COMMISSION STAFF WORKING DOCUMENT Enhanced Surveillance update – Greece, June 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION Enhanced Surveillance update – Greece, June 2019
Date: 2019-06-05
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Euro Group (euro area), Greece, economic recovery, gross domestic product, macroeconomics, multilateral surveillance, public debt, stability programme, structural adjustment, sustainable development

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.6.2019  SWD(2019) 540 final  COMMISSION STAFF WORKING DOCUMENT Enhanced Surveillance update – Greece, June 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION Enhanced Surveillance update – Greece, June 2019  {COM(2019) 540 final}  
 
 
ABBREVIATIONS 

ADEDY: Ανώτατη Διοίκηση Ενώσεων Δημοσίων Υπαλλήλων (Civil Servants' Confederation) 
ADMIE: Ανεξάρτητος Διαχειριστής Μεταφοράς Ηλεκτρικής Ενέργειας  (Greek Electricity Transmission 
System Operator) 
AEDIK: Corinth Canal S.A. 
AEO: Authorised Economic Operator 
AFCOS: anti-fraud coordination service 
AFEK: Ατομικό Φύλλο Εκκαθάρισης (personal clearance certificate)  
AIA: Athens International Airport 
AMC: Asset Management Company 
ANFA: Agreement on Net Financial Assets 
APS: Asset Protection Scheme 
ASEP: Ανώτατο Συμβούλιο Επιλογής Προσωπικού (Supreme Council for Civil Personnel Selection) 
BoG: Bank of Greece 
CBD: Consolidated Banking DataCCM: Central Committee of Mediation 
CCP: Code of Civil Procedure 
CDLF (ΤΠΔ): Ταμείο Παρακαταθηκών και Δανείων (Consignment Deposits and Loans Fund) 
CEO: Chief Executive Officer 
CET1: Common Equity Tier 1 
CF: Cohesion Fund 
CIT: corporate income tax 
CO2: carbon dioxide 
CoCo: contingent convertible bond 
CoEx: Committee of Experts 
CoS: Council of State 
DAPEEP:  Διαχειριστής  Ανανεώσιμων  Πηγών  Ενέργειας  &  Εγγυήσεων  Προέλευσης  (RES  Market 
Operator) 
DEPA: Δημόσια Επιχείρηση Αερίου (Public Gas Corporation of Greece) 
DESFA:  Διαχειριστής  Εθνικού  Συστήματος  Φυσικού  Αερίου  (Natural  Gas  Transmission  System 
Operator) 
DSA: debt sustainability analysis 
DTAs: deferred tax assets 
DTCs: deferred tax credits 
EBA: European Banking Authority  
EBF: Extra Budgetary Funds 
EBRD: European Bank for Reconstruction and Development 
ECB: European Central Bank 
EDA Attiki: Εταιρεία Διανομής Αερίου Αττικής (Natural Gas Distribution Company of Attica) 
EDP: excessive deficit procedure 
EFKA: Ενιαίος Φορέας Κοινωνικής Ασφάλισης (Unified Social Security Fund)  
EFSF: European Financial Stability Facility 
EIB: European Investment Bank 
EKAPY:  Εθνική  Κεντρική  Αρχή  Προμηθειών  Υγείας  (National  Central  Authority  of  Health 
Procurements) 
EKAS: Επίδομα Κοινωνικής Αλληλεγγύης Συνταξιούχων (pensioners' social solidarity grant) 
ELA: emergency liquidity assistance 
ELSTAT: Ελληνική Στατιστική Αρχή (Hellenic Statistical Authority) 
ELTA: Ελληνικά Ταχυδρομεία (Hellenic Post) 
EMFF: European Maritime and Fisheries Fund 
EMU: Economic and Monetary Union 
ENFIA: Ενιαίος Φόρος Ιδιοκτησίας Ακινήτων (unified property tax) 
EOPYY: Εθνικός Οργανισμός Υπηρεσιών Υγείας (national health insurance body) 
EPA Attiki: Εταιρεία Παροχής Αερίου Αττικής (Natural Gas Supply Company of Attica) 
ERDF: European Regional Development Fund  
ERGANI: database of registered employment contracts 

i 

 
ESA: European System of Accounts 
ESKAEN: Εθνικό  Συμβούλιο για  την Κωδικοποίηση και την  Αναμόρφωση της Ελληνικής Νομοθεσίας 
(National Council for the Codification of Legislation) 
ESM: European Stability Mechanism 
ETAA: Ενιαίο Ταμείο Ανεξαρτήτων Απασχολούμενων (Independent professionals Social Security Fund)  
ETAD: Εταιρεία Ακινήτων Δημοσίου ΑΕ (Public Properties Company) 
ΕΤΕΑΕP: Ενιαίο Ταμείο Επικουρικής Ασφάλισης & Εφάπαξ Παροχών (Single Social Security Fund for 
Supplementary and Lump Sum Benefits) 
ETMEAR:  Ειδικό  Τέλος  Μείωσης  Εκπομπών  Αερίων  Ρύπων  (Special  Duty  for  Reduction  of  Gas 
Emissions) 
ETS: emissions trading scheme 
EU: European Union 
EYATH A.E.: Εταιρεία Ύδρευσης και Αποχέτευσης Θεσσαλονίκης Α.Ε.(Thessaloniki Water Supply and 
Sewerage Company S.A.) 
EYDAP  A.E.: Εταιρεία Ύδρευσης και  Αποχέτευσης  Πρωτευούσης  A.E. (the  Athens Water Supply and 
Sewerage Company S.A.) 
FDI: foreign direct investment 
FEK: Φύλλο Εφημερίδος της Κυβερνήσεως (Government Gazette Issue) 
GACS: Guarantee on Securitization of Bank Non Performing LoansGAIAOSE: SOE active in the fields 
of railway property and rolling stock exploitation, management and development 
GAO: General Accounting Office (part of Ministry of Finance) 
GDP: gross domestic product 
GFN: gross financing needs  
GGE: general government entities 
GLF: Greek Loan Facility 
GSAC: General Secretariat for Anti-corruption 
GSCO: General Secretariat for Coordination 
GSIS: General Secretariat of Information Systems 
HBA: Hellenic Banking Association 
HCA: Hellenic Court of Auditors 
HCAP: Hellenic Corporation of Assets and Participations 
HELPE: Hellenic Petroleum 
HFED: Hellenic Fund for Entrepreneurship and Development 
HFSF: Hellenic Financial Stability Fund 
HICP: harmonised index of consumer prices 
HR: human resources 
IAPR: Independent Authority for Public Revenue 
ICT: information and communication technologies 
IDIKA:  Ηλεκτρονική  Διακυβέρνηση  Κοινωνικής  Ασφάλισης  Α.Ε.  (Government  Center  for  Social 
Security Services) 
ILIMS:  Ολοκληρωμένο  Πληροφοριακό  Σύστημα  Άσκησης  Δραστηριοτήτων  και  Ελέγχων  (Integrated 
Licensing and Inspections Management System) 
IMD: International Institute for Management Development 
IMF: International Monetary Fund 
JMD: Joint Ministerial Decision 
KEAO: Κέντρο Είσπραξης Ασφαλιστικών Οφειλών (Centre for the Collection of Social Security Debt) 
KEK: Kεντρική Επιτροπή Κωδικοποίησης (Central Codification Committee) 
KEPA: Κέντρο Πιστοποίησης Αναπηρίας (Disability certification centre) 
KEPE:  Κέντρο  Προγραμματισμού  και  Οικονομικών  Ερευνών  (Centre  of  Planning  and  Economic 
Research) 
KPI: Key Performance Indicator 
KYSOIP: Governmental Council for Economic Policy 
LCR: liquidity coverage ratio 
LFS: labour force survey 
MAR: Ministry of Administrative Reform 

ii 

 
 
MFI: Monetary Financial Institution 
MoJ: Ministry of Justice, Transparency and Human Rights  
MoF: Ministry of Finance 
MREL: minimum requirement for own funds and eligible liabilities 
MSS: motor service stations 
MTFS: Medium-Term Fiscal Strategy 
MTO: medium-term budgetary objective 
MW: megawatt 
MWh: megawatt hour  
NACAP: National Anti-corruption Action Plan 
NED: Non-Executive Directors 
NFC: non-financial corporation 
NOME: Nouvelle Organisation du Marché de l'Electricité (electricity auction) 
NPE: non-performing exposure 
NPL: non-performing loan 
NSJ: National School of Judges 
NSRF: National Strategic Reference Framework  
OAEE: Οργανισμός Ασφαλίσεων Ελεύθερων Επαγγελματιών (Self-employed Social Security Fund) 
OAKA: Ολυμπιακό Αθλητικό Κέντρο Αθήνας «Σπύρος Λούης (Olympic Athletic Centre of Athens)  
OASA: Οργανισμός Αστικών Συγκοινωνιών Αθηνών (Athens’ public transport company) 
OASTH: Οργανισμός Αστικών Συγκοινωνιών Θεσσαλονίκης (Thessaloniki’s public transport company) 
OBL: organic budget law 
OCC: Operational Coordination Centre 
OCW: out-of-court workout mechanism 
OECD: Organisation for Economic Co-operation and Development 
OGA: Οργανισμός Γεωργικών Ασφαλίσεων (Agricultural Insurance Organization) 
OPEKA: Οργανισμός Προνοιακών Επιδομάτων και Κοινωνικής Αλληλεγγύης (Organization of Welfare 
Benefits and Social Solidarity) 
OPS-SEPE:  Ολοκληρωμένο  Πληροφοριακό  Σύστημα  -  Σώμα  Επιθεώρησης  Εργασίας  (Integrated 
Information System - Labor Inspectorate) 
OSDDY/PP:  Ολοκληρωμένο  Σύστημα  Διαχείρισης  Δικαστικών  Υποθέσεων  /  Πολιτικών  και  Ποινικών 
(Integrated Management System for Judicial Cases / Civil and Penal) 
OTC: over-the-counter 
PCI: European Project of Common Interest 
PCR: price coupling of regions 
PDMA: Public Debt Management Agency 
PFM: public financial management 
PIB: public investment budget 
PIT: personal income tax 
PPC: Public Power Corporation 
PRP: Primary Residence Protection 
PSO: public service obligation 
RAE: Ρυθμιστική Αρχή Ενέργειας (Regulatory Agency for Energy) 
RAEM: Ρυθμιστική Αρχή Επιβατικών Μεταφορών (Regulatory Authority for Passenger Transport) 
RES: renewable energy source 
RFA: Relationship Framework Agreement 
ROSCO: Rolling-Stock Maintenance Company 
SME: small and medium-sized enterprise 
SMP: Securities Markets Programme 
SOE: State-owned enterprise 
SPA: Single Payment Authority 
SPV: special purpose vehicle 
SRSS: Structural Reform Support Service 
SRSP: Structural Reform Support Programme 
SSI: social solidarity income 

iii 

 
 
SSM: Single Supervisory Mechanism 
SSW: Special Secretariat for Water 
SUP: Special Urban Planning 
TAIPED:  Ταμείο  Αξιοποίησης  Ιδιωτικής  Περιουσίας  του  Δημοσίου  AE  (Hellenic  Republic  Asset 
Development Fund) 
TEI: Τεχνολογικό Εκπαιδευτικό Ίδρυμα (technical education institutions) 
TEN-E Regulation: Trans-European Networks-Energy 
TITLOS: swap proceeds securitized in the form of a structured finance vehicle 
TLA: Tunnel Licencing Authority 
TOMY: Τοπική Μονάδα Υγείας (Primary Health Care Unit) 
TSA: Treasury Single Account 
UCoA: Unified Chart of Accounts 
VAT: value added tax 
WWF: World Wide Fund for Nature 

iv 

 
 
 
ACKNOWLEDGEMENTS 

This report is prepared as accompanying document to the Commission's assessment pursuant Article 3(5) 
of  Regulation  (EU)  472/3013  published  as  Communication  from  the  Commission  –  Enhanced 
Surveillance – Greece, June 2019. It was prepared in the Directorate General Economic and Financial 
Affairs, under the direction of Marco Buti, Director General, Carlos Martínez Mongay, Deputy Director 
General, Declan Costello, Director and Mission Chief, and the coordination of Paul Kutos, Head of Unit 
and Deputy Mission Chief and Milan Lisicky, Deputy Head of Unit. 

Contributors: 

Chris Allen, Giuseppe Carone, Declan Costello, Fotini Dionyssopoulou, Matteo Duiella, Christos Gofas, 
András Hudecz, Alexander Ioannidis, Paul Kutos, Eloïse Lecouturier, Milan Lisicky, Vasileios Maroulis, 
Benedetta  Martinelli,  Vasilis  Nikitas,  Miguel  Angel  Otero,  Elena  Pavlova,  Zoltán  Petrov,  Eleni 
Polemidiotou, Nevenka Tosici, Andreas Trokkos, Vasiliki Vasilopoulou, Irene Vlachaki, Rainer Wichern, 
Alkistis Zavakou. Assistance was also provided by Fotini Louka and Siofra Mc Donnell. 

The European Central Bank (ECB) Staff participated in the drafting of this report in accordance with the 
ECB’s  competences  and  thus  provided  expertise  on  financial  sector  policies  and  macro-critical  issues, 
such  as  headline  fiscal  targets  and  sustainability  and  financing  needs.  Staff  of  the  European  Stability 
Mechanism (ESM) contributed to the preparation of this report in the context of the ESM's Early Warning 
System and in accordance with the Memorandum of Understanding of 27 April 2018 on working relations 
between the European Commission and ESM. IMF staff participated in the context of its 2019 Article IV 
surveillance cycle. 

Comments on the report would be gratefully received and should be sent, by mail or e-mail to: 

Paul Kutos 

European Commission 

Unit ECFIN-F-2 

CHAR 14/103 

B-1049 Brussels 

e-mail: ECFIN-GREECE-REQUESTS@ec.europa.eu 

v 

 
 
 
 
CONTENTS 

Commission Staff Working Document 

1. 

Introduction 

2.  Macroeconomic developments 

3. 

Fiscal and fiscal-structural policies 

3.1. 
3.2. 

FISCAL POLICY 
FISCAL STRUCTURAL POLICIES 
3.2.1.  Taxation 
3.2.2.  Revenue administration 
3.2.3.  Public financial management 

4. 

Social welfare 

4.1.  PENSIONS 
4.2.  HEALTH CARE 
4.3. 

SAFETY NETS 

5. 

Financial sector 

5.1. 

FINANCIAL SECTOR DEVELOPMENTS 
5.1.1.  Financial sector overview and financial stability assessment 
5.1.2.  Financing of the economy 
5.2. 
FINANCIAL SECTOR POLICIES 
5.3.  HELLENIC FINANCIAL STABILITY FUND 

6. 

Labour and product markets 

LABOUR MARKET 

6.1. 
6.2.  PRODUCT MARKETS AND COMPETITIVENESS 

6.2.1.  Business environment 
6.2.2.  Network industries 

7.  Hellenic Corporation of Assets and Participations (HCAP) and privatisation 

7.1.  HCAP 
7.2. 

IMPLEMENTATION OF THE ASSET DEVELOPMENT PLAN 

8. 

Public administration and justice 

8.1.  PUBLIC ADMINISTRATION 

Improving the human resource management in the public administration 

8.1.1.  Appointments of senior management positions 
8.1.2. 
8.1.3.  Better regulation and coordination 
8.1.4.  Controlling the size and cost of public sector 
JUSTICE 

8.2. 

9. 

Sovereign financing and capacity to repay 

9.1. 

SOVEREIGN FINANCING 

3 

5 

7 

9 

9 
15 
15 
16 
18 

23 

23 
23 
25 

27 

27 
27 
29 
31 
36 

37 

37 
38 
40 
45 

49 

49 
51 

55 

55 
55 
55 
56 
57 
58 

61 

61 

vii 

 
 
62 

63 

8 

10 
11 
13 
18 
20 
29 

8 
23 
24 
27 
28 
30 
30 
31 
34 
35 
38 
39 
61 

14 
19 

42 
43 

9.2.  DEBT SUSTAINABILITY 

Annex 

LIST OF TABLES 

Summary of the main macroeconomic variables 

2.1. 
3.1.  Differences in the Commission 2019 spring forecast and Greece's Stability Programme (% of 

GDP) 

3.2.  Measures legislated in May 2019 (% of GDP) 
3.3.  Policy intentions for measures to be adopted in late 2019 (% of GDP) 
3.4.  KPIs of the IAPR (2018-2019) 
3.5.  Arrears clearance plan (actual data until March 2019, in million EUR) 
5.1.  Main financial stability indicators 

LIST OF GRAPHS 

2.1.  Real GDP and growth contributions 
4.1.  Pensions and social spending 
4.2.  Evolution of outpatient pharmaceuticals clawback 
5.1.  Bank deposits (left panel) and total borrowing from the Eurosystem (right panel) 
5.2.  Evolution of NPL ratio (left) and NPL stock (right) 
5.3.  Bank credit to non-financial corporations and households 
5.4.  Bank interest rates on new loans 
5.5.  Cumulative number of e-auctions conducted since 29 November 2017 
5.6. 
5.7.  Outcome of multilateral negotiations - businesses 
6.1. 
6.2.  Evolution of Greece's export market share 
9.1.  Greece's credit ratings and yield spreads compared to the Bund 
9.2.  62 

Share of uninsured workers found in high-risk sectors. January 2013 - April 2019 

Submitted business applications 

LIST OF BOXES 

3.1.  Under-execution of spending ceilings in 2018 
3.2. 
6.1.  Assessment of the economic impact of selected product market reforms in pharmacies 

The phasing out of ex ante audits performed by the HCA 

and over-the-counter (OTC) drugs 

6.2.  Assessment of the economic impact of reforms affecting Sunday retail trading 

viii 

 
 
 
 
 
 
 
 
 
 
 
 
Commission Staff Working Document 

 
 
 
 
 
1. 

INTRODUCTION 

Economic  developments  and  policies  in  Greece  are  monitored  under  the  regular  economic 
surveillance framework for euro-area Member States under the European Semester for economic 
policy co-ordination and under the enhanced surveillance framework according to Regulation (EU) 
No 472/2013 (1). The activation of enhanced surveillance for Greece (2) acknowledges the fact that over 
the medium term, Greece needs to continue adopting measures to address the sources or potential sources 
of  economic  and  financial  difficulties,  while  implementing  structural  reforms  to  support  a  robust  and 
sustainable economic growth.  

Greece  made  a  general  commitment  at  the  Eurogroup  of  22  June  2018  to  continue  and  complete 
reforms  adopted  under  the  ESM  programme  and  to  ensure  that  the  objectives  of  the  important 
reforms  adopted  under  the  financial  assistance  programmes  are  safeguarded.  In  addition,  Greece 
made  specific commitments  to complete  key  structural reforms started under the programme in  six key 
areas  by  agreed  deadlines  up  to  mid-2022,  namely  (i)  fiscal  and  fiscal-structural  policies,  (ii)  social 
welfare,  (iii)  financial  stability,  (iv)  labour  and  product  markets,  (v)  privatisation  and  (vi)  the 
modernisation  of  public  administration (3).  Greece  reiterated  these  commitments  given  to  European 
partners in the Eurogroup  statement of 5  April 2019 (4). In this context,  15  specific commitments  were 
made with a deadline of mid-2019, progress on which is assessed in this report.  

This report is based on the findings of a mission to Athens between 6 and 8 May 2019 and regular 
dialogue  with  the  authorities (5).  The  mission  was  conducted  by  the  Commission  in  liaison  with  the 
ECB (6);  the  IMF  participated  in  the  context  of  its  2019  Article  IV  surveillance  cycle,  while  the  ESM 
participated  in  the  context  of  its  Early  Warning  System  and  in  line  with  the  Memorandum  of 
Understanding of 27 April 2018 on working relations between the European Commission and ESM.  

Enhanced  surveillance  provides  a  comprehensive 
for  monitoring  economic 
developments and the pursuit of policies needed to ensure a sustainable economic recovery. To this 
end, this  report includes an assessment of economic conditions in Greece (chapter 2); an assessment of 
implementation of reform commitments given by Greece to the European partners (chapters 3-8); and an 
update on sovereign financing conditions and debt repayment capacity (chapter 9). This report is issued 
alongside the 2019 spring Semester package that includes an assessment of Greece’s Stability Programme 
and the Commission Recommendation for country-specific recommendations to Greece. 

framework 

The Eurogroup on 22 June 2018 agreed that the package of debt relief measures for Greece should 
include incentives to ensure a strong and continuous implementation of the reform measures agreed 
in the programme. To this end, the implementation of some of the agreed debt measures (the abolition of 
the step-up interest rate  margin related to the debt buy-back tranche of the European Financial Stability 
Facility  (EFSF)  programme  as  of  2018  and  the  restoration  of  the  transfer  of  equivalent  amounts  to  the 
income earned by euro-area national central banks on Greek government bonds held under the Agreement 
on Net Financial Assets (ANFA) and the Securities Market Programme (SMP) will be made available to 
Greece  subject  to  compliance  with  its  commitments  on  reform  continuity  and  completion,  based  on 

(1)  Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic 
and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to 
their financial stability, OJ L 140, 27.5.2013, p. 1. 

(2)  Commission Implementing Decision (EU) 2018/1192 of 11 July 2018 on the activation of enhanced surveillance for Greece, OJ 
L  211,  22.8.2018,  p.  1,  and  Commission  Implementing  Decision  (EU)  2019/338  of  20  February  2019  on  the  extension  of 
enhanced surveillance for Greece. 

(3)  https://www.consilium.europa.eu/media/35749/z-councils-council-configurations-ecofin-eurogroup-2018-180621-specific-

commitments-to-ensure-the-continuity-and-completion-of-reforms-adopted-under-the-esm-programme_2.pdf 

(4)  https://www.consilium.europa.eu/en/press/press-releases/2019/04/05/eurogroup-statement-on-greece-of-5-april-2019/ 
(5)  This report is based on information available up to 28 May 2019. 
(6)  ECB  staff  participated  in  the  review  mission  in  accordance  with  the  ECB’s  competences  and  thus  provided  expertise  on 
financial  sector  policies  and  macro-critical  issues,  such  as headline  fiscal  targets  and  sustainability  and  financing  needs.  The 
review mission was preceded by a technical mission from 1 to 4 April. 

5 

 
 
                                                           
 
Commission Staff Working Document -  

Chapter 1 - Introduction 

positive  reports  under  enhanced  surveillance.  The  return  of  SMP-ANFA  income  equivalent  amounts 
would be made available to Greece in semi-annual tranches of some EUR 640 million up to mid-2022. 
The waiver of the step-up interest rate margin, for part of the EFSF loans, would reduce interest payments 
by  some  EUR  220  million  annually.  It  would  be  waived  on  a  semi-annual  basis  until  2022  and 
permanently after 2022. Following the Eurogroup on 5 April 2019, the first tranche of policy-contingent 
debt measures has been completed, inter alia based on the assessment of the implementation of Greece’s 
commitments for end-2018 in an updated enhanced surveillance report adopted by the Commission on 3 
April 2019 (7). Given that last year’s full amount and half of this year’s instalments of the interest step-up 
margin were eligible for a waiver, the policy-contingent debt measures exceptionally amounted to some 
EUR 970 million (8).  

(7)  https://ec.europa.eu/info/sites/info/files/economy-finance/enhanced_surveillance_report_-_greece_april_2019_en.pdf 
(8)  https://www.esm.europa.eu/press-releases/efsf-approves-reimbursement-and-reduction-step-interest-margin-greece  

6 

 
                                                           
2.  MACROECONOMIC DEVELOPMENTS 

Greece’s  economic  recovery  is  expected  to  continue  in  2019 (9).  Although  the  last  quarter  of  2018 
showed  some  deceleration  in  economic  activity,  with  real  GDP  decreasing  at  0.1%  quarter-on-quarter 
(seasonally and working-day adjusted), this slight decrease came after strong growth in the third quarter. 
The  annual  growth  rate  in  2018  came  in  at  1.9%,  which  confirms  that  the  recovery  is  gaining  some 
momentum. Real GDP growth is forecast to reach 2.2% in both 2019 and 2020, supported primarily by 
domestic  demand.  This  forecast  does  not  take  into  account  the  possible  effects  of  the  fiscal  measures 
announced in May, which will be assessed in the next fully fledged forecast in the autumn. 

Private  consumption  is  forecast  to  perform  well  in  2019.  Private  consumption  has  been  a  steady 
contributor to growth in both 2017 and 2018. The consumer sentiment indicator has been on a steady rise 
since mid-2018 and in the first five months of 2019 reached levels not seen since beginning of the crisis. 
The increase in the statutory minimum wage and the abolishment of the sub-minimum wage is expected 
to provide an additional boost to private spending in the short term.  

An increase in public consumption may support growth this year. A decrease of 2.5% in real public 
consumption put a drag on growth in 2018. This was the result of continued and large under-spending in 
intermediate  consumption  compared  to  the  budgeted  targets.  The  rule-based  forecast  for  2019  assumes 
that the budget targets will be respected and achieved in 2019, therefore public consumption is expected 
to rebound and grow by 3.1% in real terms this year: In practice, and as outlined in chapter 3.1, there are 
risks that intermediate consumption may once again fall short of budget targets in 2019, an outcome that 
would act as a drag on growth.  

Investment is expected to rebound in 2019, but only if the public investment budget is executed in 
full,  which  is  not  assured.  Real  gross  fixed  capital  formation  declined  by  12.2%  in  2018,  performing 
well below expectations. A large part of this decrease was due to the continued large under-execution of 
the  public  investment  budget.  Public  investment  in  2018  declined  close  to  29%  in  nominal  terms.  This 
had a negative multiplier effect on corporate investment as well, as many private investment projects are 
related to public investments. On a technical note, it is important to highlight that gross capital formation 
declined much less than gross fixed capital formation, i.e. the accumulation of inventories was substantial 
in 2018 whereas inventories declined in 2017. For 2019, the Commission projects double-digit growth in 
investment  based  on  the  assumption  that  the  public  investment  budget  will  be  executed  fully  and  will 
support  real  investment  activity:  in  practice,  however,  there  are  considerable  risks  that  the  structural 
bottlenecks to design and implement public investment projects of adequate quality will materialise again 
in 2019 notwithstanding the technical assistance provided by the European Commission to strengthen the 
project pipeline. The recovery of residential  construction is also expected to strengthen, while corporate 
investments may gain momentum once there is more clarity in public policy intentions after the national 
parliamentary elections. 

Exports  may  decelerate  amid  an  external  slowdown.  The  main  success  story  in  the  macroeconomic 
picture of 2018 was the buoyant performance of the export sector. Exports of goods recorded 8.4% real 
growth, while exports of services increased by 9.3%. Export performance is expected to moderate in 2019 
as  the  slowdown  of  the  external  environment  curbs  down  foreign  demand  of  goods,  and  the  capacity 
reserves left for the volume of tourism to increase further are limited. At the same time, exports of goods 
and services are still expected to increase by close to 5% in 2019 and close to 4% in 2020 in real terms. 

The  labour  market  shows  further  improvements,  although  the  decline  in  unemployment  halted 
since  October  2018.  Unemployment  has  been  declining  from  20.9%  in  December  2017  to  18.6%  in 
October 2018, and has been hovering around that level until February 2019. Employment grew by 1.7% 
in  2018  according  to  the  national  accounts  definition,  and  by  2%  according  to  the  labour  force  survey. 

(9)  The Commission’s most recent forecast was published on 7 May 2019: European Economic Forecast, Spring 2019, Institutional 

Paper 102, May 2019. https://ec.europa.eu/info/publications/european-economic-forecast-spring-2019_en 

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Employment still showed year-on-year growth of 2.4% in February, though this reflects earlier gains in 
employment  rather  than  recent  improvements,  as  the  actual  level  of  employment  has  been  on  a  mildly 
decreasing path since mid-2018, as reported in the labour force survey. Detailed monitoring is foreseen to 
assess the impact of the recent increase of the minimum wage and the abolition of the sub-minimum wage 
on the pace of the recovery in the labour market. 

Graph 2.1: 

Real GDP and growth contributions 

Source: European Commission 

Annual  inflation  reached  0.9%  on  average  in  the  first  four  months  of  2019.  Price  increases  are 
expected to remain  muted throughout the  year. Inflation  was driven primarily by non-core items,  while 
core inflation (HICP excluding energy and unprocessed food) remained at 0.6% for this period. Energy 
inflation  is  expected  to  moderate  in  the  rest  of  the  year,  while  core  inflation  is  set  to  increase  mildly, 
partly  due  to  the  ongoing  economic  recovery  and  partly  due  to  the  inflationary  effect  of  the  minimum 
wage  increase.  Inflation  is  expected  to  pick  up  considerably  only  in  the  outer  years,  as  the  output  gap 
closes. 

Downside risks dominate the forecast in the short and medium term. The forecast is heavily reliant 
on  technical  assumptions  regarding  the  execution  of  the  general  government  budget  ceilings  for 
investment  and  ordinary  spending.  Should  this  assumption  not  hold,  both  public  consumption  and 
investment  may  turn  out  to  be  significantly  lower.  Also,  the  forecast  assumes  no  reform  reversals  that 
may  affect  business  sentiment.  While  expansionary  fiscal  measures  adopted  in  May  could  provide  an 
additional boost to domestic  demand in the  near term, there  are also risks on the downside. Investment 
financing  through  the  banking  system  may  face  challenges,  should  the  level  of  non-performing  loans 
remain  high.  Increased  labour  costs  may  weigh  on  firms’  profit  margins  more  than  currently  expected, 
which  would  further  limit  business  investment.  The  marked  slowdown  in  foreign  demand  is  currently 
expected to have a moderate effect on Greece’s export performance. In case of an even more pronounced 
deterioration in the external environment, or a stronger pass-through to Greece, the recovery may prove to 
be more sluggish. 

