COMMUNICATION FROM THE COMMISSION Enhanced Surveillance update - Greece, June 2021
Date: 2021-06-02
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Euro Group (euro area), Greece, coronavirus disease, economic recovery, epidemic, gross domestic product, macroeconomics, multilateral surveillance, stability programme, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 2.6.2021  COM(2021) 528 final  COMMUNICATION FROM THE COMMISSION Enhanced Surveillance update - Greece, June 2021 {SWD(2021) 528 final}  
 
 
BACKGROUND 

Economic  developments  and  policies  in  Greece  are  monitored  under  the  European 
Semester  for  economic  policy  co-ordination  and  under  the  enhanced  surveillance 
framework  according  to  Articles  2  and  3  of  Regulation  (EU)  No 472/2013 (1).  The 
implementation  of  enhanced  surveillance  for  Greece (2)  acknowledges  the  fact  that  Greece 
needs  to  continue  implementing  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.  

Enhanced surveillance provides a comprehensive framework for  monitoring economic 
developments  and  the  pursuit  of  policies  needed  to  ensure  a  sustainable  economic 
recovery. It allows for a regular assessment of recent economic and financial developments 
in Greece, as well as for monitoring sovereign financing conditions and updates of the debt 
sustainability analysis. Enhanced surveillance also provides the framework for assessing the 
general  commitment  given  by  Greece  to  the  Eurogroup  of  22 June  2018,  to  continue  and 
complete reforms adopted under the European Stability Mechanism programme and to ensure 
that  the  objectives  of  the  important  reforms  adopted  under  the  financial  assistance 
the 
programmes  are  safeguarded.  In 
implementation of 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) Hellenic Corporation of Assets and Participations and privatisation, and (vi) the 
modernisation of public administration (3). 

that  context,  enhanced  surveillance  monitors 

This  is  the  tenth  enhanced  surveillance  report  for  Greece.  It  is  issued  alongside  the  in-
depth review of macroeconomic imbalances and country-specific recommendations assessing 
Greece’s 2021 Stability Programme under the European Semester. The report is based on the 
findings  of  a  mission  held  remotely  on  20-21 April  2021  and  regular  dialogue  with  the 
authorities.  The  mission  was  conducted  by  the  European  Commission  in  liaison  with  the 
European Central Bank (4); the International Monetary Fund participated in the context of its 
Post-Programme  Monitoring  framework,  while 
the  European  Stability  Mechanism 
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  European  Stability  Mechanism.  The  current  report  assesses  the  implementation  of 
Greece’s  commitments  to  the  Eurogroup  regarding  reform  completion  due  up  to  end-2020 
and  provides  information  on  the  commitments  due  by  mid-2021.  The  report  was  prepared 
taking into account information available up to the cut-off date 27 May 2021. 

(1)  Regulation  (EU)  No 472/2013  of  the  European  Parliament  and  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 L140, 27.5.2013, p. 1. 

(2)  Commission Implementing Decision (EU) 2021/998 of 17 February 2021 on the prolongation 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)  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,  also  held 
remotely, from 6 to 14 April 2021. 

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This report could serve as a basis for the Eurogroup to decide on the release of the next 
set  of  policy-contingent  debt  measures  worth  €748 million.  These  measures  were  agreed 
with the Eurogroup on 22 June 2018 and include the transfer of income equivalent amounts 
stemming  from  central  banks’  holdings  of  Greek  government  bonds  under  the  Securities 
Markets Programme and the Agreement on Net Financial Assets and a waiver for the step-up 
interest  margin for certain loans provided by the  European Financial Stability Facility. The 
fourth tranche of policy-contingent debt measures was released following the Eurogroup on 
30 November  2020,  inter  alia  based  on  the  assessment  of  the  implementation  of  Greece’s 
commitments  for  mid-2020  included  in  the  enhanced  surveillance  report  adopted  by  the 
Commission  on  18 November  2020 (5)  and  considering  the  extraordinary  circumstances 
posed by the coronavirus outbreak. 

OVERALL ASSESSMENT 

The  report  was  prepared  against  the  backdrop  of  the  continuing  pandemic  and 
containment  measures  but  also  expectations  for  a  gradual  reopening  of  the  economy 
thanks  to  the  vaccination  campaign.  The  Greek  economy  contracted  by  8.2%  in  2020, 
somewhat less than expected, but still considerably more than the EU as a whole, mainly on 
account of the weight of the tourism sector in the economy. The increase in new coronavirus 
cases  has  led  the  authorities  to  maintain  the  personal  mobility  restrictions  and  containment 
measures introduced at the end of 2020 and earlier this year, while starting – more recently – 
to  cautiously  reopen  the  tourism  sector  to  foreign  tourists.  The  government  presented 
additional  fiscal  policy  measures  for  2021  and  2022  to  buttress  economic  recovery  and 
private  investment.  The  fiscal  policy  stance  is  therefore  expected  to  remain  supportive  and 
continue mitigating the impact of the crisis on the labour market and the social situation. The 
employment  protection  measures  are  being  supported  by  the  EU  notably  through  the  new 
financing  instrument  for  temporary  Support  to  mitigate  Unemployment  Risks  in  an 
Emergency  (SURE)  and  the  European  Social  Fund.  Employment  is  forecast  to  grow 
marginally  in  2021,  due  to  a  gradual  restart  of  hiring  along  with  the  reopening  of  the 
economy.  The  expected  launch  of  the  implementation  of  the  reforms  and  investments 
presented in the Recovery and Resilience Plan is set to provide an additional growth impulse 
and momentum to efforts to modernise the economy and reduce unemployment, poverty and 
social exclusion (6).  

The  authorities  progressed  well  with  reform  implementation  across  a  broad  range  of 
policy  areas,  including  those  that  will  help  manage  the  socio-economic  impact  of  the 
pandemic and facilitate the implementation of new public investments. Notably: 

  The  insolvency  reform  is  expected  to  come  into  effect  as  agreed  on  1 June, 
following the entry into force of the framework on the rehabilitation of companies and 
corporate  bankruptcy  on  1 March.  This  code  represents  a  major  reform  of  the 
insolvency  framework  and  its  entry  into  force  is  a  result  of  very  substantial 
implementation work related to its detailed specification as well as to the setting up of 
an IT platform interconnected with those of the banks. The process for the set-up of 
the  sale  and  lease-back  entity  is  expected  to  take  significantly  longer  than  initially 

(5)  https://ec.europa.eu/info/publications/enhanced-surveillance-report-greece-november-2020_en.  
(6)  References  in  this  report  to  the  Recovery  and  Resilience  Facility  do  not  constitute  any  assessment  of  the 
Greek Recovery and Resilience Plan and cannot in any way serve to pre-judge the Commission assessment 
of the Plan. 

