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Occasional Papers are written by the Staff of the Directorate-General for Economic and Financial
Affairs, or by experts working in association with them. The “Papers” are intended to increase
awareness of the technical work being done by the staff and cover a wide spectrum of subjects. Views
expressed do not necessarily reflect the official views of the European Commission. Comments and
enquiries should be addressed to:
European Commission
Directorate-General for Economic and Financial Affairs
Publications
B-1049 Brussels
Belgium
E-mail: mailto:Ecfin-Info@ec.europa.eu

Legal notice
Neither the European Commission nor any person acting on its behalf may be held responsible for the
use which may be made of the information contained in this publication, or for any errors which,
despite careful preparation and checking, may appear.

This paper exists in English only and can be downloaded from the website
ec.europa.eu/economy_finance/publications
A great deal of additional information is available on the Internet. It can be accessed through the
Europa server (ec.europa.eu )

KC-AH-12-094-EN-N
ISBN 978-92-79-22849-0
doi: 10.2765/20231

© European Union, 2012
Reproduction is authorised provided the source is acknowledged.

EUROPEAN COMMISSION
DIRECTORATE GENERAL
ECONOMIC AND FINANCIAL AFFAIRS

The Second Economic Adjustment
Programme for Greece
March 2012

OUTLINE OF THE REPORT
Executive summary

1

1.
2.
3.

Introduction
Macroeconomic developments
Financial markets and financial sector developments

5
11
17

4.

Programme implementation and policy discussions
4.1
Fiscal policy
4.2
Fiscal strategy in 2012 and subsequent years
4.3
Structural fiscal reforms
4.3.1. Privatisation
4.3.2. Revenue administration, fight against tax evasion and
tax reform
4.3.3. Expenditure control
4.3.4. Public administration, public procurement and
social programmes
4.3.5. Healthcare and pension reform
4.4
Growth-enhancing structural reforms
4.4.1. Labour market
4.4.2. Regulated professions
4.4.3. Energy and transport
4.4.4. Business environment and reforms in product and
service markets
4.4.5. Absorption of structural funds
4.4.6. Judicial reform
4.5
Fiscal financing and treasury management
4.6
Technical assistance and monitoring

21
21
24
31
31

Annex 1
Annex 2
Annex 3

Assessment of compliance with the Memorandum of
Understanding on Specific Policy Conditionality
Macroeconomic forecast
Updated programme documents

34
35
35
36
37
37
41
41
42
43
43
44
48
51
85
91

LIST OF BOXES
1. Statement by the Eurogroup: 21 February 2012

6

2. Economic Adjustment Programme and social equity

8

3. Debt sustainability assessment

27

4. Private Sector Involvement

47

LIST OF TABLES
1. Disbursements under the first financing programme

5

2. Contributions by the euro area Member States to disbursements to
Greece under the first financing programme

6

3. Member States guarantees to the EFSF

8

4. Macroeconomic scenario: main features

16

5. Ratings

18

6. Banking sector soundness indicators

19

i

7. Summary of compliance with policy conditionality

21

8. Fiscal quantitative criteria

22

9. Implementation monitoring: Estimated yield of measures agreed in
June and October 2011

23

10. Developments in public employment

24

11. Main fiscal indicators 2010-14

25

12. Deficit and measures accounting: from the deficit in one year to the
next

26

13. Privatisation plans: transactions, so far

31

14. Planned privatisation receipts

32

15. Privatisation – transactions in the pipeline

33

16. Arrears to suppliers

35

17. Minimum monthly wages

40

18. Interest rates and interest payments charged to Greece by the euro
area Member States

45

19. Planned schedule of disbursement for the new programme

46

LIST OF GRAPHS
1. Real GDP growth

11

2. Business and Consumer Surveys

12

3. Equipment

12

4. Housing investment

12

5. Market shares : Performance of Greek exports of goods and
services relative to the imports of 35 industrial countries

13

6. Exports and non-domestic industrial orders

13

7. Industrial production and capacity utilisation

13

8. HICP inflation developments and projections

14

9. HICP inflation main drivers

14

10. Employment and unemployment rate

15

11. Nominal Unit Labour Cost

15

12. Athens Stock Exchange Indices

17

13. Bank deposits

18

14. Greek banks' borrowing from the Eurosystem via monetary
policy operations

18

15. Credit to private sector

19

16. Non-performing loans

19

17. Loan to deposit ratio by bank

19

18. State primary payments - 2011

22

19. Government primary balance – 2011. Outcomes and quarterly
criteria

22
ii

20. Government revenue, expenditure and gross debt

24

21. Recourse to arbitration to settle negotiations disputes

39

22. Nominal Unit Labour Cost

39

23. Regulation of the airline industry

42

24. Outstanding stock of T-bills

44

29. T-bill auctions since July 2010

44

iii

iv

ACKNOWLEDGEMENTS

The report was prepared in the Directorate General Economic and Financial Affairs, under the
direction of Matthias Mors, director and mission chief.
Contributors:
Matthias Mors, Zeta Astra, Giuseppe Carone, Jakob E. Christensen, Fotini Dionyssopoulou,
Riccardo Ercoli, Leila Fernández Stembridge, Luis García Lombardero, Loukas Kaskarelis,
Frank Kohlenberger, Daniel Kosicki, Peter Lohmus, João Nogueira Martins, Ricardo Selves,
Irmantas Simonis, Milda Valentinaitė, Rafał Wielądek and Ana Xavier, and Markus Zalewski.
Christos Zavos was responsible for the layout.
The report was prepared in liaison with the ECB.
Comments on the report would be gratefully received and should be sent, by mail or e-mail to:
João Nogueira Martins,
European Commission,
Unit ECFIN-G-3,
BU 1 01-140,
B-1040 Brussels.
e-mail: joao.nogueiramartins@ec.europa.eu

The cut-off date for this report was 11 March 2012.

v

vi

EXECUTIVE SUMMARY
A joint Commission/ECB/IMF mission met with the Greek authorities in Athens on 17 January 9 February 2012. The mission assessed compliance with the terms and conditions of the
Economic Adjustment Programme and discussed the policy package forming the basis of a
successor programme.
Greece made mixed progress towards the ambitious objectives of the first adjustment
programme. Several factors hampered implementation: political instability, social unrest and
issues of administrative capacity and, more fundamentally, a recession that was much deeper
than previously projected. Important fiscal targets were missed, which led to the adoption of
additional consolidation measures throughout 2010 and 2011. However, Greece achieved a
substantial reduction in the general government deficit: from 15¾ per cent of GDP in 2009 to
9¼ percent in 2011. This fiscal adjustment was necessary given the extremely high deficit
reached in 2009. The adjustment is much larger than most other fiscal consolidation episodes in
EU countries observed in the past. This fiscal consolidation had to be achieved over a period in
which the economy contracted by more than 11 percent, which was unavoidable given the
substantial positive output gap that had built up due to the non-sustainable policies conducted
until 2009. The pension reform and the agreed privatisation plan were important institutional
changes which will bear fruit in the medium term. Financial stability has been supported by
exceptional Eurosystem measures that contributed to the appropriate financing of the Greek
banking system and economy. However, insufficient progress was made in modernising revenue
administration and expenditure control, and steps taken in the fight against tax evasion and the
prompt settlement of payments to suppliers have remained far too timid. In addition, while
several steps were made with regard to growth-enhancing structural reforms since May 2010,
achievements in this field were clearly not commensurate with the need to accelerate
productivity growth and restore competitiveness. On several occasions, there were legitimate
doubts about the ownership of the programme by the Greek Government. More fundamentally,
reforms adopted since spring 2010 were insufficient in restoring growth and in ensuring fiscal
sustainability, and Greece has been unable to return to the markets so far.
The programme strategy has been adjusted. Through large-scale assistance to Greece, the
international community provides Greece with financing at low interest rates, thereby
compensating for the fact that Greece is not expected to be able to return to market financing
over the next three years. Greece will need to use the additional time to underpin its fiscal
consolidation efforts with structural fiscal reforms to generate expenditure savings on a durable
basis. In a similar vein, structural reforms to boost growth will need to be accelerated to
improve competitiveness, and financial stability will need to be preserved. These objectives are
the same as under the first programme. Nonetheless, in the second programme, the
implementation of the growth-enhancing structural reform agenda gains prominence in the
overall implementation of the programme, while the debt restructuring and higher official
financing allows a slower fiscal adjustment and a more gradual privatisation process.
The economy continues to contract and short-term growth rates have been further revised
downwards. In 2011, the economy is estimated to have contracted by 6.9 percent. Negative
business and household sentiment, delays and problems in the implementation of growthenhancing reforms, difficulties in the access to credit, higher unemployment levels and
heightened political uncertainty in the autumn – when Greece's participation in the monetary
union was openly discussed – contributed to weak private consumption and an additional
contraction in investment. Moreover, the deceleration of demand in the European economies
slowed down Greek exports, which had shown dynamic growth in previous quarters. Although
the second financing programme and the completion of the sovereign debt exchange will
1

European Commission
The economic adjustment programme for Greece

contribute to reducing the uncertainties of the last months, the recession will remain severe
throughout 2012. Contraction in domestic output is currently estimated at 4¾ per cent, with
downside risks. The recovery previously announced for next year will be further delayed with,
at best, a stagnation of activity in 2013. It is only in 2014 that positive annual growth rates are
expected to return.
Greece's medium-term economic performance will crucially depend on the
implementation of structural reforms. These reforms, particularly those in the labour market,
the liberalisation of several sectors and a number of measures to improve the business
environment should help promote competition, spur productivity and employment growth and
reduce production costs. Without these reforms, improvements in competitiveness may take
long to materialise, or may be achieved only through a compression of imports and an
unemployment-driven reduction in labour costs. The medium-term projections on which the
second financing programme is based assume that the ambitious labour market reforms will be
followed by equally important structural reforms in goods and services markets. If this were not
the case, the reduction in wage and non-wage costs will translate into higher profit margins and
the medium-term growth projections between 2½ and 3 per cent over 2015-20 may prove too
optimistic.
In the short run, there is some tension between internal devaluation and fiscal
consolidation. Greece has suffered from unsustainable imbalances in both the external and the
fiscal accounts and progress on both accounts has so far been insufficient. In the coming years,
progress is necessary on both fronts. Greece has to restore competitiveness through an ambitious
internal devaluation, i.e., a reduction in prices and production costs relative to its competitors, as
well as a shift from a consumption-led to an export-led economy. Since a strong increase in
productivity takes time, an upfront reduction in nominal wage and non-wage costs is necessary.
This is unavoidable, but it complicates fiscal adjustment through the impact that the internal
devaluation has on nominal GDP and, concomitantly, on tax bases. Moreover, when recovery
takes hold, the composition of growth is expected to be less tax-rich than in previous upswings.
Fiscal targets for 2012 and subsequent years have been revised. Targets have been adjusted
to take into account the unfavourable macroeconomic developments, while ensuring that, during
the programme period, there is sufficient progress towards the objective of a 120 percent debtto-GDP ratio by 2020. The programme is anchored on the objective of reaching a primary
deficit of 1 percent of GDP in 2012 and a primary surplus of 4.5 per cent of GDP in 2014.
Taking into account the savings that result from the debt restructuring, this fiscal path is
calibrated to be consistent with the correction of the excessive deficit in 2014, as envisaged at
the inception of the first programme. The 2014 primary surplus will have to be kept at such a
high level for several years. The experience of other EU countries shows, however, that a
primary surplus of such a magnitude is not disproportionate and is socially bearable. In any
case, these targets are lower than required under the first programme.
In early 2012, the Government adopted a new package of fiscal measures. These measures
(1.5 percent of GDP) are all on the expenditure side of the budget. It is the first time since May
2010 that a re-calibration of the fiscal strategy was not accompanied by an increase in taxes,
although the programme had envisaged, from the start, a strongly expenditure-based
consolidation path. If fully implemented, the new package should allow meeting the 2012
primary deficit target.

2

Executive summary

However, current projections reveal large fiscal gaps in 2013-14. Current projections reveal
a cumulated fiscal gap in 2013-14 of 5½ percent of GDP. Therefore, substantial additional
expenditure cuts will have to be announced and adopted by Greece in the coming months, in
particular when Greece updates its medium-term budget (medium-term fiscal strategy or MTFS)
in May 2012. In order to prepare these measures, the government has launched a review of
public spending programmes. To limit the negative impact on potential growth the additional
measures need to be expenditure-based. The review is expected to focus on and contribute to
savings in social transfers, while preserving basic social protection, defence and the
restructuring of central and local administration. The reduction in public employment through
redundancies and the recruitment rule of 1 entry for 5 exits will also contribute to reducing
government expenditure.
The Government has adopted an ambitious set of labour market measures,
complementing the reforms passed in 2010 and 2011. Since the social dialogue between and
with private sector employers' and employees' representatives did not deliver a satisfactory
outcome, the Government legislated a reduction in minimum wages in the private sector and a
modification of number of wage-setting procedures, including the rules on the expiration of
collective agreements and the arbitration of wage disputes. This is part of a strategy of reducing
labour costs in the business economy by 15 per cent in three years, thereby accelerating the cuts
in labour costs already observed in the course of 2011. Other than through cuts in nominal
wages, this objective is also expected to be achieved through a reduction in non-wage labour
costs, through the elimination of non-core social benefits and the corresponding reduction in
employers' social contributions. Moreover, the government committed to take additional
corrective measures to facilitate collective bargaining and ensure wage flexibility and higher
employment.
Progress in privatisation has been slower than planned, on account of adverse market
conditions and technical and legal hurdles in the preparation of assets for sale. In the
months preceding the PSI deal, the market has shown a particularly low appetite for Greek
assets. Assuming that the launch of the second financing programme will help overcome the
negative market sentiment, the privatisation fund should be able to deliver a continuous stream
of assets for privatisation for several years. While the objective of privatising assets worth EUR
50 billion is maintained, this target will only be achieved in a horizon going well beyond 2015,
while the recapitalisation of banks will add to the pool of privatisable assets. Besides its
contribution in covering financial needs, privatisation remains crucial for re-launching growth,
modernising the economy and attracting foreign direct investment.
Greece has initiated a comprehensive strategy to recapitalise banks and to restructure the
banking sector, involving a number of supervisory and regulatory measures. Greek banks
are severely hit by the sovereign debt restructuring, against the background of a continuing
recession, thereby leading to substantial capital shortfalls for all banks. Viable banks will be
identified and adequately recapitalised, following recommendations by the supervisors and
taking into account the effects of the PSI. The new programme includes sufficient resources to
recapitalise banks, should private shareholders prove unable or unwilling to provide the
necessary capital.
The governance structure of the recapitalisation and resolution processes will be
significantly enhanced. This became necessary on account of the very substantial amount of
official financing that will be channelled through the existing Greek institutions, in particular
the Hellenic Financial Stability Fund. The recapitalisation strategy is being designed to
3

European Commission
The economic adjustment programme for Greece

maximise private sector participation, while preserving the State's interests. The banks’ shares
acquired by the State in the recapitalisation process will have limited voting rights, but may still
allow for upside returns to be shared between the State and private shareholders. Whenever
possible, the private management of banks will be safeguarded.
The scaled-up official financing and the exchange of debt held by the private sector will
improve debt sustainability prospects. In a moderately optimistic but realistic scenario, if
Greece meets the programme targets, the debt-to-GDP ratio will decline to about 117 percent in
2020. However, it will remain high for many years and, therefore, be susceptible to adverse
domestic and global developments. In particular, relatively small setbacks in terms of growth
due to a slow implementation of structural reforms or an unfavourable external context, may
adversely impact debt dynamics. Moreover, the high level and share of official debt, as well as
the de facto senior status of the bonds resulting from the co-financing structure agreed in the
context of the debt restructuring complicate Greece’s return to the markets at the end of the
second programme. Should market access not be restored at the time of the expiration of the
programme, additional official sector financing could become necessary.
_____________________
The international assistance loans disbursed so far to Greece amount to EUR 73 billion. Of
this amount, EUR 52.9 billion have been paid by the euro area Member States, and EUR 19.9
billion by the IMF. In the second programme, the EFSF and the IMF commit the undisbursed
amounts of the first programme plus additional EUR 130 billion for the years 2012-14. During
this period, the EFSF commits an overall amount of EUR 144.7 billion (including the already
committed or disbursed amounts for PSI and bank recapitalisation), while the IMF will
contribute EUR 28 billion during 4 years.
Implementation risks will remain very high. The success of the second programme depends
chiefly on Greece. It crucially hinges on the full and timely implementation of fiscal
consolidation and growth-enhancing structural reforms agreed under the programme. The
successful debt exchange should help strengthen the reform momentum and build a consensus
in favour of the difficult reforms that still lie ahead. The continuation of the very comprehensive
international financial assistance can only be expected if policy implementation improves. The
determination of the Greek authorities to stick to the agreed policies will be tested already in the
coming months when the deficit-reducing measures to close the large gap for 2013-14 need to
be identified. In a similar vein, generating sustained growth and employment will require
stronger efforts to overcome the resistance of vested interests. The implementation of structural
measures - from product and service market liberalization to business environment reforms, the
fight against tax evasion and the reduction in public employment - will have to overcome
bureaucratic delays, the resistance of lobbies and vested interests and break longstanding policy
taboos. This requires the Government's determination, enhanced political coordination, as well
as the consensus of the whole Greek Society.
The Commission services recommend the first disbursement of the second programme to
take place as soon as possible. The debt restructuring has been executed and the very
comprehensive prior actions that were necessary to bring the programme back on track were
completed. Taking this into account, compliance with the agreed policy measures under the first
programme has been sufficient, in spite of deficiencies that this report discusses.

4

1.

INTRODUCTION

1. This report discusses progress by Greece in the context of its economic adjustment programme. It
assesses compliance with previously agreed requirements and elaborates on the policies agreed between
Greece and the Commission, ECB and IMF staff teams at the moment Greece shifts to a second
programme of financial assistance. Like the first programme, financing will be provided by the euro-area
Member States and the IMF. However, the financing vehicle of the euro-area Member States will be the
EFSF, rather than bilateral loans as in the first programme. From the IMF side, financing shifts from a
stand-by arrangement (SBA) to an extended fund facility (EFF), which allows for a longer repayment
period. Progress is assessed in relation to the key objectives of securing fiscal sustainability, safeguarding
the stability of the financial system, and boosting competitiveness, potential growth and jobs, through
structural reforms. The assessment is based on the findings of the joint Commission/ECB/IMF mission to
Athens on 17 January-9 February 2012.*

Table 1. Disbursements under the first financing programme
(EUR billion)
Past disbursements
Euro-area Member States
IMF
1st tranche
18 May 2010
14.5
12 May 2010
5.5
2nd tranche
13 September 2010
6.5
14 September 2010 2.5
3rd tranche
19 January 2011
6.5
21 December 2010 2.5
4th tranche
16 March 2011
10.9
16 March 2011
4.1
5th tranche
15 July 2011
8.7
13 July 2011
3.3
6th tranche
14 December 2011
5.8
7 December 2011
2.2
Total past disbursements
52.9
20.1

Total
20.0
9.0
9.0
15.0
12.0
8.0
73.0

Source: Commission services and IMF staff.

*

During the review mission in Athens, the Commission/ECB/IMF staff teams met with the Prime Minister, the deputy primeminister and minister for Finance, and the governor of the Bank of Greece; as well as with the ministers for Development and
Competitiveness and Shipping; Labour and Social Security; Health and Social Solidarity; Administrative Reform and eGovernance; Environment, Energy and Climate Change; and Infrastructure, Transport and Networks. Moreover the teams
met with staff of these ministries and of the central bank, as well as of the ministries of Culture and Tourism; Public Debt
Management Agency, Hellenic Competition Commission, Hellenic Statistical Authority (ELSTAT), Hellenic Financial
Stability Fund, and Hellenic Asset Development Fund (privatisation fund). Meetings also took place with the leadership of
the PASOK and ND parties, some social partners, think-tanks and several commercial banks.

5

European Commission
The economic adjustment programme for Greece

Table 2. Contributions by the euro-area Member States to disbursements to Greece under the first
financing programme
(EUR million)
BE
0.0
758.8
238.8
530.0
195.3
219.6
1,942.5
MT
14.8
May 2010
5.0
September 2010
6.2
January 2011
13.8
March 2011
5.1
July 2011
5.7
December 2011
50.6
Total
Source: Commission services.
May 2010
September 2010
January 2011
March 2011
July 2011
December 2011
Total

DE
4,427.9
1,495.9
1,864.4
611.8
5,050.5
1,714.8
15,165.3
NL
932.5
315.0
392.6
871.4
321.1
361.1
3,193.8

IE
0.0
347.4
----347.4
AT
454.0
153.4
191.2
424.3
156.3
175.8
1,554.9

ES
1,941.6
656.0
817.5
1,814.4
668.5
751.9
6,650.0
PT
409.3
138.3
172.3
382.5
--1,102.3

FR
3,325.2
1,123.4
1,400.1
3,107.4
1,144.8
1,287.7
11,388.6
SI
0.0
102.9
32.4
71.8
26.5
9.9
243.5

IT
2,921.9
987.2
1,230.3
2,730.5
1,006.0
1,131.6
10,007.5
SK
--------

CY
32.0
10.8
13.5
29.9
11.0
12.4
109.6
FI
0.0
392.2
123.4
274.0
100.9
113.5
1,004.1

LU
40.8
13.8
17.2
38.2
14.1
15.8
139.9
Total
14,500.0
6,500.0
6,500.0
10,900.0
8,700.0
5,800.0
52,900.0

Box 1: Statement by the Eurogroup: 21 February 2012
"The Eurogroup welcomes the agreement reached with the Greek government on a policy package that constitutes the
basis for the successor programme. We also welcome the approval of the policy package by the Greek parliament, the
identification of additional structural expenditure reductions of EUR 325 million to close the fiscal gap in 2012 and the
provision of assurances by the leaders of the two coalition parties regarding the implementation of the programme
beyond the forthcoming general elections.
This new programme provides a comprehensive blueprint for putting the public finances and the economy of Greece
back on a sustainable footing and hence for safeguarding financial stability in Greece and in the euro area as a whole.
The Eurogroup is fully aware of the significant efforts already made by the Greek citizens but also underlines that further
major efforts by the Greek Society are needed to return the economy to a sustainable growth path.
Ensuring debt sustainability and restoring competiveness are the main goals of the new programme. Its success hinges
critically on its thorough implementation by Greece. This implies that Greece must achieve the ambitious but realistic
fiscal consolidation targets so as to return to a primary surplus as from 2013, carry out fully the privatisation plans and
implement the bold structural reform agenda, in both the labour market and product and service markets, in order to
promote competitiveness, employment and sustainable growth.
To this end, we deem essential a further strengthening of Greece's institutional capacity. We therefore invite the
Commission to significantly strengthen its Task Force for Greece, in particular through an enhanced and permanent
presence on the ground in Greece, in order to bolster its capacity to provide and coordinate technical assistance. Euro area
Member States stand ready to provide experts to be integrated into the Task Force. The Eurogroup also welcomes the
stronger on site-monitoring capacity by the Commission to work in close and continuous cooperation with the Greek
government in order to assist the Troika in assessing the conformity of measures that will be taken by the Greek
government, thereby ensuring the timely and full implementation of the programme. The Eurogroup also welcomes
Greece's intention to put in place a mechanism that allows better tracing and monitoring of the official borrowing and
internally-generated funds destined to service Greece's debt by, under monitoring of the Troika, paying an amount
corresponding to the coming quarter's debt service directly to a segregated account of Greece's paying agent. Finally, the
Eurogroup in this context welcomes the intention of the Greek authorities to introduce over the next two months in the
Greek legal framework a provision ensuring that priority is granted to debt servicing payments. This provision will be
introduced in the Greek Constitution as soon as possible.The Eurogroup acknowledges the common understanding that

6

1. Introduction

has been reached between the Greek authorities and the private sector on the general terms of the PSI exchange offer,
covering all private sector bondholders. This common understanding provides for a nominal haircut amounting to 53.5
percent. The Eurogroup considers that this agreement constitutes an appropriate basis for launching the invitation for the
exchange to holders of Greek government bonds (PSI). A successful PSI operation is a necessary condition for a
successor programme. The Eurogroup looks forward to a high participation of private creditors in the debt exchange,
which should deliver a significant positive contribution to Greece's debt sustainability. The Eurogroup considers that the
necessary elements are now in place for Member States to carry out the relevant national procedures to allow for the
provision by EFSF of (i) a buy back scheme for Greek marketable debt instruments for Eurosystem monetary policy
operations, (ii) the euro area's contribution to the PSI exercise, (iii) the payment of accrued interest on Greek government
bonds, and (iv) the residual (post-PSI) financing for the second Greek adjustment programme, including the necessary
financing for recapitalisation of Greek banks in case of financial stability concerns. The Eurogroup takes note that the
Eurosystem (ECB and NCBs) holdings of Greek government bonds have been held for public policy purposes. The
Eurogroup takes note that the income generated by the Eurosystem holdings of Greek Government bonds will contribute
to the profit of the ECB and of the NCBs. The ECB’s profit will be disbursed to the NCBs, in line with the ECB’s
statutory profit distribution rules. The NCBs’ profits will be disbursed to euro area Member States in line with the NCBs’
statutory profit distribution rules.
• The Eurogroup has agreed that certain government revenues that emanate from the SMP profits disbursed by NCBs
may be allocated by Member States to further improving the sustainability of Greece's public debt. All Member States
have agreed to an additional retroactive lowering of the interest rates of the Greek Loan Facility so that the margin
amounts to 150 basis points. There will be no additional compensation for higher funding costs. This will bring down the
debt-to-GDP ratio in 2020 by 2.8 percentage points and lower financing needs by around EUR 1.4 billion over the
programme period. National procedures for the ratification of this amendment to the Greek Loan Facility Agreement
need to be urgently initiated so that it can enter into force as soon as possible.
• Furthermore, governments of Member States where central banks currently hold Greek government bonds in their
investment portfolio commit to pass on to Greece an amount equal to any future income accruing to their national central
bank stemming from this portfolio until 2020. These income flows would be expected to help reducing the Greek debt
ratio by 1.8 percentage points by 2020 and are estimated to lower the financing needs over the programme period by
approximately EUR 1.8 billion.
The respective contributions from the private and the official sector should ensure that Greece's public debt ratio is
brought on a downward path reaching 120.5 percent of GDP by 2020. On this basis, and provided policy conditionality
under the programme is met on an on-going basis, the Eurogroup confirms that euro-area Member States stand ready to
provide, through the EFSF and with the expectation that the IMF will make a significant contribution, additional official
programme of up to EUR 130 billion, until 2014.
It is understood that the disbursements for the PSI operation and the final decision to approve the guarantees for the
second programme are subject to a successful PSI operation and confirmation, by the Eurogroup on the basis of an
assessment by the Troika, of the legal implementation by Greece of the agreed prior actions. The official sector will
decide on the precise amount of financial assistance to be provided in the context of the second Greek programme in
early March, once the results of PSI are known and the prior actions have been implemented.
We reiterate our commitment to provide adequate support to Greece during the life of the programme and beyond until it
has regained market access, provided that Greece fully complies with the requirements and objectives of the adjustment
programme."

7

European Commission
The economic adjustment programme for Greece

Table 3. Member States guarantees
to the EFSF

EFSF contribution
key (%)
AT
BE
CY
DE
EE
EL
ES
FI
FR
IE
IT
LU
MT
NL
PT
SI
SK

2.98
3.72
0.21
29.07
0.27
0.00
12.75
1.92
21.83
0.00
19.18
0.27
0.10
6.12
0.00
0.50
1.06

Total

100.0

Source: EFSF.

Box 2: Economic Adjustment Programme and Social Equity
A number of commentators have criticised the Greek adjustment programme given its social implications.
Although correcting large and unsustainable external and fiscal imbalances in the space of a few years does impose a
reduction in living standards which are borne by the entire Greek Society, social considerations have always been present
in the design of the programme. In the discussions between the staff teams and the Greek authorities there has always
been a concern to minimise the impact of the measures on the most vulnerable strata of the population. This
consideration is reflected by concrete steps made in pensions, other social programmes, labour market reforms,
healthcare reform and in the fight against tax evasion. More fundamentally, there is a clear perception that large
imbalances that risk, or would ultimately lead to abrupt changes in the economic regime create a particular large burden
for the less well off, and that a correction of these imbalances improves the medium-term economic opportunities of
everyone.
Cuts in pensions have been targeted, with the aim of protecting the lowest pensions. Greece had to adopt pension
cuts on several occasions over 2010-12. Given the large proportion of pension in total government expenditure, a
reduction in pensions was inevitable. To protect the most vulnerable, these cuts have been progressive, i.e., with larger
reductions in the highest pensions. Moreover, in 2010, Greece adopted a comprehensive pension reform simplifying the
highly fragmented pension system, enhancing transparency and fairness, increasing and equalising the retirement ages
and decreasing the generosity of benefits, while preserving an adequate pension for the low- and middle-income earners.
The pension reform has gone a long way in restoring the viability of the pension social protection systems. Moreover, the
new system is fairer among generations and among the several professional categories. In the same context, a special

8

1. Introduction

contribution has been established for pensioners with a monthly pension above EUR 1 700. In addition, there has been
specific attention at fighting fraud in disability pensions and other pensions.
Healthcare is a very important component of the social protection system in Greece. This sector has also to
contribute substantially to fiscal consolidation, given the large share of the public budget spent on healthcare. This effort
has been made primarily through reduction in the prices of medicines paid by the State, the promotion of cheaper
medicines and other tools of fighting waste. The increase in co-payments also aims at reducing unnecessary demand for
healthcare services. However, the increase in costs borne by patients has amounted to a small fraction of the overall
reduction in costs.
The on-going review of social programmes aims at better targeting beneficiaries and to protect the vulnerable
effectively. For long, there has not been in Greece a clear view on the objectives, and thus on the design and
implementation of social policies. As a result, the system was disproportionately expensive for the benefits it effectively
provided, and more important, it often failed at relieving poverty and hardship. The objective is identifying the specific
groups and situations that require social protection, while avoiding waste. This is reflected in the cuts in family
allowances for the most prosperous households for which there is no good reason of financial support.
Labour market policy changes have been driven by the aim of fighting unemployment, particularly youth and
low-skilled unemployed. Despite a considerable reduction in per capita income, downward rigidities in wage-setting
systems have prevented the necessary adjustment of private sector wages; this has contributed to a sharp increase in
unemployment. The government has adopted several measures in relation to collective bargaining, so as to reduce the
downward rigidity on wages and facilitate recruitments. The reduction in public wages, while a substantial source of
hardship for those concerned, aims at reducing the public deficit and restoring balanced wages between the private and
the public sectors.
A number of changes in the rates made the tax system more progressive. In particular, in the summer 2011, the
Parliament decided a solidarity surcharge levied on income. The increase in property taxes decided in the autumn 2011
will also contribute to a fairer taxation, though there is still scope to improve the modalities of collecting property taxes.
The fight against tax evasion is critical for the success of the programme, although to date, progress in improving the
revenue administration and in fighting tax evasion has been found wanting. This is not only because of the contribution to
fiscal consolidation of additional receipts, but also because of the social acceptability of adjustment programme as a
whole. Indeed, there is a widely agreed perception that tax evasion, while pervasive, is graver among the most affluent.

9

European Commission
The economic adjustment programme for Greece

10

2.

MACROECONOMIC DEVELOPMENTS

2. The contraction in economic activity in the fourth quarter of 2011 was far deeper than expected.
The quarterly accounts indicate that real GDP fell by more than 7 percent in the last three months of
2011, compared with the same quarter of 2010. For the year as a whole, real GDP is estimated to have
contracted by 6.9 percent. The contraction resulted from both a significant fall in internal demand and
a loss of dynamism in exports. Households' disposable income was hit by rising unemployment and
the fiscal measures. In addition, heightened social and political instability in the autumn had a
substantially negative impact on business and consumer sentiment. This was compounded by
difficulties in access to credit and contributed to firms and households postponing spending decisions.
Graph 1. Real GDP growth
(outcome and forecast)
10

5

0

-5
% change, y-o-y

Forecast

-10
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: EL.STAT and Commission services.

3. All of the main components of domestic demand contracted significantly in 2011. Final domestic
demand is estimated to have shrunk, in real terms, by 9 percent. Private consumption is expected to
have contracted by around 7¼ percent, in line with the contraction in real disposable income, and
attempts by households to increase savings in response to the uncertainty in the labour market.
Government consumption has also declined strongly, while investment, now at a very low historical
level (half that in 2007 in real terms) has shrunk in double digits: by about17 percent. These trends are
expected to continue, although the pace of the contraction in consumption and investment should be
smaller than in 2011. Economic activity as a whole, in 2012, is projected to contract by 4¾ percent,
although with significant downside risks and carryover impacts for 2013. The recovery, which was
previously expected for next year, will be further delayed with, at best, a stagnation of activity in
2013. It is only in 2014 that positive annual real GDP growth rates are expected to return.

11

European Commission
The economic adjustment programme for Greece

Graph 2. Business and Consumer Surveys
110

40

105

20

100
95

0

90

-20

85

-40

80
75

-60

70

-80

65
60
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

-100
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Economic sentiment

10

Graph 4. Housing investment
50

Equipment investment (% y-o-y change QNA) (rhs)

0

30

40
30

20
10

10 %

%

0
-10

House loans (% change y-o-y)(lhs)
Building permits (% change y-o-y)(12m.Ac.)(lhs)
Housing investment (% change y-o-y)(rhs)

0
-10
-20

-30
-40
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Sources : EL.STAT and European Commission

-40

0

-10
-15
-20
-25

-20
-30

5

-5

20

-10
-20

Retail trade confidence

Sources : European Commission

Graph 3. Equipment

Industrial confidence (lhs)

Consumer confidence

Industrial confidence
Services confidence

Sources : European Commission

20

Total construction confidence

-30

-30
-35

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Sources : Bank of Greece and Eurostat.

4. Net exports contributed an estimated 2.4 percentage points to GDP in 2011 and are likely to
remain the only source of growth in 2012. Overall, exports of goods and services rose by around
2½ percent in real terms in 2011, much less than previously expected, owing to the weakening of EU
and global demand. In the last quarter of 2011, goods export growth decelerated and, as result, for the
year as a whole, their growth rate was less than half than in 2010. Services exports, at 3½ percent,
surprised on the upside. While social unrest in Athens discouraged tourists, the rest of the country
performed well and appeared to benefit from the political uncertainty in Northern African countries.
Shipping performed below expectations, being affected by the hike in oil prices and increasingly
strong competition from Asia. In 2012, exports are expected to grow at moderate rates not much
above 3 percent. It remains to be seen, whether Greek exporters will manage to secure benefits from
the labour market reforms through increased productivity, lower production costs, and therefore gains
in competitiveness. The gains in market shares that are projected for 2012 and 2013 are only a
fraction of the losses during the previous decade, which suggests upside risks and a potential for
strong growth in a medium-term perspective.
12

%

2. Macroeconomic developments

5. The current account deficit will substantially contract in 2012, but remains at an unsustainable
level. When calculated on the basis of national accounts, which may slightly differ from the balance
of payments standards, the current account deficit remained just above 10 percent of GDP in 2011, 2
points better than in 2010 and 4 points below 2009. The slow correction in the external imbalance will
continue in 2012 driven by the described developments in exports and an expected contraction in
imports, which mirrors developments in consumption and investment. After a contraction of 7 percent
in 2011, real imports are likely to fall by at least 5 percentage points in 2012. However, the
contraction in volumes is not fully reflected in the external balance because of an oil-price-induced
increase in the import deflator. The balance of goods and services is expected to stand at –4¾ percent
of GDP in 2012, almost 4 points below the 2010 deficit. Moreover, the balance of incomes will
benefit from the restructuring of government debt, which will reduce the flow of incomes paid to the
rest of the World. All in all, the 2012 current account deficit is forecast to be around 7 percent of
GDP.
Graph 5. Market shares:
Performance of Greek exports of goods and services
relative to the imports of 35 industrial countries
100
95

2000=100

90
85
80
75
70
2000

2002

2004

2006

2008

2010

2012

Source: European Commission.

Graph 6. Exports and non-domestic industrial
orders
75

50

Industrial non-domestic orders (%
change, rhs)

30

10

15

%

%

0

0

-10

-15
Exports of goods
(% change, y-o-y, lhs)

7

Industrial production (3m.m.a., %
change, y-o-y) (lhs)

76

Capacity utilisation (rhs)

45

20

78

10

60

40
30

Graph 7. Industrial production and capacity utilisation

4
1
%

74
72

-2
-5

70
68

-30

-8

-30

-45

-11

66

-40
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

-60

-14

64

-20

Sources: EL.STAT and Bank of Greece.

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

Sources: EL.STAT and European Commission

13

European Commission
The economic adjustment programme for Greece

6. Inflation remains stubbornly and worryingly high for an economy that is entering its fifth year
of recession. In 2011, headline HICP inflation averaged 3.1 percent. The fall in inflation that was in
progress since mid-2010 was interrupted during the latter months of 2011 due to the hike in oil prices
and indirect tax increases. Although constant-tax inflation, at 1.2 percent, has been lower than
headline HICP, it has remained persistently positive, thus in contradiction to the expectation of a fast
internal devaluation. Moreover, the differential in the constant tax HICP with the euro area has not
been sizeable enough to quickly recover previous losses in price competitiveness. The low level of
economic activity in 2012, and the reduction in private sector wages will moderate prices, with
slightly negative inflation rates expected in 2012 and 2013. However, such a projected development
will only materialise if the labour market reform is accompanied by action to promote competition in
the goods and services market to allow the reduction in labour costs to be passed on to consumer
prices.
Graph 8. HICP inflation developments and projections
(% change, y-o-y)
7
6

GR: headline inflation

5
4
3
%2
1
0
-1
EA17: constant-tax inflation

-2
-3
Jan-07

Jan-08

Jan-09

GR: constant-tax inflation

Jan-10

Jan-11

Jan-12

Source: EL.STAT.

Graph 9. HICP inflation: main drivers
(% change, y-o-y)
9

50

8

40

Transport (lhs)

Energy (rhs)

6
16

20

5
10

%

4
0

3

-10

2

4
%

12
8

2
4

-20

1
Jan-08

Source: EL.STAT.

14

20

Alcohol (rhs)

30

6

0
Jan-07

24
Headline inflation (lhs)

Processed food (lhs)

7

%

8

Core inflation (lhs)

Jan-09

Jan-10

Jan-11

-30
Jan-12

0
Jan-07

0
Jan-08

Source: EL.STAT.

Jan-09

Jan-10

Jan-11

Jan-12

2. Macroeconomic developments

7. Employment has taken a heavy blow in the face of downwardly rigid wages. Total employment
declined by over 6 percent in 2011 and an additional fall of 5 percent is forecast in 2012, with the
unemployment rate projected to average 18 per cent in 2012 and to reach above 20 percent in some
quarters. The labour market reforms are expected to provide a significant contribution towards both
saving, and creating new, jobs. Nevertheless, employment is not expected to stabilise before 2013,
and the subsequent recovery in the number of jobs will be progressive.
8. The closure of the competitiveness gap is expected to accelerate. Following years of continued
growth, well in excess of its main trading partners, unit labour costs are clearly declining. After the
inertia observed in 2010, wages in the business sector fell by around 5 per cent in the year leading up
to the third quarter of 2011. This was insufficient to help recover competitiveness, also due to
continued cost reductions by Greece’s main trading partners. However, the latest labour market
measures (see below), together with those legislated in 2011 are expected to contribute to reduce
labour costs by at least 15 percent over the next three years. However, the product and service market
reform have also a crucial role to play to increase internal competition and improve external
competitiveness.
Graph 10. Employment
and unemployment rate
3
2
1

Graph 11. Nominal unit labour cost
(annual growth rate)
25

15

20

10

15

5

Employment (% change, y-o-y) (lhs)
Unemployment rate (rhs)

0

Greece

European Union

forecast

-1
-2
-3

%

-4
-5

10

0

5

-5

0

-10

-6
-7
-8
-9
-10

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Source : EL.STAT (Labour force survey; these data may slightly differ from
national accounts data which appear in other tables of this report).

2001

2003

2005

2007

2009

2011

2013

2015

Source : Commission services.

15

European Commission
The economic adjustment programme for Greece

Table 4. Macroeconomic scenario
main features

Real GDP (growth rate)
Final domestic demand contribution*

2010

2011

2012

2013

2014

-3.2

-3.5

-6.9

-4.7

0.0

2.5

-3.6

-7.0

-10.0

-7.2

-1.4

1.5
1.2

Net trade contribution

3.1

3.1

2.8

2.3

1.4

Employment (growth rate)

-0.7

-1.9

-6.3

-4.8

-0.2

1.6

Unemployment rate (percent of labour force)

8.9

11.7

15.9

17.9

17.8

16.7

Compensation of employees, private sector per head

0.6

-0.3

-3.2

-13.0

-3.8

-2.2

Unit labour cost (growth rate)

4.3

-1.6

-1.0

-7.8

-1.3

-1.9

HICP inflation

1.3

4.7

3.1

-0.5

-0.3

0.1

1.1

1.4

1.2

-1.2

-0.8

0.1

-14.3

-12.3

-10.3

-6.9

-5.3

-4.6

HICP inflation at constant taxes
Current account balance (percent of GDP)
Net borrowing vis-à-vis RoW (percent of GDP)

-13.3

-10.6

-8.3

-4.8

-3.1

-2.4

Net external liabilities (percent of GDP)

-112.9

-101.9

-116.0

-88.1

-90.0

-89.6

General Government deficit (percent of GDP)

-15.8

-10.6

-9.3

-7.3

-4.6

-2.1

General Government primary surplus (percent of GDP)

-10.6

-5.0

-2.4

-1.0

1.8

4.5

General Government debt (percent of GDP)

129.3

144.9

165.3

161.4

165.4

162.1

* Excluding change in inventories and net acquisition of valuables
Source: European Commission

16

2009

3.

FINANCIAL MARKETS AND FINANCIAL SECTOR
DEVELOPMENTS

9. The expectation of the debt exchange has weighed on financial market developments. Since the
European Council decisions on 21 July and 26/27 October 2011, financial sector developments were
influenced by the expectation of the debt exchange. Yield and CDS spreads on Greek sovereign debt
have skyrocketed and the Athens stock exchange index fell. Once the debt exchange is executed, there
is an expectation of a progressive improvement in these indicators. Following the announcement of
the debt exchange offer, rating agencies have further downgraded Greece. However, rating agencies
have pre-announced that the Greek sovereign rating would be revised upgraded (to CCC or similar) as
soon as the debt exchange is executed.
Graph 12. Athens Stock Exchange Indices
8 000
7 000
6 000

Index

5 000
4 000
3 000
2 000
1 000
0
Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

ASE Banks Index[Mar-12]
ASE General Index[Mar-12]

Source : ECOWIN

10. The Greek banks confront the challenge of a protracted recession and the low credit standing of
the economy as a whole. Non-performing loans (NPL) have continued to increase, reaching 15½
percent at the end of September 2011, up from 13¼ percent in June. Restructured loans account for
another 4 percent. The coverage of impaired loans with provisions remains stable at 46 percent,
however, when also taking into account restructured loans, the ratio is deteriorating. The banks have
continued their efforts to adjust their business models to the harsh economic environment. In the third
quarter, staff costs were cut by 8 percent (year-on-year) and the general administrative expenses fell 6
percent. This allowed an improvement in the pre-provisioning income despite a slight decline in net
interest income (-1.5 percent). The pre-provisioning income of the commercial banking system
amounted to EUR 2.7 billion and increased by 16 percent compared to the third quarter of 2010.
Nevertheless, massive impairment charges related to the restructuring of the government debt, as
decided in July, resulted in EUR 8.5 billion losses in the first nine months of 2011.
11. The deleveraging continues and the liquidity position of banks tightens further. The balance
sheet of the Greek banking sector contracted by 8.7 percent in 2011. Credit to the domestic economy
shrank by 3.8 percent, with a reduction in loans to both households (-4.6 percent) and corporations
(-2.8 percent). Domestic deposits decreased at a much faster pace (-18 percent) also due to political
uncertainty (especially in May and autumn), leading to the increases in loan-to-deposit ratios in most
banks. As banks are shut off wholesale funding markets, the funding gap was closed by central bank
financing, a growing portion of which is in the form of emergency liquidity assistance since August
2011.
12. The execution of the sovereign debt exchange will bring about major losses for banks. Although
it was not executed, PSI-I, i.e. the debt restructuring decided in July 2011, impacted negatively the
capital level of Greek banks in the second quarter of 2011. The average capital adequacy ratio
declined from 13.9 at the end of 2010 to 12.0 percent for banks in Greece and from 12.3 at the end of
17

European Commission
The economic adjustment programme for Greece

2010 to 10.5 percent for the banking groups. PSI-II, decided by the euro area summit in October 2011,
and confirmed by the Eurogroup in February 2012, will result in significant additional losses and
capital needs for Greek banks as the net present value losses of government bonds may reach, or even
exceed, 70 percent on the sector's bond portfolio of about EUR 43 billion. Anticipating the conclusion
of the debt exchange, both the government and the banking community prepared for restoring the
banking sector’s solvency. Meanwhile, the new minimum regulatory requirement for capital adequacy
is set at 9 percent of core tier 1 capital as from September 2012, and is expected to be raised to 10
percent from July 2013.
Table 5. Ratings

Moody's

LT Issuer Rating

Rating
C*
Caa2
Caa2
Caa2
Caa2
Caa2

Sovereign
ATE
NBG
Eurobank
Alpha bank
Piraeus

Effective
2-Mar-12
23-Sep-11
23-Sep-11
23-Sep-11
23-Sep-11
23-Sep-11

Fitch
Rating
RD**
BBBBB-

Effective
9-Mar-12
14-Jul-11
14-Jul-11
14-Jul-11
14-Jul-11
14-Jul-11

Standard & Poor's
Rating
SD***
--CCC
CCC
CCC
CCC

Effective
27-Feb-12
--15-Jun-11
15-Jun-11
15-Jun-11
15-Jun-11

* Moody's does not use a 'Default' or 'Selective Default' rating.
** Fitch announced that after the debt exchange the sovereign rating was likely to be 'low speculative grade.'
*** S&P stated that once the debt exchange is consummated, the sovereign rating would be raised to the CCC category.
Source: Bloomberg

Graph 13. Bank deposits

250
EUR billion
200

150

100

Total deposits

Sight deposits

50

0
Jan-07

Jan-08

Source: Bank of Greece

18

Jan-09

Jan-10

Jan-11

Graph 14. Greek banks' borrowing from the
Eurosystem via monetary policy operations
140,000
35
130,000
Borrowing from the Eurosystem excluding
120,000
30
ELA (EUR million) (lhs)
110,000
Borrowing from the Eurosystem (EUR
100,000
25
million) (lhs)
90,000
as % of liabilities (rhs)
80,000
20
70,000
60,000
15
50,000
40,000
10
30,000
5
20,000
10,000
0
0
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

*Note: Estimate including ELA and ANFA
Source: IMF-IFS

3. Financial markets and financial sector developments

Graph 15. Credit to private sector
(per cent change, y-o-y)

Graph 16. Non-performing loans ratio

30

18
Households

25

16

Enterprises
Private sector(total)

20

14

15
12

10
%

%
10

5
8

0

6

-5
-10
Jan-07

4

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

2007

Source: Bank of Greece

2008

2009

2010

2011

Source: Bank of Greece

Graph 17. Loan to deposit ratio by bank
170
Sep-11

160

Sep-11

150

Sep-11

140
Dec-10

130

Sep-10

Sep-10

120
Sep-11

110
100

Sep-10 Sep-11

Sep-10

90
80

NBG

Alpha

Eurobank

Piraeus

ATE

Source : Banks' financial statements

Table 6. Banking sector soundness indicators

Capital adequacy ratio
Tier I ratio
Return on assets (after tax)
Return on equity (after tax)
Loan to deposit ratio (2)
Non-performing loans (3)
Coverage ratio (4)

Aggregation
basis (1)

2007

2008

2009

2010

2011 Q3

consolidated
solo
consolidated
solo
consolidated
solo
consolidated
solo
consolidated
solo
solo

11.3
12.7
9.3
9.4
1.4
1.0
17.8
14.6
106.0
4.7
53.9

9.5
10.7
8.1
8.8
0.7
0.2
10.0
3.1
114.0
5.1
49.5

11.9
13.3
10.9
12.3
0.1
-0.1
2.3
-1.7
113.8
8.1
42.1

12.3
13.9
11.2
12.5
-0.3
-0.6
-4.2
-8.6
121.9
10.8
46.3

10.5
12.0
9.6
10.8
-1.9
-2.1
-28.2
-34.2
132.7
15.5
45.6

Notes: (1) "Solo" refers to banks in Greece, "consolidated" to banking groups. (2) Loans to customers to liabilities due
to customers. (3) Non-performing loans as percentage of total gross loans. (4) Provisions as percentage of nonperforming loans.
Source: Bank of Greece

19

European Commission
The economic adjustment programme for Greece

13. The quality of domestic loan portfolios of Greek banks has been assessed in a diagnostic study
by BlackRock Solutions. After six months of field work, which consisted in the review of bank loan
books and calibrating the models, the contractor submitted its report to the Bank of Greece in January
2012. The estimated credit loss projections for the next three years have been adjusted by the Bank of
Greece for the foreign and state-related exposures and will, together with the results of PSI, the
forecasts of profitability and risk-weighted assets, feed in the final estimation of capital needs per
bank. For this exercise, banks have submitted their business plans, which are also the basis for
assessment of their long-term viability. The Bank of Greece endeavoured to take a view on the
optimal future structure of the Greek banking sector as a whole. The Bank of Greece has been
supported in this effort by a specialised consultant and has collaborated closely with the Commission,
the ECB and the IMF staff teams.
14. The HFSF is preparing to cover the remaining part of capital needs of the viable banks, which
will not be covered by the private sector. To this end, the financial resources of the HFSF will be
significantly increased under the second financing programme. Against the critical situation of the
Greek economy and the huge sums needed for restoring bank's solvency, the designed recapitalisation
framework aims at maximising the participation of private investors by providing targeted incentives.
At the same time, it ensures that there is no full transfer of control over the Greek banking sector to
the State. In this context, the overhaul of the HFSF governance structure has also been launched. It
includes proposals to implement a two tier management system, with a General Council and an
Executive Board, and to separate the recapitalisation and resolution functions in the HFSF's internal
organisation.
15. Two small banks were resolved under the new resolution framework. Soon after implementation
of the new bank resolution framework, at the beginning of October, Proton Bank was split into a good
bank (Nea Proton) and a bad bank. The resolution arm of the Greek Deposit Insurance Fund (TEKE)
covered the funding gap between the assets and liabilities of Nea Proton, while the HFSF provided the
capital and assumed responsibility for management oversight of the new institution. In December,
another ailing bank, T-Bank, was resolved by a transfer of assets and liabilities to Hellenic Postbank,
which previously envisaged a merger with T-Bank. TEKE covered the funding gap between the assets
and liabilities of T-Bank that were transferred to TT Postbank. Other non-viable banks may be put in
resolution according to the financial sector strategy of the programme. In order to streamline and
improve efficiency of the resolution process, the relevant laws are to be amended, taking account of
the experience from the first two resolution cases.
16. The restructuring of individual banks is on-going. Due to the PSI I-related impairment losses, ATE
Bank had to be recapitalised by the State (EUR 290 million) in December. This was the second
recapitalisation within a year. Taking into account the track record of received state aid, credit loss
projections from the BlackRock diagnostic and the expected impact of PSI-II, the government carried
out an assessment of various options to address the bank, and committed to to take a final decision,
choosing a specific course of action by end-March 2012. The transfer of the commercial activities of
the Hellenic Consignment and Loan Fund (HCLF) to a separate entity was endorsed by an InterMinisterial Decision in January 2012 and should be completed by July 2012. The merger of Alpha
Bank and Eurobank EFG was approved by the respective general assemblies in November, and
cleared by the Hellenic Competition Commission in January, but its finalisation has in the meantime
stalled due to the uncertainty surrounding the banks' final capital needs resulting from PSI-II.
17. The Bank of Greece has launched a comprehensive supervisory strategy for the insurance
sector. This is aimed at enhancing the soundness of Greek insurance undertakings, ensuring their
compliance with 'Solvency I' and preparing the sector to comply with the 'Solvency II' requirements in
the future. The Bank of Greece requested technical assistance to support the reorganisation of the two
Insurance Guarantee Funds (for life and for motor insurance) from the Commission. This technical
assistance will also explore solutions in terms of insurance resolution.
20

4.

PROGRAMME IMPLEMENTATION AND POLICY DISCUSSIONS

18. In spite of particularly difficult economic circumstances, Greece made progress in the implementation
of the programme. This applies to fiscal consolidation even if, as anticipated earlier, the annual ESA-based
target for 2011 was missed. However, to mitigate this slippage and minimise its carry-over effect on future
years, the Greek authorities in 2011 adopted additional consolidation measures that went well beyond those
initially planned. It should be noted that, reflecting the higher-than-originally-estimated starting point of the
fiscal deficit in 2009, the pace of the reduction in the overall government deficit since 2009 is in line with the
original plans. The main objectives of the successor programme remain unchanged compared to the first
programme, but the growth-enhancing structural reforms are expected gain stronger momentum and the
fiscal targets for 2012-13 have been loosened.
Table 7. Summary of compliance with policy conditionality
Overall assessment

Fiscal policy

Partially observed

Privatisation and
structural fiscal reforms

Partially observed

Financial sector policy

Largely observed

Growth-enhancing
structural reforms

Partially observed

Comments
The agreed fiscal consolidation measures were partially implemented.
The end-December quarterly performance criteria on the cash general
government primary deficit and the state primary expenditure were
respected.
There was some reduction in the stock of arrears owed to suppliers.
The ESA-based 2011 deficit exceeded the ceiling established at
programme inception, although only slightly above the projection of the
previous review.
The quantitative cumulative criterion on privatisation receipts for endDecember was missed by a small margin; several transactions for 201213 are under preparation.
Further measures have been adopted in relation to the fight against tax
evasion and public finance management, and restructuring of public
enterprises. However, the fight against tax evasion cannot yet be
considered as successful, and there were delays in several specific
revenue administration measures. Likewise, several measures to
strengthen public financial management were missed.
There were also issues in healthcare reform, and the framework law on
supplementary pensions.
Payments into the intermediate account of the Hellenic Stability Fund
continued according to plans until end-2011.
A detailed diagnostic of loan portfolios of banks was prepared.
The State increased the ATE share capital.
Governance rules were reviewed in preparation of the post-PSI bank
recapitalisation.
After attempting a dialogue with social partners, the Government
adopted several labour market measures, including a reduction in
minimum wages and changes in wage bargaining.
Progress in several other areas has been slower, in particular on business
environment related measures and the opening of the energy market.

