-
blower protection, where a new legal framework is 
planned to be in place during 2019. 

take 

Investment  Funds. 

Greece  will  also  need  to  further  develop  its 
administrative  capacities  to  prevent  and  detect 
fraud and corruption affecting European Structural 
and 
full 
It  should 
the  opportunities  provided  by 
advantage  of 
available  data  mining  tools  such  as  Arachne.  For 
example,  through  using  it  as  a  risk  scoring  and 
detection  tool  in  the  award  and  grant  process,  to 
assess  potential  conflicts  of  interest  and  risks  of 
double  funding,  to  identify  red  flags  and  increase 
the  effectiveness  and  efficiency  of  management 
verifications.  It  is  noted  that  currently  Greece  is 
using  the  Commission's  risk  analysis  tool  (53), 
which  covers  the  section  of  fraud  prevention  and 
detection. 

53 EGESIF, 14-0021-00 (2014/06/16). 

59 

 
                                                           
                                                           
3.4. Competitveness reforms and investment 

Box 3.4.2: EU funds and programmes contribute to addressing structural challenges and to 
fostering growth and competitiveness in Greece. 

Greece remains  a large  beneficiary of EU solidarity. The financial allocation from European Structural 
and  Investment  Funds  (ESI  Funds)  aimed  to  support  Greece  in  facing  the  severe  consequences  of  the 
financial and economic crisis and address its development challenges amounts to up to EUR 21.4 billion for 
2014-20, potentially representing 1.7 % of GDP annually and over 40 % of annual public investment. As per 
end-2018, some EUR 14.5 billion (around 68 % of the 2014-20 total) had been allocated to specific projects. 
In addition, EUR 627 million had been allocated to specific projects on strategic transport networks through 
a dedicated EU funding instrument, the Connecting Europe Facility. Furthermore, numerous Greek research 
institutions,  innovative  firms,  and  individual  researchers  benefited  from  other  EU  funding  instruments, 
notably Horizon 2020 which provided EUR 781 million.  

EU  funding  has  helped  to  address  policy  challenges  identified  also  in  the  European  Stability 
Mechanism  stability  support  programme  for  Greece.  By  2018,  investments  driven  by  European 
Structural  and  Investment  Funds  had led  to  the,  completion  and operation of  the  main  TEN-T  motorways 
network of the country of  more  than 1000 km (motorways  Athens –Thessaloniki,  Athens-Patra, Ioannina-
Patra,  Korinthos-Kalamata/Sparta)  and  the  reconstruction  and  modernisation  of  the  main  TEN-T  railway 
line  Athens-Thessaloniki  of  more  than  500  km.  In  addition,  European  Structural  and  Investment  Funds 
supported  close  to 9000  enterprises  creating  at  least  800  full  time  job  equivalent  whereas  improved  water 
supply was secured for some 32 000 households. By end of 2018, improved energy performance in houses 
was ensured for 32 000 households. Moreover,  European Structural and Investment Funds have supported 
various  actions  concerning  educational  and  vocational  training,  efficient  public  administration,  social 
inclusion, and sustainable and quality employment. These actions supported more than 410 000 participants, 
including more than 58 000 young people (18-29 years old) under the Youth Employment Initiative (YEI); 
155 000 unemployed and long-term unemployed; and more than 65 000 people from jobless households for 
their integration into the labour market. About 1600 pupils benefit from renovated schools, and accessibility 
to  better  health  care  services  was  secured  for  over  2  million  people.  Importantly,  Greece  received,  in  the 
context  of  the  special  measures  adopted  in  October  2015,  a  total  amount of  EUR  2  billion,  of  which  half 
under  the  2007-2013  programming  period  and  the  other  half  as  additional  advances  on  the  2014-2020 
period. This liquidity has been instrumental in relaunching the implementation of the current programmes 
and projects. 

EU  actions  strengthen  national,  regional,  and  local  authorities  and  the  civil  society.  Close  to 
EUR 600 million have been allocated to strengthening capacity of public administrations at different levels 
by  prompting  close  cooperation  with  stakeholders.  The  "Coal  Regions  in  Transition"  initiative  seeks  to 
improve  socio-economic  and  technological  transformation  processes  in  Western  Macedonia,  which  is  the 
principal coal-mining region of Greece. The “Clean Energy for the islands” and “Circular Economy on the 
islands”  initiatives  seek  to  promote  the  use  of  renewables  and  a  more  responsible  environmental 
management on islands, which is of eminent importance for tourism in Greece. 

Greece  ranks  4th  when  it  comes  to  drawing  down  funds  of  the  European  Fund  for  Strategic 
Investments. The overall volume of operations approved by the European Investment Bank with European 
Fund for Strategic Investments backing amounts to EUR 2.7 billion, which is set to trigger a total of EUR 11 
billion in additional private and public investments (February 2019). 20 projects (1) involving Greece have 
so  far  been  approved  under  the  infrastructure  and  innovation  window  of  the  European  Fund  for  Strategic 
Investments.  They  amount  to  EUR  2.3  billion  in  total  financing,  which  should  in  turn  generate  EUR  7.4 
billion of investments. Under the small SME component, 13 agreements with intermediary banks have been 
approved for a total of EUR 406 million, which should mobilise around EUR 3.7 billion of total investment. 
About  22 000  SMEs  and  mid-cap  companies  are  expected  to  benefit  from  this  support.  The  "Viotia  wind 
farm"  is  a  notable  example  of  such  project  in  Greece.  The  European  Investment  Bank  is  providing  Terna 
Energy Group with a EUR 24 million loan to build three new wind farms in Viotia in central Greece. This 
project will contribute to the EU's low-carbon strategy and create many jobs in the region. 