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expected, but it will not require amendments of the relevant legal provisions and will 
not affect the implementation of the other aspects of the framework nor the recently 
adopted lifting of the suspension of enforcement measures. The scheme may entail a 
substantial  fiscal  cost  in  case  it  is  classified  within  general  government  and  the 
authorities are therefore urged to implement it in a way that avoids this risk. 

  The authorities extended the Hercules scheme to facilitate a further reduction of 
non-performing  loans.  The  scheme  was  the  main  driver  behind  a  substantial 
decrease in the non-performing loans ratio to 30.2% at end-2020, from above 40% at 
end-2019 (7). The extension of the scheme is expected to allow Greek banks to further 
reduce their non-performing loans and support  their effort  to  reach single-digit non-
performing loan ratios in 2022 in line with their recently revised non-performing loan 
reduction strategies submitted to the supervisor. The success of these ambitious plans 
is  contingent  on  a  number  of  factors,  such  as  the  scale  of  inflows  of  new  non-
performing loans and economic and market conditions. 

  A  comprehensive  human  resources  reform  of  the  Independent  Authority  of 
Public Revenue is expected to come into effect on 1 June. The reform is expected 
to help the Independent Authority to deliver on the specific commitment on ensuring 
appropriate staffing going forward. 

  The authorities completed the reform of the system of subsidies for local  public 
transport,  a  specific  commitment,  and  the  nationwide  rollout  of  the  third  and  last 
pillar  of  the  Guaranteed  Minimum  Income  (GMI),  also  a  specific  commitment, 
allowing the provision of social support and tailor-made employment services to GMI 
recipients as of 1 June. The GMI reform has had a visible impact in terms of poverty 
reduction,  although  the  share  of  people  at  risk  of  poverty  or  social  exclusion  is  still 
among  the  highest  in  the  EU  (30%  in  2019).  The  authorities  will  legislate  in 
September  to  use  the  functionality-based  disability  assessment  system  to  assess 
benefit  eligibility  in  their  new  trial  programme  of  personal  assistance  to  disabled 
people.  This  means  the  new  assessment  scheme  will  be  used  directly  for  in-kind 
benefit decisions from the first quarter of next year, rather than a further pilot of the 
functionality assessment system being needed. 

  The authorities adopted a major overhaul of the public procurement framework, 
a  new  conceptual  framework  regarding  the  internal  control  in  the  public 
administration,  and  legislation  to  establish  a  Strategic  Project  Pipeline.  The 
legislation on the setting  up of a  Project  Preparation Facility  for large  investment 
projects is  expected to be adopted in  early June. While full implementation of these 
measures  will need to  continue in  the future, these steps are  crucial for a successful 
start of the Recovery and Resilience Facility. The reforms and investments included 
in the Recovery and Resilience Plan are complementary to reforms monitored under 
enhanced surveillance but have a longer-term horizon and, where appropriate, further 
develop reforms initiated under enhanced surveillance. 

(7)  Source: Bank of Greece, non-performing loans as a share of total gross customer loans on a solo basis. This 
figure is different than the one reported under the In Depth Review, as the latter is the figure reported by the 
European Central Bank and represents non-performing loans as a share of total gross loans and advances on 
a  consolidated  basis  (i.e.  including  cash  balances  at  central  banks  and  other  demand  deposits  in  the 
denominator). 

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  The  authorities  reached  the  30%  target  on  centralised  procurement  of 
healthcare  expenditure, a specific commitment, while taking steps to  speed up the 
collection of clawback and relaunching work on the primary healthcare reform.  

  The  capacity  of  the  Supreme  Council  for  Civil  Personnel  Selection  has  been 
strengthened  and  good  progress  has  been  made  towards  an  integrated  human 
resources management system for the public administration. A limit to the recruitment 
of temporary staff, the work on which continues, will be implemented only as of 2022 
but the authorities committed to implementing an agreed reduction in temporary posts 
in October 2021. 

Reforms  continued  also  in  other  important  areas.  The  authorities  are  progressing  well 
with the development of the 1st level of the functional classification for public accounts due 
in October 2021 and prepared a road map for implementing its 2nd level by April 2022. The 
functional classification is an essential element in budget and policy formulation. Important 
steps,  including  new  primary  and  secondary  legislation,  were  taken  to  simplify  the 
investment licensing requirements and reform the inspection framework. Despite the broad 
sectoral  coverage  of  the  reforms,  areas  related  to  the  licensing  of  business  in  educational 
activities  were  left  out  from  the  present  package  but  the  authorities  will  address  these  by 
September  2021.  The  tender  for  the  deployment  of  the  IT  system  for  licensing  and 
inspections, the execution of which had faced difficulties, was finally unblocked and the final 
decision for awarding the contract has recently been published. The  cadastral reform is on 
track according to the revised road map, with  good progress on the completion of cadastral 
surveys, setting up of the cadastral offices and preparation of forest maps. The ratification of 
95% of all maps will be achieved in the first quarter of 2022 following the extension of the 
period  for  filing  objections  on  account  of  the  pandemic  and  to  address  administrative  and 
legislative hitches. The Hellenic Corporation of Assets and Participations is preparing an 
updated  Strategic  Plan,  following  the  issuance  of  the  authorities’  updated  Ministerial 
Guidance,  which  includes  a  new  focus  on  market  based  asset  management,  and  welcome 
steps are being taken to strengthen the role of the Corporation as an active shareholder. Good 
progress  was  made  with  several  of  the  ongoing  privatisation  transactions,  including 
Hellinikon, a number of regional ports, real estate and the underground natural gas storage in 
South Kavala. Progress made on the remaining pending actions on the Egnatia concession has 
been limited  and  works  are  behind  schedule.  Last  but  not  least,  the  authorities  adopted 
relevant  measures  to  address  the  remaining  recommendations  of  the  Group  of  States 
against Corruption and established a timeline to complete the specific commitment, while 
completing  the  long-awaited  improvements  to  the  implementation  of  the  asset  declaration 
procedure. 