Source: European Commission.

19. In February and March 2012, Greece implemented several prior actions to bring the fiscal adjustment
back of track and enhance the credibility of the second programme. These prior actions concerned each
of the main chapters of the programme: fiscal consolidation, revenue administration, pension reform,
statistics, financial sector regulation and supervision, growth-enhancing structural reform (both labour and
liberalisation of regulated professions. The completion of these prior actions required acts adopted by the
Parliament and Council of Minister, Ministerial Decisions or Joint Ministerial Decisions and Circulars, and
administrative actions.
4.1.

FISCAL POLICY

20. The end-December 2011 performance criteria for primary expenditures and the primary balance have
been met. Despite the sharp deterioration in economic conditions in the last quarter of 2011, the authorities
managed to keep fiscal developments close to previous projections. Tax and social contributions were hit by
the deepening recession, increasing unemployment and aggravating liquidity constraints. Moreover, tax
21

European Commission
The economic adjustment programme for Greece

collection was disrupted by frequent industrial action in October and November. However, these effects were
mitigated by higher receipts of EU structural funds and cutbacks in capital spending and in other
discretionary expenditure.
Table 8. Fiscal quantitative performance criteria
(EUR billion)
end Sep. 2011
Data
Criterion

end Dec. 2011
Data
Criterion

General government primary cash balance

-5.3

-5.0

-4.8

-5.1

State primary spending

42.0

44.5

59.1

60.8

Central government debt

371.0

394.0

371.0

394.0

New guarantees granted by the central government

0.6

1.0

0.6

1.0

Source: Commission services.

Graph 18. State primary payments - 2011
(cumulative, EUR million)
Outcomes and quarterly criteria
70000

Graph 19. Government primary balance – 2011
(cash basis, cumulative balance, EUR million)
Outcomes and quarterly criteria
1500
500

60000

-500

50000

-1500

40000

-2500

Ceilings

Performance criteria

Outcome

-3500

30000

-4500

20000

-5500

Outcome

Performance criteria

10000

-6500
-7500

0
Jan Feb Mar Apr May Jun

Source: GAO and Commission services.

Jul Aug Sep Oct Nov Dec

Jan

Feb Mar Apr May Jun

Jul

Aug

Sep

Oct Nov Dec

Source : GAO and Commission services..

21. The indicative criterion of non-accumulation of arrears was missed. On the basis of the currently
available data, the stock of arrears to suppliers at end-2011 was above EUR 5.7 billion, around EUR 0.4
billion higher than a year before. However, the government still made progress in the last months of the year
in reducing arrears (in particular those related to investment projects) with the help of retroactive payments
by EU structural funds in the context of the decision to increase the average EU cofinancing rate from 75 to
85 percent and the additional facility of 10 percent. Most arrears are owed by hospitals and social security
funds to suppliers of medicines and other medical products. Since the ESA-based deficit is calculated in an
accruals basis, the delays in payments do not result in an underestimation of the government deficit.
However, such an underestimation may occur in relation to delays in tax refunds because taxes and the
respective refunds are predominantly recorded according to the effective cash inflows and outflows. The new
programme includes financing to settle arrears in a progressive manner. The mission stressed that the
clearance of arrears of the several government departments by the State should include a careful verification
of arrears claims, and after ensuring that the government entities requesting such a settlement are not
accumulating any further arrears and have made progress in their financial management.

22

4. Program implementation and policy discussions

Table 9. Implementation monitoring.
Estimated yield of fiscal measures agreed in June and October 2011
Oct. 2011

Feb. 2012

Difference(*)

Total measures
% of GDP

2011
7 570
3.5

2012
18 186
8.5

2011
6 729
3.1

2012
18 740
8.9

2011
-840
-0.4

2012
554
0.3

Wage bill
% of GDP

743
0.3

1 712
0.8

735
0.3

1 663
0.8

-8
0.0

-49
0.0

Operational expenses
% of GDP

180
0.1

262
0.1

180
0.1

262
0.1

0
0.0

0
0.0

Extra-budgetary funds
% of GDP

304
0.1

396
0.2

297
0.1

404
0.2

-7
0.0

8
0.0

State-owned enterprises
% of GDP

0
0.0

414
0.2

0
0.0

414
0.2

0
0.0

0
0.0

Defence expenditure
% of GDP

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

Health care
% of GDP

53
0.0

267
0.1

11
0.0

225
0.1

-42
0.0

-42
0.0

Pharmaceutical spending
% of GDP

372
0.2

601
0.3

372
0.2

356
0.2

0
0.0

-245
-0.1

Social benefits
% of GDP

967
0.4

2 329
1.1

828
0.4

2 406
1.1

-139
-0.1

77
0.0

Investment spending
% of GDP

800
0.4

804
0.4

950
0.4

504
0.2

150
0.1

-300
-0.1

Other expenditure
% of GDP

150
0.1

360
0.1

150
0.1

611
0.3

0
0.0

251
0.1

4 001
1.8

11 042
5.2

3 207
1.5

11 895
5.6

-794
-0.4

853
0.4

Tax policy
% of GDP

(*) Ratios to GDP are calculated on the basis of the latest GDP figures.
Note: This table does not include measures for 2012 adopted in February 2012.
Source: Commission services.

22. The ESA-based 2011 government deficit is estimated at 9¼ percent of GDP, 1 1/4 points lower than in
2010. The decline in the deficit ratio resulted from an increase in the revenue-to-GDP ratio by 1½ points,
while the primary expenditure ratio as a share of GDP fell 1 point. The increase in interest expenditure by
more than one point means that the improvement in the primary deficit was almost 2½ points. To achieve
this result, Greece is estimated to have adopted measures – including the carryover impacts from the
measures taken in 2010, and excluding the impact that carry into 2012 – of 7¾ percent of GDP with an
increased concentration of measures towards the end of the year. The amount of measures is significantly
higher than the reduction in the deficit, suggesting that, most of the measures effectively served to counteract
the upward drift in expenditure and downward pressure on revenue. The former mainly results from an
automatic trend increase in several large spending components such as pensions and healthcare; the latter
mainly stems from the recession but possibly also a deterioration in tax compliance.

23

European Commission
The economic adjustment programme for Greece

Graph 20. Government revenue, expenditure and gross debt
(% of GDP)

55

180

% of GDP

160

50
Expenditure (lhs)

45

140

Revenue (lhs)
Debt (rhs)

120

40

100

35
2007

2008

2009

2010

2011

2012

2013

2014

Data in this chart refer to four consecutive quarters for revenue, expenditure
and GDP.
Source : Eurostat for statistics, Commission services for forecasts

Table 10. Developments in
public employment
(stock, persons)

end-2009

end-2010

Nov. 2011

General government
Central government
Legal entities
Local government
Hospitals
Social security funds
SOEs chapter A
Other

715,882
465,609
6,971
95,585
88,230
31,519
22,975
4,993

683,627
446,789
6,034
93,194
88,564
29,471
19,565
10

664,223
428,041
5,490
98,790
89,838
26,855
15,209
0

Source: Ministry of Administrative Reform.

4.2.

FISCAL STRATEGY IN 2012 AND SUBSEQUENT YEARS

23. The fiscal outlook for 2012 looks significantly worse than expected just a quarter ago. This mainly
results from the combination of a worse fiscal outturn for 2011, the deterioration in the macroeconomic
outlook (including the impact that the lowering in private sector wages resulting from the labour market
reforms included in the new programme has on social contribution and personal income tax) and lower-thanenvisaged yields of previously adopted measures. These deficit-increasing factors are partly compensated by
savings in interest expenditure arising from PSI. If no additional measures were adopted, the 2012 primary
deficit could be in the order of 2½ percent of GDP. This compares with a small surplus targeted for 2012 in
the previous review of the programme.
24. In order to accommodate the deterioration in the macroeconomic outlook, the target for the primary
balance for 2012 was set at -1.0 percent of GDP. The target was defined in a manner that requires a similar
fiscal effort as before, while letting automatic stabilisers operate. Given the substantial savings in interest
expenditure that result from PSI and the shift to a new financing programme, the overall deficit projections
for 2012 is only slightly different from the overall deficit target of the first programme.

24

4. Program implementation and policy discussions

Table 11. Main fiscal indicators 2010-14
(EUR billions, unless otherwise noted)

ESA 95 general government primary balance (projections at
unchanged policies)
% of GDP

2011

2012

2013

2014

-5.2

-2.0

-4.0

-2.3

-2.4

-1.0

-2.0

-1.1

-2.0

3.7

9.4

-1.0

1.8

4.5

-20.0

-14.8

-17.0

-16.1

-9.3

-7.3

-8.4

-7.7

-14.8

-9.4

-4.4

-7.3

-4.6

-2.1

General government primary balance target
% of GDP

ESA 95 general government balance (projections at
unchanged policies)
% of GDP

ESA 95 general government balance (consistent with
primary targets)
% of GDP

Source: Commission services.

25. To achieve the revised fiscal target for 2012, the Government committed to reduce expenditures by 1.5
percent of GDP. Around three quarters of the cuts is of a permanent nature and have already been
introduced in the context of a supplementary budget and other legal acts:
•

•
•
•
•
•
•

•
•

Reduction in pharmaceutical expenditure by at least EUR 1 080 million, in 2012 by reducing medicine
prices (generics and branded medicines), increasing co-payments, reducing pharmacists' and
wholesalers' trade margins, applying compulsory e-prescription by active substance and protocols,
updating the positive list of medicines and implementing a mechanism of quarterly rebates (automatic
claw-back) to be paid by the pharmaceutical industry.
Reduction in overtime pay for doctors in hospitals by at least EUR 50 million.
Reduction in the procurement of military equipment by EUR 300 million (cash and deliveries).
Reduction in the number of deputy mayors and associated staff with the aim of saving at least EUR 30
million.
Reduction in the central government's operational expenditure, and election-related spending, by at least
EUR 270 million, compared to the budget.
Frontloading cuts in subsidies to residents in remote areas, and cuts in grants to several entities
supervised by the several ministries, with the aim of reducing expenditure in 2012 by at least EUR 190
million.
Reduction in the public investment budget (PIB) by EUR 400 million: this cut will be implemented
through cuts in subsidies to private investments and domestically-financed investment projects. The
reduction in the PIB budget will not have any impact on projects that are co-financed by structural
funds (uncompleted project financed by the 2000-06 operational programmes, cohesion fund (2000-06)
projects, 2007-13 operational programmes, and non-eligible expenditure related to the above projects).
Changes in supplementary pension funds and pension funds with high average pensions or which
receive high subsidies from the budget, with the aim of saving at least EUR 300 (net after taking into
account the impact of these cuts on taxes and social contributions).
An average reduction by 12 percent in the so-called 'special wages' of the public sector, to which the
new wage grid does not apply. This will apply after 1 June 2012 and it should deliver savings of at least
EUR 205 million (net after considering the impact on taxes and social contributions).

25

European Commission
The economic adjustment programme for Greece

Table 12. Deficit and measures accounting:
from the deficit in one year to the next
EUR million

% of GDP

2009 deficit (outcome)

36 624

15.8

primary deficit drift in 2010
change in interest expenditure
measures in 2010 1/
impact on ratio of nominal GDP growth

5 681
894
19 074
--

2.5
0.4
8.4
0.3

2010 deficit (outcome)

24 125

10.6

primary deficit drift in 2011
change in interest expenditure
measures in 2011 1/
impact on ratio of nominal GDP growth

10 592
1 964
16 680
--

4.9
0.9
7.7
0.6

2011 deficit (estimate)

20 002

9.3

primary deficit drift in 2012
change in interest expenditure
measures identified for 2012 1/
impact on ratio of nominal GDP growth

10 020
-2 032
13 191
--

4.9
-1.0
6.5
0.5

2012 deficit (projection)

14 799

7.3

primary deficit drift in 2013
change in interest expenditure
measures identified for 2013 1/
measures to be identified in 2013
impact on ratio of nominal GDP growth

3 572
211
1 584
7 639
--

1.8
0.1
0.8
3.8
0.0

2013 deficit (target) 2/

9 359

4.6

primary deficit drift in 2014
change in interest expenditure
measures identified for 2014 1/
measures to be identified for 2014
impact on ratio of nominal GDP growth

1 376
749
3 065
4 016
--

0.7
0.4
1.5
1.9
-0.1

2014 deficit (target) 2/

4 404

2.1

Note: Deficit in year t = Deficit in year t-1 plus primary deficit drift plus change in interest expenditure minus
measures (and for the GDP ratios: plus impact on debt ratio of nominal GDP growth).
1/ Including carry-over impacts.
2/ Overall balance consistent with the primary fiscal balance targets.
Source: Commission services.

26. The Government aims at achieving primary surpluses of 1.8 percent and 4.5 percent of GDP in 2013
and 2014, respectively. These targets are in line with the debt projections on which the euro area summit
decided in October 2011 as a precondition for shifting to a second financing programme. However, the
current policies are not sufficient to bring the public accounts to these targets. Based on the current
projections at unchanged policies, there is a cumulated fiscal gap through 2014 of 5½ percent of GDP. The
Government will have to identify this amount of measures by June 2012 and adopt them in the 2013 and
2014 budgets to reach the targets. Given that the scope for horizontal spending cuts or higher taxes has been
exhausted and the baseline scenario already includes yields from improved tax compliance, these savings
will have to come from structural spending reforms. To identify well-targeted expenditure reductions, the
government has initiated a spending review. It will focus on pensions and social transfers (while preserving
26

4. Program implementation and policy discussions

basic social protection), defence spending (while leaving unaffected the national defence capacity) and
restructuring of central and local administrations. A further rationalization of pharmaceutical spending and
operational spending of hospitals, and welfare cash benefits will also be specified in the coming months. The
mission encouraged the government to draw on external technical assistance to prepare the spending review.

Box 3: Debt sustainability assessment
This box looks at the sustainability of the Greek sovereign debt in view of the latest macroeconomic developments,
PSI, OSI decision and the shift to a new official financing programme. The Greek government debt-to-GDP ratio is
projected until 2030, on the basis of a number of assumptions on real and nominal growth, primary surplus and other
financial transactions not captured in the ESA deficit, such as privatisation receipts and the recapitalisation of banks, as well
as on interest rates on official and market financing.
The projections show that Greece's public debt may return to a sustainable trajectory if the macroeconomic
projections materialise and the programme is fully implemented. Under a baseline scenario, the debt ratio-to-GDP would
decline to below 117 percent in 2020 and would keep declining to below 90 percent in 2030.
The main assumptions for the baseline debt projections are as follows:
•

Economic activity. As discussed in this report, economic activity contracted by 6.9 percent in 2011. A further
contraction by 4¾ percent is projected for 2012. Positive growth rates are expected for 2014 as the economic activity
would stagnate (zero growth) in 2013. These are weaker growth rates than assumed in the autumn, given unfavourable
developments in the last quarter of 2011, and the deterioration in the macroeconomic outlook for Greece's trading
partners. The adoption in February 2012 of an ambitious package of labour market reforms (discussed in this report) will
reduce internal demand and output in 2012; however, by accelerating the internal devaluation it will help the recovery
from the second half of 2013 on. Provided that the agenda of structural reforms in product and service markets is
properly implemented, the previous projections for 2015-20 remain viable: Greece would register growth rates of
between 3 percent (at the beginning of this period and benefitting from the slack accumulated during the recession) to
2¼ percent, at the end of the decade. The economic activity would then decelerate to growth rates of 1½ percent per
annum when approaching 2030, on account of demographic developments.

•

Deflator. The recession and the need of restoring competitiveness through an internal devaluation mean that the GDP
deflator will remain very low for several years. Negative inflation rates are expected for 2012 and 2013. The GDP
deflator would progressively converge to the euro area average (just below 2 percent) when approaching 2020.

•

Fiscal stance. The baseline projections assume that the revised primary surplus targets for 2012-14 are met. Thus, the
primary balance would improve from a deficit of 1 percent of GDP in 2012 to a surplus of 4.5 percent of GDP in 2014.
While the primary accounts for 2011 and 2012 were/are weaker than assumed in the autumn report, the end-point for the
fiscal adjustment (2014: primary surplus of 4.5 percent of GDP) remains unchanged compared to the previous
projections. It should be noted that, while the measures that were announced by Greece for 2012 appear to suffice to
reach the 2012 target, there is still a sizeable fiscal gap for 2013-14 which will have to be bridged by deficit-reducing
measures. The debt projections have been prepared assuming that these measures will be promptly identified and
implemented so that the targets are met. After 2014, when Greece will eventually register an overall deficit below the
Treaty threshold of 3 percent of GDP, the primary surplus is assumed to remain high, although progressively declining
to 4 percent in 2021 and 3½ percent in 2030. Although these primary surpluses are ambitious, they are not without
precedent in international comparisons. Moreover, given the expected improvement in economic activity with a
progressive absorption in the output gap, they would be consistent with an effective relaxation of the cyclically-adjusted
fiscal stance from 2014 on.

•

PSI. The debt projections take into account the debt exchange transaction which took place in March 2012 (see box).
The final impact on the Greek public debt of the debt exchange concerning foreign-law bonds will only be known by
end-March. It is assumed that no bondholders included in the debt exchange will be compensated ex post.

•

OSI. The assumptions about OSI reflect the agreement reached at the Eurogroup meeting of 21 February 2012. Namely,
a reduction in the margin of the Greek Loan Facility (GLF) to a uniform 150 basis points; and the commitment by the
euro area Member States to transfer to Greece an amount which has been calculated based on the expected income
accruing on Greek bonds held by national central banks in their investment portfolio. The former reduces the debt ratio
27

European Commission
The economic adjustment programme for Greece

by 2020 by 2.8 percent of GDP in 2020, and the latter by 1.8 percent of GDP. To ensure that these transfers will
effectively contribute to reduce the debt, the primary deficit/surplus targets are considered before these receipts.
•

Bank recapitalisation. The cost of the support to the Greek banking system is estimated at EUR 50 billion, EUR 10
million more assumed than in the previous compliance report. This reflects not only the impact of PSI, but also the
results of the diagnostic exercise by BlackRock.

•

Privatisation. The privatisation receipts in the central scenario are in line with the revised programme targets. Although
the ultimate objective of Greece privatising EUR 50 billion of assets remains viable, such an objective will take much
longer to reach. The projections assume that EUR 12 billion receipts would be collected in 2012-14, and EUR 45 billion
until 2020. The assumed privatisation proceeds include EUR 16 billion of sales of shares bought by the State in the
context of the banks' recapitalisation.

•

Other. The projections also take into account small technical differences between accrual and cash accounting, with the
latter driving the debt dynamics, the settlement of arrears to suppliers (discussed elsewhere in the report), and the Greek
contribution to ESM share capital. An increase in the cash buffer (currently EUR 3 billion) by EUR 5 billion is assumed
to be accumulated in 2013-14 to deal with unexpected developments in receipts and payments.

•

Market access. The baseline projections assume Greece would be able to return to the medium- and long-term
financing market in 2015, although market access would be initially be at relatively short maturities. Projections show
that, provided market access is restored, small differences in spreads have only a small material impact on the
projections.

Graph 1. Debt sustainability assessment
Current baseline and autumn 2011 baseline
(% of GDP)

180

160

140

120

100

Baseline

80
autumn 2011 baseline

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

60

As in previous projections, sensitivity scenarios illustrate the wide spectrum of outcomes, given policy choices and
macroeconomic developments. These scenarios show, in particular, that relatively small setbacks in terms of growth, because
of an unfavourable external context, or a slow implementation of structural reforms, may have a substantial unfavourable
impact on the debt dynamics. If the annual nominal growth rate is permanently lower than in the baseline scenario by 1
percentage point, the debt ratio in 2020 would be 129 percent of GDP. In contrast stronger growth rates (1 percent per year
above the baseline) would contribute to a debt ratio of 105 percent already in 2020.

28

4. Program implementation and policy discussions

To illustrate the impact of an incomplete fiscal adjustment, the debt was projected assuming that the primary surplus does not
exceed 1.5 or 2.5 percent of GDP, respectively and then remains stable at that level over the whole period. In these cases, the
reduction in the debt ratio will be much slower. Under the scenario according to which Greece does not manage to achieve a
primary surplus above 1.5 percent of GDP, the debt reduction would not become permanent, and the debt ratio could increase
again, as soon as the effect of privatisation disappears. Moreover, under the scenario with a primary surplus of 2.5 percent of
GDP, the debt ratio would be 131 percent of GDP in 2020 and stabilise at around 120 percent of GDP: a level that would not
be reached, in this case, before 2030.
In the case efforts to privatise State assets are blocked by market developments, or administrative and political obstacles,
with privatisation proceeds not exceeding EUR 10 billion by 2020, the debt ratio still declines if other parameters are
achieved. However, 2020, the debt ratio would still be above 130 percent of GDP.
A number of features may constitute a barrier to market access in 2015: after a reduction in the debt-to-GDP ratio in
2012, owing to the debt exchange, the debt ratio will increase again in 2013, given the contraction in nominal GDP and the
still low primary surplus. Under the current baseline projections, it is only in 2014 that the debt will start to progressively
decline from 164 percent of GDP in 2013 on the back of the fiscal adjustment effort, the return to growth and the
privatisation proceeds. Moreover, owing to the agreed co-financing structure, the restructured Greek bonds (estimated at
EUR 62 billion) will be senior to new debt issuances, which may complicate market access. Furthermore, the very large share
of Greek debt held by the official sector (two thirds of total debt at end-2014) may also discourage private investors owing to
a perceived subordination of debt to be issued after market access is regained.

Graph 2. Debt sustainability assessment
Baseline and alternative scenarios
180

160

140

120
Baseline
Primary surplus not exceeding 1.5 % of GDP

100

Primary surplus not exceeding 2.5 % of GDP
Stronger growth (+1%)

80

Low growth (-1%)
Unsuccesful privatisation

60
2007

2012

2017

2022

2027

29

Table. Debt sustainability assessment
Baseline scenario
in bn EUR, unless otherwise noted
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2030

Financing needs
A. General government cash deficit

30

12.2

7.2

1.9

1.7

2.4

2.1

2.1

1.6

1.3

4.5

Primary deficit ("-" is surplus)
Interest payments

2.0
10.2

-3.7
10.8

-9.4
11.2

-9.7
11.5

-10.1
12.5

-10.6
12.6

-10.5
12.6

-11.0
12.6

-11.3
12.6

-13.4
17.9

B. Other government cash needs
Estimated cash adjustments
Arrears
Cash buffer
ESM capital

6.9
2.0
4.0
0.0
0.9

6.3
1.8
3.0
1.0
0.5

5.9
1.5
0.0
4.0
0.5

2.7
2.3
0.0
0.0
0.5

0.9
0.9
0.0
0.0
0.0

0.9
0.9
0.0
0.0
0.0

0.9
0.9
0.0
0.0
0.0

0.9
0.9
0.0
0.0
0.0

0.9
0.9
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0

C. Maturing debt
Bonds & loans after exchange
EU repayment
IMF repayment
Short-term debt (reduction with official funds)

18.9
12.8
0.0
0.0
6.0

15.6
10.8
0.0
1.7
3.1

25.3
18.0
0.0
7.4
0.0

17.0
8.4
0.0
8.6
0.0

7.8
4.4
0.0
3.2
0.0

8.6
6.9
0.0
1.4
0.0

5.8
3.3
0.0
2.5
0.0

10.6
6.9
0.0
3.6
0.0

9.9
2.4
2.8
4.5
0.0

9.7
3.4
6.2
0.0
0.0

D. Cost of PSI
Cash upfront
Bank recapitalisation

78.3
29.5
48.8

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

E. Gross financing needs (A.+B.+C.+D.)

116.3

29.1

33.1

21.4

11.1

11.5

8.7

13.0

12.0

14.2

F. Private financing sources
Market financing
Privatisation 1/

3.2
0.0
3.2

4.3
0.0
4.3

4.4
0.0
4.4

13.3
7.6
5.7

8.8
3.0
5.9

11.1
5.0
6.1

8.4
3.3
5.1

12.7
7.4
5.3

11.9
6.4
5.5

14.2
14.2
0.0

G. Additional OSI
GLF margin reduction (retroactive application)
Grants from ANFA profits

1.2
0.5
0.7

0.6
0.0
0.6

0.5
0.0
0.5

0.6
0.0
0.6

0.6
0.0
0.6

0.4
0.0
0.4

0.3
0.0
0.3

0.3
0.0
0.3

0.2
0.0
0.2

0.0
0.0
0.0

112.0

24.2

28.3

7.5

1.6

0.0

0.0

0.0

0.0

0.0

-7.3
-1.0
-4.7
-0.7
-5.4
204
327
160

-4.7
1.8
0.0
-0.4
-0.4
203
333
164

-2.2
4.5
2.5
0.0
2.5
208
335
161

-0.8
4.5
3.1
0.9
4.0
216
331
153

-1.0
4.5
3.0
1.1
4.1
225
327
145

-0.9
4.5
2.8
1.4
4.2
235
322
137

-0.9
4.3
2.6
1.7
4.3
245
319
130

-0.6
4.3
2.5
1.8
4.4
256
315
123

-0.5
4.3
2.3
1.9
4.2
266
310
116

-1.2
3.5
1.5
1.9
3.3
383
337
88

Financing sources

H. EU-IMF assistance covering needs
Overall fiscal balance (% of GDP)
Primary deficit (% of GDP)
GDP growth real (%)
GDP deflator
GDP growth nominal (%)
GDP nominal (bn EUR)
General government debt (bn EUR)
Gross debt (% of GDP)

-9.3
-2.9
-6.8
1.6
-5.3
215
356
165

4. Programme implementation and policy discussions

4.3.

STRUCTURAL FISCAL REFORMS

4.3.1. Privatisation
27. Although only a few transactions have occurred so far, mechanisms are progressively in place to
ensure a continuous supply of assets to the market. Due to negative market conditions, legal
complications and delays in implementing some intermediate steps, privatisation proceeds collected in
2011 were slightly below EUR 1.6 billion. In the months preceding the debt exchange operation
(PSI), the market was particularly hostile to Greek assets. Although the Privatisation Fund has
appointed the necessary technical, legal and financial advisers for the transactions that are expected
for 2012 and 2013, several assets are not yet mature enough for privatisation. The intermediate steps
include the restructuring of loss-making firms, state-aid clearance, rights clearance, and regulatory
changes, including the unbundling of utilities. All these intermediate steps are necessary to ensure
privatisation is successful in terms of receipts, but also that it contributes to the opening to
competition of some sectors. Concerning real estate, after long delays, a new General Secretariat for
Public Property has now become operational. It should accelerate the identification of assets to be
sold, and help in clear administrative steps like the reallocation of land uses.
28. The target of collecting EUR 50 billion in privatisation receipts remains viable, although over a
much longer horizon than envisaged initially. Annual revenue targets have been revised, whereby
at least EUR 5.2 billion should be collected by end-2012, EUR 9.2 billion by end-2013, EUR 14
billion by end-2014 and EUR 19 billion by end-2015. These figures are consistent with the debt
sustainability analyses prepared since autumn 2011, on the basis of which the euro-area summit
agreed in principle on designing a second programme.
Table 13: Privatisation plan: transactions so far

Assets
OTE
OPAP 1
(license
extension 202030)

10%

Remaining
stakes owned
by the Greek
Government
4%

Proceeds
(cash, EUR
million)
392

October 2011

-

-

October 2011

-

December
2011

Cumulative
since 2011
(EUR million)

Delayed
payment

392

-

375

767

85
(by Q4 2013)

-

474

1 241

85
(by Q4 2013)

-

-

317

1 558

-

-

-

-

1 558

31
(end-March
2012)

Date of deal

Stake sold

July 2011

OPAP 2
(sale of new
license for
VLTs)

Mobile
Telephony
Spectrum
(license
extension)

Four aircraft
(sale)

February and
March 2012

31

European Commission
The economic adjustment programme for Greece

Table 14: Planned privatisation receipts

32

By the end of:

Cumulative receipts,
cumulative since
2011
(EUR million)

2012 Q1

1 558

Q2

1 558

Q3

2 700

Q4

5 200

2013

9 200

2014

14 000

2015

19 000

4. Programme implementation and policy discussions

Table 15: Privatisation - transactions in the pipeline
Timing of Privatization
(Launch of Tender)

Project

Transferred
to Fund by

Advisors
contracted by

1/
1/

√
√
√
√

Intermediate steps

I. State-owned enterprise/share sale
2012 Q1
Q1
Q1
Q2

Public Gas (DEPA)
Public Gas (DESFA)
Football Betting (OPAP)
Hellenic Defense Systems (EAS)

√
1/

Call for tender launched in February 2012.
Call for tender launched in February 2012.
State aid clearance.
Clearance by Ministry of Defense. Adopt restructuring law by
April 2012. State aid clearance.
Sign MoU with Paneuropean April 2012.

Q2
Q2

Hellenic Petroleum (HELPE)
Horse Racing (ODIE)

March 2012 2/
March 2012 2/

March 2012

Q2
Q2
Q2
Q2
Q2
Q2
Q3
Q4

Athens Water (EYDAP)
Thessaloniki Water (EYATH)
Mining and Metallurgical Company
Hellenic Post (ELTA)
Casino Mont Parnes
Electricity Company (PPC)
Hellenic Vehicle Industry (ELVO)
Railways (Trainose)

March 2012
March 2012
March 2012 2/

March 2012
March 2012

1/
1/
1/
1/

March 2012
March 2012
March 2012
March 2012
August 2012

Athens Airport (AIA)

March 2012 2/

√

2011 Q4

Hellenic Motorways

√

March 2012

Complete negotiations. Parliamentary ratification of changes in
the concession. Establish regulatory framework by end of 2012.

Q4
2012 Q2

State Lottery
Egnatia Odos

√
√

√

Expected financial offer from the three bidders by April 2012.

March 2012

Q2

Small ports and marinas

1/

√

Unbundling into services/motorway rights. Establish regulatory
framework by end of 2012.
Identify proper policy. First lot of rights to be transferred by
March 2012. Establish regulatory framework by September
2012.

Q3

Regional airports

√

March 2012

Q4

Thessaloniki Port (OLTH)

March 2012 2/

March 2012

Q4

Piraeus Port (OLP)

March 2012 2/

March 2012

Q4

Large regional ports

1/

March 2012

South Kavala Gas Storage
Mining rights
Digital Dividend

√

March 2012

Hellenikon 1
Sale/repo N buildings

March 2012 2/

√
√

Q1

Real Estate IBC

March 2012

√

Q1

Real Estate/Astir Vouliagmenis

1/

√

Q1
Q1
Q2
Q3

Real Estate/Cassiopi
Real Estate lot 1 (Afantou)
Real Estate lot 2
Real Estate lot 3

March 2012

√
√
√
√

2013 Q1

1/

√

√

Adopt restructuring law and establish time-bound concession
rights by March 2012. State aid clearance.
Establish regulator and pricing policy by June 2012. Extend
Establish regulator and pricing policy by June 2012. Extend
Adopt restructuring law by March 2012.
Adopt law determining the public service by February 2012.
State aid clearance.
Restructuring to be decided by June 2012.
Adopt restructuring law by June 2012.
Ongoing restructuring and last phase of state aid clearance by
June 2012.

II. Concessions

Q4
To be determined
To be determined

Identify proper policy. Establish regulatory framework by
September 2012.
Identify proper policy. All port shares voting rights to be
transferred by March 2012. Establish regulatory framework by
September 2012.
Identify proper policy. All port shares voting rights to be
transferred by March 2012. Establish regulatory framework by
September 2012.
Identify proper policy. All port shares voting rights to be
transferred by March 2012. Establish regulatory framework by
September 2012.
Clear legal obstacles by September 2012.

III. Real Estate
2011 Q4
2012 Q1

√

1/
1/
1/

Adopt law on land use by March 2012.
Government to sign rental contracts by May 2012. Transfer
clean title to the HRADF by May 2012.
Strategic environmental study. ESCHADA to be issued by June
2012. 3/
Negotiations with NBG. ESCHADA to be issued. Process led
by NBG by June 2012.
Move NATO radar. ESCHADA to be issued by June 2012.
ESCHADA to be issued by June 2012.
Identify assets by June 2012.
Identify assets by September 2012.

Source: HRADF update on projects under development.
1/ Transfer of assets/rights at the point of privatization.
2/ Shares have already been transferred, but not yet voting rights.
3/ ESCHADA = Zoning and land planning permit.

33

European Commission
The economic adjustment programme for Greece

4.3.2. Revenue administration, fight against tax evasion and tax reform
29. The tax reform has been delayed. The tax reform, whose adoption by Parliament was initially
planned for September 2011 and then postponed to March 2012, is now expected to be enacted by
end-June 2012. This revision in the time-schedule was in agreement with the staff teams, given that
the need to prepare the reform properly and in consultation with a wide range of stakeholders could
not be accommodated in view of other urgent tasks that are putting a strain on the authorities’
resources (such as the adoption of a wide range of prior actions for the new programme and PSI
implementation). However, to ensure that the process gains momentum now, the Government is
expected to announce a full schedule of intermediate steps already in March, to ensure consultation
and adequate review by the Commission, ECB and IMF staff. The reform should aim at making the
tax system simpler, lowering compliance costs, and improving its growth-friendliness. The reform
should concern personal income, corporate, VAT and property taxes, as well as the employers' social
contributions. In particular, the reform should decrease the high marginal rates on labour and broaden
tax bases. The mission was of the view that the tax burden from indirect taxes relative to direct taxes
and social contributions should not be reduced. Simplification of the tax system implies the need to
eliminate tax exemptions and preferential regimes, including those of a geographic nature. The reform
needs to be ambitious in scope but it has to be carefully designed to ensure it reaches its objectives
and is fiscally neutral.
30. The authorities committed to refrain from extending tax amnesties in the future. Greece has a
tradition of very frequent tax amnesties, partially in the form of very generous instalment plans for tax
debts. While some of them might have had a positive, albeit rather limited short-term impact on tax
collection, their frequent repetition has undermined incentives for tax compliance and the credibility
of the government in respect to its willingness and capacity to enforcing tax law, eroding tax morale
and thereby promoting evasion. The Government has committed to forego any new tax and social
contribution amnesties and to limit instalment plans to small debtors that can be clearly identified as
enduring acute financial hardship. In this respect, the Greek government repealed a recent law which
would have extended the payment terms for tax debt and overdue social security contributions.
31. Strengthening revenue administration and fighting tax evasion are amongst the top priorities of
the new programme. This is not only because of the need to increase revenue and reduce the
government deficit without further increases in tax rates. It is also important for the social
acceptability of the adjustment programme, as the reduction in tax evasion will lead to a fairer sharing
of the adjustment burden. Despite some progress, the implementation of those reforms has been slow
and results are not yet satisfactory. Tax and social security evasion may have actually increased in
2011, against the backdrop of negative economic growth and increased liquidity constraints of
taxpayers. To date, the government has adopted legislation and administrative reforms that aim at
enhancing the efficiency of tax administration and controls, putting in place effective project
management, and devising an anti-evasion strategy to restore tax discipline and improve compliance.
The focus has now shifted towards implementation and the increase in the number of tax audits
indicates that the government aims at stepping up its efforts in this regard. Furthermore, the
government is about to launch a new performance evaluation system of tax offices, which will help
strengthen incentive structures. The government has also initiated the process of merging local tax
offices and to equip them with a unified IT system, with a view to having it completed by end-2012.
Moreover, the Government is expected to adopt mechanisms to better protect whistle-blowers
reporting corruption in the tax administration, introduce procedures for the rotation of managers, and
set targets for audits of asset declarations of tax officials, leading to a fully-fledged anti-corruption
plan in the autumn 2012.
32. There are several parallel initiatives to improve tax collection. The most important are: a new tax
dispute resolution system which will make it compulsory to exhaust the administrative dispute phase
before moving on to the judicial stage; an increase in the number of tax auditors from 1 000 to 2 000;
34

4. Programme implementation and policy discussions

and the replacement of managers in tax offices that underperform relative to their performance targets
defined under the programme. The mission stressed the importance of making the tax administration
progressively more independent and accountable, with headquarters controlling local tax offices. It is
also critical to integrate the collection of taxes and social contributions and organise common audits in
the near future.
4.3.3. Expenditure control
33. Reforms to strengthen public expenditure management are progressing. Timely provision of
fiscal data has been improved due to the online submission of such data by line ministries, local
governments and legal entities. However, the system has to be further improved so as to also include
timely, comprehensive and accurate information on social security funds and on the public investment
budget. Expenditure control has also improved with the adoption of commitment registries in
ministries and other entities, which should effectively detect over-commitments and arrears for the
ordinary budget and the investment budget. The General Accounting Office has established a
coordination committee to monitor and strengthen the implementation of commitment controls to
prevent further accumulation of arrears.
34. The level of arrears remains high despite the current process of setting up commitment
registries. Although commitment registries are now operational in line ministries, the reform of
public finance management is delayed and the level of arrears is still high especially for the social
security funds and hospitals. The mission stresses that the high level of arrears, including in tax
refunds, has a very negative impact on the economy as a whole. It contributes to the lack of liquidity
in the economic system affecting mainly the private firms. In this regard, a settlement of arrears could
give a positive impulse to the economy indeed.
Table 16. Arrears to suppliers
(EUR million)
Total State
Local Government
Hospitals
Social Security Funds
Other government entities
Total General Government

31-Dec-10 31-Mar-11 30-Jun-11 31-Jul-11 30-Sep-11 31-Dec-11
866.2
1 071.5
980.0
949.9
924.7
588.9
577.0
852.8
917.4
955.8
928.5
817.8
1 522.9
1 687.1
1 848.6 1 747.4
1 700.8
1 281.2
2 086.4
2 388.0
2 594.8 2 684.1
2 716.1
2 825.6
284.4
245.0
230.3
221.9
233.7
219.1
5 336.8
6 244.4
6 571.1 6 559.1
6 503.8
5 732.5

Source: General Accounting Office.

4.3.4. Public administration, public procurement and social programmes
35. Public administration reforms are ongoing, although in certain cases it might take some time
before tangible results materialise. After the publication of the OECD report on the “Functional
Review of Public Administration in Greece” in December 2011, a new phase of reforms has started
with the authorities’ efforts reflecting the OECD recommendations in a law (which is currently still
under preparation) and the establishment of a concrete road map with the help of external technical
assistance. The aim is to tackle the basic deficiencies of the public administration in a comprehensive
manner. Progress has been made in the creation of a high-level transformation steering group under
the direct supervision of the Prime Minister, while an inter-ministerial coordination working group is
under way. Fifteen ministries are planned to be thoroughly restructured by this summer, starting with
the Ministry of Administrative Reform. Similar work is also being prepared at the regional and local

35

European Commission
The economic adjustment programme for Greece

levels. The reform of public administration should help the government become more effective, at a
time when public employment is falling.
36. The reduction in public employment has been slower than programmed, as the higher-thanexpected number of exits in 2011 was overcompensated by a higher-than-expected inflow. This
trend appears to be related to the lack of effective centralised coordination of public sector
employment decisions and the weak implementation of agreed measures aiming to reduce
employment. In particular, in 2011 new hiring exceeded the maximum level imposed by the 1:10
attrition rule (by which only one in ten employees exiting from the public sector in 2011 should be
replaced by a newly hired employee). Moreover, only a small number of redundant staff were
transferred to the labour reserve scheme. This slippage may have been counteracted by a tendency of
increased voluntary retirements which may have been induced by the establishment of the labour
reserve for redundant staff. The government has stated its commitment to reduce public employment
by at least 150 000 in the period 2011–15. To achieve this target, it is expected to strictly apply the
existing numerical rule between staff inflow and outflows, reduce contractual employment, and
transfer to the labour reserve for redundant staff 15 000 staff prior to their dismissal. The mission
stressed that the reduction in staff should not take place in an across-the-board manner, but by on a
targeted approach to identify redundancies in the different units or departments with administrative
overlap to other parts of the public sector and/or overstaffing. This targeted approach should be
supported by the ongoing public administration reform.
37. The Single Public Procurement Authority (SPPA), the new central body for the coordination of
public procurement policy and for the monitoring, planning and the implementation of procurement
procedures in Greece, needs to start operation. The government has delayed the issuing three key
ministerial decisions that are necessary for the authority to enter into force; these ministerial decisions
provide for the appointment of the members of the board of the SPPA, for the implementing
regulation of the authority, as well as for the establishment of positions and organization of human
resources in the SPPA. In parallel, following the signature of the contract for an e-procurement
platform, the first module on e-auctioning should be operational in March 2012.
38. Given the poor targeting of social programmes, there is quite some scope to generate additional
savings in this area, while, at the same time, more effectively protecting the most vulnerable. So
far, social policies in Greece seem to lack a stringent strategy on how to target those parts of society
that are truly in need of government assistance. In particular, while a wide-range of social benefits are
allocated without means-testing to particular groups of society which are not subject to acute social
hardship, certain groups of households at the lower end of the income distribution remain unprotected
and are subject to pronounced poverty risks. The OECD review under preparation is expected to
highlight areas where there is room for significant efficiency gains and savings can be generated,
while improving social fairness of the respective policies.
4.3.5. Healthcare and pension reform
39. Healthcare reform is a crucial component of Greece's fiscal consolidation efforts, given the high
share of public expenditure that is spent on healthcare. Despite efforts and some progress in reforming
the system, major weaknesses still need to be addressed to increase the efficiency, cost-effectiveness
and equity of the system. The institutional setup remains fragmented, leading to reduced policy
coherence. Corruption is reported, data availability is still inadequate; and the lack of effective
monitoring and control mechanisms for prescription of medicines is hampering the achievement of the
targets. In 2011, there were delays in the implementation of policy measures on pharmaceuticals.
Strong resistance by vested interests, combined with the lack of timely data and effective monitoring
mechanisms, has made healthcare reform difficult. However, progress has been observed in areas

36

4. Programme implementation and policy discussions

such as hospital accounting and centralised procurement, leading to some savings in the hospital
sector.
40. Major policy efforts are necessary in several areas. In particular, EOPYY, the new national health
organisation responsible for purchasing health services, needs to become fully operational in order to
induce savings through a more rational use of available resources. In order to reduce the
fragmentation and contribute to policy coherence, the Government has expressed the intention of
moving all health-related institutions and policies to the responsibility of the Minister of Health,
instead of the current distribution of tasks among the ministries of Health, of Labour and of Regional
Development. The rationalisation of the hospital network needs to be speeded up and operational
costs reduced further. A set of measures should be simultaneously implemented of such as
compulsory prescription by active substance (INN), compulsory e-prescription by doctors and
pharmacists, regular monitoring of doctors' prescription behaviour and their compliance with binding
prescription guidelines, mandatory generic substitution by pharmacies, further reduction of prices of
generics and off-patent medicines to move them closer to the prices paid in most other EU countries.
Moreover, the Government is putting in place an automatic claw-back mechanism (i.e. a rebate which
will be charged on pharmaceutical companies on a quarterly basis) will guarantee that outpatient
pharmaceutical spending for 2012-15 does not exceed the available annual financial envelope in the
budget.
41. A number of adjustments are still necessary to complete the pension reform. The reform of the
main pension schemes at the beginning of the adjustment programme has substantially improved the
dynamics of public pension expenditure. However, the supplementary pension schemes (including
welfare lump-sum schemes) remained unreformed, though both auxiliary pension and lump-sum
pensions of civil servants have been reduced in 2012. In the most recent projections by the National
Actuarial Authority, the budget of the supplementary pension schemes (and other, unreformed,
schemes) is projected to be consistently and increasingly in deficit over the coming decades: in 2011,
their deficit, about 0.4 percent of GDP, had to be financed through public resources. The current and
future deficit in several supplementary funds threatens the viability of these funds already in the shortto medium-term and calls for both an immediate reduction in pension benefits and an in-depth
revision of their functioning. Moreover, the existing setup appeared to give rise to persistent inter- and
intra-generational differences, and as such is not socially equitable. The Government and mission staff
agreed that the forthcoming reform of the supplementary pension funds – initially via a framework
law, and later on, through other implementing acts – is of paramount importance to complete the
reform of the pension system and to ensure the long-term sustainability of public finances.
4.4. GROWTH-ENHANCING STRUCTURAL REFORMS
4.4.1. Labour market
42. In 2011, a number of measures were adopted to allow for a greater role of firm level
negotiations in the wage bargaining process There was action on three main inter-related fronts:
first, not extending occupational and sector collective agreements to non-signatory firms; second,
ensuring that firm-level agreements prevail over occupational and sector agreements by suspending
the so-called favourability clause; and, third, allowing firm-level agreements to be negotiated by
workers' associations (in addition to trade unions), with a view to increasing the number of firms that
can conclude those type of contracts. Although firm-level collective contracts have increased in
importance and helped some firms to adjust their labour costs, the continuing deterioration in
economic activity, the increase in unemployment, as well as the persistence of large external
imbalances is a clear indication that further labour market reforms are necessary—to allow wages and

37

European Commission
The economic adjustment programme for Greece

hours to adjust faster and in line with the needs of firms and economic activity more broadly, helping
to save jobs and create new employment opportunities.
43. A tripartite dialogue did not deliver a strategy to boost competitiveness and employment. In late
2011 and early 2012, the Government promoted discussions with, and between, the social partners.
However, the agreement reached between the social partners' representatives was not commensurate
with the needs of the Greek economy, and did not deliver a strategy to quickly address the large
challenges Greece is faced with. In a context of a sharp decline in employment, emergency action was
needed to ensure the quick responsiveness of wages to the fall in economic activity. The authorities
and the mission staff discussed and agreed on a package of actions to be taken by the Government in
the short term, which should contribute to reduce labour costs in the business sector by 15 percent
over the programme horizon.
44. The measures decided by the government build on two pillars: an adjustment of wage floors
and a revision of the collective bargaining system, with a view to spurring and easing contract
renegotiation and promoting wage flexibility. Frontloaded action is justified given the downward
rigidities in wage-setting systems, which have prevented the adjustment of private sector wages and
contributed to the sharp increase in unemployment, in particular among the low-skilled and youth.
The prompt adjustment in wages is particularly important in the context of the monetary union, as the
effective exchange rate needs to adjust through nominal prices and wages, rather than movements in
the nominal exchange. The downward wage flexibility helps viable companies to reduce their
production costs, thus creating a potential gains in external market shares, promote investment and
thus, to accelerate the much needed change in the structure of the economy. The mission noted,
however, that labour and product market reforms need to go in parallel to avoid that wage cuts simply
result in an increase in profit margins and rents, which could be socially damaging.
45. The Government has legislated a reduction in minimum wages. The wage floors in the National
General Collective Agreement (NGCA) have been reduced by 22 percent, or even by 32 percent for
those younger than 25. This is important as the level of minimum wages and of other wages regulated
by NGCA became more binding as the average wage declines. Thus, the reduction in the minimum
wage creates additional room for downward wage adjustment to be decided by employers and
employees in each firm or sector. In recent years, minimum wages in Greece ranked among the
highest in the EU, when compared, with prosperity indicators like the average wage or GDP per
capita. The Greek minimum wage is also nominally higher than in the main competitors, notably
neighbouring countries and other Southern European economies. By reducing minimum wage levels,
the government also aims to fight informality and undeclared work, pulling employment into the legal
sector, as well as helping to support the employment of low-skilled workers. The reduction in the
NGCA wages are expected to have a strong signalling role to other sectoral and firm-level wages. To
help this process, automatic wage increases (i.e. seniority bonuses) have also been suspended.
46. A broader reform of the wage setting system at national level will be prepared in the coming
months. The Government is expected to invite social partners to simplify the NGCA and to establish
a single-rate statutory minimum wage on a more permanent basis, similar to most other EU countries.
This is relevant as the current system sets different minimum wages according to, for instance, type of
work, education, marital status, and seniority, without these differences in wage levels necessarily
reflecting productivity. The overall objective of the reform will be to emphasise the nature of the
statutory minimum wage, notably to safeguard those workers that have less bargaining leverage, and
to avoid abuse.

38

4. Programme implementation and policy discussions

Graph 21. Recourse to arbitration to settle
negotiations disputes
35
30

% of agreements set through arbitration
(1995-2010)

25
%20
15
10
5
0
National occupational Local occupational
agreements
agreements

Sector agreement

Firm-level agreement

Source: Greek Government and Commission services calculations

Graph 22. Nominal Unit Labour Cost
(2001=100)
140

130

120

110

100

90

01-Q1 02-Q1 03-Q1 04-Q1 05-Q1 06-Q1 07-Q1 08-Q1 09-Q1 10-Q1 11-Q1

Greece[11-Q1]

Eurozone[11-Q2]

Germany[11-Q4]
Source: Eurostat

39

European Commission
The economic adjustment programme for Greece

Table 17: Minimum Monthly Wages
(EUR, annual wage divided by 12)
2001

2005

2008

2009

2010

2011

Belgium

1 129

1 210

1 323

1 388

1 388

1 429

Bulgaria

42

77

112

123

123

123

Czech Republic

145

238

318

303

307

324

Estonia

102

172

278

278

278

278

Ireland

977

1 238

1 462

1 462

1 462

1 462

Spain

506

599

700

728

739

748

France

1 105

1 252

1 301

1 329

1 344

1 365

Latvia

99

115

228

255

254

282

Lithuania

121

152

232

232

232

232

1 274
158
539
1 167
211
390
49
391
102
994

1 467
231
558
1 265
209
437
82
490
168
1 161

1 590
283
617
1 346
325
497
138
553
255
1 196

1 662
266
635
1 390
297
525
146
589
296
1 054

1 704
264
660
1 412
319
554
139
666
308
1 123

1 758
287
665
1 430
348
566
158
748
317
1 112

548

668

794

840

863

870

Luxembourg
Hungary
Malta
Netherlands
Poland
Portugal
Romania
Slovenia
Slovakia
United Kingdom
Greece
Source: Eurostat

47. The recently legislated reforms will give a big push to the re-negotiation of collective
agreements. In particular:
•
•

•

•

40

Collective agreements can only be concluded for a maximum duration of 3 years. The
reason is that agreements that have a longer term, or without a fixed term may become inflexible
when an economy is going through a period of deflation to restore competitiveness.
The regime of 'after effects' is revised. When a collective agreement expired it remained in
force for six months, after which its clauses became the basis of individual contracts. To promote
the renegotiation of collective agreements and restore the level-playing field between employers
and employees, the intermediate period following expiry is reduced to three months and – until a
new collective agreement or new individual contracts are agreed – total remuneration is
curtailed, as a number of allowances paid by firms are no longer applicable.
Recourse to arbitration to settle negotiation disputes will be allowed only if both parties
(employee and employer representatives) agree to it. This is needed in order to ensure that
negotiation effectively takes place. This is expected to put an end to the very high recourse to
arbitration in Greece and the high share of agreements that used to be settled through arbitration.
Privileged labour conditions in former state-owned firms will be better aligned with those
in the rest of the private sector. Privatised former SOEs are not competitive if they are forced
to inherit labour conditions from the public sector, which notably have included public-sectorlike tenure and very generous automatic wage increases. Such conditions will be aligned with
those in the wider private sector.