Table 2.1: 

Summary of the main macroeconomic variables 

Source: European Commission 

8 

-3-2-10123452017201820192020202120222023%, pps.Private consumptionPublic consumptionInvestmentNet exportsChange in inventoriesForecast201820192020202120222023Real GDP1.92.22.21.91.71.0Employment growth1.71.51.31.00.70.7Unemployment rate19.318.216.815.914.914.2GDP deflator0.51.11.21.51.62.0Harmonised index of consumer prices0.80.80.81.01.82.0 
 
 
 
 
3. 

FISCAL AND FISCAL-STRUCTURAL POLICIES 

3.1. 

FISCAL POLICY 

Greece  overachieved  the  agreed  primary  surplus  target  of  3.5%  of  GDP  in  2018.  The  general 
government  headline balance reached 1.1% of GDP in 2018, recording a surplus for the third  year in  a 
row. The primary balance, as per the definition monitored under enhanced surveillance, reached 4.3% of 
GDP, i.e. 0.8% above the fiscal target of 3.5% of GDP, after taking into account two large payments that 
made use of the fiscal space in 2018: refunds of wages to uniformed personnel and other public officials 
following a decision of the Council of  State (materialisation of fiscal risks), and a payment of a means-
tested cash transfer to low-income households (‘social dividend’), neither of which was envisaged in the 
initial  budget  for  2018.  The  primary  balance  would  have  reached  5.2%  of  GDP  in  absence  of  these 
payments.  

A large proportion of the overachievement is due to continued under-execution of spending ceilings, 
notably on public investment. As analysed in Box 3.1, the main drivers of the over-performance were 
lower-than-expected investment expenditure, consumption and social expenditure. For  the most part, the 
under-execution of expenditure arises due to budget ceilings being set above the actual spending capacity 
of individual budgetary units and underlines the need for realistic estimates of costs of new policies and 
proper assessments of the state of play on major spending projects underpinning the ceilings. These issues 
have occurred for a number of years. The European institutions are supporting the authorities to address 
the  reasons  for  the  underspending  by  further  improving  the  budget  preparation  process,  enhancing  the 
capacity  of  the  General  Accounting  Office  to  properly  scrutinise  budget  proposals  of  the  main  general 
government  entities,  and  to  establish  a  unified  approach  to  budgetary  planning  by  transferring 
responsibility for the setting of investment spending targets to the General Accounting Office. 

Given  the  underlying  causes,  the  over-achievement  of  the  primary  surplus  target  in  2018  is  not 
carried  over  to  2019  in  the  fiscal  projections  of  the  European  institutions.  In  line  with  standard 
practices  applied  to  all  Member  States,  the  fiscal  projections  prepared  by  the  European  institutions 
traditionally assume full execution of the budget ceilings, for a number of reasons. As mentioned above, 
the underspending recorded in the past years is largely due to an overstatement of budget ceilings, rather 
than objective reasons outside the control of the authorities. Secondly, anticipating underspending and the 
resulting fiscal space in the projections could lead to double booking of expenditure. Such practice would 
decrease the transparency of the budgetary framework and pose risks to reaching the fiscal targets either 
because  the  initial  budget  ceilings  are  used  fully  or  because  the  authorities  adopt  additional  one-off  or 
permanent fiscal measures throughout the year. For the reasons outlined above, and also given the need to 
take a balanced view of downside risks (see below), the projection of the European institutions is based 
on  the  assumption  that  budget  ceilings  are  fully  executed,  with  the  risk  of  underspending  treated  as  an 
upside ‘risk’ to the forecast. 

The  Commission  2019  spring  forecast,  published  before  Greece’s  adoption  of  a  new  package  of 
fiscal measures on 15 May 2019, indicated that the primary surplus target of 3.5% of GDP is met 
throughout the forecast horizon. The projection included measures adopted in the context of the 2019 
Budget,  most  notably  the  reduction  in  the  ENFIA  property  tax  in  2019;  a  reduction  in  social  security 
contributions  for  the  self-employed,  independent  professionals  and  farmers;  a  gradual  decrease  in  the 
corporate income tax rate by 1 percentage point each year in 2020-2023; and the introduction of a new 
housing  benefit.  It  also  incorporated  the  cost  of  the  subsidy  for  the  protection  of  primary  residences, 
which the authorities project at EUR 150 million in 2019 and EUR 200 million in 2020. The actual cost 
of the subsidy may turn out significantly lower both in view of the delays with initiating the scheme and 
the possible overestimation of its cost by the authorities. The projection also took into account the expiry 
of  the  current  claw-back  arrangement  in  2022  (on  current  legislation),  which  constrains  healthcare 
spending  ensuring  that  it  stays  within  the  agreed  ceiling.  In  terms  of  the  underpinning  measures,  the 

9 

 
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Commission  2019  spring  forecast  and  the  fiscal  projection  presented  by  the  Greek  authorities  in  their 
2019 Stability Programme have similar assumptions. 

Nevertheless,  the  primary  surplus  projected  by  the  Commission  in  its  2019  spring  forecast  was 
considerably  lower  than  that  of  the  Greek  authorities  in  their  Stability  Programme  sent  to  the 
Commission  at  the  end  of  April  2019 (10).  In  their  Stability  Programme,  the  authorities  forecast  a 
primary surplus reaching 4.1% of GDP in 2019 and 3.9% of GDP 2020, rising to 4.6% of GDP in 2022. 
As  shown  in  Table  3.1,  one  third  of  the  difference  between  the  projections  of  the  authorities  and  the 
European institutions in 2020 is due to a more favourable forecast of the macroeconomic environment by 
the authorities, and another 40% is due to a recent re-allocation of part of the public investment budget 
from entities outside general government to financial grants to state-owned enterprises (see below). Other 
differences are of smaller magnitude in 2020 and concern mainly the modelling of Greece’s contributions 
to the EU budget, which is currently under assessment. 

Table 3.1: 

Differences in the Commission 2019 spring forecast and Greece's Stability Programme (% of GDP) 

Source: European Commission 

The  Greek  authorities  incorporate  the  underspending  observed  in  previous  years  in  their  fiscal 
projections  with  balance-improving  effects  of  0.3%  and  0.2%  of  GDP  in  2019  and  2020, 
respectively. In operational terms, this change  was implemented through a re-assignment of part of the 
expenditure  previously  foreseen  for  investment  outside  general  government  to  grants  to  state-owned 
enterprises, without adjusting the spending ceilings of the investment budget. Since the authorities assume 
these  grants  will  not  be  used  by  the  state-owned  enterprises  for  additional  investment,  this  accounting 
operation has a balance-improving effect in their projections. The European institutions have not received 
adequate information neither on the nature nor on the specific recipients of the additional grants, and have 
therefore not reflected this in their projection. 

In their Stability Programme, the Greek authorities announced their intention not to implement the 
pre-legislated  income  tax  credit  package,  which  was  set  to  enter  into  force  in  January  2020.  This 
means not proceeding with measures that broaden the tax base and create fiscal space of 1% of GDP for 
growth-enhancing reforms of the tax system (11). In line with standard practice for all Member States, the 
announcement  was  reflected  in  the  Commission  2019  spring  forecast,  even  if  the  changes  to  the 
respective tax laws are not yet legislated. As the income tax credit package was fiscally broadly neutral, 
the announcement has only a strictly limited impact in the forecast.  

(10)  The Stability Programme represents Greece’s national medium-term fiscal plan under Article 4(1) of Regulation (EU) 473/2013 
of  the  European  Parliament  and  of  the  Council  of  21  May  2013  on  common  provisions  for  monitoring  and  assessing  draft 
budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area. 

(11)  See  Box  3.1  in  the  second  enhanced  surveillance  report  of  February  2019  for  a  comparative  assessment  of  the  structure  and 
main  issues  in  the  Greek  tax  system.  https://ec.europa.eu/info/publications/enhanced-surveillance-report-greece-february-
2019_en 

10 

20192020202120222023Commission 2019 Spring Forecast3.63.53.74.03.5Greece's Stability Programme (Greek authorities)4.13.94.14.64.2Differences -0.5-0.4-0.4-0.6-0.7Of which:EIs more prudent macro scenario-0.1-0.1-0.2-0.3-0.5Reduction of GG investment-0.3-0.2-0.2-0.1-0.1Greece's contribution to the EU: under assessment0.0-0.10.00.00.0Military deliveries: risks in 2019-0.10.00.00.00.1Indexation of expenditure in medium term0.00.0-0.1-0.3-0.5State revenues: 2nd round effects of measures-0.10.00.00.00.1Remaining differences0.00.00.00.00.1 
 
 
 
                                                           
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Chapter 3 - Fiscal and fiscal-structural policies 

Table 3.2: 

Measures legislated in May 2019 (% of GDP) 

Source: European Commission 

On 15 May 2019, and thus after the submission of the Stability Programme, the authorities adopted 
a package of permanent fiscal measures, which the European institutions estimate will have a fiscal 
cost of more than 1% of GDP in 2019 and beyond. The measures include new instalment schemes for 
debts  on  taxes  and  to  social  security  funds  and  municipalities,  reductions  in  selected  VAT  rates, 
introduction of a 13th pension and a reversal of an earlier reform of survivors’ pensions. The European 
institutions’  estimates  of  the  fiscal  cost  of  these  measures  vary  depending  on  the  take  up  of  the  new 
instalment schemes and their impact on the existing ones and are higher than that of the Greek authorities 
(see  Table  3.2).  No  estimate  of  the  potential  fiscal  impact  of  the  new  instalment  scheme  for  taxes  and 
local government revenues has been provided to the Greek Parliament. Given that the Commission 2019 
spring forecast points to a primary balance of close to 3.5% of GDP up to 2021, the adoption of measures 
with  a  fiscal  impact  of  this  magnitude  poses  a  risk  for  the  achievement  of  the  agreed  primary  surplus 
target. Moreover, and as outlined in the assessment of the Greek Stability Programme, the measures also 
raise concerns on the achievement of the medium-term budgetary objective (MTO) of a surplus of 0.25% 
of  GDP  in  structural  terms  in  2020.  A  re-assessment  of  compliance  with  the  requirements  of  the 
preventive arm of the Stability and Growth Pact will be carried out in autumn 2019, including a revision 
of the applicable benchmark for net expenditure growth in 2020. 

The quality of the fiscal measures adopted on 15 May 2019 is of concern given the objective to make 
public  finances  more  growth-friendly  and  to  direct  a  higher  share  of  social  spending  towards 
groups  who  face  the  highest  incidence  of  poverty.  The  permanent  fiscal  cost  of  these  measures  also 
absorbs  a  considerable  amount  of  fiscal  space  that  was  envisaged  in  legislation  adopted  in  2017  for 
growth-enhancing reductions in labour and corporate tax rates. In more detail, the adopted measures are 
as follows: 

  New instalment schemes to settle debts on taxes,  social security contributions and payments to 
local governments (estimated fiscal cost ranging from 0.3-0.6% of GDP in 2019). These schemes 
contrast  a  key  reform  enacted  in  2013,  which  replaced  all  former  settlement  schemes  by  a  single 
‘basic’  scheme  used  for  tax  debt  collection  as  well  as  for  social  security  debt  collection.  The  basic 
scheme is accessible only to viable and liquidity constrained taxpayers, with eligibility assessed prior 
to  entering  the  scheme.  For  big  debtors,  the  basic  scheme  requires  a  third  party  assessment  of  the 
viability  of  the  debt  schedule  and  collateral.  It  offers  no  reduction  of  past  surcharges.  The  new 
schemes will provide the possibility to clear debts in up to  120 monthly instalments, instead of only 
12 in the basic scheme, and largely without an assessment of the ability to pay. The opening of new 
schemes  six  years  after  the  basic  scheme  was  put  in  place  creates  legitimate  expectations  that  new 
schemes  will  be  opened  again  in  the  future,  and  thus  raises  critical  concerns  about  payment 

11 

2019202020192020Instalment schemes<-0.3, -0.6><-0.3, -0.6>0.20.3Social security contributions debts<-0.1, -0.2><-0.1, -0.2>0.00.1Tax debts<-0.2, -0.4><-0.1, -0.3>0.10.2Debts to local governmentsn.a.n.a.n.a.n.a.VAT rates cuts-0.3-0.4-0.3-0.4Food products (except drinks) moved from 24% to 13%-0.1-0.1-0.1-0.1Electricity and gas moved from 13% to 6%-0.1-0.1-0.1-0.1Food services (except drinks) moved from 24% to 13%-0.2-0.2-0.2-0.2Pensions-0.5-0.5-0.5-0.5Extension of the survivor's pension0.0-0.10.0-0.1Permanent 13th pension-0.4-0.4-0.4-0.4Total impact of measures<-1.1, -1.4><-1.2, -1.5>-0.6-0.6European institutionsGreek authorities 
 
 
 
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Chapter 3 - Fiscal and fiscal-structural policies 

discipline (12). The European institutions’ estimates are based upon the impact of previous instalment 
schemes; they take into account upfront losses expected due to a large proportion of persons and legal 
entities moving from existing instalment schemes to the new and more generous one, which are likely 
to be larger than the revenue generated by the inflow of persons and entities that have not started to 
clear their debts to the government yet. See section 3.2.2 for further analysis. 

  Lower VAT rates for food products, restaurants and food services, electricity and gas (estimated 
fiscal cost of 0.4% of GDP). This measure alters an important reform of the VAT system adopted in 
July 2015 to secure  the agreement on the ESM stability support programme for Greece. The reform 
aimed to reduce the VAT gap by eliminating VAT exemptions and limiting the application of reduced 
rates. The newly adopted measure leaves in place the very high 24% standard rate (5th highest in the 
EU) while further expanding the scope of the reduced rates. This will increase the VAT gap, which is 
already the 2nd highest in the EU. See section 3.2.1 for further analysis. 

  Introduction  of  a  permanent  13th  pension  and  relaxation  of  eligibility  criteria  for  survivors’ 
pensions (estimated fiscal cost of 0.5% of GDP). These measures partially alter measures adopted in 
November 2012 and in 2016 respectively. The new 13th pension will be paid once a year at a level of 
30%-100% of current pensions (the highest percentage  for pensions below EUR 500 per month and 
the lowest for pensions above EUR 1 000 per month). Regarding the survivors’ pensions, the reform 
increases  the  generosity  of  the  pension  to  70%  (up  from  50%)  and  eliminates  the  time  limit  for 
drawing  on  the  pension  (currently  3  years  for  persons  below  50  years  of  age).  Furthermore,  the 
number  of  married  years  for  eligibility  is  reduced  from  5  to  3.  See  section  4.1  for  further  analysis. 
Overall, this reform will increase public spending on pensions – which is already the highest in the EU 
as a share of GDP – and is in contrast to measures adopted in the 2019 budget which direct a higher 
share of spending on social benefits towards young people and the working-age population who face 
much higher risks of poverty (13).  

In  addition  to  the  measures  outlined  above,  the  Greek  authorities  announced  their  intention  to 
adopt a set of additional measures for 2020. These are policy intentions to be enacted in autumn 2019 
in the context of the 2020 budget and will not be legislated now. These include reductions in tax rates, as 
well as the introduction of a  series of exemptions and tax  expenditures (see Table  3.3). The authorities 
have provided only a partial estimate of the fiscal impact of these measures, totalling EUR 1.2 billion or 
0.6% of GDP. An assessment on the quality of the measures and their impact on the achievement of the 
agreed fiscal targets would only be carried out if detailed proposals are actually tabled.  

The  Greek  authorities  have  also  announced  their  intention  to  revisit  the  agreement  reached  with 
European partners in June 2018 as regards the annual primary surplus targets of 3.5% of GDP up 
to 2022. Linked to this, the authorities are considering transferring part of the cash reserves generated by 
the  2016-2018  fiscal  over-performance  to  an  escrow  account.  Any  proposal  that  alters  the  agreement 
reached with European partners in June 2018 would need to be discussed at the Eurogroup in the context 
of an updated debt sustainability analysis.  

(12)  Note that the authorities introduced in 2014 and 2015 (outside the programme framework) two new temporary schemes for both 
taxes  and  social  security  contributions,  which  are  already  closed  for  new  inflows  of  debt  but  account  for  40%-50%  of  debt 
under settlement. The experience after the introduction of the 2015 scheme supports the expectation that participants in earlier 
settlement schemes would transfer to the new more generous scheme. 

(13)  See  box  3.1  in  the  first  enhanced  surveillance  report  of  21  November  2018.  https://ec.europa.eu/info/publications/economy-

finance/enhanced-surveillance-report-greece-november-2018_en.  

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Table 3.3: 

Policy intentions for measures to be adopted in late 2019 (% of GDP) 

Source: European Commission 

Greece’s public finances continue to face important fiscal risks with respect to ongoing court cases. 
The Council of State, Greece’s highest court, is yet to issue final decisions on the constitutionality of the 
past pension reforms and the elimination of seasonal bonuses to civil servants. No new information on the 
pending case on pensions has become available since the publication of the second enhanced surveillance 
report, and the ruling by the Council of State on the constitutionality of the cuts in seasonal bonuses is yet 
to  be  published.  The  refunds  of  wage  cuts  to  uniformed  personnel  made  in  2018  following  an  earlier 
decision  of  the  Council  of  State  were  covered  by  a  reallocation  of  resources  from  unused  expenditure 
appropriations at the end of 2018, once it  was possible to  quantify the expected  size  of  underspending. 
Should  risks  materialise,  covering  them  from  under-executed  spending  ceilings  will  likely  become 
difficult  this  year  in  view  of  the  likely  slippage  against  the  fiscal  target.  In  the  event  of  court  rulings 
overturning  key  structural  elements  of  reforms  agreed  under  the  financial  assistance  programmes,  the 
recurrent fiscal implications of such rulings should be largely addressed by actions within the same policy 
area. 

Risks related to the broadening of the scope of exemptions from  the unified wage grid have partly 
materialised  and  remain  a  source  of  concern.  Following  the  decision  in  October  2018  to  exempt 
certain officials at the Ministry of Finance from the unified wage grid, the exemption was extended to the 
Ministry  of  Economy  and  Development  in  March  2019,  with  a  retroactive  application  from  September 
2018. While the cost of this measure is relatively contained, it increases the likelihood of legal challenges 
by other groups of public officials on reason of equal treatment and/or of a  unilateral decision of other 
general government entities to extend these exemptions on an ad hoc basis. Establishing a unified wage 
grid  was one of the key reforms implemented under the  financial assistance programmes. It thus  forms 
part  of  the  commitment  to  safeguard  the  objectives  of  such  reforms  that  the  authorities  made  to  their 
European partners in June 2018. See section 8.1.4 for further analysis. 

13 

20192020Cut in reduced VAT rate from 13% to 11%0.0-0.3Reduction in Solidarity Contribution Contribution0.0-0.1Deductability of mortage interest for first residence from PIT0.00.0Lower PIT for islands with population below 3,1000.00.0Super-depreciation of investment0.0-0.1Extension of subsidy to social contributions for young employees0.0-0.1Extension of subsidy for heating oil for mountainous areas0.0n.a.Reduction of income tax for partnerships to 10% 0.0n.a.Discount of 10% of taxable income for agricultural cooperatives0.0n.a.Total impact of measures0.0-0.6Greek authorities 
 
 
 
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Chapter 3 - Fiscal and fiscal-structural policies 

14 

(Continued on the next page) 

Box 3.1: Under-execution of spending ceilings in 2018This box provides an assessment of the fiscal outturn of 2018 in comparison to the budget for that year adopted in December 2017.  The outturn for the primary surplus of 2018 was significantly higher than envisaged in the budget. While the budget targeted a primary surplus (in the definition monitored under enhanced surveillance) of 3.8% of GDP, the outturn calculated by the European institutions on the basis of data notified to Eurostat reached 4.3% of GDP, i.e. by 0.5% of GDP higher. However, the actual over-performance would have been even higher without two specific transactions not foreseen in the budget: refunds of wages to uniformed personnel and other public officials following a decision of the Council of State and a payment of a social dividend. The primary balance would have reached 5.2% of GDP in absence of these payments, giving rise to an over-achievement of 1.3% of GDP or EUR 2.5 billion.  As shown in Table 1 below, the main driver of the over-achievement was public expenditure falling well below initial plans – both for investment and ordinary spending. The overall contribution of general government revenue to the over-achievement was just about 0.1% of GDP, excluding the role of payments received from the EU on co-funded projects, which is netted from the spending on these projects on the expenditure side. More than 90% of the over-performance is therefore attributable to under-execution of general government expenditure. The single biggest contributor was investment that was expected to be carried out directly by ministries (as opposed to other subsectors of general government), where the ‘net’ size of underspending reached 800 million (0.4% of GDP). This is after removing the shortfall on projects co-funded by the EU, which was reflected in lower revenues received from the EU and is therefore neutral to the balance. Before this, the ‘gross’ underspending compared to initial plans reached EUR 2 billion, while revenues received from the EU were EUR 1.2 billion below expectations. Other main drivers of the underspending included ordinary expenditure of the state budget and pensions, mainly lump sum benefits.  Table 1: Differences between fiscal outturn and plan (+ = higher revenues or underspending) in 2018  Source: European Commission  The main underlying reasons for the expenditure shortfalls are as follows:  The investment budget, where most of the underspending arises, is separated from the budget for ordinary expenditure, a situation that has been remedied in most EU Member States, even if specific aspects of their integration differ across countries. In practice, this ‘dual budgeting’ approach implies efficiency losses and redundancies, as the priorities for the two budgets are not sufficiently coordinated, and lack of external scrutiny on the realism of the plans underpinning the budget. The situation is made worse by the fact that the ‘investment’ budget includes many ordinary expenditures, on the basis of them being (potentially) eligible for co-funding from the EU. m EUR% GDPm EUR% GDPm EUR% GDPPrimary surplus 7 0353.87 9284.3 8930.5Fiscal space used before the end of the year 00.01 5910.91 5910.9Social dividend 00.0 7690.4 7690.4Wage refunds based on a court decision (net) 00.0 8220.4 8220.4Primary surplus before use of fiscal space7 0353.89 5195.22 4841.3Of which:Investment expenditure, net of EU funds revenue3 4351.92 3191.31 1160.6State budget1 0660.6 2580.1 8080.4Extrabudgetary funds, SOEs, municipalities etc.2 3691.32 0611.1 3080.2Other expenditure67 86436.766 70936.11 1550.6State budget20 07310.919 25310.4 8200.4Operational exp., benefits, subsidies19 07310.318 58310.1 4900.3Contingency reserve1 0000.5 6700.4 3300.2Social security funds38 23920.737 72320.4 5160.3Other subsectors9 5525.29 7335.3- 181-0.1Revenue, net of EU funds78 33442.478 54742.5 2130.1DifferenceBudgetOutturn 
 
 
 
 
 
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Chapter 3 - Fiscal and fiscal-structural policies 

Box (continued) 

3.2. 

FISCAL STRUCTURAL POLICIES 

3.2.1.  Taxation 

Whilst  Greece  has  made  progress  in  the  reform  of  ENFIA  property  tax  valuation,  though 
preparations  for  a  mid-2019  realignment  of  property  values  have  not  yet  been  completed.  The 
valuation  reform  aims  at  fully  aligning  property  tax  zonal  values  with  market  prices  by  2020,  thus 
widening  the  tax  base  and  improving  the  efficiency  and  fairness  of  the  tax.  Considerable  progress  has 
been made in staffing the newly set up valuation unit and in developing the tools for valuations. Two key 
IT projects have been initiated to map electronically zonal boundaries and to systemise the collection of 
real estate data. The legal framework for the new system of property valuation by professional real estate 
values  was  established  by  an  amendment  in  Law  4587/2018.  Following  an  independent  quality 
assessment exercise of the results of the last year's nationwide valuation exercise, it was agreed that a new 
nationwide valuation exercise by valuers was not needed in 2019. However, the results of the independent 
exercise highlighted the need to extend the  market valuation system beyond the existing property value 
zones and also the need to improve the valuation of commercial properties. 

15 

 The budgeting for ordinary expenditure follows a transparent process envisaged in the Organic Budget Law (OBL) but the checks and balances envisaged in the OBL are performed rather in a formalistic manner. The current resources and sectoral knowledge of the General Accounting Office, which is part of the Ministry of Finance and coordinates the budgeting process for ordinary expenditure, do not allow exercising proper scrutiny over the budgetary plans proposed by line ministries. For instance, the General Accounting Office is not providing independent estimates of the cost of their policy plans. Moreover, the budget includes ‘non-allocated’ appropriations on top of the contingency reserve that are allocated only during the year and often end up under-executed.   A related issue is the low precision of costing of new policy plans and mandatory expenditure. A case in point is the subsidy for the protection of permanent residences, where the subsidy that existed until 2018 was repeatedly budgeted but never actually used. The cost of the new subsidy that is part of the revised framework seems to be overestimated again. Other examples include the ‘transport equivalent’ subsidy (funded from the investment budget) and the cost of new active labour market policies, both of which have been systematically overestimated. Regarding mandatory expenditure and more specifically pensions, well-founded models have been developed by the responsible ministry but these factor in sizeable buffers that could be identified to free up the fiscal space for growth-enhancing policies. While pockets of best practices regarding fiscal modelling exist in the public administration (e.g. the Council of Economic Advisors), a proper allocation of limited resources requires building up the capacity directly at the General Accounting Office, which has the responsibility over the budget preparation process.  Under-execution of budget ceilings seems to be also supported by specific budgetary rules that were introduced in the past to fight over-spending. For instance, the budget for the next year is prepared on the basis of the budget adopted for the current year, without assessing whether the budget targets were met in the previous years (or in the first half of the current year) and without scrutinising the reasons for the underspending. It is to be noted that the forecast-related provisions of the 2011/85 Budgetary Frameworks Directive (Article 4, paragraph 1) call for basing budgetary planning on the most up-to-date information, which would imply, in principle, to include the within-the-year data on budgetary execution into the information set when drawing up expenditure plans for the next year. The authorities are encouraged to tackle the root causes for the underspending. Mindful of the fact that improving a situation to a satisfactory level may take several years, the European institutions have invited the authorities to develop a scoping note for an ambitious action plan, which should mainly include the following elements: a) improving the budget preparation process, b) enhancing the capacity of the General Accounting Office (staffing, training, resources) to properly scrutinise  budget proposals by main budgetary units, and c) establishing a unified approach to budgetary planning by transferring responsibility for the setting of investment spending budget to the General Accounting Office. Implementation of the plan will require close cooperation of a number of stakeholders most notably the General Accounting Office and the General Directorates for Financial Services of line ministries.  
 
 
 
 
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As an intermediate step towards full alignment of property tax values with market prices in 2020, 
the authorities have been working towards a partial realignment in 2019. The aim would be to align 
property tax values by 50% of the remaining difference from market prices this year, in the context of a 
two-step approach. To this end, the authorities would still need to prepare the detailed timetable for the 
update  to take  place and the  associated fiscal analysis of  the realignment exercise that  would allow the 
setting of revenue neutral tax rates and thresholds. The next ENFIA property tax bills will need to be sent 
out in July 2019. 

The changes to VAT rates adopted in May 2019 alter ESM programme reforms of 2015 aimed at 
reducing the VAT gap by limiting the application of the reduced rates. The newly adopted measure 
leaves in place the very high 24% standard rate (5th highest in the EU) while further expanding the scope 
of the reduced and super-reduced rates. This will likely increase the VAT gap, which is already the 2nd 
highest  in  the  EU.  In  addition,  the  parallel  lower  VAT  rate  structure  still  remains  in  force  in  a  limited 
number of Aegean islands. 

Progress is underway on other smaller tax policy reforms. With the help of technical support, reviews 
are currently underway of the system of Stamp Duty and of the potential individual liability of corporate 
managers for tax offences. 

3.2.2.  Revenue administration 

The  hiring  of  staff  to  the  Independent  Authority  for  Public  Revenue  (IAPR)  remains  slow,  with 
only  a  marginal  increase  observed  during  the  first  quarter  of  2019  (from  11 487  to  11 534)  and 
significantly  lower  than  the  specific  commitment  for  the  end  of  2019  (12 500).  A  positive 
development during this reporting period was the publication by the Supreme Council for Civil Personnel 
Selection (ASEP) of the final list with successful candidates for the recruitment of tax/customs officials 
(546 posts). Further, the complementary measures adopted in the context of the last enhanced surveillance 
round included legal provisions to facilitate the transfer of staff to the IAPR from the  mobility scheme, 
which is expected to have a positive impact for the ongoing and future mobility cycles. The most recent 
hiring  plan  submitted  by  the  IAPR  expects  that  the  staffing  will  have  reached  12 396  by  end  of  2019, 
which would require a significant acceleration compared to the hiring trend of the previous 12 months. 

A  number  of  complementary  measures  were  adopted  earlier  in  the  year  to  ensure  the  continued 
strengthening of the IAPR's capacity, and specific follow-up actions on these measures are expected 
to be completed during the next months. First, as concerns the reform of Human Resources, the IAPR 
is expected to submit a request the Legal Council of State on the planned supplementary wage grid and to 
adopt the secondary legislation required to establish a supplementary grading scale. Second, the IAPR is 
to establish an Executive Committee to oversee the implementation of the various actions/projects that are 
part  of  the  IAPR's  strategy  document  ("Blueprint",  2019-2022).  Third,  as  concerns  the  'IT  envelope' 
agreement between the General Secretariat of Information Systems and the IAPR, while the budget has 
been established, the funds are yet to be secured. 