More information at: https://cohesiondata.ec.europa.eu/countries/EL  

(1)  Among which three are multi-country projects. 

60 

 
 
ANNEX A: OVERVIEW TABLE 

Europe 2020 (national targets and progress) 

Employment  rate  target:  70 %  of  population  aged 
20-64 

R&D target: 1.21 % of GDP  

The employment rate for workers aged 20-64 was 
57.8  % in 2017, up from 56.2  % since 2016. This 
rise  continued  in  2018,  with  a  current  59.3   % 
employment rate in the second quarter.  However, 
the 70  % target remains out of reach at this stage, 
job  creations.  The 
in 
employment  rate  is  very  low  and  significantly 
below the EU average (73.2 %). 

spite  of  continued 

Greece  has  reached  in  2017  a  R&D  intensity  of 
1.13  % of GDP. In 2017, R&D intensity in Greece 
was composed of 49% private investment (0.55% 
of  GDP)  and  50%  public  investment  (0.57%  of 
GDP).  Due  to  the  good  progress  of  the  R&D 
intensity over the years, Greece has planned to set 
a new target for 2020 of 1.25 % of GDP. 

Greenhouse  gas  (GHG)  emissions  target:  4 % 
reduction  by  2020  compared  to  2005  (in  non-ETS 
sectors) 

Greece is expected to over-achieve its 2020 effort 
sharing  decision  greenhouse  gas  emissions  target 
by a significant  margin,  with  a  reduction of 22 % 
by 2020 relative to the 2005 level.  

Renewable  energy  target:  18 %  of  gross  final 
energy consumption from renewable sources. 

Energy  efficiency  target:  absolute  level  of  primary 
consumption of 24.7 Mtoe 

The renewable energy share in Greece was 15.2 % 
in  2016.  While  being  above 
the  2015/2016 
indicative  trajectory  (11.9 %),  further  efforts  are 
necessary to reach the 2020 target.  

At 23.55 Mtoe in 2016, Greece is on track to meet 
its  primary  energy  consumption  targets  for  2020, 
but  it  should  make  more  efforts  to  keep  the 
primary  energy  consumption  at  this  level  or  to 
minimise  its  increase  when  the  GDP  grows  again 
during the next five year period.   

Early school leaving target: 10 % early leavers from 
education and training aged 18-24. 

At 6  % in 2017, the share was well below the EU 
average of 10.6  % and the national target. 

Tertiary  education  target:  32 %  tertiary  education 
attainment, age group 30-34. 

the  national 

(39.9  %)  and 

At  43.7  %  in  2017,  Greece  is  well  above  the  EU 
target. 
average 
However, the attainment gap between foreign- and 
native  born  students  (35pps)  is  biggest  in  the  EU 
and  skills  mismatches  are  pronounced.  Women 
(50.5   %)  are  consistently  outperforming  men 
(37.0  %) in the attainment rate. 

Risk  of  poverty  or  social  exclusion  target:  450 
less  people  at  risk  of  poverty  or 
thousands 
exclusion. 

Greece  targeted  to  lift  out  450  thousand  people 
from  poverty  or  social  exclusion.  Greece  is  far 
from  achieving  its  target  as  in  2017  still  655 
thousand  more  lived  at  risk  of  poverty  than  in 

61 

 
 
A. Overview Table 

2008. 

62 

 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

The  long-term  sustainability  of  public  finances  is  discussed  in  the  Fiscal  Sustainability  Report  2018 
(European Commission, 2019b) and in the  second enhanced surveillance report published in parallel to 
this country report (European Commission, 2019a). 

63 

 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

1) Latest data Q3 2018. Includes not only banks but all monetary financial institutions excluding central banks. 
2) Latest data Q2 2018. 
3) Quarterly values are annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

64 

201320142015201620172018Total assets of the banking sector (% of GDP)1)225.5222.7217.8199.4167.3157.5Share of assets of the five largest banks (% of total assets)94.094.195.297.397.0-Foreign ownership of banking system (% of total assets)2)3.52.91.72.02.12.3Financial soundness indicators:2)              - non-performing loans (% of total loans)-39.746.846.345.044.9              - capital adequacy ratio (%)13.614.116.517.017.116.4              - return on equity (%)3)--10.6-24.2-7.5-1.3-2.4Bank loans to the private sector (year-on-year % change)1)-3.3-3.1-3.9-1.5-1.5-1.5Lending for house purchase (year-on-year % change)1)-4.3-3.0-3.5-3.5-3.1-3.0Loan to deposit ratio2)-79.172.375.983.578.4Central Bank liquidity as % of liabilities1)-18.338.226.616.26.0Private debt (% of GDP)130.3129.2126.7124.0116.4-Gross external debt (% of GDP)2) - public148.4149.4149.8152.9154.1154.9- private14.515.914.615.015.315.2Long-term interest rate spread versus Bund (basis points)*848.4576.6917.1827.0566.1376.1Credit default swap spreads for sovereign securities (5-year)*------ 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Key Social Scoreboard indicators 

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).       
2 Unemployed persons are all those who were not employed but had actively sought work and were ready to begin working 
immediately or within two weeks.       
3 Long-term unemployed are people who have been unemployed for at least 12 months.       
4 Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019.       
5 Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
6 Average of first three quarters of 2018 for the employment rate, long-term unemployment rate and gender employment 
gap. Data for unemployment rate is seasonally adjusted (annual series, for EE, EL, HU, IT and UK data based on first three 
quarters of 2018).  