4. Programme implementation and policy discussions

48. Cuts in non-wage labour costs will also help the economy to become more competitive. Over the
coming quarters, social contribution rates are expected to be reduced by 5 percentage points. Given
the fiscal consolidation needs this must happen in a budget-neutral way, via a parallel reduction of
non-core social benefits. The reduction in non-wage labour costs should give an additional incentive
to employment creation. Additionally, formerly state-owned enterprises, have pension schemes that
entail higher contributions rates than for the general private sector scheme. This may lead to higher
production costs and hence prices. In so far as this concerns utilities, these costs are then effectively
spread over the whole economy. Such cases will be assessed through actuarial studies and where
necessary contributions and benefits will be adjusted.
49. The fight against undeclared work and social contribution evasion is very important. There is
evidence suggesting that the evasion of social contribution payments has increased in recent quarters.
Moreover, there has been less action in fighting social contribution evasion than in tax evasion. In this
context, increasing the effectiveness of the Labour Inspectorate is critical. Efforts to streamline social
contribution collection will have to be stepped up in the course of 2012.
4.4.2. Regulated professions
50. Work for the effective implementation of the 2011 law on professional freedom has finally
started in earnest. The government has updated the list of professions and economic activities falling
under the scope of this law and the line ministries have identified restrictions within the legislative
framework of each profession that conflict with it. The Hellenic Competition Commission (HCC) has
issued some opinions on the requests for derogations to the liberalizing provisions of that law
submitted by specific professions. Most of these opinions have been against reinstating previously
existing restrictions: a development that the mission has welcomed. These work streams should be
followed and enhanced by appropriate legislative amendments to the regulations of each profession to
ensure that restrictions are effectively identified and removed. With the support of external technical
assistance, the Government has started issuing circulars for a group of 20 professions and to finalize
all other amendments by end-year.
51. There have also been positive developments as regards the main regulated professions. Notaries'
fees have been cut by almost 30 percent as these are generally higher than in other euro area countries.
The mission has, however, expressed concerns that the planned increase in real estate legal values
could jeopardize such a reform and an additional cut in notarial fees would be warranted. The new
legislation providing for the freedom of incorporation of law firms in Greece and of law firms to open
branches is expected to increase competition, providing efficiency gains to Greek law firms and
benefits to clients. Moreover, the powers granted to the Technical Chamber of Greece to control
'unusually low fees' have been repealed. Looking forward, the mission argued that there remains a
need to change the rules governing minimum fees of lawyers, engineers and architects. At the same
time, additional measures are needed to increase the transparency of all professional bodies in
financial and disciplinary matters (an area where there has been limited progress, except for the legal
profession), as well as the urgent need to assess and revise the existing reserves of professional
services to holders of specific qualifications.
4.4.3. Energy and transport
52. Compliance with energy policy conditionality remains mixed. The priorities for the sector are
increasing competition in the generation side of the market, while at the same time catering for an
effective unbundling of transmission and distribution systems in gas and electricity. These
requirements should be considered against the backdrop of the privatisation process of gas and
electricity undertakings, scheduled for the next quarters. On electricity generation, measures agreed in

41

European Commission
The economic adjustment programme for Greece

previous quarters aim to give access to competitors to the lignite-fired generation capacity as well as
to hydro reserves of the Public Power Corporation (PPC), the state-owned vertically-integrated
electricity company. The Government has now committed to grant access to 40 percent of lignite
capacity to the incumbent's competitors by end-March 2012 and it has put forward the idea of selling
hydro plants, which could be combined with the sale of lignite plants.
53. Electricity and gas transmission systems need unbundling before privatisation. On electricity,
the transfer of assets and personnel to the unbundled transmission system operator (TSO) is now
likely to be finalized shortly. Regarding the gas company (DEPA/DESFA), the Greek authorities
introduced in December 2011 an amendment to the latest energy law to allow DEPA and DESFA to
be sold as a vertically-integrated company, in addition to the option of selling both companies
separately following the ownership unbundling of DESFA as originally provided for in that law.
Whilst the combined sale of DEPA and DESFA might be financially more attractive in the short term,
it may raise energy policy and security of supply issues. The mission has argued that the Greek
government should ensure strict adherence to the provisions of the so-called 'Third Energy Package,'
addressing also the concerns stemming from a potential joint sale of the two companies.
54. As transport opens up and implements its restructuring plans, subsectors are readier for
privatisation. The sector has rapidly changed in the last months. Road haulage is now open, with the
end of its transitional period in January 2012, and the reduction in costs for issuing new operator
licenses. The occasional passenger transport sector has been liberalised with the adoption of
secondary legislation in late 2011, and the Government expressed the intention of simplifying the
highly regulated structure of regular passenger transport. Concerning railways and regional airports,
which have been public monopolies so far, the respective firms are being prepared for privatisation.
Graph 23. Regulation of the airline industry
6
5
4
3
2

0

Belgium
Germany
Slovak Rep.
Netherlands
Denmark
France
Sweden
Luxembo…
Austria
U.K
Hungary
Slovenia
EU
Spain
Italy
Finland
Ireland
Poland
Estonia
Portugal
Czech Rep.
Greece

1

Note: 2008 data.
Data for Belgium, Germany and the Slovak Republic are equal to zero. Index scale of 0-6 from least to most restrictive.
Source: OECD, Economic Policy Reforms 2012 – Going for Growth (2012)

4.4.4. Business environment and reforms in product and service markets
55. The publication of the 'business-friendly Greece' (BFG) action plan continues to accumulate
delays. The action plan could serve as a communication tool on the Government's efforts to improve
the ease of doing business in Greece. In the meantime, a draft omnibus law has been tabled in
Parliament covering several of the actions that the BFG is expected to address, such as the provisions
on the new form of limited liability company, the simplification of the regulatory framework on

42

4. Programme implementation and policy discussions

exports, as well as the streamlining of archaic publication requirements of company data in
newspapers.
56. Draft legislation has also been prepared to strengthen the 'Invest in Greece' agency, the
strategic investment promotion agency. The objective is to adopt more flexible operational rules, as
well as enhancing its status vis-à-vis other government bodies involved in the licensing process and to
provide it with an adequate allocation of resources. The mission stressed, however, that strengthening
'Invest in Greece' should not reduce efforts to complete and simplify the general regulatory framework
of licensing for environmental purposes, for manufacturing activities, as well as the point of single
contact (PSC) for service providers. The rationale is that all investors and service providers should
benefit from speedier and more predictable procedures, not only those that have been identified as
strategic. The Government has pledged to complete the issuance of the pending implementing
legislation of both laws by the second quarter of 2012, with a clear view of simplifying procedures
and limiting permits and licenses in cases that are strictly need.
4.4.5. Absorption of structural funds
57. Changes in the co-financing rates have contributed to accelerate absorption of structural funds.
The annual target for the submission of 15 large projects was met, and the payment claims submitted
for reimbursement (EUR 3 301 million) were above 98 percent of the 2011 annual target. However,
this result would, most likely, not have been possible without the increase of the co-financing rate to
85 percent and the 10 percent top-up facility. This institutional change had a total financial impact in
2011 of EUR 958 million. Up to mid-February 2012, the absorption rate of the National Strategic
Reference Framework (NSRF), i.e., the reference document for the programming of European Union
Funds at national level, was above 40 percent, up from 25 percent one year earlier, and slightly above
the EU27 average of 35 percent.
4.4.6. Judicial reform
58. There has been progress in judicial reform. Steps have been taken to reduce the backlog of tax
cases in accordance with a work plan extending until July 2013 and which will be updated quarterly.
Moreover, on the backlog of non-tax cases an external advisory group of experts has been appointed
by the Government and concrete recommendations are expected in the second quarter of 2012. The
Government has continued to introduce various e-justice applications, including the launch of an efiling pilot project in the Athens Court of First Instance which, based on the e-justice work plan, will
accelerate procedures. A newly-established task force will oversee the gradual compilation and
publication of information on tax cases, civil cases and corporate insolvency cases starting from endMarch 2012, as the basis for the development of a performance and accountability framework.
59. Other initiatives also aim at increasing the efficiency of the judicial system. At the beginning of
March 2012, the Parliament adopted a multi-subject law addressing judicial case processing,
enforcement issues, the cost of civil litigation and the organisation of court and court officials. This
legislative initiative is without prejudice to the comprehensive review of the Code of Civil Procedure,
in line with international best practice. Also with the goal of increasing efficiency and accelerating
procedures, the Government has taken the first steps to promoting alternative dispute resolution,
especially mediation, within the business community. The law aims to set up magistrates courts as the
gateway to civil justice in Greece, by strengthening and concentrating voluntary jurisdiction at the
level of these courts, for example in matters relating to inheritance and setting up and administration
of legal entities. The Government has therefore embarked on the reorganisation of the magistrates
courts and the allocation of appropriate resources to the new court structure, deploying existing
resources available within Greece’s judiciary and public administration.

43

European Commission
The economic adjustment programme for Greece

4.5. FISCAL FINANCING AND TREASURY MANAGEMENT
60. The outstanding stock of T-bills remains large. After increasing substantially in the summer, the
stock of T-bills remained very high in autumn, as the fifth disbursement, initially planned for June
was delayed to July, and the sixth disbursement (which turned out to be the last of the first financing
programme) took place in December, instead of September. Greek banks and social security funds
were the main participants in short-term debt auctions. As a result, the Treasury was able to roll-over
maturing short term debt nearly in full and at a relatively low cost. The yields on Treasury bills were
thus slightly lower in the autumn auctions compared to the April to July auctions. The stock of shortterm debt was EUR 15.1 billion at end-2011. The second financing programme is expected to reduced
reliance on T-bills and the reduction in the outstanding stock of T-bills by EUR 8 billion in a gradual
manner.
Graph 24. Outstanding stock of T-bills
(EUR million)
18 000
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
0
Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Source: GAO.

Graph 25. T-bill auctions since July 2010
(amounts: EUR billion and yields)
5.0
13w T-bills

4.0

26w T-bills

4.65%
4.8%

3.0

4.88% 4.96% 4.90%

4.90%

4.80% 4.86%
4.89%

4.54%

2.0

1.0

4.95%

4.85%

4.9%

4.86%
4.05%

4.82%

4.75%
4.64%

3.75% 4.82%
3.98%

0.0

4.1%

4.1%

4.1%

4.06% 4.62% 4.58%

4.50%

4.56% 4.61%

4.63% 4.68%

4.64%
4.61%

4.80%

3.85%

Jul-10 Aug-10Sep-10 Oct-10Nov-10Dec-10 Jan-11 Feb-11Mar-11Apr-11May-11Jun-11 Jul-11 Aug-11Sep-11 Oct-11Nov-11Dec-11 Jan-12 Feb-12Mar-12
Source : PDMA

61. A mechanism to better tracing and monitoring the official borrowing and internally-generated
funds destined to service debt may contribute to improve Greece's credit standing. This
44

4. Programme implementation and policy discussions

mechanism includes a segregated account and the payment to this account before each quarter starts
of the necessary resources to service debt. However, the disbursements to Greece by the EFSF and the
IMF will still be conditional on compliance with conditionality. Moreover, the government has
expressed the intention of adopting legislation giving priority to the debt service vis-à-vis other cash
outflows. This legislation, the specific features of which still need to be discussed, could then find its
way into the Greek Constitution (as Spain did recently), as soon as a constitutional amendment is
possible.

Table 18. Interest rates and interest payments charged to Greece
by the euro area Member States

Date

Interest
rate

Interest paid
EUR billion

15 June 2010
15 September 2010
15 December 2010
15 March 2011
15 June 2011
15 September 2011
15 December 2011
15 March 2012*

3.423%
3.719%
3.879%
4.026%
4.173% / 2.673%**
4.494% / 2.994%**
4.528% / 3.028%**
4.426% / 2.926%**

0.039
0.138
0.207
0.250
0.408
0.506
0.539
0.527

Interest to be
reimbursed to Greece
(2nd amendment of
facility agreement)
0.147
0.170
0.179
0.179

* Calculated to be paid.
** Reduction of margin to 150 basis points flat. This reduction will be retroactively applied after the second Amendment enters into force.

45

European Commission
The economic adjustment programme for Greece

Table 19. Schedule of disbursement for the new programme
(provisional)
in bn EUR, unless otherwise noted
Q1

2012
Q2

Q3

Q4

2014
Q2

Q3

Q4

A. General government cash deficit

6.9

1.8

1.8

1.8

4.2

1.5

0.7

0.8

Primary deficit ("-" is surplus)
Interest payments

0.5
6.4

0.5
1.3

0.5
1.3

0.5
1.3

-0.9
5.2

-0.9
2.4

-0.9
1.6

-0.9
1.7

3.2

0.2

-0.9

-0.6

21.3

-2.3
5.5

-2.3
2.5

-2.3
1.5

-2.3
1.7

-11.0

B. Other government cash needs
Estimated cash adjustments
Arrears
Cash buffer
ESM capital

1.0
1.0
0.0
0.0
0.0

1.2
0.3
0.0
0.0
0.9

1.6
0.3
1.3
0.0
0.0

3.0
0.3
2.7
0.0
0.0

1.5
0.5
0.8
0.3
0.0

1.9
0.5
0.8
0.3
0.5

1.5
0.5
0.8
0.3
0.0

1.5
0.5
0.8
0.3
0.0

1.4
0.4
0.0
1.0
0.0

1.8
0.4
0.0
1.0
0.5

1.4
0.4
0.0
1.0
0.0

1.4
0.4
0.0
1.0
0.0

19.1

C. Maturing debt
Bonds & loans after exchange
EU repayment
IMF repayment
Short-term debt (reduction with official funds)

4.8
4.8
0.0
0.0
0.0

6.4
4.4
0.0
0.0
2.0

5.3
3.3
0.0
0.0
2.0

2.4
0.3
0.0
0.0
2.0

3.7
0.6
0.0
0.0
3.1

7.0
7.0
0.0
0.0
0.0

3.8
3.1
0.0
0.7
0.0

1.1
0.1
0.0
1.0
0.0

3.3
2.0
0.0
1.3
0.0

11.9
10.0
0.0
1.9
0.0

7.7
5.9
0.0
1.9
0.0

2.4
0.1
0.0
2.3
0.0

59.9

D. Cost of PSI
Cash upfront
Bank recapitalisation

44.5
29.5
15.0

10.0
0.0
10.0

23.8
0.0
23.8

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

78.3

E. Gross financing needs (A.+B.+C.+D.)

57.1

19.5

32.5

7.2

9.4

10.5

5.9

3.4

7.9

13.9

8.2

3.2

178.6

F. Private financing sources
Market financing
Privatisation 1/

0.0
0.0
0.0

0.9
0.0
0.0

1.2
0.0
1.0

2.2
0.0
2.2

1.1
0.0
1.1

1.7
0.0
1.1

1.1
0.0
1.1

1.1
0.0
1.1

1.1
0.0
1.1

1.6
0.0
1.1

1.1
0.0
1.1

1.1
0.0
1.1

14.1

G. Additional OSI
GLF margin reduction (retroactive application)
ANFA profits

0.0
0.0
0.0

0.9
0.2
0.7

0.2
0.2
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.6
0.0
0.6

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.5
0.0
0.5

0.0
0.0
0.0

0.0
0.0
0.0

2.2

H. Financing needs per quarter
I. Official assistance disbursements
IMF disbursements*
EU disbursements

57.1
75.7
1.6
74.0

18.6
31.3
1.6
29.6

31.3
5.0
1.6
3.4

5.0
8.3
1.6
5.6

8.3
8.8
1.6
8.2

8.8
4.8
1.6
3.2

4.8
2.3
1.6
0.6

2.3
6.8
1.6
5.1

6.8
12.3
1.6
10.7

12.3
7.1
1.6
1.9

7.1
1.0
1.6
1.9

2.1
1.0
1.6
0.4

164.5

Q1

2013
Q2

Q3

Q4

Q1

Total

Financing needs

32.3

5.3
7.0
5.0
1.8

41.6
0.0
9.1
9.2

29.5
48.8

Financing sources

Source: Commission services.

46

0.0
11.8

0.5
1.7

164.5
19.8
144.7

4. Programme implementation and policy discussions

Box 4: Private Sector Involvement
In line with the conclusions of the euro area summit of 26 October 2011, Greece organised a debt exchange to which
the euro area Member States agreed to contribute up to EUR 30 billion via an EFSF loan. On 21 February 2012, the
Eurogroup acknowledged the common understanding that has been reached between the Greek authorities and its
private creditors on the general terms of the debt exchange offer. This common understanding provided for a nominal
haircut amounting to 53.5 percent.
Exchange Offer. On 24 February 2012, Greece launched an exchange offer for bonds with an aggregate outstanding
face amount of approximately EUR 206 billion. The exchange offer allowed private sector holders to exchange
eligible bonds for:
i) new bonds to be issued by Greece with a face value of 31.5 percent of the face amount of their exchanged bonds;
ii) EFSF notes with a maturity date of two years or less and having a face value of 15 percent of the face amount of
their exchange bonds, and
iii) detachable GDP-linked securities issued by Greece.
iv) on the PSI settlement date, Greece also delivers short-term EFSF notes in discharge of all unpaid interest accrued
on the exchanged bonds.
Maturity and coupon. The new Greek bonds have a term of 30 years (final maturity is in 2042) and an amortization
period starying on the eleventh anniversary of the issue date. They bear a coupon of 2.0 percent p.a. to the payment
date in 2015, 3.0 percent p.a. to payment date in 2020, 3.65 percent p.a. to payment date in 2021 and 4.3 percent p.a.
thereafter. Interest accrues starting from 24 February 2012.
English law and co-financing structure. The new bonds are governed by English law and contain standard market
clauses such as pari passu, negative pledge, events of default, collective action clauses and a waiver of immunity.
Holders of the new bonds will be entitled to benefit from a co-financing agreement among Greece, the new bond
trustee and the EFSF by linking the servicing of their bonds to the EFSF loan (up to EUR 30 billion). This will be
made effective by the appointment of a common paying agent, an inclusion of a turnover covenant, payments of
principal and interest on the new bonds and the EFSF loan on the same dates as the EFSF loan and on a pro rata
basis.
GDP-linked securities. In case of an increase of the Greek nominal GDP above a defined threshold and of a positive
GDP growth in real terms in excess of specified targets, the GDP-linked securities provide an amount of up to 1
percent of their notional amount for all annual payments beginning in 2015.
Credit Rating Action. On 27 February 2012, Greece had its long-term sovereign credit ratings cut from CC to SD
(selective default) by Standard & Poor’s Ratings Services, which called the action of Greece’s government regarding
its sovereign debt as a 'distressed debt restructuring.' The downgrade was triggered after Greece retroactively inserted
collective action clauses (CACs) in the documentation of certain sovereign debt series. On 9 March 2012, following
the confirmation from the Greek government that the exchange of Greek government bonds would proceed, Fitch
Ratings also downgraded Greek credit rating from C to RD (restricted default). Moody's Investor Service, which
downgraded the Greek rating from Ca to C on 2 March 2012, stated on 9 March 2012 that it considers Greece to have
defaulted. Greece's government bond rating remains unchanged at C, the lowest rating on Moody's rating scale.
The Law on CACs. The Law on "Rules on the modification of titles issued or guaranteed by the Greek State with the
Bondholders' agreement" was voted by the Greek Parliament on 23 February 2012. This Law introduced provisions
whereby bondholders may adopt by the qualified majority decisions that are binding on all holders of all eligible
titles. Only bonds governed by Greek law and issued or guaranteed by the State before 31 December 2011 fall within
the scope of this Law, which therefore, does not capture bonds governed by foreign law. Following the PSI invitation
deadline, the Greek Council of Ministers decided on 9 March 2012 to approve the bond holders decision to accept the
bond exchange. This decision binds all bondholders of eligible titles.
Foreign law bonds. In relation to bonds governed by foreign law, existing collective action clauses that are part of
the terms and conditions of those bonds may be used. The expiry date for the invitation on participation in the PSI for
the bonds governed by foreign law was extended until 23 March 2012 and bondholder meetings are planned to be
held on 27–29 March 2012 with a view to vote on the activation of CACs.

47

European Commission
The economic adjustment programme for Greece

Result of the Debt Exchange Offer. From a total of EUR 177 billion of Greek sovereign bonds governed by Greek
law and eligible to the exchange offer, Greece received tenders for exchange and consents from holders of EUR 152
billion of bonds, representing 85.8 percent of the outstanding face amount of these bonds. Holders of 5.3 percent of
the outstanding face amount of these bonds participated and opposed the proposed amendments. Greece has also
received tenders for exchange and consents to the proposed amendments from holders of approximately EUR 20
billion, or 69 percent, of its bonds issued under foreign law and of bonds issued by state-owned enterprises and
guaranteed by the Republic. The sum of the face amount of those bonds that will be exchanged and of the other bonds
eligible to the exchange offer for which Greece has received tenders for exchange and consents to the proposed
amendments amount to approximately EUR 197 billion, or 95.7 percent of the eligible bonds.
Table. Outcome of the Debt exchange offer (March 2012)

Total Outstanding
Principal Amount EUR

Tendered for Exchange
and Vote In Favour
EUR

GGB Greek Law
GGB Foreign Law
SOE

€ 177,252,131,542.39
€ 18,644,227,751.00
€ 9,671,766,956.00

€ 152,042,932,772.40
€ 12,680,381,327.41
€ 6,832,321,956.00

SOE Greek Law
SOE Foreign Law

€ 6,701,326,956.00
€ 2,970,440,000.00

€ 6,366,276,956.00
€ 466,045,000.00

€ 205,568,126,249.39

€ 171,555,636,055.81

Category

Total

Consent and Vote
In Favor
%
85.8%
68.0%
70.6%
95.0%

Reject and Vote
Against
EUR

Reject and
Vote Against
%

€ 9,308,013,293.14
€ 588,146,961.51
€ 462,762,000.00

5.3%
3.1%
4.9%

15.7%

€ 0.00
€ 462,762,000.00

0.0%
15.6%

83.5%

€ 10,358,922,254.65

5.0%

Source: PDMA

Extension. Greece has decided to extend the invitation period until 23 March 2012 in respect of each series of its
bonds issued under laws other than Greek law and of bonds issued by state enterprises and guaranteed by Greece, to
allow holders of those bonds who have not yet tendered them for exchange or submitted consents to do so, and has
deferred the settlement date for the exchange offer until 11 April 2012. However, holders of such bonds will not have
the right to revoke any participation instructions previously submitted, unless otherwise permitted pursuant to the
relevant invitation. In addition, the government confirmed that it intends to issue an invitation to the holders of Greek
law-governed bonds issued by state enterprises and guaranteed by the Republic, including bonds that have been
tendered in the exchange offer but have not been accepted by the Republic, soliciting consents to amend these bonds
as contemplated by the Greek Bondholder Act in a manner similar to the amendments proposed for the Republic’s
bonds governed by Greek law.
Credit Default Swaps (CDS). On 9 March 2012, the International Swaps and Derivatives Association (ISDA)
Determinations Committee decided that the invoking of the collective action clauses by Greece to force all holders to
accept the exchange offer for existing Greek debt constituted a restructuring credit event under the 2003 ISDA Credit
Derivatives Definitions. According to the Depository Trust and Clearing Corporation’s CDS data warehouse, the
total net exposure of market participants who have sold CDS credit protection on Greek sovereign debt was
approximately USD 3.2 billion as of 2 March 2012. Market participants will conduct an auction through which the
recovery value of Greek debt and the net payouts to be made under CDS contracts will be determined. The
Determinations Committee decided that an auction will be held in respect of outstanding Greek sovereign CDS
transactions on 19 March 2012.

4.6. TECHNICAL ASSISTANCE AND MONITORING
62. Greece is receiving technical assistance coordinated by the Commission's taskforce and
provided by the Commission, Member States, the IMF and other sources. Technical assistance
(TA) concerns several areas which are crucial for the success of the programme, such as tax
administration and fight against tax evasion, public financial management, the reform of the public
administration, as well as in a range of projects improving the business environment. By providing
advice based on best practice, TA contributes to enhancing the government's capacity to implement
policies. It also helps to increase programme ownership, via the exchange of views and policy options
between the government and the TA providers. (For more details on the several TA projects, the
reader is referred to the quarterly reports by the Commission's Taskforce.) Greece, the Eurogroup and
48

4. Programme implementation and policy discussions

the Commission have agreed TA should help further strengthening of Greece's institutional capacity
in delivering the agreed policies. With this objective in mind, the Commission is significantly
strengthening its presence on the ground in Greece. This will bolster its capacity to provide and
coordinate technical assistance. Moreover, a continuous monitoring will contribute to the timely and
full implementation of the programme.

49

European Commission
The economic adjustment programme for Greece

50

European Commission

ANNEX 1

The economic adjustment programme for Greece

Annex 1: Assessment of compliance with the
Memorandum of Understanding on Specific Policy Conditionality
(fifth update, 31 October 2011)
Table A1- Fiscal Consolidation
Budget implementation
The Government implements the revenue and expenditure policies agreed in this and previous memoranda with the aim of
minimising any deficit in excess of the deficit ceiling of EUR 17 065 million in 2011, and to reduce the 2012 deficit to below
EUR 14 916 million, as established in the Council Decision.
Quarterly performance criteria (EUR billion)
Criteria
Actual
Floor on the modified general government primary cash balance
-5.1
-4.8
Ceiling on State Budget primary spending
60.8
59.1
Ceiling on the overall stock of central government debt
394.0
371.0
Ceiling on the new guarantees granted by the central government
1.0
0.6
Ceiling on the accumulation of new external payments arrears on external debt contracted or
0
0
guaranteed by general government
Floor on privatisation receipts
1.7
1.6
The Government adopts and implements the following measures prior to the sixth disbursement (i.e. in December 2011):
-A reduction in tax exemptions, in particular the tax-free personal income thresholds, with the aim of increasing revenue by at
least EUR 2 831 million in 2012;
-A permanent levy on real estate, collected through the electricity invoices, with the aim of collecting at least EUR 1 667
million in 2011, and increasing amounts in subsequent years;
-An immediate implementation of the revised wage grid for civil servants, which contributes to reduce expenditure by at least
EUR 101 million in 2011, and with a carry over of at least EUR 552 million for 2012, additional to savings provided in the
MTFS (Medium-Term Fiscal Strategy through 2015, of June 2011). This reform should cover all general government
employees, except those covered by special wage regimes. These net savings take into account the impact of this measure on
income tax and social security collection, as well as bonuses to be paid to specific employee categories;
-A cut in main, and supplementary, pensions, as well as in lump sums paid on retirement, with the aim of saving at least EUR
219 million in 2011 with a carry over of EUR 446 million in 2012, additional to savings provided for in the MTFS;
-Spending by the Green Fund is capped at 5 percent of their deposits, with the aim of saving EUR 360 million in 2012.

51

Partially observed.
The 2011 government deficit (ESA) is currently estimated to
have been close to EUR 20 billion; i.e. above the ceiling
established in May 2010. However, most performance criteria
for Q4-2011 have been observed.

Observed.
Observed.
Observed.
Observed.
Observed.
Partially observed (see below)

Observed.

European Commission

ANNEX 1

The economic adjustment programme for Greece

The Government also adopts the following
acts (which concern measures included in the MTFS), prior to the sixth disbursement:
-Ministerial Decisions or circulars to start collection of excises on natural gas, heating oil and vehicle tax measures;
-Ministerial Decisions to uniformly regulate health benefits for social security funds;
-Legislation for the collection of the solidarity surcharge through withholding;
-Ministerial Decisions that initiate closing, merging or substantially downsizing entities are adopted. This affects KED, ETA,
ODDY, National Youth Institute, EOMEX, IGME, OSK, DEPANOM, THEMIS, ETHYAGE and ERT, and 35 other smaller
entities specified in the 'second implementation bill';
-Ministerial Decisions specifying the disability criteria consistent with achieving the MTFS saving objectives;
-A Law to freeze the indexation of main and supplementary pensions through 2015;
-Finalise the positive list for pharmaceuticals that establish prices charged to social security funds.
The Government prepares the budget for 2012 [November 2011] in line with the MTFS targets, this Memorandum, and the
Council Decision's deficit ceilings. Information on the several measures provided for in the MTFS will be updated and made
public.
The several tax and expenditure legislative acts that are necessary to implement the budget are adopted at the same time of
the budget. [December 2011]
In order to prepare the measures that will be adopted with the 2013 and 2014 budgets, the Government initiates a review of
public expenditure programmes that should be completed by June 2012, with the aim of identifying measures amounting to 3
percent of GDP (including one percent of GDP in contingency measures). The review will draw on external technical
assistance and will focus on pensions and social transfers (in a manner that will preserve basic social protection); defence
spending without prejudice to the defence capability of the country; and restructuring of central and local administrations. By
the same date, adjustments to special wage regimes; further rationalization of pharmaceutical spending and operational
spending of hospitals, and welfare cash benefits will also be specified.
The Ministry of Finance ensures a tight supervision of expenditure commitments by the government departments, including
extra-budgetary funds, public investment budget, social security funds and hospitals, local governments and state-owned
enterprises, and an effective tax collection, in order to secure the programme quantitative criteria (Article 1 (2 and 3) of the
Council Decision, and of the MEFP).
The Government stands ready to define and enact additional measures, if needed, in order to respect the budgetary ceilings
established in the Council Decision.

52

Observed.

Observed.

Not yet applicable.

Observed.

European Commission
The economic adjustment programme for Greece

Table A2-Structural Reforms
Comments
Asset management and privatisation
The Government implements the privatisation programme with the aim of collecting EUR 35 billion by end-2014 and EUR
50 billion by end-2015 (see cumulative quarterly targets in Annex 1, plus the bank equity acquired through recapitalisation).
The Government stands ready to offer for sale its remaining stakes in state-owned enterprises, if necessary in order to reach
the privatisation objectives. Public control will be limited only to cases of critical network infrastructure.
To ensure that the plan objectives are achieved, the Government continuously transfers assets to the Hellenic Republic Asset
Development Fund (HRADF). In particular, prior to the sixth disbursement, it will transfer to the privatisation fund the
following assets:
Alpha Bank (0.619% of shares);
National Bank of Greece (1.234% of shares);
Piraeus Bank (1.308% of shares);
Piraeus Port Authority (23.1% of shares);
Thessaloniki Port Authority (23.3% of shares);
Elefsina, Lavrio, Igoumentsia, Alexandropoulis, Volos, Kavala, Corfu, Patras, Rafina, Heraklion port authorities (100%);
Athens Water and Sewerage Company (27.3%);
Thessaloniki Water and Sewerage Company (40%);
Regional state airports (transfer of concession rights);
Off-shore natural gas storage facility 'South Kavala' (transfer of rights of current and future concessions);
Hellenic motorways (transfer of economic rights of current and future concessions);
Egnatia odos (100%);
Hellenic Post (90%);
OPAP, SA (29%)
4 state buildings.

Partially observed.
Compared to the target of EUR 1 700 million (which was
defined ion a cash basis), the Government collected EUR 1 558
million in cash (since June 2011).

Observed.

The legal, technical and financial advisors for at least fourteen of these transactions that are planned until end-2012 are
appointed prior to the sixth disbursement.
For the other transactions planned for 2012, advisors are appointed by end-November 2011
The Government continues compiling and publishing an inventory of state-owned assets, including stakes in listed and nonlisted enterprises and commercially viable real estate and land to ensure it is comprehensive. The inventory will be
published in successive stages by end-2011, mid-2012 and end-2012.

53

Partially observed.
10 out of the 14 projects for 2012 and 6 out of 17 projects for
2013 are fully staffed
Ongoing.
The strategic plan for the development of real estate assets
which includes categorization of real estate assets in groups is
expected to be completed by June 2012.

European Commission

ANNEX 1

The economic adjustment programme for Greece

The Government accelerates state land ownership registration, and adopts secondary legislation on tourism housing and on
land use [Q4-2011].
A new General Secretariat of Public Property is established and made operational with the aim of improving management of
real estate assets, clearing them of encumbrances and preparing them for privatisation. The real estate entities KED and ETA
are merged and professionally managed in coordination with the HRDAF. The HRDAF creates six real estate portfolios.
[Q4-2011].
Proceeds from privatisation of financial and non-financial assets do not substitute fiscal consolidation efforts and will not be
considered when assessing compliance of the annual general government deficit with the ceiling established in the Council
Decision (see technical memorandum of understanding).
When restructuring state-owned enterprises with a view to preparing them for privatisation, specific attention will be given
to a timely clearance of state aid issues.
Fighting waste in public enterprises and other public entities
The legal act on the transfer to the State of the mobile and immobile assets of entities that are closed is adopted. [end-2011]
Tariffs in OASA, OSE group and other state-owned enterprises increase by at least 25 percent, while their business plans are
appropriately updated. [Q1-2013]
Tax policy and revenue administration reforms
In line with the anti-tax evasion action plan, the Government will step up audits of large-scale tax payers, high-wealth
individuals and self-employed, it will accelerate the resolution of tax arrears, and better integrate anti-laundering tools into
the strategy. Progress will be monitored by quantitative indicators. These quantitative indicators and compliance with these
targets will be monitored and made public.
The audits of 1 700 high-wealth and self-employed individuals identified by the anti-evasion task force will be initiated
immediately.
To advance the reforms of revenue administration, the Government:
- activates a large-taxpayers unit; [end-October 2011]
- removes barriers to effective tax administration by implementing the key reforms of the new tax law, including replacing
managers who do not meet performance targets [end-2011], reassessing tax auditors’ qualifications [end-2011] and hiring
new auditors in the course of 2012
- makes operational the newly created fast-track administrative dispute resolution body to deal rapidly with large dispute
cases (i.e. within 90 days). [November 2011]
- centralises the functions of, and merges, at least 31 tax offices by end-October 2011, and merges, 31 transfers
competences, eliminates management positions and closes some 200 local tax offices identified as inefficient, in the course of
2012
- puts in place a new IT system that interconnects all tax offices.

54

Partially observed.
The First Implementation Bill (Chapter 2, Arts 10-17) includes
the development of state property (public land). Still pending:
Revision of Ministerial Decision on Strategic Spatial Planning
Framework for Tourism; and revision of Law on land-use
planning.

Observed.
The General Secretariat of Public Property has been established.
KED and ETA have been merged (ETAD). The HRADF has
created the six real estate portfolios.

Observed.
The assets are transferred to the States according to each acts
that closes public entities.
Not yet applicable.

Observed with delay.

Partially observed.
31 tax offices closed or merged and key functions consolidated
Performance-based contracts for auditors have been approved.
Reassessment of tax auditors’ qualifications is ongoing.
The large taxpayer unit has been established, but not yet fully
staffed.

European Commission
The economic adjustment programme for Greece

The preparation of the new IT system involves the following main steps in relation to the new data centre, web-facing and
back-office applications:
-15 new electronic services and enhancements are running by end-December 2011. These concern mainly the corporate
income tax.
- the new data centre hardware is in place and running by end-March 2012;
- 20 more new electronic services and enhancements by end-June 2012. These concern mainly taxes withheld at source.
-database and application design and implementation, by end-October 2012;
-8 remaining new electronic services and enhancements by end-December 2012. These concern forms filed late with a fine,
real-estate tax, and VAT administration.
-system and user tests, user training, and migration of all tax offices to the centralized database: by end-December 2012;
-operational use of the new IT infrastructure by all tax offices: 1 January 2013.
To speed up tax-related judicial appeals, the government has created the possibility of dedicated court chambers for tax cases;
24 chambers are expected to be operational by end-2011.
The Government prepares a tax reform that aims at simplifying the tax system, eliminating exemptions, including and
broadening bases, thus allowing reductions in tax rates in a prudent and fiscally-neutral manner. This relates to the personal
income tax, corporate income tax and VAT, as well as social contributions. The reform will also simplify the Code of Books
and Records. [March 2012]
Public financial management reforms
A plan for the clearance of arrears is published in November 2011. The Government ensures that the stock of arrears steadily
declines from the sixth disbursement onwards. Data on arrears are published monthly with a lag of not more than 20 days
after the end of each month.
To strengthen expenditure control, the Government:
appoints permanent financial accounting officers in all Ministries [end-November 2011];
continues the process of establishing commitment registries, which should cover the whole general government; [Q1-2012]
enforces the obligation of accounting officers to report commitments, including by enacting sanctions to entities not
submitting the data and disciplinary action for accounting officers; [Q1-2012]
tables legislation streamlining the procedure for submission and approval of supplementary budgets. [February 2012]

55

Observed.
or
Not yet applicable.

Observed.

Not yet applicable

Not observed.
The delays in the sisth disbursement did not allow preparing a
plan for the clearance of arrears. However, available data
indicated that the stock of arrears to suppliers declined in the
fourth quarter of 2011.

Observed.
or
Not yet applicable.

European Commission

ANNEX 1

The economic adjustment programme for Greece

To modernise public administration
Functional reviews
The Government assesses the results of the first phase of the independent functional review of central administration. This
assessment will result in an action plan for the implementation of operational policy recommendations. These
recommendations should determine how to achieve a more streamlined and effective public service, to define clear
responsibilities and command lines of ministerial departments, eliminating overlapping competences, and to improve interand intra- mobility. [October 2011]
A second phase of the review will lead to an action plan and to the drafting of framework legislation by end-2011.
The ongoing functional review of existing social programmes is finalised [Q4-2011].
A second phase will include a more detailed review of specific social programmes, aiming at reducing excessive
fragmentation, generating savings and creating efficiencies. [Q1-2012]
Public sector wages and human resource management
The Government publishes a medium-term staffing plan [end-December 2011] for the period up to 2015, in line with the
rule of 1 recruitment for 5 exits. The recruitment/exit rule applies to general government as a whole without sectoral
exceptions.
Before end-2011, about 15 000 staff currently employed by various government entities are transferred to the labour reserve,
while about 15 000 will be placed in pre-retirement. Staff in the labour reserve, and in pre-retirement, will be paid at 60
percent of their basic wage (excluding overtime and other extra payments) for not more than 12 months, after which they will
be dismissed. This period of 12 months may be extended up to 24 months for staff close to retirement. Payments to staff
while in the labour reserve are considered part of their severance payments.
Additional redundant staff will be transferred to the labour reserve in the course of 2012, in connection with the identification
of entities or units that are closed or downsized, and in case the recruitment rule is violated. Staff transferred to the
Government from either state-owned enterprises or other entities under restructuring are considered as new recruitments. The
same applies to staff in the labour reserve that is transferred to other government entities, after screening of professional
qualifications by ASEP under its regular evaluation criteria. The overall intake in the professional schools (e.g. military and
police academies) is adjusted in line with the staffing plans.
The staffing plans per Ministry and each group of public entities will include tighter rules for temporary staff, cancellation of
vacant job post and reallocation of qualified staff to priority areas and takes into account the extension of working hours in
the public sector. The staffing plans and monthly data on staff movements (entries, exits, transfers among entities) of the
several government departments are published on the web. [monthly starting end-November 2011]
The Government commissions an expert assessment of the new wage grid. [end-2011]
This assessment will focus on the wage drift that is embedded in the new promotion mechanism. If the assessment reveals
any excessive wage drift, the promotion rules are adjusted before end-2012. No promotion takes place before the assessment
and adjustment to the promotion rules.

56

Ongoing.
The OECD Report on central administration reforms was
published in December 2011. The recommendations of this
report are being considered by the authorities.
A road map has been identified to implement these reforms
throughout 2012. A draft law is being prepared.
Ongoing.
A joint OECD-IMF Technical Assistance team has collected
data on social programmes from all line ministries. A final
report is expected shortly.
The second phase will be merged with the functional review
and the final report will be ready shorlty.
Not observed.
Medium-term staffing plans identifying the recruitment needs of
each ministry have not yet been published.
Not observed.
Approximately, 10 000 employees left the public sector under
the pre-retirement scheme. As a result of merges and closers,
630 employees were shifted in the labour reserve.

Not yet applicable.

Not observed.
Medium-term staffing plans identifying the recruitment needs of
each ministry has not yet been prepared.
Not observed
or
not yet applicable.

European Commission
The economic adjustment programme for Greece

Public procurement
The Government launches the development of an e-procurement IT platform and sets intermediate milestones in line with the
action plan. These milestones include testing a pilot version, availability of all functionalities for all contracts and phasing-in
of the mandatory use of e-procurement system for supplies, services and works. [October 2011]

A thorough review of the system of redress against award procedures and the role to confer to the SPPA is carried out, in
agreement with the European Commission. [Q4-2011]

The Government undertakes a review identifying areas to increase the efficiency of the public procurement system outside
the SPPA, as specified in the Action Plan. The review includes conclusions and actions in agreement with the European
Commission. [Q4-2011]

57

Observed.
The contract to develop an e-procurement platform was signed
on 14 October 2011. The first module on e-auctions is expected
to be operational in March 2012. The e-procurement platform is
for supplies only. It will at a later stage accommodate services
and eventually, public works.
Ongoing.
The Commission has received some data on appeals lodged
throughout the various stages of the life of procurement
contracts based on a questionnaire submitted to 500 public
bodies. Data refer to 2010 and to the first half of 2011 to
procurement of goods and services. Looking forward, data
should also indicate among others, how many appeals reach the
judicial system and cover other types of procurement contracts,
such as works.
The Ministry of Development, Competitiveness and Shipping is
working on draft legislation to reduce the number of steps
within the life of a procurement contract where decisions of the
contracting authorities that can be appealed.
Ongoing.
Greece has already submitted a preliminary study which maps
numerous other public bodies with public procurement
competences and points to possible frictions with the mandate
of the Single Public Procurement Authority (SPPA). The
Taskforce Greece (TFGR) is ready to provide technical
assistance on public procurement commitments and in this
respect, a study synthesising main provisions of national public
procurement legislation is being prepared.

European Commission

ANNEX 1

The economic adjustment programme for Greece

The Government issues decisions, in consultation with the Commission services
- to provide for the institution and establishment of positions for the SPPA’s personnel, as well as for the
organisation of human resources and services of the Authority in accordance with the provisions of the law on the
SPPA; [October 2011]
- to appoint the members of the SPPA; [October 2011]
- to provide for the operational regulation of the SPPA. [Q4-2011]
The SPPA starts its operations with the necessary resources to fulfil its mandate, objectives, competences and powers as
defined in the law on the SPPA and the Action Plan agreed with the European Commission in November 2010. This includes
the adoption of the operational regulation of the SPPA. [January 2012]
The e-procurement platform is fully operational, and a common website is created for the publication of all procurement
procedures and outcomes. [October 2012]
To complete the pension reform
The National Actuarial Authority (NAA) continues the submission of long-term projections of pension expenditure up to
2060 under the adopted reform. The projections encompass the main supplementary (auxiliary) schemes (ETEAM, TEADY,
MTPY), based on comprehensive data collected and elaborated by the NAA. The projection will be peer-reviewed and
validated by the EU Economic Policy Committee and the European Commission, ECB, and IMF staff. For the remaining
supplementary schemes, the same procedure is followed. [end-November 2011]
The list of heavy and arduous professions is revised and its coverage is reduced to less than 10 percent of employment. The
new list of difficult and hazardous occupations (Law 3863/2010) is published by end-October 2011 and applies
immediately to all workers. No profession will be added to the list after its revision.

58

Not observed.

Not yet applicable.

Observed.
Long-term projections of pension expenditure were submitted
and presented at the AWG, peer-reviewed and endorsed by the
AWG of the Economic Policy Committee.
Observed.
The list has been revised with categories being removed and
some new ones added in. It now covers less than 10 percent of
current employment.

European Commission
The economic adjustment programme for Greece

In addition to an initial cut (see above), the Government proceeds with an in-depth revision of the functioning of
secondary/supplementary public pension funds, including welfare funds and lump-sum schemes. The aim of the revision is to
stabilise pension expenditure, guarantee the budgetary neutrality of these schemes, and ensure medium- and long-term
sustainability of the system. The revision achieves:
- a further reduction in the number of existing funds;
- the elimination of imbalances in those funds with deficits;
- the stabilisation of the current spending at sustainable level, through appropriate adjustments to be made from 1 January
2012;
- the long-term sustainability of secondary schemes through a strict link between contributions and benefits. [Q4-2011]
The reform of the secondary/supplementary schemes is designed in consultation with European Commission, ECB and IMF
staff, and its estimated impact on long-term sustainability is validated by the EU Economic Policy Committee. The
parameters of the new secondary notional defined-contribution system ensure long-term actuarial balance, as assessed by the
NAA. [legislation: Q4-2011; implementation: Q1-2012]

Observed with delay.
The NAA projections show that there are substantial deficits in
supplementary pension funds (close to 0.4% of GDP) which
will increase over time if no reform took place.
A framework law to reform supplementary pension schemes
was adopted in February 2012

The Government identifies the schemes for which lump sums paid on retirement are out of line with contributions paid,
[November 2011] and adjusts the payments. [Q1-2012]

Not observed.
However, there has already been adjustment to lump sums paid
on retirement.

The reform contributes to achieving the overarching target of reducing the overall (basic, contributory, supplementary and
any other related scheme, including lump sums at retirement) increase of public sector pension spending, over the period
2009-60, to under 2.5 percentage points of GDP. If the projections by the NAA show that, even after the reforms of the
supplementary schemes, the projected increase in the total public pension expenditure exceeds the limit of 2.5 percentage
points of GDP over 2009-60, The Government revises also the main parameters of the pension system provided by Law
3863/2010. [Q4-2011]

Not yet applicable.

The Health Committees set up by Law 3863/2010 will start operating the planned revision of disability status and produce a
first quarterly report of its activities by end-December 2011.
The objective is to reduce the disability pensions to not more than 10 percent of the overall number of pensions. For this
purpose, the definition of disability and respective rules will be revised, and the central evaluation office is operational since
September 2011.
The Government implements the reform of the secondary/supplementary pension schemes, by merging funds and starting the
calculation of benefits on the basis of the new notional defined-contribution system. The Government freezes nominal
supplementary pensions and reduces the replacement rates for accrued rights in funds with deficits, based on the actuarial
study prepared by the NAA. In case the actuarial study is not ready, replacement rates are reduced, starting from 1 January
2012, to avoid deficits. All funds set up a computerised system of individual pension accounts. [Q1-2012]
The Bank of Greece commits not to grant pension privileges to its staff and to revise the main parameters of its pension
scheme, so that they remain aligned to those of IKA.

59

Partially observed.
The Committee has started operating with substantial delay
compared to initial timetable and has just started revising the
disability categories. The report has not been submitted.
Partly observed.
Central evaluation office is in operation but no report has been
produced.

Not yet applicable.

European Commission

ANNEX 1

The economic adjustment programme for Greece

To modernise the health care system
The Government continues to implement the comprehensive reform of the health care system started in 2010 with the
objective of keeping public health expenditure at or below 6 percent of GDP, while maintaining universal access and
improving the quality of care delivery. Policy measures include the integration of primary healthcare, strengthening central
procurement and e-health capacity.

The Government continues to undertake measures yielding savings on pharmaceuticals of at least EUR 2 billion relative to
the 2010 level, of which at least EUR 1 billion in 2011. This will bring average public spending on outpatient
pharmaceuticals to about 1 percent of GDP (in line with the EU average) by end 2012.

The provisions of Article 31 and 32 of Law 3863/2010 are implemented. In particular, the Health Benefit Coordination
Council (SYSPY):
- continues the work on establishing new criteria and terms for the conclusions of contracts by social security funds with all
healthcare providers, and all other actions envisaged in Article 32 with the aim of achieving the targeted reduction in
spending;
- initiates joint purchase of medical services and goods to achieve substantial expenditure reduction of at least 25 percent
compared to 2010 through price-volume agreements. [Q4-2011]
The Government equalises the common benefit package for the insurers of EOPYY, with the aim of full equalisation of
benefits and contributions across funds by December 2011.
Contributions paid by OGA members are progressively equalised to those of other members of EOPYY, as envisaged in the
medium-term fiscal strategy. The process of equalisation of contributions is legislated by end-2011, implemented in January
2012 and will be completed in 30 months.

Ongoing with delay.
The reform is continuing and there has been some progress.
However, there have been delays and in some areas, like
pharmaceuticals, there has been a lack of policy implementation
i.e. agreed measures have not been implemented.
Partially observed.
There has been a reduction in outpatient pharmaceutical
expenditure of almost EUR 1 billion since 2009 but the
reduction in 2011 compared to 2010 was negligible. This has
been due to the lack of implementation of structural and good
practice reforms regarding pharmaceuticals which are common
in other EU countries. The reduction in spending was mainly
due to a one-off across-the-board cut in prices and entry fees for
the positive list.
Additional measures were legislated in February and March
2012.
Ongoing.
New types of contracts have been established and some pricevolume agreements have been made. The work needs to speed
up and intensify.

Observed.
Ongoing.

EOPYY starts operating by end-October 2011. The new fund will lead to a substantial reduction of administrative staff of at
least 50 percent and of contracted doctors of at least 25 percent as compared to the four originating funds combined. The aim
is to achieve a ratio of patients per doctor in line with the European average.

Ongoing with delay.
EOPYY has nominally started to operate only in January 2012,
with significant delay, and only a minor part of the
administrative staff allocated to EOPYY has physically moved
to its offices and started working full time in EOPYY. There
has been a decrease in the number of contracts with doctors,
though the number of doctors under contract remains very high
by EU standards.

The Government revokes market regulation 40 (17.12.1990) to abolish the 0.4 percent contribution of wholesale sales prices
in favour of the Panhellenic Pharmaceutical Association. [Q4-2011]

Observed.

60

European Commission
The economic adjustment programme for Greece

An action plan is adopted by early November 2011, based on the final report of the task force (see below), including a
timetable for concrete actions. [Q4-2011]
Pricing of medicines and medical services
The Government updates the complete price list for the medicines in the market, using a new pricing mechanism based on the
three EU countries with the lowest prices. The list will be updated on a quarterly basis. [November 2011]
Fees for medical services outsourced to private providers are reviewed with the aim of reducing related costs by at least 15
percent in 2011, and by an additional 15 percent in 2012. [Q4-2011]
Starting from 2012, the pharmacies' profit margins are calculated as a flat amount or flat fee combined with a small profit
margin with the aim of reducing the overall profit margin to no more than 15 percent, including on the most expensive drugs
as defined in law 3816/2010. [Q1-2012]
Prescribing and monitoring

The Government:
- publishes binding prescription guidelines for physicians defined by EOF on the basis of international prescription guidelines
to ensure a cost-effective use of medicines; [November 2011]
- publishes and continuously updates the positive list of reimbursed medicines using the reference price system developed by
EOF. [November 2011]

61

Ongoing with delay.
There was a delay in the submission of the final report of the
Task Force (submitted in January 2012). As a consequence,
there has been no government action plan so far.
Observed with delay.
Ongoing with delay.
Limited reduction in the price of services contracted to private
providers has been realised so far in some areas but need to be
extended to other areas.
Additional measures were legislated in February and March
2012.
Not yet applicable.

Partially observed.
Only about 150 guidelines have been published (with
substantial delays). No guideline has been implemented or made
binding so far. A positive list of reimbursed medicines has been
published but it does not work as a standard "reference price
mechanism" for reimbursement. It is used as a list of products
reimbursed by the State, with an entry fee charged to new
medicines on the list.
Additional measures were legislated in February and March
2012.

European Commission

ANNEX 1

The economic adjustment programme for Greece

The Government takes further measures to extend in a cost-effective way the e-prescribing of medicines, diagnostics and
doctors' referrals to all social security funds, health centres and hospitals. In compliance with EU procurement rules, the
Government conducts the necessary tendering procedures to implement a comprehensive and uniform health care information
system (e-health system). [Q4-2011]

EOPYY and the remaining social security funds establish a process to regularly assess the information obtained through the
e-prescribing system and produce regular reports, at least on a quarterly basis, to be transmitted to the competent authorities
in the Ministry of Labour, Ministry of Health, Ministry of Finance and ELSTAT. Monitoring and assessment is carried out
through a dedicated common unit under SYSPY. Feedback is provided to each physician at least every quarter and a yearly
report is published. Sanctions and penalties will be enforced as a follow-up to the assessment. [Q4-2011]
The Government starts to produce a semi-annual report on the prescription and consumption of medicines and diagnostic
tests. This report includes information on the rebate received from pharmacies and from pharmaceutical companies and on
the volume and value of medicines. The Ministry of Health provides a feedback report to all physicians on their prescription
volume and value, at least on a quarterly basis. Monitoring and reporting of misconduct and conflict of interest in
prescription behaviour are intensified. [Q4-2011]
E-prescribing covers all medical acts (medicines, referrals, diagnostics, surgery) in both NHS facilities and providers
contracted by EOPYY and the social security funds. Detailed monthly auditing reports are produced by NHS facilities and by
providers. [Q1-2012]
Increasing use of generic medicines

Additional measures are taken to promote the use of generic medicines through:
- setting the maximum price of generics to 60 percent of the branded medicine with similar active substance; [November
2011]
- establishing and monitoring compulsory e-prescription by active substance and of less expensive generics when available;
[Q4-2011]
- associating a lower cost-sharing rate to generic medicines that have a significantly lower price than the reference price
(lower than 60 percent of the reference price) on the basis of the experience of other EU countries. [Q1-2012]

62

Partially observed.
The tender for e-prescription has been launched with significant
delays and is ongoing. There has been some extension of the eprescription system but very limited and unsuccessful: less than
40 percent of doctors prescribe electronically and the share of
outpatient pharmaceutical expenditure covered by e-prescription
is 12 percent. There is no effective control of volume and value
of prescription and doctors' behaviour.
Not observed.
The dedicated unit has not yet been created in EOPYY. IDIKA
has done a basic assessment of the number and value of
prescriptions by different funds. Feedback and sanctions remain
sporadic. Nevertheless, new contracts between EOPYY and
private physicians are more stringent regarding prescription
behaviour.
Not observed.

Not yet applicable.

Partially observed.
The price of generics was 63 percent of the branded at the end
of 2011. A December 2011 decision set the price at 55 percent
of the branded medicine, but it is still a fixed price not a
maximum price. As a result there is no competition in this
market, that could lead to lower prices over time.
There is no compulsory prescription by active substance INN,
no generic substitution in pharmacies and no guidelines
ensuring the less expensive medicine is provided
There have been no changes in cost-sharing which is partly
related to the fact that there is no real reference price system for
reimbursement.
Additional measures were legislated in February and March
2012.