The  authorities  are  taking  steps  to  remedy  the  delays  caused  by  the  pandemic.  First, 
contrary  to  initial  plan,  the  stock  of  arrears  increased  by  €96  million  between  December 
2020  and  February  2021,  largely  on  account  of  liquidity  shortages  in  certain  entities.  The 
authorities  took  measures  to  remedy  the  situation  and  provided  an  updated  clearance  plan, 
which confirms the previously agreed targets, while taking into account a new comprehensive 
analysis  of  factors  out  of  the  direct  control  of  the  government.  The  analysis,  which  was 
agreed with the European institutions, is expected to support the credibility and attainability 
of the targets. In parallel, the authorities are progressing with the implementation of structural 
measures to address the recommendations of the Hellenic Court of Auditors mainly focused 
on  IT 
internal  control  systems,  staffing  and 
improvements in payment procedures with the majority of them to be addressed by mid-2021. 

improvements,  establishing  efficient 

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Secondly,  the  authorities  successfully  completed  the  revaluation  exercise  for  the  ENFIA 
property tax and agreed to bring forward the August 2022 tax declarations to the first quarter 
of 2022, as implementing the reform still in 2021 is no longer feasible. Thirdly, the procedure 
for updating the statutory minimum wage resumed and is expected to be completed by end-
July and the long-awaited Labour Code reform has been put into public consultation and is 
planned to be submitted to Parliament during the first week of June, bringing in a significant 
modernisation  of  labour  legislation  and  opening  the  way  to  its  codification,  which  is  a 
specific  commitment.  Finally,  judiciary  reforms  saw  some  welcome  progress  with  the 
adoption  of  the  Code  of  Judicial  Staff  and  the  secondary  legislation  for  the  ‘JustStat’  unit, 
while  work  on  other  important  laws  and  the  setting  up  of  special  chambers  will  continue. 
There is good momentum on the digitalisation of judiciary but the much delayed introduction 
of  mandatory  e-filing  is  progressing  only  in  administrative  courts,  as  its  implementation  in 
civil  and  criminal  courts  is  linked  to  the  development  of  the  second  phase  of  the  case 
management system, the tender for which will be relaunched – with a broadened scope – in 
July  2021.  The  European  institutions  encouraged  the  authorities  to  support  e-filing  in  civil 
and criminal courts on an optional basis.  

Despite  the  substantial  progress  on  the  insolvency  legislation,  the  pandemic-related 
disruptions  to  court  proceedings  continued  to  weigh  on  the  implementation  of  other 
reforms  in  the  financial  sector  in  the  first  quarter  of  2021  but  the  processes  are 
gradually restarting. This is in particular the case for the processing of the backlog of earlier 
household  insolvency  cases.  While  a  specific  roadmap  is  being  implemented  for  the 
processing to accelerate, the full clearance is now likely to be delayed beyond the end-2021 
target. The horizontal suspension of enforcement proceedings, including auctions, which had 
been in place since November 2020 and was assessed as having a potential adverse effect on 
the reduction of non-performing loans, was lifted at the beginning of April 2021, allowing for 
a  gradual  restart  of  all  enforcement  steps.  Most  auctions  will  be  rescheduled  for  after  the 
summer,  thus  limiting  the  total  number  of  auctions  to  be  conducted  in  2021  to  below  pre-
pandemic levels. The authorities are also preparing further steps to facilitate compliance with 
the  measures  passed  in  December  2020  to  improve  the  conduct  of  auctions  and  confirmed 
that  the  revised  Code  of  Civil  Procedure,  which  will  among  others  complete  the  auctions 
reform, will be adopted in July 2021 and enter into force before the start of the next judicial 
year after the summer. The pandemic has continued to hamper progress on the clearance of 
called state guarantees but the measures that have already been put in place are expected to 
allow for an acceleration in the second quarter of the year. 

Overall, this report concludes that Greece has taken the necessary actions to achieve its 
due  specific  commitments,  despite  the  challenging  circumstances  caused  by  the 
pandemic. The authorities delivered on a number of fundamental  reforms, including in  the 
areas  that  will  be  key  to  managing  the  long-run  repercussions  from  the  current  economic 
crisis and strengthening the capacity of the public administration to successfully implement 
the  Recovery  and  Resilience  Plan.  The  European  institutions  welcome  the  close  and 
constructive engagement in all areas and encourage the authorities to keep up the momentum 
and,  where  necessary,  reinforce  the  efforts  to  remedy  the  delays  partly  caused  by  the 
pandemic, in particular as concerns the financial sector reforms. 

MACROECONOMIC DEVELOPMENTS 

The impact of the coronavirus pandemic marked the course for the Greek economy in 
2020.  Greece’s  gross  domestic  product  contracted  by  8.2%  on  an  annual  basis  in  2020, 
reflecting the impact of the containment measures on economic activity and especially on the 

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tourism  sector.  Despite  the  tightening  of  restrictions  to  limit  the  spread  of  the  pandemic 
during the last quarter of the year, the Greek economy recorded a marked growth of 2.7% on 
a  quarterly  basis,  reflecting  higher  government  expenditure  and  a  strong  upswing  in  net 
exports.  Consumer  prices  fell,  mostly  on  account  of  the  strong  deflationary  pressures  from 
energy prices and the slack in the economy. 

Employment  support  measures  managed  to  protect  the  labour  market  by  keeping  the 
unemployment  rate  at  16.3%  in  2020  despite  the  large  economic  disruption  brought 
about by the pandemic. At the same time, employment decreased compared to a year ago on 
the back of a lower number of newly hired workers primarily in the tourism sector. The main 
scheme  protecting  the  labour  market  was  put  in  place  already  in  early  2020  and  supports 
workers  whose  labour  contracts  have  been  temporarily  suspended,  while  protecting  their 
positions. In March 2021, the number of employees under labour contract suspension reached 
547 000 (in 128 400 enterprises), which is more than three times as much as in October 2020, 
when the second wave of the pandemic started in Greece. Similarly, the employment subsidy 
programme  that  was  launched  in  October  2020  has  so  far  provided  employment  to  nearly 
30 000 persons, of which 4 600 were previously long-term unemployed. The short-time work 
scheme  (‘Synergasia’),  supported  by  the  financing  instrument  for  temporary  Support  to 
mitigate  Unemployment  Risks  in  an  Emergency  (SURE),  continued  to  provide  support  to 
about 17 000 employees in 1 600 enterprises in February 2021.  