Progress on other commitments and reform items is mixed. On customs, continued progress has been 
made  in  delivering  on  the  anti-smuggling  strategy  and  the  fuel  tank  action  plan,  including  proceeding 
with  the  preparations  for  the  tender  on  fuel  markers  with  the  Expression  of  Interest  published  in  May 
2019. As concerns the Operational Coordination Centre that aims to coordinate the services involved in 
the  fight  of  smuggling  of  excise  goods,  a  law  amendment  relating  to  the  Centre's  internal  rules  (e.g. 
duration of secondment from the various services) would need to be adopted without delay, in order not 
to  risk  reducing  its  operational  capacity.  Continued  progress  is  being  made  in  promoting  electronic 
payments,  with  the  action  plan  being  updated  to  include  specific  milestones  to  be  achieved  until  mid-
2020. On the other hand, the asset registry, a commitment included under Greece's growth strategy and 
expected  to  be  adopted  by  end  of  2018,  has  not  been  completed.  Finally,  a  recently  adopted  law 
amendment (14)  extending  the  General  Secretariat  of  Information  Systems'  mandate  to  develop  and 
manage IT systems relating amongst other to traceability of tobacco products raises potential overlaps of 

(14)  Article 233, Law 4610/2019 (OJ A 70/7.5.2019) 

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responsibilities with the IAPR. It is therefore essential that a cooperation framework is agreed to ensure 
that the IAPR has full and easy access to the needed information.  

The  results  for  the  first  quarter  of  2019  on  tax  collection  and  other  key  performance  indicators 
(KPIs) set by the IAPR presents a mixed picture. Overall the tax collection target has not been fully 
met, as EUR 923 million were collected compared to a target of EUR 970 million. Although the target for 
collection  of  debts  by  the  Large  Debtor  Unit  has  been  met  (EUR  200  million  collected  compared  to  a 
target  of  EUR  185  million),  actual  collection  during  the  same  quarter  of  2018  had  been  close  to  15% 
higher (EUR 235.2 million). Possible reasons for the weaker than expected tax collection could include an 
extension granted by the Ministry of Finance concerning withheld income tax and the announcements of 
new instalment schemes adopted on 15 May 2019. On the other hand, KPIs in most other areas, including 
collection after audits, are being met, although, as concerns audits, improvements are needed to meet the 
target on the share of the so-called "fresh" tax audit cases, which is expected to increase in comparison to 
the overall number of audits carried out (see Table 3.4). 

The single centre for the collection of social security debt (KEAO) continues to meet its targets for 
the collection of social security debt. The targets set for 2019 are more ambitious than for the preceding 
year and rather close to the actual collection achieved during 2018. For the first quarter of 2019, the target 
was an overall collection of EUR 299 million and the actual collection exceeded this target as EUR 312 
million were collected. However, it is noteworthy that the debt collection in April 2019 was significantly 
lower than the corresponding month in 2018 (13.17%) and a plausible reason could be the announcement 
of a new instalment scheme concerning social security contribution debt. As concerns the strengthening 
of  joint  actions  between  the  IAPR  and  the  KEAO,  secondary  legislation  that  will  allow  the  KEAO  to 
consider  directly  applying  the  IAPR’s  classification  of  the  persons/entities  considered  to  have 
'uncollectable'  debt  remains  pending  and  should  be  adopted  without  delays.  Further,  the  KEAO  is 
undertaking a re-organisation, mainly consolidating its regional offices, and is also taking steps to fill the 
vacant posts (currently 450 out of 700 posts are filled), in order to further enhance its capacity. Finally, 
the  KEAO  is  currently  reviewing  the  collection  tools  available,  in  particular  how  to  more  efficiently 
target strategic defaulters, in order to present concrete suggestions during the next months. 

Finally, the authorities adopted three new instalment schemes for tax, social security and municipal 
debts  with  up  to  120  monthly  instalment  schemes (15). The  scope of  the  social  security  debt (16)  was 
more targeted as its main focus was on the self-employed and also linked future contributions to amount 
paid. In contrast, the instalment scheme on taxation (17) did not include any specific prioritisation for the 
physical  persons  with outstanding debt as of end of 2018 (e.g. include a  maximum threshold for assets 
and/or  differentiate  number  of  instalments  depending  on  type  of  debt  owed).  Also  participation  is  not 
conditional on any viability assessment. The potential fiscal impact of the adopted schemes is analysed in 
section 3.1. 

(15)  Law 4611/2019 (OJ A 73/17.5.2019) 
(16)  Online platform through EFKA's website was launched on 22 May 2019 and the deadline to submit applications is set for end of 

September 2019. 

(17)  Online platform through  IAPR's website was launched on 21 May 2019 and the deadline to submit applications is set for 28 

June 2019. 

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Table 3.4: 

KPIs of the IAPR (2018-2019) 

Source: IAPR 

3.2.3.  Public financial management 

Arrears  

The Greek authorities have committed to clear  the stock of arrears, to avoid the accumulation of 
new  arrears  (continuous  action)  and  to  complete  the  implementation  of  reforms  identified  by  the 
Hellenic  Court  of  Auditors  (HCA)  by  mid-2019.  Despite  the  fact  that  the  net  stock  of  arrears  has 
decreased since the end of the programme, the pace of reduction has significantly slowed and new arrears 
continue to be created in some sectors. The remaining stock of arrears as of end-March 2019 still needs to 
be cleared.  

The  arrears  clearance  process  saw  only  limited  progress  since  end-August  2018.  The  end-March 
2019 (18) stock of net arrears stood at EUR 1.4 billion; and while it is EUR 0.3 billion lower than the end 
of programme (August 2018), it is the same level as at end-December 2018. This indicates that despite the 
efforts  to  tackle  structural  weaknesses  in  the  public  financial  management,  new  arrears  continue  to  be 
created.  Programme  financing  and  own  resources  continue  being  used  to  clear  arrears.  Of  the  total 
EUR 7 billion disbursed for arrears clearance during the programme, EUR 0.1 billion remain unused by 
end-April 2019. In the same period, the authorities have used more than four times the disbursed amount 
to clear arrears from own resources, much of this amount allocated to the clearance of new arrears, which 
have continued to be created.  

(18)  Latest available data at the cut-off date of the report.  

18 

Q1 2018TargetResultResultsKPI 1Collection of tax debts as of the end of the previous year (EUR millions)970924985KPI 2Collection of new debts in the current year (percent of new debt in the year)16.2%15.2%12.5%KPI 3Collection of debts by Large Debtor Unit (EUR millions)185200235Audits of fresh tax cases by the whole IAPRKPI 4Percent of fresh tax audit cases in total completed audits70.0%54.7%53.7%Tax audits and collection of large tax payersKPI 5Collection after audits in the year (percent of assessed tax and penalties)40.0%104.0%56.8%Tax audits and collection of high wealth individualsKPI 6Collection after audits in the year (percent of assessed tax and penalties)40.0%1096.6%140.6%Tax refundsKPI 7Percent of VAT tax refund claims processed within 90 days95.0%94.1%66.9%Compliance and enforcementKPI 8Percentage of total tax paid on time for VAT, Income and Property taxes81.5%82.2%79.7%Percentage of total tax paid on time for VAT, Income and Property taxesKPI 9Percentage of debtors under enforcement measures65.0%66.0%64.5%Pre litigation phaseKPI 10Percentage of cases closed by explicit decision of the DRU70.0%95.6%96.6%Prosecution audits by Mobile UnitsKPI 11Prosecution audits by Mobile Units  (Customs Administration)4 5504 3747 622Debt collectionQ1 2019 
 
 
 
                                                           
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(Continued on the next page) 

19 

Box 3.2: The phasing out of ex ante audits performed by the HCAThe ex ante audit of the state expenditures constituted until recently a crucial component of the payment process, since no payment could be completed unless its legality and its regularity was validated by two independent bodies, Ministry of Finance (MoF) – GAO and the Hellenic Court of Auditors.  The abolition of ex ante audits in the Organic Budgetary Law (art 31) in 2015 under the ESM programme was designed to streamline the process with an overall objective of reducing the time required for payments to be processed and executed and alleviating administrative cost. This would act as a major contribution to arrears reduction.   The authorities carried out the first part of the reform for line Ministries successfully in January 2017. The creation of General Directorate for Financial Services allowed line Ministries to fully assume responsibility for the whole expenditure chain, from budgeting to commitment and then to payment.  GAO carried out the first part of the reform for line Ministries successfully in January 2017. The creation of General Directorates for Financial Services allowed line Ministries to fully assume responsibility for the whole expenditure chain, from budgeting to commitment and then to payment. Two additional years (until January 2019) were granted to hospitals, Extra Budgetary Funds (EBFs) and local government to make appropriate arrangements to phase out of ex ante audits. Nevertheless, the authorities were not fully ready to implement the phase-out reform even by the extended deadline and they initially postponed the implementation of the reform until the end of the year.   Following consultations with the institutions and the concerned entities, it was agreed to implement immediately the reform for hospitals and OPEKA (responsible for the payment of social benefits) and to implement the full phasing out of ex ante audits in local government and EBFs from 31 July 2019.   In addition, to remedy problems stemming from the abolition of ex-ante audits by the HCA and to streamline payment processes, some further important actions in local government, EBFs and hospitals were agreed to be undertaken.    On the hospital side, the financial liability regime for accountants was amended(1) and an action plan is being developed to take specific actions in the hospitals in which serious increases in arrears have arisen. The full roll out of the central procurement system for public hospitals (EKAPY) would be another major step forward in the arrears creation process management. EKAPY has initiated the process to considerably enhance its capacity by hiring 23 additional permanent staff by the end of the year.    On local governments, the Ministry of Interior has issued instructions on internal auditing procedures and resources since August 2018. However, not all local governments were prepared to abolish the ex-ante audits performed by HCA as of January 2019, mainly due to lack of resources in the smaller local governments. To this end, the Ministry of Interior has initiated a hiring process through the Supreme Council for Civil Personnel Selection (ASEP) of 118 permanent positions in small municipalities. The announcement of the preliminary list of appointees is expected by August while the final results are expected by the end of the year. In the meantime, local governments can hire the appointees under temporary contracts. Furthermore, staff will be provided with targeted training seminars aiming at enhancing their expertise on payment processes.                                                            (1) (GG A' 70/7.5.2019 - Article 230)  
 
 
 
 
 
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Box (continued) 

The  authorities  are  currently  implementing  structural  measures  to  address  the  bottlenecks  of 
arrears management. The measures are based on the recommendations issued by the Hellenic Court of 
Auditors (HCA) following its audit on arrears in May 2018, which are of a structural nature. To this end, 
two  action  plans  were  prepared,  in  the  fields  of  responsibility  of  GAO  and  the  IAPR  respectively. 
According to the latest available information, around one third of the  measures  mentioned in the IAPR 
action plan are fully completed and about another one third are very close to be completed. Some of the 
actions mentioned in GAO’s action plan are completed while some are under development or in the very 
first  phase  of  implementation.  The  overall  implementation  of  the  reforms  in  both  action  plans  will  be 
assessed in mid-2019 in the context of a follow-up audit by the HCA.  

The  authorities  committed  to  provide  a  full  arrears  clearance  plan  with  complementary  actions 
targeting  the  structural  sources  of  arrears  creation.  The  plan  shows  that  the  authorities  would  clear  on 
average EUR 185  million per  month between  April and  August 2019, leaving arrears of slightly below 
EUR  0.5  billion  one  year  after  the  end  of  the  ESM  programme.  The  majority  of  the  remaining  arrears 
belong to social security funds, pension claims and local governments. Even though the remaining stock 
in August 2019 would be substantially lower, the authorities will need to continue clearance and avoid the 
creation of new arrears. 

Table 3.5: 

Arrears clearance plan (actual data until March 2019, in million EUR) 

Figures from April 2019 are the authorities’ projections according to their clearance plan. 
Source: European Commission 

To further  streamline  payment  processes and facilitate  arrears clearance, the authorities are also 
working on the following measures:  

  Although  consignments  can  be  opened  at  the  Consignment  Deposits  these  are  not  recognized  by 
standing Organic Budgetary Law (OBL) provisions as a means of payment. An amendment will allow 
entities to open consignments for obligations they cannot repay for reasons beyond their powers (e.g. 
because  the  beneficiary  has  not  responded  to  the  entity’s  notifications)  and  delete  these  obligations 
from  their  books.  It  would  indeed  allow  entities  to  pay  their  obligations  while  protecting  the 

20 

Aug-18Dec-18Jan-19Feb-19Mar-19Apr-19May-19Jun-19Jul-19Aug-19Total gross arrears3 5882 5102 5422 6062 617o/w new accumulation (inflows)1 285 948 671 772 837o/w clearance (outflows)-1 039-1 482- 639- 708- 827  with programme funds- 177- 303- 12- 58- 105  with own funds- 862-1 179- 627- 650- 722Total adjustments1 8911 1191 1571 2311 221Total net arrears 1 6971 3911 3851 3751 3951 165 935 745 568 469Monthly change in total net arrears- 263- 174- 6- 11 21- 231- 229- 190- 178- 99Breakdown of net arrearsState 92 48 49 45 80 61 39 32 12 5Local Government 263 200 203 217 247 215 140 103 103 103EBFs 249 255 259 256 243 164 160 119 67 44Hospitals- 1 0 0 4 56 52 0 0 0 0Social Security Funds 683 504 466 455 436 407 372 301 240 193Pension claims 192 180 194 196 205 199 188 166 144 122Tax refunds 219 204 215 202 128 66 37 24 2 2Stuck ESM programme financing1 190 237 225 130 70 57Monthly change in stuck financing 746- 303- 12- 95- 60- 13 On EBFs, the authorities have identified the main weaknesses stemming from the abolition of ex-ante audits by HCA and developed a list of actions to tackle the problems. The main issues relate to insufficient resources, lack of expertise and in some cases the organisational structure of the entities. The actions focus on addressing the lack of staff through the mobility scheme, organising trainings and restructuring the entities’ financial services and organisational charts.  
 
 
 
 
 
 
 
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beneficiaries’  interests.  As  a  result,  large  amounts  of  obligations  will  be  deleted  from  the  stock  of 
arrears, hence allowing the entities to focus on  the  management of their remaining obligations. The 
authorities  plan  to  issue  primary  and  secondary  legislation  by  September  2019,  with  the  provisions 
implemented by November 2019.  

  The provision of specific instructions to entities in order to clarify the process and the requirements 
for  issuing  settlement  vouchers  for  cases  where  the  amount  corresponding  to  some  obligation  has 
already  been  seized  from  the  entity’s  bank  account  as  a  result  of  a  court  ruling.  The  OBL  already 
provides  for  such  a  treatment,  but  this  possibility  is  rarely  used  by  entities.  The  authorities  plan  to 
issue the relevant Ministerial Decisions following discussion with the entities by the end of the year, 
with the provisions implemented as of January 2020.  

  A legal amendment whereby the mandatory upload of commitments’ revocation and re-assumption in 
the  “Diavgeia”  website  in  the  beginning  of  each  fiscal  year  will  be  made  en  masse  in  order  to 
streamline  procedures  and  reduce  the  excessive  administrative  burden  that  leads  to  a  slowdown  in 
normal clearance and payment of obligations in the first months of the year. Currently, both processes 
have to take place for every single commitment, significantly increasing the administrative workload. 
The  authorities  plan  to  amend  the  Presidential  Decree  by  September  2019,  with  the  first 
implementation of the new provisions as of January 2020. 

  A  decision  has  been  signed  by  the  Governor  of  the  IAPR  to  eliminate  the  need  for  a  separate 
administrative  process  performed  by  a  tax  refund  beneficiary  before  legal  entities  can  clear  arrears 
related to tax refund. This arrangement created additional administrative burden to the IAPR, while it 
also  directly  led  to  creation  of  arrears  in  cases  where  the  beneficiaries  would  delay  to  submit  their 
application. 

 

In  order  to  address  the  administrative  capacity  problem  in  the  clearance  plan  for  lump  sums 
(ETEAEP),  the  Ministry  of  Labour  is  going  to  amend  the  legal  framework  in  the  coming  weeks  in 
order to allow for the swift payment of arrears in the form of temporary lump sums, along the lines of 
the procedure that is already in place for pensions. This arrangement will allow for a fast reduction of 
ETEAEP’s  obligations.  A  legal  provision  is  currently  prepared  by  the  Ministry  of  Labour  and  is 
expected  to  be  submitted  in  the  Parliament  in  the  coming  weeks,  since  its  implementation  is  a 
necessary condition for reaching the reduction targets set out in the plan. 

Treasury Single Account 

The Greek authorities are moving forward with implementing a Treasury Single Account (TSA) at 
the Bank of Greece to achieve an end-2019 specific commitment. The main objective of this reform is 
to allow the Hellenic Republic to access liquidity held throughout the general government sector and to 
benefit from a more effective liquidity management. Some progress has been made in the first months of 
2019 though the most important measures still remain to be taken.  

Two Ministerial Decisions were issued regarding the general cash planning framework for general 
government  entities.  By  31  July  2019,  general  government  entities  are  required  to  open  a  cash 
management  account  in  the  Bank  of  Greece  and  to  transfer  their  surplus  cash  from  the  commercial 
banking  system  to  the  cash  management  accounts  in  Bank  of  Greece (19).  As  of  mid-May,  588  general 
government entities (i.e. approximately one third of the total) had a cash management account in the Bank 
of Greece. A 15 days liquidity buffer can be held in the commercial bank with an exception targeted for 
financial stability purpose. Besides, a new Directorate in the Ministry of Finance is on the point of being 
created  and  will  have  to  monitor  general  government  entities’  cash  flows  projections  based  on  their 
approved annual budget. The General Accounting Office will launch a pilot phase with the participation 
of 29 general government entities when the Ministerial Decision enters into force in July. Other steps to 
be  undertaken  quickly  as  they  are  lagging  behind  at  this  stage  are  the  elaboration  on  the  general 

(19)  This objective enshrined in the Decisions 2/6748/21-01-2019 and 2/16606/21-02-2. 

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government  entities’  15 days  liquidity  buffer  calculation  and  assessment  as  well  as  the  mandatory 
payment of their wages and pensions through the cash management accounts.  

On the Bank of Greece side, after some technical difficulties earlier in the year, the central bank is now 
able  to  provide  the  service  of  electronic  transfer  of  funds  between  cash  management  accounts  and 
commercial bank accounts. The pilot phase for the use of the web platform run by the Bank of Greece as 
well as the seminar organized by the central bank for General Government entities are on track.  

Chart of Accounts 

The  Unified  Chart  of  Accounts  (UCoA)  is  one  of  the  key  elements  of  the  public  financial 
management reforms in Greece, as it is a necessary step forward for improvements in fiscal analysis, 
decisions and reporting, and  a crucial  element for transparency and reliability of fiscal  data. The  Greek 
authorities committed to fully implement the UCoA in all General Government entities by 2023. 

Though  limited  to  some  entities (20)  and  to  a  rather  simple  economical  classification  structure,  a 
major step forward was undertaken for the 2019 Budget with the rollout of an UCoA in the State. 
The  2019  Budget  preparation  indeed  took  place  under  the  new  UCoA  and  transactions  were  recorded 
against  these  new  rules  on  January  2019.  The  authorities  are  processing  with  ELSTAT  to  tackle 
remaining  issues  on  the  new  economic  and  administrative  accounting  classifications.  The  crucial 
compliance of the Public Investment Budget with the budget and accounting classifications, which is one 
of  the  objectives  of  a  January  Presidential  Decree (21),  remains  under  discussion  between  the  General 
Accounting Office and the Ministry of Economy. Besides, acting as a precondition for further accounting 
reforms, it would be warranted to reinforce the governance structure with the appointment of an ad hoc 
Steering Committee fully dedicated to the UCoA reform. By mid-2020, Greece will need to complete the 
UCoA rules with deeper economical and administrative classifications and with other segments such as 
the  functional  one.  Deepening  the  reform  by  broadening  the  scope  to  include  all  general  government 
entities will also be a step forward as the medium-term goals are, on the one hand, the implementation of 
the  new  UCoA  to  the  whole  general  government  and,  on  the  other  hand,  the  migration  to  accrual 
accounting by January 2023. These objectives were enshrined in a Presidential Decree (9) in June 2018.  

The  implementation  of  the  UCoA  and  accounting  reforms  are  closely  linked  with  other  public 
financial  management  reforms  such  as  the  development  of  the  Treasury  Single  Account  and  the 
avoidance of the creation of new arrears. Incorporating the recording of all  workflows  will  facilitate 
accrual accounting and will allow for a better monitoring of accounts and consequently, arrears. 

(20)  Up  to  the  2nd  level  of  the  administrative  classification,  and  to  the  3rd  level  for  the  regional  units  of  central  administration 

(Ministry of Finance, Ministry of Education and IAPR). 

(21)  June 2018, Presidential Decree 54. 

22 

 
                                                           
4. 

SOCIAL WELFARE 

4.1. 

PENSIONS 

The  authorities  have  recently  passed  legislation  that  repeals  important  elements  of  the  pension 
reforms adopted in 2012 and 2016 and leads to an increase in spending on pensions as a share of 
GDP.  In  May  2019,  the  authorities  have  repealed  the  2016  reform  of  the  survivors’  pensions  that  had 
modernised  and  aligned  the  pension  entitlements  to  standard  practices  of  other  EU  Member  States.  In 
particular,  the  measure  has  increased  the  amount  of  pension  bringing  it  back  to  70%  (from  50%); 
eliminated  the  limitation  on  duration  (previously  3  years  for  those  below  55  years  of  age)  for  those  of 
active age, who can now receive a survivor pension of 50% even if employed; and reduced the number 
years  of  marriage  needed  to  trigger  eligibility  (from  5  to  3).  The  changes  to  the  rules  on  survivors’ 
pensions  risk  to  negatively  affect  female  labour  participation,  which  is  already  low  in  Greece  (activity 
rate of 64.8% in 2018 compared to 72.4% for the EU). 

Furthermore, the authorities have reinstated a permanent 13th pension, which had been eliminated 
in 2012. It will be paid once a year at a level of 30%-100% of current pensions (the highest percentage for 
pensions below EUR 500 per month and the lowest for pensions above EUR 1 000 per month) and will 
cost as much as EUR 0.8 billion. These measures will decrease the relative share of social benefits spent 
on the young and working age population where the risk of poverty is much higher. See section 3.1 for 
the overall assessment of the fiscal cost.  

As regards the implementation of the action plan for the completion of the setup of the unified main 
pension fund EFKA, which is a mid-2020 commitment, the authorities are making good progress, 
with the technical support from the Commission. The launching of the public tender for new EFKA 
information  and  innovation  technology  services  is  still  pending.  The  authorities  have  continued 
publishing detailed statistical information on pensions (monthly Helios reports).  

Graph 4.1: 

Pensions and social spending 

Source: 2018 Ageing Report, Greek National Actuarial Authority, Eurostat 

4.2.  HEALTH CARE 

The  pace  of  collection  of  the  clawbacks  has  seen  a  recent  improvement,  and  collection  of  the 
clawback  for 2018 is currently ongoing (specific commitment  for  mid-2019). The Greek authorities 
committed to the Eurogroup to complete the full offsetting and collection of the clawback (i.e. the excess 
public spending beyond the legislated ceilings that providers need to pay back into the public purse), by 
June  every  year  for  the  previous  calendar  year.  Based  on  reports  obtained  during  the  May  post-

23 

13.812.2+1.4+0.4024681012141618Greeceeuro area% of GDPPension spending (2019)Spending, net of recalibrationNo recalibration13th pension15.912.48.714.5051015202530Greeceeuro area% of GDPPensions and social protection (2017)PensionsOther social 
 
 
Commission Staff Working Document -  

Chapter 4 - Social welfare 

programme  mission,  the  procedure  for  the  collection/offsetting  of  the  clawback  has  already  started  for 
2018. In brief:  

  approximately one third of the outpatient pharmaceutical clawback has been recovered by May 2019; 

  a  similar  rate  applies  to  the  collection  of  the  clawback  for  drugs  circulated  through  pharmacies 

affiliated with the national health insurance body, EOPYY;  

  as for privately provided services reimbursed by EOPYY, the amount to be paid back for 2018 has not 
been  quantified  yet.  Prior  to  the  start  of  the  collection,  the  authorities  need  to  complete  the 
quantification and inform providers of the due amount. The necessary documents and communications 
have not been shared by the authorities so far.  

There are still some backlogs in the clawbacks for previous years, especially for private providers, 
for whom more than half of the clawback of 2017 has not yet been collected. Some backlog applies to 
pharmaceuticals too, although at this stage only one fifth of the total amount remains to be collected. In 
general, residual clawback amounts still date back to 2012 for pharmaceuticals and to 2013 for providers 
(and to 2016 for EOPYY pharmacies clawback), but these mostly do not represent large amounts.  

Despite  improvements  in  collection,  the  generation  of  new  clawbacks  is  quite  high  and  has  been 
increasing  over  time  to  levels,  which  may  soon  become  not  sustainable.  The  pace  of  collection  of 
clawbacks has seen an improvement in the last years, however recent measures to dilute the repayment by 
providers  (increase  in  the  maximum  number  of  instalments  to  repay  the  clawback  from  24  to  48)  raise 
concerns  as  to  the  future  evolution  of  clawback  collection  and  thus  the  liquidity  of  EOPYY  and  the 
deterrent  to  providers  of  facing  high  repayments.  Indeed,  Greece  still  faces  significant  challenges  in 
containing the creation of  new clawbacks. The  clawback  for pharmaceuticals, especially outpatient,  has 
been continuously increasing year by year, with the level in 2018 exceeding 550 million, from 79 million 
in 2012, which is also increasingly linked to the reimbursement of high-cost drugs.  

Graph 4.2: 

Evolution of outpatient pharmaceuticals clawback 

Source: European Commission 

The size of the excess spending through the clawback underlines the need for more sustained efforts 
to  implement  structural  measures  designed  to  curb  supply-induced  demand,  and  indeed  some 
recent  measures  may  exacerbate  the  situation.  The  need  for  more  sustained  and  effective 
implementation applies in many areas including therapeutic protocols, negotiating committee, centralised 
procurement,  patient  registers  for  high  cost  drugs,  monitoring  and  control  of  prescription  patterns  by 
doctors  and  dispensing  by  pharmacists.  The  recent  modification  of  the  pricing  procedure  for 
pharmaceuticals, replacing the previous well-established one that so far was amongst the most successful 
tools to contain pharmaceutical spending, contains  several  features that do not  support the reduction of 
the  clawbacks,  amongst  which  the  introduction  of  price  floors  and  the  transition  to  a  euro  area  (as 

24 

28802371200020001945194519457715320031945647858005001000150020002500300035002012201320142015201620172018mn EURExpenditure ceilingsClawback/overrun 
 
Commission Staff Working Document -  

Chapter 4 - Social welfare 

opposed to EU) basket of comparators for reference pricing. These and other features ( 22) will likely result 
in an increase in pharmaceutical expenditure in 2019.  

Enforcing existing measures to rationalise spending and adopting new ones will be necessary given 
the level of the current and future expenditure ceilings. The emerging increasing trend in spending, 
which  may be  aggravated by  the future incoming  wave  of  high-cost drugs, can also be indicative  of an 
underlying  distortion  of  incentives.  Unless  the  clawback  mechanism  is  reviewed  to  ensure  that  its 
incentive structure limits moral hazard also on the public payer’s side and improves the balance of burden 
sharing between the public sector and private companies, this distortion might contribute to delaying the 
implementation of structural measures.  

The roll-out of primary health care is proceeding but at a slow pace and with marked disparities 
across the territory. The authorities fulfilled the commitment of opening at least 120 TOMYs (primary 
health care units), and have meanwhile exceeded the target with 124 openings thus far, with the support 
of  the  European  Social  Fund.  However,  based  on  the  latest  reports  a  rather  static  picture  emerges 
concerning  progress  with  the  broader  roll-out  of  primary  health  care.  The  registered  population  so  far 
only counts around 2 million people. Notably, the obstacles with the recruitment of general practitioners 
persist,  which  may constitute a bottleneck in  view of opening additional TOMYs, due to the  minimum 
staffing  requirements  to  ensure  proper  functioning.  In  order  to  meet  the  Eurogroup  commitment  of 
opening 240 TOMYs by mid-2020, the roll-out pace of the network should gain greater momentum. This 
is paired with a currently uneven distribution of TOMYs over the territory. To this date, less than thirty 
TOMYs are available in the area of Attica, which includes 50 municipalities and around half of the Greek 
population, i.e. 5 million.  

Progress  on  centralised  health  procurement  continues  at  a  slow  pace,  with  staff  constraints 
translating  into  still  limited  capacity  to  launch  new  tenders.  The  newly  established  health  care 
centralised  procurement  body  EKAPY  is  not  yet  fully  staffed:  the  appointment  of  the  permanent  board 
has not yet been completed, which may result in future disruptions in operations; recruitment of regular 
staff  is  also  still  slow,  with  less  than  half  of  the  available  positions  currently  filled  (including  both 
permanent  and  temporary  staff).  With  a  view  to  acquiring  the  autonomy  to  launch  new  tenders, 
recruitment of staff with legal background is of the essence and it is thus far proving challenging. This is 
de  facto  constraining  activity  mostly  to  the  completion  of  tenders  launched  in  the  past.  Reaching  the 
necessary  minimum  staffing  level  will  be  a  key  determinant  of  the  capability  of  EKAPY  to  operate 
effectively and systematically to realise the potential savings coming from central procurement.  

4.3. 

SAFETY NETS 

A new housing benefit for renters has been introduced, further enhancing the effectiveness of the 
Greek  social  welfare  system.  The  scheme  addresses  housing  cost  overburden  by  providing  a  means-
tested subsidy to low-income households for paying the rent on their primary residence. The amount of 
the  monthly  benefit  ranges  from  EUR  70  to  EUR  210,  depending  on  the  household  size,  which 
corresponds to 30-50% of average rental costs in Greece. As of 30 April 2019, 272 179 applications had 
been submitted, and 237 701 of these had been accepted (87% approval rate), corresponding to 633 888 
individuals  (about  5.8%  of  the  Greek  population),  a  result  in  line  with  initial  expectations.  The  vast 
majority of applications (92%) have been submitted through the on-line platform and eligibility is verified 
automatically  thanks  to  the  inter-linkage  between  different  administrative  databases  providing  the 
necessary information (such as income, rental contract, etc.). 