European Commission
The economic adjustment programme for Greece

The Government takes further measures to ensure that at least 50 percent of the volume of medicines used by public hospitals
is composed of generics with a price below that of similar branded products and off-patent medicines, in particular by making
compulsory that all public hospitals procure pharmaceutical products by active substance. [Q4-2011]
NHS (ESY) service provision
A plan for the reorganisation and restructuring is prepared for the short and medium term with a view to reducing existing
inefficiencies, utilising economies of scale and scope, and improving quality of care for patients. The aim is to reduce
hospital costs by at least 10 percent in 2011 and by an additional 5 percent in 2012 in addition to the previous year. This is to
be achieved through:
- increasing the mobility of healthcare staff (including doctors) within and across health facilities and health regions. [Q42011]
- adjusting public hospital provision within and between hospitals within the same district and health region; [Q4-2011]
- revising the activity of small hospitals towards specialisation in areas such as rehabilitation, cancer treatment or terminal
care where relevant; [Q4-2011]
A system for comparing hospital performance (benchmarking) is set up on the basis of a comprehensive set of indicators.
[Q4-2011] Annual reports will be published as of Q1-2012.
Wages and human resource management in the health care sector
The Ministries of Health and Labour, in cooperation with the Ministry of Finance, prepare the first draft report presenting the
structure (age, specialty, grade, regional distribution), levels of remuneration (including fees provisions to consultants and
doctors) and the volume and dynamics of employment in hospitals, health centres, and health funds. This report will be
updated annually and will be used as a human resource planning instrument. The 2011 report will present plans for the
allocation and re-qualification of human resources for the period up to 2013. It will also provide guidance for the education
system and it will specify a plan to reallocate qualified and support staff within the NHS and health funds. [Q4-2011]
The Government extends the use of capitation payments of physicians, currently used by OAEE, to all contracts between
social security funds and the doctors they contract. The new payment mechanism starts for each new contract renewed in
2011 and for all contracts from 2012. It defines a minimum number of patients per doctor, on the basis of the experience of
other EU countries. The new system will lead to a reduction in the overall compensation cost (wages and fees) of physicians
by at least 10 percent in 2011, and an additional 15 percent in 2012, as compared to the previous year. [November 2011]
Accounting and control
Internal controllers are assigned to all major hospitals. [December 2011]
By end-October 2011, the Government starts publishing the monthly report with analysis and description of detailed data on
healthcare expenditure by all social security funds with a lag of three weeks after the end of the respective month.
Social security funds start publishing an annual report on medicine prescription. The annual report and the individual
prescription reports examine prescription behaviour with particular reference to the most costly and most used medicines.
[Q1-2012]
All hospitals adopt commitment registers. [Q1-2012]
63

Ongoing.
About 30 percent of the expenditure on pharmaceuticals in
hospitals is made of generics and this can still go up.
Partially observed.
Hospital operational expenditure was reduced by 13.4 percent
since 2009 (7.2 percen reduction in 2011 compared to 2010).
Hospital administrations have been merged (82 rather than 131
hospital boards) but not necessarily the hospitals within each
administration. The number of hospital beds has been reduced.
Some facilities have been closed or transformed. No progress
regarding mobility of staff.
Ongoing.
On the basis of ESY.net a basic set of financial and activity
indicators is now compiled for all NHS hospitals. A first report
is due by March 2012.
Ongoing.
A basic report has been done presenting the number of
physicians, nurses, auxiliary and administrative staff by region,
by age and by education level. The study is being upgraded for
specialty.
Partially observed.
The capitation system has been extended to almost all contracts
between EOPYY and private physicians and a reduction in
payroll has been observed. However, the number of patients per
doctor is still very high by EU standards and there are many
specialist physicians compared to general practitioners and
paediatricians.
Observed.
Observed.
Monthly data are available for all social security schemes.
Not yet applicable.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Hospital computerisation and monitoring system
The necessary tendering procedures are carried out to develop the full and integrated system of hospitals' IT systems. [Q42011]
The Ministry of Health completes the ERP (enterprise-resource planning) programme of hospital computerisation and
extends coverage of the web-based platform ESY.net to all hospitals. [Q4-2011]
Further measures are taken to improve the accounting, book-keeping of medical supplies and billing systems, through:
- finalising the introduction of double-entry accrual accounting systems and the regular annual publication of balance sheets
in all hospitals;
- the calculation of stocks and flows of medical supplies in all the hospitals using the uniform coding system for medical
supplies developed by the Health Procurement Commission (EPY) and the National Centre for Medical Technology
(EKEVYL) for the purpose of procuring medical supplies;
- timely invoicing of treatment costs (no later than 2 months) to Greek social security funds, other EU countries and private
health insurers for the treatment of non-nationals/non-residents. [Q4-2011]
The programme of hospital computerisation allows for a measurement of hospital and health centres activity. The
Government defines a core set of activity and expenditure indicators in line with Eurostat, OECD and WHO health databases.
ELSTAT starts providing data in line with the System of Health Accounts (joint questionnaire collection exercise). [Q42011]
The programme of hospital computerisation allows for the setting up of a basic system of patient electronic medical records.
[Q4-2011]
In all NHS hospitals, the Government pilots a set of DRGs (diagnostic-related groups), with a view to developing a modern
hospital costing system for contracting (on the basis of prospective block contracts between EOPYY and NHS). To support
the development of DRGs, the government develops clinical guidelines. [Q4-2011]
Centralised procurement
The Government will move towards a new centralised procurement of pharmaceuticals and medical goods for the NHS
through the Supplies Coordination Committee with the support of the Specifications Committee, using the uniform coding
system for medical supplies and pharmaceuticals. [Q1-2012]

64

Ongoing with delay.
The Ministry of Health has prepared the terms of reference.
Ongoing with delay.
Planned for March 2012
Partially observed.
Double-entry accounting system has been finalised.
The calculation of stock and flows covers 80 percent of the
procedures,
NHS facilities are now timely invoicing treatment costs.
However, these invoices cover only partially the costs of
treatment and will be updated when DRGs are in place.

Ongoing with delay.
Ongoing.
Basic patient records exist in 55 percent of the NHS hospitals.
Ongoing.
DRGs have been piloted and are now being revised as a
consequence.

Not yet applicable.

European Commission
The economic adjustment programme for Greece

Independent task force of health policy experts
The independent task force of health policy experts produces, in cooperation with the European Commission, ECB and IMF,
a first draft of its policy report, with specific recommendations on policies to be implemented. [end-October 2011] The
report and policies proposals cover the following areas:
- health system governance to reduce the fragmentation of the system;
- financing: pooling, collection and distribution of funds;
- harmonisation of health packages across funds;
- service provision and incentives for providers including:
integration between private and public provision;
primary care vis-à-vis specialist and hospital care;
efficiency in the provision of hospital services;
pharmaceutical consumption;
human resources;
- public health priorities, health promotion and disease prevention;
- data collection, health technology assessment and assessment of performance;
- expenditure control mechanisms.

Observed with delay.
The first draft was submitted at end November and the final
draft by mid-January. An internal workshop took place to
discuss the report and the report has been given to the Ministry
of Health. The report provides an overview of the measures
implemented and recommendations for future measures.

The report will provide preliminary quantitative targets in the fields above, in order to contribute to keep public health
expenditure --constant at, or below, 6 percent of GDP.
The task force of health policy experts produces the final comprehensive policy report, with specific recommendations on
policies to be implemented. [end-November 2011]
On the basis of this report, the Government adopts an action plan by end-2011, including a timetable for concrete actions.
The taskforce produces an implementation report, revising the policies implemented so far. [Q2-2012]

65

Not observed.
Since the report was delayed, the Ministry of Health is now
preparing the action plan.
Not yet applicable.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Table A3- Fiscal sector regulation and supervision
Comments
Each quarter, the Government transfers EUR 1 000 million to a dedicated government account opened by the General
Accounting Office. Funds from this account are regularly paid to the HFSF (Hellenic Financial Stability Fund) to ensure the
latter keeps a cash balance of EUR 1 500 million and if programme reviews of bank capital suggest that the resources are
necessary. The release of the funds from that account is subject to agreement by the European Commission, ECB and IMF
staff. Any support provided with HFSF resources will continue to be in line with state aid rules.
The Bank of Greece and the HFSF complete a memorandum of understanding to further strengthen their cooperation,
including sharing of appropriate supervisory information, prior to the sixth disbursement.
Over the medium term, banks will need to reduce their reliance on Eurosystem borrowing and government guarantees.
Regular updates of medium-term funding plans under guidance of the Bank of Greece will be an important tool to ensure that
this process proceeds at a pace consistent with the programme’s macroeconomic, fiscal, and financial framework. The next
update is finalised by end-2011.
Banks’ consolidated core tier 1 minimum regulatory capital requirement will be set at 10 percent from January 2012 on. The
core tier 1 capital requirements will exclude hybrid capital, but will include preference shares issued by banks and subscribed
by the Greek government at the onset of the global financial crisis in 2008-09.
The Bank of Greece ensures an equivalent capital treatment of risks related to Greek government bond exposures across all
institutions (with reference to the NPV reduction of the PSI). In this context, the Bank of Greece updates its last Pillar II
assessment [one month] after completion of the PSI.
The diagnostic of bank loan portfolios commissioned by the Bank of Greece will be concluded by end-December 2011. The
Bank of Greece will ensure that any existing under-provisioning revealed by this exercise will be recognized in banks' profit
and loss accounts. The Bank of Greece, in cooperation with the Commission, the ECB, and the IMF staff teams will use the
diagnostic results to determine capital needs over the three year horizon, based on a minimum core tier 1 target capital ratio
of 6 percent under an adverse stress test scenario. The capital needs will be assessed per bank and disclosed to the market by
end-February 2012.
Following the additional capital needs assessment based on the diagnostic study, banks may be given time to raise this
additional capital on the market. If the Bank of Greece determines that a period of time should be allowed for a bank to meet
capital requirements, the relevant bank will be asked to present, by end-April 2012, a viable 3-year business plan to this end.
Any bank in this circumstance will have to meet capital requirements by no later than end-August 2012. Any capital to be
raised to this end should consist of instruments qualifying as Tier I capital.

66

Observed.
Total EUR 3 000 million have been transferred to the account.

Observed.

Observed.

Revised.

Observed.

Revised.

Not yet applicable

European Commission
The economic adjustment programme for Greece

The governance arrangements of financial oversight agencies will be reviewed in consultation with the European
Commission, ECB, and IMF staff:
the organisational arrangements for the Bank of Greece to ensure that they are in line with best international practice and that
any potential conflict of interest in its expanded supervision and resolution role is avoided;
the corporate governance arrangements for the HFSF (including the need for internationally recognized professionals with
banking experience to be members of the board with voting rights); and
the governance arrangements for the HDIGF (to address potential conflicts of interest).
The enactment of legislation to address any outstanding issues in these areas will be completed by end-2011.

The government commits to fully subscribe its share in cash in ATE bank, and to purchase any other unsubscribed shares
(after notification to the European Commission). An appropriate amount of funds will be set aside for this purpose. This
capital increase will be reflected in ATE’s restructuring plan, an update of which will be resubmitted to the European
Commission by end-October 2011.
Regarding the Hellenic Consignment and Loan Fund (HCLF), an implementing decree and commitments to comply with
state aid rules will clarify the future tasks of the remaining activities of the HCLF, ensuring that these will not be in
competition with commercial activities. A more detailed schedule for transferring the commercial activities and the abovementioned commitments will be specified by end-October 2011 and will thereafter be endorsed by an Inter-Ministerial
Decision. The disposal of the commercial activities branch will be completed on or before end-July 2012.
Any support provided by the HDIGF and the HFSF in the framework of resolution will be notified to the European
Commission under state aid rules.
The Bank of Greece will require capital shortages to be addressed by end-November 2011, [or take the appropriate actions to
deal with the situation (by end-November 2011)] in line with EU state aid rules. Until capital shortages have been resolved,
the Bank of Greece will closely monitor affected banks and continuously enforce appropriate remedial measures.
The Bank of Greece commits to continue efforts to reduce remuneration of its staff in light of the overall effort of fiscal
consolidation.

67

Observed.

Observed..

Observed.

Observed.
Action taken on T bank and FBBank.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Table A4- Growth enhancing structural reforms
Comments
To strengthen labour market institutions
Wage setting
The Government initiates discussions [Q4-2011] with social partners to examine all labour market parameters that affect the
competitiveness of the companies and the economy as a whole. The goal is to conclude a national tripartite agreement which
addresses the macroeconomic challenges to support stronger competitiveness, growth and employment.
Moreover, based on a dialogue with social partners and taking into account the objective of creating and preserving jobs and
improving the firms’ competitiveness, the Government adopts further measures to allow the adaptation of wages to
economic conditions. In particular:
−the extension of occupational and sectoral collective agreements is suspended until end-2014;
−the so-called favourability principle is suspended throughout the MTFS period, in such a manner that firm-level
agreements take precedence over sectoral and occupational agreements;
−firm-level collective contracts can be signed either by trade unions or, when there is no firm-level union, by work councils
or other employees' representations, irrespective of the firms' size.
These amendments are legislated prior to the sixth disbursement.
Fighting undeclared work
Quantitative targets on the number of controls of undeclared work to be executed are set for the Labour Inspectorate. A pilot
study is implemented in order to verify the favourable financial net impact on the overall social security budget of a discount
of up to 10 percent on social contributions for those enterprises introducing the labour card. The pilot study covers a limited
scope of firms (maximum 100), over a short period of time (maximum four months). [December 2011]
An assessment on the effectiveness of the Labour Inspectorate law will be made six months after its implementation. [Q42011] Should the law prove ineffective, an appropriate amendment will be adopted. In particular, any wider-scale application
of a discount of up to 10 percent on social contributions for those enterprises introducing the labour card will be conditional
on the pilot study showing sufficient evidence of a favourable financial impact of the discount on the overall social security
budget.

68

Observed.
The Government initiated discussions with social partners.
However, since the outcome was not satisfactory, the
Government adopted legislation to reduce labour costs.

Observed.

Not observed.
There has been no pilot study.

European Commission
The economic adjustment programme for Greece

To improve the business environment and enhance competition in open markets
Regulated professions

In the implementation of Law 3919/2011, any decision to reinstate a restriction considers the need to promote competition
and takes into account international best practice. The Government consults widely, and in particular with the Hellenic
Competition Commission. [not later than end-Q4 2011]

The Government repeals Ministerial Decision 648/2011 and issues a new Joint Ministerial Decision significantly reducing
the value of a transaction above which the notaries' pro rata fee for drafting contracts is the maximum permissible fee. In
addition, the new Ministerial Decision defines pro rata fees for transactions below this maximum value at successively
decreasing rates in inverse proportion to the graduated increase, ensuring a sharp reduction of the fees already charged. To
this end, the new ministerial decision reduces pro rata fees by at least 30 percent in the first two tranches defined in
Ministerial Decision 648/2011, with larger cuts in the pro rata fees applicable to subsequent tranches. The new Joint
Ministerial Decision also lowers fees for copies and for additional pages. [Q4-2011]
For the legal profession, the Government issues a Presidential Decree revising the percentages applicable to the reference
amounts (Article 96(2) of the Code of Lawyers, as amended), which sets prepaid amounts for each procedural act or court
appearances (i.e., it sets a system of prepaid fixed/contract sums for each procedural act or appearance by a lawyer which is
not linked to a specific ‘reference amount’). [Q4-2011]

An audit is launched to assess to what extent the contributions of lawyers and engineers to cover the operating costs of their
professional associations are reasonable, proportionate and justified. [Q4-2011]

69

Ongoing.
As of mid-February 2012, the Ministry of Finance received
requests for derogation of chapter A of law 3919/2011 for 53
professions. In general, the Hellenic Competition Commission
has issued opinions against those requests barring the cases of
i) manufacturing and marketing of weapons and explosives,
ii) private primary and secondary schools,
iii) tutoring centres and language schools,
iv) vocational training institutes,
v) vocational training centres,
vi) post-secondary education centres,
vii) liberal arts studios where the maintenance of the prior
authorization regime were deemed to be warranted.
Observed.
A joint ministerial decision reduced notaries' fees by 27% in the
first two tranches compared to the 2011 decision. It also
reduced fees for copies and for additional pages by EUR 1each
and provided that starting from EUR 20 million the fee defined
in the decision is the maximum fee (compared to EUR 30
million before).
Ongoing.
As of mid-February 2012 a draft Presidential Decree had been
prepared, but it needed further refinements to be in line with the
law on fair trial and denial of justice adopted by the Hellenic
Parliament on 6 March 2012.
Partially observed.
The Ministry of Infrastructure has provided information to the
Commission services on the profit and loss account of the
Technical Chamber of Greece.
The Ministry of Justice still has to provide similar information
for the legal profession.

European Commission

ANNEX 1

The economic adjustment programme for Greece

The Government publishes a report, by mid-November 2011, on the implementation of Law 3919/2011, including:
1. the list of professions falling under the scope of the law;
2.
the list of professions exempted from the lifting of restrictions by Presidential Decree and the justifications for such
exemptions;
3.
an assessment on whether further measures are needed on the rules on access to, and exercise of the profession, and on
pricing to align Greek legislation with EU law and competition rules;
4. a timetable to screen existing legislation and to adopt the necessary changes to the existing specific regulations of the
professions (i.e., Presidential Decrees, Ministerial Decisions and Circulars) to make them fully compatible with Law
3919/2011, EU law and competition rules.
Changes to Presidential Decrees, Ministerial Decisions and Circulars following the screening of legislation are adopted.
[March 2012].
Measures are identified to ensure that providers of services are not subject to requirements which oblige them to exercise a
given specific activity exclusively, or which restrict the exercise jointly or in partnership of different activities, except in the
circumstances and under the conditions set in the Services Directive. [December 2011]

The Government identifies measures to remove complete prohibitions on commercial communications by the regulated
professions and to ensure that professional rules on commercial communications are non-discriminatory, justified by an
overriding reason relating to the public interest and proportionate. [Q4-2011]

The Government identifies measures to reinforce transparency in the functioning of professional bodies by requiring them to
publish an annual report on their webpage regarding their financial performance and statistics on disciplinary actions in
defence of consumers' interests. [November 2011]
The Government monitors the implementation of Law 3919/2011 and launches a study on how effective such a law is in
increasing competition and reducing prices [October 2011]. The study is regularly updated, with the first results available by
end-December 2011. If necessary, adjustments to the law with the aim of increasing competition are adopted by March
2012.
The Government presents the results of screening of the regulations of the main regulated professions to assess the
justification and the proportionality of the requirements reserving certain activities to providers with specific professional
qualifications. [November 2011]

70

Partly observed.
The third and fourth elements have not been complied with.

Not yet applicable.
Not observed.
Partly observed.
The main outstanding case of complete bans on advertisement
applied to the legal profession (namely, to lawyers, law firms
and notaries).
PD 95/2011 and Art. 6 of Law 4038/2012allow more flexibility
in the commercial communications of notaries and lawyers,
respectively. However, law 4038/2012 keeps a complete ban on
TV, radio and billboards, which appears contrary to Art. 24 of
the Services Directive and to the European Court of Justice
caselaw.
Partly observed
(observed only for the legal profession)
Law 4038/2012 provides for the publication of the annual
accounts of the bar associations in Greece as well as of
aggregate information on disciplinary procedures.
The principle of transparency should however, be applied to all
other regulated professions.
Observed.
The study is being carried out by KEPE, a Greek think- tank.
An interim report was completed and presented in December
2011.
Not observed.

European Commission
The economic adjustment programme for Greece

The Government prepares acts by end-2011, to be adopted by Q1-2012, at the latest, in order to:
1. abolish provisions of the regulations of the professional chambers on access to, and exercise of, the profession and on
pricing, that are against Law 3919/2011 and EU law including competition rules;
2. ensure that providers of services are not subject to requirements which oblige them to exercise a given specific activity
exclusively, or which restrict the exercise jointly or in partnership of different activities, except in the circumstances and
under the conditions set in the Services Directive;
3. remove complete prohibitions on commercial communications by the regulated professions and to ensure that
professional rules on commercial communications are non-discriminatory, justified by an overriding reason relating to
the public interest and proportionate;
4. reinforce transparency in the functioning of professional bodies;
5. set up contributions of lawyers and engineers to their professional associations that reflect the operating costs of the
services provided by those associations. These contributions are paid periodically and are not linked to prices charged by
professions;

Not observed.
There are on-going discussions on specific provisions of the
code of lawyers regarding minimum levels of remuneration
applicable to salaried lawyers and on areas reserved to the legal
profession.
Not observed.
(This follows from lack of compliance with the identification of
restrictions to multidisciplinary activities referred to above)
Partly observed
Observed for the legal profession (i.e., notaries, lawyers and law
firms).
Observed
for the legal profession (i.e., lawyers).
Not observed for other professions..
Not observed.

6.

simplify the requirements reserving certain activities to the legal and engineering professions that are not justified or
proportionate;

Not observed. To date, discussions have only started with the
Ministry of Justice regarding certain reserved activities in
favour of Greek lawyers covering mediation and mandatory
presence in contracts where notaries' participation are also
required.

7.

amend Article 6 of Law 3919/2011 to provide for the freedom of incorporation of law firms and the freedom to the
opening of branches inside Greece.

Observed.

8.

abolish Article 7.1 b) of Law 3919/2011, regarding the powers of the Technical Chamber of Greece to monitor and to
open disciplinary proceedings for unusually low fees.

Observed.

9.

tackle any other issues identified in the assessment of the implementation of Law 3919/2011.

The Government requests the Hellenic Competition Commission to issue an opinion of the proposed acts. [Q4-2011]
Recognition of professional qualifications
All the necessary measures are taken to ensure the effective implementation of EU rules on the recognition of professional
qualifications, including compliance with ECJ rulings (inter alia, related to franchised diplomas). The Government:
- updates the information on the number of pending applications for the recognition of professional qualifications, and sends
it to the Commission; [October 2011]
- presents draft legislation by October 2011, to be adopted by end-year, in order to remove the prohibition to recognise the
professional qualifications derived from franchised degrees. Holders of franchised degrees from other Member States should
have the right to work in Greece under the same conditions as holders of Greek degrees.

71

Observed.
Partially observed
Information on the number of pending applications for
recognition of professional qualifications was transmitted to the
Commission in December 2011.
The draft legislation providing for the recognition of franchised
diplomas for professional is pending.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Services Directive
The Government completes the adoption of changes to existing sectoral legislation in key services sectors such as retail (e.g.
open air markets and outdoor trade), wholesale (e.g. central markets), agriculture (e.g. veterinary services), employment
(employment agencies), and technical services. The Government also adopts changes to the remaining sectoral regulation,
ensuring full compliance with the directive.
Regulations should:
−facilitate the establishment by:
abolishing or amending requirements which are prohibited by the Services Directive;
abolishing or amending unjustified and disproportionate requirements, including those relating to quantitative and territorial
restrictions, legal form requirements, shareholding requirements, fixed minimum and/or maximum tariffs and restrictions to
multidisciplinary activities.
−facilitate the provision of cross-border services, so that providers of cross-border services are required to comply with
specific requirements of the Greek legislation only in exceptional cases (when admitted by Articles 16 or 17 of the Services
Directive).
−provide legal certainty for providers of cross-border services by setting out in the respective (sectoral) legislation which
requirements can, and which requirements cannot, be applied to cross-border services. [Q4-2011]

Essentially observed.
Since the previous review there has been good progress in the
adoption of sectoral legislation deriving from the
implementation of the services directive. There is however
pending legislation in the field of employment (to remove inter
alia, minimum fees in employment agencies) and on technical
professions (i.e., a series of Presidential Decrees simplifying the
access and exercise of a number of technical professions such as
electricians, plumbers, machine operators, etc.).

The Government ensures:
−that the point of single contact (PSC) is fully operational in all sectors covered by the Services Directive;
−that the PSC distinguishes between procedures applicable to service providers established in Greece and those applicable to
cross-border providers (in particular for the regulated professions);
−that there is adequate connection between the PSC and other relevant authorities (including one-stop shops, professional
associations and the recognition of professional qualifications). [Q4-2011]

Ongoing.
Since the last review there has also been good progress towards
the completion of the Point of Single Contact (PSC). However,
the Greek PSC needs to improve to increase the information
available in English as well as the number of procedures that
can be completed online. It has been estimated that in 30% of
the cases, the PSC provides information only and in almost 20%
of the procedures, the PSC does not provide any information (or
access to the electronic completion of procedures) at all.

Sectoral growth drivers
The Government publishes reports analysing:
- the potential contribution of the tourism sector to growth and jobs. In an Action Plan, the Government identifies legislative,
administrative and other obstacles hindering competition and market entry to the realisation of sector potential; [November
2011]
- the potential contribution of the retail sector to price flexibility, growth and jobs. It should identify legislative,
administrative and other obstacles hindering competition and market entry to the realisation of sector potential. [November
2011]

Not observed (tourism)
Partly observed (retail).
The Ministry of Development, Competitiveness and Shipping
(MDCS) submitted in December 2011 a list of actions taken or
to be taken in response to the study on retail carried out by
McKinsey.

72

European Commission
The economic adjustment programme for Greece

The necessary legal acts and other structural actions are adopted [Q4-2011] to implement the findings of these reports.

The Government initiates additional studies on manufacturing, energy, and wholesale sectors with a view to removing
remaining obstacles to growth in these sectors. On the basis of these studies, the Government prepares concrete actions and a
timetable for implementation [March 2012].
Business environment
The Government publishes a plan [October 2011] for a "Business-Friendly Greece" tackling 30 remaining restrictions to
business activities, investment and innovation. The plan identifies hurdles to innovation and entrepreneurship - ranging from
company creation to company liquidation - and presents the corresponding corrective actions. The plan includes measures,
among others, in order to:
−simplify and reduce costs linked to company publication requirements;
−complete the setting-up of the General Commercial Registry (GEMI) by promptly taking measures such as the training of
OSS and GEMI users, the completion of the GEMI database, the further development of web services and use of electronic
signatures, the interconnection of GEMI to the Chamber's information systems and to the PSC, in order to ensure access to
online completion of procedures both for company formation and for any administrative procedures necessary for the
exercise of their activities;
−simplify location, environmental, building and operating permits;
−eliminate distortions in fuel distribution;
−develop a "single electronic window" centralizing standardized trade-related information and simplifying the number of
documents needed to export;
−address restrictions in the transport sector, including the transport of empty containers and of non-hazardous waste;
− reduce the complexity of the Code of Books and Records and provide clarity on all categories of non-deducted expenses.
The Government concludes the screening of Ministerial Decision A2-3391/2009 on market regulations, as well as any other
related regulations. The screening is carried out, in cooperation with the Hellenic Competition Commission, with a view to
identifying administrative burdens and unnecessary barriers to competition to be eliminated, and developing alternative, less
restrictive, policies to achieve government objectives. A draft proposal of market regulation is ready by [end-December
2011].

73

Observed (retail).
As of February 2012, legislation had been adopted to lift
constraints on the sale by other retailers of currently restricted
product categories, such as baby milk. There was also draft
legislation ready i) to allow the sale of bake off bread through
retailers other than bakeries; ii) to simplify the system of
submission of wholesale and retail price lists, cost elements and
contracts to the Ministry of Competitiveness.
Not yet applicable

Partially observed.
Although a draft plan exists, it has not yet been published.

Ongoing.
The Ministry of Development Competitiveness and Shipping is
expected to issue in April 2012 a new Ministerial Decision on
market regulations to replace Ministerial Decision A23391/2009. Draft sections of the new decision on market
regulations –covering fresh foods, meat and fish– are treated as
a pilot and are expected to be available for discussion in March
2012.

European Commission

ANNEX 1

The economic adjustment programme for Greece

A comprehensive list of non-reciprocating charges in favour of third parties is presented, identifying beneficiaries and
quantifies contributions paid by consumers in favour of those beneficiaries. [October 2011]

The Government reviews and codifies the legislative framework of exports (i.e., Law 936/79 and Law Order 3999/59),
simplifies the process to clear customs for exports and imports and gives larger companies or industrial areas the possibility
to be certified to clear cargo for the customs themselves. The obligation of registration with the exporters’ registry of the
Chamber of Commerce is abolished. [December 2011], while the e-customs system is fully operational. [June 2012]

In order to help attract investment in key sectors, the Government speeds up the review of project applications in the pipeline
of the procedure for large investments for at least three large investment projects by end-November 2011, with two more
projects one month later.

The Decrees necessary for the implementation of the law on fast-track licensing procedure for manufacturing activities and
business parks are implemented. [October 2011]

Observed.
The Ministry of Finance submitted a comprehensive list of nonreciprocating charges to the Commission services in November
2011. The list has to be further refined to quantify the
contributions and to better identify beneficiaries.
Ongoing.
As of February 2012, the Government had submitted to
Parliament draft legislation replacing Law 936/79 and Law
Order 3999/59 and abolishing the need to register with the
exporters’ registry of the Chamber of Commerce.
Regarding the simplification of customs' procedures, the
Ministry of Finance issued a Ministerial Decision allowing the
exporter to get an authorization to export without prior
submission of custom declarations and without presentation of
the goods to the customs premises. Another Decision provides
for a simplified import clearance procedure and for clearing the
goods in the importer's premises. The simplified procedures are
those in Community Customs' regulations.
Observed.
The interministerial committee for strategic investment
approved the inclusion in the procedures of fast-track three
investment projects in renewable energy.
Four projects have completed their electronic submission in
strategic investment.
Ongoing.
As of mid-February 2012, three implementing regulations
deriving from this law have been issued.
The majority of the implementing decisions is, nonetheless,
pending.

The Government accelerates [Q4-2011] the completion of the land registry, with a view to:
−tendering cadastral projects for additional 4 million rights by December 2011;
−digitalising the operations of all mortgage and notaries' offices and conveying all newly registered deeds to the cadastre by
2015;
−exclusively-operating cadastral offices for large urban centres by 2015;
−establishing a complete cadastral register and exclusively operating cadastral offices nationwide by 2020.

Observed.
7 million rights were tendered in December 2011.

A Ministerial Decision on market regulations is issued following the screening launched in Q2-2011. [Q4-2011]

Ongoing.
See comment above on the screening of Ministerial Decision on
market regulations.

74

European Commission
The economic adjustment programme for Greece

An ex post impact assessment is presented in order to evaluate Law 3853/2010 on the simplification of procedures for the
establishment of companies in terms of savings in time and cost to set up a business, as well as to verify that all secondary
legislation is in force. [Q1-2012]
Transport
Liberalisation of tourist coaches is immediately effective after passing legislation in early August 2011. Secondary legislation
establishing the costs and the time required for issuing new licences is adopted by end-October 2011. Such costs will not
exceed the administrative costs and the required timing will not exceed 20 business days in total.
The Government submits a policy paper, indicating how all regional airports will be merged into groups ensuring that
regional airports become economically viable in compliance with state-aid rules, including realistic projections identified by
the appointed financial advisors. [Q4-2011] After ensuring that regional airports are economically viable, the Government
launches an effective transaction strategy leading to their privatisation. [Q1-2012]

Observed.

A report is submitted on the functioning of the regular passenger transport services (KTEL), presenting options for
liberalisation. [Q4-2011]

Ongoing with delay.
Consultants working on the report. Final results expected to be
ready by March 2012.

The transitional period established in Law 3887/2010 for the reduction in costs for issuing new road transport operator
licences is brought to an end on 1 January 2012. The necessary secondary legislation as foreseen in that law (Article 14(11))
is adopted, specifying the cost for issuing new road transport operator licences. This cost is transparent, objectively calculated
in relation to the number of vehicles of the road transport operator and does not exceed the relevant administrative cost. [Q42011]
In line with the policy objectives of Law 3919/2011 on regulated professions, the Government removes entry barriers to the
taxis market (in particular, restrictions on the number of licences and price of new licences), in line with international best
practice. [Q4-2011]
Energy
The Government finalises the remedies to ensure the access of third-parties to lignite-fired electricity generation. [October
2011]
The Government ensures that network activities are effectively unbundled from supply activities.
In particular, for electricity:
- all the necessary transfers of staff and assets of the transmission system operator (TSO) are completed; the TSO
management, it supervisory body and the compliance officer are appointed in accordance with the Electricity Directive
2009/72/EC; [Q4-2011]
- all necessary transfers of staff and assets to the legally unbundled distribution system operator (DSO) are completed; [Q12012]
- the unbundled TSO is certified by the Greek energy regulator. [Q2-2012]

75

Not yet applicable

Ongoing with delay.
The Privatisation Fund is preparing the policy paper.

Observed.

Not observed.
Draft law is still under discussion.

Not observed.
Ongoing.
The Q4-2011 deadline for the transfer of assets and personnel to
the unbundled TSO was partly complied with by the end of
2011, but is likely to be complied fully in Q1-2012.
It is also likely that the Q1-2012 deadline for the
implementation of the DSO unbundling will be observed.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Not observed.
In December 2011 the Greek authorities introduced an
amendment to Law 4001/2011 on the operation of gas and
electricity markets as well as the exploration and production of
hydrocarbons, to allow for the implementation of the ITOmodel for the gas TSO, DESFA. This allows also for DEPA and
DESFA to be sold as a vertically integrated company (as
opposed to selling both companies separately, which was the
policy originally provided for in the energy law, intentionally
negotiated with the Greek authorities and included in the
previous update of the MoU). Ownership unbundling still
remains an option for the unbundling of the gas TSO.

For gas:
- ownership unbundling is implemented as foreseen in the Greek energy law. [Q1-2012]

- the unbundled TSO is certified by the Greek energy regulator. [Q2-2012]

Not yet applicable.

The Government starts implementing the measures ensuring the access by third parties to lignite-fired electricity generation.
[Q4-2011]
Detailed plans are presented for ensuring a maximum market opening as regards the non-interconnected system, covering
among others, access of suppliers to the non- interconnected system markets in particular in Rhodes and Crete. The
Government submits a request for derogation under certain conditions of Article 44 of Directive 2009/72 for small isolated
systems. [Q4-2011]

Legislation is adopted to award the hydro reserves management to an independent body. [Q4-2011]

76

Not observed.
This follows from the lack of compliance with the deadline to
finalize the remedies to grant access to 40% of lignite fired
capacity in Greece to competitors of PPC.
Partially observed.
Greece has submitted in January 2012 a request for derogation
for the non-interconnected islands to the Commission.
However, the code for ensuring maximum market opening on
the non-interconnected islands has not yet been adopted.
Not observed.
Following announcements of the Greek ministry of
environment, the Ministry of Energy is considering the option
of selling lignite plants with hydro plants in the context of the
privatization of PPC. Depending on how it is implemented, this
measure could help to solve the lack of competition on the
generation side of the electricity market, where to date PPC
keeps privileged access to both energy sources, and hence, an
unfair advantage over other electricity producers that rely
exclusively on gas and renewables, which are relatively more
expensive. This measure could also be an alternative solution to
awarding the management of hydro reserves to an independent
body.

European Commission
The economic adjustment programme for Greece

The Government removes regulated tariffs for customers except households and small enterprises (as defined in the second
and third energy liberalisation packages). [Q4-2011]

Further measures are adopted to ensure that the energy component of regulated tariffs for households and small enterprises
reflects, at the latest by June 2013, wholesale market prices, except for vulnerable consumers. [Q4-2011]
The Government completes the implementation of the measures to ensure access by competitors of PPC to lignite-fired
electricity generation. Third parties can effectively use lignite-fired generation in the Greek market. [Q2-2012]
R&D and innovation
The Government pursues an up-to-date and in-depth evaluation of all R&D and ongoing innovation actions, including in
various operational programmes with their costs and benefits. It presents a strategic action plan for policies aimed at
enhancing the quality and the synergies between public and private R&D and innovation, as well as tertiary education. This
action plan identifies a clear timetable for relevant measures to be taken, taking the budgetary impact into account and
harmonising these actions with other relevant initiatives in these areas, in particular the investment law. [February 2012]

77

Observed.
A Ministerial Decree was issued in January 2012 which
deregulates medium voltage consumers.
Ongoing.
Oother measures have been undertaken to bring the remaining
regulated customers (low-voltage customers, i.e. mainly
households and small businesses) closer to the market price.
Regulated prices were increased by 3% at the beginning of
2012.
Not yet applicable.

Ongoing.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Better regulation
The Government tables legislation [November 2011] to improve regulatory governance covering, in particular:
−the principles of better regulation;
−the obligations of the regulator for the fulfilment of those principles;
−the tools of better regulation, including the codification, recast, consolidation, repeal of obsolete legislation, simplification
of legislation, screening of the entire body of existing regulation, ex-ante and ex-post impact assessments and public
consultation processes;
−the transposition and implementation of EU law and exclusion of gold plating;
−the setting-up of better regulation structures in each ministry as well as the creation of a Central Better Regulation unit;
−the requirement that draft laws and the most important draft legislative acts (Presidential Decrees and Ministerial Decisions)
are accompanied by an implementation timetable;
−electronic access to a directory of existing legislation and an annual progress report on Better Regulation.
On impact assessments, legislation provides that:
−implementing legislation with potentially large significant impact is also subject to the requirement to produce an impact
assessment;
−impact assessments address the competitiveness and other economic effects of legislation by making use of the Commission
Impact Assessment guidelines and the OECD Competition Assessment toolkit;
−the Central Better Regulation Unit can seek the opinion of other ministerial departments and independent authorities for
regulations that fall under their respective competences so as to improve the quality of impact assessment;
−
an independent authority and the Central Better Regulation Unit carry out quality checks of impact assessments.
−
the Central Better Regulation Unit consults the Hellenic Competition Commission when formulating and drafting
the guidelines to be implemented by the ministries' better regulation units;
−
impact assessments are published.
The Government identifies priority areas to codify and simplify existing legislation within the better regulation agenda.
[December 2011]
On administrative burden reduction, the Government submits a list of 13 selected priority areas to the European Commission
that will be subject to measurement. It also sets deadlines for the completion of measurements in each area, for the
identification of proposals to reduce burdens and for the amendment of the regulations. This policy initiative should reduce
administrative burdens by 25 percent (compared with the baseline year 2008) in the 13 priority areas. [December 2011]

78

Ongoing.
A draft law has been tabled in Parliament; it largely complies
with the MoU criteria.

Not observed.

European Commission
The economic adjustment programme for Greece

To raise the absorption rates of structural and cohesion funds

The Government meets targets for payment claims and major projects in the absorption of EU structural and cohesion funds
set down in the table. Compliance with the targets shall be measured by certified data.

In meeting absorption rate targets, recourse to non-targeted state aid measures is gradually reduced. The Government
provides data on expenditure for targeted and non-targeted de minimis state aid measures co-financed by the structural funds
in 2010 [October 2011] and in 2011 [Q4-2011].
Legislation is adopted, and immediately implemented, to shorten deadlines and simplify procedures on contract award and
land expropriations, including the deadlines needed for the relevant legal proceedings. [Q4-2011]
The Government earmarks appropriate amounts to:
−complete unfinished projects included in the 2000-06 operational programme closure documentation (ca. EUR 260 million),
as well as an appropriate amount for the rest of the implementation and closure of the 2000-06 cohesion-fund projects;
−to cover the required national contribution, including non-eligible expenditure (i.e. land acquisitions) in the framework of
the 2007-13 operational programmes. [Q4-2011]
The Government identifies EUR 500 million from ERDF within the 2007-13 operational programmes for the creation of a
guarantee fund for small and medium-sized enterprises. [Q1-2012]
The Government launches a web-based monitoring tool of procedures for the approval of project proposals and for the
implementation of public projects, [October 2011], which should be fully operational by end-2011.
The managerial capacity of all managing authorities and intermediate bodies of operational programmes under the framework
of the National Strategic Reference Framework 2007-13 is certified according to the standard ISO 9001:2008 (quality
management). [Q4-2011]
The Government provides an impact assessment of measures since 2010, in order to accelerate the absorption of structural
and cohesion funds adopted since May 2010, and it indicates any additional measures. [Q4-2011]

79

Observed.
The government has met the annual target for the submission of
15 large projects. Moreover, payment claims of approximately
EUR 3 301 million were declared to the Commission in 2011
against the annual target of EUR 3 350 million, implying that
overall compliance stood at 98.6% of the annual target.
By type of fund, the European Regional Development Fund
(ERDF)/Cohesion Fund target of EUR 2.6 billion was exceeded
by 4.5% (with payment claims of around EUR 2 718 million),
whereas European Social Fund (ESF) payment claims
(amounting to a total of EUR 583.8 million) were at 78% of the
annual target.
Not observed.
Data on non-targeted de minimis state aid for 2011 have not
been provided.
Not observed.

Ongoing.

Observed.
Observed.
Largely observed.
Observed.

European Commission

ANNEX 1

The economic adjustment programme for Greece

With the aim of accelerating the absorption of EU financing and in order to adapt itself to the increase in the EU co-financing
rates, the Government will, by December 2011:
- establish priority projects per operational programme, including, where appropriate major projects, which will have a
significant impact on cohesion, growth and employment, and their respective estimated allocation. These projects should be
operational by 2015; [December 2011]
- activate or eliminate sleeping projects (i.e. projects already approved in the operational programmes but not yet contracted
within the timeframes as defined at the national level). For those projects which are retained, it indicates which conditions
must be met in order that the co-financing is upheld; [December 2011]
- create a central database monitoring compensation and the time elapsed for the completion of expropriations incurred in the
framework of the implementation of projects co-financed by the ERDF and the Cohesion Fund; [Q1-2012]
- simplify tasks relating to project implementation by mapping responsibilities and removing unnecessary steps in accordance
with the management and control systems while also consolidating management capacities where appropriate (e.g. waste
treatment). [Q2-2012]
To upgrade the education system
The Government prepares, and starts implementing, an action plan for the improvement of the effectiveness and efficiency of
the education system, taking into account the measures recommended by the independent task force's report. [end-October
2011]
Based on the recommendations of the blueprint and the action plan, the existing legal/institutional framework for primary,
secondary and tertiary education will be amended with a view to increasing the efficiency and effectiveness of the education
system. The Government starts publishing a bi-annual progress report on the implementation of the law on quality assurance
in Higher Education. [Q4-2011]
The new tertiary education framework law, aimed at reducing excessive costs and at improving its overall efficiency and
effectiveness, is implemented. [Q2-2012].

80

Observed (for the propriety projects)
Ongoing (for the identification of sleeping projects)

Not yet applicable.

Partially observed.
The action plan needs improving.
Ongoing with delay.
Legal framework still under preparation.
Not yet applicable.

European Commission
The economic adjustment programme for Greece

To reform the judicial system
In order to improve the functioning of the judicial system, which is essential for the proper and fair functioning of the
economy, and without prejudice to the constitutional principles and the independence of justice, the Government:
(i)
ensures effective and timely enforcement of contracts, competition rules and judicial decisions;
(ii)
increases efficiency by broadening the skills' base of senior judges to whom court management tasks have been
assigned;
(iii)
speeds up the system by eliminating backlog of courts cases and by facilitating out-of-court settlement
mechanisms.
Specifically, the Government:
launches [October 2011], jointly with an external body of experts, a study of the backlog of non-tax cases in courts.
The study includes the Supreme Court and the Supreme Administrative Court, with data available by end-March
2012 and the analysis by end-June 2012.
puts in place implementing rules for Law 3898/2010 on mediation in civil and commercial matters; [October 2011]
identifies dormant cases, i.e. cases pending before the civil courts in which the relevant court’s file records that they
have been postponed or never received a hearing date and no party activity for receiving a hearing date has taken
place for at least 18 months; [October-2011]

The Government presents a working plan for the clearance of the backlog of tax cases in all administrative tribunals and
administrative courts of appeal by the end of July 2013, which provides for intermediate targets for reducing the backlog by
at least 15 percent by December 2011, 50 percent by July 2012 and 80 percent by December 2012; [Q4-2011]

The Government prepares a working plan for the use of e-registration, e-tracking of the status of individual cases in all courts
of the country, and for e-filing. The work plan includes deadline for the evaluation and completion of current pilot projects
(e.g. e-filing) and their extension to all courts. The plan [Q4-2011] envisages that e-registration, and e-tracking is extended to
all courts by end-2013;

The Government improves alternative dispute resolution for out-of-court settlement and actively promotes pre-trial
conciliation, mediation, and arbitration, with a view to ensuring that a significant amount of citizens and businesses make use
of the new legal framework for mediation; [Q4-2011]

81

Observed.
The external body of experts has been appointed and the study
is ongoing.
The following implementing rules have been adopted:
Presidential Decree No 123/2011 of 9 December 2011 and
Decisions No 109087 and 109088 of the Ministry of Justice,
Transparency and Human Rights dated 12 December 2011.
The joint ministerial decisions under Articles 5(3), 6(2), 6(3)
and 9(2) of Law 3898/2010 and the decisions of the Ministry of
Justice, Transparency and Human Rights under Articles 6(5)
and 12(3) of Law 3898/2010 are pending.
Regular reporting of dormant cases will be requested starting
from end-June 2012.
Observed.
The Government met the 15 percent reduction target on the
basis of its interpretation of backlog clearance that it equates
with the fixing of a hearing date. In particular, a hearing date
was fixed until 31 December 2011 for 24 780 out of 156 862
cases that were pending on 31 August 2011 at first instance
level, and 3 260 out of 8 590 cases that were pending at appeal
level.
Partly observed and ongoing.
A technically detailed work plan has been submitted presenting
the current state of affairs. However, the forward-looking part
of the plan with deadlines for the
evaluation/completion/extension of current pilot projects (e.g. efiling) is missing. There is no information concerning the
extension of e-registration and e-tracking to all courts by end2013.
Observed.
The Ministry of Justice has started promoting alternative
dispute resolution, especially mediation, in close cooperation
with chambers of commerce.

European Commission

ANNEX 1

The economic adjustment programme for Greece

The Government produces an evaluation or impact assessment of existing and required additional efficiency measures (such
as the fast-lane procedure at the Athens Court of First Instance) in order to reduce the processing time of cases, including
further simplifying case registration, further rationalizing docket management with a view to allowing the resolution of
docketed cases, and providing increased computer support to judges in order to allow the issuance of written decisions in all
courts within two weeks from the judge taking the decision; [Q4-2011]

The Government takes the necessary measures in order to be able to publish quarterly reports on recovery rates by bailiffs
and notaries, duration and costs of corporate insolvency cases and tax cases. For the purposes of this Memorandum,
‘recovery rate’ refers to the ratio of the amount collected by the creditor in enforcement proceedings -following the issuance
of an enforceable title- to the amount adjudicated by the court; [Q4-2011]

Ongoing.
The Ministry of Justice is of the view that the explanatory
memorandum of the law addressing issues of fair trial and
denial of justice would suffice to meet this requirement. The
required evaluation/impact assessment is expected to be
available shortly.
Ongoing.
The Federation of Court Bailiffs of Greece and the National
Council of Greek Notaries have informed the Ministry of
Justice that court bailiffs and notary associations do not collect
data on recovery rates by bailiffs or notaries. Statistics on tax
cases and corporate insolvency cases will be requested to be
compiled and published starting from the first quarter of 2012
for tax cases and the third quarter of 2012 for corporate
insolvency cases.

The Government conducts an assessment on whether the reform of the Code of Administrative Procedure has delivered the
results that the legislation had set out to do; [Q4-2011]

Observed.

The Government increases the costs of civil litigation in line with the policy underlying the increase of litigation costs in
administrative matters; [Q4-2011]

Ongoing.
The law addressing issues of fair trial and denial of justice that
was adopted by the Hellenic Parliament on 6 March 2012
provides for the increase of the costs of civil litigation,
especially for litigants who are defeated at the appeal stage. The
Government expects that the draft law will be adopted during
the current parliamentary term.

The Government establishes a task force with a mandate to design a performance framework for courts with a view to
considering links to resource allocation in future revisions of this Memorandum. The task force will develop by September
2012: i) a dependable data management system, a workload measurement system, and a management structure, that is
conducive to a more effective, responsible, and accountable judicial management; ii) a fully operational and publicly
available database with case data for each court (as well as consolidated data for all courts), giving basic performance data,
including number of judges and staff, number of cases (including by case type) and backlogs; iii) a work plan on
benchmarking cases for workload measurement, including focusing on delays in case processing, and the types of cases
where such delays are most acute. [Q4-2011]
In order to improve the efficiency of courts, the Government amends Law 1756/1988 on the organisation of the courts and
the situation of court officials, and relevant implementing rules, always respecting the independence of justice, so as to allow
and facilitate the introduction of human resource management measures in courts, such as mobility of court officials,
incentives for the efficient administration of courts and continuous management training programmes for court officials with
management tasks; [Q1-2012]
The Government imposes additional dissuasive measures against non-cooperative debtors in enforcement cases; [Q1-2012]

82

Observed or ongoing.
The Government established a working group mandated to
design a performance and accountability framework for courts.
The working group has initially been set up until 31 May 2012
and will also be responsible for the project on statistics for
justice contained in the December 2011 e-justice work plan.
Ongoing.
The law addressing issues of fair trial and denial of justice
provides for an amendment of Law 1756/1988. In particular, the
draft law amends provisions regulating matters such as leave,
promotion, transfer, career review and disciplinary action.
Ongoing.
In the area of enforcement, the law addressing issues of fair trial
and denial of justice shortens statutory time periods and tightens

European Commission
The economic adjustment programme for Greece

The Government presents a qualitative study on recovery rates in enforcement proceedings, evaluating the success rates and
the efficiency of the various modes of enforcement. [Q1-2012]
The Government decides on the date by when it will open access to the regulated profession of mediator to non-lawyers in
line with this memorandum conditionality on regulated professions and presents an action plan ensuring that non-lawyers
may offer mediation services on that date. [Q1-2012]
The Government establishes a task force that is broadly representative of the legal community, including, but not limited to,
academia, practising lawyers, in-house lawyers, lawyers from other EU Member States established or offering their services
in Greece, aimed at reviewing the Code of Civil Procedure and bring it in line with international best practices on, inter alia,
(i) judicial case management, including the possibility of removing dormant cases from court registers; (ii) relieving judges
from non-adjudicatory work, such as pre-mortgaging of immovable property, formation and dissolution of incorporated
entities and consensual/non-litigious family law applications, (iii) the enforcement of decisions and of orders to pay, in
particular small claims cases with a view to reducing the role of the judge in these procedures, and (iv) enforcing statutory
deadlines for court processes, in particular for injunction procedures and debt enforcement and insolvency cases. For the
purposes of this Memorandum, judicial case management shall mean the possibility of judges to be involved early in
identifying the principal factual and legal issues in dispute between the parties, require lawyers and litigants to attend prehearing conferences and manage the conduct of proceedings and the progression of the case to achieve the earliest and most
cost-effective resolution of the dispute. [Q2-2012]
The Government carries out an evaluation [Q3-2012] of the backlog reduction plan of tax cases in all administrative tribunals
and administrative courts of appeal established in Q4-2011, it also updates the plan and it takes remedial action, should there
be deviations in achieving full clearance of the backlog by end-July 2013;
By end-August 2012, the Government presents, based on the study conducted jointly with an external body of experts, an
action plan with specific targets for a reduction of the backlog of non-tax cases in courts of at least 50 per cent by end-July
2013 and it starts implementing the action plan.
The Government conducts an assessment of whether the enactment of Law 3898/2010 on mediation on civil and commercial
matters has delivered the results which the legislation had set out to do, and presents data and analysis concerning costs, time
and success rates associated with the enforcement of agreements arising from alternative dispute resolution as compared with
the enforcement of judicial decisions. [Q4-2012]
The taskforce on the review of the Code of Civil Procedure makes specific recommendations on: (i) case management, (ii)
relieving judges from non-adjudicatory work; (iii) the reduction of the role of the judge in the enforcement of decisions and
of orders to pay and (iv) on enforcing statutory deadlines for court processes. [Q1-2013]

83

conditions under which enforcement action may be suspended
Ongoing.
The Ministry of Justice plans to contact the President of the
National Council of Greek Notaries, the Federation of Court
Bailiffs of Greece and several high street banks for the purpose
of this study.

Not yet applicable.

European Commission

ANNEX 1

The economic adjustment programme for Greece

Table A5 – Reform Monitoring and Technical Assistance

Actions in the Memorandum of Understanding on specific policy conditionality

Comments

The Ministry of Finance's directorate of planning, management and monitoring becomes operational with the aim of
improving reform management and oversight. It starts publishing quarterly monitoring indicators for each of the key
structural reform initiatives, on a quarterly basis. [Q4-2011]

Not observed.

Ongoing.
The Government will request technical assistance to be provided by the EU Member States, the European Commission the
IMF or other organisations in priority areas. These technical assistance actions will be coordinated by the Commission's
technical assistance taskforce.

84

The Commission's taskforce for technical assistance for Greece
has been very active in several projects (see the respective
quarterly report).