The pace of recovery in the short run is likely to be somewhat slower than previously 
forecast, due to the prolongation of the containment measures, but the expected launch 
of the implementation of the Recovery and Resilience Plan is set to boost growth going 
forward. The tightened containment measures are expected to weigh on the pace of recovery 
in  the  first  quarter  of  2021.  However,  the  steady  progress  in  vaccinations  and  the  gradual 
reopening of the tourism sector are likely to accelerate economic activity in the second half of 
the year. According to the Commission 2021 spring forecast, real GDP in Greece is forecast 
to grow by 4.1% in 2021 and 6.0% in 2022, driven mainly by investments from the second 
half  of  2021  onwards.  Net  exports  are  also  expected  to  provide  a  positive  contribution, 
supported by the gradual reopening of the tourism sector. Private consumption is likely to be 
supported  by  the  realisation  of  part  of  the  purchases  delayed  from  the  previous  year.  The 
expected  increase  in  household  spending,  and  the  ensuing  recovery  in  the  more  labour-
intensive  services  sector,  should  also  facilitate  the  return  of  workers  currently  under 
employment  support  schemes  to  regular  employment,  allowing  for  a  gradual  easing  of  the 
support  measures.  Inflation  is  forecast  to  remain  mildly  negative  in  2021,  on  account  of 
negative price pressure from the services sector and weak demand for industrial goods.  For 
2022, consumer prices are expected to slowly recover as the economic activity returns to its 
pre-pandemic levels and tourism activity gradually recovers. 

The Commission 2021 spring forecast factors  in the reforms and investments included 
in  the  Recovery  and  Resilience  Plan.  The  Plan  includes  a  number  of  mature  investment 
projects,  notably  in  the  areas  of  green  transformation,  digital  transition,  sustainable  and 
inclusive  growth  as  well  as  other  growth-enhancing  expenditures,  the  implementation  of 
which is expected to get quickly underway in the second half of 2021. By fostering the green 
and digital transformation of Greece, these investments are likely to provide a strong impetus 
to recovery, and lift growth by around 1.3 percentage points on average in 2021 and 2022. As 
well  as  improving  competitiveness  and  productivity,  the  Plan  also  aims  to  promote 
employment and an inclusive recovery. 

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Uncertainty  regarding  the  outlook  remains  high.  Despite  the  progressing  vaccination 
campaign,  the  evolution  of  the  pandemic  at  both  domestic  and  international  level  remains 
subject  to  substantial  uncertainty.  This  has  repercussions  for  tourism  and  tourism-related 
sectors such as the hospitality sector and the provision of food and services, which represent a 
relatively large share of the Greek economy. Uncertainty also concerns the speed of recovery 
of  the  corporate  and  the  banking  sector  after  the  phasing  out  of  support  measures,  which 
could create pressure for firms’ liquidity and possibly solvency. The cliff effects are expected 
to be mitigated by a recent subsidy scheme supporting business loans. Impediments to access 
to finance in particular for small and medium-sized enterprises persist but are expected to be 
eased through measures presented in the Recovery and Resilience Plan. The developments on 
the  labour  market  in  the  short  run  will  crucially  depend  on  the  phasing  out  of  the  labour 
market support measures, which will need to be carefully managed. The external geopolitical 
factors  and  the  potential  resurgence  of  the  migration  crisis  once  the  pandemic  subsides 
remain a source of uncertainty. On the upside, the savings accumulated during the pandemic 
could  boost  spending  going  forward.  Turning  to  inflation,  the  uncertainty  surrounding  the 
economic outlook implies downside risks to the projected path. 

Table .1: 

Summary of main macroeconomic variables (%) 

Source: European Commission 

FISCAL DEVELOPMENTS 

Greece’s primary deficit monitored under enhanced surveillance reached 7.5% of GDP 
in 2020. The deterioration compared to the Commission’s 2020 autumn forecast is explained 
by  the  additional  measures  taken  by  the  government  to  address  the  second  wave  of  the 
pandemic  in  the  last  months  of  2020.  Furthermore,  several  statistical  issues  have  been 
clarified  by  Eurostat,  which  contributed  to  the  lower  fiscal  balance.  The  most  notable 
statistical revision is the decision to accrue all the expected clearance cost of the backlog of 
state guarantees to 2020. This revision added 1.2% of GDP to the 2020 deficit, while having 
no impact on the debt level of the general government. Another important decision taken by 
the statistical authorities concerned the fiscal recording of the claw-back mechanism. Due to 
the  constantly  accumulating  stock  of  uncollected  claw-backs,  the  statistical  authorities 
decided to abandon the previous practice of recording, whereby the accrual expenditure was 
defined by the claw-back ceilings, and to record all claw-backs and rebates when they would 
actually  be  collected  or  offset.  For  2020,  this  change  is  estimated  to  have  had  a  balance-
deteriorating impact of 0.3% of GDP, while the past fiscal balances between 2012 and 2019 
have  deteriorated  by  0.2%  of  GDP  on  average,  with  no  impact  on  the  level  of  general 
government debt. 

Fiscal  policy  will  remain  accommodative  in  2021  and  most  of  the  fiscal  measures 
adopted to mitigate the social and economic costs of the crisis are expected to be phased 
out  in  2022.  The  authorities  sustain  the  support  to  address  the  pandemic  in  2021  by 
prolonging earlier measures in  response to  the third wave of the infections. This  includes a 

7 

202020212022Real GDP growth-8.24.16.0Employment growth-1.30.40.7Unemployment rate16.316.316.1Harmonized index of consumer prices growth-1.3-0.20.6 
 
 
  
 
further  increase  in  the  envelope  of  the  ‘repayable  advance  payments’  (public  support  to 
companies  affected  by  the  pandemic,  distributed  in  the  form  of  loans  with  a  conditional 
subsidy component), increased fiscal support related to employees whose labour contract has 
been  suspended,  increased  health  care  expenditures  and  prolonged  tax  deferrals.  Under  the 
current  assumption  of  the  gradual  easing  of  the  lock-down,  most  measures  targeted  to 
companies  and  households  who  have  been  directly  hit  by  the  pandemic  are  expected  to  be 
discontinued from 2022.  