Source: Eurostat 

65 

201320142015201620172018 6Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)10.19.07.96.26.0:Gender employment gap (pps)19.418.318.019.019.720.8Income inequality, measured as quintile share ratio (S80/S20)6.66.56.56.66.1:At-risk-of-poverty or social exclusion rate1 (AROPE)35.736.035.735.634.8:Young people neither in employment nor in education and training (% of population aged 15-24)20.419.117.215.815.3:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)52.953.354.956.257.859.4Unemployment rate2 (15-74 years)27.526.524.923.621.519.6Long-term unemployment rate3 (as % of active population)18.519.518.217.015.613.8Gross disposable income of households in real terms per capita4 (Index 2008=100) 68.870.469.668.869.3:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)18029181691844718577::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-7.0-3.1-1.10.0::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction517.515.016.115.915.8:Children aged less than 3 years in formal childcare14.012.811.48.920.5:Self-reported unmet need for medical care9.010.912.313.110.0:Individuals who have basic or above basic overall digital skills (% of population aged 16-74)::44.046.046.0: 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
1 Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
2 PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
3 Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science.       
4 Average of first three quarters of 2018. Data for youth unemployment rate is seasonally adjusted (annual series, for EE, EL, 
HU, IT and UK data based on first three quarters of 2018).  
Source: Eurostat, OECD 

66 

Labour market indicators201320142015201620172018 4Activity rate (15-64)67.567.467.868.268.3:Employment in current job by durationFrom 0 to 11 months8.09.910.19.59.9:From 12 to 23 months5.16.16.97.17.2:From 24 to 59 months12.411.911.212.512.8:60 months or over74.572.171.970.970.1:Employment growth* (% change from previous year)-2.60.90.70.51.51.5Employment rate of women(% of female population aged 20-64)43.344.346.046.848.049.1Employment rate of men (% of male population aged 20-64)62.762.664.065.867.769.9Employment rate of older workers* (% of population aged 55-64)35.634.034.336.338.340.7Part-time employment* (% of total employment, aged 15-64)8.49.39.49.89.79.1Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)10.211.611.911.211.411.5Participation in activation labour market policies(per 100 persons wanting to work)6.78.67.03.1::Transition rate from temporary to permanent employment(3-year average)18.317.917.721.520.0:Youth unemployment rate (% active population aged 15-24)58.352.449.847.343.640.1Gender gap in part-time employment7.26.56.46.87.57.1Gender pay gap1 (in undadjusted form):12.5::::Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)3.23.23.34.04.5:Underachievement in education2::35.8:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)34.937.240.442.743.7:Variation in performance explained by students' socio-economic status3::12.5::: 
 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator       
1 At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.        
2 Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone.       
3 Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation.       
4 People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
5 Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59.       
6 Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard.       

Source: Eurostat, OECD 

67 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare6.05.44.74.95.4:Disability1.81.61.61.71.5:Old age and survivors17.316.216.717.017.1:Family/children1.01.11.11.11.0:Unemployment1.41.31.11.01.0:Housing0.00.00.00.00.0:Social exclusion n.e.c.0.10.10.30.10.2:Total27.525.825.525.926.2:of which: means-tested benefits0.91.21.51.41.3:General government expenditure by function (% of GDP, COFOG)Social protection20.819.420.120.320.7:Health5.85.24.74.74.9:Education4.54.64.34.34.3:Out-of-pocket expenditure on healthcare (% of total health expenditure)30.133.736.636.234.3:Children at risk of poverty or social exclusion (% of people aged 0-17)*35.438.136.737.837.536.2At-risk-of-poverty  rate1 (% of total population)23.123.122.121.421.220.2In-work at-risk-of-poverty rate (% of persons employed)15.113.113.413.414.112.9Severe material deprivation rate2  (% of total population)19.520.321.522.222.421.1Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan3.63.73.44.95.54.8Tenant, rent at market price9.99.98.08.88.28.0Proportion of people living in low work intensity households4 (% of people aged 0-59)14.218.217.216.817.215.6Poverty thresholds, expressed in national currency at constant prices*485942323916388939213973Healthy life years (at the age of 65)Females7.36.87.17.57.8:Males8.68.07.77.98.0:Aggregate replacement ratio for pensions5 (at the age of 65)0.50.60.60.60.60.6Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::35.042.944.948.0GINI coefficient before taxes and transfers*55.457.357.256.657.053.8GINI coefficient after taxes and transfers*33.734.434.534.234.333.4 
 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

1 Value added in constant prices divided by the number of persons employed.       
2 Compensation of employees in current prices divided by value added in constant prices.       
3 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
4 Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if received 
75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the application is still 
pending or don't know.       
5 Percentage population aged 15-64 having completed tertiary education.       
6 Percentage population aged 20-24 having attained at least upper secondary education.       
7 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
8 Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).       

Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation  
indicators); SAFE (for outcome of SMEs' applications for bank loans). 