European Commission

ANNEX 2

The economic adjustment programme for Greece

Annex 2: Macroeconomic forecast
Table A1: USE AND SUPPLY OF GOODS AND SERVICES (volume)

Annual % change

1. Private consumption expenditure
2. Government consumption expenditure
3. Gross fixed capital formation
4. Final domestic demand
5. Change in inventories + net acquisitions of
valuables
6. Domestic demand
7. Exports of goods and services
7a. - of which goods
7b. - of which services
8. Final demand
9. Imports of goods and services
9a. - of which goods
9b. - of which services
10. Gross domestic product at market prices

2009

2010

2011

2012

2013

2014

-1.3
4.8
-15.2
-3.1

-3.6
-7.2
-15.0
-6.2

-7.2
-9.5
-17.0
-9.1

-5.7
-11.0
-6.6
-6.7

-1.1
-9.5
6.7
-1.3

0.9
-4.7
9.8
1.4

-1.1
-5.0
-19.5
-15.7
-22.5
-8.0
-20.2
-21.0
-16.5
-3.2

-0.5
-5.7
4.2
5.4
3.2
-4.2
-7.2
-10.7
7.0
-3.5

0.2
-8.6
3.0
2.5
3.5
-6.6
-7.0
-7.0
-7.2
-6.9

0.0
-6.9
3.2
3.2
3.2
-5.0
-5.1
-5.1
-5.1
-4.7

0.0
-1.3
5.5
4.0
6.8
0.1
0.0
0.3
-1.0
0.0

0.0
1.4
7.0
7.0
7.0
2.6
2.4
2.4
2.4
2.5

-3.6
-2.3
3.1

-7.0
0.6
3.1

-10.0
0.7
2.8

-7.2
-0.2
2.3

-1.4
0.0
1.4

1.5
0.0
1.2

Contribution to change in GDP
11. Final domestic demand
12. Change in inventories + net acq. of valuables
13. External balance of goods and services

Table A2: USE AND SUPPLY OF GOODS AND SERVICES (value)

Annual % change

2009

2010

2011

2012

2013

2014

1. Private consumption expenditure
2. Government consumption expenditure
3. Gross fixed capital formation
4. Final domestic demand
5. Change in inventories + net acquisition of valuables
6. Domestic demand
7. Exports of goods and services
7a. - of which, goods
7a. - of which, services
8. Final demand
9. Imports of goods and services
9a. - of which goods
9a. - of which, services
10. Gross domestic product at market prices

-1.1
12.6
-11.3
-0.6

0.7
-12.7
-14.4
-4.3

-4.4
-12.2
-16.2
-7.5

-6.1
-12.8
-6.2
-7.1

-1.3
-10.5
6.9
-1.5

1.1
-4.7
10.3
1.7

-2.7
-20.2
-18.9
-21.2
-5.7
-19.1
-20.2
-13.9
-0.8

-4.0
9.9
13.8
6.8
-2.0
-2.4
-5.2
9.2
-1.9

-7.1
6.1
5.5
6.6
-4.9
-3.7
-3.7
-3.8
-5.3

-7.1
3.0
2.9
3.0
-5.3
-5.1
-5.1
-5.1
-5.4

-1.5
5.2
3.8
6.5
-0.2
0.7
1.0
-0.4
-0.4

1.7
6.9
6.9
6.9
2.8
3.7
3.7
3.6
2.5

11. Gross national income
12. Compensation of employees
13. Gross operating surplus and mixed income
14. Gross value added at basic prices
14a. - of which, labour costs, including self-employed
15. Taxes net of subsidies
16. - taxes on products
17. - subsidies on products

-0.3
2.6
-1.0
0.5
2.9
-10.0
-9.8
76.7

-2.2
-5.1
-1.5
-3.0
-5.1
6.6
6.1
-16.4

-5.5
-8.8
-3.6
-5.7
-8.8
-1.7
-1.4
20.0

-4.2
-12.4
-1.0
-5.5
-12.4
-3.6
-3.4
2.6

-0.2
-1.5
0.0
-0.5
-1.5
1.2
1.2
2.6

2.2
0.7
3.8
2.7
0.7
1.7
1.8
2.6

85

European Commission

ANNEX 2

The economic adjustment programme for Greece

Table A3: COSTS AND PRICES
% change in implicit price deflator
1. Private consumption expenditure
2. Government consumption expenditure
3. Gross fixed capital formation
3a. - of which, construction
3b. - of which, equipment
4. Final domestic demand
5. Domestic demand
6. Exports of goods and services
6a. - of which, goods
6b. - of which, services
7. Final demand
8. Imports of goods and services
8a. - of which, goods
8b. - of which, services
9. Gross domestic product at market prices
10. Terms of trade of goods and services
10a. - of which, terms of trade of goods
10b. - of which, terms of trade of services
11. HICP
11a. -at constant taxes

2009

2010

2011

2012

2013

2014

1.1
2.0
-0.2
0.3
-0.6
1.3
1.4
-0.2
-1.1
0.5
1.3
-0.7
-2.1
6.2
1.6
0.4
1.0
-5.3
1.3
1.1

4.5
-6.0
0.7
0.3
1.3
2.0
1.8
5.5
7.9
3.5
2.3
5.2
6.1
2.1
1.7
0.3
1.7
1.4
4.7
1.4

3.0
-3.0
1.0
0.9
0.8
1.8
1.6
3.0
3.0
3.0
1.8
3.5
3.5
3.7
1.6
-0.5
-0.5
-0.7
3.1
1.2

-0.4
-2.0
0.4
0.4
0.4
-0.4
-0.3
-0.2
-0.2
-0.2
-0.3
0.0
0.0
0.0
-0.7
-0.2
-0.2
-0.2
-0.5
-1.2

-0.3
-1.0
0.2
0.1
0.0
-0.2
-0.2
-0.2
-0.2
-0.2
-0.2
0.6
0.7
0.6
-0.4
-0.9
-0.9
-0.8
-0.3
-0.8

0.2
0.0
0.4
0.4
0.4
0.2
0.2
-0.1
-0.1
-0.1
0.2
1.3
1.3
1.2
0.0
-1.4
-1.4
-1.3
0.1
0.1

Table A4: LABOUR MARKET AND LABOUR COST

Annual % change

86

2009

2010

2011

2012

2013

2014

1. Gross value added at 1995 basic prices
2. Employment ('000)
3. GVA per occupied person
4. Compensation of employees (per employee)
5. Unit labour costs (1995=100)

-1.4
-0.7
-0.7
3.6
4.3

-3.6
-1.9
-1.7
-3.3
-1.6

-8.0
-6.3
-1.8
-2.7
-1.0

-5.0
-4.8
-0.2
-8.0
-7.8

-0.2
-0.2
0.0
-1.3
-1.3

2.6
1.6
1.0
-0.9
-1.9

6. Total population
7. Population of working age (15-64 years)
8. Total labour force

0.4
0.1
1.1

0.2
0.0
1.2

0.4
-0.2
-1.5

0.4
-0.3
-2.5

0.4
-0.2
-0.3

0.4
-0.2
0.2

9. Total employment
9(a). - of which, employees
9(b). - of which, self-employed
10. Unemployment
10a. Calculated unemployment rate (%)

-0.7
-0.9
-0.3
24.4
9.1

-1.9
-1.9
-1.9
33.0
11.7

-6.3
-6.3
-6.3
34.5
15.9

-4.8
-4.8
-4.8
9.5
17.9

-0.2
-0.2
-0.2
-0.7
17.8

1.6
1.6
1.6
-6.3
16.7

European Commission

ANNEX 2

The economic adjustment programme for Greece

Table B1: USE AND SUPPLY OF GOODS AND SERVICES (value, in EUR billion)
levels
1. Private consumption expenditure
2. Government consumption expenditure
3. Gross fixed capital formation
4. Final domestic demand (1+2+3)
5. Change in inventories + net acquisition of valuables as % of GDP
6. Domestic demand (4+5)
7. Exports of goods and services
7a. - of which, goods
7a. - of which, services
8. Final demand (6+7)
9. Imports of goods and services
9a. - of which goods
9a. - of which, services
10. Gross domestic product at market prices ( 8-9 )
11. - of wich, external balance of goods and services
12. Balance of primary income with rest of the world
13. Gross national income at market prices (10+12)
14. Compensation of employees
15. Gross operating surplus and mixed income
16. Gross value added at basic prices
16a. - of which, labour costs, including self-employed
17. Taxes net of subsidies (18-19)
18. - taxes on products
19. - subsidies on products
20. Gross domestic product at market prices ( 16 + 17 )

2009

2010

2011

2012

2013

2014

168.2
47.3
44.1
259.7
-1.7
257.9
44.5
20.1
24.4
302.4
70.8
57.1
13.6
231.6
-26.3
-5.6
226.0
86.4
122.4
206.6
131.5
25.03
25.6
0.5
231.6

169.4
41.3
37.8
248.5
-1.0
247.5
48.9
22.8
26.1
296.4
69.1
54.2
14.9
227.3
-20.2
-6.2
221.1
82.0
120.6
200.6
124.8
26.69
27.1
0.4
227.3

161.9
36.3
31.7
229.9
0.0
229.9
51.9
24.1
27.8
281.7
66.5
52.1
14.3
215.2
-14.6
-6.4
208.9
74.7
116.3
189.0
113.8
26.2
26.8
0.5
215.2

152.1
31.6
29.7
213.4
0.0
213.4
53.4
24.8
28.6
266.9
63.1
49.5
13.6
203.8
-9.7
-3.6
200.2
65.5
115.1
178.4
99.7
25.3
25.8
0.5
203.7

150.1
28.3
31.8
210.2
0.0
210.2
56.2
25.7
30.5
266.4
63.5
49.9
13.6
202.9
-7.3
-3.1
199.7
64.5
115.1
177.3
98.2
25.6
26.1
0.6
202.9

151.7
27.0
35.0
213.7
0.0
213.7
60.1
27.5
32.6
273.8
65.9
51.8
14.0
207.9
-5.8
-3.7
204.2
64.9
119.4
181.9
98.9
26.0
26.6
0.6
207.9

Table B2: LABOUR MARKET AND LABOUR COST (in EUR billion unless otherwise stated)
levels

2009

2010

2011

2012

2013

2014

1. Gross value added at 1995 basic prices
2. Employment ('000)
3. GVA per occupied person (1:2)
4. Compensation of employees (per employee)
5. Unit labour costs (4:3) (1995=100)

180.3
4834.8
37.3
27.2
72.9

173.9
4743.4
36.7
26.3
71.8

160.1
4444.6
36.0
25.6
71.1

152.1
4231.2
36.0
23.6
65.5

151.8
4222.8
36.0
23.3
64.7

155.8
4290.3
36.3
23.0
63.5

6. Total population
7. Population of working age (15-64 years)
8. Total labour force
9. Calculated activity rate (%) (8:7)
10. Total employment
11. Total employment
11(a). - of which, employees
11(b). - of which, self-employed
12. Calculated employment rate (11:7)
13. Unemployment (8 - 11)
13a. Calculated unemployment rate (%) (13:8)

11287.8
7542.0
5305.9
70.4
4762.7
4762.7
3174.9
1587.7
64.1
471.1
8.9

11310.1
7539.6
5369.9
71.2
4743.4
4743.4
3114.6
1628.8
62.9
626.5
11.7

11349.7
7524.5
5287.3
70.3
4444.6
4444.6
2918.4
1526.2
59.1
842.7
15.9

11389.4
7501.9
5154.0
68.7
4231.2
4231.2
2778.3
1452.9
56.4
922.7
17.9

11429.3
7486.9
5139.1
68.6
4222.8
4222.8
2772.8
1450.0
56.4
916.3
17.8

11469.3
7471.9
5148.9
68.9
4290.3
4290.3
2817.1
1473.2
57.4
858.5
16.7

87

European Commission

ANNEX 2

The economic adjustment programme for Greece

levels
1. Exports of goods (fob)
2. Imports of goods (fob)
3. Trade balance (goods, fob/fob) (1-2)
3a. p.m. (3) as % of GDP
4. Exports of services (a)
5. Imports of services (a)
6. Services balance (a) (4-5)
6a. p.m. 6 as % of GDP
7. External balance of goods & services (3+6)
7a. p.m. 7 as % of GDP
8. Balance of primary incomes and current Transfers
8a. - of which, balance of primary income
8b. - of which, net current Transfers
8c. p.m. 8 as % of GDP
9. Current external balance (7+8)
9a. p.m. 9 as % of GDP
10. Net capital transactions
11. Net lending (+)/ net borrowing (-) (9+10)
11a. p.m. 11 as % of GDP

88

Table B3: EXTERNAL BALANCE
2009
2010
20.1
57.1
-37.1
-16.0
24.4
13.6
10.8
4.6
-26.3
-11.4
-6.8
-5.6
-1.2
-3.0
-33.1
-14.3
2.4
-30.8
-13.3

22.8
54.2
-31.3
-13.8
26.1
14.9
11.2
4.9
-20.2
-8.9
-7.8
-6.2
-1.6
-3.5
-28.0
-12.3
3.9
-24.1
-10.6

2011

2012

2013

2014

24.1
52.1
-28.1
-13.0
27.8
14.3
13.5
6.2
-14.6
-6.8
-7.5
-6.4
-1.1
-3.5
-22.1
-10.3
4.2
-18.0
-8.3

24.8
49.5
-24.7
-12.1
28.6
13.6
15.0
7.4
-9.7
-4.7
-4.4
-3.6
-0.8
-2.2
-14.1
-6.9
4.3
-9.7
-4.8

25.7
49.9
-24.2
-11.9
30.5
13.6
17.0
8.4
-7.3
-3.6
-3.5
-3.1
-0.4
-1.7
-10.8
-5.3
4.5
-6.3
-3.1

27.5
51.8
-24.3
-11.7
32.6
14.0
18.6
8.9
-5.8
-2.8
-3.8
-3.7
-0.1
-1.8
-9.6
-4.6
4.7
-4.9
-2.4

European Commission

ANNEX 2

The economic adjustment programme for Greece

C1: FISCAL ACCOUNTS AND FORECAST
2009

2010

2011

2012

2013

2014

Levels (in EUR billion)
Total revenue
Indirect taxes
Direct taxes
Social contributions
Sales
Other current resources
Capital transfers received

88.1
26.2
19.1
29.5
5.2
4.9
3.2

89.8
27.3
17.5
29.8
5.5
5.1
4.6

88.5
27.8
17.8
27.3
5.2
5.3
5.0

86.3
26.1
19.9
25.1
5.0
5.0
5.2

85.5
26.0
19.0
25.2
5.0
5.1
5.2

86.9
26.1
19.8
25.8
5.1
5.3
4.8

Total expenditure
Intermediate consumption
Compensation of employees
Social transfers other than in kind
Interest
Subsidies
Other current expenditure
Gross fixed capital formation
Other capital expenditure

124.7
17.1
31.0
49.0
12.0
0.1
3.5
7.3
4.9

113.9
14.0
27.5
47.2
12.9
0.1
3.3
6.6
2.3

108.5
11.2
26.2
46.2
14.8
0.1
2.8
4.7
2.3

101.1
10.7
24.0
43.3
12.8
0.1
2.7
5.1
2.3

102.5
10.9
23.8
43.9
13.0
0.1
3.2
5.3
2.3

103.0
10.9
23.4
43.8
13.8
0.1
3.3
5.4
2.3

General Government balance

-36.6

-24.1

-20.0

-14.8

-17.0

-16.1

Primary balance

-24.7

-11.3

-5.2

Primary target balance
Measures to be identified

-2.0

-4.0

-2.3

-2.0
0.0

3.7
-7.6

9.4
-11.7

% of GDP
Total revenue
Indirect taxes
Direct taxes
Social contributions
Sales
Other current resources
Capital transfers received

38.0
11.3
8.3
12.7
2.3
2.1
1.4

39.5
12.0
7.7
13.1
2.4
2.2
2.0

41.1
12.9
8.3
12.7
2.4
2.5
2.3

42.3
12.8
9.8
12.3
2.4
2.5
2.6

42.2
12.8
9.4
12.4
2.4
2.5
2.6

41.8
12.6
9.5
12.4
2.5
2.6
2.3

Total expenditure
Intermediate consumption
Compensation of employees
Social transfers other than in kind
Interest
Subsidies
Other current expenditure
Gross fixed capital formation
Other capital expenditure

53.8
7.4
13.4
21.1
5.2
0.1
1.5
3.1
2.1

50.1
6.1
12.1
20.8
5.7
0.1
1.5
2.9
1.0

50.4
5.2
12.2
21.5
6.9
0.0
1.3
2.2
1.1

49.6
5.3
11.8
21.3
6.3
0.0
1.3
2.5
1.1

50.5
5.4
11.7
21.6
6.4
0.0
1.6
2.6
1.1

49.5
5.2
11.3
21.1
6.6
0.0
1.6
2.6
1.1

General Government balance

-15.8

-10.6

-9.3

-7.3

-8.4

-7.7

Primary balance

-10.6

-5.0

-2.4

-1.0

-2.0

-1.1

-1.0
0.0

1.8
-3.8

4.5
-5.6

Primary target balance
Measures to be identified

89

European Commission

ANNEX 2

The economic adjustment programme for Greece

C2: GOVERNMENT DEBT
2009

2010

2011

2012

2013

2014

327.0
-28.8
-14.8
-43.6

333.0
6.0
-9.4
-3.4

335.0
2.0
-4.4
-2.4

levels (EUR billion)
Debt
Change in debt
Government deficit (level)
Stock-flow adjustment

299.5
36.4
-36.6
-0.2

329.4
29.9
-24.1
5.8

355.8
26.4
-20.0
6.4

Debt
Change in the ratio
Contributions:
Primary balance (+ is a deficit)
“Snow-ball” effect
Stock-flow adjustment

129.3
16.5

144.9
15.6

165.3
20.4

160.5
-4.7

164.2
3.6

161.1
-3.0

10.6
5.9
-0.1

5.0
8.1
2.5

2.4
15.0
3.0

1.0
15.7
-21.4

-1.8
7.1
-1.7

-4.5
2.6
-1.2

% GDP

90

European Commission

ANNEX 3

The economic adjustment programme for Greece

Annex 3: Updated programme documents

Letter of Intent

93

Memorandum of Economic and Financial Policies

95

Memorandum of Understanding on Specific Economic Policy conditionality

123

Technical Memorandum of Understanding

173

91

Athens, 11 March 2012
Mr. Jean-Claude Juncker,
President,
Eurogroup,
Brussels.

92

Mr. Olli Rehn,
Vice President for Economic and Monetary Affairs and the Euro,
European Commission,
Brussels.
Mr. Mario Draghi,
President,
European Central Bank,
Frankfurt am Main.

Dear Messrs Juncker, Rehn and Draghi,

The attached Memorandum of Economic and Financial Policies (MEFP) and Memorandum of
Understanding on Economic Policy Conditionality (MoU) outline the economic and financial
policies that Greece will implement during the remainder of 2012 and in the period 2013-14.
These policies aim to address Greece’s competitiveness gap, support growth and employment,
restore public finances to sustainability, secure financial system stability, and distribute the cost
of adjustment in an equitable way, within our commitment to the common currency.
In support of our objectives, we have committed to a set of key policies, building on what has
been achieved under the programme agreed in May 2010. This set of policies places strong
emphasis on restoring growth and ensuring an equitable fiscal adjustment:
•

To restore competitiveness and growth, our policies aim to accelerate the
implementation of deep structural reforms in the labour, product and service markets.
Indeed to give a strong upfront impetus to unit labour cost reductions, and protect
employment, we have already reformed the collective bargaining framework and
reduced the minimum wage as a prior action for this programme. And to reduce market
rigidities, boost productivity, and increase long-term growth potential we are
implementing reforms in product and service markets and improvements in the business
environment.

•

To bring the fiscal deficit to a sustainable position, while protecting the most vulnerable
members of the population, our policies target bold structural spending and revenue
reforms. The adjustment will be achieved through permanent expenditure reductions.
Measures to this end have already been implemented as prior actions. These efforts will
be supported on the revenue side by a tax reform to broaden the tax base and achieve a
fairer distribution of the tax burden, and by revenue administration reforms to improve
tax and social contribution, collection. To reinvigorate this crucial latter effort, we have
taken prior actions to strengthen the tax administration.

•

We have adopted a comprehensive banking sector strategy to secure a viable and wellcapitalized private banking sector that supports the economic recovery and sustained
growth. The banking system will be restructured and recapitalized following the
upcoming sovereign debt exchange. We have completed a capital needs assessment and
a plan for a large state-owned bank as prior actions. In support of these efforts, and as a
further prior action, we have strengthened our resolution and financial oversight
framework

93

•

We remain committed to our ambitious privatization plans. Transferring assets in key
sectors of the economy to more productive uses through privatization and concessions
will encourage private investment and support long-term growth.

In support of our ambitious multi-year policy program, we request a financing arrangement, until
end-2014, by the European Financial Stability Facility (EFSF) in the overall amount of EUR
144.7 billion (including the already committed or disbursed amounts for PSI liability
management exercise and banks recapitalisation). At the same time, we are requesting financing
by the IMF, under the Extended Fund Facility, in the amount of EUR 28 billion in a four-year
arrangement, of which EUR 19.75 billion are expected to be disbursed by end-2014.
The implementation of our program will be monitored through quantitative performance criteria
and structural benchmarks as described in the attached MEFP, MoU and Technical
Memorandum of Understanding (TMU). The quarterly reviews will assess progress in
implementing the program and reach understandings on any additional measures that may be
needed to achieve its objectives.
We believe that the policies set forth in the attached memoranda are adequate to achieve the
objectives under the programme. We stand ready to take any corrective actions that may become
appropriate for this purpose as circumstances change. We will consult with the European
Commission, the IMF and ECB staff before the adoption of any such actions and in advance of
revisions to the policies contained in these memoranda.
This letter is being copied to Ms Lagarde.

_______________/s/_______________
Lucas Papademos
Prime Minister
_______________/s/_______________
Evangelos Venizelos
Deputy Prime Minister and Minister of Finance

94

_______________/s/_______________
George Provopoulos
Governor of the Bank of Greece

GREECE: MEMORANDUM OF ECONOMIC AND FINANCIAL POLICIES
Objectives, Strategy, and Outlook
1.
Greece faces three key challenges. First, the Greek economy lacks competitiveness.
While progress has been made since 2010 in containing unit labor costs, the estimated real
effective exchange rate overvaluation still amounts to perhaps
15–20 percent. Second, fiscal sustainability needs to be restored. The primary deficit has been
brought down considerably since 2009, but the estimated 2011 outcome, a primary deficit of
about 2½ percent of GDP, remains well below the debt-stabilizing surplus. Lastly, the financial
sector faces liquidity and solvency issues due to its exposures to the sovereign, deteriorating
quality of the domestic loan portfolio, and a steady loss of deposits.
2.
To address these challenges, the government will build on policies laid down in its
previous program, but amend the mix of adjustment and financing. To reduce policy
conflicts, the program will continue to place emphasis on ambitious implementation of
productivity-enhancing structural reforms in the labor, product, and service markets and to
improve the business environment. However, we must be realistic about the ultimate magnitude
and timing of their effects, which is inherently uncertain. To rebalance the economy, support
growth and employment, restore fiscal sustainability, and secure financial stability, we will thus:
•

Place more emphasis on securing reductions in unit labor costs and improvements in
competitiveness, through a combination of upfront nominal wage cuts and structural
labor market reforms. In unison with the elimination of rigidities in product and service
markets, these are expected to lower costs and facilitate the reallocation of resources
towards the tradable sectors, stronger growth, and higher employment.

•

Smooth the impact of the deep and prolonged recession and deeper structural reforms
(and give them time to take effect) by reducing the amount of fiscal adjustment in 2012.

•

Fundamentally reduce the footprint of government in the economy through bold
structural fiscal reforms and by privatizing public assets. Greece’s recovery must come
from a vigorous private sector response and this cannot happen with the government
controlling access to key assets.

•

Strengthen the capacity of the government to implement policies, via a wide ranging
administrative reform. We need to improve significantly the quality of public services,
the efficiency and effectiveness of the civil service (including in mobilizing structural
funds), and its ability to manage economic policy.

•

These cost-reducing structural reforms and FDI-encouraging privatization plans, when
combined with fiscal retrenchment and gradual arrears clearance, will free up liquidity
for the private sector. Together with continued program finance, and liquidity assistance
for the banking system, this will help improve the tight financial conditions now
affecting the economy.

3.
Nonetheless, the government recognizes that eliminating Greece’s large initial
imbalances, and achieving a balanced growth path, will take significant time:

95

•

Real GDP is expected to recover to positive quarter-on-quarter growth rates during
2013. The program assumes that over time business sentiment benefits from the
successful implementation of the PSI operation, and economic activity and employment
growth gather momentum as unit labor costs decline, other productivity-enhancing
structural reforms are implemented, and fiscal adjustment is completed. Still in the shortterm GDP is projected to contract by another
4–5 percent cumulatively in 2012–13 on account of the worsened external environment,
the needed fiscal consolidation, private sector wage adjustment, and adjustments in the
banking system.

•

Competitiveness is programmed to improve at an accelerated pace, supported by
upfront labor market reforms and by a comprehensive set of product market reforms.
Inflation is projected to drop significantly below the euro area level as cost-reducing
reforms and wage reductions filter through to prices. It should be possible to
significantly shrink the competitiveness gap relative to trading partners by the end of the
program period, and the economic system should continue to adjust for some time
thereafter to fully eliminate the gap.

•

The external balance is projected to adjust only modestly in the remainder of 2012
given the deterioration of global economic conditions. However, as domestic demand
continues to contract and competitiveness improves the pace of external adjustment
should pick up. Still it is projected to take some time before Greece’s current account
deficit falls to a level that will allow Greece’s external debt to steadily decline.

4.
The government’s policy program, assisted by debt relief from private creditors
and official support on favorable terms, should put public debt on a sustainable path.
Under our program baseline, public debt will remain high during the program period, but is
projected to fall to about 120 percent of GDP by 2020, with continued declines thereafter. Given
the lengthy period of elevated debt levels, and Greece’s continued vulnerability to shocks, we
recognize that full and timely policy implementation will be critical to realize this debt
trajectory, notwithstanding the favorable financing we have received. These policies and
program financing are discussed in more detail in what follows.
Economic Policies
A. Fiscal Policy
5.
The government is committed to achieve a general government primary surplus of
4½ percent of GDP by 2014. This is above Greece’s debt stabilizing primary balance, and will
allow debt to gradually decline (even with small shocks), and it is a level which Greece and
many other countries have sustained in the past. Mindful of the initial fiscal position, the
potential macroeconomic impact of fiscal tightening, and limitations on the pace at which we can
develop and implement structural fiscal reforms, we have adjusted our 2012 fiscal target to a
primary deficit of 1 percent of GDP (versus our previous target of a small surplus). We will
target an adjustment of 2¾ percent of GDP in the primary balance in both 2013 and 2014,
drawing on bold fiscal structural reforms to be defined in the context of the 2012 update of the
MTFS, due in June. We would consult with the EC, ECB, and IMF in the event of a significantly
deeper than anticipated recession, to evaluate whether the fiscal adjustment path should be
extended beyond 2014.

96

6.
To secure the program’s fiscal adjustment path, the government will undertake
bold structural spending reforms. Accounting for the projected pace of recovery, Greece’s
ongoing problems with tax compliance, and the need to adjust some of our previous measures,
additional measures will be needed beyond those already approved in the context of the 2011
MTFS and 2012 budget. We project a need for 1½ percent of GDP in measures in 2012, 1½
percent of GDP in tax administration improvements, and a further 5½ percent of GDP in
spending measures in 2013-14 to get to the primary surplus target of 4½ percent of GDP by
2014. The bulk of adjustment will be achieved through expenditure cuts that aim at permanently
reducing the size of the state and improving government efficiency, including by closing entities
that no longer provide a cost-effective public service and by targeted reductions in public
employment. Many of these cuts will need to fall on social transfers, the category of spending
which increased most explosively in the post euro accession period, but specific measures will be
introduced to protect the core of our social safety net and the most vulnerable segments of the
population.
7.

Key reforms, including those defined under the MTFS and 2012 budget, include:

•

Public sector wage bill reductions. We intend to bring our general government wage
bill into line with the performance of the most efficient OECD countries. This would
yield 1½ percent of GDP in savings by 2015, including ¼ percent of GDP in new
savings not captured in the existing MTFS. To achieve this objective, we will combine
reforms of employee compensation with personnel reductions.
¾ Reform of the public sector employee compensation. By end-June, we will reform
the special wage regimes (that account for about one-third of the public sector wage
bill). In line with the principles of the reform initiated in 2011, we will adjust the
wage grid for special regimes effective July 1, 2012 (including for judges, diplomats,
doctors, professors, police and armed forces), while protecting those at lower pay
scales, to realize permanent net savings of about 0.2 percent of GDP on an annual
basis. We will also review the new promotion system to ensure that there are
appropriate controls against wage drift through such channels.
¾ Personnel reductions. We remain committed to reduce general government
employment by at least 150,000 in the period 2011–15. To achieve this target, we
will continue to strictly apply the existing 1:5 hiring to attrition ratio (1:10 for stateowned enterprises) as well as the newly established pre-retirement scheme, reduce
contractual employment, and furlough enough redundant public employees into the
labor reserve by end-2012 to achieve 15,000 mandatory separations (i.e. once their
time in the labor reserve has been exhausted). The planned functional review of
public administration (below), and plans to close, merge or shrink general
government entities, will help identify redundant public employees.
¾ Controls on hiring. To better control and limit hiring, we will: (i) reduce the annual
intake into schools for public sector employees, namely military and police schools
and other public academies, to a level consistent with hiring plans; (ii) augment the
labor reserve annually; and (iii) eliminate vacant positions in the context of public
sector restructuring. If slippages vis-à-vis the targeted personnel reductions emerge,
we will immediately enact a hiring freeze.

97

•

Rationalizing and better targeting of social spending. Over the last few years, we
started reforms to contain the projected increase in pension spending to less than
2½ percentage points of GDP by 2060 (from a projection of 12½ percent of GDP),
maintain public health expenditures at about 6 percent of GDP, and to improve the
targeting of our social benefits. In our program we intend to bring this work agenda to
closure, realize in total around 4 percent of GDP in additional savings, while improving
social programs for those who are most in need:
¾ Pension reform. Given the high share of pensions in Greek government spending,
the large remaining fiscal adjustment will necessarily have to involve further pension
adjustments. We will do this in a way that protects lower income pensioners. As
upfront measures, to generate savings of about €450 million in 2012 (0.2 percent of
GDP), we will: (i) reduce with a progressive schedule supplementary pensions above
€200 per month; (ii) adopt a framework law to eliminate the structural deficit in
supplementary pension funds over time; and (iii) reduce by 12 percent the part for
main pensions exceeding €1,300 a month. Looking forward, by end-June, we will
introduce reforms to eliminate arrears and deficits in lump sum pension funds.
¾ Health spending. Our key aims are to bring pharmaceutical spending closer to
levels in other European countries, and to continue to reform health system
governance. For 2012, we have set a target to reduce public spending on outpatient
pharmaceuticals from 1.9 to 1⅓ percent of GDP. Key upfront actions include:
promotion of the use of generics (e.g. via compulsory prescription by active
substance), reduction by about 15 percent in the maximum price of generic relative
to branded medicines, reduction in margins of pharmacists, and extend the coverage
of copayments. An automatic claw back mechanism will guarantee that outpatient
pharmaceutical spending for 2012–15 will not exceed budget limits. Through the
new health fund EOPYY, we will also complete the introductions of new and more
cost-effective contracts for physicians and adopt uniform conditions for the purchase
of health services. To rationalize the system and exploit economies of scale, we will
merge all health funds in EOPYY and move its responsibility to the Ministry of
Health.
¾ Other social benefit programs. Greece’s level of social spending (as a share of
GDP) remains well above the euro area average. We will thus continue to reform
social benefit programs and the governance of social assistance and social security
programs. As an upfront measure, we will improve the targeting of the family
allowances by excluding high income earners. Drawing on external assistance, we
will also undertake a thorough review of social spending programs with the aim to
identify 1½ percent of GDP in additional measures to be taken over 2013-14. The
review, to be completed by end-June 2012, will identify programs to be
discontinued, and opportunities to rationalize and strengthen core social programs to
better support individuals in need, while reducing transfers to individuals who do not
require them.

•

98

Restructuring of government operations. The Greek public administration is highly
fragmented, has overlapping structures, and lacks coordination and adequate IT systems.
To address this we will take upfront actions, and identify deeper changes to implement
over the course of the program:

¾ Upfront actions. To help meet our 2012 fiscal target, we will: (i) in anticipation of
the forthcoming functional review, curtail operational spending and selected
subsidies and transfers at the central government level by an additional 0.2 percent
of GDP (compared to the 2012 budget); and (ii) reduce investment subsidies and
lower-priority investment projects by 0.2 percent of GDP (compared to the 2012
budget).
¾ Deeper restructuring. By end-June 2012, we will complete a plan to restructure
government operations and achieve additional savings of at least 1 percent of GDP
over the period 2013-14. The focus will be on closing and downsizing general
government units; identifying opportunities to outsource functions; identifying
redundancies, and restructuring both central and local public administrations. The
plan will also include the rationalization of defense spending (without compromising
defense capabilities).
8.
Tax system reforms will also contribute to the fiscal adjustment through base
broadening, and reforms will also aim to facilitate revenue-neutral tax rate reductions. The
strategy involves:
•

Tax reform. We intend to introduce a budget-neutral tax reform to simplify the tax
system, broaden the tax base to allow reductions in selected tax rates, and rebalance the
tax burden across tax categories to foster growth and competitiveness. We will define a
full schedule of intermediate steps towards adoption of such a tax reform, including
initial public consultation, review by the EC/ECB/IMF staff and release of a formal
proposal for discussion. This process will be concluded with the presentation to
parliament and enactment of reform legislation by end June 2012. The reform package
will include: (i) the repeal of the Code of Books and Records and its replacement by
simpler legislation, (ii) the elimination of several tax exemptions and preferential
regimes; (iii) simplification of the VAT and of the property tax rate structure; (iv) a more
uniform tax treatment of individual capital income; and (v) a simplified personal and
corporate income tax schedule.

•

Revenue administration reforms. Given our low tax collection compared to other
European countries, our adjustment strategy relies on the introduction of extensive
revenue administration reforms (see below). These reforms will facilitate a more
equitable distribution of the adjustment burden across taxpayers. For medium-term
budget planning purposes, these reforms will be assumed to provide only back loaded
gains, limited to 1½ percent of GDP over the period 2011–15 and expected to accrue
only from 2013.

9.
We are committed to deliver our fiscal target and stand ready to take corrective
measures in the event of underperformance. Corrective measures, if necessary, would include
additional targeted reductions in the public sector wage bill and social transfer expenditures.
Likewise, in the event of a sustained over performance that is deemed permanent, we will tighten
our deficit targets, but may also consider a reduction in social contribution rates. We intend to
maintain the relative tax burden from indirect taxes.
10.
To secure early gains we will implement several prior actions, and to assist with
subsequent monitoring of the fiscal adjustment program, we will set several key steps as
program benchmarks. As prior actions for the program, we will: (i) fully implement all

99

overdue measures (Annex I); and (ii) enact and implement measures needed to reach the fiscal
deficit target in 2012 (Annex II). The adoption of a budget-neutral tax reform by end-June 2012,
and the completion of reviews of social spending programs and government functions that
identify, respectively, 1½ and 1 percent of GDP in additional measures, are proposed as
structural benchmarks for end-June 2012. Identification and enactment (where feasible) of all
measures necessary to attain the medium-term fiscal target will be an over-arching condition for
completion of the first program review.
B. Fiscal Institutional Reforms
11.
Strengthening fiscal institutions is of the utmost importance. Greece has for many
years suffered from a widespread problem of nonpayment of taxes, eroding the fairness of the
system and forcing less growth-friendly policy measures, such as high tax rates. Meanwhile, the
public sector has had difficulties paying its bills and tax refunds on time, driving up procurement
costs and damaging corporate sector liquidity. Putting an end to these practices will require a
deep restructuring of the revenue administration and the public financial management system. Of
course, these are complex institutional reforms, and gains both in terms of higher revenue and
lower spending can only be achieved over time with resolute efforts. Therefore, we are
determined to undertake the needed reforms with urgency.
12.
We are committed to reform our revenue administration. It is not operating at the
level Greece requires, and will need to be overhauled completely. We have started this process,
and made progress over the past two years, but much more remains to be done:
•

Strengthening of operations is the near-term priority:
¾ The dispute resolution system. As upfront actions, we will: (i) approve legislation
making it compulsory for large tax cases to exhaust the administrative dispute phase
before accessing judicial appeals; (ii) tighten rules for waiving the deposit to access
judicial appeals (without prejudice to the independence of the judicial system); and
(iii) issue secondary legislation enabling the certification of tax arbitrators, making
the arbitration system established in 2011 fully operational.
¾ Making use of additional tools. We will integrate anti-money laundering tools into
our anti-tax evasion strategy. As upfront actions, we will: clarify the Bank of
Greece’s rules on financial institutions’ obligations to detect and report to the
Financial Intelligence Unit (FIU) transactions suspected of being related to the
proceeds of tax evasion; and take measures to ensure that complaint reports related
to confirmed unpaid tax debts arising from an audit are transmitted to the
prosecution services and to the FIU as required under the system in place.
¾ Upgrading personnel. Consistent with our operational plans, by April, we will
complete the reassessment and hiring of 1,000 auditors and will gradually bring the
numbers of auditors to 2,000 (consistent with public sector attrition and hiring rules).
For existing employees, we will establish a formal performance review framework
that will specify targets against which to evaluate manager performance. The
framework will be operational by June 2012. We intend to replace managers that
have underperformed their targets.
¾ Anti-corruption measures. By end-June 2012, we will set up the internal affairs
services established in Law 3943/2011 and reform the role of the financial

100

inspection unit so as to limit its focus to the revenue administration. We also plan to
improve the system to protect whistle-blowers reporting corruption in the tax
administration, introduce procedures for the rotation of managers, and set targets for
audits of asset declarations of tax administration officials. By end-September, we
will prepare a fully-fledged anti-corruption plan.
•

Over time, we need to restructure the administration to create an independent but
accountable tax administration, with a functional organization centered in a strong
headquarters. Towards this end, for 2012 our priorities include:
¾ Establishing key functional units. The major units have been set up, including the
large taxpayer unit, the debt collection unit and the audit department. Looking ahead,
our priority is to build capacity in these directorates. In 2012, by end-March we will
increase the staff of the debt collection directorate by 50, and by the second quarter,
we will complete the doubling of the audit capacity of the large taxpayer unit.
¾ Consolidating tax administration operations. We plan to close a total of
200 underutilized local tax offices by end-December 2012.
¾ Securing greater control over local tax offices. By end-March 2012 the GSTC
headquarters will set operational targets for local tax offices for core activities
including audits, dispute resolution and filing, and performance targets for local
managers against which they will be assessed. The GSTC headquarters will be given
legal powers to direct how local tax office resources must be used. Additionally,
collection of large debts will be placed under direct central control and consolidated
in the largest 35 tax offices. Processing of all tax payments in local offices will be
discontinued by end-September 2012 and replaced by mandatory bank transfers, and
payments at banks.
¾ Steps towards independence. By end-March, we will appoint as Secretary General
of the revenue administration an individual with an impeccable track record of tax
compliance and with significant experience in tax matters. To support independent
decision-making, we will delegate from the ministerial to the administrative level,
via a ministerial decision, the control over core business activities and human
resource management. We will ensure that at the same time activities of the tax
administration headquarters will be externally audited.

•

Collection of social security contributions will be strengthened. We will undertake a
thorough review of current collection and enforcement practices, drawing on external
assistance. A fully articulated reform plan will be developed by end-September 2012,
which will, among other things, lay out a timeline and set of intermediate steps to fully
integrate tax and contribution collections. In the near term, to help stem recent deep
problems with social security collections, by March 2012 we will expand monthly
declarations to a wider range of large taxpayers, unify the collection of tax and social
security contribution debts of the largest tax debtors, enact common audits of tax and
social security contribution of large taxpayers, increase the number of inspections and
establish targets for inspectors.

•

The government undertakes to fully enforce the tax code, and to forego any tax
amnesties. We commit not to implement any new or extend any existing amnesties or

101

incentive schemes for the collection of taxes and social security contributions. Given the
importance of making this regime change, we will amend law 4038/2012 to restrict the
extension of payment terms for tax debt and overdue social security contributions and
the suspension of criminal prosecution and asset freezing, in line with good international
practices.
13.
We are determined to secure tighter control over all general government spending
and to prevent the accumulation of arrears. This will require improving every step of our
spending process: budgeting procedures; commitment-based spending controls; and fiscal
reporting and budget monitoring:
•

Budgeting. To improve budgeting at both the medium and short term horizons, we will:
(i) issue a circular during Q1 2012 regulating the calendar, deadlines, and the role of all
institutions in formulating the next MTFS (covering 2012–6); and (ii) adopt legislation
and regulations by October 2012 to streamline submission and approval procedures of
within-year supplementary budgets.

•

Spending controls. Once fully established, commitment-based spending controls, and
the architecture accompanying them, will help us to prevent units both at the central and
decentralized level from overspending their budgets. There are two near-term issues, and
a set of next steps for the remainder of the program:
¾ Commitment registers. By March 2012, we will begin to extend registers to cover
the investment budget. By June 2012, we will increase the number of fully
functional commitment registers reporting on the e-portal of the Ministry of Finance
to 70 percent of spending units, including in local governments, social security
funds, extra budgetary funds, and hospitals. We will also consistently enact
sanctions (when needed) to improve data reporting from commitment registers, and
expand the content of the e-portal reporting system to include the whole expenditure
cycle (e.g. cumulative appropriations released, commitments made, invoices
received, and payments made at the end of each month).
¾ Accounting officers. We have appointed permanent accounting officers in all line
ministries. The officers will be responsible for line ministries’ financial
management, including budget formulation, spending controls, and data reporting.
The accounting officers will be obliged to adopt and implement new organizational
plans for their directorates by end-June 2012.
¾ Revised audit procedures. Looking forward, we will focus on the progressive
devolution of financial responsibility to accounting officers and reforming the
functions of financial audit offices in line ministries and the Court of Audit. This
will involve a shift away from preventive audits towards ex-post quality audits, and
reconfiguration of our financial information systems.
•

102

Fiscal reporting. More comprehensive, timely, and accurate reports will help us better
monitor budget execution and spot problems early. To this end, in 2012 we will: (i)
expand our arrears data base to cover tax refunds, and establish standards for their
processing and payment (by end-June 2012); (ii) make operational by end-March the
inter-ministerial committee to monitor, control, and report on the implementation of the
social budget; and (iii) expand the recently piloted information systems to collect more

detailed revenue and spending data from general government entities (the new system
will cover more than 90 percent of spending by end-June 2012).
•

Clearance of domestic arrears. We expect to clear our existing domestic arrears in line
with available program financing. The 2012 budget includes a budget appropriation,
based on the end-2011 outturn, and conditions to access it will include the verification of
arrears claims, compliance with basic financial management reforms (as described
above), and that line ministries and general government entities requesting access
demonstrate that they have not accumulated any further arrears and have reported at least
three months of consistent data from commitment registers.

14.
We will further strengthen the Greek statistical agency, El.Stat. We will revise the
statistics law to reform El.Stat’s governance arrangements. The law will establish the El.Stat
Board as advisory, and clarify the professional authority of El.Stat’s president as the institution’s
chief officer and coordinator of the national statistical system.
15.
We are taking prior actions to secure early gains, and to track progress during the
program. As prior actions for the program, we will implement various measures to strengthen
tax administration operations, including meeting end-2011 performance targets, reversing a
recent amnesty, tightening administrative regulations, and strengthening delegation of powers to
the revenue administration (Annex III). Looking ahead, we have set and will monitor targets for
quantified quarterly performance indicators for revenue administration and public financial
management (see the Technical Memorandum of Understanding for a full description of the
indicators; the targets for end-June 2012 and end-December 2012 are proposed as structural
benchmarks). Beyond these indicators, an additional structural benchmark will focus on the
completion of the strategy for strengthening social security collections (by end-September 2012).

C. Financial Sector Policies
16.
The government is committed to provide the support needed to restore confidence
in the Greek banking system. The combination of the deepening recession and government
debt restructuring will require significant government support to ensure the soundness of the
banking system and to maintain depositor confidence. Well-targeted recapitalization and
resolution actions will be needed, alongside legal changes to facilitate the strategy and improve
the financial oversight framework. With the actions specified, the Greek authorities intend to
support banking system liquidity, and create a viable and well-capitalized private banking sector
that can support the economic recovery and sustainable growth. Depositors will be protected.
17.

The financial sector reform strategy comprises several key elements:

•

An assessment of capital needs. All banks will be required to achieve a core tier 1
capital ratio set at 9 percent by end-September 2012, reaching 10 percent in June 2013.
The BoG, with the support of external consultants, will undertake an assessment of
banks’ capital needs (prior action). This assessment will be based on, inter alia, the
results from the BlackRock loan diagnostic exercise, the PSI impact, and the business
plans banks have submitted. In addition banks’ capital needs will be determined on the
basis of a requirement to maintain a 7 percent core tier 1 capital ratio under a three year
adverse stress scenario (Pillar II requirements). Based on these capital needs identified

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by the Bank of Greece, banks will revise their business plans and submit capital raising
plans by end-March 2012.
•

In parallel, a strategic assessment of the banking sector will be carried out. In
consultation with the EC/ECB/IMF, the Bank of Greece will conduct a thorough and
rigorous assessment of each bank, using a set of quantitative and qualitative criteria. The
criteria will include in non-exhaustive terms: shareholders’ soundness and willingness to
inject new capital; quality of management and risk management systems; capital,
liquidity, and profitability metrics (both forward and backward looking); the Bank of
Greece’s assigned ratings to bank risks; and a sustainable business model. The
assessment will be complete by end-March 2012 (proposed as a structural
benchmark).

•

Agricultural Bank (ATE). Based on the ongoing work by the commissioned external
audit firms, the Ministry of Finance will complete a study on how to address ATE (as a
prior action). This study will illustrate the legal, operational, and financial aspects of the
different solutions and lay out the associated costs.

•

Recapitalization and resolution actions.
¾ Banks will be given time to raise capital in the market. Based on an assessment
of their viability and capital raising plans, the Bank of Greece will communicate to
banks, by end-April, specific deadlines to raise capital in the market. The deadlines
to raise capital will be set for each bank on a case by case basis—with a maximum
duration to end-September—taking into account the regulatory framework and the
requirements set by the Hellenic Capital Market Commission.
¾ Banks submitting viable capital raising plans will be given the opportunity to
apply for and receive public support in a manner that preserves private sector
incentives to inject capital and thus minimizes the burden for taxpayers. Specifically,
banks will be able to access capital from the Hellenic Financial Stability Fund
(HFSF) through common shares and contingent convertible bonds.
¾ We will ensure that Greek banks have business autonomy both dejure and
defacto. The voting rights of the HFSF for the common shares it holds will be
strictly limited to specific strategic decisions (unless the private participation in the
form of common shares is less than a given minimum percentage of the bank's total
capital needs). This percentage will be defined in the amended HFSF law. The
shares and/or the voting rights acquired by the HFSF shall not be transferred or sold
to any other state-related entity in any form. Private shareholders will be given
incentives to purchase HFSF-held shares. A ministerial decision in line with EC,
ECB and IMF advice shall provide the technical details of the banks' recapitalization
framework, embodying these principles, by end-March 2012 (proposed as a
structural benchmark).
¾ Banks that do not submit viable capital raising plans and do not raise the
capital needed to meet the regulatory requirements within the deadline set by
the Bank of Greece will be resolved in an orderly manner and at the lowest cost to
the State, in a way that ensures financial stability and which follows the overall
strategic plan for resolved banking system assets. Resolution options will include the

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tools available under the law such as, inter alia, purchase and assumption (transfer
order), interim credit institution (bridge banks), and orderly wind down.
•

Follow up. To ensure that the system remains well-capitalized, the Bank of Greece will
by end-June 2013 conduct a new stress test exercise, based on end-2012 data, using a
methodology determined in consultation with the EC/ECB/IMF (proposed as a
structural benchmark).

18.
We will enact legislation to support our strategy for bank recapitalization and
resolution (prior action):
•

Capital adequacy requirements. The banking law (3601) will be amended to enable
the Bank of Greece to set new bank capital standards through regulation, and the Bank of
Greece will introduce regulations to phase in the foreseen increases in Core Tier 1
requirements.

•

Technical aspects of bank resolution. Building on the recent changes in the bank
resolution framework and the experiences gained so far, we will clarify the procedures
and responsibilities for the valuation of assets and liabilities and thus for the opening
balance sheet of the interim credit institutions. We will also clarify that resolution should
proceed in a manner that minimizes costs to the HFSF. In this context, we will
strengthen the framework to ensure that future resolutions initially use conservative asset
valuations of failed banks’ assets, based on fair value, and subsequently allowing for a
proper due diligence and revaluation followed by complementary asset transfers within a
specified time period. We will also identify the legislative impediments to a flexible
management of employment contracts in the context of bank resolutions and adopt the
needed legislative changes to remove them.

•

Recapitalization framework. The HFSF law will be amended to allow the use of
contingent convertible bonds and to provide for restrictions on HFSF voting rights for a
5 year period. The voting rights of the HFSF for the common shares it holds will depend
on the size of the capital injection by private investors via common shares. If this
injection is below a given minimum percentage of a bank’s total capital needs (to be
defined in the HFSF law), the HFSF will have full voting rights. The HFSF shall hold its
shares for a period of two years, with the possibility to extend for an additional two years
for financial and market stability reasons. If instead this private injection is larger than
this percentage, the HFSF voting rights will be strictly limited to specific strategic
decisions. In this case, the legal framework will be revised to allow the HFSF to hold
bank shares for five years.

•

Resolution framework. We will introduce a clear separation of the supervisory,
resolution and restructuring functions. In particular, the legal framework shall vest
resolution responsibilities in a separate department in the BoG and restructuring
responsibilities (pertaining to management of all temporary credit institutions) in the
HFSF. As regards interim credit institutions, the Bank of Greece will continue pursuing
its financial stability role, notably via its supervisory authority, while the HFSF will
continue aiming at safeguarding its investments.

•

Framework for managing non-performing loans. Separate from the prior action,
during Q2 2012 we will prepare changes to the legal framework for addressing non-

105

performing loans and those at risk of becoming non-performing, with input from
international experts and in line with EC/ECB/IMF advice. Any changes will be guided
by several principles, including the need to: target our interventions (and in line with
fiscal and financial sector capacity); preserve the payment culture and avoid strategic
loan defaults; maximize asset recovery; and facilitate market distinctions between
rehabilitation of viable borrowers and the efficient exit from the economy of non-viable
borrowers.
19.
The government will ensure that enough financing is available to provide for
recapitalization and resolution needs. Total bank recapitalization needs and resolution costs
are estimated to amount to €50 billion. The timing of transfers to the HFSF will take into account
the expected timeline for bank resolution and recapitalization, and requirements for continued
ECB liquidity support. Funds received via program disbursements will be deposited in the
HFSF’s ring-fenced account.
20.
We are committed to preserve continued access to central bank liquidity support.
The Bank of Greece, following Eurosystem procedures and rules, will stand ready to continue
disbursing adequate appropriate emergency liquidity support in a timely manner. Adequate
liquidity support in the near term must be consistent with plans to reduce banks reliance on
exceptional central bank support in the medium term. To this end, medium-term funding plans
will be updated after completion of the recapitalization and restructuring exercise to ensure that
the gradual unwinding of exceptional liquidity support proceeds at a pace consistent with the
program’s macroeconomic, fiscal, and financial framework.
21.
The government will enact legislation to strengthen governance arrangements in
financial oversight agencies (prior action):
•

Hellenic Financial Stability Fund:
¾ The Board of Directors will reorganize the HFSF to introduce legislation to clarify
that the HFSF shall have two departments, responsible for separate functions:
o

A department responsible for managing its ownership interest in banks on behalf
of the government. In this capacity, its mandate shall be to ensure that the banks
under its stewardship operate on a commercial basis and are restored to a wellfunctioning and profitable part of the Greek financial sector, which can
eventually be returned to private ownership in an open and transparent manner.

o

A department for management of interim credit institutions (bridge banks),
established following the resolution of non-viable banks. It will undertake this
role in a cost-effective manner, based on a comprehensive strategy agreed by the
BoG, MoF and HFSF, and in compliance with EU state aid rules. From time-totime, this function may require funding to accomplish its restructuring role. Such
funding will be reduced, either partly or entirely, by a contribution from the
HDIGF Depositor Branch to the extent of its obligations for deposit insurance.

¾ We will introduce legislation to changes the HFSF’s governance structure to include
a General Council and an Executive Board:
o

106

The General Council shall have five members: two members, including the
Chair, with relevant international experience in banking, one other member, one

representative from the MoF, and one member nominated by the BoG. All
members shall be appointed by the Minister of Finance with the approval of the
Euro Working Group (EWG); other than the representative from the MoF and
the nominee from the BoG. EC and ECB observers on the Council will be
maintained.
o

The Executive Board shall have three members: two members—one of which
shall be the CEO—with international experience in banking and bank resolution,
and one member nominated by the BoG. All members shall be appointed by the
Minister of Finance with the approval of the EWG. Staff and officials of the
BoG shall not sit on the Board of the HFSF. EC and ECB observers will be
present on the Executive Board.

¾ We, in consultation with HFSF, will adopt regulations to help the HFSF execute its
mandate with full autonomy and at the same time coordinate effectively with the
MoF. It will cover reporting lines and frequencies, strategic decision-making (and
the involvement of the MoF therein), investment mandate and business plan,
relationship with the MoF (in its role as shareholder in the HFSF), and remuneration
policy.
•

Hellenic Deposit & Investment Guarantee Fund. We will strengthen the funding of
the HDIGF Depositor Branch by revising the HDIGF Law to: (i) prescribe that fees shall
be increased if its funds fall below a certain level of coverage of insured deposits, which
should be set taking due account of developments in the financial system; (ii) ensure
adequate diversification of re-deposits of HDIGF funds and to gradually eliminate redeposits in covered banks, as developments with the restructuring of the Greek banking
sector permit; and (iii) clarify that the HDIGF’s status as privileged creditor does not
impinge on claims secured with financial collateral in the sense of the financial collateral
directive. With a view to limiting any real or perceived conflicts of interest we will
prohibit HDIGF board membership for individuals who are actively involved in credit
institutions and introduce in the law strong conflict of interest rules for Board members.

22.
We will also reform governance arrangements in the Bank of Greece. In light of the
BoG’s responsibility for resolution, restructuring, and supervision, we will revise the BoG
Statute to provide for collegial decision-making at the level of executives (Governor and Deputy
Governors) and ongoing accountability through internal oversight by nonexecutives in the
General Council (also including oversight in matters other than ESCB-related tasks). We will
also revise the structure and rights of BoG shareholders to eliminate possible conflicts of interest
in the Bank of Greece’s public policy role (e.g. prohibiting supervised institutions from
shareholdings and setting a cap on the number of votes that each or related private shareholders
can exercise). We propose that this become a structural benchmark for end-December 2012.
D. Privatization
23.
Under the program, we aim to accomplish a fundamental shift of public assets to
private sector control. Transferring assets in key sectors of the economy (such as ports,
airports, motorways, energy, and real estate) to more productive uses through privatization and
concessions should help encourage FDI and other private investment, supporting the economic
recovery and long-term growth. It will also help to reduce public debt, contributing to improved
market sentiment over time and supporting Greece’s return to bond markets. The government is

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determined to overcome the challenges posed by market conditions and clean the assets from
technical and legal complexities, and the program defines targets and the steps towards achieving
these.
24.
The assets comprising the privatization program have been identified. The list
includes state enterprises, concessions, and real estate (Annex IV) along with any bank assets
either previously owned or to be acquired during the recapitalization process. Given the assets
targeted for sale, the government anticipates €50 billion in proceeds over the lifetime of the asset
sale program, including at least €19 billion through 2015. Because many of these assets are
encumbered, and with current poor market conditions, we expect it to take time beyond the
program period to realize the full amount of proceeds. We will annually update the expected
value of proceeds over the timeframe in question, and to the extent proceeds fall short of target,
we will identify additional assets to be brought into the program, including stakes in public
corporations not now included. In light of the need for assets to use in and backstop the
privatization program, we will not transfer any public assets to the recently established pension
fund SPV (and we will consult with the EC/ECB/IMF staff on a mutually agreed approach to
manage this SPV). The program will monitor progress towards objectives via quarterly
indicative targets.
25.
The privatization process for each asset is in general expected to comprise several
stages. This includes most prominently transferring the asset to the privatization fund and
appointing the advisors. Other steps include, restructuring of the asset, filling in public policy
and regulatory policy gaps, design of the tender process, EC clearances (for procurement,
competition and state aid), running the tender, and obtaining all of the necessary by-law
approvals.