Further measures are envisaged to continue to provide support to the recovery in 2022, 
including a much needed relief to the tax burden of corporates. The reduced rate of social 
security contributions and the reduction of the social solidarity tax in the private sector will 
remain  in  place  also  in  2022.  The  authorities  also  decided  to  reduce  the  rate  of  advance 
payment of corporate income tax from 100% to 70% in 2021 and to maintain it at 80% from 
2022  onwards.  This  measure  aims  to  safeguard  liquidity  and  private  investments  as  firms 
would  otherwise  face  a  nearly  50%  effective  tax  rate  when  turning  profitable (8),  which 
would pose a major risk for private investments. Furthermore, the corporate income tax will 
be reduced by two percentage points to 22% from the 2021 tax year onwards. This measure 
has a minor negative permanent impact on public finances of about 0.1% of GDP, but it is a 
step in the right direction in addressing the high tax burden on corporates, which has been a 
long standing concern (9). The impact of this measure will be offset by a permanent increase 
in the revenues of the Renewable Energy Source account applied from 2021 onwards, most 
notably from greenhouse gas emission allowances and the introduction of a green fee on the 
consumption of diesel. 

The Commission 2021 spring forecast expects that the primary deficit monitored under 
enhanced surveillance will reach 7.3% of GDP in 2021 and 0.5% of GDP in 2022, which 
is closely aligned with the projection of the authorities (10). This projection factors in the 
gradual  expiry  of  the  fiscal  support  measures  and  the  expected  economic  recovery.  It  also 
includes the cost of the ‘repayable advance payments’ (public support to companies affected 
by  the  pandemic  distributed  in  the  form  of  loans  with  a  conditional  subsidy  component). 
Provisions for the guarantees provided in the context of the pandemic have been recorded in 

(8)  In Greece, firms pay advances on the corporate income tax based on their profits of the previous year, with 
clearance made in the following year, once profits have become known. This means that if a company makes 
a profit in year T-1 for the first time, then in year T it will be liable to pay a 24% advance on the tax that will 
be  due  for  year  T  and  a  24%  corporate  income  tax  on  the  profit  made  in  T-1  through  the  clearance 
mechanism as no advances have been paid in the previous year. This adds up to an effective tax rate of 48% 
in year T. 

(9)  See the 2nd enhanced surveillance report (February 2019) for an analysis of the tax burden. 
(10) The  General  Escape  Clause  was  activated  in  agreement  between  the  European  Commission  and  the 
European Council in March 2020 and remains active in 2021 as indicated in the Annual Sustainable Growth 
Strategy  2021.  The  General  Escape  Clause  allows  for  a  temporary  departure  from  the  budgetary 
requirements,  including  Greece’s  fiscal  targets  monitored  under  enhanced  surveillance,  provided  that  this 
does  not  endanger  fiscal  sustainability  in  the  medium  term.  In  March  2021,  the  Commission  adopted  a 
Communication suggesting that Member States with high debt levels as Greece should pursue prudent fiscal 
policies  in  2022,  while  preserving  nationally-financed  investment  and  making  use  of  grants  under  the 
Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. 
On  the  basis  of  the  Commission’s  2021  spring  forecast,  on  2 June  the  Commission  considered  that  the 
conditions for the continued application of the general escape clause in 2022 and its deactivation as of 2023 
are  met.  Country-specific  situations  will  continue  to  be  taken  into  account  after  the  deactivation  of  the 
general escape clause. See ‘Communication from the Commission on Economic policy coordination in 2021: 
overcoming  COVID-19,  supporting  the  recovery  and  modernising  our  economy’,  Brussels,  2.6.2021, 
COM(2021)500 final. 

8 

 
 
                                                           
2020. By contrast, the guarantees provided in the context of the Hercules scheme may affect 
the  fiscal  balance  only  in  the  future,  if  and  when  they  are  called.  The  Commission  spring 
forecast takes into account the large-scale financial support from growth-enhancing reforms 
and investments  included in  Greece’s Recovery  and Resilience Plan, which are expected to 
provide  a  substantial  support  to  the  economy  and  boost  potential  growth.  This  will  in  turn 
facilitate  achieving  prudent  fiscal  positions.  The  authorities’  2021  Stability  Programme 
projects the primary deficit to reach 7.2% of GDP in 2021 and 0.3% of GDP in 2022. 

Table .2:  Main drivers of the fiscal projection 

Source: European Commission 

The authorities adopted secondary legislation that sets out the criteria for the re-entry 
to  the  tax  settlement  scheme  for  tax  liabilities  which  were  interrupted  before  the 
pandemic. This legislation is part of arrangements agreed in the context of the 8th enhanced 
surveillance report and operationalises a ‘second chance’ for those who had dropped out from 
earlier settlement schemes after the November 2019 revision of the framework. It introduces 
wealth,  income  loss  and  strict  compliance  criteria,  which  is  a  welcome  novelty  to  the 
framework. 

Fiscal  risks  remain  substantial.  For  the  large  part,  they  continue  to  be  driven  by  the 
uncertainty surrounding  the evolution  of the pandemic and further fiscal  support that might 
become necessary to mitigate the social and economic cost of the health crisis. Further risks 
are related to the actual cost of the state guarantees and repayable advances extended during 
the  pandemic.  The  planned  sale  and  lease-back  scheme  for  properties  owned  by  vulnerable 
debtors  may  carry  substantial  fiscal  costs  if  it  is  classified  into  the  general  government 
sector (11).  The  risks  stemming  from  the  litigation  cases  against  the  Public  Real  Estate 

(11)  Depending on the degree of economic freedom and ownership under which such an organisation operates, it 
can be considered to be part of the general government or not. If an overwhelming majority of its operating 
conditions  is  defined  by  the  state  in  a  way  that  limits  its  discretion  over  important  parameters,  it  may  be 

9 

202020212022Act.Proj. Proj. Total revenues, bn EUR82.984.690.0% of GDP50.049.248.9levelTotal revenues, bn EUR82.91.75.5Macro1.03.0Revenue measures-2.11.2Non-tax revenues and claims on EU funds0.50.9Other adjustments 2.20.4Total  primary expenditures, bn EUR95.397.190.9% of GDP57.556.549.4levelTotal primary expenditures, bn EUR95.31.8-6.2Compensation of employees22.30.40.2Social transfers39.50.9-0.3Investments5.23.82.0Intermediate consumption8.71.3-0.5Other expenditure and reserve19.8-4.6-7.5Primary balance in enhanced surveillance terms, bn EUR-12.4-12.6-0.9% of GDP-7.5-7.3-0.5y-o-y change (bn EUR)y-o-y change (bn EUR) 
 
 
  
 
                                                           
 
Company (ETAD) and the ongoing legal challenges against earlier reforms, as described in 
previous reports, remain considerable. A resurgence in migration flows would deteriorate the 
fiscal balance going forward. Finally, the forecast assumes a full execution of budget ceilings, 
which,  if  not  achieved,  would  improve  the  fiscal  outturn  at  the  cost  of  reducing  the 
contribution of public expenditures to growth. 