68 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry2.045.12-1.60-3.764.480.78Labour productivity growth in construction9.90-16.80-14.13-0.2522.81-1.10Labour productivity growth in market services-1.471.13-0.60-2.53-3.760.16Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry-11.09-8.074.011.61-4.05-1.77ULC growth in construction-22.065.83-5.59-12.46-17.12-7.55ULC growth in market services-3.74-10.21-2.89-2.493.143.29Business environment201220132014201520162017Time needed to enforce contracts3 (days)114013001580158015801580Time needed to start a business3 (days)11.014.013.013.013.012.5Outcome of applications by SMEs for bank loans41.591.541.811.211.541.14Research and innovation201220132014201520162017R&D intensity0.700.810.830.960.991.13General government expenditure on education as % of GDP4.504.604.304.304.30:Employed people with tertiary education and/or people employed in science and technology as % of total employment333433343637Population having completed tertiary education5232425252627Young people with upper secondary education6868788909192Trade balance of high technology products as % of GDP-1.40-1.24-1.18-1.30-1.22-1.36Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall2.512.211.74OECD PMR7, retail4.503.852.55OECD PMR7, professional services3.303.263.01OECD PMR7, network industries84.293.132.55 
 
 
 
 
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices)  
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)  
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)  
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)  
          Waste intensity: waste (in kg) divided by GDP (in EUR)  
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP    
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP  
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change)  
Real unit energy cost: real energy costs as % of total value added for the economy  
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)   
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors  
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP  
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT.  
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste  
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP  
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions  
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency.  
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR)  
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport industry  
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels  
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk.  
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels  
* European Commission and European Environment Agency  

Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes); Eurostat (all other indicators) 

69 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0.140.130.130.130.130.1Carbon intensity kg / €0.590.560.530.520.50-Resource intensity (reciprocal of resource productivity)kg / €0.760.730.750.700.700.69Waste intensity kg / €0.38-0.38---Energy balance of trade % GDP-4.0-3.7-3.4-2.1-1.6-1.8Weighting of energy in HICP%7.739.5511.968.456.667.75Difference between energy price change and inflation %18.816.20.1-10.5-5.36.9Real unit of energy cost% of value added12.913.113.213.714.2-Ratio of environmental taxes to labour taxesratio0.210.250.260.260.25-Environmental taxes% GDP3.33.73.73.83.84.0Sectoral Industry energy intensity kgoe / € 0.110.110.130.140.130.12Real unit energy cost for manufacturing industry excl. refining% of value added9.49.29.79.89.9-Share of energy-intensive industries in the economy% GDP5.75.65.45.25.55.8Electricity prices for medium-sized industrial users€ / kWh0.120.120.130.120.110.11Gas prices for medium-sized industrial users€ / kWh0.060.050.050.040.030.03Public R&D for energy % GDP0.020.010.010.010.010.03Public R&D for environmental protection% GDP0.010.010.010.020.010.03Municipal waste recycling rate%17.015.815.415.817.218.9Share of GHG emissions covered by ETS*%56.856.254.952.550.8-Transport energy intensitykgoe / €0.520.580.580.640.700.7Transport carbon intensitykg / €1.391.521.491.651.81-Security of energy supplyEnergy import dependency%65.861.765.471.072.971.1Aggregated supplier concentration indexHHI29.532.137.233.640.3-Diversification of energy mixHHI0.340.320.330.330.340.3 
 
  
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR GREECE 

Building  on  the  Commission’s  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027  of  2  may  2018  (COM  (2018)  321),  this  Annex  D  presents  the   preliminary  Commission 
services’ views on priority investment areas and framework conditions for effective delivery of the 2021-
2027  Cohesion  Policy. (54)  These  priority  investment  areas  are  derived  from  the  broader  context  of 
investment bottlenecks, investment needs and regional disparities assessed in the report.  It provides the 
basis  for  a  dialogue  between  Greece  and  the  Commission  services  in  view  of  the  programming  of  the 
Cohesion  policy  funds  (European  Regional  Development  Fund,  Cohesion  Fund  and  European  Social 
Fund Plus) in Greece. 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

The Greek economy is characterised by very low public and private investments in innovation and a low 
ranking  in  the  Global  Competiveness  Index  (last  of  the  EU28).  Specifically  in  relation  to  small  and 
medium  sized  enterprises  innovators,  performance  has  fallen  since  the  start  of  the  crisis.  In  order  to 
strengthen  innovation  performance  and  foster  productivity  growth,  smart  specialisation  areas  are 
identified based on national and regional needs and potential.  High priority investment needs(55) are 
identified to enhance research and innovation capacities and the uptake of advanced technologies, 
in particular: 

  promote  business  investment  in  research  and  development  and  foster  collaboration  between  public 

and private research on targeted smart specialisation areas; 
facilitate business technology transfer, networking, clusters and open innovation; 

 
  support activities that allow innovations to reach the  market, especially for start-ups and small and 

medium sized enterprises in the digital market; 

  develop skills related to smart specialisation areas, in particular reskilling and digital skills.   
Greece  ranks  very  low  in  the  uptake  of  information  technologies  and  is  last  of  the  EU28  on  the 
e-government  scoreboard.  High  priority  investment  needs  are  identified  to  close  the  gap  with 
respect  to  the  Digital  Agenda  for  Europe,  to  reap  the  benefits  of  digitalisation  for  citizens, 
businesses and the public sector, in particular: 

  support  the  increase  of  information  and  communication  technology  uptake  in  small  and  medium 
sized  enterprises  (business  to  business,  business  to  consumer,  consumer  to  consumer),  including 
supporting infrastructures and services;  

  expand and complete the range of e-service provision (e-government, e-procurement, e-inclusion, e-
health,  e-learning,  e-skilling,  e-commerce)  and  their  uptake  by  citizens,  businesses  and  the  public 
sector. 

