Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Greece and delivering a Council opinion on the 2019 Stability Programme of Greece
Date: 2019-06-05
Institutions: European Commission, Secretariat-General
Subjects: Greece, economic disparity, economic policy, economic reform, financial supervision, investment, labour market, stability pact, stability programme, transport infrastructure

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   EUROPEAN COMMISSION  Brussels, 5.6.2019  COM(2019) 508 final  Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Greece and delivering a Council opinion on the 2019 Stability Programme of Greece  
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2019 National Reform Programme of Greece and delivering a Council opinion on 
the 2019 Stability Programme of Greece 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof,  

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

On 21 November 2018, the Commission adopted the Annual Growth Survey, marking 
the start of the 2019 European Semester for economic policy coordination. It took due 
account  of  the  European  Pillar  of  Social  Rights,  proclaimed  by  the  European 
Parliament, the Council and the Commission on 17 November 2017. The priorities of 
the  Annual  Growth  Survey  were  endorsed  by  the  European  Council  on  21  March 
2019.  On  21  November  2018,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Greece 
as one of the Member States for which an in-depth review would be carried out. On 
the  same  date,  the  Commission  also  adopted  a  recommendation  for  a  Council 
recommendation on the economic policy of the euro area, which was endorsed by the 
European  Council  on  21  March  2019.  On  9  April  2019,  the  Council  adopted  the 
recommendation  on  the  economic  policy  of  the  euro  area  (‘Recommendation  for  the 
euro area’).  

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2 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 

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(2) 

(3) 

(4) 

(5) 

(6) 

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As a Member State, whose currency is the euro and in view of the close interlinkages 
between the economies in the economic and monetary union, Greece should ensure the 
full and timely implementation of the Recommendation for the euro area, as reflected 
in  recommendation  (1)  and  (2)  below.  In  particular,  reforms  in  line  with  the  post-
programme  commitments  and  focusing  economic  policy  related  to  investment  in  the 
specified areas will help address the euro area recommendation. 
The 2019 country report for Greece3 was published on 27 February 2019. It assessed 
Greece's  progress  towards  its  national  Europe  2020  targets.  It  also  included  an  in-
depth review under Article 5 of Regulation (EU) No 1176/2011, the results of which 
were  also  published  on  27  February  20194.  The  Commission’s  analysis  led  it  to 
conclude  that  Greece  is  experiencing  excessive  macroeconomic  imbalances.  The 
imbalances  identified  related  in  particular  to  the  high  public  debt,  the  negative  net 
international  investment  position,  the  high  non-performing  loans  on  banks’  balance 
sheets  and  the  still  high  unemployment  rate.  In  addition,  deep  institutional  and 
structural reforms initiated in recent years to modernise the economy and the State will 
require many years of sustained implementation for their impact to be fully felt. 

On 26 April 2019, Greece submitted its 2019 National Reform Programme and, on 30 
April  2019,  its  2019  Stability  Programme.  In  order  to  take  account  of  their 
interlinkages, the two programmes have been assessed at the same time. 

As  provided  for  in  Article  23  of  Regulation  (EU)  No  1303/2013  of  the  European 
Parliament and of the Council5, where it is necessary to support the implementation of 
relevant  Council  recommendations,  the  Commission  may  request  a  Member  State  to 
review  and  propose  amendments  to  its  Partnership  Agreement  and  relevant 
programmes. The Commission has provided further details on how it would make use 
of  that  provision  in  guidelines  on  the  application  of  the  measures  linking  the 
effectiveness of the ESI Funds to sound economic governance6.  

Greece is currently in the preventive arm of the Stability and Growth Pact and subject 
to  the  transitional  debt  rule.  It  should  also  preserve  a  sound  fiscal  position  which 
ensures  compliance  with  the  primary  surplus  target  set  by  Decision  (EU)  2017/1226 
on 30 June 2017 of 3.5% of GDP for 2018 and over the medium term7. In spring 2018, 
the Council issued no country-specific recommendation to Greece in the context of the 
European Semester because pursuant to Article 12 of Regulation (EU) No 472/20138 
Greece was exempt from the monitoring and assessment under the European Semester 
at that time since it was subject to a macroeconomic adjustment programme. The post-
programme  framework  for  Greece  entails  the  activation  of  enhanced  surveillance 

SWD(2019) 1007 final. 
COM(2019) 150 final. 
Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 
laying  down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social 
Fund,  the  Cohesion  Fund,  the  European  Agricultural  Fund  for  Rural  Development  and  the  European 
Maritime  and  Fisheries  Fund  and  laying  down  general  provisions  on  the  European  Regional 
Development  Fund,  the  European  Social  Fund,  the  Cohesion  Fund  and  the  European  Maritime  and 
Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320). 
COM(2014) 494 final. 
Council  Implementing  Decision  (EU)  2017/1226  of  30  June  2017  amending  Implementing  Decision 
(EU)  2016/544  approving  the  macroeconomic  adjustment  programme  of  Greece  (2015/1411),  OJ  L 
174, 7.7.2017, p. 22. 
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 

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(7) 

(8) 

together with Greece’s integration to the European Semester framework of economic 
and social policy coordination, while maximising the synergies between the enhanced 
surveillance and European Semester processes. 