SOVEREIGN FINANCING 

The  sovereign  yield  spreads  have  been  stable  since  February  2021,  at  around  60 basis 
points on the five year tenure. The favourable financing conditions continue to be supported 
also  by  the  European  Central  Bank’s  accommodative  monetary  policy  stance,  including  its 
Pandemic  Emergency  Purchase  Programme.  Greece  maintained  its  presence  on  the  bond 
markets  and  carried  on  with  implementing  its  funding  plan.  In  March,  €2.5  billion  were 
raised through the issuance of a 30-year government bond with a  yield just below 2%. The 
auction was more than 10-times oversubscribed, and it was the first 30-year Greek sovereign 
bond issued since 2007. Also in March, Greece carried out the partial early-repayment of the 
International Monetary Fund loans, which is a welcome step that helps to reduce the foreign 
exchange  risk  and  sends  the  right  signal  to  the  markets.  The  remaining  amount  of  loans 
outstanding  towards  the  International  Monetary  Fund  is  €1.8  billion.  The  general 
government’s  cash  reserves  stood  at  around  €28  billion  at  the  end  of  March  2021,  which 
would be sufficient to cover the financing needs of the general government for more than a 
year under the current fiscal projections. In April 2021, Standard & Poor’s upgraded Greece’s 
sovereign credit rating by one notch from  BB- to BB while maintaining  a positive outlook. 
With  this  update,  Greece’s  sovereign  rating  is  only  two  notches  below  investment  grade  at 
two rating agencies. 

DEBT SUSTAINABILITY ANALYSIS 

An update of the debt sustainability analysis has been carried out following the updated 
macroeconomic  and  fiscal  outlook  in  the  Commission  2021  spring  forecast.  The 
methodology was published in  the 8th enhanced  surveillance report. The  framework closely 
follows  the  Commission  Debt  Sustainability  Monitor’s  framework  and  considers  additional 
alternative scenarios. The forward rates used for the interest rate assumptions are as of end-
March 2021.  

The protracted pandemic increased fiscal sustainability risks, which are partly offset by 
the  expected  economic  recovery.  The  results  of  the  analysis  show  that  in  the  baseline 
scenario,  the  debt-to-GDP  ratio  remains  on  a  downward  path  from  2021  onwards.  Debt  is 
projected  to  reach  169%  by  the  end  of  the  decade,  and  to  decline  below  100%  of  GDP  by 
2047 in the baseline scenario. 

The  assessment  takes  into  account  the  expected  positive  impact  of  the  Recovery  and 
Resilience  Facility  on  growth  in  the  coming  six  years.  It  is  based  on  the  information 
provided  in  the  Recovery  and  Resilience  Plan  and  reflected  in  the  assumptions  used  in  the 
Commission’s  spring  forecast,  and  is  without  prejudice  to  the  formal  assessment  of  the 
Recovery and Resilience Plan being conducted by the Commission. The measures presented 
in the Recovery and Resilience Facility are expected to have a multiplier effect of 0.8 on real 

classified to be part of the general government. In this case the purchases made by this organisation would 
be considered government expenditure. 

10 

 
 
                                                                                                                                                                                     
GDP on average between 2021 and 2026. While this has a long-term impact on GDP levels, 
this debt  sustainability analysis does not  factor in  for any potential long-term  impact  of the 
Recovery  and  Resilience  Facility  on  potential  GDP  growth  beyond  2026.  In  terms  of 
financing, 13% of the total envelope is expected to be disbursed in 2021 as pre-financing. For 
the loans, the calculations are based on the government’s plan to on-lend the whole amount to 
the private sector, in the form of co-financing, with maturities matching that of the Recovery 
and Resilience Facility loans. This leads to an increase in gross financing needs in the short 
term, but has no impact on the nominal debt levels in the long term, as the repayment of loans 
by the private sector to the government is assumed to provide the necessary financing for the 
repayment  of  the  government’s  loan  to  the  EU.  The  current  simulations  do  not  take  into 
account any possible impacts on the fiscal balance from the loan element of the Facility (save 
for second round effects). 

Graph .1:  Results of the debt sustainability analysis 

Source: Commission services 

Table .3:  Main assumptions and results 

Source: Commission services 

Gross financing needs remain elevated in the short term mainly due to the high primary 
deficit.  The  implementation  of  the  Loan  Facility  presented  in  the  Recovery  and  Resilience 
Plan is expected to contribute to the higher gross financing needs in 2021-2022, although this 
additional  financing  need  is  covered  by  the  assumed  disbursement  of  the  Recovery  and 
Resilience Facility loan. In the following years, financing needs are expected to be moderate 
and  remain  below  15%  of  GDP  until  2030.  Following  a  period  of  elevated  gross  financing 
needs  in  2030s,  linked  to  the  start  of  repayments  of  loans  extended  under  the  European 
Stability  Mechanism  programme  and  to  the  expiry  of  the  interest  deferral  period  of  the 
European Financial Stability Facility loans, they are expected to remain on a declining path 
and reach 13% of GDP by 2060.  