Access  to  finance  for  small  and  medium  sized  enterprises  remains  a  very  problematic  area  and 
framework  conditions  for  entrepreneurship,  innovation,  and  start-ups  are  unfavourable.  Credit 
conditions  tightened  significantly  during  the  financial  crisis  and  remain  very  restrictive  compared  to 
other  EU  countries.  High  priority  investment  needs  are  identified  to  enhance  the  growth  and 
competiveness of small and medium sized enterprises, in particular:   

 

foster  growth  of  start-ups  /  scale-ups  and  accelerators,  and  develop  integrated  business  advisory 
services; 

  promote entrepreneurship and support for  new business models; 
  encourage  industrial  cluster  development  and  enhanced  cooperation  between  small  and  medium 

sized enterprises and universities/research centres. 

(54)  This  Annex  is  to  be  considered  in  conjunction  with  the  requirements  for thematic  concentration  and  urban  earmarking,  as 
outlined  in  the  EC  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  the  European  Regional 
Development  Fund  and  on  the  Cohesion  Fund  COM(2018)  372  and  in  the  EC  Proposal  for  a  Regulation  of  the  European 
Parliament and of the Council on the European Social Fund Plus COM(2018) 382.  

(55)  The intensity of needs is classified in three categories in a descending order – high priority needs, priority needs, needs. 

70 

 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Greece 

Policy Objective 2: A low carbon and greener Europe  – Clean and fair energy transition, Green 
and blue investment, circular economy, climate adaptation and risk prevention 

The  building  stock  in  Greece  is  mostly  aged,  with  many  public,  residential  and  commercial  buildings 
constructed prior to 1980, with no or very low levels of thermal protection.  High priority investment 
needs are identified to promote energy efficiency measures, in particular:  

  enhance  the  energy  efficiency  of  public  buildings,  private/residential  buildings  and  small  and 

medium sized enterprises premises and installations. 

Greece still relies considerably on  fossil  fuels and large opportunities  for renewable power  generation 
notably  from  wind  and  solar  sources  remain  unexploited.  High  priority  investment  needs  are 
identified  to  promote  renewable  energies,  also  in  the  context  of  the  “Clean  Energy  for  EU  islands” 
initiative, the “Coal Regions in transition” initiative and the blue growth pillar of “EU Strategy for the 
Adriatic and Ionian Region”, in particular:  

  district  heating  and  cooling  based  on  renewable  energy  sources;  small-scale  renewable  energy 
sources  installations  for  buildings/premises  where  connection  to  a  district  heating  network  is  not 
possible; 

  small-scale  electricity  generation  based  on  renewable  energy  sources,  e.g.  by  renewable  energy 
sources self-consumers and energy communities based on renewable energy sources, notably in non-
connected insular and rural areas; 

  smart grids and smart storage systems related to renewable energy sources; 
 

increasing  islands’  electricity  interconnections  to  phase  out  costly  and  polluting  local  fossil  fuel 
based  generation  and  to  allow  for  more  and  optimised  generation  and  use  of  electricity  from 
renewable energy sources.(56) 

Greece relies heavily on landfilling of solid waste, and lags behind in recovery/recycling and the circular 
economy.  Many  smaller  municipalities  are  still  deprived  of  proper  wastewater  management  and/or  a 
reliable  provision  of  drinking  water.  High  priority  investment  needs  are  identified  to  promote 
sustainable water management, and to improve resource efficiency and waste management, also in 
the context of the blue growth pillar of “EU Strategy for the Adriatic and Ionian Region”, in particular: 

  support waste water infrastructures for agglomerations with 2,000 to 15,000 population equivalent; 

ensure sustainable sludge management; 

  modernise  water  supply  networks,  improve  leakage  control  and  promote  water  savings  actions; 

support small-scale water supply projects in areas with structural or seasonal shortages;  

  support  waste  prevention  and  recycling,  reuse  centres,  composting  plants;  modernise  or  upgrade 
existing  sorting  and  recycling  facilities;  support  solid  waste  transfer  stations  where  necessary  for 
sorting and recycling; 

  promote measures to facilitate the transition to a circular economy; 
  develop targeted actions to provide assistance  to small  municipalities and  utilities to improve their 
technical, managerial and organisational capacities for the implementation of the above investments, 
following the technical assistance model for the wastewater sector implemented in 2014-2020; 

  support  conservation/protection  actions 

in  approved  protected  nature  areas  with  adopted 

conservation plans and established management bodies. 

Greece  faces  multiple  natural  and  environmental  risks,  in  particular  floods  and  wildfires.  Investment 
needs are identified to promote risk prevention and disaster resilience, in particular:   

  sectoral  mapping  of  hazards  and  risk  analysis  (notably  for  floods  and  wildfires),  preparation  and 
implementation of disaster risk management strategies, where appropriate in a cross border context 

(56)  While outside of the scope of the ERDF and the Cohesion Fund (art. 6.1(h), COM (2018) 372), energy interconnectors could be 

financed by the Connecting Europe Facility in line with its objectives (art. 3, paragraphs 1 and 2 (b), COM (2018) 438). 

71 

 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Greece 

 

(e.g. the Evros river basin);  
flood protection and prevention infrastructures; land,  forest and river  basin  management  measures, 
where appropriate in a cross border cooperation context.  