In its 2019 Stability Programme, the government plans a headline surplus of between 
1.1%  and  1.7%  of  GDP  over  2019-2022.  The  government  set  its  medium-term 
budgetary  objective  –  a  budget  surplus  of  0.25%  of  GDP  in  structural  terms  as  of 
2020.  Based  on  the  recalculated  structural  balance9,  this  medium-term  budgetary 
objective  is  planned  to  be  overachieved  throughout  the  programme  period  and  the 
general  government  debt-to-GDP ratio is  expected to  gradually decline to  153.3% in 
2022.  The  macroeconomic  scenario  underpinning  those  budgetary  projections  has 
been endorsed by an independent  body  and is  favourable. Based on the Commission 
2019 spring forecast, the structural balance is forecast to register a surplus of 1.9% of 
GDP in 2019 and 0.8% of GDP in 2020, above the medium-term budgetary objective. 
General  government  debt  is  forecast  to  remain  on  a  downward  path  and  to  comply 
with the transitional debt rule in 2019 and with the debt rule in 2020. Overall, based on 
the  Commission  2019  spring  forecast  and  thus  excluding  the  new  measures  adopted 
after  its  cut-off  date,  Greece  was  projected  to  comply  with  the  provisions  of  the 
Stability  and  Growth  Pact  in  2019  and  2020.  On  the  same  basis,  Greece  was  also 
considered to  comply with the 3.5% of GDP primary surplus target monitored under 
the enhanced surveillance framework. 

The  Stability  Programme  and  Commission  2019  spring  forecast  do  not  incorporate 
new  permanent  measures  announced  and  adopted  shortly  after  their  respective 
submission  and  cut-off  dates.  The  Commission  estimates  the  fiscal  impact  of  these 
measures to exceed 1.0% of GDP in 2019 and subsequent years. It is also assessed that 
the adoption of these new measures poses a risk for the agreed primary surplus target, 
as monitored under the enhanced surveillance framework and set by the by Decision 
(EU) 2017/1226 of 30 June 2017. Moreover, the new measures are expected to reduce 
the  structural  balance,  raising  concerns  on  the  achievement  the  medium-term 
budgetary objective in 2020. But, a re-assessment will be carried out in autumn 2019, 
and will include a revision of the applicable benchmark for the net expenditure growth 
rate  in  2020.  While  general  government  debt  is  forecast  to  remain  on  a  downward 
path,  some  risks  could  be  posed  to  compliance  with  the  debt  reduction  benchmark.  
This  will  have  to  be  reassessed  in  autumn  as  a  result  of  these  newly  adopted 
measures.Following  its  successful  completion  of  the  financial  assistance  programme 
under  the  European  Stability  Mechanism,  Greece  is  subject  to  a  post-programme 
surveillance  framework  integrated  into  the  European  Semester  and  is  subject  to 
enhanced  surveillance  in  accordance  with  Regulation  (EU)  No  472/2013.  The 
activation  of  enhanced  surveillance  for  Greece10  acknowledges  the  fact  that  over  the 
medium term, Greece needs to continue adopting measures to address the sources or 
potential  sources  of  macroeconomic  imbalances,  while  implementing  structural 
reforms  to  support  a  robust  and  sustainable  economic  growth.  Greece  made  a 
commitment  in  the  Eurogroup  of  22  June  2018  to  continue  all  key  reforms  adopted 
under  the  programme  until  they  are  fully  completed.  Greece  also  committed  to 
implementing  specific  actions  related  to  fiscal  and  fiscal-structural  policies,  social 

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Cyclically-adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
using the commonly agreed methodology 
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  prolongation  of  enhanced  surveillance  for  Greece,  OJ  L  60, 
28.2.2019, p. 17. 

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welfare,  financial  stability,  labour  and  product  markets,  privatisation  and  public 
administration. Greece is subject to quarterly reporting on progress with implementing 
its commitments under enhanced surveillance, where a favourable report can, on a six 
monthly  basis,  pave  the  way  for  the  release  of  debt  relief  measures  worth  0.7%  of 
GDP  per  annum.  The  release  of  the  first  tranche  of  policy-contingent  debt  measures 
worth  EUR  970  million  was  agreed  by  the  Eurogroup  in  April  2019.  The  third 
Enhanced Surveillance report assessing Greece’s progress with the implementation of 
its commitments was published on 5 June 2019. 