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26.

To move the privatization process forward in 2012, we will take a number of steps:

•

Appointment of advisors. We expect to appoint by end-March 2012 all remaining
advisors for thirteen 2012/13 projects which do not currently have all their advisors.

•

Transfer of assets to the privatization fund (HRADF). By end-March 2012, all assets
included in the MTFS will be transferred, except banking shares and loss making assets
which HRADF cannot finance before their privatization (TRAINOSE, ELVO, EAS).
Also the remaining balance of the shares of the two large ports (OLP and OLTH) will be
transferred. Real estate assets will be transferred at HRADF’s request from the
Government Real Estate Company (ETAD). Shares already transferred or to be
transferred to the HRADF will be provided their voting rights in full so that the HRADF
will be able to make all the changes necessary for the swift privatization of each asset.

•

Preparations of state-owned enterprises. We will work with the EU authorities to
obtain clearance for state aid for the lottery, DEPA/DESFA, EAS, OPAP and ODIE, and
develop the necessary regulatory frameworks with assistance from the EU Task Force
for Greece. Ministries and other public bodies will expedite administrative decisions
and/or special legislation to facilitate privatizations.

•

Preparation of real estate assets. The government will correct legal and technical
deficiencies, expedite zoning, and issue required permits for real estate assets. It has
requested technical assistance from the Task Force to develop a comprehensive land
registry, and in this context, the HRADF will register 3,000 plots by end-June.

•

Policy coordination. The government will formulate new policies regarding the use of
assets (e.g. town planning, REITS) and set up new regulatory authorities and
frameworks (e.g. for water, ports, airports, motorways). The Task Force for Greece is
expected to support the government through technical assistance.

•

Offer of assets for sale. We intend to launch some landmark asset sales in the first half
of 2012, such as DEPA/DESFA, HELPE, OPAP, EYDAP, EYATH, and IBC, and in the
second half of the year to proceed with tenders for the ports, airports and Egnatia Odos
motorway.

27.
We remain committed to a process insulated from political pressures. The HRADF
has been set up to operate under a mandate to privatize assets at prevailing market conditions as
soon as technically feasible and in an open and transparent manner. Under the HRADF, assets
will be overseen and directed so as to accelerate their transfer to the private sector. The HRADF
will not be able to transfer assets back to the general government, and if it is determined by the
Board that an asset cannot be sold in its current form, it will be sold in pieces or liquidated. The
Fund is able to raise money, on market terms, but cannot grant liens over any of its assets if this
might prevent or delay the relevant assets from being privatized. The Fund will return all
proceeds received to the government without delay.
E. Structural reforms
28.
As noted above, the government’s most pressing priority is to restore
competitiveness and economic growth. We recognize a need to significantly accelerate the
implementation of comprehensive and deep structural reforms aimed at boosting employment,
output, and productivity growth by liberalizing labor, product, and service markets and removing
existing barriers in the business environment. However, as these will likely require some time to
fully translate into sustained growth, we will also take upfront measures to allow a reduction in
nominal wages to rapidly close our competitiveness gap and lay an earlier foundation for
sustained growth.
29.
The government will take actions to improve the functioning of the labor market.
Rigidities in the labor market are preventing wages from adjusting to economic conditions and
are pushing labor into the informal sector. To protect employment and close Greece’s
competitiveness gap more rapidly, the government intends to target a reduction in unit labor
costs of about 15 percent during the program period. If the ongoing social dialogue is
unsuccessful in identifying concrete solutions, then to achieve this goal the government will take
legislative measures in the urgent public interest to allow wage and non-wage costs to adjust as
needed. The package of labor market measures that will be implemented includes:
•

Structural measures to level the playing field in collective bargaining. The key
measures we will enact into law (as a prior action) include:
¾ Length of collective contracts and revisions of the ‘after effects’ of collective
contracts. Changes will specify that: (i) all collective contracts should have a
maximum duration of 3 years; (ii) collective contracts already in place for
24 months or more will expire not later than one year after the law is adopted; (iii)
the grace period after a contract expires is reduced from six to three months; and (iv)
in the event that a new collective agreement cannot be reached after three months of
efforts, remuneration will revert back to the basic wage plus the following general

109

allowances (seniority, child, education, and hazardous). This will continue to apply
until replaced by terms specified in a new collective agreement or in new or
individual contract.
¾ Removal of ‘tenure’ in all existing legacy contracts in all companies. The new legal
provision will automatically transform contracts with definite duration (defined as
those expiring upon age limit or retirement) into indefinite duration contracts for
which standard layoff procedures apply.
¾ A freeze of ‘maturity’ provided by law and/or collective agreements (referring to all
automatic increases in wages dependent on time) until unemployment falls below 10
percent.
¾ Elimination of unilateral recourse to arbitration, allowing requests for arbitration
only if both parties consent. At the same time, we will clarify (by law or circular)
that: (i) arbitrators are prohibited to introduce any provisions on bonuses,
allowances, or other benefits, and thus may rule only on the basic wage; and (ii)
economic and financial considerations must be taken into account alongside legal
considerations.
•

Adjustment of wage floors. This will help ensure that as the economy adjusts, and
collective bargaining agreements respond, firms and employees do not find themselves
bound at a lower limit (and a limit which is very high in international comparison):
¾ We will legislate: (i) an immediate realignment of the minimum wage level
determined by the national general collective agreement by 22 percent at all levels
based on seniority, marital status and daily/monthly wages; (ii) its freeze until the
end of the program period; and (iii) a further 10 percent decline for youth, which
will apply generally without any restrictive conditions (under the age of 25) (prior
action). These measures will permit a decline in the gap in the level of the minimum
wage relative to peers (Portugal, Central and Southeast Europe). We expect this
measure to help address high youth unemployment, the employment of individuals
on the margins of the labor market, and to help encourage a shift from the informal
to the formal labor sector.
¾ Together with social partners, we will prepare by end-July 2012 a clear timetable for
an overhaul of the national general collective agreement. This will bring Greece’s
minimum wage framework into line with that of comparator countries and allow it to
fulfill its basic function of ensuring a uniform safety net for all employees.

•

Adjustment to non-wage labor costs. To help reduce non-wage costs and foster
employment, we will bring the labor tax wedge in Greece broadly into line with
European peers:
¾ We will enact legislation to reduce IKA social security contribution rates for
employers by 5 percentage points, and implement measures to ensure that this is
budget neutral. Rates will be reduced only once sufficient measures are in place to
cover revenue losses. The measures to finance rate reductions will be legislated in
two steps. First, as a prior action, we will enact legislation to close small earmarked
funds engaged in non-priority social expenditures (OEK, OEE), with a transition
period not to exceed six months. Second by end-September 2012, we will adjust

110

pensions (with protections for low-income pensioners), and broaden the base for
contribution collections (proposed as a structural benchmark).
¾ As an additional measure, by end-September we will prepare jointly with social
partners an actuarial study of first pillar occupational pension schemes in companies
with excessive social security costs (relative to comparable firms or industries
covered by IKA) and finalize a list of concrete proposals to eliminate this differential
in a fiscally neutral manner.
•

Follow up work. We will review on an ongoing basis the effects of these measures on
the labor market and unit labor costs and, if necessary, are prepared to take additional
corrective measures to facilitate collective bargaining, in order to ensure wage flexibility
and higher employment. If by end-2012 effects on the labor market remain elusive, we
will consider more direct interventions.

30.
The program will, like our previous program, place deep emphasis on product and
service market reforms. The slow response of inflation to the current crisis, even after adjusting
for taxation and energy prices, suggests that rigidities remain in such markets. These will need to
be addressed in tandem with labor market reforms to facilitate the pass-through from wages to
prices. Our strategy will consist of prioritizing and phasing service sector reforms while pushing
forward with product market reforms:
•

Service sector reforms. As a prior action, we will abolish restrictions in 20 high value
and/or highly restricted professions, from the list of professions and economic activities
covered in Annex II of KEPE’s “Second Report on the Impact of Liberalizing Regulated
Professions.” We will also publish the ministerial decision establishing the road haulage
license price in line with administrative costs. Looking forward, by end-March we will
prepare a detailed quarterly timetable for 2012 for the screening and cleaning of existing
legislation prioritized according to economic performance, and again drawn from Annex
II of the KEPE report (completion of this work by end-2012 is proposed as a structural
benchmark). Finally, for professions where reinstatement of restrictions is required in
line with the principles of necessity, proportionality, and public interest, we will pass the
required legislation no later than end-June and upon consultation with the Hellenic
Competition Commission and in line with EC/ECB/IMF advice.

•

Product market reforms. To promote price flexibility, by April 2012 we plan to screen
the retail, wholesale, and distribution sectors and prepare an action plan to promote
competition and facilitate price flexibility in product markets.

31.
The government is committed to continue with improvements in Greece’s business
environment. A number of reforms initiated in 2011—fast-tracking investments, speeding up
licensing procedures and facilitating electronic business registration—will be fully implemented
this year. These reforms are key to promoting investment and exports, and will boost growth
once the recovery takes hold.
•

By end-March, we will enact and publish legislation facilitating investment and exports:
¾ We will enact legislation which: (i) improves the functioning of the fast-track
investment law (by making the framework available to more projects, lowering fees,
and relaxing financing requirements), and (ii) eliminates the registration requirement

111

in the Export Registry and simplifies export legislation.
¾ Moreover, we will publish the main secondary legislation required to implement the
licensing laws covering technical professions, manufacturing activities, business
parks, and environmental licensing.
•

By end-March we will also establish timetables with the key steps needed to complete
(by end-December) the implementation of an electronic export window, e-customs, and
the new electronic environmental register, as well as to fully implement the two
licensing laws.

32.
In support of efforts to improve the business climate, we will advance our mediumterm reform agenda aimed at improving the efficiency of the judicial system. Greece’s
judicial system is highly inefficient, with significant backlogs despite a relatively large number
of courts and judges. Complex judicial procedures, cumbersome execution of court decisions,
lack of transparency, and disconnect between court performance and budgeting, have negatively
affected FDI, other private investment, entrepreneurship, exports, and employment. In this
regard, our efforts will focus on:

112

•

Addressing the case backlog in the courts. We are committed to meet the objectives and
implement the measures specified in our January 2012 work plan for the reduction of tax
cases backlog through setting semi-annual milestones, including by placing priority on
high-value tax cases exceeding €1 million). Regarding the non-tax case backlog, we
have commissioned a study to be completed by end-June, on the basis of which we will
draw up an action plan (by end-August) with specific targets for the clearance of all
backlog cases.

•

Speeding Up Case Processing: We plan to speed up civil and administrative case
processing through the adoption (by end-March) of a law aimed at improving the
efficiency of administrative court proceedings (including by streamlining procedures for
group adjudication of similar administrative cases) and requiring submission of
decisions in electronic form by administrative and civil judges.

•

Improving the Performance and Accountability of Courts: To improve the
effectiveness of magistrate courts, secondary legislation will be published by end-May,
merging existing courts to reduce their number. To improve transparency, at end-March
the Ministry of Justice will start publishing detailed court information on its website.
This quarterly exercise will initially cover data for tax cases. These actions will help set
the stage for the design (by end-September) of a performance framework for all courts,
including the development of a dependable data management system, and a workload
measurement system.

•

Reforming the Code of Civil Procedure: By end-March, we will establish a task force to
review the Code of Civil Procedure so as to bring it in line with international best
practices. By end-June, the task force will issue a concept paper identifying the core
issues and bottlenecks in the pre-trial, trial, and enforcement stages of civil cases and set
out proposed solutions. Following its issuance, we will consult with domestic and
international experts, such that, by end-December, a detailed paper can be prepared
outlining the main proposals for amendments to the Code of Civil Procedure.

33.
The government will accelerate efforts to improve structural reform management
and monitoring. To this end, by March we will implement a directorate of planning,
management, and monitoring of reforms. Starting with end-March, we will start publishing on a
quarterly basis monitoring indicators for each reform initiative on the government’s website. Our
efforts to carry out our ambitious reform agenda (including for judicial reform, screening of
legislation for closed professions, and using the competition toolkit to identify rigidities in
product markets) will be supported by the Commission’s Technical Assistance Task Force.
F. Program Financing
34.
Greece will face sizable balance of payments financing needs during the program
period. It is expected to take time for Greece to restore sovereign market access, given the long
process of reforms and adjustment ahead, and the projected government debt trajectory. Given
the insufficient level of domestic savings to finance these needs (alongside private investment),
we expect to face sizable balance of payments financing needs in the period ahead, which we
anticipate to be covered through financial support from our European partners, the IMF, and
private sector involvement (PSI) in the form of a comprehensive debt restructuring operation.
35.
We expect private sector involvement (PSI) to help Greece achieve debt
sustainability and to cover a significant portion of our financing gap. While the measures
outlined above would bring about an improvement in the fiscal accounts, they would not by
themselves close the financing gaps and put debt on a sustainable path. Accordingly, with the
assistance of our debt advisors, and after consultations with creditors, we have launched a
comprehensive debt exchange offer, covering a pool of government debt of €205.6 billion.1 Our
program assumes that the financial contribution of the private sector through the debt exchange,
together with the official sector support, will deliver a debt to GDP ratio of 120 percent by 2020
(given anticipated macroeconomic and policy developments). We recognize that this financing is
essential to the program and securing it is necessary to give the program financing assurances.
We expect the debt exchange offer to be successfully completed prior to the meeting of the IMF
Executive Board to consider our request for an Extended Arrangement under the EFF.
36.
Beyond our request to the Fund for a 4 year EFF from (in an amount of SDR
23.7853 billion, or 2,158.8 percent of quota), we have secured additional financial resources
from our European partners to fill remaining needs. Euro area partners have committed a
total of €144.7 billion over 2012-14. They have also committed to support Greece for as long as
it takes to restore market access, provided Greece implements and adheres to its policy program.
Finally, to ensure that this financing places Greece on a sustainable debt trajectory, to deliver a
debt-to-GDP ratio of about 120 percent by 2020, with continued declines thereafter, they have
committed to: (i) new lending at maturities of 30 years and at close to funding costs, using the
EFSF as a financing vehicle; (ii) reduce the margin of the Greek Loan Facility to a uniform 150
basis points; and (iii) for eurozone countries where central banks currently hold Greek
government bonds in their investment portfolio, pass on to Greece an amount equal to any future
income accruing to their national central bank stemming from this portfolio until 2020.
G. Program modalities
37.
Progress in the implementation of the policies under this program will be monitored
through quarterly reviews and consultations, as well as via quarterly (and continuous)
1

See: www.greekbonds.gr

113

quantitative performance criteria (PCs) and indicative targets, and structural benchmarks. These
are detailed in Tables 1 and 3. The attached Technical Memorandum of Understanding (TMU)
defines the quantitative performance criteria, indicative targets, and various benchmarks under
the program. Quantitative targets up to end-December 2012 are PCs. Targets for 2013‒15 are
indicative and for 2013 will be converted into PCs at the time of the second review. It is
expected that the first and second reviews under the Extended Arrangement take place by endJune and end-September 2012. A Memorandum of Understanding (MoU) on specific policy
conditionality agreed with the European Commission, on behalf of the euro-area Member States,
specifies additional structural policies, and sets a precise time frame for their implementation.
38.
In the context of the arrangement, the Bank of Greece will undergo an updated
safeguards assessment in accordance with the IMF safeguards policy. Given that Fund
disbursements will be deposited into the government’s single treasury account at the BoG, the
existing Memorandum of Understanding between the Ministry of Finance and the BoG will be
updated.

114

Annex I: Pending Fiscal Measures

From the July MTFS
•

Government to enact a framework law to reform supplementary pensions, to generate
savings of 0.4 percent of GDP by 2014 (in line with MTFS estimates)

•

Issue MDs for the implementation of the business tax (Article 31 of Law 3986)

From the end-October implementation bill
•

Issue the 4 pending MDs to fully implement the new wage grid (see TMU)

•

Pass law to establish deadline for implementation of the wage grid reform in the general
government and the recovery of wage overpayments since November 1, 2011

•

Issue MD to bring down the transfer time from PPC of the property tax proceeds to 10 days
after the end of each month

From the November prior actions
•

Issue the pending MDs on the closure/merger of extra-budgetary funds

•

Update the positive list mechanism to deliver the 2012 savings target of €250 million

115

Annex II. Measures to reach the 2012 deficit target
•

Pass a supplementary budget with a primary deficit target of 1 percent of GDP for 2012 that
reflects all of the changes that follow.

•

Reduce operational spending of the state by €200 million Adjust other spending by €280
million: election spending, subsidies for remote areas; allocations for the ministry of
education, (including for service abroad; staff allowance for universities, alternate teachers in
secondary schools; operational spending of high schools); allocation of the ministry of
agriculture; and transfers to entities.

•

Reduce pensions in OTE, DEI, ETE, ATE, ETVA, Emporiki, Ex-Olympic Airways and in
all other main pension funds, above the monthly amount of €1,300, by 12 percent, effective
January, 2012. Reduce supplementary pensions between €200–250 by
10 percent, between €250–300 by 15 percent, and above €300 by 20 percent, effective
January 1, 2012.

•

Eliminate all family allowances for families with annual incomes above €45,000, with the
exception for families with 5 or more children, effective January 1, 2012.

•

Cut domestic investment spending by €400 million relative to the 2012 budget.

•

Implement a 1:10 hiring to attrition rule in the state-owned enterprises for 2012.

•

In local governments: (i) reduce wages of all political employees by 10 percent (effective
January 1, 2012); and (ii) issue a decision to reduce the number of fixed term contracts, and
to limit the number of these paid from the state budget.

•

Take actions (all laws, Ministerial Directives (MDs), and circulars) to limit overprescribing
of pharmaceuticals and reduce generic costs:
¾ Pass law and issue MDs to set maximum price of generics to 40 percent and for offpatented products to 50 percent of patented products.
¾ Reduce profit margins for pharmacies to below 15 percent and wholesale margins to a
maximum of 5 percent. Establish a fixed rate of €30 for all medicine above €200.
Increase rebate for pharmacies with turnover above €35,000 by average 1½ percent.
¾ Pass law on rebates that will yield €250 million; pass law on an additional rebate
covering 2012–15 to be paid if outpatient pharmaceutical spending (including taxes),
retroactive to January 1, 2012 exceed €240 million per month.
¾ Make compulsory: electronic prescription for all doctors (and only reimburse pharmacies
for electronic entries); prescriptions of the cheapest product by active substance;
international protocols for 160 diseases, including the 10 most expensive.
¾ Update negative list; issue MD to allow for intakes of new brands into the positive list
only if they have been included by two-thirds of EU countries.

116

Annex III. Upfront Revenue Administration Reforms
Meeting end-2011 targets
•

General Secretariat for Tax and Customs to meet end-2011 revenue administration
performance indicators (full scope and VAT audits of large taxpayers).

Amnesty reversal
•

Amend the recent “Omnibus bill” to repeal/modify articles 3 and 21 (to eliminate the
extension of payment terms of tax debt, and eliminate the suspension of criminal prosecution
and asset freezing).

Regulations
•

Amend the Bank of Greece's decisions on the reporting by financial institutions, to the
Financial Intelligence Unit, of suspicious transactions linked or related to tax evasion
(Decisions 285/2009 and 281/2009) to enhance monitoring and detection mechanisms.

•

Take measures to ensure that complaint reports related to confirmed unpaid tax debts arising
from an audit are transmitted to the prosecution services and to the FIU, as required under
the system in place.

•

Make it compulsory for large tax cases to exhaust the administrative dispute phase before
accessing judicial appeals.

•

Tighten rules concerning suspension of payment of taxes in dispute when accessing judicial
appeals (Article 202, Administrative Procedure Code).

Delegation of powers
•

Minister of Finance to issue decisions to delegate from the ministerial to the administrative
level the control powers over core business activities and human resource management.

•

Place under direct control and management of GSTC headquarters the collection of large
debts, and focus activities in the largest 35 tax offices.

117

Annex IV. Privatization Program
Project
Timing of
Privatization (launch)

Transferred
to Fund

Advisors
contracted

Intermediate steps

Public Gas (DEPA)
Public Gas (DESFA)
Football Betting (OPAP)
Hellenic Defense Systems (EAS)
Hellenic Petroleum (HELPE)
Athens Water (EYDAP)
Horse Racing (ODIE)
Athens Water (EYDAP)
Thessaloniki Water (EYATH)
Mining and Metallurgical Company (LARCO)
Hellenic Post (ELTA)
Casino Mont Parnes
Electricity Company (PPC)
Hellenic Vehicle Industry (ELVO)
Railways (Trainose)
Athens Airport (AIA)

√
√
√
1/
March 2012 2/
√
March 2012 2/
March 2012
March 2012
March 2012 2/
1/
1/
1/
1/
1/
March 2012 2/

√
√
√
√
March 2012
March 2012
√
March 2012
March 2012
√
March 2012
March 2012
March 2012
March 2012
August 2012
√

Call for tender launched in February 2012.
Call for tender launched in February 2012.
State aid clearance.
Clearance by Ministry of Defense. Adopt restructuring law by April 2012. State aid clearance.
Sign MoU with Paneuropean by April 2012.
Establish regulator and pricing policy by June 2012. Extend concession.
Adopt restructuring law and establish time-bound concession rights by March 2012. State aid clearance.
Establish regulator and pricing policy by June 2012. Extend concession.
Establish regulator and pricing policy by June 2012. Extend concession.
Adopt restructuring law by March 2012.
Adopt law determining the public service by February 2012.
State aid clearance.
Restructuring to be decided by June 2012.
Adopt restructuring law by June 2012.
Ongoing restructuring and last phase of state aid clearance by June 2012.
Re-approach Hochtief Airports by June 2012.

Hellenic Motorways
State Lottery
Egnatia Odos
Small ports and marinas
Regional airports
Thessaloniki Port (OLTH)
Piraeus Port (OLP)
Large regional ports
South Kavala Gas Storage
Mining rights
Digital dividend

√
√
√
1/
√
March 2012 2/
March 2012 2/
1/

March 2012
√
March 2012
√
March 2012
March 2012
March 2012
March 2012
March 2012

Complete negotiations. Ratify changes in concession. Establish regulatory framework by end-2012.
Expected financial offer from the three bidders by April 2012.
Unbundling into services/motorway rights. Establish regulatory framework by end 2012.
Identify policy. First lot of rights transferred by March 2012. Est. regulatory framework by Sept. 2012
Identify proper policy. Establish regulatory framework by September 2012.
Identify policy. All share voting rights transferred by March 2012. Est. reg. framework by Sept. 2012
Identify policy. All share voting rights transferred by March 2012. Est. reg. framework by Sept. 2012
Identify policy. All share voting rights transferred by March 2012. Est. reg. framework by Sept. 2012
Clear legal obstacles by September 2012.

√
√
√
√
√
√
√
√

Adopt law on land use by March 2012.
Government to sign rental contracts by May 2012. Transfer clean title to the HRADF by May 2012.
Strategic environmental study. ESCHADA to be issued by June 2012. 3/
Negotiations with NBG. ESCHADA to be issued. Process led by NBG by June 2012.
Move NATO radar. ESCHADA to be issued by June 2012.
ESCHADA to be issued by June 2012.
Identify assets by June 2012.
Identify assets by September 2012.

I. State-owned enterprise/share sale
2012 Q1
Q1
Q1
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q3
Q4
Q4
II. Concessions
2011 Q4
Q4
2012 Q2
Q3
Q3
Q4
Q4
Q4
Q4
To be determined
To be determined

√

√

III. Real Estate
2011 Q4
Hellenikon 1
2012 Q1
Sale/repo N buildings
Q1
Real Estate IBC
Q1
Real Estate/Astir Vouliagmenis
Q1
Real Estate/Cassiopi
Q1
Real Estate lot 1 (Afantou)
Q2
Real Estate lot 2
Q3
Real Estate lot 3
Source: HRADF update on projects under development.

March 2012 2/
√
March 2012
1/
March 2012
1/
1/
1/

1/ Transfer of assets/rights at the point of privatization.
2/ Shares have already been transferred, but not yet voting rights.
3/ ESCHADA = Zoning and land planning permit.

118

Table 1. Greece: Quarterly Performance Criteria (2012-15 Program)
(billions of euros, unless otherwise indicated)
2013

2012

2014

2015

Mar-12

Jun-12

Sep-12

Dec-12

Dec-13

Dec-14

Dec-15

Progr. 1/

Progr. 1/

Progr. 1/

Progr. 1/

Progr. 3/ 6/

Progr. 4/ 6/

Progr. 5/ 6/

1. Floor on the modified general government primary cash balance

-2.5

-6.0

-6.3

-7.0

-0.2

8.8

8.1

2. Ceiling on State Budget primary spending

13.9

29.2

44.4

60.4

52.6

43.8

43.0

3. Ceiling on the overall stock of central government debt

340

340

340

340

..

..

..

4. Ceiling on the new guarantees granted by the central government

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

7. Ceiling on the accumulation of new domestic arrears by the general
government 7/

0.0

0.0

0.0

0.0

0.0

0.0

0.0

8. Floor on privatization receipts 8/

0.03

0.03

1.20

3.2

7.5

11.0

16.0

Performance Criteria (unless otherwise indicated)

5. Ceiling on the accumulation of new external payments arrears on
external debt contracted or guaranteed by general government 7/
6. Ceiling on the accumulation of new domestic arrears by Hospitals and
Line Ministries 7/
Indicative Targets

1/ Cumulatively from January 1, 2012 (unless otherwise indicated).
3/ Cumulatively from January 1, 2013 (unless otherwise indicated).
4/ Cumulatively from January 1, 2014 (unless otherwise indicated).
5/ Cumulatively from January 1, 2015 (unless otherwise indicated).
6/ Indicative targets.
7/ Applies on a continuous basis from program approval.
8/ Calculated on a cumulative basis from January 1, 2012 and applied on a continuous basis from program approval.

119

Table 2. Greece: Prior Actions
Measures

Macro critical relevance

Status

Fiscal
1. Government to fully implement all overdue MTFS measures (Annex 1).

To help restore fiscal sustainability.

Proposed.

2. Government to enact and implement measures needed to reach the fiscal deficit target in 2012 (Annex II).

To help restore fiscal sustainability.

Proposed.

3. Government to implement measures to strengthen tax administration operations (Annex III).

To improve tax collection.

Proposed.

To promote competitiveness and employment.

Proposed.

To promote competitiveness and employment.

Proposed.

To promote competitiveness and employment.

Proposed.

To effectively deregulate key service sectors.

Proposed.

Financial
8. Bank of Greece to undertake a comprehensive assessment of banks’ capital needs.

Financial stability

Proposed.

9. Ministry of Finance to complete a detailed study on how to address ATE, based on work by the commissioned external audit firms.

Financial stability

Proposed.

10. Government to enact legislation to improve the framework for resolution and recapitalization to: (i) enable the Bank of Greece to set
new bank capital standards through regulation, and to use this power to establish new Core Tier 1 requirements; (ii) remove impediments
to a flexible management of employment contracts in the context of bank resolutions; (iii) ensure the use of conservative asset valuations
for failed banks; (iv) allow the use of contingent convertible bonds in recapitalization; (v) introduce the possibility of restrictions on HFSF
voting rights; and (vi) vest resolution responsibilities in a separate department in the BoG and systemic restructuring responsibilities in
the HFSF.
11. Government to enact legislation to improve the financial oversight framework. In particular, covering reforms to: (i) establish two
departments in the HFSF mandated, respectively, to manage the government's ownership of banks and interim credit institutions; (ii)
revise the HFSF's governance structure to include a General Council and an Executive Board; and (iii) address HDIGF funding
arrangements, and to eliminate possible conflicts of interest within the HDIGF.

To support effective recapitalization of banks

Proposed.

To strengthen governance arrangements for
financial oversight agencies.

Proposed.

Structural
4. Government to legislate measures to level the playing field in collective bargaining, including: (i) removal of the 'after effects' of
contract expiration; (ii) removal of 'tenure' in all existing legacy contracts; (iii) a freeze of 'maturity' in all private contracts; (iv) elimination of
compulsory arbitration.
5. Government to legislate a realignment of the minimum wage level determined by the national collective agreement by 22 percent;
freeze it until the end of the program period, and a further 10 percent decline for youth, which will apply generally without any restrictive
conditions.
6. Government to close small social security funds and reduce other non-priority social security spending to allow a fully-funded reduction
in social security contribution rates.
7. Government to enact secondary legislation establishing license prices for road-haulage in line with administrative costs, and to screen
specific service sector legislation and repeal or modify unnecessary and outdated regulations for an additional 20 high value and/or
highly restricted professions to ensure full consistency with the law liberalizing restricted professions (3919).

120

Table 3. Greece: Proposed Structural Conditionality—Structural Benchmarks
Measures

Macro critical relevance

Status

End-March 2012
1. A ministerial decree shall be issued to provide the technical details of the banks' recapitalisation framework
2. Bank of Greece to complete a strategic assessment of banks' business plans.

To strengthen financial sector resilience
To strengthen financial sector resilience

Proposed.
Proposed.

End-June 2012
To simplify the tax system, improve its efficiency,
3. Government to adopt a budget-neutral tax reform package, including: (i) the repeal of the Code of Books and Records and its
replacement by simpler legislation; (ii) the elimination of several tax exemptions and preferential regimes; (iii) simplification of the VAT and and broaden the tax base.
of the property tax rate structure; (iv) a more uniform tax treatment of individual capital income; and (v) a simplified personal and
corporate income tax schedule.
4. Government to complete the reviews of social spending programs to identify 1 percent of GDP in savings, while at the same time
To help achieve medium-term fiscal targets.
making proposals to strengthen core safety net programs.
5. Government to complete the reviews of public administration to identify 1 percent of GDP in savings.
6. Government to meet quantified quarterly performance indicators for revenue administration
7. Government to meet quantified quarterly performance indicators public financial management.
End-September 2012
8. Government to complete the strategy for strengthening social security collections.
9. Government to adjust pensions, with protections for low income pensioners, and the social security contribution base, to permit a fullyfunded reduction in rates (cumulatively 5 percent from January 1, 2012)
End-December 2012
10. Government to meet quantified quarterly performance indicators for revenue administration
11. Government to meet quantified quarterly performance indicators for public financial management
12. Government to complete the screening and cleaning of existing legislation covering the list of professions and economic activities
covered in Annex II of KEPE’s “Second Report on the Impact of Liberalizing Regulated Professions.”
13. Government to reform the governance of the BoG, to provide for collegial decision-making at the level of executives (Governor and
Deputy Governors) and expanded internal oversight by nonexecutives of the existing General Council, and to revise the structure and
rights of BoG shareholders to eliminate possible conflicts of interest in the Bank of Greece’s public policy role.
End-June 2013
14. Bank of Greece will complete an additional assessment of capital needs based on end-2012 data.

121

Proposed.

Proposed.

To help achieve medium-term fiscal targets.
To improve tax collection
To contain arrears

Proposed
Proposed.

To improve social security collections.

Proposed.

To improve unit labor costs and competitiveness
To improve tax collection
To contain arrears
To improve competitiveness

Proposed.

To strengthen financial sector stability

Proposed.

To align capital buffers to banks’ individual risk
profiles

Proposed.

Proposed.

GREECE

Memorandum of Understanding
on
Specific Economic Policy Conditionality

The disbursements of financial assistance to Greece, by the European Financial
Stability Facility (EFSF), are subject to quarterly reviews of conditionality for the
duration of the arrangement. The release of the tranches will be based on observance
of quantitative performance criteria and a positive evaluation of progress made with
respect to policy criteria in Council Decision 2011/734/EU of 12 July 2011 (as
amended; hereinafter the Council Decision), the memorandum of economic and
financial policies (MEFP) and in this Memorandum.
The annex on data provision is part of the Memorandum and how well it has been
respected will be considered in the assessment of compliance.
Greece commits to consult with the European Commission, the ECB and the IMF
staff on the adoption of policies falling within the scope of this Memorandum
allowing sufficient time for review. The Government publishes a quarterly report in
line with Article 4 of the Council Decision.
In line with the conclusions of the euro-area summit of 26 October 2011, the
Government will fully cooperate with the Commission, the ECB and the IMF staff
teams to strengthen the monitoring of programme implementation, and will provide
the staff teams with access to all relevant data and other information in the Greek
administration. However the ownership of the programme and all executive
responsibilities in the programme implementation remain with the Greek
Government.

122

FISCAL CONSOLIDATION

1

FISCAL CONSOLIDATION

Budget implementation
For 2012, the annual general government primary deficit should not exceed
EUR 2 037 million; and for 2013 and 2014 the primary surplus should be at least
EUR 3 652 million and EUR 9 352 million, respectively.
Proceeds from the privatisation of financial and non-financial assets do not substitute
fiscal consolidation efforts and will not be considered when assessing compliance
with the annual general government deficit ceilings established in this memorandum
and in the Council Decision. The bank recapitalisation-related flows will not be
considered in the monitoring of annual general government deficit ceilings
irrespective their recording in the ESA accounts by ELSTAT and Eurostat.
Prior to the first disbursement of the new programme, the Government adopts
the following measures, through a supplementary budget, and other legal acts:
•

•
•
•

•

•
•

•

123

Reduction in pharmaceutical expenditure by at least EUR 1 076 million, in 2012
by reducing medicine prices (generics, off-patent and branded medicines),
increasing co-payments, reducing pharmacists' and wholesalers' trade margins,
application of compulsory e-prescription by active substance and protocols, the
update of the positive list of medicines and the implementation of a mechanism
of quarterly rebates (automatic claw-back) to be paid by the pharmaceutical
industry. (See below section 2.8).
Reduction in overtime pay for doctors in hospitals by at least EUR 50 million.
Reduction in the procurement of military material by EUR 300 million (cash and
deliveries).
Reduction by 10 percent in the remuneration of elected and related staff at local
level and reduction in the number of deputy mayors and associated staff in 2013
with the aim of saving at least EUR 9 million in 2012 and 28 million in 2013
onwards.
Reduction in the central government's operational expenditure, and electionrelated spending, by at least EUR 370 million (compared to the 2012 budget), of
which at least EUR 100 million in military-related operational expenditure., and
at least EUR 70 million in electoral spending.
Reduction in operational expenditure by local government with the aim of
saving at least EUR 50 million.
Frontloading cuts in subsidies to residents in remote areas, and cuts in grants to
several entities supervised by the several ministries, with the aim of reducing
expenditure in 2012 by at least EUR 190 million.
Reduction in the public investment budget (PIB) by EUR 400 million: this cut
will be implemented through cuts in subsidies to private investments and
nationally-financed investment projects. The reduction in the PIB will not have
any impact on projects that are co-financed by structural funds (uncompleted
project financed by the 2000-06 operational programmes, cohesion fund (200006) projects, 2007-13 operational programmes, and non-eligible expenditure
related to the above projects, including TEN-T projects).

FISCAL CONSOLIDATION

•

•

Changes in in supplementary pension funds and pension funds with high average
pensions or which receive high subsidies from the budget and cuts in other high
pensions, with the aim of saving at least EUR 450 million (net after taking into
account the impact on taxes and social contributions).
Cuts in family allowances for high-income households, with the aim of saving
EUR 43 million.

Prior to the disbursement, the Government also adopts the following pending acts:
•
•

Ministerial Decisions for the implementation of the business tax (minimum levy
on self-employed) provided for Article 31 of Law 3986/2011;
Ministerial Decisions to complete the full implementation of the new wage grid
in all the pertinent entities, and legislation on the modalities for the recovery of
wages paid in excess from November 2011 afterwards.

By end-June 2012, the Government will legislate an average reduction by 12
percent in the so-called 'special wages' of the public sector, to which the new wage
grid does not apply. This will apply from 1 July 2012 on and deliver savings of at
least EUR 205 million (net after taking into account the impact on taxes and social
contributions).
In order to prepare the measures that will be adopted with the 2013 and 2014
budgets and contribute to meet the fiscal targets, the Government initiates, before
end-February 2012, a review of public spending programmes. This review should
be completed by June 2012. The review will draw on external technical assistance
and will focus on pensions and social transfers (in a manner that will preserve basic
social protection); defence spending without prejudice to the defence capability of
the country; and restructuring of central and local administrations. By the same date
(June 2012), a further rationalization of pharmaceutical spending and operational
spending of hospitals, and of welfare cash benefits will also be specified.
Preliminary results from the spending review will be included in the update of the
medium-term fiscal strategy (MTFS), which will be tabled in Parliament by May
2012.
The Ministry of Finance ensures a tight supervision of expenditure commitments by
the government departments, including extra-budgetary funds, public investment
budget, social security funds and hospitals, local governments and state-owned
enterprises, and an effective tax collection, in order to secure the programme
quantitative criteria.
The Government stands ready to define and enact additional measures, if needed, in
order to respect the budgetary targets.

124

STRUCTURAL FISCAL REFORMS

2

STRUCTURAL FISCAL REFORMS

2.1

Asset management and privatisation

The Government implements the privatisation programme with the aim of
collecting EUR 50 billion in the medium term.
Cumulative privatisation receipts since June 2011 should be at least EUR
5 200 million by end-2012, EUR 9 200 million by end-2013 and, EUR
14 000 million by end-2014.
The Government stands ready to offer for sale its remaining stakes in stateowned enterprises, if necessary in order to reach the privatisation objectives.
Public control will be limited only to cases of critical network infrastructure.
To ensure that the plan objectives are achieved, the Government will
continuously transfer assets to the Hellenic Republic Asset Development
Fund (HRADF). In particular, the Government will transfer to the HRADF all
the assets that are expected in 2012 and 2013 at the request of the HRADF.
All legal, technical and financial advisors for the privatisations planned for
2012 and 2013 will be appointed by end Q1-2012.
Privatisation is conducted in a transparent manner and will clearly set out
post-privatisation property rights and obligations. For a number of assets,
successful privatisation requires a proper regulatory framework ensuring that
entry in a competitive market is possible after privatisation, consumers are
adequately protected, and privatised assets are deployed in competitive
markets. The conditions for sales or concessions shall avoid the creation of
unregulated private monopolies, prevent any form of discrimination, facilitate
open access, and impose full transparency of accounts.
Intermediate steps for privatisation are specified, including clearing all legal
titles, securing state-aid approval, unbundling assets, respecting public
procurement rules, having a more comprehensive inventory of real estate
assets; reallocating land uses; seeking the council of experts' and audit court's
approvals.
The Government will neither propose nor implement measures which may
infringe the rules on the free movement of capital. Neither the State nor other
public bodies will conclude shareholder agreements with the intention or
effect of hindering the free movement of capital or influence the management
or control of companies. The Government will neither initiate nor introduce
any voting or acquisition caps, and it will not establish any disproportionate
and non-justifiable veto rights or any other form of special rights in privatised
companies. No further special rights will be introduced in the course of future
privatisation projects.
To ensure compliance with the EU Treaty, the Government repeals or
appropriately amends the existing special rights granted to the State in the

125

STRUCTURAL FISCAL REFORMS

process of privatisation. In particular, the Law on Strategic Companies (Law
3631/2008, Art 11) is repealed or appropriately amended. [Q2-2012]
In order to ensure a timely clearance of state-aid issues that could constitute a
hurdle for privatisation:
•
•

the Government appoints an interlocutor formally designated for ensuring
compliance of privatisation with State aid rules by end-Q1 2012.
the Government,in cooperation with the HRADF, submits by end-Q2
2012, to the Commission information on the financial situation of each
asset that will be privatised in the course of 2012, whether the
privatisation needs to be preceded by restructuring and respective
modalities; liabilities to the state which might hinder the privatisation
process or the final price; legislation which grants an advantage to the
firm (or concessionaire), such as tax discrimination or monopoly status,
etc.; conditions that may be imposed on interested buyers, as well as
conditions on buyers' eligibility; and the method of privatisation planned
(public tender, negotiation with existing shareholders, IPO, etc.). A
similar report will be submitted in Q4-2012 for each asset that is expected
to be launched for privatisation in 2013.

The Government continues compiling and publishing a comprehensive
inventory of state-owned assets, including stakes in listed and non-listed
enterprises and commercially viable real estate and land. The inventory will
be published in successive stages by mid-2012 and end-2012 on the Ministry
of Finance's website.
The Government accelerates state land ownership registration. For this
purpose, the Government (i) prepares a comprehensive asset-inventory
(ii) prepares a special law for the land development of the Hellinikon Area
(iii) clarifies land-use status for the single assets and/or portfolios of assets
that will be assessed and selected for exploitation within 2012. [Q2-2012]
2.2

Reducing waste in public enterprises and other public entities

Tariffs in OASA, OSE Group and Trainose increase by at least 25 percent,
while their business plans are appropriately updated. [Q1-2013]
2.3

Tax policy

The Government will prepare a tax reform that aims at simplifying the tax
system, eliminating exemptions and preferential regimes, including and
broadening bases, thus allowing a gradual reduction in tax rates as revenue
performance improves. This reform relates to the personal income tax,
corporate income tax and VAT, property taxes, as well as social contributions,
and will maintain the relative tax burden from indirect taxes. The reform will
be adopted by June 2012. In March 2012, the Government will announce the
full schedule of intermediate steps until the reform is tabled. These
intermediate steps will include public consultation and appropriate review by
the European Commission, ECB and IMF staff.

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By June 2012, the Government will revise the legal values of real estate to
better align them with market prices.
2.4

Revenue administration reforms

Articles 3 and 21 of Law 4038/2012 are amended prior to the disbursement.
The suspension of criminal prosecution and asset freezing is eliminated; the
conditions to extend the instalment plans for overdue taxes and social
contributions are revised so that the instalment plans will only apply to
existing overdue amounts below EUR 10 000 for individuals and EUR 75 000
for corporations. Tax payers applying for an extended instalment plan should
disclose all their financial statements to the tax authorities.
Moreover, during the years covered by the economic adjustment programme,
the Government commits not to adopt new tax amnesties, or extend existing
amnesties for the collection of taxes and social contributions.
The Government will define 'tax refunds in arrears,' set standards for their
processing [Q1-2012] and publish on the web [Q2-2012] monthly data on
these arrears with a lag of 20 days after the end of each month.
In line with the anti-tax evasion action plan, the Government will step up
audits of large-scale tax payers, high-wealth individuals and self-employed. It
will also accelerate the resolution of tax arrears, and better integrate antimoney laundering tools into the strategy. Progress will be monitored by
quantitative indicators according to targets set under the anti-tax evasion plan
(key performance indicators). These indicators concern completion of full
scope and temporary audits of large taxpayers, of risk-based audits of selfemployed and high wealth individuals and of non-filers. They also involve
collection of assessed taxes and penalties from new audits of large taxpayers,
of the existing stock of tax debt, and increase in the number of registered VAT
taxpayers filing returns.
The achievement of the completion of 75 full-scope audits and 225 VAT
audits of large taxpayers, as targets set in the memorandum of 31 October
2011 for end-December 2011, are prior to the disbursement.
To advance the reforms of revenue administration, the Government:
•
•

•
•
•
•

127

increases the staff of the large-taxpayers unit by 40 auditors to step up the
fulfilment of audits in progress [end-March 2012]
steps up the hiring procedure in order to complete the first wave of auditor
reassessment and hiring (1 000 staff), [end-April 2012] with the objective
to achieve the target of 2 000 tax auditors fully operational by end-2012
within the overall limits for public hiring;
removes barriers to effective tax administration [June 2012], including a
formal performance review and replacing managers who do not meet
performance targets;
continues to centralise and merge tax offices; 200 local tax offices,
identified as inefficient, will be closed, by end-2012;
centralises the management of tax files related to the taxpayers in the list
of big debtors; [Q1-2012]
revises the procedures to write-off tax debts, so that the administrative
efforts may focus on effectively collective debts, by end-2012;

STRUCTURAL FISCAL REFORMS

•

•
•

discontinue payments in cash and cheque in tax offices which should be
replaced by bank transfers, so that staff time is freed-up to focus on more
value added work (audit, collection enforcement and taxpayer advice);
[Q2-2012]
starts to publish on the web key performance indicators for the tax
department; [Q2-2012]
puts in place a new IT system that interconnects all tax offices.

The preparation of the new IT system involves the following main steps in
relation to the new data centre, web-facing and back-office applications:
•
•
•
•
•
•

the new data centre hardware is in place and running by end-March 2012;
20 more new electronic services and enhancements by end-June 2012.
These concern mainly taxes withheld at source;
database and application design and implementation, by end-October
2012;
8 remaining new electronic services and enhancements by end-December
2012. These concern forms filed late with a fine, real-estate tax, and VAT
administration;
system and user tests, user training, and migration of all tax offices to the
centralized database: by end-December 2012;
operational use of the new IT infrastructure by all tax offices: 1 January
2013.

To strengthen the anti-corruption framework for the tax administration, the
Government will:
•
•
•
•
•
•

reform the financial inspections' unit, which should focus only on auditing
tax collectors and revenue administration issues [June 2012];
activate an Internal Affairs Directorate [June 2012];
require the Financial Intelligence Unit to audit annually at least 200 asset
statements of tax officials [June 2012];
establish procedures for the rotation of managers on a periodic basis [June
2012];
improve the system to protect whistle-blowers who report corruption
[June 2012];
prepare a fully-fledged anti-corruption plan [September 2012].

Moreover, the Government will define powers to be delegated from the
political level to the tax administration. These powers will include control over
core business activities and management of human resources. The Government
will also tighten the control of local tax offices by central offices, and fill the
position of Secretary General of Revenue Administration with an external
appointee with appropriate professional experience. [March 2012]
The Government adopts secondary legislation to make arbitration operational
and certifies arbitrators by end-March 2012. By the same date, legislation will
make it compulsory to exhaust administrative dispute phase for large tax cases,
before entering the judicial appeals.
The Code of Books and Records is repealed in its entirety and replaced by
simpler legislation. [not later than June 2012]

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2.5

Public financial management reforms

A plan for the clearance of arrears owed to suppliers by public entities is
published by June 2012 and the Government ensures that the stock of arrears
steadily declines. Clearance of arrears of government entities by the state
budget will be contingent on progress in relation to the commitment registry,
and no additional accumulation of arrears by each public entity. Data on
arrears are published monthly with a lag of not more than 20 days after the
end of each month.
To strengthen expenditure control, the Government:
•

•

•

2.6

continues the process of establishing commitment registries, which should
fully cover the central government by March 2012, and the investment
budget and at least 70 percent of general government units [June 2012])
and extended to other general government entities;
enforces the obligation of accounting officers to report commitments,
including by enacting sanctions to entities not submitting the data and
disciplinary action for accounting officers; [June 2012]
adopts legislation streamlining the procedure for submission and approval
of supplementary budgets, [October 2012] and establishes an
administrative calendar for the update of the medium-term fiscal strategy.
[Q1-2012]

To modernise the public administration

At the central level
By December 2012, and in accordance with the roadmap established, the
Government has to: i) set up a high-level transformation steering group,
chaired by the PM, that will supervise, monitor and ensure the implementation
of administrative reforms; [February 2012] ii) establish a stable structure for
Inter-Ministerial Coordination; [May 2012] iii) create basic horizontal
structures in each Ministry, implementing the relevant procedures with
Budget/Finance [February 2012], Audit, Internal Control, Human Resource
Management, acting under common rules. A framework legislation, to be
drafted in line with the roadmap agreed and adopted, will provide the legal
reference for implementing such a reform.
At the decentralized/regional/local level
A specific roadmap is created, translating all principles of coherence and
efficiency at the central level into the decentralized regional/local level.
[March 2012]
Social programmes
The ongoing functional review on social programmes is finalised by endMarch 2012. The review report will include recommendations to the
Government on the objectives, design and implementation of social policies,

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as well as on the need to keep a balance between achieving savings and
protecting the most vulnerable.
Public sector wages and human resource management
The Government publishes and updates on a quarterly basis its mediumterm staffing plans per department, for the period up to 2015, in line with the
rule of 1 recruitment for 5 exits. The recruitment/exit rule applies to the
general government as a whole. The staffing plans should be consistent with
the target of reducing public employment by 150 thousand in end-2010–end2015. If necessary, the Government will enact temporary hiring freezes.
Staff transferred to the Government from either state-owned enterprises or
other entities under restructuring are considered as new recruitments. The
same applies to staff in the labour reserve that is transferred to other
government entities, after screening of professional qualifications by ASEP
under its regular evaluation criteria. The overall intake in the professional
schools (e.g. military and police academies) is reduced to a level consistent
with hiring plans. .
The staffing plans per Ministry and each group of public entities will include
tighter rules for temporary staff, cancellation of vacant job post and
reallocation of qualified staff to priority areas and takes into account the
extension of working hours in the public sector. The staffing plans and
monthly data on staff movements (entries, exits, transfers among entities) of
the several government departments are published on the web. [monthly
starting March 2012]
15 000 redundant staff will be transferred to the labour reserve in the course
of 2012, in connection with the identification of entities or units that are
closed or downsized. Staff in the labour reserve will be paid at 60 percent of
their basic wage (excluding overtime and other extra payments) for not more
than 12 months, after which they will be dismissed. This period of 12 months
may be extended up to 24 months for staff close to retirement. Payments to
staff while in the labour reserve are considered part of their severance
payments.
The Government commissions an expert assessment of the new wage grid.
[Q1-2012] This assessment will focus on the wage drift that is embedded in
the new promotion mechanism. If the assessment reveals any excessive wage
drift, the promotion rules are adjusted before end-2012. No promotion takes
place before the assessment and adjustment to the promotion rules.
The Government sets up an electronic automated system linking the census
data base with the Single Payment Authority (SPA)'s, which will allow for a
more effective coverage, assessment and payment of employees. This system
will be coordinated with other ministries. [Q2-2012]

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Public procurement
Single Public Procurement Authority (SPPA)
The Government issues decisions:
•
•

•

to appoint the members of the SPPA. [February 2012]
to provide for the institution and establishment of positions for the SPPA’s
personnel, as well as for the organization of human resources and services
of the Authority in accordance with the provisions of the law on the SPPA.
[March 2012]
to provide for the Implementing Regulation of the SPPA. [April 2012]

The SPPA starts its operations to fulfil its mandate, objectives, competences
and powers as defined in the law on the SPPA and the Action Plan agreed with
the European Commission in November 2010. [April 2012]
E-procurement
The Government presents a detailed plan for the development of the eprocurement platform, including its phased roll-out, communication and
training programmes, its target usage levels, and planned revision of the
current legislation (if needed). [Q1-2012]
The Government presents a pilot version of the e-procurement system. [Q22012]
The e-procurement platform is fully operational and ready for use and a
common portal is created for the publication of all procurement procedures
and outcomes. The e-procurement framework is placed under the
responsibility of the SPPA, which supervises its operations. [Q1-2013]
The whole public sector uses the e-procurement platform [Q4-2013] and the
government presents results of the monitoring activities covering year 2013
against the target usage levels. [Q1-2014]
Efficiency of procedures
The Government will move towards more centralised procurement, especially
in the field of health procurement, services and supplies:
The Government identifies a number of potential sectoral Central Purchasing
Bodies (CPB) at central government level. The first CPBs are fully operational
and coordinated by the SPPA. [Q2-2012]
The Government establishes centralised purchasing/framework contracts for
frequently purchased supplies or services at central government level with the
obligation for ministries and central government bodies to source via these
contracts and optional use for regional entities. [Q3-2012]
The Government proposes an Action Plan to establish CPB at regional/local
level, at least one per administrative region. [Q3-2012] Regional/local CPBs
are fully operational and coordinated by the SPPA.

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The Government undertakes a reform of the public procurement system
including works, supplies and services with a view to (a) simplifying,
streamlining and consolidating the body of public procurement legislation, and
(b) rationalising the administrative structures and processes in public
procurement to desired procurement results in terms of efficiency and efficacy.
The review starts from an analysis of the state of play (flowcharts, procedural
phases, actors involved, timelines, statistics). A first Action Plan for the reform
is developed in agreement with the European Commission. [Q2-2012]
Government presents drafts of the necessary legislative and organisational
measures to implement the above-mentioned Action Plan to the European
Commission. [Q4-2012]
The Government undertakes a thorough review of the system of redress
against award procedures with the objective of (1) reducing the significant and
frequent delays triggered by excessive use and lengthy processing of redress in
public procurement procedures and of (2) assessing the role to confer to the
SPPA in this area. The Government proposes an Action Plan in agreement
with the European Commission. [Q2-2012]
Quality of statistics
The ongoing strengthening of the European Statistical System includes the
introduction of Commitments of Confidence in Statistics, to be signed by all
Member States. The Government will sign such a Commitment, which will be
endorsed by Parliament, prior to the disbursement. This Commitment
includes the revision of the Statistical Law to reform the ELSTAT governance
arrangements and establish the ELSTAT Board as an advisory body, and to
clarify further the professional authority of the ELSTAT President as chief
officer and coordinator of the national statistical system.
2.7

To complete the pension reform

Prior to the disbursement, the Government proceeds, through a framework
law, with an in-depth revision of the functioning of secondary/supplementary
public pension funds.
The aim of the revision is to stabilise pension expenditure, guarantee the
budgetary neutrality of these schemes, and ensure medium- and long-term
sustainability of the system. The revision achieves:
•
•
•
•

the elimination of imbalances in those funds with deficits;
the unification of all existing funds;
reduction of overall operational and payroll costs including an adequate
reduction in staff headcount (by at least 30 percent) in the new single fund;
the long-term sustainability of secondary schemes through a strict link
between contributions and benefits.