Policy  Objective  3:  A  more  connected  Europe  by  enhancing  mobility  and  regional  information 
and communication technologies 

Major railways infrastructures in Greece remain uncompleted, which hampers the multimodality of the 
transport system. Many connections of the seaports system, especially where it concerns islands, as well 
as  connections  to  airport  facilities  in  northern  Greece  and  major  tourist  destinations,  remain  poor  and 
unreliable.  High  priority investment needs are identified to develop sustainable,  climate resilient, 
intelligent and intermodal transport systems, in particular:   

  modernise  the  existing  rail  network  and  interconnections  of  domestic  and  international  transport 

links in Northern Greece which are economically justified and financially viable;  

  support  the  redesign  of  the  coastal  shipping  network  to  create  regional  nodes  that  improve  the 
accessibility of islands, decongest the port of Piraeus, reduce costs and increase service quality and 
efficiency of the coastal shipping system; 

  promote freight transport multi-modality by improving rail connections to Trans-European Transport 

Network ports such as Thessalonica, logistics platforms, and industrial zones such as Oinofyta. 

Thessalonica  and  the  mid-sized  urban  centres  lack  sustainable  and  integrated  urban  mobility  systems, 
which  favours  continued  dependence  on  individual  transport  modes.  High  priority  investment  needs 
are identified to promote sustainable multimodal urban mobility, in particular:   

  support sustainable urban mobility in Thessalonica and the principal peripheral urban centres (Patras, 
Heraklion, Larissa, Ioannina, Agrinion and Chalkis), based on sustainable urban mobility plans. 
Missing  links  in  the  motorway  and  primary  road  network  continue  to  inhibit  accessibility  and  the 
optimal  use  of  highways,  seaports  and  airports  in  Greece.  High  priority  investment  needs  are 
identified  to  develop  sustainable,  climate  resilient,  intelligent  and  intermodal  Trans-European 
Transport Networks, in particular:   

  construction  of  the  Northern  Crete  Trans-European  Transport  Network  core  motorway  axis,  along 

with its multimodal connections to the main network nodes, sea ports and airports;  

  consolidate the regional primary east-west road axes in Epirus and Thessaly (Igoumenitsa  – Volos) 
and  Continental  Greece  (Karpenisi  –  Kymi),  to  capitalise  on  the  newly  constructed  north-south 
motorways; 

  support  the  multimodal  development  of  transport  in  Western  Greece  and  Epirus  linked  to  the 
recently  completed  Ionia  Odos  and  Egnatia  Odos  motorways,  where  such  links  are  economically 
justified and financially viable. 

Greece's  transition  to  fast  broadband  is  slow  and  coverage  of  households  with  next  generation  access 
remains low compared to the EU average; ultra-fast speeds for households and small and medium sized 
enterprises  are  virtually  inexistent.  High  priority  investment  needs  are  identified  to  support  the 
country's digital transformation and enhance its digital connectivity, in particular to:   

  complete  investments  in  future-proof  broadband  infrastructure  to  meet  the  EU2025  strategic 
objectives with download speeds of at least 100 Mbps upgradable to 1 Gbps for  households and all 
main  socio-economic  drivers  (businesses,  transport/logistics  hubs,  universities,  research  centres, 
schools, hospitals, public services). 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights  

Greece  has  high  unemployment,  including  youth  and  long-term,  large  numbers  of  persons  not  in 
education, employment or training, and low women employment rate. High priority investment needs 
are therefore identified to improve access to employment of all jobseekers, in particular youth and 

72 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Greece 

long-term  unemployed,  promote  self-employment  and  the  social  economy,  continue  modernising 
labour  market  institutions  and  services  to  assess  and  anticipate  skills  needs  as  well  as  promote 
women’s labour market participation, and in particular to: 

identify individual needs and provide personalised services and targeted and tailored training;  

  support active and preventive labour market measures that are open to all;  
 
  strengthen capacity and support structures for the promotion of social enterprises;  
 
  develop and implement comprehensive skills strategies including digital skills, with the involvement 

further improve the capacity of public employment services for better provision of services;  

of social partners and other relevant actors; 

  develop work-life balance policies and promote innovative work organisation. 
Education  and  training  systems  respond  insufficiently  to  labour  market  needs,  foreign-born  students’ 
underperform and adult participation in learning remains low. Priority investment needs are therefore 
identified  to  improve  the  quality,  effectiveness  and  labour  market  relevance  of  education  and 
training, support acquisition of key competences including digital skills; promote equal access to, 
and  completion  of,  quality  and  inclusive  education  and  training;  promote  lifelong  learning, 
flexible upskilling and reskilling opportunities for all, and in particular to: 

 

increase  the  relevance  of  education  for  labour  market  needs;  develop  high  quality  educational 
content  and  competences  of  educators;  promote  vocational  education  and  training  as  a  quality  and 
skilled career pathway also to support urban regeneration strategies;  

  develop comprehensive life-long learning strategies and upgrade basic skills of the adult population; 
  enhance  partnerships  between  stakeholders  and  social  partners,  and  guidance  services  to  build 
flexible pathways between sectors of education, training and work, based on labour market needs;  
  enhance access to inclusive quality education and training, in particular for persons with disabilities, 

migrants and refugees; 

  develop infrastructure and equipment for early childhood education and care, primary and secondary 

school and vocational educational training facilities. 