The reform of the system of disability benefits is advancing but with significant delays. One element 
of  this  reform  process  is  the  upgrading  and  simplification  of  the  administrative  processes  to  determine 

(22)  The main new features of the system include the maximum reduction of 10% for each repricing; generics allowed to be priced 
at  75%,  instead  of  65%,  of  the  price  of  the  relative  off  patent if  the  price  decrease  with  the  new  pricing  exceeds  10%  (thus 
generating  some  price  increases);  the  loss  of  the  automatic  50%  decrease  of  off-patents  following  expiry  of  the  exclusivity 
period; prices set with respect to a euro area basket are higher than the previous ones based on the EU; the introduction of a 
price floor. 

25 

 
                                                           
Commission Staff Working Document -  

Chapter 4 - Social welfare 

disability  status.  After  having  been  successfully  piloted,  these  new  procedures  are  being  gradually 
introduced throughout the country. The second element of this reform is the adoption of a new approach 
to determine disability status based on both medical and functional assessment (specific commitment for 
mid-2019). The new methodology for a functional assessment of disability (which would complement the 
current purely  medical assessment) is  to be developed on the  basis of  the evaluation of  the results of a 
completed pilot project that received technical support of the World Bank. Originally, the evaluation of 
the pilot project should have been completed by end-2018. However, a slower-than-expected processing 
of  applications  due  to  bottlenecks  in  the  administrative  procedures  severely  delayed  the  initial  data 
collection phase. As a consequence, the evaluation of the pilot is only set to begin in September 2019, to 
be  completed  by  the  end  of  the  year.  The  authorities  are  therefore  not  in  a  position  to  endorse  and 
formally adopt a new methodology for disability assessment before 2020. A revised timeline detailing the 
intermediate steps and a final deadline for adoption should be defined. 

The Social Solidarity Income (SSI) scheme is reaching its maturity. It guarantees a minimum level of 
income to households with very low disposable incomes, and has become a well-established element of 
the  Greek  social  welfare  system.  In  the  first  four  months  of  2019,  the  scheme  reached  about  270 000 
households (corresponding to about 500 000 individuals), for an annual expenditure of around EUR 680 
million.  This  is  a  lower  number  of  beneficiaries  compared  to  the  previous  year,  where  the  scheme  had 
about  300 000  beneficiary  households  (corresponding  to  more  than  600 000  individuals),  for  an  annual 
expenditure of around EUR 750 million. The reduction can be attributed partly to improvements in the 
system  of  automatic  eligibility  checks  and  intensification  of  controls,  and  partly  to  the  general 
improvement  of  the  economic  and  social  situation,  with  a  reduction  in  the  number  of  potential 
beneficiaries.  

The implementation of the social inclusion and labour market (re-)integration elements of the SSI, 
to be achieved by end-2019 (specific commitment), is progressing. Since its inception, the SSI scheme 
has been designed around three pillars, which are being built progressively: (i) income support; (ii) social 
inclusion;  and,  (iii)  labour  market  reintegration.  With  respect  to  the  second  pillar,  a  network  of 
Community Centres has been established throughout the country with the support of the European Social 
Fund, expanding the provision of social services at local level in a coordinated way. The third pillar relies 
on the provision of active labour  market services to help SSI recipients (re-)enter the labour market. To 
achieve this, the authorities are shifting from an ad-hoc and irregular to a more systematic approach to the 
design and management of active labour market programmes. Concretely, this entails: i) a shift to a new 
delivery  model  for  active  labour  market  programmes,  whereby  a  menu  of  options  and  programmes  is 
continuously made available to the unemployed; ii) a strengthened provision of counselling services; and, 
iii)  a  better  mapping  of  the  needs  of  the  labour  market  which  in  turn  informs  the  design  of  new 
programmes. The new system is currently being tested – so far successfully – in a pilot project launched 
in June 2018 in one local office of the public employment service (Elefsina) covering three municipalities 
(with a population of about 10 000 registered unemployed), and is going to be gradually expanded to the 
entire country by the end of 2019.  

The  authorities  committed  to  review  the  system  of  subsidies  for  local  public  transport  (specific 
commitment  end-2019).  Different  categories  of  people  such  as  students,  persons  over  65,  the 
unemployed, the disabled and members of large families, currently benefit from subsidised fares for local 
public transport. Thanks to the recent introduction of electronic ticketing on the public transport network 
of  Athens,  data  on  actual  transport  usage  by  each  category  of  beneficiaries  has  become  available, 
allowing a more precise costing of these policies in the Attica region. The Greek authorities are expected 
to carry out a study to assess the appropriateness of the current system of subsidised fares for local public 
transport across Greece. The study should be concluded by June 2019 and contain recommendations for 
possible improvements to the system. 

26 

 
5. 

FINANCIAL SECTOR 

5.1. 

FINANCIAL SECTOR DEVELOPMENTS 

5.1.1.  Financial sector overview and financial stability assessment 

The situation of the financial sector continues to be challenging with improvements at a very slow 
pace; significant vulnerabilities remain, such as the high volumes of non-performing loans (NPLs) 
and  the  strong  sovereign-bank  nexus.  On  a  positive  note,  the  liquidity  situation  of  Greek  banks  has 
further  improved.  Greek  banks  continue  relying  primarily  on  their  internal  capacity  to  generate  capital, 
which has been further weakened by their low profitability due to their poor asset quality.  

Banks’  private  sector  deposits  have  slightly  increased  since  the  end  of  the  ESM  programme  and 
reliance  on  central  bank  funding  has  significantly  decreased  (see  graph  5.1)  with  all  banks  having 
completely  repaid  emergency  liquidity  assistance  (ELA).  The  improving  liquidity  situation  of  Greek 
banks and increased confidence of depositors gave room for a further loosening of capital controls as of 1 
October  2018.  If  financial  stability  considerations  allow,  only  one  or  two  final  steps  of  capital  control 
relaxation are needed to put an end to the restrictions still in place. This would normalise the functioning 
of the Greek economy within the Economic and Monetary Union (EMU) and would reduce the economic 
costs attached to it.  

Graph 5.1: 

Bank deposits (left panel) and total borrowing from the Eurosystem (right panel) 

Source: Bank of Greece 

Although broadly adequate, the capital position of the banking system slightly deteriorated during 
2018  in  a  context  of  low  profitability  and  weak  asset  quality,  while  deferred  tax  credits  (DTCs) 
continue to account for a sizeable part of CET1 capital. According to Bank of Greece data as of the 
end of 2018, the Greek banking system had a Common Equity Tier 1 (CET1) of 15.3% on a consolidated 
basis,  which  is  comparable  with  the  EU  average.  Data  from  the  European  Banking  Authority  (EBA) 
indicate a similar capital position for December 2018 (15.3%), though the data also point to a fully loaded 
CET 1 ratio below the EU average (12.1% vs. 14.4%). In addition, the high level of DTCs in CET1 raises 
concerns  regarding  capital  quality  and  contributes  to  the  strong  sovereign-bank  nexus  in  Greece.  The 
share  of  DTCs  in  the  banks’  capital  has  increased  over  2018  due  to  the  decrease  in  total  capital  and 
exceeded 60% of the CET1 capital on average  for the four systemic banks as of end 2018 (23). Another 
aspect that warrants further monitoring in the medium term is the need of Greek banks to issue bail-inable 

(23)  Deferred  tax  credits  for  the  four  systemic  banks  amount  to  EUR 15.7  billion  whereas  their  aggregate  common  equity  tier  1 
capital is EUR 25.9 billion as of end-2018. Therefore, the share of DTCs over CET 1 capital reaches 60.8% end 2018, 2 pps 
more than in Q3 2018. 

27 

050100150200250300201420152016201720182019MFIsHouseholdsNFCCentral Governmentbn EUR010203040500501001502002007200820092010201120122013201420152016201720182019Borrowing from the EurosystemEurosystem liquidity as % of liabilities (rhs.)bn EUR% 
 
                                                           
Commission Staff Working Document -  

Chapter 5 - Financial sector 

debt  in  the  following  years  in  order  to  meet  the  minimum  requirement  for  own  funds  and  eligible 
liabilities (MREL) (24) as per the EU legislation. 

Profitability remains a source of concern for the Greek banking sector. During the first nine months 
of 2018, operating profits declined and the proportion taken up by provisions reached 95%. Despite the 
gradual improvement of the economic situation in Greece, the 2018 financial results of the four systemic 
banks  indicate  lower  profitability  in  2018  compared  to  2017  and,  overall,  the  Greek  banking  system 
closed the financial year 2018 with minor net losses. Going forward, the still high level of NPLs coupled 
with the decline in pre-provisioning profits creates challenges for Greek banks especially due to the need 
to  swiftly  reduce  NPL  levels  and  comply  with  the  forthcoming  provisioning  calendar,  in  line  with  the 
ECB Banking Supervision Guidance and also in view of the application of the prudential backstop in the 
coming years (25).  

NPL  resolution  continues  to  be  the  most  important  challenge  for  the  banking  sector  in  Greece. 
NPLs  have  been  gradually  decreasing,  but  remain  elevated,  amounting  to  EUR  81.8  billion  at  end-
2018 in comparison with the peak of EUR 107.2 billion of March 2016. This translates into a NPL ratio 
of 45.4%, which is 1.8 pps lower than the previous year and 0.7 pps below the previous quarter (see graph 
5.2), indicating an accelerated rate of NPL reduction in the last quarter. During the fourth quarter of 2018, 
the  reduction in  NPLs has been  mainly led by cured loans and  write-offs (circa EUR 1.6 billion each), 
followed by sale of loans, collections and liquidations (circa EUR 0.5 billion each) (see graph 5.3). The 
latter could gain more relevance in the upcoming quarters once e-auctions and other initiatives show more 
clearly their results. By segments, the share of non-performing residential loans increased during 2018 by 
1  percentage  point,  while  consumer  credit  and  business  loans  saw  a  reduction  in  their  respective  NPL 
ratios in the same period (26). According to EBA data, the NPL ratio in Greece on a consolidated basis for 
the four systemic banks remained the highest in the EU at end-2018, being more than twelve times bigger 
than the EU average (41.2% vs. 3.2%). Despite the progress made to date, these figures show that further 
major efforts are required to achieve a faster NPL reduction.  

Graph 5.2: 

Evolution of NPL ratio (left) and NPL stock (right) 

Source: Bank of Greece 

Substantial further efforts to reduce the level of NPLs in the Greek banking system are essential in 
order to ensure stability of the Greek banking sector and to safeguard reform momentum. This will 
underpin  credibility  over  the  medium  term  and  reassure  markets  and  interested  stakeholders  that  sound 

(24)  MREL targets are established by the resolution authorities on a bank-by-bank basis at a sufficiently prudent level to allow the 
two following components: (i) a default loss-absorbing amount (LAA), which reflects the losses that the bank would incur in a 
potential  resolution,  and  (ii)  a  recapitalisation  amount  (RCA),  which  would  reflect  the  capital  needed  to  meet  ongoing 
prudential  requirements  after  resolution.  The  latter  component  is  complemented  by  a  market  confidence  charge  (MCC), 
necessary to ensure market confidence post-resolution. 

(25)  Regulation  (EU)  2019/630  amending  Regulation  (EU)  No  575/2013  as  regards  minimum  loss  coverage  for  non-performing 
exposures  aims  to  accelerate  the  reduction  of  NPLs  in  the  banking  sector  by  providing  for  a  statutory  prudential  backstop 
against any excessive future build-up of NPLs without sufficient loss coverage on banks' balance sheets. It establishes common 
minimum  levels  for  the  amount  of  money  banks  need  to  set  aside  to  cover  losses  caused  by  future  loans  that  turn  non-
performing. In case a bank does not meet the applicable minimum level, deductions from own funds would apply. 

(26)  Data extracted from Bank of Greece: https://www.bankofgreece.gr/Pages/en/Statistics/loans.aspx 

28 

25303540455055606570Dec 2014Jun 2015Dec 2015Jun 2016Dec 2016Jun 2017Dec 2017Jun 2018Dec 2018%Total NPL ratioConsumer loansResidential loansBusiness Loans84.71.7-1.60.5-0.5-0.5-0.6-1.5-0.481.88081828384858687EUR bn 
 
                                                           
Commission Staff Working Document -  

Chapter 5 - Financial sector 

financial practices will be sustained. To this end, the various important reforms enacted to facilitate NPL 
resolution should be implemented in a determined manner. This relates to the insolvency framework for 
households and corporations, the enforceability of collateral through electronic auctions, the out-of-court 
debt  workout  mechanism,  as  well  as  an  active  secondary  market  for  non-performing  loans  as  further 
discussed in Section 5.1.2. Reforms should be supportive of reducing the legacy NPLs, but also improve 
the incentive system to limit the inflow of new NPLs. 

In  addition  to  enacted  reforms,  NPL  resolution  could  be  supported  by  well-designed  systemic 
initiatives.  While  some  analysis  and  preparations  have  taken  place  with  the  support  of  the  Bank  of 
Greece and HFSF in late 2018, it would be advisable that the Greek authorities increase their efforts to 
scrutinize  all  available  policy  options  that  could  support  a  swift  NPL  reduction.  The  Greek  authorities 
sent a draft proposal to the Commission services for a type of asset protection scheme (APS), based on 
the initiative and preparations of the HFSF, which are being assessed from a State aid perspective. This 
initiative would consist of the granting of state guarantees on NPL securitization transactions in order to 
facilitate the removal of NPLs from banks’ balance sheets, similarly to the scheme already introduced in 
Italy  (GACS).  At  the  same  time,  there  has  been  no  progress  in  exploring  whether  an  APS  can  be 
complemented  by  establishing  an  Asset  Management  Company  (AMC),  based  on  the  initiative  and 
preparations of the Bank of Greece. The proposal would entail a transfer of NPLs currently held by Greek 
banks along with part of their DTCs to a special purpose vehicle, thus addressing the main weaknesses of 
the Greek banks.  

Such initiatives could be helpful additions to the NPL resolution toolkit, provided they are designed 
to benefit the whole banking system and are based on thorough technical preparation, inter alia on 
scope,  regulatory  and  supervisory  treatment,  governance,  funding,  compatibility  with  EU 
competition and State aid rules and impact on bank and sovereign balance sheets. In January 2019, 
the Ministry of Finance announced that it established a working group with the Bank of Greece and the 
HFSF,  which  is  supporting  the  coordinated  assessment  of  the  respective  schemes,  including  through 
improved cooperation. However, the lack of deliverables raises the question whether the working group is 
fully operational. It is important that the preparations of the respective schemes progress in an expedited 
manner, in order to allow for the swift implementation of the schemes, which may benefit from elements 
of  state  support  subject  to  State  aid  and  other  regulatory  approval  and  taking  into  account  relevant 
supervisory considerations.  

Table 5.1: 

Main financial stability indicators 

(1) Annualised data 
Source: ECB - CBD2 - Consolidated Banking data; own calculations 

5.1.2.  Financing of the economy 

In  the  first  quarter  of  2019,  bank  lending  to  non-financial  corporations  turned  slightly  positive, 
while credit to households continued to contract. From 2011 until late 2018, the annual growth rate of 
loans  extended  to  non-financial  corporations  either  hovered  in  negative  territory,  or  was  close  to  zero 
(Graph 5.3). Most recently, the gradual recovery in lending to non-financial corporations that started in 
December  2018  has  picked  up  further.  Credit  to  non-financial  corporations  recorded  four  consecutive 
months of positive growth and reached 1.6% year-on-year in February and March 2019, a growth rate last 
observed  in  early  2011. The  growth  rate  of  loans  to  households  has  been  very  slowly  recovering  since 
July 2016, but as of the end of the first quarter of 2019 remained in clearly negative territory and even 

29 

2014Q42015Q42016Q42017Q12017Q22017Q32017Q42018Q12018Q22018Q3Non-performing loans39.746.846.346.646.946.745.045.444.943.5o/w NFC & HH sectors41.849.550.450.350.650.449.449.248.447.3o/w NFC sector44.752.553.953.453.352.651.451.149.447.9o/w HH sector38.545.946.346.847.547.947.147.047.346.6Coverage ratio43.548.548.248.147.447.246.749.549.047.8Return on equity(1)-10.6-24.2-7.51.3-0.4-0.3-1.30.7-2.4-0.8Return on assets(1)-1.0-2.8-0.90.1-0.10.0-0.20.1-0.3-0.1Total capital ratio14.116.517.016.817.217.217.116.416.416.3CET 1 ratio13.816.316.916.717.117.217.015.815.815.7Tier 1 ratio13.816.316.916.717.117.217.015.815.815.7Loan to deposit ratio79.172.375.977.278.281.883.578.878.476.0 
 
 
 
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Chapter 5 - Financial sector 

decreased slightly further. Growth in consumer loans has remained broadly unchanged since late 2016 at 
close to zero. In the second half of 2018, some temporary easing in credit standards for all types of loans 
took  place  for  the  first  time  in  many  years;  however,  credit  standards  remained  unchanged  thereafter. 
Survey data suggests that demand has been growing for all categories of credit throughout 2018 and in the 
first  quarter  of  2019.  In  particular,  demand  for  housing  loans  benefits  from  better  housing  market 
prospects,  while  demand  for  consumer  loans  is  supported  by  improved  consumer  confidence  and  by 
increasing expenditures for consumer durables. Increased demand for corporate credit has been motivated 
by fixed investment and debt restructuring needs. 

Graph 5.3: 

Bank credit to non-financial corporations and households 

Source: Bank of Greece 

Lending rates to non-financial corporations have broadly stabilised, while interest rates for credit 
to  households  continue  to  rise  (Graph  5.4).  The  bank  lending  rate  for  non-financial  corporations  has 
been  on  a  downward  trend  since  the  end  of  2011  and  has  stabilised  at  around  4%  in  recent  months, 
reflecting  diminished  risk  perceptions.  By  contrast,  lending  rates  to  households  generally  followed  an 
upward  trend  during  the  past  four  years.  In  the  first  quarter  of  2019,  the  average  lending  rate  for 
households were around 100 basis points above the corresponding rate for corporations, mainly reflecting 
credit risk developments, as the NPL ratio for consumer loans is particularly high and the NPL ratio for 
mortgage loans has been deteriorating recently as compared to other loan categories. In this context, any 
government policies (e.g. aimed at supporting vulnerable or other groups in society) affecting the banks’ 
loan  portfolios  imply  a  cost  to  the  banks  that  cannot  seize  the  collateral  and  have  to  agree  to  loan 
restructurings and therefore could be expected to exert upward pressure on average lending rates in the 
economy.  

Graph 5.4: 

Bank interest rates on new loans 

Source: Bank of Greece 

Small  and  medium-size  enterprises  (SMEs)  in  Greece  continue  to  be  adversely  affected  by 
constraints  to  access  to  finance.  The  demand  for  external  financing  in  Greece  continues  to  be  strong. 
Surveys show that there has been an ongoing improvement in the willingness of banks to provide credit in 

30 

Jan.2014: -5.3%Mar. 2019: 1.6%Mar. 2019: -2.3%-7-6-5-4-3-2-10123%Νοn-financial corporationsHouseholdsMar. 2019:-2.9%Mar. 2019:-0.7%-7-6-5-4-3-2-10123%Housing loansConsumer loansMar. 2019:4.0%Mar. 2019:4.9%012345678%Loans to non-financial corporationsLoans to households 
 
 
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Chapter 5 - Financial sector 

Greece  since  the  beginning  of  2017,  but  overall  SMEs  are  still  disproportionately  affected  by  limited 
access to bank financing. This is also reflected in the spread between the interest rate on small bank loans 
(up  to  EUR 250,000)  and  on  larger  bank  loans  (above  EUR  1  million)  to  non-financial  corporations, 
which has been widening since mid-2014. 

5.2. 

FINANCIAL SECTOR POLICIES 

Work is ongoing on a range of initiatives to strengthen the NPL resolution framework, but the pace 
of implementation remains uneven, and additional efforts are warranted. The implementation of the 
actions outlined below is monitored and assessed under enhanced surveillance as part of the continuous 
specific  commitment  to  “continue  to  implement  reforms  aimed  at  restoring  the  health  of  the  banking 
system, including NPL resolution efforts”. 

Electronic auctions 

The conduct of electronic auctions is proceeding across the territory, though at a somewhat slowing 
pace. Still,  a large share of auctions (approximately two-thirds in the  first quarter of 2019 according to 
data provided by the Greek authorities) is cancelled, suspended or is unsuccessful.  

Graph 5.5:  Cumulative number of e-auctions conducted since 29 November 2017 

(1) According to stakeholders' reports, 70-80% of the auctioned properties are repossessed by banks. 
Source: Ministry of Justice 

One  identified  impediment  seems  to  derive  from  procedural  abuses,  which  are  currently  under 
assessment. The Greek authorities shared the latest progress report on e-auctions detailing developments 
up to the end of the first quarter or 2019, showing a downward trend in the number of auctions launched 
on the initiative of creditors; otherwise, the mechanism continues to operate across the territory of Greece 
(with the exception of Corfu, where the local notarial association continues to abstain from the conduct of 
e-auctions). The main impediments identified by the Hellenic Banking Association relate to the strategic 
behaviour  of  debtors  to  resort  to  filings  under  the  household  insolvency  law  after  the  launch  of 
enforcement proceedings and shortly before the conduct of the auction in an effort to block the process 
and  from  the  submission  of  petitions  by  the  debtor  to  revise  the  minimum  bid  prices  upward  with  a 
similar  motivation.  The  Hellenic  Banking  Association  presented  supporting  data  on  these  two 
impediments  during  the  3rd  enhanced  surveillance  mission.  No  action  has  been  taken  so  far  to  address 
these  issues.  The  Greek  authorities,  together  with  the  Hellenic  Banking  Association,  established  a 
working  group,  which  is  currently  still  assessing  the  data,  in  order  to  define  and  take  the  necessary 
mitigating actions soon as indicated in the context of the second enhanced surveillance report, including 
in the  context of the ongoing review of the  implementation of the Greek  Code of Civil Procedure. The 
working group will prepare a report by September 2019. 

31 

 05 00010 00015 00020 00025 000Properties where scheduled auction was cancelled/suspendedProperties where auction took place but was unsuccessful (lack of bids)Successful auctions (1) 
 
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Chapter 5 - Financial sector 

Clearing of the household insolvency backlog 

The  process  of  the  gradual  elimination  of  the  backlog  of  pending  cases  in  the  context  of  the 
household  insolvency  framework  is  significantly  behind  schedule.  A  revised  action  plan  by  the 
authorities is expected to be prepared by end-June 2019, while the impact of the new mechanism for the 
protection of primary residences (which is yet uncertain) could be factored in later in the year. The Greek 
authorities reported that they are in the process of collecting data from magistrate courts and optimizing 
the processing procedure, including the use of new improved templates covering variants not available in 
past  reports,  aiming  at  the  provision  of  more  reliable,  standardized  and  granular  court  statistics.  The 
European institutions received the preliminary aggregated data for 2018 and the first quarter of 2019 on 
17 May 2019. Based on the data received, the number of pending cases remained broadly stable in 2018 
and increased again in December 2018 and up to end-February 2019, due to the projected (end-December 
2018) expiry of the foregoing primary residence protection framework (27) and its subsequent extension 
until end-February 2019. The level of processed cases remained broadly stable in the first quarter of 2019. 
Overall, the number of pending cases at the end of the first quarter of 2019 (89,498 pending cases against 
a target of 85,130) is above the trajectory which would lead to the elimination of the backlog of cases by 
2021. Since the elimination of the backlog is a specific commitment undertaken by the Greek authorities 
to  the  Eurogroup (28)  it  seems  to  be  necessary  to  increase  the  processing  capacity  to  achieve  the 
elimination of the backlog by 2021. At the same time, the level of processed cases over the same period 
exceeded the targets set by the June 2018 action plan in conjunction with its “statistical update” by the 
Greek authorities in March 2019, with an average monthly processing rate of 3,504 cases against a target 
of 2,580 cases. Going forward, it will be important to include in the monitoring the implementation data 
pertaining  to  the  newly  adopted  primary  residence  protection  scheme,  taking  account  of  reschedulings 
achieved  either  under  the  electronic  platform  procedure  or  pursuant  to  litigation  resulting  from  non-
productive platform procedures.  

Primary residence protection  

Following  the  adoption  of  primary  legislation  establishing  a  new  system  for  the  protection  of 
eligible primary residences in support of the restructuring of non-performing loans (29), the Greek 
authorities proceeded to the adoption of the requisite secondary legislation and the technical work 
for  the  electronic  platform  for  its  implementation  is  ongoing.  Due  to  a  number  of  delays,  the  law 
could  not  be  implemented  by  30  April  2019  as  envisaged  and  the  platform  may  be  fully  operating  no 
sooner than end-July 2019. More specifically: 

  The  adopted  secondary  legislation  consists  of  three  Joint  Ministerial  Decisions  laying  down  the 
specifications of the electronic platform (30), the procedure for the provision of the state  subsidy (31) 
and the manner of valuation of certain assets included in the wealth criteria pertaining to the eligibility 
assessment (32). 

  Regarding the technical work, the authorities set up a steering committee to supervise the creation and 
functioning of the electronic platform (33); the committee is composed of state agencies, stakeholders 
and  a  technical  advisor.  Work  on  the  platform  started  immediately  upon  enactment  of  the  primary 
legislation  and  is  progressing  but,  according  to  the  Greek  authorities,  the  complexity  of  the  tasks 
involved and technical challenges  encountered so far have led to a revision of the initial time frame 
for  the  completion  of  the  project  (end-April  2019),  with  the  platform  now  scheduled  to  be  fully 
operational by end-July 2019, including the interconnection between the module that will be added for 

(27)  Under the household insolvency law 3869/2010.  
(28)  Annex to Eurogroup statement of 22.6.2018 
(29)  Law 4605/2019 (OJ A-52/1.4.2019, articles 68-84). 
(30)  Joint Ministerial Decision No. 47158/2.5.2019 of the Ministers of Finance, Economy and Development, Labour, Social Security 

and Social Solidarity (OJ B-1498/3.5.2019).  

(31)  Joint Ministerial Decision No. 39100/8.4.2019 of the Ministers of Finance, Economy and Development, Labour, Social Security 

and Social Solidarity (OJ B-1167/8.4.2019). 

(32)  Joint  Ministerial  Decision  No.  39095/8.4.2019  of  the  Ministers  of  Finance  and  Economy  and  Development  (OJ  B-

1165/8.4.2019). 

(33)  Decision of the Government Council for economic policy, protocol no. 99/1.4.2019. 

32 

 
                                                           
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Chapter 5 - Financial sector 

that  purpose  to  the  Social  Security  Electronic  Governance  e-platform  of  the  Greek  Single  Social 
Security Entity that is required for the provision of the state subsidy. Until then, no applications can be 
filed  by  borrowers.  This  should  not  affect  its  planned  expiry  at  the  end  of  2019  however  it  might 
adversely affect the enforcement procedure in the second and third quarter of 2019.  

With respect to the required State aid approval of the protective framework by the Commission, the Greek 
authorities intend to submit the official request shortly. 

An important pending issue regarding the effectiveness of the new framework in the context of NPL 
resolution  is  the  required  enactment  of  a  provision  extending  the  tax  treatment  of  write-offs  that 
expired at the end of 2018 (34), which should be undertaken in a timely manner. The tax regime in 
question  stipulated  that  the  amount  of  the  write-off  is  not  considered  as  an  income  of  the  debtor  or  a 
donation by the bank. Therefore, following the  expiry of said regime at the end of 2018,  write-offs are 
currently subject to income tax, which represents a disincentive to restructurings. The extension should be 
enacted prior to the end of 2019 so as to cover debt restructurings under the law.  

Harmonisation of the personal insolvency framework 

The  Greek  authorities  committed  in  the  context  of  the  second  enhanced  surveillance  report  to 
harmonize and improve in the coming months in a holistic fashion the bankruptcy and insolvency 
regimes. The multiplicity of frameworks makes their monitoring harder and increases the risk of either an 
erroneous choice of framework or even procedural abuse, by means of parallel or consecutive recourse to 
several  mechanisms.  Having  expressly  stated  their  intent  to  establish  a  single  personal  insolvency 
framework in the  near  future, the  Greek authorities proposed to address the  issue either through a law-
drafting  committee  or  by  means  of  a  working  group.  While  no  proposal  has  been  received  so  far,  they 
committed to reverting on the issue with a more concrete proposal shortly. 

Evaluation of the implementation record of the reformed Code of Civil Procedure  

Following  the  formation  of  a  working  group  in  February  2019 (35)  and  the  dispatch  of  an  initial 
round  of  questionnaires  to  stakeholders,  work  on  the  evaluation  of  the  implementation  record  of 
the reformed Code of Civil Procedure is ongoing, and advancing towards completion of the data-
gathering phase. The completion of that phase will allow for the conduct of a comprehensive evaluation 
of the reform, the quantification of its influence on the achievement of targets and the elaboration of new 
proposals. The working group consists of judges, academics, legal professionals such as lawyers, notaries, 
bailiffs  and  representatives  of  stakeholders.  The  current  work  concentrates  on  refining  the  contents  of 
questionnaires.  In  parallel  to  this  work  stream,  the  working  group  is  engaged  in  the  collection  and 
assessment of relevant legal precedent that will inform the final stage of its work, i.e. the formulation of 
proposals  for potentially  needed legislative  amendments. The completion of  the  first draft of the report 
has  been  tentatively  set  by  the  Greek  authorities  on  mid-October  2019,  contingent  upon  observance  of 
intermediate timelines by the above-mentioned third parties.  