11 

04080120160200240202020222024202620282030203220342036203820402042204420462048205020522054205620582060Gross government debtLow growth scenarioHigher risk premium scenarioBaseline scenario8th report baseline scenario051015202530202020222024202620282030203220342036203820402042204420462048205020522054205620582060Gross financing needsLow growth scenarioHigher risk premium scenarioBaseline scenario8th report baseline scenario20212022202320242030204020502060average 2021-2029average 2030-2060Primary balance (% of GDP)-7.3-0.52.22.22.22.22.22.20.82.2Real GDP growth4.16.02.41.70.71.71.61.52.01.5Nominal GDP growth3.86.73.22.52.83.83.63.52.93.5Re-financing rate (10 year maturity)0.81.01.11.32.33.14.04.01.53.4Gross financing needs (% of GDP)22.617.413.511.114.315.615.213.2Gross goverment debt (% of GDP)208.1200.1194.9191.6168.8124.888.365.4AssumptionsResults 
 
  
 
 
  
 
Table .4:  Main assumptions of the scenarios 

Source: Commission services 

The  alternative  scenarios  indicate  slightly  increased  sustainability  risks.  The  two 
alternative  scenarios  developed  in  the  8th  enhanced  surveillance  report  have  also  been 
updated. Under the ‘higher risk premium’ scenario, the debt  trajectory is overall higher but 
remains decreasing throughout the period under assessment. Gross financing needs are higher 
in the long run and marginally exceed 20% of GDP in the final years of the projection. In the 
‘low growth’ scenario, debt levels remain high in the long run and gross financing needs are 
rising throughout the horizon, permanently surpassing 20% of GDP from the mid-2040s. 

The composition and maturity profile of government debt mitigates debt vulnerabilities, 
while  additional  risks  could  emerge  from  contingent  liabilities.  A  large  share  of  debt  is 
financed  at  low  rates  with  long  maturities,  which,  along  with  the  high  cash  reserves  of  the 
Greek  general  government,  effectively  cushions  the  impact  of  short-term  fluctuations  in 
financing  costs.  The  debt  sustainability  analysis  presented  in  this  report  does  not  take  into 
account  the  long-term  growth  impact  of  the  reforms  and  investments  presented  in  the 
Recovery  and  Resilience  Plan,  which  may  further  mitigate  sustainability  risks.  By  contrast, 
there  are  risks  stemming  from  the  uncertainty  related  to  contingent  liabilities  vis-à-vis  the 
private sector, including  the state  guarantees  granted to firms  and self-employed during the 
pandemic  or  in  the  context  of  the  Hercules  scheme.  Finally,  a  reversal  in  the  currently 
prevailing low-interest environment over the medium-term would also increase sustainability 
risks, if it materialises. 

FINANCIAL SECTOR DEVELOPMENTS 

Bank  profitability  in  2020  benefitted  from  extraordinary  trading  gains  and  low 
financing costs. At the same time, some banks have frontloaded provisioning linked to 
the impact of the pandemic and upcoming securitisations. The banks registered positive 
trading  gains  in  their  government  bond  portfolios  and  a  lower  cost  of  funding,  thanks  to 
ample  Eurosystem  liquidity  and  the  shrinking  costs  of  retail  deposits.  At  the  same  time, 
impairments were increased to cater for higher provisioning needs due to the pandemic and to 
anticipate  the  planned  securitization  transactions  of  non-performing  loans  in  2021.  In 
addition,  one  systemic  bank  had  to  account  for  the  incurred  losses  within  a  securitisation 
transaction  implemented  by  the  end  of  2020.  On  the  positive  side,  banks  have  contained 
operating  costs  thanks  to  the  implementation  of  voluntary  staff  exit  schemes.  Overall,  the 
banking system as a whole posted losses after taxes in 2020, while avoiding the triggering of 
deferred tax credits following earlier corporate transformations (the ‘hive-downs’). The low-
interest-rate environment and uncertainty about the economic outlook weigh on the prospects 
for  2021.  Low  interest  rates  should  continue  to  support  economic  activity  but  will  also  put 
further  pressure  on  net  interest  margins,  especially  after  the  expected  clean  up  of  balance 
sheets. This could be counterbalanced through new loan activity, increased fees from digital 
services,  wealth  management  and  bank  insurance  business  and  initiatives  to  reduce  costs. 
Impairments  could  normalise  due  to  stronger  balance  sheets,  subject  to  the  success  of  non-
performing loan reduction efforts.  

12 

20212022202320242030204020502060average 2021-2029average 2030-2060Baseline scenario3.86.73.22.52.83.83.63.52.93.5Higher risk premium scenario3.86.73.22.52.83.83.63.52.93.5Low growth scenario3.86.73.22.52.83.03.03.02.93.0Baseline scenario0.81.01.11.32.33.14.04.01.53.4Higher risk premium scenario0.81.01.11.34.04.75.96.02.35.2Low growth scenario0.81.01.11.34.04.75.96.02.35.2Nominal GDP growth (%)Re-financing rate (%) 
 
 
  
 
The capital position of the banking system as a whole is broadly adequate but it remains 
challenged by low profitability and poor asset quality, while the sovereign bank nexus 
has become stronger. Banks’ average Common Equity Tier 1 and Total Capital ratios stood, 
on a consolidated basis, at 14.6% and 16.3% of risk-weighted assets, respectively, at the end 
of September 2020. Although banks are taking a series of capital enhancing actions to cover 
the  cost  of  upcoming  non-performing  loan  securitisations  and  the  gradual  phasing  out  of 
transitional prudential arrangements, the subdued profitability levels may pose challenges for 
the  banks’  capital  position  going  forward.  Moreover,  this  may  lead  to  a  rise  in  the  already 
high share of deferred tax credits in banks’ capital (59% of Common Equity Tier 1 capital as 
of  end-2020).  The  large  share  of  deferred  tax  credits,  the  banks’  increasing  domestic 
government  bond  holdings,  the  equity  stakes  held  by  the  state  in  the  sector  and  the  state 
guarantees under the Hercules scheme imply a stronger sovereign-bank nexus that will need 
to be monitored closely going forward. On the positive side, the first share capital increase by 
a systemic bank since 2015 was successfully concluded in April 2021, raising €1.38 billion. 
In the medium-term, in line with the EU banking regulatory framework, Greek banks, like all 
EU  banks,  will  also  have  to  issue  substantial  amounts  of  bail-in-able  debt  in  the  following 
years  in  order  to  meet  the  minimum  requirement  for  own  funds  and  eligible  liabilities 
(MREL), which could put upward pressure on their cost of long-term unsecured funding. 