Reforms  that  improve  the  business  environment  and  the  quality  of  institutions,  in 
particular  the  efficiency  of  the  justice  system,  would  foster  economic  resilience  in 
Greece,  improve  payment  discipline  and  should  have  a  significant  impact  on 
investment  decisions  and  attracting  businesses.  Despite  recent  improvements,  the 
Greek judicial system still faces challenges and displays inefficiencies, as the time to 
reach  a  decision  is  often  too  long  and  backlogs  weigh  on  the  productivity  of  courts. 
Further  targeted  action  in  this  area  is  therefore  critical,  also  to  facilitate  the  smooth 
functioning of the financial system as well as help unlocking investment potential. 

(9) 

(10)  Several  years  of  underinvestment  have  led  to  major  investment  gaps  in  Greece. 
Increasing growth-enhancing investment will be instrumental in underpinning longer-
term  growth  and  reducing  regional  disparities.  The  country  report  identified  priority 
areas for public and private sector investment. 

(11)  Higher  investment  in  education  and  training  is  crucial  to  improve  Greece’s 
productivity  and  long-term  inclusive  growth  and  address  barriers  to  growth  in 
innovative  sectors.  The  Greek  education  system  faces  several  challenges  with 
inadequate  resources,  low  autonomy,  underachievement  in  basic  (including  digital) 
skills  and  persisting  skills  mismatches.  At  all  levels,  accountability  and  monitoring, 
which  are  necessary  for  quality  improvement  of  the  education  system,  are  largely 
missing.  Promoting  quality  and  inclusive  education  and  training,  establishing  closer 
links  between  education  and  labour  market  needs,  improving  the  attractiveness  of 
vocational education and training, and increasing participation in life-long learning are 
important for underpinning sustainable growth. 

(12)  The  share  of  long-term  unemployed,  who  represented  70%  of  the  unemployed  in 
Greece in 2018, is very high, while high youth unemployment and low labour market 
participation  of  women  are  also  a  matter  of  concern.  Interventions  should  focus  on 
improving  employment  prospects,  promoting  labour  market  participation,  and 
fostering conditions for job creation. Effective social dialogue and responsible social 
partnership  in  Greece  can  support  the  environment  for  the  implementation  and 
ownership of sustained reforms, resulting in a better functioning of the labour market. 

(13)  Greece is characterised by high income inequality and has the lowest impact of social 
transfers  on  reducing  the  risk  of  poverty  in  the  EU  (15.83%  in  2017  versus  an  EU 
average  of  33.98%).  Investments  should  focus  on  enhancing  access  to  inclusive, 
affordable and high quality social services, as well as on developing day-care centres. 
Supporting the most deprived and promoting the social integration of children at risk 
of  poverty,  of  persons  with  disabilities,  of  migrants  and  refugees,  while  paying 
attention to geographic disparities would improve social inclusion in Greece. 

(14)  Greece initiated a far-reaching reform of the primary healthcare system in 2017, which 
is crucial to ensure access and requires continued investment through the deployment 
of local healthcare units (the so called “TOMYs”). 

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(15)  The Greek transport system  faces significant  challenges.  It  is  largely  road-based  and 
heavily  dependent  on  oil,  with  all  main  connections  rotating  around  the  Athens– 
Thessaloniki  route.  Transport  costs  are  still  high  while  the  quality  of  service,  safety 
standards  and  penetration  of  intelligent  transport  systems  remains  low.  New 
investment  is  needed  to  increase  multimodal  transport  and  promote  regional 
integration and urban development. 

(16)  Treatment of solid waste and urban and industrial wastewater is the main area needing 
additional  investment  in  order  to  align  the  country’s  environmental  protection 
standards with  the  rest  of the EU. The management  of solid waste  continues  to  be a 
major  structural  challenge,  with  Greece  still  relying  heavily  on  landfilling  and 
mechanical-biological  treatment  instead  of  more  modern  techniques.  In  addition,  the 
proportion of municipal waste that is recycled is only about a third of the EU average. 
Investments  are  also  needed  to  improve  water  treatment,  combat  ground  water 
salinisation, and support measures to prevent flooding and restore the natural flow of 
rivers. 

(17)  Underdeveloped  infrastructures  increase  energy  costs  for  businesses  and  households 
and  form  a  barrier  to  the  uptake  of  renewable  energy.  Greece  faces  a  particular 
challenge  here  with  the  electricity  connectivity  of  islands  and  the  connection  with 
neighbouring countries. Further development of commercial gas infrastructure would 
help grow the market. The reform of both the gas and electricity markets should strive 
to take advantage of these new infrastructure opportunities.  