Training of judges and appointment of court clerks 

The authorities reported further progress in the provision of financial training to judges, notably in 
the area of household insolvency (a specific end-2018 commitment). Two draft Presidential Decrees 
have  been  drafted  by  the  Ministry  of  Justice,  Transparency  and  Human  Rights  and  should  shortly  be 
submitted to the Council of State for a constitutionality assessment (36), regarding: (a) the setting up of a 
section within the National School of Judges for the formation of magistrate’s court judges, who will be 
henceforth  enrolled  in  the  School  and  (b)  the  syllabus  that  will  include  courses  on  financial  and 
accounting matters and on the methodology of judicial work. 

(34)  Article 62 para. 4 of Law 4389/2016 (OJ Α-94/27.5.2016). 
(35)  Ministerial  Decision  No.  5542/φ.325/24.1.2019,  of  the  Minister  of  Justice,  Transparency  and  Human  Rights  (OJ  YODD-

56/11.22019). 

(36)  [Protocol numbers for the submission of the draft PDs to the CoS to be provided by the MoJ.] 

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Regarding  the  appointment  of  clerical  court  staff,  the  authorities  have  also  continued  with  the 
appointment  of  successful  candidates  of  recently  completed  Supreme  Council  for  Civil  Personnel 
Selection  competitions (37).More  specifically,  since  the  publication  of  the  February  2019  Enhanced 
Surveillance  Report,  107  successful  candidates  were  appointed  as  clerks  in  courts  and  court  services 
throughout the territory of Greece (38). Also, the Greek authorities reported that a replacement procedure 
has been engaged by Supreme Council for Civil Personnel Selection with respect to 72 vacant IT posts.  

Out-of-court workout framework 

While  the  use  of  the  out-of-court  workout  mechanism  recorded  modest  increases  up  to  the  first 
quarter  of  2019,  recently  adopted  legislative  amendments  to  the  framework  are  of  concern. 
Successful  multilateral  business  negotiations  score  low,  while  bilateral  business  negotiations  and 
restructurings  of  self-employed  professionals’  and  farmers’  debt  fare  markedly  better;  some  recent 
legislative  initiatives  raise  concerns.  Based  on  the  latest  data  provided  by  the  Greek  authorities  and 
extending to the end of the first quarter of 2019, the previously noted continuous increase in the number 
of  submitted  applications  (from  497  to  6,077  in  2018)  seems  to  be  levelling  off,  with  6,733  submitted 
applications submitted up to end-March 2019.  

Graph 5.6: 

Submitted business applications 

Source: Special Secretariat for Private Debt Management Ministry of Justice 

The  number  of  successfully  resolved  business  cases  involving  multilateral  negotiations  remains  small: 
approximately  83.8%  of  multilateral  negotiations  are  reported  as  pending  (total  debt  amount  EUR 
845.4 million), with 3.3% of them successfully resolved (total debt amount EUR 7.0 million) and the rest 
rejected. 

(37)  OJ 1579-C/2018, OJ 68-C/2019 
(38)  Ministerial Decision 26327/11.4.2019 of the Minister of Justice, Transparency and Human Rights (OJ C-635/22.4.2019). 

34 

 01 0002 0003 0004 0005 0006 0007 0008 000Sep-17Oct-17Nov-17Dec-17Jan-18Feb-18Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19BusinessesSelf-employedFarmers 
 
                                                           
Graph 5.7:  Outcome of multilateral negotiations - businesses 

Commission Staff Working Document -  

Chapter 5 - Financial sector 

Source: Special Secretariat for Private Debt Management Governmental council for private debt management 

The situation looks better regarding bilateral negotiations, with 46.0% pending (total debt amount EUR 
186.4 million),  26.8%  of  them  successful  (total  debt  amount  EUR  53.2 million)  and  the  rest  rejected. 
With respect to restructurings in cases involving self-employed professionals and farmers, the percentage 
of successful outcomes is higher (33.8% and 45.6% respectively), while pending proceedings account for 
28.8% and 21.3% respectively and unsuccessful negotiations for 37.4% and 33.1% respectively. 

It should be noted that the distinction between bi- and multilateral negotiations is not material regarding 
the  self-employed  individuals  and  farmers,  given  that  in  97.2%  of  all  cases  the  creditor  is  the  public 
sector, either in the form of the tax authority (40.7% of all cases) or social security entities (56.5% of all 
cases). 

In conclusion, notwithstanding the fact that the  OCW is a mechanism that  was conceived and designed 
predominantly  for  serving  as  a  conduit  for  multilateral  negotiations  with  a  view  to  preserving  viable 
businesses, it ensues from results reported up to date that it has not emerged as the preferred choice for 
that category of restructurings.  

A  recent  development  that  gives  grounds  for  concern  is  the  enactment,  on  16  May  2019 (39),  of  an 
amendment  to  the  law  on  the  OCW (40)  extending  the  cut-off  date  regarding  the  time  limit  set  to  the 
inclusion  of  debt  in  the  restructuring  for  the  second  time since  its  adoption (41),  to  31  December  2018. 
The stipulation of a  firm cut-off date  is an important  feature of this  mechanism, because it discourages 
strategic default planning and thereby helps avert moral hazard. 

This  marks  the  second  time  the  out-of-court  workout  framework  has  been  amended  in  the  last  five 
months,  without  consultation  or  information-sharing  with  relevant  stakeholders.  Given  the  need  for  a 
stable and predictable framework, careful and long-term planning by the authorities is warranted before 
changes are introduced to its  setup. If the  authorities are  inclined to  make  the OCW  legislation a  more 
permanent  feature,  due  care  should  be  given  to  properly  structured  incentives,  ensuring  efficient 
restructurings without inciting strategic defaults.  

(39)  Cf. minutes of the plenary session of the Greek Parliament, under reference RKST/16.5.2019, article 5 of the Ministry of Health 

bill adopted on that date.  

(40)  Law 4469/2017 (OJ A-62/3.5.2017), as subsequently amended by laws 4549/2018, (OJ A-105/14.6.2018) and 4587/2018 (OJ 

218/A/24.12.2018). 

(41)  The  first  extension,  from  31.12.2016  to  31.12.2017,  was  enacted  by  virtue  of  articles  45&ff.  of  law  4549/2018,  (OJ  A-

105/14.6.2018). 

35 

In progress84%Successful 3%Unsuccessful13% 
 
                                                           
Commission Staff Working Document -  

Chapter 5 - Financial sector 

State guarantees 

The large stock of called loan guarantees by the state is subject to a low processing rate and a high 
rejection  rate.  Over  the  past  seven  years,  the  state  has  accumulated  about  EUR 1.5 billion  backlog  in 
payment of called standardised guarantees. 

Such guarantees were granted by the state on loans to private companies and individuals, mainly by virtue 
of  Ministerial  Decisions  issued  for  social  and  humanitarian  reasons.  As  of  end-March  2019,  the  total 
number  of  claims  submitted  by  the  financial  institutions  is  575,908  for  a  total  of  EUR  1.8 billion.  The 
processing rate  of such  guarantees is very low  with an average of 8% over 2013-2018, also because of 
limited capacity of the Ministry of Finance to face such a workload. The slow path of clearance entails a 
significant  burden  for  the  banks  due  to  the  non-payment  of  primary  obligors  and  the  guarantor,  which 
does not help the Greek banks in their effort to reduce the exceptionally high level of NPLs. Besides, the 
fiscal impact of the clearance of the called guarantees remains unclear as the eligibility of the guarantees 
claimed is uncertain and the total stock of claims is not known fully accurately. Therefore, the issue of the 
called guarantees and its slow processing rate remains to be addressed.  

In  early  March  2019,  the  authorities  provided  an  action  plan  to  improve  the  clearance  of  state 
guarantees but more ambitious measures also of structural nature are necessary to allow for a full 
clearance of the guarantees called in a reasonable timeline. Consequently, some additional measures 
are considered by the Greek authorities. The temporary recruitment of external personnel is under survey 
and a new clearance method that would entail further cooperation between the General Accounting Office 
and  commercial  banks  is  envisaged.  A  working  group  has  been  formed  mid-May  with  the  General 
Accounting  Office  and  the  banks  to  address  technical  issues,  and  the  authorities  are  expected  to 
communicate concrete proposals to the banks shortly.  

5.3.  HELLENIC FINANCIAL STABILITY FUND 

In line with Greece’s Eurogroup commitments, the status of the Hellenic Financial Stability Fund 
(HFSF)  will  remain  unchanged  and  it  will  continue  its  efforts  to  achieve  its  ultimate  goal  of 
reprivatising  its  stakes  in  the  systemic  banks  in  the  coming  years.  The  restructuring  plans 
implemented by the four systemic banks may necessitate certain changes in the operational framework of 
the  HFSF  and  the  systemic  banks,  including  through  amendments  in  both  the  HFSF  Law  and  the 
Relationship Framework Agreements (42). The discussions between the HFSF and the Ministry of Finance 
and between the HFSF and the respective banks on these issues are still ongoing. 

The  HFSF  General  Council  has  approved  a  divestment  strategy  in  November  2018.  Although  the 
document makes it clear that the strategy, design, structure and execution of sale transactions regarding 
HFSF  stakes  in  Greek  banks  are  the  sole  responsibility  of  the  HFSF  as  an  independent  institution,  the 
potential involvement of the authorities in the final stage of the divestment and the legal protection for the 
HFSF governing bodies is still subject to discussions between the HFSF and the Ministry of Finance. 

The  authorities  have  clarified  that  the  mandate  of  the  HFSF  Selection  Panel  as  a  body  was  in 
alignment  with  the  recently  extended  mandate  of  the  HFSF;  this  has  been  confirmed  by  the  Legal 
Council of State. In early May 2019, the appointments to the vacant positions both in the Executive Board 
(including the Deputy CEO) and in the General Council of the HFSF have been enacted.  

(42)  The Relationship Framework Agreements are mandatorily concluded bilateral agreements between the HFSF and each of the 
four systemic banks that received State aid, regulating  – among others – the significant obligations and the monitoring of the 
implementation of the restructuring plans and the HFSF's consent rights. 

36 

 
 
                                                           
6. 

LABOUR AND PRODUCT MARKETS 

6.1. 

LABOUR MARKET 

The  Greek  authorities  continue  monitoring  labour  market  and  wage  developments  and  intend  to 
conduct an ex-post assessment of the recent increase in the minimum wage. The statutory minimum 
wage was increased by 10.9%, as of 1 February 2019, and the sub-minimum wage for persons aged under 
25 was abolished (implying an increase of 27% for this group). As a result, around 600,000 employees 
are estimated to have benefitted from a direct increase in their salaries. In view of the concerns raised by 
the increase of the minimum wage as regards its potential impact on undeclared work, on the wider wage 
distribution  and  on  competitiveness,  the  government  has  been  encouraged  to  conduct  an  ex-post 
assessment of its impact, as well as to continue monitoring labour market developments, including with 
respect to collective bargaining outcomes (43). To this end, the Ministry of Labour has been developing a 
monitoring  tool  based  on  administrative  data  (ERGANI  database  of  registered  employment  contracts). 
According  to  preliminary  data,  employment  growth  was  robust  in  the  first  three  months  following  the 
increase  in  the  minimum  wage  (period  February-April  2019),  with  a  large  increase  in  the  number  of 
registered contracts in the private sector (about 182,000 representing a 9% increase). In order to be able to 
carry  out  a  proper  assessment,  the  authorities  are  planning  to  use  and  integrate  additional  data  sources 
(namely  social  insurance  records)  which  should  allow  a  more  robust  estimation  of  the  effects  of  recent 
policy changes. For this purpose, a request for technical support has been submitted to the Commission 
concerning the appropriate collection and treatment of data from different existing administrative sources. 

The  action  plan  to  fight  undeclared  work  is  progressing  (a  specific  end-2019  commitment).  A 
detailed  action  plan  to  fight  undeclared  work  was  adopted  in  May  2017,  promoting  an  integrated 
approach to undeclared work by reinforcing the cooperation among different institutions, improving the 
capacity to detect the phenomenon, reviewing the system of incentives and strengthening the capacity of 
the labour inspectorate. So far, the implementation of the action plan has progressed smoothly. Recently 
completed  actions  include:  the  delivery  of  an  assessment  report  regarding  labour  inspections  in 
agriculture; the completion of an ad-hoc business survey aimed at identifying the obstacles to the creation 
of formal jobs; and, the delivery of a  diagnostic report on bogus self-employment.  A higher  number of 
inspections  was  carried  out  in  2018  compared  to  the  previous  year  (3.8%  increase),  and  data  from 
inspection results show a positive picture, with a steady reduction in the incidence of undeclared work in 
high risk sectors, which stood at 8.4% in April 2019, down from 10.7% in April 2018 (see Graph 6.1).  

A new provision on the rules for dismissal (whereby a dismissal is not valid if it is not based on a ‘valid 
reason’), was adopted in May 2019. According to the Greek authorities, this provision does not appear to 
materially alter the current rules, as the right of employees not to be dismissed without a ‘valid reason’ 
had  already  been  introduced  in  the  Greek  legal  system  in  2016  with  the  ratification  by  Greece  of  the 
Revised European Social Charter (which establishes such a right under its Article 24). Therefore, while in 
the past employers in Greece were not explicitly required to provide a justification for a dismissal, since 
the  ratification  of  the  Charter  this  is  now  the  case:  an  employer  can  legally  resolve  an  employment 
relationship for reasons connected with the capacity or conduct of the employee, or for reasons based on 
the  operational  requirements  of  the  enterprise  (economic  reasons).  In  case  a  dismissal  is  challenged  in 
court  and  the  employer  is  unable  to  prove  the  existence  of  such  a  ‘valid  reason’,  the  dismissal  is 
considered to be unlawful and the employee has the right to be reinstated and is entitled to compensation 
of financial losses incurred since the date of the unlawful dismissal. According to the Greek authorities, 
the purpose of the new provision is to improve legal clarity, by listing under the same article of legislation 
all the requirements that must be met in order for a dismissal to be considered as valid. It remains to be 
seen to what extent such improved clarity will affect the overall number of dismissals, lead to an increase 

(43)  Following  the  end  of  the  economic  adjustment  programme,  the  favourability  principle  and  the  principle  of  extension  of 
collective agreements have been restored. To date, 12 sectoral or local collective agreements have been extended to apply to the 
entire sector, covering in total more than 200 000 workers. 

37 

 
                                                           
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in  litigation  with  a  higher  number  of  dismissal  decisions  being  challenged  in  court,  and/or  lead  to  an 
improved processing of such cases by the courts. 
Graph 6.1: 

Share of uninsured workers found in high-risk sectors. January 2013 - April 2019 

Source: Greek labour inspectorate 

Education 

Τhe  Greek  educational  system  faces  long-standing  challenges,  including  inadequate  allocation  of 
resources,  low  autonomy,  poor  educational  outcomes,  skill  mismatches,  and  weaknesses  in  the 
governance of higher education institutions. These challenges are identified and discussed in the 2019 
Country Report for Greece under the European Semester. The 2018 OECD country review on Greece (44) 
also  makes  specific  policy  recommendations  to  improve  the  quality  and  efficiency  of  the  system.  In 
contrast, some measures taken in recent months raise questions of consistency with the spirit of reforms 
made  in  past  years.  Mergers  between  technical  education  institutions  (TEIs),  which  focus  on  applied 
sciences,  technology  and  art  and  universities  commenced  in  2018  and  were  completed  in  2019. 
Rationalising  the  higher  education  system,  which  consisted  of  36  independent  institutions  before  the 
mergers, is in principle warranted. However, the current policy which integrates the TEIs into the existing 
universities,  expands  the  system  by  establishing  new  departments,  and  maintains  their  regional 
fragmentation across different cities. In the absence of a comprehensive prior evaluation, it is unclear how 
the  upgrading  of  TEIs  will  serve  to  improve  the  fragmented  higher  education  landscape  or  the  need  to 
make  tertiary  education  more  relevant  for  the  labour  market.  This  complements  a  particularly  low 
participation  and  completion  rates  of  students  in  secondary  vocational  education.  Mismatches  of  the 
education  system  and  labour  market  needs  risk  leading  the  emigration  of  recent  graduates  to  other 
countries to continue, contributing to the ageing of the country’s labour force. 

6.2. 

PRODUCT MARKETS AND COMPETITIVENESS  

While  significant  and  wide-ranging  reforms  have  been  delivered  in  recent  years  to  improve  the 
business environment, much remains to be done in this area to stimulate economic activity and job 
creation, and to support the shift towards a more export- and investment-led growth model. Over 
the  last  years,  the  authorities  have  taken  positive  steps  with  respect  to  alleviating  the  administrative 
burden on start-ups and businesses through the establishment of one-stop shops and the rationalisation of 
licensing,  inspection  and  customs  procedures.  In  parallel,  improvements  in  the  regulation  of  network 
industries  and  the  removal  of  barriers  to  competition  in  specific  sectors  of  the  economy  have  been 
achieved,  along  with  improvements  in  the  spatial  planning  framework  for  industrial  and  business  sites, 
and advances in cadastral and forest mapping. Nonetheless, the administrative burden on firms remains a 

(44)  Education for a Bright Future in Greece, OECD, April 2018 

38 

0510152025303540452013201420152016201720182019% 
 
                                                           
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major  issue,  while  there  is  greater  scope  for  openness  in  specific  markets  to  create  further  economic 
opportunities and jobs, given the still high unemployment rate (45).  

Positive results are being recorded on the export and investment side, reflecting an improvement in 
framework  conditions,  with  nonetheless  significant  challenges  laying  ahead.  Exports  of  goods  and 
services reached 36% of GDP in 2018, climbing up from 33% in 2017, and recording an annual growth 
rate in real terms of 8.7% compared to 6.8% in 2017. Moreover, Greece’s export performance in relation 
to the rest of the world has improved, as reflected in export market shares gains recorded over the last two 
years (see Graph 6.2), largely due to improvements in cost-competitiveness. Nonetheless, according to the 
Commission 2019 spring forecast, export growth is expected to decelerate in the coming years, partly in 
response  to  the  slowdown  in  the  global  economy,  and  especially  in  the  euro  area,  which  is  a  major 
destination  of  Greek  goods  exports  and  the  main  source  of  tourism  inflows.  Further,  despite  a  fall  in 
overall gross fixed capital formation (-12.2% in 2018), foreign direct investment (FDI) inflows resumed 
their upward trend in 2018 following the gains recorded in 2016 and 2017. FDI inflows in 2018 amounted 
to close  to 2% of GDP, attributable to a  large extent to privatisations (21% of the total  FDI inflow  for 
2018). Yet, this is still half the euro area average, reflecting Greece’s poor track record in attracting FDI, 
partly due to shortcomings in the investment environment.  

Non-price competitiveness still remains at a relatively low level, and has even slightly retreated over 
the past two years according to a number of indicators. Greece ranks 72nd among 190 countries (down 
from 67th in 2017 and 61st in 2016), according to the 2019 Doing Business Report of the World Bank, and 
57th among 140 countries (four places down from the previous year) according to the 2017-2018 Global 
Competitiveness  Index  of  the  World  Economic  Forum.  Greece’s  performance  according  to  the  2018 
the  Swiss-based  International  Institute  for  Management 
World  Competitiveness  Rankings  of 
Development was broadly stable between 2016 and 2018, positioning Greece on the 57th place out of 63 
countries assessed in 2018, after having deteriorated quite markedly in 2016 (six places down  from the 
previous year). 
Graph 6.2: 

Evolution of Greece's export market share 

Source: European Commission 

Overall, it will be key to focus reform efforts on further rationalising and digitising  administrative 
procedures  for  firms,  improving  the  regulatory  and  legislative  framework  in  key  sectors,  and 
facilitating  access  to  finance.  An  improved  business  environment  would  also  contribute  to  addressing 
the structural component of sluggish productivity growth by tackling the crisis-induced investment gap, 
the emigration of skilled labour and the still high long-term unemployment. 

(45)  The  challenges  facing  the  business  environment  in  Greece  were  discussed  among  the  European  Commission,  World  Bank, 
OECD, experts from Member States, local policy makers, social partners, journalists, think-tanks and academics in the context 
of the European Semester Conference that was organised by the European Commission in collaboration with the Foundation for 
Economic  &  Industrial  Research  (IOBE)  in  Athens,  in  March  2019.  https://ec.europa.eu/info/events/integrating-greece-
european-semester-policy-framework-2019-mar-20_en 

39 

-30-25-20-15-10-5051015202503040506070809101112131415161718y-o-y change (%)Contribution: World export growth (nominal, neg. sign)Contribution: Export growth (nominal)Export market share growth rate 
 
                                                           
 
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Chapter 6 - Labour and product markets 

6.2.1.  Business environment 

With a further increase of 14% of GDP still needed to be achieved within a 6-year horizon,  more 
needs to be done on export promotion to reach the export/GDP target of 50% by 2025, as set out by 
the Growth Strategy adopted by the authorities in July 2018. The pace of implementation of the two 
related  action  plans,  namely  the  Export  Promotion  Action  Plan  and  the  Trade  Facilitation  Roadmap, 
drawn during  the ESM  stability  support programme, has been  mixed. Particular concerns are related to 
the implementation of an integrated Single Window ICT system, which aims to speed up procedures for 
traders  and  customs  officers,  as  significant  delays  in  both  the  tendering  procedure  and  the  preparatory 
work  are  observed  with  respect  to  the  end-2020  target.  Further,  given  the  interplay  between  several 
services, greater complementarity and synergies between projects and actions in overlapping domains is 
necessary to maximise the effectiveness of these actions in terms of increasing the exporters’ base, which 
remains highly concentrated, as well as the export propensity of the Greek economy as a whole. In doing 
so,  there  is  a  need  to  develop  better  export  business  skills  and  diversify  the  export  strategy  to  non-
traditional  markets, also  focusing on the  development of smart specialisation strategies  in order to gain 
from  untapped  sectoral  and  export  market  opportunities.  Registering  comparatively  larger  increases  in 
exports would also be necessary to keep the current account balance in check as demand for imports picks 
up.  

In the context of the ongoing technical assistance project for customs authorities provided through 
the  Commission  Services,  further  work  is  expected  on  removing  unnecessary  procedural 
impediments to trade and increasing the openness of the economy. Specifically, further rationalisation 
of  cumbersome  customs  procedures,  which  entail  a  significant  cost  to  both  businesses  and  customs 
authorities, would be important. To this end, it would be warranted for the authorities to work towards the 
promotion  of  a  better-targeted  ex-ante  control  strategy  based  on  a  risk  analysis  approach,  whilst 
developing and formalising ex-post controls in line with EU best practices. Moreover, resources should 
be devoted towards the implementation of a rigorous outreach activity programme to promote the use of 
privileged  trader  status  both  within  the  customs  network  and  towards  businesses,  such  as  that  of 
Authorised  Economic  Operator  (AEO).  This  essentially  constitutes  a  quality  label  based  on  reliability, 
solvency, trust and internal security criteria that allows for less control and swifter customs procedures, as 
well as adhering significant branding benefits in export markets both in the EU and third countries. Whilst 
there has been an increase in the number of AEOs in Greece in recent years, the current figure of 148 still 
accounts for an low percentage of the trading firms, in comparison with other EU countries. 

Investment licensing 

On the investment licensing reform, which is part of the specific reform commitments given to the 
Eurogroup,  significant  work  is  underway  by  the  authorities.  Despite  delays  in  certain  areas,  the 
reform appears to be broadly on track with deadlines on specific investment licensing commitments for 
the outer years. Whilst continued efforts to complete reform commitments are welcome, the adequacy of 
control mechanisms to contain the risk of potential policy reversal should be ensured. This calls for the 
creation  of  an  effective  institutional  mechanism  to  safeguard  the  integrity  of  critical  reform  gains 
achieved thus far. In particular, progress has been achieved on the following: 

  The  tendering procedure on  the relevant ICT system (ILIMS), due to be  completed by end-2019, is 
progressing again, following  the  conclusion of an appeal review procedure in  April. The authorities 
have envisaged to complete the technical evaluation process by the end of May and to proceed with 
the financial evaluation of the five eligible offers in June, with a view to signing the contract with the 
successful tenderer by September 2019. The first deliverable of the contractor, i.e. the implementation 
study, should be made available within six months from the awarding of the contract. 

  Work on the implementation of the inspections framework law has proceeded in accordance with the 
agreed  action  plan,  with  the  development  of  relevant  horizontal  and  sector-specific  actions,  in  line 
with the objective to finalise the inspection legislation by mid-2020. Further work on the development 
of  sector-specific  tools  in  certain  sectors  (food  safety  and  environmental  protection)  continues  with 
the support of European Commission technical assistance provided through the World Bank. 

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Chapter 6 - Labour and product markets 

  Regarding the extension of simplification, by mid-2020, of the investment licencing procedures in the 
24  remaining  sectors,  work  on  the  primary  production  sector  (livestock  installations,  fish  farming, 
forestry and veterinary clinics installations) is underway. Whilst progress has been achieved in some 
areas, some delays are anticipated in the passing of primary and secondary legislation. 

  As  regards  the  revision  of  the  nuisance  classification,  to  be  completed  by  mid-2021,  the  authorities 
issued, in February 2019, an inter-ministerial decision setting up a Steering Committee for the project 
as well as a Secretary General decision to define the composition and functions of the corresponding 
Working Group, in line with the agreed roadmap. Following the operationalisation of these structures, 
work  is  currently  underway  on  the  initial  definition  of  nuisance  parameters  and  criteria,  with  the 
participation  of  the  private  sector.  The  authorities  are  also  preparing  a  contract  to  secure  technical 
support for the project through EU funds. 

It  is  important  to  assess  the  actual  impact  of  product  market  reforms  adopted  in  recent  years  so 
that they can be fine-tuned and strengthened where needed. As part of Greece’s reporting obligations 
under  enhanced  surveillance,  the  Centre  of  Planning  and  Economic  Research  (KEPE)  completed  in 
January 2019 an impact assessment of reforms enacted since 2011 in Greece in the areas of pharmacies, 
over-the-counter  (OTC)  drugs,  and  Sunday  retail  trading.  Overall,  despite  a  number  of  constraints, 
including data limitations, the interplay of other factors and the relatively short implementation period in 
some cases, the analysis suggests that these reforms have already had a positive effect on competition and 
job creation, based on indicators such as commodity prices, number of new products or market entrants, 
business  turnover  and  employment  (see  Boxes  6.1and  6.2).  KEPE  will  provide  an  updated  impact 
assessment  of  these  reforms  in  September  2019,  which  should  shed  more  light  on  the  quantification  of 
their potential impact,  and further, undertake an impact assessment of prior reforms affecting engineers 
(including public engineers), lawyers, and private clinics.  

The  authorities  have  resumed  work  on  completing  key  reforms  that  could  foster  product  market 
competition in the area of health. Following the completion of the reform of day clinics in June 2018, 
the Greek authorities enacted, on 9 March 2019, a law on private clinics (4600/2019, FEK A’43), which 
had been pending since July 2018. Τhe law aims to modernise and reform the regulatory framework of 
private  clinics  in  a  single  piece  of  legislation  by  revising  entry  and  conduct  requirements.  Some  of  its 
provisions, including the obligation of private clinics to have a publicly available price list (online and on 
site) of the services that they provide, could potentially increase competition in this particular market. In 
addition, the new framework introduces greater flexibility by relaxing requirements in a number of areas. 
These concern the minimum number of beds per clinic, the  maximum permissible period for temporary 
suspension  of  operation,  and  the  ability,  under  certain  conditions,  to  make  conversions  to  the  beds 
capacity in clinic departments with a notification to the supervising authority, instead of obtaining a new 
license.  Moreover,  the  law  introduces  some  exceptions  to  previous  provisions  (presidential  decree 
247/1991) concerning the need for clinics to operate in separate and autonomous buildings, allowing for 
some  specific  cases  of  business  activity  to  co-exist  within  the  building.  Nevertheless,  whilst  the 
autonomous building requirement has been in place since 1991, approximately 70% of existing clinics do 
not  meet  this  requirement,  due  to  lack  of  legal  clarity  in  the  old  framework.  Whilst  the  transitional 
provisions  allow  for  such  clinics  to  operate  on  the  basis  of  the  license  acquired  under  the  previous 
legislative framework, all new private clinics, or those that wish to renew or amend their licence have to 
adhere to the stricter autonomous building requirement. As a result, the new framework does not address 
this  dual  licensing  system. More  information  about  the  economic  impact  of  this  reform  will  become 
available in September 2019 by the Centre of Planning and Economic Research (KEPE) in the context of 
its biannual assessment of key reforms. Beyond private clinics, law 4600/2019 also introduces provisions 
about health professions (dentists and physiotherapists) setting, among others, fines for individuals  who 
exercise  the  profession  without  a  license,  but,  there  is  no  particular  provision  directly  affecting  the 
liberalisation of these professions. 