Income  inequality  and  risk  of  poverty  or  social  exclusion  are  high  and  the  effectiveness  of  social 
transfers'  impact  is  poor,  while  unmet  needs  for  medical  care  remain  a  challenge.  High  priority 
investment  needs  are  therefore  identified  to  foster  active  inclusion;  promote  socio-economic 
integration  of  people  at  risk  of  poverty  or  social  exclusion,  including  the  most  deprived  and 
children, marginalised communities and third country nationals; enhance access to affordable and 
effective services and social protection; improve effectiveness and resilience of healthcare systems 
and long-term care services, and in particular to: 

  enhance access to, and inclusiveness of affordable, sustainable and high-quality social services;  
  promote measures to overcome prejudice and discrimination against third-country nationals;  
 

fight early school-leaving for marginalised communities and ensure successful transition from school 
to employment for all; 

  support the most deprived; promote the social integration of children at risk of poverty, persons with 

disabilities, migrants and refugees;  

  develop measures tackling in-work poverty;  
 

tackle  educational  and  housing  segregation,  including  infrastructures  such  as  social  housing, 
extension of mainstream schools and school bus systems; develop family and community based care 
services,  including  primary  care  facilities  for  homeless  or  women  experiencing  domestic  violence, 
family and community centres and counselling services;  
increase  equal  access  to  eHealth  services  to  promote  e-inclusion,  notably  for  vulnerable  groups; 
address  shortages  and  skills  gap  in  health  and  long-term  care  sectors  through  re-skilling  and 
upskilling of the workforce;    
invest in the primary health care systems (local primary health care units and similar), in information 
and communication technologies for health purposes that emerge from the business plan on health, 
tele-medicine, and interoperability of related systems; develop day-care centres for the people with 

 

 

73 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Greece 

disability (children, adults and the elderly). 

Policy Objective 5:  A Europe  closer  to  citizens  by  fostering  the  sustainable  and  integrated  
development  of urban, rural and coastal areas and local initiatives 

The  morphological  characteristics  of  Greece  and  its  territorial  disparities  call  for  regional  and  local 
policies  with  a  strong  territorial  dimension.  High  priority  investment  needs  are  identified  to  foster 
the  integrated  social,  economic,  cultural  and  environmental  development  of  the  most  vulnerable 
territories,  especially  small  remote  islands,  mountainous  zones,  and  deprived  urban  areas  that 
suffer from persistent structural weaknesses, also in the context of the “Coal Regions in transition” 
initiative (which may also affect the other policy objectives), the “Clean Energy for EU islands” and the 
“Circular economy on islands”  initiatives, and the blue  growth pillar of  “EU Strategy  for the  Adriatic 
and Ionian Region”, in particular: 

In urban areas: 

  sustainable regeneration of disadvantaged and/or de-industrialised zones/areas in the Athens-Piraeus 
and  Thessaloniki  conurbations  and  in  the  principal  peripheral  urban  centres,  including  through 
support to small and medium sized enterprises; 

  promotion  of  culture  and  cultural  heritage  and  the  social  economy  in  the  context  of  integrated 
development  plans  for  deprived  neighbourhoods,  including  through  support  to  small  and  medium 
sized enterprises; 

  enhance the planning, programming and implementation capacity to develop high-quality large-scale 

investment projects. 

On small remote islands: 

  small-scale ports infrastructures to improve connectivity with neighbouring bigger islands and/or the 

mainland;  

  small-scale wastewater treatment, water reuse and water production infrastructures; 
  small-scale local transport based on renewable energy sources. 

On small remote islands and in mountainous areas: 

 

integrated local renewable energy systems covering production, distribution and consumption using 
smart grids and smart energy storage facilities; 

  broadband  connectivity,  where  applicable  through  deeply  embedded  “very  high  capacity  network” 

 

architectures; 
information and communication technology applications for e-education, e-commerce, e-health and 
e-government services; 

  promotion  of  the  cultural  and  natural  heritage  and  of  local  products,  in  the  context  of  sustainable 

alternative tourism development strategies; 

  develop targeted actions to provide assistance to small municipalities and utilities and improve their 
technical, managerial and organisational capacities for the implementation of the above investments, 
following the technical assistance model for the wastewater sector implemented in 2014-2020. 

Factors for effective delivery of cohesion policy 

 

review  the  appropriateness  of  ESIF  executive  units  in  line  Ministries  and  their  contribution  in  the 

74 

 
 
 
 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Greece 

current  programming  period  and  if  necessary  revisit  their  number,  role  and  legislative  context  to 
ensure  a  homogenous  and  streamlined  approach  in  the  programming  and  implementation   of 
cohesion policy funds; 

  a clear division of responsibilities in the programming, management and implementation cycle of the 
cohesion policy funds, including a streamlined and simple mechanism for cross-programme thematic 
policy  coordination  and  monitoring,  taking  into  account  actions  undertaken  under  consecutive 
economic  adjustment  programmes,  experiences  from  Greece’s  participation  in  the  administrative 
capacity building pilot action, and the results of the OECD study on regional policy for Greece post-
2020;a central coordination mechanism that is simple, avoids overlap and acts fast; 

  empowering regional managing authorities and enhancing their managerial independence; 
  efficient and effective measures to prevent and address conflict of interest, fraud and corruption; in 
this  context  complete  and  solidify  the  actions  undertaken  under  consecutive  economic  adjustment 
programmes, including the staff selection, evaluation and mobility schemes; the electronic platforms 
for  the  management  of  state  aids  and  public  procurement;  and  the  integration  of  the  General 
Secretariat for Anti-Corruption in the Cohesion Funds’ management system; 
improved  public  procurement  performance  by  tackling  the  weaknesses  identified  in  the  Single 
Market  Scoreboard  and  paying  specific  attention  to  the  issues  of  excessively  low  bids  and  single 
bidding; 

 

  broader  use  of  financial  instruments  and/or  contributions  to  a  Greek  compartment  under  InvestEU 

 

for revenue-generating and cost-saving activities; 
foster  adequate  participation  and  strengthened  capacity  of  social  partners,  civil  society  and  other 
relevant stakeholders in the delivery of policy objectives. 