The  extension  of  the  Hercules  scheme  is  expected  to  facilitate  an  acceleration  in  the 
reduction  of  non-performing  loans  in  2021,  mainly  through  inorganic  actions (12), 
building on the strong performance of the previous year. Sales and securitisations of non-
performing  loan  portfolios  under  the  Hercules  scheme  were  the  main  driver  behind  a 
substantial fall by €21.1 billion in the stock of non-performing loans in 2020, reaching €47.5 
billion on a solo basis, following a strong fourth quarter performance. As a result, the non-
performing loans ratio came down significantly to 30.2% (13), remaining however the highest 
in the euro area. The continuous improvement in 2020, despite the pandemic and the resulting 
drop in the number of cured loans, has been supported by historically low default rates thanks 
to  the  moratoria  and  the  state  support  measures  in  place.  The  recent  prolongation  of  the 
Hercules  asset  protection  scheme  for  an  additional  18  months,  coupled  with  additional 
€12 billion  bringing  the  schemes’  overall  envelope  of  state  guarantees  to  €24  billion,  is 
expected  to  allow  Greek  banks  to  further  implement  their  non-performing  loan  reduction 
strategies,  in  an  effort  to  reach  single  digit  non-performing  loan  ratios  in  2022 (14).  The 
success of these ambitious reduction plans is contingent on a number of factors, such as the 
scale  of  new  non-performing  loan  inflows,  future  economic  growth  and  overall  market 
conditions.  The  authorities  are  assessing  whether  an  additional  amendment  in  the  relevant 
implementing  law  of  the  Hercules  scheme  is  required  to  reflect  the  adverse  impact  of  the 

(12) Inorganic  actions  refer  to  sales  and  securitisations  of  non-performing  loans.  Organic  actions  refer  to  the 

internal restructuring or collateral liquidation of non-performing loans. 

(13) Source: Bank of Greece.  
(14) Three transactions under the original Hercules scheme involving a total of €17.6 billion of non-performing 
loans,  have  been  signed  and  will  be  concluded  within  the  first  half  of  2021,  with  one  more  close  to 
completion  for a loan portfolio of €6 billion. In addition, an additional four transactions, corresponding to 
€16.3 billion  worth of securitisations  have  been announced and are expected to be concluded between the 
fourth quarter of 2021 and the second quarter of 2022, taking advantage of the recent extension. 

13 

 
 
                                                           
pandemic on recoveries (15). The Commission has approved the measure as being free of any 
State aid. 

Initial signs of payment behaviour following the expiry of the moratoria suggest that the 
adverse impact on asset quality may be broadly in line with banks’ original expectations 
but downside risks remain. Most moratoria expired at the end of 2020, with some limited 
exceptions, particularly linked to the hospitality sector. The initial results from the first two 
months  of  2021  suggest  that  the  number  of  potential  defaults  may  not  exceed  the  original 
estimate  incorporated  in  the  banks’  business  plans  or  the  lower  end  of  Bank  of  Greece’s 
current projections. The smooth transition to a normal payment pattern for borrowers is also 
supported  by  a)  the  temporary  instalment  subsidy  scheme  set  up  by  the  authorities  for 
coronavirus-affected  debtors  with  primary  residence  loans  (the  “Gefyra”  scheme)  and  b)  a 
series  of  step-up  products  offered  by  the  banks  to  viable  customers  facing  temporary 
difficulties. A similar scheme to Gefyra, targeting business loans of small and medium-sized 
firms and professionals, has also been adopted recently and will contribute to mitigating any 
cliff effect from the expiry of the moratoria. However, downside risks persist as part of the 
adverse impact  on asset quality may spill-over to the second half of 2021 or early 2022, in 
particular following the lifting of various state support programmes. This could imply higher 
provisioning  needs  than  those  booked  so  far  to  fully  capture  the  eventual  impact  of  the 
pandemic  on  the  loan  book.  Moreover,  the  material  flow  of  new  bad  loans,  under  any 
scenario, still points to the need for an improved internal capacity by banks for viable long-
term loan restructurings to meet the ambitious non-performing loan reduction targets.  

The  Hellenic  Development  Bank  continues  to  support  credit,  not  only  with  measures 
related  to  the  pandemic  but  also  with  new  initiatives  planned  for  2021.  The  Covid-19 
enterprise guarantee fund has managed to provide €5.4 billion in loans by the end of March, 
while  the  launch  of  a  new  call  towards  small  business  and  professionals  is  expected  to 
leverage additional €0.4 billion in new loans. Under TEPIX II almost €2.6 billion loans have 
been  granted  until  the  end  of  March.  Moreover,  discussions  are  under  way  to  implement 
additional  schemes  during  the  course  of  the  year  with  a  focus  on  small  and  medium  sized 
enterprises.  The  positive  impact  of  these  support  programs  has  bolstered  net  credit  to  non-
financial  corporations,  which  continued  to  show  record  12-month  growth  rates,  reaching 
10.3% in February 2021, with higher rates for large corporates than for small and medium-
sized enterprises. However, the future phase-out of state support measures may affect banks’ 
capacity  to  maintain  such  levels  of  credit  growth  in  the  future.  The  cost  of  credit  to  non-
financial  corporations  remained  stable  at  historically  low  levels  as  regards  large  corporates 
while small rises were observed for smaller firms, reflecting increased credit risk. Net credit 
to households continues to show a stable negative 12-month growth rate (-2.5% in February 
2021), despite a decline in bank lending rates for this type of credit. 

The  Hellenic  Financial  Stability  Fund  has  completed  its  3rd  corporate  governance 
evaluation  of  the  boards  of  the  four  systemic  banks.  This  will  be  followed  by  a  list  of 
recommendations towards the banks. At the same time, a recently adopted amendment of its 
governing  law  allows  the  Fund  to  participate  as  a  private  investor  in  future  share  capital 
increases of the banks where it maintains a shareholding, starting with the recently concluded 
share capital increase in one of the systemic banks. Other key aspects, including the lifetime 

(15) The suspension of enforcement measures during the pandemic has affected the ability of servicers to recover 
on their credits. The authorities are assessing if some flexibility could be provided, given that the legislative 
framework foresees measures in case recoveries fall short of the business plans’ projections.  

14 

 
 
                                                           
of the Fund, governance, special rights, the divestment strategy and board eligibility criteria 
for banks, are expected to be addressed jointly by October 2021. 

15