41 

 
 
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42 

Box 6.1: Assessment of the economic impact of selected product market reforms in pharmacies and over-the-counter (OTC) drugsRegulatory changes in the sector of pharmacies took place in 2011, 2014 and 2018 and aimed at revising market entry and operation requirements, mainly by relaxing ownership and population-related criteria, by lifting minimum-distance restrictions and by extending opening hours. Based on the analysis of the Centre of Planning and Economic Research (KEPE) that was completed in January 2019, these reforms appear to have had an initially positive effect, as reflected in the increased number of market entrants and the higher employment observed during the period 2011-14 (4.5% more pharmacies and 3.1% more pharmacists in 2014 compared to 2011). This positive trend was reverted somehow in subsequent years, as both the number of pharmacies and that of pharmacists decreased by 0.8% and 2.8% respectively during the period 2014-17 (Graph 1, left side). According to the analysis, however, this reversal is associated, in part, to the interplay of other factors. In particular, while there has been a positive net inflow of pharmacies over the whole reform period, a significant number of pharmacies exited the sector, notably during the years 2013-15, in response to announced pension reforms. In terms of turnover of pharmacies, there has been a sharp decrease over the whole reform period, which is, nevertheless, mostly attributed to price setting adjustments that took place during the same period to contain public health expenditure. On the other hand, the sales of pharmacies in volumes have recorded a slight increase since 2011. Graph 1: Evolution of pharmacies and pharmacists (left), sales of over-the-counter (OTC) drugs (right)  Source: ELSTAT, AESGP, 2018 (calculations by KEPE) In the market of over-the-counter (OTC) drugs, reforms were enacted in 2014, 2016 and 2017. These led to changes in the classification of drugs in the OTC category (including the introduction of a subcategory of OTC drugs and the liberalisation of the distribution network for the latter), the establishment of an indicative retail price and a maximum price for hospitals, and the abolition of profit margin ceilings for wholesalers and pharmacies. In particular, the reforms resulted in an increase in the number of products that fall under the OTC category (408 new products in 2014). Moreover, they led to an increase in the number of products classified under the new OTC drugs subcategory (4 new product codes), which could also be sold by other retailers (e.g. supermarkets) under specific conditions, increasing consumer options somewhat. In terms of retail price effects, the impact assessment by KEPE is based on a sample of 69 OTC drugs out of a total 602 drugs, for which the Ministry of Health provided indicative prices in July 2018 and which, following the 2017 reform, were computed based on the three lowest prices in the EU (as opposed to five in the past). During the period from 15 January 2018 to 15 January 2019, 74% of these 69 drugs were sold at a price that was higher than the indicative retail price in pharmacies all over Greece, but with small variations across pharmacies and products of the same category. Total sales value (in terms of producer prices) increased by 8% between 2014 and 2017, possibly owing to the increase in the number of OTC drugs and to greater accessibility due to the liberalisation of the distribution network for some of these products (Graph 1, right side). The updated assessment by KEPE in September 2019 is expected to shed more light on price developments, as well as to the entry of new products into the market. 9 0009 50010 00010 50011 00011 50012 0002011201220132014201520162017Number of pharmaciesNumber of pharmacists 310 320 330 340 350 360 370 3802014201520162017EUR mnSales value of OTC drugs 
 
 
 
 
 
 
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Cadastre and land policy 

The  establishment  of  a  full  cadastre  in  Greece  remain  a  key  policy  priority  for  the  business 
environment.  As  part  of  the  June  2018  specific  commitments  now  enshrined  under  the  enhanced 
surveillance framework, the Greek authorities committed to complete the cadastre project by mid-2021. 
As  intermediate  steps,  they  also  committed  to  complete  the  remaining  forest  maps  by  mid-2019  and  to 

43 

Box 6.2: Assessment of the economic impact of reforms affecting Sunday retail tradingExpanding the shopping opening hours to Sundays in selected areas has been identified as a key reform area by the institutions and the OECD. Several changes to the regulatory framework of Sunday retail trading were introduced in 2014, but most of them were suspended by the Council of State. The main reform in this area took place in May 2017 (Law 4472, FEK A’ 74/19-5-2017) and allowed for Sunday trading in four regions (including the touristic areas of Attica and Thessaloniki), as well as the possibility to undertake retail trading on Sundays in any other region in Greece under specific conditions, while also lifting prior shop size and ownership criteria. The effectiveness of this reform was analysed by a study conducted by the Centre of Planning and Economic Research (KEPE) in January 2019. Despite data availability constraints, the short implementation period of the reform and the fact that it coincided with the general economic upturn, there are some signs that point to higher competition (new market entrants, a higher share of the sector to total employment, continued low commodity prices and higher demand). In terms of market dynamism, in 2018 there was a positive net inflow of new businesses (+867 businesses) in the retail sector as a whole, as opposed to the negative trend observed over the period 2009-2017. Notably, retail trade sectors that are traditionally affected by Sunday trade (clothing, sports equipment, toys, IT software/hardware, cosmetics/beauty products, and telecommunication equipment) contributed to this upturn through a net inflow of 320 businesses (with the former four sectors registering positive net inflows for the first time in 2018 since 2010). In terms of prices, KEPE notes that the price of three categories of products and services that may have been affected by Sunday trading (clothes/shoes, durable goods/household appliances and entertainment/cultural activities) continued to decrease in 2017 and 2018, as opposed to the general consumer price index that had already started increasing in 2017 (Graph 1). Moreover, the increase in the value of transactions made with electronic cards on Sundays in areas affected by the reform (+711%) was, during the whole 2016-18 period, much higher than the increase in the total value of electronic card transactions observed in the same areas (+175%). The share of transactions conducted with foreign cards on Sundays also increased (reaching 38.1% of total purchases in 2018 compared to 24.5% in 2017 and 23.3% in 2016). Graph 1: Evolution of prices levels (2010 = 100)  Source: ELSTAT  859095100105201020112012201320142015201620172018CPIClothing and footwearRecreation, cultural activitiesDurable goods, household appliances & services 
 
 
 
 
 
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fully  establish  the  cadastral  agency  and  complete  45%  of  the  cadastral  mapping  by  mid-2020.  The 
authorities have adopted a comprehensive road map in order to achieve these objectives. 

The  cadastre  project  has  further  progressed  in  recent  months.  The  Commission  has  taken  the 
decision to co-finance with structural funds the last set of contracts (about EUR 84 million). A two-year 
technical  support  contract  has  also  been  signed  between  the  Commission  and  the  World  Bank  in 
November 2018 and is under implementation. The staffing of the agency assigned to the management of 
the contracts is satisfactory with the exception of IT staff, where it proved difficult to attract a sufficient 
number  of  highly  qualified  experts.  A  custom-made  monitoring  tool  (Project  Management  Information 
System) is operational. The declaration of properties for 62% of property rights around the country (phase 
IV)  is  progressing  satisfactorily.  Hellenic  Cadastre  has  launched  an  electronic  application  for  property 
declaration  and  payment.  Overall,  42  cadastral  offices  are  operating  throughout  the  country  to  serve 
persons that are unable to declare their properties electronically and a major cadastral office has opened in 
Athens to facilitate the process. 

The  preparation  of  the  forest  maps  (mid-2019  commitment)  is  on  time.  Fifteen  contracts  are 
proceeding  according  to  schedule.  As  of  May  2019,  forest  maps  for  55  %  of  the  territory  have  been 
uploaded,  of  which  maps  for  41%  of  the  territory  are  ratified  and  the  rest  is  in  the  public  consultation 
phase. Forest maps for 43% of the country are under preparation, with the projection that all maps will be 
produced by July 2019. The remaining 2% of the country's forest maps have been contracted in May 2019 
and will be finished by February 2020. To strengthen the local forestry offices, 100 specialists (forestry 
and agronomists) were recruited for 8-month contracts, and the committees on objections are proceeding 
with their work.  

In  order  to  accelerate  the  ratification  of  the  maps,  some  areas  with  building  settlements  within 
forest land were temporarily excluded from the maps. The rationale was to cover the vast majority of 
the country with permanent and definitive maps, while the State would decide on how to proceed with the 
more controversial areas, where whole settlements were built within forest land at a later stage. However, 
a decision of the Council of State in March 2019, after an appeal launched by WWF Greece, states that 
these areas of "building concentrations" cannot be excluded from the maps. The authorities have prepared 
draft legislation to be urgently introduced in Parliament to address the concerns of the Council of State. 
Until  then  it  is  not  clear  if  this  decision  will  have  an  implication  on  the  intermediary  commitment  to 
complete the drawing of the remaining forest maps by mid-2019. 

Progress  with  the  establishment  of  the  new  institutional  framework  for  the  cadastre  has  been 
mixed. The appointment of the new management team and Board of Directors has progressed somewhat. 
A transitional management was appointed a  year ago. A migration team was appointed to carry out the 
task of integrating the mortgage offices into the new structure, but its capacity remains weak. Regarding 
the integration of the mortgage offices into the new structure, two new regional cadastre offices have been 
established on 19 April and 14 May (Veria and Karditsa) and are functional replacing the corresponding 
mortgage  offices.  The  government  is  preparing  legislation  aiming  at  strengthening  the  migration  team 
with sufficient full-time dedicated staff and a detailed plan for the integration of the mortgage offices to 
meet the deadlines set with the advice of the World Bank. The next three months will be critical for the 
implementation of these actions. 

On spatial  planning,  most of the secondary legislation  necessary for the application of the spatial 
planning law is completed. There is no pending legislation that would prevent the completion of spatial 
planning  in  Greece,  but  the  adoption  of  remaining  legislation  (Presidential  Decree  to  harmonise  older 
legislation  with  Law  4447/2016,  and  Ministerial  Decision  with  the  technical  specifications  for  town 
plans) is substantially delayed. More specifically, the Presidential Decree to harmonise older legislation 
with Law 4447/2016 has been retained in order to harmonise it with a new legislative framework under 
discussion on urban re-development. The technical specifications for town plans are also delayed. 

An  important  issue  regards  the  Local  Spatial  Plans  (LSP).  Currently,  no  Local  Spatial  Plan  is 
completed,  two  are  underway  and  353  remain  to  be  executed.  A  Joint  Ministerial  Decision  for  the 

44 

 
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financing the LPS by a European Investment Bank loan is in the process of receiving signatures and an 
algorithm for the calculation of the cost of studies has been produced.  

Finally,  a  study  with  support  from  the  Commission  has  been  signed  for  the  systematisation  of 
environmental legislation. This is a complementary action to the cadastre and spatial planning aiming at 
better enabling citizens and investors to access and understand environmental legislation. 

6.2.2.  Network industries 

Energy 

The second quarter of 2019 saw a wide-ranging energy law passed (46), covering several key reform 
topics.  In  particular,  the  law  set  up  the  framework  for  the  restructuring  of  the  gas  company  DEPA, 
established  conditions  for  the  lignite  divestiture  of  the  Public  Power  Company  (PPC)  and  contained 
provisions  for  dealing  with  extra  electricity  generation  in  Crete  by  facilitating  transfer,  installation  and 
operation  of  specific  units  to  address  energy  security  concerns.  However,  regarding  the  Eurogroup 
commitments, there was only limited progress. 

A  key  reform  underpinning  the  evolution  of  the  energy  markets,  the  divestiture  of  PPC’s  lignite 
plants,  was  relaunched  after  the  first  deadline  resulted  in  no  bids  being  accepted.  A  new  timeline 
had been agreed which should close by the end of June 2019. Given that the last bid failed due to offers 
being below the  valuation, the terms of this round state that a fairness opinion on any  offers  should be 
included, and that the first valuation should not be taken into account, given some of the assumptions it 
was  based  on.  Several  companies  expressed  interest  in  the  latest  round,  though  it  remains  to  be  seen 
whether bids will be made and accepted. A unilateral decision extending the process deadline to 15 July 
was  made  by  PPC  following  consultation  with  the  Ministry  of  Energy  and  Environment.  As  such,  the 
closure will not be made within the agreed deadline. 

Progress  with  the  implementation  of  the  target  model  for  the  electricity  market  has  been  slow. 
Whilst  Greece  has  made  some  steps  forward,  such  as  stakeholder  workshops  and  English-language 
translations of the rulebooks, it seems clear at this juncture that the go-live of the intraday, day-ahead and 
balancing  markets,  already  delayed  from  the  initial  plan  of  April  2019,  will  not  occur  until  2020,  inter 
alia  due  to  delays  from  contractors.  Some  groundwork  for  coupling  with  the  Bulgarian  and  Italian 
markets has been prepared, but will not go live at least until 2020 due to the domestic delays. Its eventual 
implementation  will give Greece  access to the pan-European electricity  market, bringing  many benefits 
for the security of the system and electricity prices. Related to consumer markets, a planned smart meters 
project appears to have stalled; such technology will be helpful in the future should the markets develop 
to the point that consumers can respond to pricing movements. 

The NOME electricity auctions continued with its allocated quantities, and the delays to the lignite 
divestiture meant that a planned correction mechanism was not triggered. The latest auction of 355 
MWh  saw  higher  prices  than  the  previous  events.  After  some  concerns  about  single  market  rules,  a 
proposed clause to limit exports was accepted by the Commission, though its impact is not clear. Further 
reductions  of  quantities  will  follow  the  successful  completion  of  the  lignite  plants  divestiture.  On  the 
retail side, PPC’s  market share  was reduced to some 76.6% in March 2019, down from around 78% in 
January,  and  below  the  80.3%  at  the  time  of  the  last  report.  The  market  share  varies  between  high, 
medium and low voltage customers. Whilst this does reflect progress, the market conditions are still some 
way  off  the  goal  of  PPC’s  market  share  going  to  below  50%  by  end-2019.  Consumer  prices  are  still 
highly  distorted,  through  the  application  of  social  tariffs,  which  are  established  to  address  Greece’s 
energy poverty concerns. PPC’s decisions to reduce the discount for early-paying consumers from 15% to 
10% is a positive step in recuperating market price, as well as increasing PPC’s revenue base. The Greek 
authorities recently announced a proposal to reduce the VAT on energy to 6%, from the  current level of 
13%. In another market development, the second flexibility auction, planned for May, did not go ahead. 

(46)  Law 4602/2019 (OJ 95-A/9.3.2019) 

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Progress with the implementation of energy market reforms has slowed notably during the past few 
months.  It  is  key  that  the  reform  of  the  market  stays  on  course,  and  important  to  note  that  the  main 
developments are interconnected. It is evident that the deadlines for all the major commitments have been 
significantly delayed so far and there is still uncertainty about the direction Greece is heading in. 

Taking a wider perspective, the date for the 3rd renewable energy (RES) auction has not been set 
yet. Quantities have been established at 300 MW for both solar and wind projects. The RES Account is 
still  in  surplus,  but  cash  flow  issues,  including  its  reporting,  remain.  The  surplus  is  driven  by  high  EU 
Emissions Trading System (ETS) CO2 prices. Ongoing/ public consultations carried out by the national 
regulator (RAE) are good opportunities to increase the confidence of RES producers in the system, and to 
strengthen DAPEEP’s ability to manage this important account. One is on the return to the suppliers of 
the  2018 surplus  following the abolition of the  supplier surcharge, and the other on the  calculation and 
collection  of  ETMEAR  (Special  Duty  for  Reduction  of  Gas  Emissions)  by  the  RES  market  operator 
(DAPEEP).  Beyond  the  RES  Account  and  auctions,  a  major  factor  in  the  development  of  renewable 
energy sources is licensing. Many stakeholders raise concerns that RES projects have complicated, long-
procedures, which detracts investors. Greece has started work to update its spatial planning, which could 
be an opportunity to streamline the process. 

Fundamental  steps  to  reform  the  gas  market  have  been  undertaken,  both  in  terms  of  the 
transmission  grid  and  distribution,  and  efforts  should  continue.  DESFA,  the  transmission  network, 
was  sold  to  private  investors  at  the  end  of  2018,  however  adjustments  to  the  final  certification  by  the 
energy regulator (RAE) raised concerns. At this stage it appears that these issues have been resolved, and 
RAE  have  passed  their  final  decision  that  is  expected  to  be  officially  published  shortly,  allowing  the 
investors to move forward with developing new market opportunities. As far as DEPA is concerned, the 
splitting  of  the  Commercial  and  Infrastructure  parts  of  the  business  took  place,  in  accordance  with  the 
terms  of  Greece’s  new  corporate  law  on  mergers.  Effective  unbundling  of  network  and  supply  is  a 
fundamental  element  of  the  restructuring  so  it  is  important  the  future  ownership  of  these  new  ventures 
respects  this.  A  liquid  and  well-functioning  gas  market  remains  an  opportunity  for  Greece  to  play  an 
international strategic role across various suppliers and routes through both pipelines and liquefied natural 
gas, and for the Greek gas market to grow. 

Whilst the progress made with the implementation of Crete’s interconnection to the Peloponnese is 
positive news, the uncertainty about the status of the Attica-Crete  interconnection continued. The 
overall  project,  linking  Attica,  Crete,  Cyprus  and  Israel,  remains  on  the  list  of  Projects  of  Common 
Interest  (PCI)  for  now;  thus  being  eligible  for  EU  funding  (approximately  EUR  300  million  to  be 
allocated  to  this  project),  until  the  formal  adoption  of  the  4th  PCI  list.  However,  the  electricity 
transmission  operator  (ADMIE)  decided  to  start  implementing  the  Attica-Crete  segment  as  a  national 
competitive project and Greece did not support the inclusion of the project in the 4th PCI list, therefore 
rendering  it  ineligible  for  grants  under  the  Connecting  Europe  Facility.  Continued  support  by  the 
authorities of the PCI status of the project beyond 2019 could allow taking full advantage of the benefits 
deriving  from  the  TEN-E  Regulation,  such  as  eligibility  for  applying  for  grants  under  the  Connecting 
Europe Facility. 

The  recently-released  financial  results  of  PPC  for  2018  show a  strong  decline  in  profitability  and 
worsening  cash-flow  issues.  Higher  CO2  prices,  a  loss  of  retail  market  share  and  the  NOME  auctions 
were  identified by PPC and  the authorities as the  key drivers of  the negative  results. The lignite plants 
subject to the ongoing divestiture further contributed to losses. Whilst results of 2018 are very different 
from  2017,  when  PPC  made  profits,  it  seems  clear  that  structural  issues  remain,  and  it  raises  questions 
about the size PPC is able to maintain, and about its pricing policy. Whilst higher prices will allow for 
PPC to improve its cost recovery, equally important is that it should facilitate the overall competitiveness 
of  the  electricity  markets,  thereby  leading  to  an  increase  in  the  much-needed  investments  in  the  sector. 
PPC  is  clearly  going  to  remain  the  cornerstone  of  the  Greek  energy  market,  but  its  current  path  is 
worrying, something which is increasingly recognised by PPC’s senior management. The current quarter 
did see some positive news for PPC, with an upgrade of its bonds and securing loans from national and 
international financial institutions. It also appears that PPC is seeking an agreement with the authorities 

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regarding payments from previous years for Public Service Obligations (PSO), with a decisions expected 
by RAE on this matter. Arrears collection showed some improvement, but some structural issues remain 
which will be challenging to resolve and will require determined efforts, including regulatory intervention 
to  address  the  issue  concerning  the  so-called  inactive  users  (generally  low  voltage  category  customers 
who have swapped suppliers) that has seen a 20% increase in outstanding payments during 2018.  

A  fundamental  requirement  for  successful  reform  of  the  energy  market  will  be  the  ability  and 
willingness of RAE to oversee the market and make the necessary regulatory decisions in a timely 
and transparent  manner. The authorities are discussing provisions to increase the independence of its 
decision-making  (e.g.  through  liability  provisions  for  its  members  and  staff)  as  well  as  to  increase  its 
overall capacity through hiring of new permanent staff. It is important that the adopted provisions will be 
fully aligned with EU legislation and practices while also being consistent with and respecting the overall 
principles  of  key  public  administration  reforms  adopted  during  the  programme  period  in  Greece.  As 
recent  developments  have  demonstrated,  such  as  with  the  NOME  auctions  and  exports,  a  cooperative 
effort between RAE and the European and Greek authorities can deliver results, and it is recommended 
such an approach is continued. 

Water 

In  the  water  sector,  an  information  system  has  been  set  up  in  January  2019  to  monitor  the 
performance  of  water  companies  throughout  the  country  through  the  regular  collection  of 
information.  The  functioning  and  objective  of  the  system  is  to  ensure  the  sustainability,  quality  and 
affordability  of  water  provision  in  Greece,  which  is  currently  suffering  from  a  lack  of  transparency, 
accountability  and  coordination  across  different  actors  in  the  sector.  The  Special  Secretariat  for  Water 
(SSW) has dedicated staff to support this system of data collection and analysis. Initial statistics on the 
performance of the system covering information for the year 2017 are expected shortly. The system will 
include information on cost recovery, infrastructural investments and planned human resources, drinking 
water quantity, quality and water losses across the country, among others. The SSW intends to finalise a 
strategic and operational plan by the end of June 2019 to streamline its supervisory activities. 

Transport and Logistics 

A  Strategic  Transport  Master  Plan  for  Greece  to  identify  future  policies  and  investments  in  the 
transport sector is being prepared by the Ministry of Transport. The plan which is now almost ready 
covers all transport modes for the years 2027 and 2037, the necessary supporting planning tools as well as 
accompanying capacity building activities.  A  major problem in the transport sector is that contracts  for 
new  projects  are  delayed  (Athens  metro  line  4,  Patra-Pyrgos  motorway,  Amvrakia  –  Aktio  highway). 
Among  the  reasons  for  the  delays  are  low  prices  and  appeals  procedures  launched  by  non-selected 
bidders.  Regarding  urban  transport,  the  elaboration  of  sustainable  urban  mobility  plans  will  be  the 
condition for investment in the sector. 

On  logistics,  little  progress  has  been  made  in  the  "Thriasio  logistics  complex"  which  remains 
unutilised. Once fully operational, this investment – co-financed with EU funds – could give a big boost 
to  rail  freight  and  the  overall  competitiveness  of  the  country.  However,  the  concession  contract  for  the 
private freight centre has not been activated and the tender for the exploitation and operation of the park 
of 1,450 hectares is severely delayed. Urgent measures to expedite these contracts are warranted. 

Regarding the transport company of Thessaloniki, OASTH, the legislation in place (47) foresees the 
liquidation  of  the  company  by  the  end  of  2019  and  its  replacement  with  a  new  entity.  A  business 
plan needs to be prepared as soon as the new entity is established, given also that the Thessaloniki metro 
will  start  operating  in  2020  (by  a  separate  company),  which  will  require  a  new  planning  of  the  public 
buses  network.  Preliminary  balance-sheet  information  on  2018  operations,  still  to  be  validated  by  the 
general accounting office, show positive signs with an increase in revenues and a reduction in operation 
costs and public transfers. Until the new entity is established, the authorities should continue reporting on 

(47)  Law 4482/2017 

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the management of the company, including its revenues, operation costs and public transfers. The results 
of the first semester of 2018 will be published in July 2019. 

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7.  HELLENIC CORPORATION OF ASSETS AND 

PARTICIPATIONS (HCAP) AND PRIVATISATION 

7.1.  HCAP 

Greece  made  commitments  to  European  partners  in  June  2018  to  continue  and  complete  the 
important  work  of  HCAP,  which  gathers  under  a  single  institutional  structure  a  significant 
portfolio  of  assets  and  shareholdings  in  public  enterprises.  The  Eurogroup  statement  of  June  2018 
foresees  that  the  strategic  plan  of  HCAP  will  be  implemented  on  a  continuous  basis.  In  addition,  the 
authorities committed to complete the review, and replacement if required of Board members, of all SOE 
Boards by mid-2019. The implementation of the strategic plan has proceeded as planned and the Board 
review  is  progressing.  Furthermore,  the  authorities  committed  to  the  transfer  of  the  Olympic  Athletic 
Centre (OAKA) to HCAP but the transfer of OAKA will be delayed due to practical complexities. Since 
the publication of the second enhanced surveillance report in February 2019, progress has also been made 
in improving corporate governance in the State-Owned Enterprises (SOEs) and in the implementation of 
the coordination mechanism that governs the interaction between the authorities and HCAP regarding the 
mandates and objectives of the SOEs under HCAP.  

HCAP is continuing with the implementation of its strategic plan (continuous specific commitment), 
which incorporates its overall approach for better management and use of the assets of the Greek 
State  that  became  part  of  its  portfolio.  HCAP  proceeded  in  December  2018  to  the  preparation  of  its 
business  plan  for  2019-2021,  implementing  the  strategic  plan  and  setting  key  performance  indicators 
(KPIs) for its direct subsidiaries and the non-listed other subsidiaries (SOEs with majority participations). 
The  KPIs  include  the  following  areas:  enhancement  of  economic  and  public  value,  improvement  of 
financial  performance,  corporate  governance,  improvement  of  quality  of  services  offered  to  customers, 
operational efficiency and innovation. HCAP has also elaborated the framework for monitoring the KPIs, 
and it is following up on the KPIs set for each SOE in which it has majority participation (and which is 
not listed) through regular meetings.  

HCAP’s  real  estate  portfolio  is  managed  by  its  subsidiary  ETAD,  which  was  restructured  during 
2018 (end 2018 specific commitment) with a view to increasing its effectiveness in the management 
of real estate assets. The completion of the restructuring, the arrival of new management executives, and 
clearer guidance on short and medium-term objectives, are expected to deliver an improving operational 
performance of ETAD in 2019, and to lay the ground for significant value creation over the medium term. 
Achieving the full potential of the real estate portfolio will remain a key challenge for HCAP and should 
be a primary source of value creation. Given the importance of the real estate portfolio, a thorough set of 
performance targets have been set for ETAD in 2019 in order to consolidate and test the effectiveness of 
the  restructuring.  These  targets  include  exploitation,  portfolio  management  and  revenue  enhancement 
objectives  and  will  be  quarterly  monitored  by  HCAP.  If  necessary,  corrective  actions  will  be  taken  in 
order to achieve the expected operational performance. 

HCAP  continues  its  work  on  SOEs  governance,  in  particular  regarding  the  review  (and 
replacement, if needed) of the boards of the SOEs (mid-2019 specific commitment), and improving 
internal and external audit capabilities. The HCAP Board, following the completion of the review of 
the Board of Directors of the Athens Urban Transport Organization (OASA) in June 2018, selected the 
candidates  for  the  posts  of  CEO,  Chair  and  three  non-executive  members  in  OASA.  The  General 
Assembly of OASA appointed those candidates on 6 May 2019.  The HCAP Board further reviewed the 
Board of Corinth Canal (AEDIK) and proceeded to the selection of new members, in the cases deemed 
necessary. The General Assembly of AEDIK appointed those candidates on 6 May 2019. Candidates for 
the  post  of  Chair  of  the  Audit  Committee  have  been  selected  for  almost  all  SOEs  and  on-boarding  is 
gradually taking place in parallel with the process of assessing and staffing the new BoDs as a whole. Up 
to the  present,  HCAP  has appointed 39 Board members (executive and  non-executive) in its direct and 

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other subsidiaries. HCAP has also focused on improving compliance functions and it is implementing a 
standardised  method  for  monitoring  reporting  financial  information  within  the  SOE  group  with  the 
purpose of preparing the consolidated financial statements as well as performance on the specific KPIs set 
by HCAP.  

However,  appointing  professional  members  in  the  Boards  of  Directors  (BoD)  in  the  bigger  non-
listed  SOEs  –  in  particular  executive  members  –  proved  to  be  challenging  for  HCAP  due  to 
legislative  caps  on  the  remuneration  of  SOE  board  members  (both  executive  and  non-executive). 
The  caps  limit  the  remuneration  that  can  be  offered  to  prospective  members  of  SOE  boards  to 
uncompetitive  levels,  considering  the  level  of  responsibility  and  the  business  activity  of  some  of  the 
SOEs.  To  date,  this  has  been  a  serious  issue  affecting  HCAP’s  ability  to  sustainably  attract  new  BoD 
members  for  SOEs,  with  implications  for  the  improvement  of  SOEs’  operations  and  performance,  and 
long delays in finding competent candidates, as manifest for example in the difficulties to renew the board 
of  OASA.  It  would  be  warranted  to  address  this  shortcoming  through  a  legal  amendment,  as  had  been 
planned in 2018 but postponed.  

In  addition  to  the  extensive  work  on  governance,  HCAP  is  increasing  its  focus  on  operational 
improvements at SOEs following the development of new business plans in 2018. A key  upcoming 
challenge  will  be  to  effectively  address  significant  operational  and  financial  issues  in  Hellenic  Post 
(ELTA),  which  faces  a  number  of  challenges  common  to  postal  service  operators  in  many  European 
countries.  A  restructuring  proposal  has  been  prepared  by  ELTA's  new  management  and  it  is  under 
consultation and review by HCAP and key stakeholders regarding its main parameters. 

The  implementation  of  the  Coordination  Mechanism,  which  is  a  key  focus  area  and  challenge  in 
2019,  has  been  launched.  The  Coordination  Mechanism  sets  out  the  procedures  and  deliverables  for 
coordination between the State, the HCAP and SOEs, in relation to (i) the SOEs'  mandates,  which  will 
define the main activities of each public enterprise (ii) a statement of commitments for each SOE, which 
will  include  the  operational  and  financial  objectives  that  each  SOE  must  adopt  to  achieve  its  strategic 
goals, and (iii) a performance contract that will clearly reflect the objectives and financing of any special 
obligations required by the State.  

Effective implementation of the Coordination Mechanism requires the cooperative engagement of 
the  authorities  across  all  parts  of  the  government.  The  Greek  authorities  have  proceeded  to 
establishing the Cabinet Committee provided for in the Coordination Mechanism and HCAP law, and to 
operationalise the mechanism. Representatives of the Cabinet Committee of the Ministry of Finance and 
of HCAP met in February 2019 and agreed on the agenda, the schedule and the prioritisation for dealing 
with the SOEs for the prompt implementation of the Coordination Mechanism. The implementation of the 
Coordination  Mechanism  was  launched  with  a  meeting  of  the  Cabinet  Committee  with  HCAP  on  21 
February 2019, discussing issues related to the SOEs under the surveillance of the Ministry of Economy 
and Development. The implementation of the coordination mechanism for four SOEs, namely the central 
markets of Athens and Thessaloniki, the Corinth Canal and Helexpo is at an advanced stage, expected to 
be  finalised  soon.  So  far,  the  process  runs  smoothly.  With  the  setting  up  of  the  Cabinet  Committee,  it 
should  be  possible  for  the  government  to  ‘speak  with  one  voice’  to  avoid  a  difficult  situation  in  which 
different  parts  of  the  government  have  contrasting  priorities  regarding  activities  of  SOEs  under  the 
Coordination Mechanism.  