75 

 
 
 
REFERENCES 

Amanatidou,  E.,  Damvakeraki,  T.  and  Karvounaraki,  A.  (2018).  'RIO  Country  Report  2017:  Greece', 
Research and Innovation Observatory country report series.  

CEDEFOP, European Centre for the Development of Vocational Training (2018), '2018 European Skills 
Index'. 

Coutinho, L., Turrini, A. and Zeugner S. (2018), 'Methodologies for the Assessment of Current Account 
Benchmarks', European Commission Discussion Paper 086/September 2018 

European Commission (2018a), Draft Joint Employment Report 2019, Luxembourg: Publications Office 
of the European Union, 2018 
semester-draft-joint-employment-report_en_1.pdf 

 https://ec.europa.eu/info/sites/info/files/file_import/2019-european-

European Commission (2018b), 'The 2018 Ageing Report: Economic and Budgetary Projections for the 
EU Member States (2016-2070) ', European Economy, Institutional papers, No 079, May 2018 

European  Commission  (2018c),  'Enhanced  surveillance  report  –  Greece  2018  November',  European 
Economy, Institutional papers, No 090, November 2018,  

European  Commission,  EACEA,  Eurydice  (2018d),  The  European  Higher  Education  Area  in  2018: 
Bologna Process Implementation Report, Luxembourg: Publications Office of the European Union, 2018. 

European Commission (2018e), Small Business Act Fact Sheet 2018: Greece,   
https://ec.europa.eu/docsroom/documents/32581/attachments/13/translations/en/renditions/native 

European  Commission  (2018f),  Early  Warning  Report  2018,  Luxembourg:  Publications  Office  of  the 
European Union, 2018 

European  Commission  (2018g),  Employment  and  Social  Developments  in  Europe  –  Annual  Review 
2018, Luxembourg: Publications Office of the European Union, 2018 

European  Commission  (2018h),  Intermediary  Report  2018,  Effective  Tax  Levels  Using 
Devereux/Griffith methodology, TAXUD/2018/DE/307 

the 

European Commission (2019a), 'Enhanced surveillance report – Greece, February 2019' 

European  Commission  (2019b),  'Fiscal  Sustainability  Report  2018',  European  Economy  Institutional 
Paper 094, January 2019. Luxembourg: Publications Office of the European Union, 2019 

European Commission (forthcoming), Consumer Conditions Scoreboard, 2019 edition 

Council  Recommendation  2016/C  349/01,  'Council  Recommendation  of  20  September  2016  on  the 
establishment of National Productivity Boards' 

General Secretariat of the Government (2018), 'Inter-ministerial Manual on Coordination Procedures', 
June 2018 

INSETE (2018), 'An X-Ray of Inbound Tourism 2005 – 2017. Development of figures and indicators for 
inbound tourism in Greece from its  main source  markets,  2005  – 2017', Institute of the Greek Tourism 
Confederation, INSETE, November 2018 
http://www.insete.gr/Portals/0/meletes-INSETE/01/2018_Incoming_Tourism_2005-2017_EN.pdf  

76 

 
 
 
References 

IOBE, Foundation for Industrial and Economic Research (2016a) 'The Greek Economy: Second Quarter 
2016', Athens July 2016 

IOBE, Foundation for Industrial and Economic Research (2016b) 'The Greek Economy: Second Quarter 
2016', Athens October 2016 

Monfort,  Ph.  (2009),  'Regional  Convergence,  Growth  and  Interpersonal  Inequalities  across  EU',  DG 
REGIO Working paper, 
https://ec.europa.eu/regional_policy/archive/policy/future/pdf/9_monfort_final_formatted.pdf 

Ministry  of  Administrative  Reconstruction  (2017),  'National  Strategy  for  the  Administrative  Reform 
2017-2019', July 2017 

OECD (2017), 'Entrepreneurship at glance 2017' 

OECD (2018a), 'Education at a Glance' 

OECD (2018b), 'Education for a Bright Future in Greece' 

OECD (2018c), 'Effective Teacher Policies: Insights from PISA' 

Persyn,  D.  and  Algoed  K.  (2011),  'The  effect  of  interregional  redistribution  on  regional  growth  and 
convergence', Vives discussion paper 4, April 2011’ 

Thijs,  N.,  Hammerschmid,  G.,  Palaric,  E.  (2017),  A  comparative  overview  of  public  administration 
characteristics and performance in EU28, Luxembourg: Publications Office of the European Union, 2018 

Transparency International (2018), 'Corruption Perception Index 2017', February 2018 

Turrini,  A.  and  Zeugner  S.  (forthcoming),  'Benchmarks  for  net  international  investment  positions', 
European Commission Discussion Paper 

World Economic Forum (2018), 'Global Competitiveness Report 2018' 

World Economic Forum (2017), 'The Global Competitiveness Report 2017–2018', September 2017 

World  Economic  Forum  (2018), 
https://www.weforum.org/reports/the-global-competitveness-report-2018 

'The  Global  Competitiveness  Report  2018',  October  2018, 

World Bank Group (2018a), 'Doing Business 2019' 

World Bank Group (2018b), 'Connecting to compete 2018, trade logistics in the global economy' 

WWF,  World  Wide  Fund  for  Nature  (2018),  'Annual  report  on  environmental  legislation  in  Greece', 
December 2018 

77