C 312/70
EN
Official Journal of the European Union
1.9.2023
(12)
The Commission carried out an in-depth review under Article 5 of Regulation (EU) No 1176/2011 for Greece and published its results on 24 May 2023.
The Commission concluded that Greece is experiencing excessive macro­ economic imbalances.
In particular, vulnerabilities relating to high government debt and a high stock of nonperforming loans in the context of high unemployment have been receding, but its external position has deteriorated.
A key concern is that the current account deficit markedly widened in 2022, also due to the Union-wide sharp rise in energy prices, despite the recovery in tourism revenue.
Even though it is forecast to narrow this year and next, the external deficit is set to stay well above the level that is required to ensure a lasting improvement in the net international investment position.
While the government debt-to-GDP ratio remains the highest in the Union, it improved markedly in 2022, largely thanks to strong nominal GDP growth, and it is expected to recede further in 2023 and 2024.
Non-performing loans recorded a sharp fall last year building on large reductions in earlier years, yet remain high relative to the Union average, and continue to weigh on banks' profitability and lending capacity, which in turn impinges on the capital deepening and on the productivity growth of the economy.
The policy response has contributed to the unwinding of imbalances and the imple­ mentation of the recovery and resilience plan represents a major opportunity to tackle remaining structural weaknesses.
Yet more efforts are needed, in particular to ensure that external balances are put on a firmly improving path, and that non-performing loans decline further including through increasing the effectiveness of debt enforcement and improving the secondary non-performing loans market.
(13)
According to data validated by Eurostat, Greece's general government deficit decreased from 7,1 % of GDP in 2021 to 2,3 % in 2022, while general government debt fell from 194,6 % of GDP at the end of 2021 to 171,3 % at the end of 2022.
(14)
The general government balance has been impacted by the fiscal policy measures taken to mitigate the economic and social impact of the increase in energy prices.
In 2022, such fiscal policy expenditure-increasing measures included electricity subsidies to households and businesses and increased social benefits to vulnerable households.
The cost of those measures was partly offset by new taxes on windfall profits of energy producers and suppliers, namely the price cap on electricity producers and the extraordinary levy on electricity producers for the period October 2021 to June 2022.
The Commission estimates the net budgetary cost of those measures at 2,5 % of GDP in 2022.
At the same time, the estimated cost of temporary emergency measures related to the COVID-19 crisis dropped to 1,5 % of GDP in 2022, from 6,5 % in 2021.
(15)
On 18 June 2021, the Council recommended that in 2022 Greece (7) use the Recovery and Resilience Facility to finance additional investment in support of the recovery, while pursuing a prudent fiscal policy.
Moreover, the Council recommended that Greece preserve nationally financed investment.
(16)
According to the Commission estimates, the fiscal stance (8) in 2022 was supportive, at ‒ 1,0 % of GDP.
As recommended by the Council, Greece continued to support the recovery with investments to be financed by the Facility.
Expenditure financed by grants under the Facility and other Union funds amounted to 2,1 % of GDP in 2022 (2,6 % of GDP in 2021).
The decrease in expenditures financed by grants under the Facility and other Union funds in 2022 was due to the phasing-out of the previous programming period while investment expenditure in the new programming period has not yet picked up.
Nationally financed investment provided an expansionary contribution of 0,6 percentage points to the fiscal stance (9).
Greece therefore preserved nationally financed investment, as recommended by the Council.
At the same time, the growth in nationally financed primary current expenditure (net of new revenue measures) provided an expansionary contribution of 0,6 percentage points to the fiscal stance.
That significant expansionary contribution included the additional impact of fiscal policy measures taken to mitigate the economic and social impact of the increase in energy prices (additional net budgetary cost of 2 % of GDP).
Greece therefore sufficiently limited the growth in nationally financed current expenditure.
(7) Council Recommendation of 18 June 2021 delivering a Council opinion on the 2021 Stability Programme of Greece (OJ C 304, 29.7.2021, p. 33).
(8) The fiscal stance is measured as the change in primary expenditure (net of discretionary revenue measures), excluding temporary emergency measures related to the COVID-19 crisis but including expenditure financed by non-repayable support (grants) from the Facility and other Union funds, relative to medium-term potential growth.
For more details see Box 1 in the Fiscal Statistical Tables.
(9) Other nationally financed capital expenditure provided a neutral contribution of 0,0 percentage points of GDP.