Recent legislation and actions in certain sectors appear to potentially overlap with the function of 
the coordination mechanism, or to affect HCAP's rights in respect of certain assets transferred to it. 
Any inconsistencies would need to be addressed. The Greek authorities have agreed to avoid such actions 
in  the  future.  Possible  overlaps  may  also  emerge  more  clearly  in  the  process  of  implementing  the 
Coordination Mechanism. Overlaps  would need to be  removed, in order to give effect to the intent and 
balance of the coordination mechanism, along with acts that impinge on the exercise of rights transferred 
to the HCAP. In the case of the 23 regional airports, in particular, overlaps should be avoided in the phase 
of implementation of any exploitation plans and actions for these airports, since the rights for utilisation 
and concession were transferred to HCAP on the basis of article 198 of Law 4389/2016. 

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The transfer of the Olympic Athletic Centre OAKA, which was an end-2018 specific commitment, 
proves to be very complex, involving multiple stakeholders as well as a series of administrative and 
procurement steps. These include procurement for the repair or overhaul of significant facilities, in order 
to ensure that the asset is provided in a satisfactory condition. Given the complexities and involvement of 
third  parties,  an  adjusted  timetable  for  the  transfer  by  end-2020  appears  reasonable,  while  the  process 
needs to be pursued as diligently as possible. 

7.2. 

IMPLEMENTATION OF THE ASSET DEVELOPMENT PLAN 

Implementation of the Asset Development Plan (ADP) of the Hellenic Republic Asset Development 
Fund (TAIPED) is key to stimulate private investment, increase efficiency, and provide financing to 
the State. In June 2018, the authorities made a specific commitment to Eurogroup partners to implement 
the  ADP,  which  will  be  updated  every  six  months,  and  in  this  context  to  complete  the  transactions  on 
Hellenic Petroleum (HELPE) and the marina of Alimos by mid-2019. Further commitments  were taken 
for  end-2019  and  beyond.  In  addition,  the  transaction  on  Hellinikon  (development  of  the  site  of  the 
former Athens International airport, end-2018 specific commitment) has remained pending despite good 
progress, in view of the complexity of the project.  

On  Hellinikon,  the  authorities  have  continued  the  efforts  to  complete  the  conditions  precedent  to 
allow the  transfer  of  shares  to  the  preferred  investor, Lamda.  If  the  authorities  continue  the  strong 
efforts,  financial  closing  could  be  feasible  in  the  coming  months.  The  current  state  of  play  on  key 
elements is as follows:  

  The tender process for awarding the casino license is ongoing. The deadline for submission of offers 

has been further extended to the end of June.  

  The public consultation of the Integrated Environmental Impact Assessment Study  was launched on 
21 March 2019 and it has been concluded on 14 May 2019. The conclusion of the public consultation 
is a necessary precondition prior to the issuance of the Joint Ministerial Decisions for the Metropolitan 
Park, development zones and the urban planning zones. Within the framework of the required work, 
on  17  May  2019,  the  first  meeting  of  the  Central  Administration  Council  for  the  discussion  of  the 
Joint Ministerial Decisions  for the Metropolitan Park, development zones and urban planning zones 
was held. 

  Preparatory  work  regarding  the  partition  of  the  Hellinikon  site  is  ongoing  (pending  issues  with  the 

Cadastre are expected to be resolved). 

Progress  on  other  transactions  in  the  Asset  Development  Plan  which  are  due  to  be  completed  in 
2019 is behind schedule, with progress in smaller transactions, but delays elsewhere. On a positive 
note,  challenges  related  to  the  regional  ports  were  resolved,  and  there  was  some  progress  in  removing 
obstacles to the Egnatia motorway concession project. In contrast, outcome of the transaction for the sale 
of 50.1% of Hellenic Petroleum was unsuccessful, while complications have arisen on the sale of 30% of 
AIA and no progress was made on the sale of 11% of EYDAP and 24% of EYATH. The state of play can 
be summarised as follows: 

Marina of Alimos (a mid-2019 specific commitment): the marina of Alimos is one of the largest marinas 
in the South-Eastern Mediterranean, located on the South-Eastern waterfront of Athens. Three consortia 
participated in an e-auction procedure that took place on 16 April 2019. The preferred bidder (AKTOR 
Concessions SA) won the tender by offering EUR 57.5 million in NPV terms (a nominal offer of EUR 
177 million in total). Thus, satisfactory progress is being made in the tender for the long-term concession 
of the marina of Alimos, however the financial closing is not expected before Q4-2019. 

  Hellenic Petroleum (HELPE, a mid-2019 specific commitment): No binding offers were submitted 
for  the  joint  sale  (along  with  the  other  strategic  shareholder  of  HELPE,  PanEuropean  Oil  and 

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Industrial Holdings S.A. (POIH) of a majority stake (50.1%) and thus there was no positive outcome 
of the specific transaction. The financial closure is thus inevitably subject to significant delays. Within 
the  framework  of  the  third  enhanced  surveillance  round  and  with  a  view  to  minimising  the  time 
delays, an agreement was reached between the Greek authorities and the institutions that TAIPED is 
given the technical mandate to explore all options available towards proceeding with the transaction. 
A  discussion  on  the  structure  of  the  tender  between  the  Greek  authorities  and  the  institutions  is 
expected in the context of the 4th enhanced surveillance cycle. 

Sale of 30% of AIA: According to the Airport Development Agreement (ADA) in place, any transfer of 
shares  exceeding  25%  of  AIA’s  share  capital  requires  the  consent  of  all  existing  shareholders.  In  this 
context, complications arose from a decision of the Greek authorities, more specifically the Governmental 
Council for Economic Policy (KYSOIP) in February 2019, which instructed TAIPED to proceed with the 
execution of a new waiver agreement, with provisions substituting the independent member of the nine-
member Board with a member appointed by the Hellenic Republic, thus increasing the number of Board 
members appointed by the State. This new agreement request was rejected by AviAlliance, shareholder of 
40%  stake  in  AIA,  as  it  considers  the  independent  Board  member  as  a  key  element  of  the  balanced 
governance of the company. In the context of the mission of 6-8 May 2019, the Greek authorities agreed 
to  seek  an  immediate  resolution  of  the  issue,  so  that  the  signing  of  the  waiver  agreement  would  be 
possible by mid-June and the launching of the tender process for the sale of 30% of AIA by 30 June 2019, 
day of expiration, proposed by the private shareholders of AIA, of the Initial Waiver agreement. To date, 
this action is still pending.  

DEPA - Public Gas Corporation: The law on DEPA’s corporate restructuring (Law 4602/2019 which 
amended Law 4001/11, the “Energy Law”) enabling the  split of DEPA’s commercial and infrastructure 
(networks and international projects) activities was enacted on 9 March 2019. According to article 80I of 
the  Energy  Law,  a  partial  demerger  of  DEPA’s  gas  distribution  branch  shall  take  place,  by  which  all 
distribution gas activities of DEPA, along with the international projects in which DEPA participates, will 
be transferred to a separate legal entity (“DEPA Infrastructure”), the shares of which will be transferred 
proportionately to the DEPA current shareholders (TAIPED 65%  - HELPE 35%). All current wholesale 
and  retail  gas  activities  of  DEPA,  including  any  existing  or  future  commercial  commitments  deriving 
from  the  international  projects  in  which  DEPA  participates,  will  remain  under  DEPA,  which  will  be 
renamed  to  “DEPA  Commercial  SA”.  On  22  April,  DEPA’s  BoD  approved  the  partial  demerger  of 
DEPA’s Infrastructure activities from  DEPA. It is essential that the status of the contracting staff to be 
allocated between the two entities will be clarified as a matter of urgency in order to avoid this to be an 
area of uncertainty/risk for the tender. Further, pursuant to article 80ΙΓ paragraph 1 of the Energy Law, 
and in line with the agreement reached between the Greek authorities and the institutions, TAIPED will 
issue an invitation for the expression of interest for the sale of 50% plus one share of the share capital of 
DEPA Commercial even prior to the completion of DEPA’s partial demerger. It should be also noted that 
Hellenic  Petroleum,  DEPA’s  co-shareholder,  is  in  the  process  of  formulating  its  strategic  role  in  the 
imminent  sale  process  (buyer  or  seller),  that  has  to  be  compliant  with  term  sheet  agreed  on  DEPA’s 
transformation and privatisation, in particular concerning unbundling.  

Egnatia: The privatisation process for the Egnatia motorway entails the award of a long-term concession 
for the operation and maintenance of the motorway and its three vertical axes. The transaction has been 
characterised  by  systematic  delays  and  problems,  whereas  over  the  last  months  of  2018  the  transaction 
had been effectively blocked. In January 2019, within the framework of the second enhanced surveillance 
round, the authorities had agreed to a number of actions to be swiftly implemented in order to deal with 
the recurrent obstacles to the concession. Most of the agreed actions due so far have been implemented in 
line with technical feasibility. This includes notably the adoption of Egnatia’s budget, the completion of 
the parliamentary procedure for the appointment of the CEO of Egnatia, the submission by Egnatia of all 
pending files to the Tunnel Licencing Authority and the submission of necessary information on the toll 
pricing policy to the Commission.  

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A number of actions are still needed before the submission of binding offers:  

  Launch  and  completion  of  the  construction  of  all  remaining  frontal  and  lateral  toll  stations.  The 

relevant contracts were signed on 2 May 2019. 

  Specification  by  the  Tunnel  Licencing  Authority  (based  on  Egnatia’s  submissions)  of  the  measures 
that need to be implemented in order for the tunnels to be licensed. Once this is done and the cost of 
necessary  works  is  calculated  the  concession  agreement  will  specify  who  will  implement  the  works 
and who will assume the relevant risk.  

  Obtaining a clear picture on  what  works  needs to be  done for bridges to be classified as safe. Very 
recently (March 2019) some of the motorway’s bridges were classified by Egnatia S.A. as “potentially 
dangerous”, although there has been no apparent change in the state of the bridges. Egnatia needs to 
clearly define the measures that must be taken as well as the cost for the bridges to be completely safe. 
Once  this  is  done,  the  concession  agreement  will  specify  the  allocation  of  risk  between  the 
Concessionaire and the State. 

  Clearance of the new toll pricing policy by the Commission. 

  Resolution  of  the  open  issues  related  to  the  motor  service  stations  contracts  re.  Eleftherochori, 

Oraiokastro, Ardanio and Sostis, that have been inactive since 2011, by Egnatia S.A..  

  Egnatia  needs  to  proceed  to  the  necessary  actions  (tender  for  advisor  appointment)  for  all  the 
preparatory  work  necessary  for  the  remaining  expropriations.  While  the  completion  of  the 
expropriation process with issuance of Ministerial Decisions is not a prerequisite for binding offers or 
for Concession Commencement Date, and it is handled accordingly in the Concession Agreement, the 
process should be initiated promptly. 

The  above  actions  need  to  be  completed  before  the  submission  of  binding  offers  in  order  for  the 
Concession Agreement to be adequately balanced without any of the two parties (Concessionaire or State) 
assuming excessive risks. 

Regional  Ports:  There  is  significant  investor  interest  to  operate  specific  and/or  combined  port 
activities/services by means of sub-concession agreements in the ports of Alexandroupolis, Kavala, (end-
2019  specific  commitments)  Igoumenitsa  and  Kerkyra  (mid-2021  specific  commitments).  Following  a 
lengthy process, as reported in the second enhanced surveillance report, an agreement on the final text of 
the required legislative changes was reached on 21 January 2019. Following the enactment of the agreed 
legal amendments on 21 February, TAIPED elaborated proposals for the sub-concessions of the ports of 
Alexandroupolis and Kavala. The Expression of Interest for the two ports, however can only be launched 
following the issuance of a Joint Ministerial Decision by the ministries of Shipping and Finance that will 
define the specific activities to be subject to the sub-concession as well as the fees to be paid by the sub-
concessionaires to the relevant port authorities. The issuance of the relevant Joint Ministerial Decision is 
pending. 

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8. 

PUBLIC ADMINISTRATION AND JUSTICE 

8.1. 

PUBLIC ADMINISTRATION 

8.1.1.  Appointments of senior management positions 

A  specific  commitment  for  mid-2019  is  for  an  independent  assessment  of  the  selection  process  of 
Administrative Secretaries, with follow-up measures to be adopted by September 2019. As noted in 
the last enhanced surveillance report, the selection process has been subject to significant delays, which 
the  authorities  attributed  to  several  reasons,  including  the  importance  and  high  visibility  of  this 
appointment cycle, which is carried out for the first time. Given the difficulties faced, including the re-
launching  of  22  calls  in  June  2018  due  to  a  lack  of  clearly  defined  minimum  eligibility  criteria,  the 
independent  assessment  is  expected  to  take  stock  of  the  selection  process  and  to  identify  scope  for 
improvements. The authorities have requested technical support from the Commission and the assessment 
is planned to be completed by June 2019. The authorities intend to establish a high-level working group, 
involving  officials  from  the  Ministry  of  Administrative  Reform  (MAR)  and  the  Supreme  Council  for 
Civil Personnel Selection (ASEP), that  will review the results of the  assessment and also decide on the 
follow-up  measures to be adopted by September 2019 in order to improve the selection  process for the 
next appointment cycle. 

The state of play on the various appointment cycles for public  sector managers at the end of May 
2019 was as follows: (i) Administrative Secretaries – one appointment out of 69 completed (expected to 
be completed by end of 2019); (ii) Directors-General – completed (90 posts in total); (iii) Directors – 101 
appointments out of 395 completed (expected to be completed by July 2019); and (iv) Heads of Division 
–  expected  to  be  launched  in  June  2019  and  completed  by  October  2019.  Although  progress  has  been 
made during this reporting period, in particular as concerns appointments of Directors, overall significant 
delays are observed vis-à-vis the initial completion targets and it is highly doubtful if the revised target of 
completing all selection decisions by end-2019 for the Administrative Secretaries will be met. 

8.1.2.  Improving the human resource management in the public administration 

A  second  specific  commitment  for  mid-2019  is  completion  of  the  third  mobility  cycle  that  was 
launched in August 2018. The implementation of the mobility scheme is progressing. This cycle saw a 
continued gradual increase in the number of entities seeking transfers of staff (165) as well as the number 
of  published  vacant  posts  (5,440).  To  date,  223  transfers  (out  of  744  selection  decisions)  and  12 
secondments  (out  of  48  selection  decisions)  have  been  completed.  Although  compared  to  the  previous 
two cycles, which are yet to be completed, the time needed from publication of post to selection decision 
and  then  the  actual  appointment  taking  place  has  been  significantly  shortened,  there  is  a  risk  that  a 
significant  part  of  the  expected  transfers  (and  secondments)  will  not  be  completed  by  the  end  of  June 
2019. As concerns the fourth cycle (published in February 2019) the number of entities taking part (351) 
and positions (7,962) continue to increase. This reporting period also saw a number of legal amendments 
adopted that allow  specific  general  government entities to be exempted  from the  mobility  scheme. The 
authorities argue that most of these exemptions are time restricted, in order to avoid causing  operational 
difficulties  until all entities are  in a position to take part in the  mobility scheme. In  summary, although 
there  is  a  risk  that  the  third  mobility  cycle  will  not  be  completed  by  mid-2019,  the  gradual  increase  of 
number of entities and applications for each cycle is encouraging and a clear signal that the public sector 
has  embraced  this  public  administration  reform.  At  the  same  time,  it  is  warranted  to  continue  closely 
monitoring and addressing specific issues identified that are currently delaying the process.  

A third specific commitment concerns the completion of the performance assessments for 2018 by 
mid-2019. The assessment round was launched in March 2019 and is expected to be completed by end of 
June 2019 as per the circular issued by MAR.  

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Continued  progress  has  been  made  towards  establishing  an  integrated  human  resources 
management  system, which  should  be on track to be completed by end of 2019. More specifically, 
745  general  government  entities  (approximately  half  of  the  total)  have  completed  their  digital 
organigrams,  with  close  to  135,000  job  descriptions  completed  (i.e.  for  around  70%  of  all  positions). 
Given the importance of completing this exercise, it will be important to continue monitoring its progress, 
in  particular  as  concerns  (i)  ensuring  that  entities  that  have  completed  their  digital  organigrams  also 
proceeds  to  complete  all  job  descriptions;  and  (ii)  providing  timely  support  to  entities  (e.g.  small 
municipalities) that are  struggling to complete  the exercise  for capacity reasons. Once this exercise  has 
been  successfully  completed,  it  will  provide  the  main  elements  for  the  integrated  human  resources 
management system, as it will allow for each job holder to have a position and specific job description 
assigned to them as well as setting out the entity/unit the job holder currently works for.  

Progress  with  the  streamlining  of  the  existing  job  classification  system  (‘klados’),  with  a  view  to 
aligning  it  to  the  functions  referred  to  in  the  generic  job  descriptions,  has  been  limited.  The 
authorities have committed to a specific 'road map', and some progress has been made on specific actions, 
including  holding  the  first  meeting  of  an  inter-ministerial  pilot  working  group  to  update/validate  the 
linking of ‘klados’ with the functional domains of the job description template. The authorities are urged 
to speed up the implementation of the various actions during the next months, also taking full advantage 
of the technical support provided. 

8.1.3.  Better regulation and coordination 

Progress  has  been  made  in  terms  of  legal  codification,  including  with  the  adoption  of  a  law  that 
strengthens the  mandate of the Central Codification Committee (KEK). Two manuals on legal and 
administrative  codification  were  prepared.  Steps  to  ensure  close  and  efficient  coordination  between  the 
two codification strands (led by KEK and MAR respectively) have been undertaken, particularly in the 
context of the national codification strategy, and it will be essential to ensure close coordination also at 
the operational level, in order to avoid duplication of work and take full advantage of potential synergies. 
The  adopted  legal  provisions  for  KEK (48),  includes  the  legal  codifications  that  KEK  has  currently 
committed  to  oversee  following  agreement  with  respective  Ministries (49).  As  the  actual  codifications 
might  be  done  by  a  third  party  (e.g.  through  a  project  funded  by  the  National  Strategic  Reference 
Framework),  it  is  essential  that  such  legal  codification  projects  are  implemented  applying  the  overall 
approach and methodology set out by KEK. The authorities are therefore urged during the next reporting 
period  to  adopt  a  standard  agreement  template  between  KEK  and  the  Ministries,  which  will  set  out  in 
detail  KEK’s  role,  including  reviewing  the  output.  With  solid  progress  being  made  in  establishing  a 
coherent  process  for  the  conduct  of  the  legal  codification  process,  it  will  also  important  to  ensure  that 
sufficient  resources  are  allocated  at  the  General  Secretariat  of  the  Government,  including  its  Central 
Legislative Committee, as well as the legal services of each Ministry. Finally, the approval decision that 
will  allow  the  tender  for  the  flagship  project  to  set  up  a  digital  codification  portal  was  taken  in  March 
2019, and the tender is expected to be launched by June.  

A specific commitment for mid-2020 is for the legal codification of a unified Labour Law Code and 
Code of Labour Regulatory Provisions. The Ministry of Labour has proceeded to establish a specific 
committee  to  take  the  lead  in  preparing  these  legal  codifications,  on  the  basis  of  the  drafts  already 
prepared through technical support provided by Commission services. At the same time, exchanges have 
been  taking  place  also  with  KEK  on  how  to  align  these  specific  codifications  with  the  overall 
approach/methodology overseen by KEK. An updated timeline is expected to be presented in the coming 
months and following  successful conclusion of the  ongoing exchanges between the Ministry of  Labour 
and KEK. 

On  inter-ministerial  coordination  no  concrete  progress  on  actions  has  been  reported  by  the 
authorities following the adoption of an inter-ministerial manual that was adopted in June 2018. An 

(48)  Law 4606/2019 (OJ A-57/11.4.2019)  
(49)  Article 8, Law 4606/2019 (OJ A-57/11.4.2019) 

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update  on  actions  initiated  and  for  actions  to  be  launched  is  expected  to  be  prepared  by  the  General 
Secretariat for Coordination, in order to be reported in the next enhanced surveillance round.  

8.1.4.  Controlling the size and cost of public sector 

The  hiring  plan  for  2019  as  well  as  for  2020-2022,  as  included  in  the  2018  Medium-Term  Fiscal 
Strategy  (MTFS),  seems  to  be  respecting  the  one-in-one  out  hiring  rule  currently  in  place  for 
recruitments of new permanent staff in the public sector. Following the adoption of the MAR law (50), 
which  introduced  provisions  for  a  more  strategic  recruitment  planning,  MAR  is  in  the  process  of 
consolidating  the  first  four-year  recruitment  plan  that  will  be  coupled  with  the  MTFS  and  the  budget 
allocated for new hirings, while updated annual plans will be consolidated and submitted by MAR each 
year. As the law was adopted in early 2019, the initial exercise is taking place during the spring, but as 
concerns  the  next  cycle  it  would  be  important,  as  foreseen  in  the  law,  to  link  the  four-year  and  annual 
plans with the budget cycle. The next enhanced surveillance report is expected to include an overview of 
the key elements of the four-year plan. 

The  ceiling  for  temporary  staff  set  for  2018  was  not  respected,  and  it  will  be  important  for  this 
trend  to  be  reined  in  during  2019.  As  reported  in  the  previous  enhanced  surveillance  report,  it  is 
estimated that the number of temporary staff will need to be reduced by approximately 1,550 persons in 
order for the overall size of the public sector to be maintained.  

The agreed actions to improve  the reporting of the census ('apografi') are yet to be implemented. 
These cover the inclusion of data on (i) flows of permanent staff of legal entities of private law; and (ii) 
temporary staff of legal entities of private law being paid by the National Strategic Reference Framework 
and/or  other  sources.  It  would  also  be  warranted  to  update  the  'apografi'  website  with  monthly  staff 
figures covering 2019, and to restore the reporting to the regularity of previous years. 

In  terms  of  continuing  the  institutional  and  legal  reforms  associated  to  the  unified  wage  grid, 
various  actions  remain  pending.  For  example,  as  concerns  the  special  wage  grid (51),  the  Joint 
Ministerial Decision (Ministry of Finance and Ministry of Foreign Affairs) to set up a coherent approach 
on  how  the  allowance  for  service  abroad  is  being  calculated  has  yet  to  be  taken,  although  a  detailed 
proposal has been prepared for some time. In addition, it is important that the third phase of the Single 
Payment  Authority  reform  is  initiated  that  will  see  it  becoming  mandated  to  carry  out  also  the  actual 
clearing,  besides  executing  the  payments,  of  all  salaries  paid  to  public  officials.  This  would  entail, 
amongst  other,  (i)  adoption  of  the  approval  decision  for  a  project  funded  by  the  National  Strategic 
Reference Framework to set up the needed IT infrastructure; and (ii) legal amendment adopted that will 
extend  the  Single  Payment  Authority's  mandate  to  allow  for  the  clearing  of  salaries  for  all  general 
government  entities  covered  by  the  unified  wage  grid.  A  third  item  is  for  MAR  to  proceed  to  set  up  a 
system to allow for supplementary compensation linked to the job description and the evaluation of the 
position as  foreseen in the unified  wage grid (52). Given that the digital organigram and job description 
exercise is expected to be completed by end of 2019, if the preparatory work is completed during the next 
months  it  would  allow  for  this  provision  to  be  applied  as  of  next  year.  Finally,  a  Joint  Ministerial 
Decision  is  expected  to  be  adopted  by  July  2019  that  will  establish  a  more  coherent  framework  as 
concerns  hazardous  allowances,  although  to  date  the  expected  scenarios  to  be  prepared  by  the  inter-
ministerial committee are yet to be finalised. 

Recently adopted salary provisions pose risks to the unified wage grid, and a number of decisions to 
complete  this  reform  remain  pending.  Salary  provisions  adopted  to  extend  the  payment  of  'personal 
differences'  were  further  extended  both  in  time  and  scope  to  also  cover  the  Ministry  of  Economy  and 
Development (53). Although the actual fiscal cost is small, this raises structural problems and fiscal risk, 

(50)  Law 4590/2019 (OJ A-17/7.2.2019) 
(51)  Article 144, Law 4472/2017 (OJ A-74/19.5.2017) 
(52)  Article 17, Law 4354/2015 (OJ A-176/16.12.2015) 
(53)  Article 57, Law 4605/2019 (OJ A-52/1.4.2019) 

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as other Ministries  may seek  similar salary provisions. Establishing a unified  wage grid  was one of the 
key reforms implemented under the financial assistance programmes. 

There  are  ongoing  discussions  on  legal  provisions  for  specific  independent  authorities  that  if 
adopted  would  allow  for  significant  deviation  from  key  public  administration  reforms  adopted 
during  the  programme  period.  While  specific  provisions  might  be  needed  in  order  for  the  various 
authorities  to  be  in  a  position  to  attract  and  maintain  highly  qualified  personnel  needed  to  carry  out  its 
function, a preferable approach would be to base it on the various public administration reforms in place 
(e.g. appraisal, job descriptions, mobility system) and build on these blocks through respecting the overall 
principles.  In  the  event,  specific  salary  provisions  are  being  considered,  it  would  again  be  preferable  if 
these provisions would be part of a systematic approach to certain entities (e.g. independent authorities) 
rather  than  ad  hoc  exceptions  of  the  unified  wage  grid.  If  the  latter  approach  is  adopted,  which  could 
amongst other entail deviation from the current norm that the personal differences are being accounted for 
under  the  remuneration  thresholds  defined  by  the  unified  wage  grid,  this  risks  setting  a  precedent  and 
could result in a significant increase of the wage bill. Similarly, a more strategic approach would also be 
preferable as concerns adjustments on the hiring process of permanent staff, in particular as regards  the 
role and mandate of the Supreme Council for Civil Personnel Selection (ASEP). 

8.2. 

JUSTICE 

E-justice 

The  Greek  authorities  are  proceeding  with  the  preparatory  stage  of  the  second  phase  of  the 
Integrated  Judicial  Case  Management  System,  activated  earlier  this  year  and  scheduled  for 
finalisation  by  mid-2020.  The  second  phase,  scheduled  for  finalisation  by  mid-2020,  will  extend 
coverage to the entire territory of Greece, also building on the experience acquired during the roll-out of 
the  first  phase.  In  this  context,  completion  of  the  tendering  procedure  for  the  electronic  filing  of  legal 
documents to the courts is a mid-2019 specific commitment. The special permanent legislative committee 
responsible for legal adaptations for the purposes of optimal implementation and efficiency of OSDDY-
PP, established in February 2019 (54), should initiate the proceedings for the public consultation, on the 
public procurement platform (www.promitheus.gov.gr), of the draft tender texts regarding the projects of 
the  second  phase  by  end-June  2019.  Upon  conclusion  of  the  public  consultation  and  finalization  of  the 
tender,  the  tendering  procedure  should  be  launched  by  end-September  2019.  Furthermore,  the 
implementation of the electronic filing of court documents (legal writs), already available in 18 magistrate 
courts  throughout  Greece,  as  well  as  in  the  Court  of  Audit,  the  Council  of  State  and  first-  and  second-
instance administrative courts, is proceeding, as evidenced by a recent notice addressed by the Athens Bar 
Association to its members and covering the filing of legal writs, memoranda and means of evidence (55). 
In  parallel,  the  work  of  the  law-drafting  committee  for  the  enactment  of  the  legal  amendments  to  the 
Greek  Code  of  Civil  Procedure  and  the  Judicial  Bailiffs’  Code  that  are  necessary  for  allowing  the 
electronic  service  of  documents  is  progressing,  along  with  the  setting  up  of  the  requisite  electronic 
platform by the judicial bailiffs’ association in collaboration with the Thessaloniki University regarding 
the  technical  aspects  of  the  project.  The  implementation  of  this  new  method  of  service  of  documents 
should facilitate their processing, optimize the unhindered conduct of the relevant judicial procedures and 
reduce  costs,  particularly  taking  into  account  entities  on  which  a  large  number  of  services  is  regularly 
made, such as banks, State entities and services, the Legal Council of State, etc. 

Alternative dispute resolution  

With a view to addressing the issues created by a  postponement, from  mid-October 2018 to  mid-
September  2019,  of  the  entry  into  force  of  the  provisions  on  mandatory  mediation,  the  Greek 
Ministry  of  Justice  established  a  working  group  to  draw  up  a  report  on  mediation  and 

(54)  Ministerial Decision 12695/F327/2019 of the Minister of Justice, Transparency and Human Rights  
(55)  Athens  Bar  Association  announcement  of  16.2.2019,  cf.  Athens  Bar  Association  Announcement  of  Electronic  Filing  of 

Procedural Documents  

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arbitration (56). The  working group is chaired by a Supreme Court judge and includes the chairman of 
the  Plenary  Session  of  Greek  Bar  Associations,  a  representative  of  the  Association  of  Judges  and 
Prosecutors, mediators, judges and representatives of the Ministry of Justice. There group has so far held 
five  meetings,  addressing  a  range  of  relevant  issues:  the  cost  of  the  mediation  process,  the  disputes 
eligible  for  compulsory  mediation,  possible  changes  in  the  legal  framework  of  judicial  mediation,  the 
status of judicial arbitration and the manner in which the three alternative dispute resolution mechanisms 
(extra-judicial and judicial mediation, judicial arbitration) can coexist and interact without overlapping. 