The reform of the secondary/supplementary schemes is designed in
consultation with the European Commission, ECB and IMF staff, and its
estimated impact on long-term sustainability is validated by the EU Economic
Policy Committee. The parameters of the new secondary notional definedcontribution system ensure long-term actuarial balance, as assessed by the
National Actuarial Authority. [Q1-2012]

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The individual pension benefit will be calculated on the basis of (i) a notional
rate of return linked to the rate of growth of the wage bill of insured workers;
(ii) a sustainability factor that adjust benefits to promptly eliminate any future
imbalances should they occur. [Q1-2012]
The Government will reduce nominal supplementary pension benefits starting
from January 2012 to eliminate deficits. The new single fund sets up in a cost
effective way a computerised system of individual pension accounts. [Q12012]
The Government identifies the schemes for which lump sums paid on
retirement are out of line with contributions paid, and adjusts the payments.
[Q1-2012]
The Health Committee set up by Law 3863/2010 will produce a first quarterly
report of its activities aimed at revising the disability status and reduce the
disability pensions to not more than 10 percent of the overall number of
pensions. [Q1-2012]
The Bank of Greece commits not to grant pension privileges to its staff and to
revise the main parameters of its pension scheme, so that they remain aligned
to those of IKA.
The Government will ensure that social security's assets, including the
liquidity that results from the ongoing debt exchange is invested in
government bills, deposits in Treasury, or any other instrument that
consolidates in government debt.
2.8

To modernise the health care system

The Government continues to implement the comprehensive reform of the
health care system started in 2010 with the objective of keeping public health
expenditure at or below 6 percent of GDP, while maintaining universal access
and improving the quality of care delivery. Policy measures include reducing
the fragmented governance structure, reinforcing and integrating the primary
healthcare network, streamlining the hospital network, strengthening central
procurement and developing a strong monitoring and assessment capability
and e-health capacity.
The Government continues the efforts undertaken in 2010-11 and intensifies
measures to reach savings in the purchasing (accruals basis) of outpatient
medicines of close to EUR 1 billion in 2012 compared to the 2011. This will
contribute to the goal of bringing average public spending on outpatient
pharmaceuticals to about 1 percent of GDP (in line with the EU average) by
end-2014.
More specifically, the following measures are implemented:
Governance
To strengthen health system governance, improve health policy coherence,
reduce fragmentation in the purchasing of health services and reduce
administrative costs, the Government further concentrates all health-related
decision making procedures and responsibilities (including payroll

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expenditures) under the Ministry of Health by at the latest June 2012. In order
to do this, the Government prepares a plan and the necessary legislative
changes by end-February 2012. As part of this concentration process, all
health insurance funds are merged into EOPYY and come under the
responsibility of the Ministry of Health. EOPYY buys services in a cost
effective way from NHS facilities and private providers through contracts. All
other welfare / social assistance schemes under the Ministry of Health are
moved to the Ministry of Labour by at the latest June 2012.
From January 2013 EOPYY will purchase hospital services on the basis of
prospective budgets following the development of costing of procedures by
treatment/ pathology categories (full absorption cost DRGs).
As a result of the concentration process, EOPYY rationalises the number of
contracts with private doctors so as to bring down the doctor-to-patients ratio
close to the much lower EU average. [Q2-2012]
Contributions paid by OGA members are progressively equalised to those of
other members of EOPYY, as envisaged in the medium-term fiscal strategy.
The process of equalisation of contributions will be completed in 2013.
Controlling pharmaceutical spending
In order to achieve EUR 1 billion of reduction in outpatient pharmaceutical
spending in 2012, the Government will simultaneously implement a set of
consistent policies comprising changes in pricing, prescribing and
reimbursement of medicines that enhance the use of less expensive medicines,
control prescription and consumption and prosecute misbehaviour and fraud.
The Government defines a consistent set of incentives and obligations for all
participants along the medicines supply chain (including producers,
wholesalers, pharmacies, doctors and patients) to promote the use of generic
medicines.
The Government will revise the co-payment system in order to exempt from
co-payment only a restricted number of medicines related to specific
therapeutic treatments. [Q1-2012]
Pricing of medicines
The Government continues to update, on a quarterly basis, the complete price
list for the medicines in the market, using the new pricing mechanism based on
the three EU countries with the lowest prices. [Q1-2012]
The Government introduces an automatic claw-back mechanism (quarterly
rebate) on the turnover of pharmaceutical producers which guarantees that the
outpatient pharmaceutical expenditure does not exceed budget limits. [Q12012]
Starting from Q1-2012, the pharmacies' profit margins are readjusted and a
regressive margin is introduced - i.e. a decreasing percentage combined with
flat fee of EUR 30 on the most expensive medicines (above EUR 200) - with
the aim of reducing the overall profit margin to below 15 percent.
Government produces an implementation report on the impact of the new
profit margins by Q1-2013. If it is shown that this new model to calculate

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profit margins does not achieve the expected result, the regressive margin will
be further revised.
Starting from Q1-2012, the wholesalers' profit margins are reduced to
converge to 5 percent upper limit.
Prescribing and monitoring
The Government
•

•

•

•
•

•

•

135

takes further measures to extend in a cost-effective way the current eprescribing to all doctors, health centres and hospitals. E-prescribing is
made compulsory and must include at least 90 percent of all medical acts
covered by public funds (medicines, referrals, diagnostics, surgery) in both
NHS facilities and providers contracted by EOPYY and the social security
funds. [Q1-2012]
introduces a temporary and cost-effective mechanism (until all doctors are
able to use the e-prescription system) which allows for the immediate and
continuous monitoring and tracking of all prescriptions not covered by eprescription. This mechanism will make use of the web-based eprescription application established by IDIKA, which allows the
pharmacies to electronically register manual prescriptions from a specific
doctor to a specific patient. For medicines to be reimbursed by EOPYY
(and other funds), pharmacies must register in the web-based application
all manual prescriptions. For this service, doctors who prescribe manually
will be charged a monthly administrative fee by EOPYY to compensate
the pharmacies. The introduction of this temporary mechanism would
ensure that all prescriptions are electronically recorded, allowing for the
full and continuous monitoring of doctors' prescription behaviour, their
compliance with prescription guidelines. [February 2012]
continues publishing prescription guidelines/protocols for physicians.
Starting with the guidelines for the most expensive and/or mostly used
medicines the government makes it compulsory for physicians to follow
prescription guidelines. Prescription guidelines/protocols are defined by
EOF on the basis of international prescription guidelines to ensure a costeffective use of medicines and are made effectively binding. [Q1-2012]
enforces the application of prescription guidelines also through the eprescription system, therefore discouraging unjustified prescriptions of
most expensive medicines and diagnostic procedures. [Q1-2012]
produces (Ministry of Health and EOPYY together with the other social
security funds until they merge) detailed monthly auditing reports on the
use of e-prescription in NHS facilities and by providers contracted by
EOPYY and other social security funds (until they merge). These reports
are shared with the European Commission, ECB and IMF staff teams.
[Q1-2012]
implements (Ministry of Health and EOPYY together with the other social
security funds until they merge) an effective monitoring system of
prescription behaviour. They establish a process to regularly assess the
information obtained through the e-prescribing system. [Q2-2012]
produces regular reports, at least on a quarterly basis, on pharmaceutical
prescription and expenditure which include information on the volume and
value of medicines, on the use of generics and the use of off-patent
medicines, and on the rebate received from pharmacies and from

STRUCTURAL FISCAL REFORMS

•

•

•
•

pharmaceutical companies. These reports are shared with the European
Commission, ECB and IMF staff teams. [Q1-2012]
provides feedback and warning on prescription behaviour to each
physician when they prescribe above the average of comparable
physicians (both in NHS facilities and contracted by EOPYY and other
social security funds until they merge) and when they breach prescription
guidelines. This feedback is provided at least every month and a yearly
report is published covering: 1) the volume and value of the doctor's
prescription in comparison to their peers and in comparison to prescription
guidelines; 2) the doctor's prescription of generic medicines vis-à-vis
branded and patent medicines and 3) the prescription of antibiotics. [Q22012]
enforces sanctions and penalties as a follow-up to the assessment and
reporting of misconduct and conflict of interest in prescription behaviour
and non-compliance with the EOF prescription guidelines. Continuous or
repeated non-compliance with the prescription rules will lead to the
termination of the contract between the doctor and the EOPYY and the
doctor’s permanent loss of his/her capability/right to prescribe
pharmaceuticals which are reimbursed by the government/EOPYY in the
future. [Q1-2012]
continuously updates the positive list of reimbursed medicines using the
reference price system developed by EOF. [Q1-2012]
selects a number of the most expensive medicines currently sold in
pharmacies, to be sold in hospitals or EOPYY pharmacies, so as to reduce
expenditure by eliminating the costs with outpatient distribution margins,
and by allowing for a strict control of the patients who are being
administered the medicines. [Q1-2012]

If the monthly monitoring of expenditure shows that the reduction in
pharmaceutical spending is not producing expected results, additional
measures will be promptly taken in order to keep pharmaceutical consumption
under control. These include a prescription budget for each doctor and a target
on the average cost of prescription per patient and, if necessary, across-theboard further cuts in prices and profit margins and increases of co-payments.
[Q2-2012]
In compliance with EU procurement rules, the Government conducts the
necessary tendering procedures to implement a comprehensive and uniform
health care information system (e-health system). [Q1-2012]
Increasing use of generic medicines
A comprehensive set of measures is adopted simultaneously to promote the
use of generic and less expensive medicines. The aim of these measures is to
gradually and substantially increase the share of the generic medicines to reach
35 percent of the overall volume of medicines sold by pharmacies by end2012, and 60 percent by end-2013. This will be achieved by:

•

•

reducing the maximum price of the generic to 40 percent of the price of
the originator patented medicine with same active substance at the time its
patent expired. This is set as a maximum price; producers can offer lower
prices, thus allowing an increased competition in the market. [Q1-2012]
automatically reducing the prices of originator medicines when their
patent expires (off-patent branded medicines) to a maximum of 50 percent

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•
•

•

•
•
•

of its price at the time of the patent expiry. Producers can offer lower
prices, thus allowing an increased competition in the market. [Q1-2012]
creating dynamic competition in the market for generic medicines through
price reductions of at least 10 percent of the maximum price of each
generic follower. [Q4-2012]
associating a lower cost-sharing rate to generic medicines that have a
significantly lower price than the reference price for reimbursement (lower
than 40 percent of the reference price) on the basis of the experience of
other EU countries, while increasing substantially the co-payment of more
expensive medicines in the reference category and of new molecules. [Q12012]
deciding about the reimbursement of newly patented medicines (i.e. new
molecules) on the basis of objective criteria and, until internal capacity is
in place, by relying on best practice health technology assessment of their
cost-effectiveness carried out in other member states, while complying
with Council Directive 89/105/EEC. [Q1-2012]
excluding from the list of reimbursed medicines those which are not
effective or cost-effective, also on the basis of the experience of other
countries. [Q1-2012]
making it compulsory for physicians to prescribe by international nonproprietary name for an active substance, rather than the brand name. [Q12012]
mandating the substitution of prescribed medicines by the lowest–priced
product of the same active substance in the reference category by
pharmacies (compulsory "generic substitution"). [Q1-2012]

The Government takes further measures to ensure that at least 40 percent of
the volume of medicines used by public hospitals is made up of generics with
a price below that of similar branded products and off-patent medicines. This
should be achieved, in particular by making compulsory that all public
hospitals procure pharmaceutical products by active substance, by using the
centralised tenders procedures developed by EPY and by enforcing
compliance with therapeutic protocols and prescription guidelines. [Q2-2012]
The Government, pharmaceutical companies and physicians adopt a code of
good conduct (ethical rules and standards) regarding the interactions between
pharmaceutical industry, doctors, patients, pharmacies and other stakeholders.
This code will impose guidelines and restrictions on promotional activities of
pharmaceutical industry representatives and forbids any direct (monetary and
non-monetary) sponsorship of specific physicians (sponsorship should be
attributed through a common and transparent allocation method), based on
international best practice. [Q1-2012]
The Government simplifies administrative and legal procedures, in line with
EU legal frameworks, to speed up the entry of cheaper generic medicines in
the positive list. [Q2-2012]
Pricing and use of diagnostic services
Fees for diagnostic services contracted to private providers are reviewed with
the aim of reducing related costs by EUR 45 million in 2012. [Q1-2012]

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The government starts publishing a quarterly report on the prescription and
expenditure of diagnostic tests. [Q1-2012]
NHS (ESY) service provision
The plan for the reorganisation and restructuring is implemented for the short
and medium term with a view to reducing existing inefficiencies, utilising
economies of scale and scope, and improving quality of care for patients. The
aim is to reduce further hospital operating costs by 8 percent in 2012. This is
to be achieved through:
•
•
•
•
•

increasing the mobility of healthcare staff (including doctors) within and
across health facilities and health regions.
adjusting public hospital provision within and between hospitals within the
same district and health region.
revising the activity of small hospitals towards specialisation in areas such
as rehabilitation, cancer treatment or terminal care where relevant.
revising emergency and on-call structures.
optimise and balance the resource allocation of heavy medical equipment
(e.g. scanners, radiotherapy facilities, etc.) on the basis of need.

A first annual report comparing hospitals performance on the basis of the
defined set of benchmarking indicators will be published by end-March 2012.
Wages and human resource management in the health care sector
The Government updates the existing report on human resources conducted by
the Ministry of Health to present the staff structure according to specialty. This
report will be updated annually and will be used as a human resource planning
instrument. The 2012 report will also present plans for the allocation and requalification of human resources for the period up to 2013. It will also provide
guidance for the education and training system and it will specify a plan to
reallocate qualified and support staff within the NHS with a focus in particular
on training and retention of primary care healthcare professionals and hospital
nurses. [Q3-2012]
The revised payment system used by EOPYY for contracting with physicians,
and the efficiency gains in the use of staff (including reduction in overtime
costs) will lead to savings of at least EUR 100 million in the overall social
security costs associated with wages and fees of physicians in 2012. [Q42012]
Accounting and control
Internal controllers are assigned to all hospitals and all hospitals adopt
commitment registers. [Q1-2012]
By end-March 2012, the Government publishes the monthly report with
analysis and description of detailed data on healthcare expenditure by all social
security funds with a lag of three weeks after the end of the respective month.
This report will make it possible a detailed monitoring of the budget execution,
by including both expenditure commitments/purchases (accruals basis) and
actual payments (cash basis). The report will also (1) describe performance of
entities on execution of budget and accumulation of arrears, (2) highlight any
defaulters, and (3) recommend remedial actions to be taken. [Q1-2012]

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EOPYY and other social security funds (until they merge) start publishing an
annual report on medicine prescription. The annual report and the individual
prescription reports examine prescription behaviour with particular reference
to the most costly and most used medicines. [Q1-2012]
Hospital computerisation and monitoring system
The necessary tendering procedures are carried out by HDIKA to develop the
full and integrated system of hospitals' IT systems. [Q1-2012]
Throughout 2012, further measures are taken to improve the accounting, bookkeeping of medical supplies and billing systems, through:
•
•

•
•

the introduction of analytical cost accounting systems and the regular
annual publication of balance sheets in all hospitals. [Q2-2012]
the calculation of stocks and flows of medical supplies in all the hospitals
using the uniform coding system for medical supplies developed by the
Health Procurement Commission (EPY) and the National Centre for
Medical Technology (EKEVYL) for the purpose of procuring medical
supplies. [Q1-2012]
timely invoicing of full treatment costs (including staff payroll costs) - i.e.
no later than 2 months to other EU countries and private health insurers for
the treatment of non-nationals/non-residents. [Q2-2012]
enforcing the collection of co-payments and implementing mechanisms
that fight corruption and eliminate informal payments in hospitals. [Q22012]

ELSTAT starts providing expenditure data in line with Eurostat, OECD and
WHO databases i.e. in line with the System of Health Accounts (joint
questionnaire collection exercise). [Q1-2012]
The programme of hospital computerisation allows for a measurement of
financial and activity data in hospital and health centres. Moreover, the
Minister of Health defines a core set of non-expenditure data (e.g. activity
indicators) in line with Eurostat, OECD and WHO health databases, which
takes account of the future roll-out of DRG (diagnostic-related groups)
schemes in hospitals. [Q1-2012] The programme of hospital computerisation
will continue the development of a system of patient electronic medical
records. [Q3-2012]
In all NHS hospitals, the Government pilots a set of DRGs, with a view to
developing a modern hospital costing system for contracting (on the basis of
prospective block contracts between EOPYY and NHS). To support the
development of DRGs, the government develops clinical guidelines and
assesses existing international examples of DRG-base schemes, in particular
considering observations on DRG costing and proportionality of DRG-based
tariffs. DRGs include a detailed item on costs of personnel. [Q3-2012]
An analysis will be made of how hospital accounting schemes integrate DRGs
at hospital level in view of future activity-based cost reporting and prospective
budgets payment for hospitals [Q3-2012]

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Centralised procurement
Government continues centralised procurement through EPY and regional
procurement through the Regional Health Authorities, with the aim of
increasing substantially the number of expenditure items and therefore the
share of expenditure covered by centralised tender procedures. [Q4-2012]
EPY will undertake a major effort to utilise tender procedures for framework
contracts for the most expensive medicines used in the outpatient context so as
to substantially reduce the price paid by EOPYY. [Q4-2012]
Government puts in place the procurement monitoring mechanism. [Q1-2012]
Independent task force of health policy experts
The Independent Task Force of Health Policy Experts, established as an
advisory group, produces an annual report on the implementation of reforms.
[Q4-2012]

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FINANCIAL SECTOR REGULATION AND SUPERVISION

3

FINANCIAL SECTOR REGULATION AND SUPERVISION

Assessment of capital needs
All banks will be required to achieve a core tier 1 capital ratio set at 9 percent
by Q3-2012, reaching 10 percent in Q2-2013. The Bank of Greece, with the
support of external consultants, will undertake a comprehensive assessment of
banks’ capital needs prior to disbursement. This assessment will be based on,
inter alia, the results from the BlackRock loan diagnostic exercise, the PSI
impact, and the business plans banks have submitted. In addition, banks’
capital needs will be determined on the basis of a requirement to maintain a
7 percent core tier 1 capital ratio under a three-year adverse stress scenario
(pillar II requirements), Based on these capital needs identified by the Bank of
Greece, banks will revise their business plans and submit capital raising plans
by Q1-2012.
A strategic assessment of the banking sector will be carried out. In
consultation with the Commission, ECB and IMF staff, the Bank of Greece
will conduct a thorough and rigorous assessment of each bank, using a set of
quantitative and qualitative criteria. The criteria will include in non-exhaustive
terms: shareholders’ soundness and willingness to inject new capital; quality
of management and risk management systems; capital, liquidity, and
profitability metrics (both forward and backward looking); quality of Bank of
Greece’s assigned ratings to bank risks; and a sustainable business model. The
assessment will be completed by Q1-2012.
Based on the ongoing work by the commissioned external audit firm, a study
will be completed prior to disbursement on how to address ATE. The study
will illustrate the legal, operational and financial aspects of the different
solutions and lay out associated costs.
Recapitalization and resolution actions.
Banks will be given time to raise capital in the market. Based on an assessment
of their viability and capital raising plans, by end-April 2012, the Bank of
Greece will communicate to banks specific deadlines to raise capital in the
market. The deadlines to raise capital will be set for each bank on a case by
case basis, with a maximum duration by to Q3-2012, taking into account the
regulatory framework and the requirements set by the Hellenic Capital Market
Commission.
Banks submitting viable capital raising plans will be given the opportunity to
apply for and receive public support in a manner that preserves private sector
incentives to inject capital and thus minimizes the burden for taxpayers.
Specifically, banks will be able to access capital from the Hellenic Financial
Stability Fund (HFSF) through common shares and contingent convertible
bonds.
The Government will ensure that Greek banks have business autonomy both
de jure and de facto. The voting rights of the HFSF for the common shares it
holds will be strictly limited to specific strategic decisions (unless the private
participation in the form of common shares is less than a given minimum
percentage of the bank's total capital needs). This percentage will be defined in
the amended HFSF law. The shares and/or the voting rights acquired by the
HFSF shall not be transferred or sold to any other state-related entity in any

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FINANCIAL SECTOR REGULATION AND SUPERVISION

form. Private shareholders will be given incentives to purchase HFSF-held
shares. A ministerial decree agreed in consultation with the European
Commission, ECB and IMF staff shall provide the technical details of the
banks' recapitalisation framework, embodying these principles, by Q1-2012.
Banks that do not submit viable capital raising plans and do not raise the
capital needed to meet the regulatory requirements within the deadline set by
the Bank of Greece will be resolved in an orderly manner and at the lowest
cost to the State, in a way that ensures financial stability and which follows the
overall strategic plan for resolved banking system assets. Resolution options
will include the tools available under the law such as, inter alia, purchase and
assumption (transfer order), interim credit institution (bridge banks), and
orderly wind down.
To ensure that the system remains well-capitalized, by Q2-2013, the Bank of
Greece will conduct a new stress-test exercise, based on end-2012 data, using
a methodology determined in consultation with the Commission, ECB and
IMF staff.
Legislation will be enacted prior to disbursement to support the strategy for
bank recapitalisation and resolution:
•

•

•

Capital adequacy requirements. The banking law (3601) will be amended
to enable the Bank of Greece to set new bank capital standards through
regulation, and the Bank of Greece will introduce regulation to phase in
the foreseen increases in Core Tier 1 requirements.
Technical aspects of bank resolution. Building on the recent changes in the
bank resolution framework and the experiences gained so far, the
authorities will clarify the procedures and responsibilities for the valuation
of assets and liabilities and thus for the opening balance sheet of the
interim credit institutions. The authorities will also strengthen the
framework to ensure that future resolutions initially use conservative asset
valuations of failed banks’ assets, based on fair value, and subsequently
allowing for a proper due diligence and revaluation followed by
complementary asset transfers within a specified time period. The
authorities will also identify the legislative impediments to a flexible
management of employment contracts in the context of bank resolutions
and adopt the needed legislative changes to remove them.
Recapitalisation framework. The HFSF law will be amended to allow the
use of contingent convertible bonds and to provide for restrictions on
HFSF voting rights for a 5-year period. The voting rights of the HFSF for
the common shares it holds will depend on the size of the capital injection
by private investors via common shares. If this injection is below a given
minimum percentage of a bank's total capital needs (to be defined in the
HFSF law), the HFSF will have full voting rights. The HFSF shall hold its
shares for a period of two years, with the possibility to extend for an
additional two years for financial and market stability reasons. If instead
this private injection is larger than this percentage, the HFSF voting rights
will be strictly limited to specific strategic decisions. In this case, the legal
framework will be revised to allow the HFSF to hold bank shares for 5
years.

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FINANCIAL SECTOR REGULATION AND SUPERVISION

•

Resolution framework. The Government and the Bank of Greece will
introduce a clear separation of the supervisory, resolution and
restructuring functions. In particular, the legal framework shall vest
resolution responsibilities in a separate department in the Bank of Greece
and restructuring responsibilities (pertaining to management of all
temporary credit institutions) in the HFSF. As regards interim credit
institutions, the Bank of Greece will continue pursuing its financial
stability role, notably via its supervisory authority, while the HFSF will
continue aiming at safeguarding its investments.

The Government will ensure that enough financing is available to provide for
recapitalization and resolution needs. Total bank recapitalization needs and
resolution costs are estimated to amount to EUR xx billion. The phasing will
be determined taking into account the expected timeline for bank resolution
and recapitalization, and requirements for continued ECB liquidity support.
The Bank of Greece is committed to preserve continued access to central bank
liquidity support. The Bank of Greece, as a member of the Eurosystem, stands
ready to disburse adequate liquidity support in a timely manner. Adequate
liquidity support in the near term must be consistent with plans to reduce
banks reliance on exceptional central bank support in the medium term. To this
end, medium-term funding plans will be updated after completion of the
recapitalization and restructuring exercise to ensure that the gradual unwinding
of exceptional liquidity support proceeds at a pace consistent with the
program’s macroeconomic, fiscal, and financial framework.
Prior to the disbursement, the Government will enact legislation to
strengthen governance arrangements in financial oversight agencies:
•

Hellenic Financial Stability Fund:
The Government will revise the legal framework to clarify that the HFSF
shall have two departments, responsible for separate functions:

143

o

A department responsible for managing its ownership interest in
banks on behalf of the Government. In this capacity, its mandate
shall be to ensure that the banks under its stewardship operate on a
commercial basis and are restored to a well-functioning and
profitable part of the Greek financial sector, which can eventually
be returned to private ownership in an open and transparent
manner.

o

A department for management of interim credit institutions
(bridge banks), established following the resolution of non-viable
banks. It will undertake this role in a cost-effective manner, based
on a comprehensive strategy agreed by the Bank of Greece,
Ministry of Finance and HFSF, and in compliance with EU state
aid rules. From time-to-time, this function may require funding to
accomplish its restructuring role. Such funding will be reduced,
either partly or entirely, by a contribution from the HDIGF
Depositor Branch to the extent of its obligations for deposit
insurance.

FINANCIAL SECTOR REGULATION AND SUPERVISION

The Government will revise the HFSF’s governance structure to include a
General Council and an Executive Board:
o

The General Council shall have five members: two members,
including the Chair, with relevant international experience in
banking, one other member, one representative from the Ministry
of Finance, and one member nominated by the Bank of Greece.
All members shall be appointed by the Minister of Finance with
the approval of the Euro Working Group (EWG); other than the
representative from the Ministry of Finance and the nominee from
the Bank of Greece. European Commission and ECB observers on
the Council will be maintained.

o

The Executive Board shall have three members: two members—
one of which shall be the CEO—with international experience in
banking and bank resolution, and one member nominated by the
Bank of Greece. All members shall be appointed by the Minister
of Finance with the approval of the EWG. Staff and officials of
the Bank of Greece shall not sit on the Board of the HFSF.

The Government, in consultation with the HFSF, will adopt regulations to
help the HFSF execute its mandate with full autonomy and at the same
time coordinate effectively with the Ministry of Finance. It will cover
reporting lines and frequencies, strategic decision-making (and the
involvement of the Ministry of Finance therein), investment mandate and
business plan, relationship with the Ministry of Finance (in its role as
shareholder in the HFSF), and remuneration policy.
•

Hellenic Deposit and Investment Guarantee Fund.
The Government will strengthen the funding of the HDIGF Depositor
Branch by revising the HDIGF Law to: (i) prescribe that fees shall be
increased if its funds fall below a certain level of coverage of insured
deposits, which should be set taking due account of developments in the
financial system; (ii) ensure adequate diversification of re-deposits of
HDIGF funds and to gradually eliminate re-deposits in covered banks, as
developments with the restructuring of the Greek banking sector permit;
and (iii) clarify that the HDIGF’s status as privileged creditor does not
impinge on claims secured with financial collateral in the sense of the
financial collateral directive and follows best practice with respect to
secured creditors in general. With a view to limiting any real or perceived
conflicts of interest, HDIGF board membership will be prohibited for
individuals who are actively involved in credit institutions and introduce in
the law strong conflict of interest rules for Board members.

The Bank of Greece will carry out a new insurance sector analysis to evaluate
insurers’ solvency under Solvency I and Solvency II risks of defaults based on
the Q3-2012 results. Clear obligations will be established in law concerning
the governance, role and tasks of the Greek Motor Auxiliary Insurance
guarantee funds in Greece to ensure that they it can comply with their its
obligations related to compensation of car accidents’ victims, by Q2-2012 .
The Bank of Greece will evaluate, by Q1-2013, the capacity of the insurance
sector to assume social security/pension schemes. taking into consideration the
under development Solvency II regime for institutions for occupational

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pensions (IORP Directive). In this regard, the Bank of Greece will establish a
list of additional changes in legislation/structure of Greek insurance industry
and the relevant legislation will be adopted by Q2-2014.

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4

GROWTH-ENHANCING STRUCTURAL REFORMS

4.1 To ensure a rapid adjustment of the labour market and strengthen labour
market institutions
Given that the outcome of the social dialogue to promote employment and
competitiveness fell short of expectations, the Government will take measures to
foster a rapid adjustment of labour costs, fight unemployment and restore costcompetitiveness, ensure the effectiveness of recent labour market reforms, align
labour conditions in former state-owned enterprises to those in the rest of the private
sector and make working hours arrangements more flexible. This strategy should
aim at reducing nominal unit labour costs in the business economy by 15 percent in
2012-14. At the same time, the Government will promote smooth wage bargaining at
the various levels and fight undeclared work.
Exceptional legislative measures on wage setting
Prior to the disbursement, the following measures are adopted:
•

•

The minimum wages established by the national general collective agreement
(NGCA) will be reduced by 22 percent compared to the level of 1 January 2012;
for youth (for ages below 25), the wages established by the national collective
agreement will be reduced by 32 percent without restrictive conditions.
Clauses in the law and in collective agreements which provide for automatic
wage increases, including those based on seniority, are suspended.

Reforms in the wage-setting system
The Government will engage with social partners in a reform of the wage-setting
system at national level. A timetable for an overhaul of the national general
collective agreement will be prepared by end-July 2012. The proposal shall aim at
replacing the wage rates set in the NGCA with a statutory minimum wage rate
legislated by the government in consultation with social partners.
Measures to foster the re-negotiation of collective contracts
Prior to the disbursement, legislation on collective agreements is amended with a
view to promoting the adaptation of collectively bargained wage and non-wage
conditions to changing economic conditions on a regular and frequent basis. Law
1876/1990 will be amended as follows:
•
•

Collective agreements regarding wage and non-wage conditions can only be
concluded for a maximum duration of 3 years. Agreements that have been
already in place for 24 months or more shall have a residual duration of 1 year.
Collective agreements which have expired will remain in force for a period of
maximum 3 months. If a new agreement is not reached, after this period,
remuneration will revert to the base wage and allowances for seniority, child,
education, and hazardous professions will continue to apply, until replaced by
those in a new collective agreement or in new or amended individual contracts.

Raising the potential of recent labour market reforms
•

Prior to the next disbursement, legislation is revised so that arbitration takes
place when agreed by both employees and employers. The government will
clarify that arbitration only applies to the base wage and not on other
remuneration, and that economic and financial considerations are taken into
account alongside legal considerations.

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GROWTH-ENHANCING STRUCTURAL REFORMS

•

Moreover, by October 2012, an independent assessment of the working of
arbitration and mediation shall be prepared, with a view to improve the
arbitration and mediation services in order to guarantee that arbitration awards
adequately reflect the needs of wage adjustment.

Legacy issues and special labour conditions
•
•

Prior to the disbursement, clauses on tenure (contracts with definite duration
defined as expiring upon age limit or retirement) contained in law or in labour
contracts are abolished.
The Government carries out an actuarial study of first-pillar pension schemes in
companies where the contributions for such schemes exceed social contribution
rates for private sector employees in comparable firms/industries covered in
IKA. Based on this study, the Government reduces social contributions for these
companies in a fiscally-neutral manner [Q3-2012].

Non-wage labour costs, fighting undeclared work and social contribution evasion
The Government will enact legislation to reduce social contributions to IKA by 5
percentage points and implement measures to ensure that this is budget neutral.
Rates will be reduced only once sufficient measures are in place to cover revenue
losses. The measures to finance rate reductions will be legislated in two steps. First,
as a prior action, legislation will be enacted to close small earmarked funds engaged
in non-priority social expenditures (OEK, OEE), with a transition period not to
exceed 6 months. Second, by end-September 2012, the government will adjust
pensions (with protections for low-income pensioners), and adjust the base for
contribution collections.
An independent assessment on the effectiveness of the Labour Inspectorate structure
and activities will be carried out. Corrective actions to tackle the ineffectiveness
found in that assessment will be presented. These may include changes in the
organisation and work of the Labour Inspectorate, reinforced anti-fraud and anticorruption mechanisms and reinforced monetary and legal penalties for infringement
of law and labour regulations and for social contribution evasion. Quantitative
targets on the number of controls of undeclared work to be executed will be set for
the Labour Inspectorate [Q2-2012].
A fully articulated plan for the collection of social contribution will be developed by
end-September 2012. Already by end-March 2012, the collection of taxes and
social contributions of the largest tax debtors is unified, and there will be common
audits of tax and social contributions for large payers.
The Labour Card is progressively introduced as of March 2012 and every firm in
specific sectors will be obliged to use it by end-2012. For those firms using the
labour card, the simultaneous payment by electronic means of wages, withheld
payroll taxes and social contributions will be made compulsory. [Q2-2012]
4.2

To improve the business environment and enhance competition in open
markets

Regulated professions
Implementation of Chapter A of Law 3919/2011
Prior to the disbursement, the Government screens and makes the necessary
changes to ensure that the regulatory framework (e.g., laws, presidential decrees,

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GROWTH-ENHANCING STRUCTURAL REFORMS

ministerial decisions, circulars) of the following professions and economic activities
is fully in line with chapter A of law 3919/2011:
•

•
•
•
•
•
•
•
•

private providers of primary care services i.e., i) private providers of primary
health care (private doctors and dentists' practices; private group doctors' and
dentists' practices; private diagnostic centres; private centres for physical
medicine and rehabilitation); ii) chronic dialysis units other than in hospitals and
clinics; iii) dental laboratories; iv) shops for optical use and contact lenses;
v) physiotherapy centres; vi) beauty salons; vii) slimming/dietary businesses;
stevedores (loaders for land operations at central markets);
sworn-in valuators;
accountants and tax consultants;
actuaries;
temporary employment companies;
private labour consultancy offices;
tourist guides;
real-estate brokers.

The Government publishes on its website a report [Q1-2012] on the implementation
of Law 3919/2011, including:
•
•

the list of all professions/economic activities falling under the scope of that law.
a timetable to screen and eliminate inconsistencies between Chapter A of Law
3919/2011 and the regulations (i.e., laws, presidential decrees, ministerial
decisions and circulars) of professions and economic activities falling under that
chapter. The timetable specifies the list of professions and economic activities
prioritised by economic importance that will be assessed every quarter with a
view to finalizing this exercise by end-2012.

For professions where reinstatement of restrictions is required in line with the
principles of necessity, proportionality and public interest, the Government will pass
the required legislation no later than end-June 2012 upon consultation with the
HCC and the Commission, IMF and ECB staff teams.
Measures for regulated professions falling under chapter B of law 3919/2011
The Government also adopts legislation [Q2-2012] to:
•

reinforce transparency in the functioning of professional bodies by publishing on
the webpage of each professional association the following information:
o the annual accounts of the professional association.
o the remuneration of the members of the Governing Board broken down by
function.
o the amounts of the applicable fees broken down by type and type of service
provided by the professional association as well as the rules for their
calculation and application.
o statistical and aggregate data relating to sanctions imposed, always in
accordance with the legislation on personal data protection.
o statistical and aggregate data relating to claims or complaints submitted by
consumers or organisations and the reasons for accepting or rejecting the
claim or the complaint, always in accordance with the legislation on personal
data protection.
o any change in the professional codes of conduct, if available.
o the rules regarding incompatibility and any situation characterised by a
conflict of interests involving the members of the Governing Boards.

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Additional measures on regulated professions
On fixed fees applied by the main regulated professions:
•

•

•
•
•

The Government amends Art. 10 of Presidential Decree 100/2010 on the
authorization process and applicable fees for energy inspectors, to repeal the
minimum fees for energy inspection services provided for thereof and to replace
the fixed fees per square meter by maximum fees. [Q2-2012]
For the legal profession, the Government issues a Presidential Decree, which
sets prepaid amounts for each procedural act or court appearances (i.e., it sets a
system of prepaid fixed/contract sums for each procedural act or appearance by a
lawyer which is not linked to a specific ‘reference amount’). [Q1-2012]
The Government carries out an assessment regarding the extent to which the
contributions of lawyers and architects to cover the operating costs of their
professional associations are reasonable, proportionate and justified. [Q1-2012]
The Government identifies ways of decoupling taxation, social contributions,
distribute funds (if applicable) and payments to the professional associations
from legal fees. [April 2012]
The Government defines contributions of lawyers and engineers to their
professional associations that reflect the operating costs of the services provided
by those associations. These contributions are paid periodically and are not
linked to prices charged by professions. [Q3-2012]

Revision of the areas of reserve of activities of regulated professions:
•

•

The Government presents the results of screening of the regulations of the
professions to assess the justification and the proportionality of the requirements
reserving certain activities to providers with specific professional qualifications.
[Q2-2012]
The Government modifies the unjustified or disproportionate requirements
reserving certain activities to providers with specific professional qualifications,
starting from the main regulated professions. [Q3-2012]

Reform of the Code of Lawyers
In the context of the Government's initiative to revise the Code of Lawyers, the
Government amends the terms of entry and re-entry as well as the conditions for the
exercise of the profession. Draft legislation is presented to the European
Commission by end-February 2012 and is adopted by end-June 2012.
Before end-June 2012, legislation is adopted to:
•

amend or repeal provisions on pricing and on access to, and exercise of,
professional or economic activities that are against Law 3919/2011, EU law and
competition principles. In particular, legislation:
o repeals Art. 42.1 of Legislative Decree 3026/1954, regarding the mandatory
presence of a lawyer for the drawing up of documents before a notary for a
series of legal transactions;
o repeals Arts. 92.2 and 92A of Legislative Decree 3026/1954 providing for
the minimum amounts and for the scale of minimum monthly amounts that
are due to lawyers that are only remunerated for services rendered with a
fixed periodic fee. This is without prejudice to having fee regulations for
trainee lawyers.

Recognition of professional qualifications
All the necessary measures are taken to ensure the effective implementation of EU
rules on the recognition of professional qualifications, including compliance with
ECJ rulings (inter alia, related to franchised diplomas).

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GROWTH-ENHANCING STRUCTURAL REFORMS

In particular, the Government:
•

keeps updating the information on the number of pending applications for the
recognition of professional qualifications, and sends it to the European
Commission.

•

presents draft legislation by end-March 2012, to be adopted by Q2-2012, in
order to remove the prohibition to recognise the professional qualifications
derived from franchised degrees. Holders of franchised degrees from other
Member States should have the right to work in Greece under the same
conditions as holders of Greek degrees.

Services Directive
The Government completes the adoption of changes to existing sectoral legislation
in key services sectors such as retail (e.g. open air markets and outdoor trade),
agriculture (e.g. slaughter houses), employment (employment agencies), real estate
services and technical services (cfr. the section on business environment). The
Government also adopts changes to the remaining sectoral regulation, ensuring full
compliance with the directive.
Regulations should:
•

facilitate the establishment by:
o abolishing or amending requirements which are prohibited by the Services
Directive;
o abolishing or amending unjustified and disproportionate requirements,
including those relating to quantitative and territorial restrictions, legal form
requirements, shareholding requirements, fixed minimum and/or maximum
tariffs and restrictions to multidisciplinary activities.
• facilitate the provision of cross-border services, so that providers of cross-border
services are required to comply with specific requirements of the Greek
legislation only in exceptional cases (when admitted by Articles 16 or 17 of the
Services Directive).
• provide legal certainty for providers of cross-border services by setting out in the
respective (sectoral) legislation which requirements can, and which requirements
cannot, be applied to cross-border services.
In particular, the following pending regulations are adopted by Q1-2012:
•

•
•

Law providing for the possibility of having secondary establishment for private
employment agencies, eliminating fixed maximum rates, abolishing the
requirement of having a minimum number of employees and allowing for the
cross border provision of services of private employment agencies.
Law on real estate agents.
Presidential Decree abolishing the economic test for the opening of slaughter
houses.

The Government carries out a proportionality analysis of the restrictions applied on
outdoor / ambulant trade for social policy criteria. [Q1-2012]
The Government also ensures:
•
•

that the Point of Single Contact (PSC) is fully operational in all sectors covered
by the Services Directive;
that the PSC distinguishes between procedures applicable to service providers
established in Greece and those applicable to cross-border providers (in particular
for the regulated professions);
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GROWTH-ENHANCING STRUCTURAL REFORMS

•

that there is adequate connection between the PSC and other relevant authorities
(including one-stop shops, professional associations and the recognition of
professional qualifications). [Q1-2012]

Studies on price flexibility
The Government screens the main service sectors (including retail and wholesale
distribution) and prepares an action plan to promote competition and facilitate price
flexibility in product markets. [April 2012]
Business environment
Package of reform measures to improve the business environment
The Government adopts a package of measures to improve the business environment
to:
•

•

•

•
•
•

•

•

•

151

review and codify the legislative framework of exports (i.e., Law 936/79 and
Law Order 3999/59), abolish the obligation of registration with the exporters’
registry of the Chamber of Commerce and set the framework for the introduction
of a single electronic export window. [Q1-2012]
amend Arts. 26.2, 43B, 49.1, 49.5, 69.3 and 70.1 of Law 2190/1920, the
corresponding articles in Law 3190/1955 and any other legal provisions to lift
the requirement to publish company information in any kind of newspapers for
companies with a website. This is without prejudice to the publication of
company information in the Official Gazette / GEMI. [Q1-2012]
repeal Art. 24 of Law 2941/2001, prohibiting the sale of merchandise at prices
below the cost of purchase. This is without prejudice to Art. 2 of Law 3959/2001
on abuse of dominance in the form of predatory pricing and to Law 149/14 on
unfair competition. [Q1-2012]
lift constraints for retailers to sell restricted product categories such as baby food
provided for in Law 3526/2007 and its implementing legislation. [Q1-2012]
repeal Art. 9 and 12 of Ministerial Decision A2-3391 concerning the submission
of wholesale price lists, cost elements and contracts to the Ministry of
Development, Competitiveness and Shipping. [Q1-2012]
amend Art. 22 law 3054/2002 regulating the market of oil products and other
clauses as well as its implementing ministerial decision to fully liberalize petrol
station opening hours, with parallel application of the current system of
compulsory night opening, on a rotating basis, on a certain number of petrol
stations per prefecture outside the normal opening hours. [Q1-2012]
amend Art. 11(1) of law 3897/2010 to i) reduce the minimum distance provided
for thereof between a petrol station and a place where more than 50 people may
gather; ii) repeal the requirement to have an independent traffic connection for
petrol stations within the area of a hypermarket provided for in Article 11(1) of
Law 3897/2010 and iii) amend Art. 11(6) of the same law to allow EEA citizens
to open a petrol station in Greece. [Q2-2012]
repeal Art. 12.2 of Law 3853/2010, providing that draft model company statues
will be first proposed by the chambers of notaries and lawyers before the
Ministry of Development, Competitiveness and Shipping can issue the relevant
common ministerial decision provided thereof. [Q1-2012]
cease to earmark the 0.15 percent surcharge (provided for in the Joint Ministerial
Decision 25323/1960 and in Art. 64 of law 1249/1982) levied on the CIF value
of imported goods from non-EU countries in favour of the Assistance Account

GROWTH-ENHANCING STRUCTURAL REFORMS

•

•

•

of Foreign Trade. Government allocates the aforementioned amounts to the 2013
State budget. [Q2-2012]
cease to earmark the 0.5 percent charge provided for in the Emergency Statute
788/48 and in Law 3883/1958 on the value of all imported merchandise in
favour of the National Technical University of Athens, the University of
Thessaloniki, the Athens Academy and for the promotion of exports.
Government allocates the aforementioned amounts to the 2013 State budget.
[Q2-2012]
cease to earmark the non-reciprocating charge paid via the power public
corporation bill in favour of the executive work provided for in No. T.
4363/1236. Government allocates the aforementioned amounts to the 2013 State
budget. [Q2-2012]
cease to earmark the non-reciprocating charge calculated on the fuel price in
favour of Mutual Distribution Fund of the Oil-Pump Operators of Liquid Fuel.
Government allocates the aforementioned amounts to the 2013 State budget.
[Q2-2012]

Implementation of law 3982/2011 on the fast track licensing procedure for technical
professions, manufacturing activities and business parks and other provisions
The Government:
•
•
•

•
•
•

Issues the Joint Ministerial Decision of degrees of nuisance provided for in Art.
20.9 of 3982/2011. [March 2012]
Issues the Joint Ministerial Decision on standardised environmental terms for
industrial activities provided for in Art. 36.1 of Law 3982/2011. [March 2012]
Issues the Presidential Decrees on preconditions for obtaining a licence for
industry technicians, plumbers, liquid and gaseous fuel technicians, cooling
technicians and machine operators in constructions provided for in Art. 4.4 of
Law 3982/2011. [March 2012]
Issues the Presidential Decrees on preconditions for obtaining a licence for
electricians provided for in Art. 4.4 of Law 3982/2011. [May 2012]
Issues the Presidential Decree on Certified Inspectors provided for in Art. 27.4
of law 3982/2011. [Q2-2012]
Issues the Joint Ministerial Decision on the process of licencing business parks
provided for in Art. 46.6 of law 3982/2011. [March 2012]

Implementation of Law 4014/2011 on environmental licensing of projects and
activities
The Government:
•

•

Issues the Ministerial Decision provided for in Art. 2.7 of Law 4014/2011 on
environmental licensing of projects and activities, laying down requirements for
the content of the decision approving the environmental conditions according to
the type of project or activity. [Q2-2012]
Issues the Ministerial Decisions provided for i) in Art. 8.3 of Law 4014/2011 on
environmental licensing of projects and activities (other than industrial
activities), laying down the standard environmental commitments of projects and
activities in category B; and ii) in Art. 2.13 of Law 4014/2011 to further specify
the procedure and specific criteria for environmental licencing. [Q2-2012]

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Business-Friendly Greece
The Government publishes on its website a plan for a Business-Friendly Greece,
tackling remaining restrictions to business activities, investment and innovation not
covered elsewhere in this memorandum. [end-February 2012]
The Government implements the Business-Friendly Greece Action plan. [Q1-2012]
The plan includes measures, among others, in order to:
•

•
•
•

complete the setting-up of the General Commercial Registry (GEMI) by
promptly taking measures for the completion of the GEMI database, the further
development of web services and use of electronic signatures, the
interconnection of GEMI to the Chamber's information systems and to the PSC,
in order to ensure access to online completion of procedures both for company
formation and for any administrative procedures necessary for the exercise of
their activities. By July 2012, all companies established in Greece should be
able to publish all relevant company data through GEMI.
simplify environmental, building and operating permits.
develop a "single electronic window" centralizing standardized trade-related
information and simplifying the number of documents needed to export.
address restrictions in the transport sector, including the transport of empty
containers and of non-hazardous waste.

Land registry and spatial planning
The Government accelerates the completion of the land registry, with a view to:
•
•
•
•

tendering out all remaining rights (ca. 15 million) and awarding cadastral
projects for 7 million rights. [Q4-2012]
digitalising the operations of all mortgage and notaries' offices and conveying all
newly registered deeds to the cadastre by 2015.
exclusively-operating cadastral offices for large urban centres by 2015.
establishing a complete cadastral register and exclusively operating cadastral
offices nationwide by 2020.

The Government completes the revision of the 12 regional spatial plans to make
them compatible with the sectoral plans on industry, tourism, aquaculture and
renewable energy. [Q4-2012]
The Government adopts legislation to (i) simplify and reduce time needed for town
planning processes; (ii) update and codify legislation on forests, forest lands and
parks. [Q3-2012] It also adopts legislative measures for the management of
industrial hazardous waste [Q2-2012] and licenses at least two disposal sites for
hazardous waste by [Q4-2012].
Other measures to improve the business environment

153

•

Quasi fiscal charges: the list of non-reciprocating charges in favour of third
parties presented to the Commission services in November 2011 is further
refined by i) identifying beneficiaries, ii) specifying the legal base of each
contribution and by iii) quantifying contributions paid by consumers in favour of
those beneficiaries, with a view to rationalize these contributions and/or channel
those through the State budget. [Q2-2012]

•

Market regulations: the revision of Ministerial Decision A2-3391/2009 on
market regulations, as well as any other related legislation, is completed [March
2012]. This exercise is carried out in cooperation with the Hellenic Competition
Commission, with a view to identifying administrative burdens and unnecessary

GROWTH-ENHANCING STRUCTURAL REFORMS

barriers to competition and developing alternative, less restrictive, policies to
achieve government objectives. The revised Ministerial Decision on market
regulations is adopted in April 2012.
•

Screening of business restricting regulations: The Government completes a
structured analysis of how regulation in areas such as permits and licences,
health and safety rules, urban planning and zoning, can unnecessarily restrict
business and competition in important sectors such as food processing, retail
trade, building materials, manufacturing or tourism. Similarly, the government
seeks to simplify business regulations in areas such as new business registration
and regulation of accounting. [Q3-2012] Within 6 months of the completion of
the analysis, the Government will take the necessary legislative or other actions
to remove disproportionate regulatory burdens.

•

Planning reform: The Government reviews and amends general planning and
land-use legislation ensuring more flexibility in land development for private
investment and the simplification and acceleration of land-use plans. [Q3-2012]

•

Development of an integrated and simplified process for export and customs
formalities. By end-March 2012, the e-customs system supports the electronic
submission of export declarations. By end-December 2012, (i) the e-customs
system supports the electronic submission of import declarations; (ii) precustoms procedures (i.e., certificates, licenses as well as steps and actors
involved in the processes) are streamlined according to EU regulations and best
practices; (iii) legislation is aligned with EU regulations and the common rules
for customs procedures at export and import, including the local clearance
procedure; (iv) the level (number) of customs' controls (both physical and
documentary) are also aligned with best practices; (v) the electronic singlewindow of exports is launched after the simplification of the pre-customs
procedures and it is interlinked with e-customs to provide a single entry point for
the exporters.

•

Security stocks of crude oil and petroleum products: The Government transposes
Directive 2009/119 imposing an obligation on Member States to maintain
minimum stocks of crude oil and /or petroleum products. [Q4-2012]

•

An ex post impact assessment is presented in order to evaluate Law 3853/2010
on the simplification of procedures for the establishment of companies in terms
of savings in time and cost to set up a business, as well as to verify that all
secondary legislation is in force. [Q3-2012]

Transport
Road
A report is submitted on the functioning of the regular passenger transport services
(KTEL), presenting options for liberalisation. [Q1-2012]
The transitional period established in Law 3887/2010 for the reduction in costs for issuing
new road transport operator licences has been brought to an end in January 2012. Prior to
the disbursement, the necessary secondary legislation as foreseen in that law (Article
14(11)) is published, specifying the cost for issuing new road transport operator licences.
This cost is transparent, objectively calculated in relation to the number of vehicles of the
road transport operator and does not exceed the relevant administrative cost.
In line with the policy objectives of Law 3919/2011 on regulated professions, the
Government removes entry barriers to the taxis market (in particular, restrictions on the

154

GROWTH-ENHANCING STRUCTURAL REFORMS

number of licences and price of new licences), in line with international best practice. [Q12012]
Ports
The Government defines a strategy to integrate ports into the overall logistics and transport
system, specifying the objectives, scope, priorities and financial allocation of resources.
The strategy will ensure the implementation of the TEN-T priorities and the establishment
of the foreseen corridors. It will also ensure the efficient use of the assigned Structural and
Cohesion Funds [Q2-2012]
Aviation
The Government submits a policy paper, indicating how regional airports will be merged
into groups ensuring that regional airports become economically viable in compliance with
State aid rules, including realistic projections identified by the appointed financial
advisors. [Q2-2012] After ensuring that regional airports are economically viable, the
Government launches an effective transaction strategy leading to their privatisation. [Q42012]
Railways
The rail regulatory authority establishes the procedures for issuing licenses and decisions
affecting non-discriminatory access of EU railway undertakings to Greek rail
infrastructure. It identifies the benchmarking data on the cost effectiveness of the
infrastructure manager. The authority conducts on its own initiative procedures and
respects the legal time lines for such decisions set out in the EU railway Directives,
including cases on international traffic. All operators are awarded licenses and safety
certificates. [Q2-2012]
The Government establishes independent award authorities for passenger services by rail
that can organise competitive tenders. Contracts concluded in 2014 or later will generally
by awarded by means of competitive tender. The rolling stock that is not used/needed by
Trainose should be transferred to a body which leases it on market conditions, including to
winners of such tenders. The documentation for calls for a first bundle of services is ready,
general rules on the ticket prices are established and a decision on the provision of rolling
stock is taken. [Q4-2012]

Energy
Unbundling of network activities
The Government ensures that network activities are effectively unbundled from
supply activities.
In particular, for electricity:
•

•
•

155

all the necessary transfers of staff and assets of the transmission system operator
(TSO) are completed; the TSO management, its supervisory body and the
compliance officer are appointed in accordance with the Electricity Directive
2009/72/EC. [February 2012]
all necessary transfers of staff and assets to the legally unbundled distribution
system operator (DSO) are completed. [Q1-2012]
the unbundled TSO is certified by the Greek energy regulator. [Q2-2012]

GROWTH-ENHANCING STRUCTURAL REFORMS

For gas:
•
•

unbundling is implemented as provided for in Art. 9 of Directive 2009/73/EC on
common rules for the internal market in natural gas. [Q1-2012]
the unbundled TSO is certified by the Greek energy regulator. [Q3-2012]

The Government commits to launch the privatisation of PPC and DEPA following
the unbundling of the TSOs in line with the commitments of this memorandum and
monitors the process to ensure competition in the market.
The Government undertakes that whichever the outcome of the privatisation process
the gas industry structure will be fully compliant with Directive 2009/73/EC.
Measures to increase competition on the generation of electricity
The Government finalises the remedies to ensure the access of third-parties to
lignite-fired electricity generation. [Q1-2012]
The Government starts implementing the measures ensuring the access by third
parties to lignite-fired electricity generation. [Q3-2012]
The implementation of the measures to ensure access by competitors of PPC to
lignite-fired electricity generation is completed. Third parties can effectively use
lignite-fired generation in the Greek market. [November 2013]
In the context of the privatization of PPC, the Government takes the necessary steps
to be able to sell hydro capacity and other generation assets to investors. That sale is
separate from the divestiture of lignite capacity provided for in the Commission's
decision on the Greek lignite case. Nevertheless, investors may be given the
possibility to buy hydro capacity / other generation assets jointly with the lignite
capacity provided for in that decision. The sale of hydro capacity will i) not delay
the sale of lignite assets beyond the time frame provided for in the relevant
Commission Decision and ii) not prevent the sale of lignite assets without a
minimum price.
Regulated tariffs
Further measures are adopted to ensure that the energy component of regulated
tariffs for households and small enterprises reflects, at the latest by June 2013,
wholesale market prices, except for vulnerable consumers. [Q2-2012]
The Government removes regulated tariffs for all but vulnerable consumers [Q22013]
Renewables
The Government completes the transposition and the implementation of the
renewable energy Directive (2009/28/EC) and submits the progress report required
by the Directive. [Q1-2012]
The Government prepares a plan for the reform of the renewable energy support
schemes such that they are more compatible with market developments and reduce
pressures on public finances. The plan should contain:
•

a timetable scheduling meetings and stakeholder discussions on the reform of the
support scheme.