(18)  The digital transformation of the economy and society remains challenging, with low 
access to high-speed broadband networks and digital skills well below the EU average. 
Greece  particularly  needs  to  invest  in  information  and  communication  technology, 
also to make up for the investment slump during the crisis.  Insufficient higher speed 
broadband  connectivity  creates  major  bottlenecks  for  dynamic  export  oriented 
businesses. The investment in innovation and people’s skills is insufficient to promote 
productivity  growth,  and  the  lack  of  digital  skills  among  the  population  at  large  is 
preventing  them  from  finding  employment  and  hindering  the  development  of 
innovative businesses. 

(19)  Renewed ‘smart specialisation’ strategies at national and regional level, and additional 
measures  to  address  the  most  pressing  weaknesses  of  the  research  and  innovation 
system,  are  needed  to  stimulate  market-oriented  investment  in  research  and 
development, which remains low and weighs on Greece’s growth potential. Advances 
in  scientific  excellence  are  hindered  by  the  low  intensity  of  public  research  and 
development,  a  lack  of  a  performance-based  funding  system  and  weak  science-
business  links.  Higher  investment  is  also  needed  to  boost  the  low  levels  of 
technological development, reflected in the very low number of patents compared with 
other Member States, and to fully tap into the potential of start-ups and scale-ups. 

(20)  As  a  crosscutting  theme,  investment  in  the  regeneration  of  deprived  urban  areas, 
islands  and  highlands  is  needed  to  counter  the  loss  and  deteriorated  quality  of  the 
country’s  physical  and  human  capital  during  the  economic  crisis.  Sustainable  re-
development of disadvantaged and/or de-industrialised areas in the Athens-Piraeus and 
Thessaloniki  conurbations  and  in  the  principal  peripheral  urban  centres  (Patras, 
Heraklion, Larissa, Ioannina, Agrinion and Chalkis) is a specific short to medium-term 
priority. Longer-term priorities include developing of sustainable productive activities, 
upgrading  mobility  and  security  systems,  energy  efficiency  and  renewable  energy, 
environmental protection and improving resilience to natural risks and socio-economic 

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crises. Interventions should also target the social inclusion, the integration of migrants, 
the acquisition of skills to reduce unemployment, and cultural activities to increase the 
attractiveness of deprived areas. Addressing these challenges through integrated urban 
renewal strategies would maximise the chances of achieving the best economic, social 
and environmental outcomes.  

(21)  The programming of EU funds for the period 2021-2027 could help address some of 
the  gaps  identified  in  the  recommendations,  in  particular  in  the  areas  covered  by 
Annex  D  to  the  country  report11.  This  would  allow  Greece  to  make  the  best  use  of 
those funds in respect of the identified sectors, taking into account regional disparities. 
Strengthening  the  administrative  capacity  for  the  management  of  the  Funds  is  an 
important factor for the success of investment. 

(22) 

(23) 

(24) 

In  the  context  of  the  2019  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Greece’s  economic  policy  and  published  it  in  the  2019 
country  report.  It  has  also  assessed  the  2019  Stability  Programme  and  the  2019 
National  Reform  Programme.  It  has  taken  into  account  not  only  their  relevance  for 
sustainable fiscal and socioeconomic policy in Greece, but also their compliance with 
Union  rules  and  guidance.  This  reflects  the  need  to  strengthen  the  Union’s  overall 
economic governance by providing Union-level input into future national decisions.  

In  the  light  of  this  assessment,  the  Council  has  examined  the  2019  Stability 
Programme and is of the opinion that Greece is expected to comply with the Stability 
and Growth Pact. 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  2018  National  Reform  Programme  and  the  2018  Stability  Programme. 
Its recommendations under Article 6 of Regulation (EU) No 1176/2011  are reflected 
in recommendation (1) and (2) below. Those recommendations also contribute to the 
implementation of the first four of the Recommendations for the euro area. 

HEREBY RECOMMENDS that Greece take action in 2019 and 2020 to: 

1. 

2. 

Achieve  a  sustainable  economic  recovery  and  tackle  the  excessive  macroeconomic 
imbalances by  continuing  and  completing reforms in  line with  the post-programme 
commitments given at the Eurogroup of 22 June 2018.  

Focus  investment-related  economic  policy  on  sustainable  transport  and  logistics, 
environmental  protection,  energy  efficiency,  renewable  energy  and  interconnection 
projects,  digital 
technologies,  research  and  development,  education,  skills, 
employability,  health,  and  the  renewal  of  urban  areas,  taking  into  account  regional 
disparities and the need to ensure social inclusion. 

Done at Brussels, 

For the Council 
The President 

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SWD(2019) 1007 final. 

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