Work by the Central Committee of Mediation (CCM) is progressing. A new Chairman of the CCM 
has been appointed, and  weekly sessions are  held. The CCM  has conducted a competition and certified 
about  340  new  mediators,  approved  the  functioning  of  new  training  centres,  including  the  first  training 
center of the  University of Athens, recognized certified intermediaries from other Member States under 
the  new  simplified  procedure  and  is  in  the  process  of  drafting  a  proposal  to  the  Ministry  of  Justice  for 
legislative  improvements of the law on  mediation (57). Mediations  under  Law 4512/2018 (regarding the 
categories of disputes for which mediation is not compulsory) are taking place normally, according to the 
Ministry of Justice referring to market information. 

In  the  area  of  anti-corruption,  the  authorities  have  continued  their  efforts,  led  by  the  General 
Secretariat  for  Anti-corruption  (GSAC).  The  legal  initiatives  promoted  by  GSAC  are  yet  to  be 
introduced to the Parliament. As concerns progress on implementing the National Anti-corruption Action 
Plan for 2018-2021 the bi-annual report prepared by GSAC provides a detailed overview of key actions 
carried  out.  The  next  progress  report  will  cover  the  period  January-June  2019  and  is  also  expected  to 
update the timeline to reflect that a certain number of actions have been delayed due to contractual issues 
outside the direct control of GSAC. One key action where little progress has been made to date concerns 
the  establishment  of  a  coordination  mechanism  for  corruption  cases.  During  the  next  reporting  it  is 
expected that GSAC will be in a position to define and commit to a specific road map to deliver on this 
important action, including adopting the legal framework needed. Other actions included in the National 
Anti-corruption  Action  Plan  where  some  progress  has  been  made  but  where  follow-up  actions  are 
expected,  includes  establishing  a  more  unified  framework  for  controlling  bodies  and  also  for  the  asset 
declaration system. As concerns the three legislative initiatives that had been expected to be submitted to 
the Parliament by May 2019, these  includes: (i)  whistleblowing (will be aligned  with the EU Directive 
currently  being  finalised);  (ii)  internal  auditing  across  the  public  administration;  and  (iii)  an  update  of 
GSAC's  mandate,  including  establishment  of  its  organigram.  It  is  expected  that  all  three  laws  will  be 
adopted in the next couple of  months, but especially important is  for the law on internal auditing to be 
adopted  shortly,  in  order  to  be  in  place  before  the  newly  elected  local  administrations  assume  their 
function. GSAC has also contributed to the  preparation of the updating of the Penal  Code and Code of 
Penal  Procedure  that  are  yet  to  be  adopted  by  suggesting  the  inclusion  of  references  to  GRECO  and 
OECD practices to combat corruption. Finally, as concerns the action relating to the role and operations 
of the anti-fraud coordination service (AFCOS), although progress is being made the Commission is not 
yet in a position to confirm that the system set up for Greece fully meets the requirements expected. 

The Commission has continued to monitor developments in relation to the legal proceedings against 
the members of the Committee of Experts of TAIPED and the former President and senior staff of 
the  Hellenic  Statistical  Authority  (ELSTAT).  In  the  case  against  former  ELSTAT  President  A. 
Georgiou related to charges filed in connection with fiscal statistics, the Athens Court of Appeal issued a 
ruling in his favour that was officially published on 8 March 2019; the delay for filing an appeal against it 
expired  on  9  April2019.  A  certificate  attesting  to  the  non-filing  of  an  appeal  by  the  Supreme  Court 
Prosecutor  by  that  date  was  issued  on  10  April  2019  and  delivered  to  A.  Georgiou’s  counsel. 
Consequently,  the  ruling  stands  in  force  and  the  excessive  deficit  case  has  been  irrevocably  dismissed. 
This  is  a  very  welcome  development.  Regarding  other  pending  cases  involving  Mr.  A.  Georgiou,  an 
appeal introduced by him, in his quality as an appellant-defendant in a civil case against a first-instance 
court decision that found for the claimant in a defamation lawsuit, is scheduled to be heard in May 2019. 
Regarding the CoEx, there has been a positive development since the last enhanced surveillance report, in 

(56)  Ministerial Decision 5543/F.326/24.1.2019 (OJ YODD-56/11.2.2019) 
(57)  Law 4512/2018 (OJ A-5/17.1.2018 and A-8/23.1.2018) 

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Chapter 8 - Public administration and justice 

the form of the issuance of a favourable ruling by the chamber formation of the Athens Court of Appeal 
(not  yet  published).  upon  publication,  it  may  be  appealed  by  the  Supreme  Court  Prosecutor.  The 
Commission  will  continue  to  closely  monitor  developments  in  both  procedures  to  report  back  in  the 
context of enhanced surveillance. 

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9. 

SOVEREIGN FINANCING AND CAPACITY TO REPAY 

9.1. 

SOVEREIGN FINANCING 

After  the  successful  bond  issuance  in  January,  Greece  tapped  the  markets  for  a  second  time  in 
March  2019.  On  1  March,  Moody’s  improved  Greece’s  credit  rating  by  two  notches  from  B3  to  B1 
acknowledging the consolidation of the economic recovery. Taking advantage of the improving  market 
environment, the Public Debt Management Agency decided to go forward with the issuance of a 10-year 
government bond raising EUR 2.5 billion at a re-offered yield of 3.9% and a coupon rate of 3.875%. This 
has been the first market issuance of a Greek government bond with such a long maturity since 2010. The 
demand was strong with high real money participation.  

Despite the successful conclusion of the programme and the release of the debt measures related to 
the  end-2018  commitments,  Greece’s  yield  spreads  remain  elevated.  After  a  positive  momentum 
recorded  after  the  issuance  of  the  10-year  government  bond,  in  the  more  recent  period  Greek  bonds 
experienced pressure in particular after the announcements made by Prime Minister Tsipras on 7th May. 
Following the announcements, bond yields increased on all maturities by around 30 basis points. While 
yields have somewhat receded after mid-May, still Greek bonds underperformed when compared to other 
euro  area  issuers.  This  suggests  that  some  of  the  risk  premia  are  related  to  domestic  factors,  and  may 
signal  investor  concerns  over  recent  fiscal  decisions,  in  addition  to  the  more  persistent  factors  such  as 
weaknesses in the banking sector.  

Graph 9.1:  Greece's credit ratings and yield spreads compared to the Bund 

Source: European Commission, Macrobond 

Furthermore, in February the Public Debt Management Agency replaced a loan with the National 
Bank of Greece of EUR billion outstanding (the so-called TITLOS interest rate swap, depicted as a 
loan  according  to  Eurostat  decisions),  with  three  private  placements  totalling EUR  3.3 billion. 
Greece managed to reduce its debt by EUR 0.7 billion as the exchange was performed in market terms. 
Overall, the state cash reserves stood high at EUR 24.3 billion at the end of March; including the cash 
reserves of general government entities already on the treasury single account, the reserves reached EUR 
33.7 billion. The cash buffer account remained undrawn in the first quarter. According to the authorities’ 
plan, the state cash reserves would be reduced to around EUR 18.3 billion by March 2020, corresponding 
to a general government reserve of EUR 25.9 billion, assuming the early repayment of a part of the IMF 
loan, financed partially through the cash buffer account. An IMF repayment and use of the cash buffer in 
this way would require certain approvals by ESM and EFSF governing bodies. 

State  liquidity  remains  sufficient  to  cover  financing  needs  for  more  than  two  years,  even  without 
new issuances. According to data provided by the authorities, state reserves are projected to decrease to 
EUR 15.9 billion by the end of 2019 without new issuances. Given the limited financing needs in 2020 
and 2021, the estimated reserves would cover the state debt-financing needs well into 2022. 

61 

AAAAA+AAAA-A+AA-BBB+BBBBBB-BB+BBBB-B+BB-CCC+CCCCCC-CCCDAaaAa1Aa2Aa3A1A2A3Baa1Baa2Baa3Ba1Ba2Ba3B1B2B3Caa1Caa2Caa3CaC​2007200820092010201120122013201420152016201720182019Moody'sS&PFitchS&P,FitchMoody's00.511.522.533.544.55%10year government bond spreads to the BundPortugalIrelandGreeceItaly 
 
Commission Staff Working Document -  

Chapter 9 - Sovereign financing and capacity to repay 

9.2.  DEBT SUSTAINABILITY  

A  technical  update (58)  of  the  debt  sustainability  analysis  shows  that  the  assessment  of  the 
sustainability of Greece's debt is broadly unchanged. This assumes compliance with primary balance 
targets and the full implementation of all medium-term measures to ensure debt sustainability agreed in 
June  2018.  The  baseline  scenario  shows  that  debt  will  remain  on  a  downward  path  (save  for  the 
capitalisation of the deferred interest in 2033), but remains above 100% of GDP until 2048. A technical 
update of the adverse scenario shows that debt starts rising again after the mid-2030s.  

Graph 9.2: 

Source: European Commission 

Under the baseline scenario, Greece’s gross financing needs (GFN) are set to hover around 10% of 
GDP until 2032. Thereafter, the GFN start to increase slowly, but are projected to remain around 17% of 
GDP at the end of the forecast horizon. In the adverse scenario, the GFN reach 20% in 2041 and increase 
further thereafter. At the current juncture, it is not possible to fully incorporate the recent fiscal measures 
into the DSA as further analysis is required on the impact of such measures on growth and more clarity is 
required  on  the  future  orientation  of  policies  over  the  medium-term.  Policy  slippage,  however,  would 
have a negative impact on the trajectory of debt,  especially if this led to a situation  whereby additional 
debt  measures  are  not  implemented.  For  example,  based  on  the  macroeconomic  assumptions  of  the 
baseline scenario, a 1 percentage  point deviation from the  agreed target primary  surplus of 3.5 of GDP 
from  2019  to  2022  would  ceteris  paribus  result  in  a  higher  debt-to-GDP  ratio  by  over  25 percentage 
points by 2060. 

(58)  The  technical  update  includes:  updated  debt  data  for  2018,  updated  macroeconomic  scenarios  and  assumptions  on  risk  free 
rates,  updated  interest  and  amortization  payments  on  Greek  Loan  Facility  as  well  as  other,  non-official  loans,  new  bond 
issuances and an updated privatisation schedule. 

62 

040801201602002018202020222024202620282030203220342036203820402042204420462048205020522054205620582060%Gross government debtAdverse scenarioBaseline scenario0510152025303540201920212023202520272029203120332035203720392041204320452047204920512053205520572059%Gross financing needsAdverse scenarioBaseline scenariosustainability 
 
 
 
                                                           
ANNEX 

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Commission Staff Working Document -  

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Commitment 

State of play and next steps 

Mid-2019 specific commitments 

Fiscal.  Adopt  MTFS  in  line  with  fiscal 
targets 

The primary surplus monitored under enhanced surveillance reached 4.3% of GDP, well above the target of 3.5% of GDP.  

Greece’s  Stability  Programme  was  submitted  on  30  April  2019  and  represents  the  national  medium-term  fiscal  plan  under 
Article 4(1) of Regulation (EU) 473/2013. On 15 May 2019, thus after the submission of the Stability Programme, the authorities 
adopted a package of new permanent fiscal measures which the European institutions estimate will have a fiscal cost of more than 
1% of GDP. The adoption of the new fiscal measures poses a risk to the achievement of the agreed primary surplus target of 3.5% 
of GDP in 2019 and beyond. 

The European institutions are supporting the authorities to address the reasons for the under-execution of budget ceilings, which 
contribute to the over-achievement of fiscal targets, by further improving the budget preparation process, enhancing the capacity 
of  the  General  Accounting  Office  (staffing,  training,  resources)  to  properly  scrutinise  budget  proposes  of  the  main  budgetary 
units,  and  to  establish  a  unified  approach  to  budgetary  planning  by  transferring  responsibility  for  the  setting  of  investment 
spending targets to the General Accounting Office. 

Health care – Clawbacks. Complete the 
offsetting and collection of the clawback 
for 2018 

For pharmaceuticals, the process of offsetting/collection has started. As of early May, 357 out of 580 million (62%) remained to 
be  collected.  The  quantification  of  clawbacks  for  provider  services  has  not  been  finalised  yet.  Despite  improvements  in 
collection, the generation of new clawbacks is high, which underlines the need for more sustained efforts to implement structural 
measures  designed  to  curb  supply-induced  demand.  Some  recent  measures  on  pricing  weaken  one  of  the  most  effective  cost-
containment mechanisms thus far (the previously biannual repricing procedure). 

Undertake 
Taxation–ENFIA. 
nationwide 
of 
property  tax  value  based  on  market 
values  

valuation 

exercises 

Progress  has  been  made  in  setting  up  the  Valuation  unit  and  developing  the  tools  for  valuations.  Following  a  Technical 
Assistance study, there has been agreement that a new nationwide valuation exercise by valuers is not needed in 2019, but that a 
further partial realignment of zonal property tax values will be undertaken by mid-2019 to bring them 50% closer to the market 
price valuations established in 2018. The authorities need to prepare the detailed timetable for this update to take place and the 
associated fiscal analysis of the realignment exercise that would allow the setting of revenue neutral tax rates and thresholds. 

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Public  financial  management.  Avoid 
the  accumulation  of  new  arrears  and 
complete  the  implementation  of  reforms 
identified  by 
the  Hellenic  Court  of 
Auditors (HCA) 

The  authorities  committed  to  clear  the  current  stock  of  arrears.  In  net  terms,  the  stock  stood  at  EUR  1.4 billion  at  end-March 
2019,  EUR  0.3  billion  lower  than  the  end-August  2018  value.  The  pace  of  reduction  has  slowed  significantly,  as  new  arrears 
continue to be created especially in the areas of pension claims and hospitals. In order to streamline payment processes in these 
sectors, the financial liability regime for accountants has been modified and corrective measures are expected to be adopted.  

Programme financing and own resources are still utilised to clear arrears. Stuck programme financing has been reallocated within 
some  entities.  As  some  programme  funds  remained  unused  by  the  end  of  March  2019,  the  period  for  their  utilisation  was 
extended until May 2019. The updated arrears clearance plan prepared by the authorities shows that net arrears would stand at 
slightly below EUR 0.5 billion by August 2019. 

Progress on the implementation of the action plans of the Independent Authority for Public Revenue and the General Accounting 
Office  will be assessed in mid-2019 in the context of a follow-up audit by the HCA. The implementation of additional actions 
related to streamlining of payment processes and facilitation of arrears clearance is progressing.  

A provision was tabled in the Parliament postponing the phasing out of ex ante audits by the HCA until 31 July 2019 for local 
entities and extra-budgetary funds (excluding the social benefits agency OPEKA).  

Regarding the Treasury Single Account (TSA), the Bank of Greece successfully runs a pilot phase. About a third of the general 
government entities (588) have a cash management account in the Bank of Greece, with others to follow by the end July 2019. 
Other  near-term  steps  include  the  creation  of  a  new  Directorate  responsible  for  the  TSA,  the  elaboration  on  the  general 
government entities’ 15 days liquidity buffer calculation for general government entities and assessment as well as the mandatory 
payment of their wages and pensions through the cash management accounts. 

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Social safety nets. Apply to all disability 
benefits  the  new  approach  for  disability 
determination based on both medical and 
functional assessment 

to 

Financial.  Continue 
implement 
reforms  aimed  at  restoring  the  health  of 
the  banking  system, 
including  NPL 
resolution efforts 

  NPL resolution schemes 

  PRP implementation 

  E-auctions 

  Household insolvency action plan 

of 

insolvency 

  Harmonisation 
legislation  

  State guarantees 

The new criteria to determine disability on the basis of (also) a functional assessment are still to be established. The pilot project 
that  should  have  allowed  defining  these  criteria  encountered  delays  and  is  still  running.  Its  ex-post  evaluation  will  only  be 
completed towards the end of 2019.  

NPL resolution schemes under discussion have seen limited progress: While the securitisation scheme is relatively advanced 
and  currently  under  discussions  with  the  Commission  regarding  compliance  with  state  aid  rules,  the  proposal  of  shifting  bad 
assets along with deferred tax credits to an SPV has not progressed yet.  

Household Insolvency Action Plan: following receipt of 2018 and Q1 2019 data the action plan should be revised by end-June 
2019  in  the  light  of  recent  developments  (particularly  an  increase  in  filings  under  article  9  of  the  Household  Insolvency  law 
during its extension up to end-February 2019) so as to ensure the attainment of the objective to eliminate the backlog of pending 
court cases by end-2021, which cannot be achieved with the current processing rate.  

New Primary Residence Protection (PRP) framework: further to the adoption of law 4605/2019 and of the required secondary 
legislation,  establishing  a  new  mechanism  for  the  protection  of  primary  residences  through  the  restructuring  of  eligible  non-
performing  loans,  close  monitoring  will  be  required  regarding  the  timely  operationalization  of  the  platform  for  the  filing  and 
processing of restructuring requests (including its interaction with the platform for the granting of the State contribution), by end-
July 2019.  

E-auctions:  Data  have  been  provided  by  the  HBA  related  to  court  filings  by  debtors  for  the  protection  of  primary  residences 
under the Household Insolvency law and/or bid pricing revision requests in the context of forced liquidation proceedings, as  well 
as the causes for the high percentage of failed auctions and of repossessions by creditors); in light of the analysis of these data, 
the authorities are expected to take measures (also in the context of the ongoing review of the implementation of the new CCP), 
in order to define and take the necessary mitigating actions.  

Harmonization  of  the  personal  insolvency  framework:  The  authorities  committed  to  harmonize  and  improve  in  the  coming 
months  in  a  holistic  fashion  the  bankruptcy  and  insolvency  regimes.;  moreover,  the  authorities  intend  to  provide  shortly  a 
concrete proposal for establishing a single personal insolvency framework through either a law-drafting committee or a working 
group The authorities committed to send a proposal which has not been received so far. 

State guarantees: The authorities are considering some additional actions to speed up the clearance of called guarantees. Work is 
ongoing to develop a new payment process in collaboration with the banks. In the context of ensuring the full clearance of the 

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called but not paid guarantees within the foreseeable future, more ambitious measures of a structural nature will be necessary. 

This action forms part of the second phase of the OSDDY-PP project.; the draft tendering documentation should be put in public 
consultation on the public procurement platform (www.promitheus.gov.gr) by end- June 2019 in view of finalization of the tender 
and the launch of the tendering procedure by end-September 2019. 

the 

tendering 
Justice.  Complete 
procedure  for  the  launching  of  phase  II 
of 
the 
Management  of  Court  cases  (OSDDY-
PP), 

the  Unified  System 

for 

Financial.  Continue  the  relaxation  of 
capital controls in line with the published 
roadmap 

Cadastre.  Complete  the  drawing  of  the 
remaining forest maps 

Capital controls have been relaxed in line  with the published roadmap, although no further relaxation was recorded this year in 
the limited remaining restrictions still in place. 

The  preparation  of  the  forest  maps  is  on  time  with  some  implementation  risks.  Fifteen  contracts  are  proceeding  according  the 
schedule and the sixteenth and final one  that  was delayed due to an appeal procedure launched by an unsuccessful bidder was 
signed in May 2019. A decision of the Council of State in March 2019 states that the areas of "building concentrations" cannot be 
excluded from the forest maps. The authorities have prepared draft legislation to be urgently introduced in Parliament to address 
the  concerns  of  the  Council  of  State.  Until  then  it  is  not  clear  if  this  decision  will  have  an  implication  on  the  intermediary 
commitment to complete the drawing of the remaining forest maps by mid-2019. 

Energy.  Launch  the  Target  Model  for 
the electricity market  

The original timeline (April 2019 rollout) is unachievable. A revised timeline was discussed, suggesting an October go-live, but 
based on current information, it seems that rollout before 2020 will not be possible. Further monitoring and the implementation of 
intermediate steps will be required. 

Privatisation. Complete the transactions 
on  HELPE 
transfer  of 
(including 
remaining  shares  to  HCAP)  and  Marina 
of Alimos  

HELPE:  No  binding  offers  submitted.  TAIPED  was  given  in  early  May  2019  the  technical  mandate  to  explore  all  options 
available towards proceeding with the transaction and come up with proposals as to the best options. 

Marina of Alimos: Binding offers submitted. An e-auction took place on 16 April 2019, leading to the selection of the preferred 
bidder  was  selected  on  16  April.  Next  steps  are  for  Court  of  Audit  approval  (end  June)  and  the  signing  of  the  Concession 
Agreement (end July)  

67 

 
Implement 

the  Asset 
Privatisation. 
Development  Plan  of  TAIPED  on  a 
continuous basis 

Asset  Development  Plan  (ADP):  The  ADP  of  TAIPED  should  be  updated  and  endorsed  by  KYSOIP.  Maintaining  progress 
towards completion of the end-2019 commitments under the ADP requires in particular the following actions: 
Egnatia 

Commission Staff Working Document -  

Chapter - Annex 

 

Immediate launch and completion of the construction of all remaining frontal and lateral toll stations.  

  Specification  by  the  Tunnel  Licencing  Authority  (based  on  Egnatia’s  submissions)  of  the  measures  that  need  to  be 

implemented in order for the tunnels to be licensed (by end of May). 

  Completion of the process for the appointment of Chairman,  CEO and NED  members of the BoD of Egnatia. Proposal by 
Minister  on  Chairman  and  the  parliamentary  hearing  process  should  all  be  concluded  in  due  time  to  allow  for  TAIPED  to 
complete work stream by said deadline. 

  Resolution of the motor service stations contracts open issues (re. Eleftherochori, Oraiokastro, Ardanio and Sostis) by Egnatia 

S.A. without delays 

  Clear picture on what works needs to be done for bridges to be classified as safe (mid-June). Egnatia must clearly define the 

measures that must be taken as well as the cost for the bridges to be completely safe. 

  Egnatia  to  proceed  to  necessary  actions  (tender  for  advisor  appointment)  for  all  the  preparatory  work  necessary  for  the 

remaining expropriations. 

DEPA launching of the transactions for the sale of 50% + 1 share of DEPA Commercial 

Regional ports of Alexandroupolis and Kavala: Issue of the relevant Joint Ministerial Decision that would make possible the 
launching of the tender. Launching of the transactions on the regional ports of Alexandroupolis and Kavala 

Sale  of  30%  of  the  AIA  shares:  Resolution  of  the  issue  of  the  9th  member  in  the  Board  of  Directors  of  AIA.  Signing  of  the 
waiver agreement by mid-June 2019; Launching of the tender process for the sale of 30% of AIA by end June 2019. 

EYDAP: The  concession agreement between EYDAP and the HR expires in October. There is a  need  for an extension of the 
concession agreement the soonest possible.  

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HCAP.  Implement  the  Strategic  Plan  of 
HCAP  on  a  continuous  basis.  Complete 
review/replacement  of  all  SOE 
the 
boards 

HCAP's Strategic Plan was approved by the General Assembly in January 2018. On the basis of the Strategic Plan, the non-listed 
subsidiaries submitted updated Business Plans to HCAP. Furthermore, HCAP prepared the Business Plan of the Corporation for 
the period 2019-2021 implementing the Strategic Plan and setting key performance indicators for the non-listed subsidiaries. 

Public  administration. 
Independent 
assessment  of  the  appointment  process 
for senior management, including follow 
up measures 

Public  administration.  Complete  the 
3rd  cycle  of  mobility  and  performance 
assessments 

Review / replacement of ELTA, GAIAOSE, OASA and AEDIK (Corinth Canal) Board of Directors completed. Assessment in 
other 4 SOEs has been launched. In addition to that, new Heads of the Audit Committee have been appointed for PPC, EYATH, 
Central Market of Thessaloniki and Hellenic Saltworks. Appointing professional members in the BoDs in the bigger non-listed 
SOEs (in particular executive members) continues to be challenging due to the low level of remuneration, which would need to 
be addressed through legislative action. 

Authorities  confirmed  timeline  for  assessment  to  be  finalised  by  June  2019.  Following  the  completion  of  the  assessment,  the 
authorities  confirmed  intention  to  set  up  a  high-level  working  group  (incl.  officials  from  MAR  and  ASEP)  to  review  the 
recommendations and proceed to adopt various measures (incl. legal amendments) by September 2019.  

Mobility  scheme  -  3rd  cycle:  launched  in  August  2018.  5,440  vacant  posts  (out  of  which  4,754  concerned  transfers)  were 
published  originating  from  165  entities  and  attracting  5,333  applications.  Until  today  (i)  223  transfers  (out  of  744  selection 
decisions);  and  (ii)  12  secondments  (out  of  48  selection  decisions)  have  been  completed.  Although,  the  time  needed  from 
publication of a post to selection decision and then actual appointment taking place has been significantly shortened, there  is a 
risk that a significant part of the expected transfers (and secondments) will not be completed by the end of June 2019.  

Performance assessment: circular launching the performance assessment was issued on 12 March 2019 with a revised timeline 
published on 3 May 2019: the timeline foreseen is as follows: (i) 14 March – 12 April: registering of officials to be assessed by 
HR departments; (ii) 15 April – 13 May: officials carry out their self-assessment; (iii) 15 May – 10 June: first evaluators carry out 
their assessments; (iv) 12 – 30 June: second evaluators carry out their assessments. Authorities have confirmed that the appraisal 
will be completed on time and as per the timeline set out above. 

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2nd 

on 
Follow-up 
enhanced surveillance report 

issues 

from 

Fiscal.  Monitor  and  contain  fiscal  risks 
instalment 
related 
schemes and the public sector wage bill 

cases, 

court 

to 

Updates to be provided as needed. 

Tax  administration.  Progress  with 
IAPR recruitment. 

The hiring of staff to the Independent Authority for Public Revenue (IAPR) remains slow. Latest update from authorities is that 
expected staff number end of 2019 will have reached close to 12,400 (compared to the specific commitment of 12,500), though 
achieving the authorities’ target would require am increase in the pace of recruitments. Actual staffing has marginally increased 
during the first quarter of 2019 to 11,534 from 11,487 end-2018. Authorities confirmed that final list of successful candidates was 
published in April 2019 by ASEP for 546 tax/customs officials to be appointed.  

As concerns the 'complementary measures' adopted in early 2019: (i) HR reform: the IAPR to submit request to the Legal Council 
of State to seek its legal opinion as concerns the supplementary wage grid for the IAPR by June and proceed to adopt secondary 
legislation  needed  for  the  supplementary  grading  scale;  (ii)  'blueprint'  (2019-2022):  regular  monitoring  of  progress  on  various 
projects, including the IAPR to establish an executive committee; and (iii) IT envelope: budget agreed between GSIS and IAPR, 
but not yet secured/allocated.. 

Labour  market.  Monitor 
impact  of 
minimum  wage  increase  and  collective 
bargaining 

Authorities  agree  on  the  need  to  assess  the  impact  of  the  recent  minimum  wage  increase  and  to  monitor  overall  wage 
developments.  Technical  work  is  on-going  to  make  full  use  of  the  information  on  labour  market  trends  contained  in 
administrative databases (EFKA, ERGANI, OPS-SEPE), with the support of technical assistance.  

Energy. 
divestiture 

Completion 

of 

lignite 

As per the recent Commission decision C(2019) 2748, an extension to the commitment was granted to allow for a new tender 
under  the  same  framework.  This  foresees  binding  offers  received  by  mid-May  and  closure  by  end-June.  It  calls  for  the 
appointment of another valuator to provide a fairness opinion on the plants’ values in order to assess offers. The Commission has 
stressed the expectation of a distancing from the initial valuation and the pressing need for a fairness valuation. In the wake of the 
recent  announcement  that  the  government  will  be  holding  parliamentary  elections  before  the  summer,  a  unilateral  decision 
extending  the  process  deadline  to  15  July  was  made  by  PPC  following  consultation  with  the  Ministry  of  Energy  and 
Environment. As such, the closure will not be made within that given deadline. 

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Commission Staff Working Document -  

Chapter - Annex 

Public  Administration.  Progress  with 
appointment 
Administrative 
Secretaries  and  issues  relating  to  the 
unified wage grid. 

of 

According  to  the  latest  updates  from  the  authorities,  one  actual  appointment  and  four  selections  of  Administrative  Secretaries 
have been completed out of 69 in total. According to the authorities, the two selection panels should be able to complete up  to 
five shortlists per month, which means that all selection decisions should be completed by end-2019. If the current selection trend 
remains it is increasingly unlikely that the revised target of completing all selection decisions by end-2019 will be achieved. 

Legal amendments adopted since  the publication of the 2nd Enhanced Surveillance report risk  further counteracting the unified 
wage grid reform. In addition, various amendments under discussion concerning salary provisions and hiring process for specific 
entities should preferably not adopted as ad hoc exceptions to existing provisions but following a strategic/systemic approach for 
certain  public  entities  (e.g.  independent  authorities).  Authorities  confirmed  that  they  do  not  have  any  intention  to  proceed  to 
implement provision  foreseen in the unified  wage  grid (Article 17) to provide supplementary remuneration on the basis of job 
description  and  appraisal  of  position  until  all  job  descriptions  have  been  completed  (expected  by  end-2019)  and  a  common 
approach having been defined by MAR. 

Privatisation:  The 
on 
Hellinikon  should  have  been  completed 
by end-2018 

transaction 

The authorities should continue the strong efforts to complete all pending conditions precedent the soonest possible: (i) Award of 
the casino licence in Hellinikon, (ii) Issue of the Joint Ministerial Decisions on the metropolitan park, the development zones and 
the  urban  planning  zones;  (iii)  Partition  of  the  Hellinikon  site  between  the  Hellenic  Republic  and  Lamda  Development  (iv) 
Completion of the relocation of all users. 

HCAP. The transfer of OAKA to HCAP 
should  have  been  completed  by  end-
2018. 

The  transfer  of  OAKA  will  take  longer  to  complete.  Given  the  complexities  and  involvement  of  third  parties,  an  adjusted 
timetable for the transfer by end-2020 appears reasonable. The authorities have further developed a roadmap for specific actions 
to be taken during 2019 to address the open technical issues, which appears appropriate in light of the complexity of the project. 

71