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GROWTH-ENHANCING STRUCTURAL REFORMS

•
•
•
•

options for reform of the support scheme, including a feed in premium model,
and specifying in each option the method of tariff calculation and the means of
avoiding possible over compensation.
current and expected trends in costs for all relevant technologies.
consideration of the option of automatic tariff digression.
measures for the development of wind and solar energy resources. [Q1-2012]

The Government pursues implementation of the renewable energy project 'Helios,'
through legislation [Q1-2012], facilitation of licencing process [Q2-2012] and
cooperation with other EU countries for the export of solar energy.
Other measures
The Government ensures that its regulatory framework for the energy sector fully
complies with the provisions in the Electricity and Gas Regulation, in particular
concerning transparency, congestion management and non-discriminatory and
efficient allocation of capacity on gas and electricity networks. In particular, the
Government commits to resolve all open issues regarding the infringement case
2009/2168 for non-compliance with the Electricity Regulation. This resolution will
include the adoption by the Independent Regulatory Authority (RAE) of a modified
electricity market code and establishing cross-border electricity trading procedures
for the interconnectors with Bulgaria in line with the provisions of Regulation (EC)
714/2009 and its annexes. [Q1 2012]
The Government undertakes to:
•
•

Establish a One-Stop Shop for the licensing and permitting of the following
classes of infrastructure projects [Q4-2012]: LNG installations, natural gas
storage and transmission pipeline projects and electricity transmission lines.
Establish an LNG code, approved by RAE, which ensures transparency and nondiscriminatory access to the Revithoussa LNG plant and the efficient allocation
of unused capacities. [Q3 2012]

Electronic communications
The Government adopts the Common Ministerial Decision on "Base stations and
antennae constructions that are exempted from authorisation" provided for in Art.
31.8 of Law 3431/2006 and in Art. 29.9 of the draft law on the Regulation of the
functioning of the postal market, matters of electronic communications and other
provisions. [end-February 2012]
The Government adopts the provisions instituting EETT as a One-Stop Shop for the
licensing of antennae and base stations. [end-February 2012]
The Law transposing the 2009 Reform Package (i.e., Directive 2009/140/EC and
Directive 2009/136) is adopted by Parliament. [Q1-2012]
Regarding the Digital Dividend, the Government (and/or EETT):
•

•
•

157

defines a legal framework in primary law that envisages a mandatory date for
switch-off of analogue broadcasting for 30/06/2013 and a technologically neutral
utilisation of the 800MHz band after the switch off, taking also into account the
provisions of the draft Radio Spectrum Policy Programme (RSPP). [Q1-2012]
completes the studies on the evaluation of the value of the Digital Dividend and
on the strategy for the granting of the Digital Dividend (800 MHz band). [Q12012].
resolves cross-border coordination issues with neighbouring countries. If
difficulties on international coordination make this date unfeasible, the
frequency and broadcasting plans might indicate alternative channels for re-

GROWTH-ENHANCING STRUCTURAL REFORMS

•
•
•
•
•
•

location of broadcasters, while continuing negotiations with third countries in
view of the final assignment of frequencies to broadcasters and mobile
operators. [Q2-2012]
launches the consultation for the amendment of the frequency and broadcasting
plans. [Q2-2012]
amends the frequency and the broadcasting plans, depending on the
outcome/actual state of play of international coordination. [Q3-2012]
adopts necessary secondary legislation for the assignment of licenses for
broadcasting and for the establishment of licensing procedures, antennae
specifications, etc. [Q3-2012]
launch the public consultation on the tender procedure for the assignment of the
digital dividend to broadband. [Q4-2012]
proceed to the tender for the assignment of definitive rights of use for
broadcasting transmission. [Q1-2013]
proceed to the tender procedure for the assignment of frequencies of the digital
dividend, allocating and authorising the use of the digital dividend (800 MHz
band) to Electronic Communications Services in line with EC Decision
2010/267/EU and in respect of the deadlines and procedures of the RSPP. [Q22013]

R&D and innovation
The Government pursues an up-to-date and in-depth evaluation of all R&D and ongoing innovation actions, including in various operational programmes and existing
tax/subsidy incentives with their costs and benefits. It presents a strategic action plan
for policies aimed at enhancing the quality and the synergies between public and
private R&D and innovation, as well as tertiary education. This action plan identifies
a clear timetable for relevant measures to be taken, taking the budgetary impact into
account and harmonising these actions with other relevant initiatives in these areas,
in particular the investment law. [Q1-2012]
Better regulation
Legislation is adopted to improve regulatory governance [Q1-2012], covering in
particular:
•
•
•

•
•
•
•
•

the principles of better regulation.
the obligations of the regulator for the fulfilment of those principles.
the tools of better regulation, including the codification, recast, consolidation,
repeal of obsolete legislation, simplification of legislation, screening of the
entire body of existing regulation, ex-ante and ex-post impact assessments and
public consultation processes.
the transposition and implementation of EU law and exclusion of gold plating;
the setting-up of better regulation structures in each ministry as well as the
creation of a Central Better Regulation unit.
the requirement that draft laws and the most important draft legislative acts
(Presidential Decrees and Ministerial Decisions) are accompanied by an
implementation timetable.
electronic access to a directory of existing legislation and an annual progress
report on Better Regulation.
the requirement that the government produces an annual plan with measurable
targets for administrative burden reduction, deregulation and other policies for
the simplification of legislation.

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GROWTH-ENHANCING STRUCTURAL REFORMS

On impact assessments, legislation provides that:
•
•
•
•
•
•
•

implementing legislation with potentially large significant impact is also subject
to the requirement to produce an impact assessment.
impact assessments address the competitiveness and other economic effects of
legislation by making use of the Commission Impact Assessment guidelines and
the OECD Competition Assessment toolkit.
the Central Better Regulation Unit can seek the opinion of other ministerial
departments and independent authorities for regulations that fall under their
respective competences so as to improve the quality of impact assessments.
an independent authority and the Central Better Regulation Unit carry out
quality checks of impact assessments; the independent authority also gives an
opinion on progress made on the governments' better regulation agenda.
the Central Better Regulation Unit delivers its opinion on the quality of impact
assessments before draft legislation is sent to the Cabinet.
the Central Better Regulation Unit consults the Hellenic Competition
Commission when formulating and drafting the guidelines to be implemented by
the ministries' better regulation units.
impact assessments are published.

Under no circumstances will this law impede the passing of urgent legislation during
the duration of the programme.
The Government will set a deadline for the completion of measurements in each of
the priority areas, for the identification of proposals to reduce burdens and for the
amendment of the regulations. This policy initiative should reduce administrative
burdens by 25 percent (compared with the baseline year 2008) in the 13 priority
areas. [February 2012]
4.3

To raise the absorption rates of structural and cohesion funds

The Government meets targets for payment claims and major projects in the
absorption of EU structural and cohesion funds set down in the table below.
Compliance with the targets shall be measured by certified data.
In meeting absorption rate targets, recourse to non-targeted state aid measures is
gradually reduced. The Government provides data on expenditure for targeted and
non-targeted de minimis state aid measures co-financed by the structural funds in
2010 and in 2011. [Q1-2012]

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GROWTH-ENHANCING STRUCTURAL REFORMS

Table 1: Targets for payment claims in the absorption of Structural and Cohesion
Funds (programming period 2007-2013) to be submitted through 2013
(EUR million)
2012
2013
European Regional Development Fund (ERDF)
and Cohesion Fund

2,850

3,000

European Social Fund (ESF)

880

890

Target of first half of the year

1,231 (*)

1,284

Total annual target

3,730 (**)

3,890

(*) of which, 5 major project applications
(**) of which, 15major projects applications

Legislation is adopted, and immediately implemented, to shorten deadlines and
simplify procedures on contract award and land expropriations, including the
deadlines needed for the relevant legal proceedings. [Q1 2012]
The Government earmarks amounts to:
•

complete unfinished projects included in the 2000-06 operational programme
closure documentation (ca. EUR 260 million). [Q2 2012]
• complete the implementation and closure of the 2000-06 cohesion-fund projects.
[Q2 2012]
• cover the required national contribution, including non-eligible expenditure (i.e.
land acquisitions) in the framework of the 2007-13 operational programmes. [Q2
2012]
The Government identifies the necessary amounts from ERDF within the 2007-13
operational programmes for the first allocation to the guarantee mechanism for small
and medium-sized enterprises. [Q1 2012]
The Government ensures that the web-based monitoring tool of procedures for the
approval of project proposals and for the implementation of public projects is
available to the public by February-2012.
Based on the assessment of the measures adopted since May 2010 to accelerate the
absorption of structural and cohesion funds, the Government takes measures to
speed up absorption and to simplify project implementation by i) mapping
responsibilities and removing unnecessary steps; ii) consolidating management
capacities where appropriate (e.g. waste treatment) in accordance with existing
management and control systems. [Q2-2012]
To accelerate the absorption of EU financing and following the increase in the EU
co-financing rates, Government will, by Q1-2012:
•
•

•

establish appropriate monitoring tools for priority projects. These projects
should be operational by 2015 at the latest.
report to the Commission the final results of the activation or elimination of
sleeping projects (i.e. projects already approved in the operational programmes
but not yet contracted within the timeframes defined at the national level). For
retained projects, the Government indicates the conditions that must be met to
keep the co-financing.
create a central database monitoring compensation and the time elapsed for the
completion of expropriations incurred in the framework of the implementation
of projects co-financed by the ERDF and the Cohesion Fund.

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4.4

To upgrade the education system

The Government implements the Action Plan for the improvement of the
effectiveness and efficiency of the education system and regularly reports (twice a
year) on the progress of its implementation, including an indicative planning of selfevaluations and external evaluations of Higher Education institutions in compliance
with the new Law 4009/2011 on Higher Education. [Q2-2012]

4.5

To reform the judicial system

To improve the functioning of the judicial system, which is essential for the proper
and fair functioning of the economy, and without prejudice to the constitutional
principles and the independence of justice, Government:
(a)

ensures effective and timely enforcement of contracts, competition rules and
judicial decisions;

(b)

increases efficiency by adopting organisational changes to courts;

(c)

speeds up the administration of justice by eliminating backlog of court cases
and by facilitating out-of-court settlement mechanisms.

Specifically, the Government submits the draft law addressing issues of fair trial and
denial of justice to the Greek Parliament, which i.a. encompasses an amendment of
Law 1756/1988 on the organisation of courts and the situation of court officials, and
dissuasive measures against non-cooperative debtors in enforcement cases, with a
view to having it adopted during the current parliamentary term. [Q1-2012]
The Government establishes a task force, which is broadly representative of the legal
community, including but not limited to academia, practising lawyers, in-house
lawyers, and lawyers from other EU Member States established or offering their
services in Greece. This taskforce reviews the Code of Civil Procedure to bring it in
line with international best practice on, inter alia, i) judicial case management,
including the possibility of removing dormant cases from court registers; ii)
relieving judges from non-adjudicatory work, such as pre-mortgaging of immovable
property, formation and dissolution of incorporated entities and consensual/nonlitigious family law applications, iii) the enforcement of decisions and of orders to
pay, in particular small claims cases with a view to reducing the role of the judge in
these procedures, and iv) enforcing statutory deadlines for court processes, in
particular for injunction procedures and debt enforcement and insolvency cases. For
the purposes of this Memorandum, judicial case management means the possibility
of judges to be involved early in identifying the principal factual and legal issues in
dispute between the parties, require lawyers and litigants to attend pre-hearing
conferences and manage the conduct of proceedings and the progression of the case
to achieve the earliest and most cost-effective resolution of the dispute. [Q1-2012]
In order to facilitate the work of the existing task force mandated to design a
performance and accountability framework for courts, the Government will compile
and publish the information indicated in Annex 2.
The Government presents a qualitative study on recovery rates in enforcement
proceedings, evaluating the success rates and the efficiency of the various modes of
enforcement. [Q2-2012]
The Government decides on the date by when it will open the access to the regulated
profession of mediator to non-lawyers in line with the conditionality on regulated
professions and presents an action plan ensuring that non-lawyers may offer
mediation services starting from that date. [Q1-2012]

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Following on the submission of the work plan for the reduction of the backlog of tax
cases in all administrative tribunals and administrative courts of appeal in January
2012, which provides for intermediate targets for reducing the backlog by at least 50
per cent by end-June 2012, by at least 80 per cent by end-December 2012 and for the
full clearance of the backlog by end-July 2013, the Government presents by endMay 2012 and thereafter once a quarter, updated and further refined work plans
(ensuring that priority is placed on high value tax cases –i.e., exceeding €1 million-)
and takes remedial action in case of anticipated or actual deviations.
The task force mandated to review the Code of Civil Procedure to bring it in line
with international best practice will prepare a concise concept paper which will
identify the core issues and bottlenecks at the pre-trial, trial and enforcement stages
of civil cases, examples of which are outlined above, and set out proposed solutions
in general terms. [Q2 2012]
As publicly announced, the Government adopts a Presidential Decree providing for
the rationalisation and reorganisation of the magistrates’ courts and the allocation of
appropriate human resources and infrastructure for the new structure of magistrates’
courts resulting from this reform. [Q2 2012]
The Government prepares a strategy on the active promotion of pre-trial
conciliation, mediation, and arbitration, with a view to ensuring that a significant
amount of citizens and businesses make use of these modes of alternative dispute
resolution. [Q2-2012]
Starting from end-June 2012, Government updates and further refines every quarter
the e-justice work plan of December 2011 for the use of e-registration and e-tracking
of the status of individual cases in all courts of the country and for e-filing. The
updates will contain deadlines for the evaluation and completion of pilot projects
and information regarding the extension of e-registration and e-tracking to all courts
by end-2013.
By end-August 2012, Government presents, based on the study of the backlog of
non-tax cases in courts conducted jointly with an external body of experts and to be
presented by end-June 2012, an action plan with specific measures for a reduction of
such backlog of at least 50 per cent by end-July 2013 and starts implementing the
action plan.
The Government holds a series of workshops to discuss the findings and
recommendations in the concept paper prepared by the task force on the review of
the Code of Civil Procedure. These workshops will allow for broad consultation of
domestic stakeholders and participation from recognised international experts in the
field of civil procedure. [Q3-2012]
The Government conducts an assessment of whether the enactment of Law
3898/2010 on mediation in civil and commercial matters has delivered the results
which the legislation had set out to do, and presents data and analysis concerning
costs, time and success rates associated with the enforcement of agreements arising
from alternative dispute resolution as compared with the enforcement of judicial
decisions. [Q4-2012]
The task force on the review of the Code of Civil Procedure prepares a detailed
paper outlining the main proposals for amendments to the Code of Civil Procedure.
[Q4-2012]
The Government implements the Presidential Decree on the reform of the
magistrates’ court by creating their new structure, filling vacant positions with
graduates from the National School of Judges and redeploying judges and
administrative staff on the basis of existing resources available within Greece’s
judiciary and public administration. [Q4-2012]
162

GROWTH-ENHANCING STRUCTURAL REFORMS

The Government launches, jointly with an external body of experts, a study on the
costs of civil litigation, its recent increase and its effects on workload of civil courts,
with recommendations due by end-December 2013. [Q2-2013]

163

GROWTH-ENHANCING STRUCTURAL REFORMS

5

MONITORING AND TECHNICAL ASSISTANCE

The Ministry of Finance's directorate of planning, management and monitoring
becomes operational with the aim of improving reform management and oversight.
By end-March 2012, it starts publishing quarterly monitoring indicators for each of
the key structural reform initiatives.
The Government will request technical assistance to be provided by the EU Member
States, the European Commission the IMF or other organisations in priority areas.
These technical assistance actions will be coordinated by the Commission's Task
Force for Greece according to its mandate. The Greek administration will ensure
continuity of technical assistance launched.
In line with the conclusions of the euro-area summit of 26 October 2011, and the
Eurogroup Conclusions of 21 February 2012, the Government will fully cooperate
with the Commission, the ECB and the IMF staff teams to strengthen the monitoring
of programme implementation, and will provide the staff teams with access to all
relevant data and other information in the Greek administration.

The Government will promptly put in place a mechanism that allows better tracing
and monitoring of the official borrowing and internally-generated funds destined to
service Greece's debt, by paying an amount corresponding to the coming quarter's
debt service directly to a segregated account of Greece's paying agent. By end-April
2012, the Government will introduce in the Greek legal framework a provision
ensuring that priority is granted to debt servicing payments. This provision will be
introduced in the Greek Constitution as soon as possible.

164

ANNEX 2

Annex 1: Provision of data
During the programme, the following data shall be made available to the European
Commission, the ECB and the IMF staff on a regular basis.
These data should be sent to the following e-mail address:
ecfin-greece-data@ec.europa.eu
This address should also be used for the transmission of other data and reports related to the
monitoring of the programme.
To be provided by the Ministry of Finance
Preliminary monthly data on the state
budget execution (including breakdown by
main categories of revenue and expenditure
and by line ministry).

Monthly, 15 days after the end of
each month; these data should also
be included in subsequent
transmissions in case of revision.

(Data compiled by the Ministry of Finance)
Updated monthly plans for the state budget
execution for the remainder of the year,
including breakdown by main categories of
revenue and expenditure and by line
ministry.

Monthly, 30 days after the end of
each month.

(Data compiled by the Ministry of Finance)
Monthly data on the public wage bill (of
general
government,
including
a
breakdown in nominal wage and
allowances paid to government employees
per line ministry and public entity), number
of employees (including a breakdown per
ministry and public entities outside the
central government) and average wage
(including the relative shares of the base
wage, allowances and bonuses).

Monthly, 30 days after the end of
each month (starting in June 2010).

(Data compiled by the Ministries of
Interior and Finance)
Preliminary monthly cash data on general
government entities other than the state.
(Data compiled by the Ministry of Finance)

165

Monthly, 30 days after the end of
each month, these data should also
be included in subsequent
transmissions in case of revision.

ANNEX 1

Monthly data on staff: number of employees,
entries, exits, transfers among government entities;
and from and into the labour reserve, per entity.

Monthly, 30 days after the
end of each month.

(Data compiled by the Ministries of Interior and
Finance)
Weekly information on the Government's cash
position with indication of sources and uses as
well of number of days covered.

Weekly on Friday, reporting
on the previous Thursday.

(Data compiled by the Ministry of Finance)

Data on below-the-line financing for the general
government.
(Data compiled by the Ministry of Finance)

Data on expenditure pending payment (including
arrears) of the general government, including the
State, local government, social security, hospitals
and legal entities.

Monthly, no later than 15
days after the end of each
month; these data should also
be included in subsequent
transmissions in case of
revision.

Quarterly, within 55 days
after the end of each quarter.

(Data compiled by the Ministry of Finance on the
basis of basic data from the several line ministries)
Data on use of international assistance loans split
among following categories: Financial stability
fund, escrow account, debt redemption, interest
payments, other fiscal needs, building of cash
buffer; per quarter and cumulative

Quarterly, by the end of each
quarter.

Data on public debt and new guarantees issued by
the general government to public enterprises and
the private sector.
Data on maturing debt (planned redemptions per
month, split between short-term (Treasury bills
and other short-term debt) and long-term (bonds
and other long-term) debt).

Monthly, within one month.

Data on planned monthly interest outflows.
(Data compiled by the Ministry of Finance)

166

ANNEX 2

Data on assets privatised and proceeds collected.
Monthly.
(Data compiled by the Ministry of Finance)

Data on state-owned enterprises: revenue, costs,
payroll, number of employees and liabilities
(including maturities of public enterprises' debts)
(Data compiled by the Ministry of Finance)

Monthly statement of the transactions through offbudget accounts.
(Data compiled by the Ministries of Finance and
Education)
Monthly statement of the operations on the special
accounts.

Monthly, within three weeks
of the end of each month for
the ten largest enterprises.
Quarterly within three weeks
of the end of each quarter for
the
other
enterprises.
Quarterly for the maturities
of state-owned enterprises'
liabilities.

Monthly, at the end of each
month.

Monthly, at the end of each
month.

(Data compiled by the Ministry of Finance)
Report on progress with fulfilment of policy
conditionality.

Quarterly
before
respective review starts.

the

(Report prepared by the Ministry of Finance)
Monthly data on health care expenditure by the
social security funds with a lag of three weeks
after the end of the respective quarter.
(Data compiled by the Ministries of Labour and
Health)

167

Monthly, within three weeks
of the end of each month.
Starting with data for January
2011 for EOPPY, and from
April 2011 on for the other
funds

ANNEX 1

To be provided by the Bank of Greece

Assets and liabilities of the Bank of
Greece.

Weekly, next working day.

Assets and liabilities of the Greek banking
system - aggregate monetary balance
sheet of credit institutions.

Monthly, 30 days after the
end of each month.

Evolution of the external funding
provided by Greek banks to their
subsidiaries abroad.

Monthly, 15 days after the
end of each month.

Report on
situation.

Weekly, next working day.

banking

sector

liquidity

Report on the evolution of financial
stability indicators.

Quarterly, 30 days after the
publication data of each
quarter.

Report on results from the regular
quarterly solvency assessment exercise.

Quarterly, 15 days after the
end
of
each
quarter
depending
on
data
availability.

Weighted average of Loan-to-value (LTV)
ratio for new loans with real estate
collateral

Yearly.

168

ANNEX 2

To be provided by the Hellenic Financial Stability Fund

Detailed report on the balance sheet of the
Financial Stability Fund with indication and
explanation of changes in the accounts.

169

Weekly, next working day.

ANNEX 1

Annex 2: Statistics to be published by the Ministry of Justice or Ministry of Finance
(a)

(b)

(c)

(d)

by end-March 2012, for each administrative tribunal, court of appeal and the supreme
administrative court:
(i)

the number of judges and administrative staff, with a breakdown for judges
working in tax chambers or dealing primarily with tax cases;

(ii)

the number of all cases;

(iii)

the number of cases carried over from 2011;

(iv)

the number of cases filed in the first quarter of 2012;

(v)

the number of tax cases, with a breakdown according to case value (up to
EUR 10 000, EUR 10 001 to EUR 50 000, EUR 50 001 to EUR 100 000,
EUR 100 001 to EUR 500,000, and above EUR 500 000);

(v)

the number of tax cases carried over from 2011;

(vi)

the number of tax cases filed in the first quarter of 2012;

(vii)

the recovery rate for all tax cases, which for the purposes of the MoU, shall
mean the ratio of the amount collected by the creditor in enforcement
proceedings – following the issuance of an enforceable title – to the amount
adjudicated by the court.

by end-June 2012, in addition to the information in (a) above, updated as necessary, for
each civil court, court of appeal and the supreme civil court:
(i)

the number of judges and administrative staff;

(ii)

the number of all cases;

(iii)

the number of cases carried over from 2011;

(iv)

the number of cases filed in the first two quarters of 2012;

(v)

the number of dormant cases, i.e. cases pending before the civil courts in
which the relevant court’s file records that they have been postponed or never
received a hearing date and no party activity for receiving a hearing date has
taken place for at least 18 months.

by end-September 2012, in addition to the information in (a) and (b) above, updated as
necessary, at the first instance and the appeal level:
(i)

the number of corporate insolvency cases;

(ii)

the average duration of corporate insolvency cases;

(iii)

the average cost of corporate insolvency cases;

by end-December 2012, quarterly updates of the information in (a) to (c) above.

170

Abbreviations

ASEP
CPB
DEPA
DRG
DSO
ECB
EEA
EETT
EFSF
EKEVYL
ELSTAT
EOF
EOPYY
EPY
ERDF
ESA
ESF
ESY
EU
GDP
GEMI
HRADF
IDIKA
IMF
KTEL
LNG
LTV
MEFP
MTFS
NHS
OASA
OECD
OGA
OSE
OTE
PPC
PSC
RAE
RSPP
SPA
SPPA
TAP
TEN-T
TSO
WHO

171

Supreme Council for Staff Selection
Central Purchasing Bodies
Public Gas Corporation
Diagnostic-Related Group
Distribution System Operator
European Central Bank
European Economic Area
Hellenic Telecommunications and Post Commission
European Financial Stability Facility
National Centre for Medical Technology
Hellenic Statistical Authority
National Organisation for Medicines
National Organisation for the provision of Health services
Health Procurement Commission
European Regional Development Fund
European System of Accounts
European Social Fund
National Health System
European Union
Gross Domestic Product
General Commercial Registry
Hellenic Republic Asset Development Fund
E-governance of social insurance
International Monetary Fund
Joint Fund for Bus Receipts
Liquefied Natural Gas
Loan-to-value
Memorandum of Economic and Financial Policies
Medium-Term Fiscal Strategy
National Health System
Athens Urban Transport Organisation
Organisation for Economic Cooperation and Development
Agricultural Insurance Organisation
Railway Organisation of Greece
Hellenic Telecommunication Company
Public Power Corporation
Point of Single Contact
Regulatory Authority for Energy
Radio Spectrum Policy Programme
Single Payment Authority
Single Public Procurement Authority
trans-Adriatic pipeline
Trans European Transport network
Transmission System Operator
World Health Organisation

172

TECHNICAL MEMORANDUM OF UNDERSTANDING
March 9, 2012

1.
This Technical Memorandum of Understanding (TMU) sets out the understandings
regarding the definitions of the indicators subject to quantitative targets (performance criteria and
indicative targets), specified in the tables annexed to the Memorandum of Economic and Financial
Policies. It also describes the methods to be used in assessing the program performance and the
information requirements to ensure adequate monitoring of the targets. We will consult with the Fund
before modifying measures contained in this letter, or adopting new measures that would deviate from
the goals of the program, and provide the European Commission, ECB and the Fund with the
necessary information for program monitoring. We will also consult and provide information to the
European Commission and the ECB in the same manner.
2.
For program purposes, all foreign currency-related assets, liabilities, and flows will be
evaluated at “program exchange rates” as defined below, with the exception of the items affecting
government fiscal balances, which will be measured at current exchange rates. The program exchange
rates are those that prevailed on January 31, 2012. In particular, the exchange rates for the purposes of
the program are set €1 = 1.3176 U.S. dollar, €1 = 100.63 Japanese yen, €1.1772= 1 SDR.
General Government
3.

Definition: For the purposes of the program, the general government includes:

•

The central government. This includes:
¾ The entities covered under the State Budget as defined in Chapter 2 of the Law
2362/1995 as being modified by Law 3871/2010 regarding “Public Accounting,
Auditing of Government Expenditures and Other Regulations,” and other entities
belonging to the budgetary central government.
¾ Other entities or extra-budgetary funds (EBFs) not part of the State budget, but which
are, under European System of Accounts (ESA95) rules (“ESA95 Manual on
Government Deficit and Debt”), classified under central government. This includes
ETERPS and the National Wealth Fund.
¾ The following state enterprises and organizations included by the National Statistical
Service (ELSTAT) under the definition of central government (ATTIKO METRO,
ETHEL, HLPAP, ELGA, HELLENIC DEFENCE SYSTEMS S.A., OSE,
TRAINOSE, ERT, ELECTROMECHANICA KYMI LTD, OPEKEPE, KEELPNO,
EOT, INFORMATION SOCIETY IN GREECE, Unit for the Organization and
Management of Development Projects S.A.). References to individual companies are
understood to include all of their subsidiaries which are to be consolidated under IFRS
requirements.

•

173

Local government comprising municipalities, prefectures, and regional governments including
their basic and special budgets, including all agencies and institutions attached thereto, which
are classified as local governments according to ESA 95.

•

Social security funds comprising all funds that are established as social security funds in the
registry of ELSTAT.

•

Other extra budgetary entities included by ELSTAT under general government, which are not
yet counted under central government.

•

This definition of general (central) government also includes any new funds, or other special
budgetary and extra budgetary programs that may be created during the program period to
carry out operations of a fiscal nature. The government will inform IMF, European
Commission and ECB staff of the creation of any such new funds, programs, or entities
immediately.

•

Supporting material: The Ministry of Finance (MoF) will provide to the European
Commission, ECB and IMF detailed information on monthly revenues and expenditures,
domestic and foreign debt redemptions, new domestic and foreign debt issuance, change in the
domestic and foreign cash balances of the central government at the central bank of Greece,
all other sources of financing including capital transactions, and arrears of the general
government. The Ministry of Finance, in collaboration with the Ministry of Interior, will
provide monthly data on revenues and expenditures for local governments, as collected in the
Ministry databank. The Minister of Finance, in collaboration with the Ministry of Labor and
Social Security, will provide monthly data on revenues and expenditures in main social
security funds (including IKA, OGA, OAEE, OAED). The Bank of Greece will provide
detailed monthly data on assets and liabilities of local authorities, social security funds,
ETERPS (and other extra-budgetary funds), and state enterprises included in the definition of
general government in line with monetary survey data. Data will be provided within four
weeks after the closing of each month.

174

I.

QUANTITATIVE AND CONTINUOUS PERFORMANCE CRITERIA, INDICATIVE TARGETS, AND
CONTINUOUS PERFORMANCE CRITERIA: DEFINITIONS AND REPORTING STANDARDS
A.

Floor on the Modified General Government Primary Cash Balance (Performance
Criterion)

4.
Definition: The modified general government primary cash balance (MGGPCB) is defined as
the modified general government cash balance (MGGCB) minus interest payments by the state budget.
The MGGCB is defined as the sum of the cash balances of the ordinary state budget, the cash balance
of the public investment budget, the change in net financial assets of local government, the change in
net financial assets of social security, the change in net financial assets of ETERPS, the change in net
financial assets of reclassified public enterprises (RPEs) minus guarantees called to entities within the
general government and the spending by the National Wealth Fund. Privatization receipts, as defined
below and the proceeds from the sale of land and buildings will be excluded from cash receipts. Net
lending operations by the state budget will be recorded as cash expenditures.
•

The cash balance of the ordinary state budget. The cash balance of the ordinary state
budget will be measured from above the line, based on (i) ordinary budget revenues (recurrent
revenue plus non-recurrent revenue, including NATO revenues, but excluding tax refunds and
all transfers related to the Eurogroup decision of February 21, 2012 (in regard to income
of euro zone national central banks, including the BoG, stemming from their investment
portfolio holdings of Greek government bonds)); minus (ii) ordinary budget expenditures
(ordinary budget expenditures will exclude amortization payments, but include salaries and
pensions; grants to social security funds, medical care and social protection; operational and
other expenditure; returned resources; payments in exchange of claims of insurance fund for
the personnel working in the Public Electricity Company; the reserve, interest payments;
transfers for the settlement of past debt, payments for military equipment procurement on a
cash basis; NATO expenses, capital transfers to social security funds or other entities by
bonds; and called guarantees where the state or central government assumes payments on
behalf of entities outside of the general government, and transfers made from the special
budget allocation for clearance of arrears to any general government entity) of the ordinary
state budget as published monthly on the official website of the General Accounting Office of
the Ministry of Finance, and in line with the corresponding line items established in the
ordinary state budget.

•

The cash balance of the public investment budget. The cash balance of the public
investment budget will be measured from above the line, based on investment budget revenues
minus investment budget expenditures of the investment state budget as published monthly on
the official website of the General Accounting Office of the Ministry of Finance, and in line
with the corresponding line items established in the investment state budget.

•

The change in net financial assets of local governments is defined on a transactions basis,
as the change in the total of financial assets minus financial liabilities of local authorities
adjusted for valuation changes by the Bank of Greece.
¾ Financial assets include (but are not limited to) deposits of local governments in the
Bank of Greece and deposits of local governments in domestic credit institutions.
Deposits will be measured at face value excluding accrued interest in line with
recording for monetary survey data.

175

¾ Financial liabilities include (but are not limited to) short- and long-term loans from
domestic credit institutions to local governments, measured at face value, consistent
with recording for monetary survey data.
•

The change in net financial assets of social security funds is defined on a transactions basis,
as the change in the total of financial assets minus financial liabilities of social security funds,
adjusted for valuation changes by the Bank of Greece.
¾ Financial assets include
o Deposits of social security funds in the Bank of Greece and deposits of
social security funds in the domestic credit institutions and deposits held
either directly or indirectly through the IKA mutual fund. Deposits are
measured at face value excluding accrued interest, consistent with reporting
requirements for monetary survey data.
o Holdings of shares quoted on the Athens Stock Exchange held by social
security funds either directly or indirectly through the IKA mutual fund.
o Direct or indirect holdings of Mutual Fund units issued by Greek
management companies (other than the IKA mutual fund).
o Holdings of central government bonds, including short and long-term
securities issued domestically, long-term securities issued abroad operated
from Bank of Greece accounts, and indirect holdings through the IKA
mutual fund. Holdings will be measured at nominal value.
o Holdings of bonds issued abroad and other foreign assets.
¾ Financial liabilities include the short and long term loans from domestic credit
institutions to the social security funds, measured consistently with monetary survey
data.

•

The change in net financial assets of ETERPS is defined on a transactions basis, as the
change in the total of financial assets minus financial liabilities of ETERPS, adjusted for
valuation changes by the Bank of Greece.
¾ Financial assets include
o Deposits of ETERPS in the Bank of Greece and deposits of ETERPS in
domestic credit institutions. Deposits will be measured at face value
excluding accrued interest in line with recording for monetary survey data.
o Holdings of shares, held by ETERPS, quoted on the Athens stock exchange.
o Holdings of Mutual Fund units issued by Greek management companies.
o Holdings of central government bonds.
o Holdings of other bonds issued abroad.

176

¾ Financial liabilities include the short and long term loans from the domestic credit
institutions to ETERPS, measured consistently with monetary survey data, or other
lending from the Bank of Greece.
•

The change in net financial assets of reclassified public enterprises (RPEs) is defined on a
transactions basis, as the change in the total of financial assets minus financial liabilities of
RPEs, adjusted for valuation, minus the amount of guarantees called from entities which are
consolidated within the general government. RPEs will include the following organizations:
ELGA, KEELPNO, OPEKEPE (excluding the account ELEGEP), EOT, ATTIKO METRO,
HELLENIC DEFENCE SYSTEMS S.A., ERT, ETHEL, TRAINOSE, HLPAP,
ELECTROMECHANICA KYMI LTD, INFORMATION SOCIETY IN GREECE, Unit for
the Organization and Management of Development Projects S.A., and OSE.
¾ Financial assets include
o Deposits of RPEs in the Bank of Greece and deposits of RPEs in the credit
institutions (domestic and foreign). Deposits will be measured at face value
excluding accrued interest.
o Holdings of shares, held by RPEs quoted on the Athens Stock Exchange.
o Holdings of Mutual Fund units issued by Greek management companies.
o Holdings of central government bonds.
o Holdings of other bonds issued abroad.
¾ Financial liabilities include the short and long term loans from the domestic credit
institutions to RPEs, measured consistently with monetary survey data. They also
include short and long term loans from the foreign banking system, as well as loans
from the EIB or other official lenders, as measured by the difference between new
loans granted to these entities (as approved by the GAO in line with the Fiscal
Responsibility Act) and amortization of these loans through called guarantees of the
government or amortization of these loans made by actual payments by the companies
themselves, upon monitoring and information provided by the General Accounting
Office (D25).

•

5.

The expenditures of the National Wealth Fund are defined from below the line as the
change in deposits of the NWF net of deposit changes due to borrowing for securitization
purposes that are remitted to the central government as privatization receipts. Changes in net
deposits of the NWF and borrowing are to be measured from the monetary survey data for
data on borrowing and on deposits held in commercial banks. For deposits held at the central
bank, net deposits are measured directly from the Bank of Greece. Remittance of privatization
proceeds to the state will be measured from the inflows into the Treasury Single Account.
Other provisions.
¾ For the purpose of the program, the primary expenditure of the central government
that is monitored excludes payments related to bank support, when carried out under
the program’s banking sector support and restructuring strategy. Transactions that
may be excluded from the balance include loans to financial institutions and

177

investments in equity of financial institutions (requited recapitalization); unrequited
recapitalization; purchases of troubled assets, and operations related to the FSF.
However, any financial operation by central government to support banks, including
the issuance of guarantees or provision of liquidity, will be immediately reported to
IMF, European Commission, and ECB staff.
¾ Capital transfers to social security funds or other entities by bonds shall exclude bond
issuance for settlement of end-2009 health related arrears, and the settlement related to
the judiciary liabilities.
6.
Adjustor: The floor on the modified general government primary cash balance will be
adjusted upward by the difference between transfers to any general government entity made for the
purpose of clearance of arrears from the special budget allocation and the arrears actual paid out of
transfers from the special budget allocation. Timetable for the clearance of arrears from the special
budget allocation included under the ceiling is reflected in Schedule A.
Schedule A: Payments made from the special budget allocation for clearance of arrears.
(in billions of Euro)
2012

Payments made from the special budget allocation for clearance of arrears

2013

Mar-12
Progr. 1/

Jun-12
Progr. 1/

Sep-12
Progr. 1/

Dec-12
Progr. 1/

0

0

1.3

4.0

2014

2015

Dec-13
Dec-14
Dec-15
Progr. 2/ Progr. 3/ Progr. 4/
0.0

0.0

0.0

1/ Cumulatively from January 1, 2012.
2/ Cumulatively from January 1, 2013.
3/ Cumulatively from January 1, 2014.
4/ Cumulatively from January 1, 2015.

7.

B.

Supporting material.
•

Data on cash balances of the ordinary and state budgets will be provided to the European
Commission, ECB and IMF by the General Accounting Office in the Ministry of Finance
within three weeks after the end of each month. Data will include detailed information on
revenue and expenditure items, in line with monthly reports published on the official website
of the Ministry of Finance. Data will also include data on capital transfers to social security
funds or other entities in bonds and called guarantees.

•

Data on net financial assets of local authorities and social security funds, extra-budgetary
funds including ETERPS, AKAGE, and reclassified public enterprises will be provided to the
IMF, European Commission and ECB by the GAO in cooperation with the Statistics
Department of the Bank of Greece within four weeks after the end of each month.

•

Data on the amount of arrears cleared from the special budget allocation will be provided by
the General Accounting Office in the Ministry of Finance within three weeks after the end of
each month.
Ceiling of State Budget Primary Spending (Performance Criterion)

8.
Definition: The state budget primary spending consists of state budget spending (spending of
the ordinary state budget plus spending of the public investment budget) minus interest expenditures
paid by the state budget, in line with the definitions provided above. Primary expenditure of the central
government that is monitored for the Performance Criterion excludes any cash payments related to
bank restructuring, when carried out under the program’s banking sector restructuring strategy. Costs
that may be excluded from the balance include loans to financial institutions and investments in equity

178

of listed and non-listed financial institutions (requited recapitalization); unrequited recapitalization;
and purchase of troubled assets. However, any financial operation by central or general government to
support banks, including the issuance of guarantees or provision of liquidity, will be immediately
reported to European Commission, ECB and IMF staff.
9.
Adjustor: The Ceiling of State Budget Primary Spending will be adjusted downward by the
difference between transfers to any general government entity made for the purpose of clearance of
arrears from the special budget allocation and the arrears actual paid out of transfers from the special
budget allocation.
10.
Supporting material. The General Accounting Office of the Ministry of Finance will provide
monthly expenditure data of the ordinary and investment state budget, as defined above. The Ministry
of Finance will further provide monthly data on the stock of arrears of line ministries.
C.
Non-Accumulation of Domestic Arrears by Line Ministries and Hospitals (Performance
Criterion)
11.
Definition. For the purpose of the program, domestic arrears of Line Ministries and Hospitals
are defined as the unpaid invoices that have past the due date by 90 days. In case no due date is
specified on the supplier contract, an unpaid commitment is considered to be in arrears 90 days after
the initiation of the invoice. Data will be provided within four weeks after the end of each month. The
non-accumulation of domestic arrears is defined as no increase in the stock of all general government
arrears (including ordinary investment budget) outstanding at the end of every month, measured on
cumulative basis, irrespective of the time period in which the unpaid commitments were entered into
plus transfers to any General government entity made out of special budget allocation for clearance of
arrears. This does not include the arrears which are being accumulated by the Civil Servants’ Welfare
Fund.
12.
Supporting material. Monthly data on arrears of public hospitals (NHS hospitals) will be
provided by the Ministry of Health and arrears of line ministries by the Ministry of Finance within
four weeks after the end of each month. The Ministry of Finance will publish this information on the
Ministry of Finance website. The arrears data will be based on survey data, until data from
commitment registers are assessed by the IMF, European Commission, and ECB staff to provide
comprehensive and reliable information. These reports will also include data on accounts payable
overdue for more than 30 and 60 days for the central government (line ministries and Decentralized
Prefectures). Data on accounts payable overdue for more than 30 and 60 days will be based on the
commitment registers. The stock of arrears will reflect all arrears outstanding, irrespective of the time
period in which the unpaid commitments were entered into, but will exclude the 5.34 billion hospital
arrears to pharmaceutical companies which were incurred by end-2009 to the extent these are still
outstanding.
D.

Non-Accumulation of Domestic Arrears by the General Government (Indicative Target)

13.
Definition. For the purpose of the program, domestic arrears are defined as the unpaid
invoices that have past the due date by 90 days. In case no due date is specified on the supplier
contract, an unpaid commitment is considered to be in arrears 90 days after the initiation of the
invoice. Data will be provided within four weeks after the end of each month. The continuous nonaccumulation of domestic arrears is defined as no increase in the stock of all general government
arrears outstanding at the end of every month during which quarter the indicative target is being
monitored, irrespective of the time period in which the unpaid commitments were entered into. This
does not include the arrears which are being accumulated by the Civil Servants’ Welfare Fund. It will

179

also exclude €5.34 billion hospital arrears to pharmaceutical companies which were incurred by end2009 to the extent these are still outstanding.
Supporting material. The Ministry of Finance will provide consistent data on monthly expenditure
arrears of the general government, as defined above within four weeks after the end of each month,
and publish this information on the Ministry of Finance website. The arrears data will be based on
survey data, until data from commitment registers are assessed by the IMF, European Commission,
and ECB staff to provide comprehensive and reliable information. These reports will also include data
on accounts payable overdue for more than 30 and 60 days for the central government (line ministries
and Decentralized Prefectures). Data on accounts payable overdue for more than 30 and 60 days will
be based on the commitment registers.
E.

Ceiling on the Overall Stock of Central Government Debt (Performance Criterion)

14.
Definition. The overall stock of central government debt will refer to ESA95 central
government debt, which includes the state debt, debts of extrabudgetary funds and public enterprises
that are consolidated into the central government, and other ESA 95 adjustments. It will be defined for
the purposes of the program as total outstanding gross debt liabilities. It will include, but not be
limited to, liabilities in the form of securities and loans. It will exclude accounts payable. Debt will be
measured at nominal value. The program exchange rate will apply to all non-euro denominated debt.
Inflation indexation will apply to inflation indexed debt, using the relevant index as specified in the
debt instrument. For the purposes of the program, the ceiling on the stock of central government debt
will exclude debt arising from payments for bank restructuring, when carried out under the program’s
banking sector restructuring strategy (this does not cover the debt related to the Financial Stability
Fund). This includes loans to financial institutions and investments in equity of financial institutions
(requited recapitalization); unrequited recapitalization; and purchase of troubled assets. However, any
financial operation by the central government to support banks, including the issuance of guarantees or
provision of liquidity, with the exception of Hellenic Republic intermediation in repos between foreign
and domestic financial institutions will be immediately reported to IMF, European Commission and
ECB staff.
15.
Adjusters. For 2011, the ceiling on the overall stock of ESA95 central government debt will
be adjusted upward (downward) by the amount of any upward (downward) revision to the stock of
end-December 2011 ESA95 central government debt of €378.2 billion. The ceiling shall also exclude
the borrowing for collateral for a private sector involvement operation under the program to the extent
that such borrowing would be recognized in the gross debt definition.
16.
Supporting material. Data on the total stock of central government debt will be provided to
the European Commission, ECB and IMF staff by the General Accounting Office consistent with the
ESA95 definition no later than 30 days after the end of each month.
F.

Ceiling on New Central Government Guarantees (Performance Criterion)

17.
Definition. The ceiling on the new central government guarantees shall include new
guarantees granted by the state, as well as new guarantees granted by any other entity that is classified
under ESA95 under central government, but exclude guarantees to entities whose debt is covered
under the ceiling on the stock of central government debt as defined in paragraphs 13 and 14. The
ceiling shall exclude guarantees to support banks and exclude guarantees related to EIB financed
loans. The ceiling shall also exclude guarantees granted by ETEAN up to an amount of €50 million
provided these are fully backed by an equivalent amount of bank deposits. New guarantees are
guarantees extended during the current fiscal year. The latter shall include also guarantees for which

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the maturity is being extended beyond the initial contractual provisions above a total cumulative
amount of €500 million per calendar year. Modification of existing guarantees (without changing the
maturity, amount of guarantees, and beneficiaries of the loan) will not be treated as new guarantees.
The ceiling shall also exclude guarantees granted under a risk sharing instrument of the EU structural
funds (see COM(2011) 655 final) that do not create contingent liabilities for the Greek State.
18.
Supporting material. All new central government guarantees will be reported in detail,
identifying amounts and beneficiaries. The General Accounting Office will provide the data on a
monthly basis within three weeks after the end of each month. Non-state entities classified under the
central government shall report the new guarantees they extended to the General Accounting Office on
a monthly basis within three weeks after the end of each month.

G.

Non-Accumulation of External Debt Payment Arrears by the General Government
(Continuous Performance Criterion)

19.
Definition. For the purposes of the program, an external debt payment arrear will be defined
as a payment on debt to non-residents contracted or guaranteed by the general government, which has
not been made within seven days after falling due. For purposes of this program, the term “falling
due” means the date in which external debt payments are due according to the relevant contractual
agreement, including any contractual grace periods. The performance criterion will apply on a
continuous basis throughout the program period.
20.
Supporting material. The stock of external arrears of the general government will be
provided by the General Accounting Office with a lag of not more than seven days.
H.

Floor on Privatization Proceeds (Indicative Target)

21.
Definition. Privatization proceeds will be defined as the cash receipts from the asset sales to
be carried out by the privatization agency (HRADF) and prior to its establishment directly by the
government. These will include, but not be limited to, the sale of equity of listed or non-listed
companies and banks, shareholdings in public infrastructure, shareholdings in SPVs, leasehold in
commercial real estate and publicly held land, sale-lease back operations, securitization of assetrelated cash streams, or other assets incorporated in the authorities’ privatization program, as well as
sale of rights and concessions (including securitization of the proceeds of concessions). Proceeds will
be valued in euro and reported on a gross basis, excluding any associated capital expenditure or other
restructuring costs as well as the operating costs of the National Wealth Fund. Proceeds will be
measured as the inflows of cash received by the National Wealth Fund, and prior to its establishment
directly by the government, as deposited in the Special Privatization Account at the Bank of Greece on
the day the transaction is settled.
22.
Supporting material. Quarterly information on the cash receipts from asset sales, quarterly
balances of the privatization account, inflows to the account (by project), and outflows to the state
budget, will be made available by the Minister of Finance, in collaboration with the National Wealth
Fund, no later than two weeks after the end of each quarter. The Ministry of Finance will also provide
a quarterly progress report on the Sovereign Wealth Fund activity, including a description of its
operations, information on any borrowing (amounts, terms, and collateral), updates on the key steps in
the operational plan, and latest estimates of the expected proceeds and timeline for completion of the
transactions. In addition, quarterly reports on the National Wealth Fund’s activities, along with an
audited report of its finances will be published on the website of the Ministry of Finance.

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23.
Other. For QPC monitoring, receipts from privatization are excluded (in line with paragraph 5
of the TMU) from cash revenue receipts. However, for 2012 and 2013 where this is applicable, sales
of those gaming licenses, telecom licenses, sales of aircrafts, and extension of the airport concession
that were established in the context of the May 2010 SBA program or the 2011 budget (Second
Review) discussions will be recorded as cash revenue receipts and taken into account for the
MGGPCB criterion, irrespective of whether the realized proceeds accrue to the privatization agency or
not. The privatization agency will provide GAO, analytical data on the gross receipts and expenditures
of the above mentioned sources, on a monthly basis – by the end of the 20th of every next month.
I.

ESA “Program” Deficit and Overall Monitoring and Reporting Requirements

24.
ESA Program Deficit. For the purposes of the program, the ESA deficit (EDP B.9) will
exclude the sale of non-financial assets such as land, buildings, and other concessions or licenses,
unless these have been agreed in the context of the May 2010 SBA program (including subsequent
reviews). The ESA deficit will also exclude all transfers related to the Eurogroup decision of
February 21, 2012 per schedule B (in regard to income of euro zone national central banks,
including the BoG, stemming from their investment portfolio holdings of Greek government
bonds).
Schedule B: Amounts to be Transferred to the Greek Government by Eurosystem National Central Banks.
(in millions of Euro)

Total
o/w: from the BoG
Source: ECB

2012

2013

2014

2012-14

2015

2016

2017

2018

2019

2020

2015-20

Total

729.0
305.3

600.6
275.8

470.4
236.2

1,800.0
817.3

612.7
331.5

521.4
312.7

420.6
289.3

324.5
271.3

260.7
234.7

160.1
150.7

2,300.0
1,590.2

4,100.0
2,407.5

25.
ESA Primary Balance. For the purpose of the program, the ESA primary balance is defined as
general government ESA95 balance (EDP B.9) plus ESA 95 general government consolidated interest
payable (EDP D.41).
26.
Overall Monitoring and Reporting Requirements. Performance under the program will be
monitored from data supplied to the EC, ECB, and IMF by the Ministry of Finance, the General
Accounting Office, and Bank of Greece. The authorities will transmit to the IMF, EC, and ECB staff
any data revisions in a timely manner.
II. MONITORING OF STRUCTURAL BENCHMARKS
27.
Benchmark on progress in revenue administration, 2012. Progress in revenue
administration in 2012 will be defined as reaching the targets set in table 1.
28.
Definition. A completed audit is defined as an audit reported as formally finalized in the
ELENXIS audit case management system, including signed off by the audit supervisor, and the
taxpayer has settled or appealed the assessment, or the audit report states that no underpayment has
occurred. Risk-based audits for large taxpayers are defined as audits selected on a risk basis using the
ELENXIS audit management system.
29.
Supporting material. Monthly information on risk-based full-scope audits and temporary
audits of large taxpayers, self employed and high wealth individuals, and VAT non-filers, and
collection of assessed taxes and penalties, and collection of tax debt will be made available by the
Minister of Finance, in collaboration with the steering committee on revenue administration, no later
than two weeks after the end of each month. Data submission will include data back to 2010.
Information will continue to be provided after December 2012.

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30.
Benchmark on progress in public financial management, 2012. Progress in implementing
public financial management reforms in 2012 will be defined as reaching the targets set in table 2.0
31.
Definition. The reporting institutional units (State and general government entities) include
any unit under the general government as defined by Elstat as of end-February 2012, excluding
additions of new entities under the control of sub-national governments. Any entity coming into the
above definition after December 2011 could run commitment registers on a pilot base. Summary data
reported on the e-portal from the commitment registers include all 11 fields now available under the eportal. From end-June, entries under the e-portal will include an expanded set of fields, including
cumulative appropriations released, commitments made, invoices received, and payments made.
32.
Supporting material. Monthly summary information from the e-portal, surveys, and other
sources on performance against the above indicators will be published by the General Accounting
Office of the Ministry of Finance on their website no later than four weeks after the end of each
month. Data submission will include data back to end-2011. Survey information will continue to be
provided after December 2012 unless discrepancies between survey and e-portal data are eliminated.

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Table 1. Structural Benchmark in Revenue Administration
Area

Indicator

2012 targets 1/
end-June

end-December

1,000

2,000

20%

20%

a. Number of completed risk-based full-scope audits

150

300

b. Number of completed risk-based temporary audits (VAT, Withholding,
refunds, exemptions etc.)

150

325

25

100

50%

50%

a. Number of completed new risk-based audits of high wealth individuals,
as identified by the task force in 2011 2/

600

1,300

b. Collection of assessed tax and penalties from all risk-based audits, as
identified by the task force in 2011
(percent of assessed tax and penalties)

50%

50%

5,000

10,000

Debt collection
a. Collection of tax debt as of end-December 2011 (million of euros)
b. Collection of new debt accumulated in 2012
(percent of new debt)
Tax audits and collection of large taxpayers

Of which field audits
c. Collection of assessed tax and penalties from all risk-based full scope
and temporary audits
(percent of assessed tax and penalties)
Audits and collection for high wealth individuals

Audits and collection for VAT non filers
a. Number of completed risk-based VAT audits of VAT non-filers

b. Collection of all assessed tax and penalties
20%
20%
(percent of assessed tax and penalties)
1/ Cumulative target from January 1, 2012. Targets are defined net of the audits completed in the first two months of 2012
counted against meeting the end-2011 targets (prior action).
2/ The audits completed since January 2011 will amount to at least 1,700 audits as identified by the task force in 2011.
Table 2. Structural Benchmark in Public Financial Management
Area

Indicator

2012 targets 1/
end-June

end-December

70%

90%

25%

1%

Expenditure Controls
a. Percent of institutional units (State and general government entities)
reporting (on the E-portal of GAO) total budget allocations (including any
revisions), pending outstanding commitments, unpaid commitments, and
arrears data (for both ordinary and investment) at the end of each month,
based on data from their commitment registers.
b. Discrepancy between the total arrears to third parties of non-state
general government entities reported under the E-Portal of GAO using
data from the commitment registers and the total arrears reported through
monthly surveys (% of arrears)
1/ Cumulative target from January 1, 2012.

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