troika report

EUROPEAN COMMISSION DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS

The Second Economic Adjustment Programme for Greece

March 2012

OUTLINE OF THE REPORT

i

Executive summary 1

1. Introduction 6

2. Macroeconomic developments 11

3. Financial markets and financial sector developments 17

4. Programme implementation and policy discussions 22

4.1 Fiscal policy 22

4.2 Fiscal strategy in 2012 and subsequent years 25

4.3 Structural fiscal reforms 32

4.3.1. Privatisation 32

4.3.2. Revenue administration, fight against tax evasion and

tax reform 35

4.3.3. Expenditure control 36

4.3.4. Public administration, public procurement and

social programmes 36

4.3.5. Healthcare and pension reform 37

4.4 Growth-enhancing structural reforms 38

4.4.1. Labour market 38

4.4.2. Regulated professions 42

4.4.3. Energy and transport 42

4.4.4. Business environment and reforms in product and

service markets 43

4.4.5. Absorption of structural funds 44

4.4.6. Judicial reform 44

4.5 Fiscal financing and treasury management 45

4.6 Technical assistance and monitoring 49

Annex 1 Assessment of compliance with the Memorandum of

Understanding on Specific Policy Conditionality 51

Annex 2 Macroeconomic forecast 85

Annex 3 Updated programme documents 91

LIST OF BOXES

1. Statement by the Eurogroup: 21 February 2012 7

2. Economic Adjustment Programme and social equity 9

3. Debt sustainability assessment 28

4. Private Sector Involvement 48

LIST OF TABLES

1. Disbursements under the first financing programme 6

2. Contributions by the euro area Member States to disbursements to

Greece under the first financing programme 7

3. Member States guarantees to the EFSF 9

4. Macroeconomic scenario: main features 14

5. Ratings 18

6. Banking sector soundness indicators 19

ii

7. Summary of compliance with conditionality 22

8. Fiscal quantitative criteria 23

9. Implementation monitoring: Estimated yield of measures agreed in

June and October 2011 24

10. Developments in public employment 25

11. Main fiscal indicators 2010-14 26

12. Deficit and measures accounting: from the deficit in one year to the

next 27

13. Privatisation plans: transactions, so far 32

14. Planned privatisation receipts 33

15. Privatisation – transactions in the pipeline 34

16. Arrears to suppliers 36

17. Minimum monthly wages 41

18. Interest rates and interest payments charged to Greece by the euro

area Member States 46

19. Planned schedule of disbursement for the new programme 47

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 23

19. Government primary balance – 2011. Outcomes and quarterly

criteria 23

iii

20. Government revenue, expenditure and gross debt 25

21. Recourse to arbitration to settle negotiations disputes 40

22. Nominal Unit Labour Cost 40

23. Regulation of the airline industry 43

24. Outstanding stock of T-bills 45

29. T-bill auctions since July 2010 45

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 Valentinait!, Rafa" Wiel#dek 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: [email protected]

The cut-off date for this report was 11 March 2012.

EXECUTIVE SUMMARY

1

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 growth-

enhancing 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

European Commission

The economic adjustment programme for Greece

2

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

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 counts 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 debt-

to-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.

Executive summary

3

However, current projections reveal large fiscal gaps in 2013-14. Current ptojections 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 sectot 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

European Commission


4

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.

1. INTRODUCTION

5

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 18 January-10 February 2012.*

Table 1. Disbursements under the first financing programme

(EUR billion)

Total

1st tranche 18 May 2010 14.5 12 May 2010 5.5 20.0

2nd tranche 13 September 2010 6.5 14 September 2010 2.5 9.0

3rd tranche 19 January 2011 6.5 21 December 2010 2.5 9.0

4th tranche 16 March 2011 10.9 16 March 2011 4.1 15.0

5th tranche 15 July 2011 8.7 13 July 2011 3.3 12.0

6th tranche 14 December 2011 5.8 7 December 2011 2.2 8.0

Total past disbursements 52.9 20.1 73.0

Past disbursements

Euro-area Member States IMF

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 prime-

minister and minister for Finance, and the governor of the Bank of Greece; as well as with the ministers for Regional

Development and Competitiveness and Shipping; Labour and Social Security; Health and Social Solidarity; Administrative

Reform and e-Governance; 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.

European Commission


6

Table 2. Contributions by the euro-area Member States to disbursements to Greece under the first

financing programme

(EUR million)

BE DE IE ES FR IT CY LU

May 2010 0.0 4,427.9 0.0 1,941.6 3,325.2 2,921.9 32.0 40.8

September 2010 758.8 1,495.9 347.4 656.0 1,123.4 987.2 10.8 13.8

January 2011 238.8 1,864.4 -- 817.5 1,400.1 1,230.3 13.5 17.2

March 2011 530.0 611.8 -- 1,814.4 3,107.4 2,730.5 29.9 38.2

July 2011 195.3 5,050.5 -- 668.5 1,144.8 1,006.0 11.0 14.1

December 2011 219.6 1,714.8 -- 751.9 1,287.7 1,131.6 12.4 15.8

Total 1,942.5 15,165.3 347.4 6,650.0 11,388.6 10,007.5 109.6 139.9

MT NL AT PT SI SK FI Total

May 2010 14.8 932.5 454.0 409.3 0.0 -- 0.0 14,500.0

September 2010 5.0 315.0 153.4 138.3 102.9 -- 392.2 6,500.0

January 2011 6.2 392.6 191.2 172.3 32.4 -- 123.4 6,500.0

March 2011 13.8 871.4 424.3 382.5 71.8 -- 274.0 10,900.0

July 2011 5.1 321.1 156.3 -- 26.5 -- 100.9 8,700.0

December 2011 5.7 361.1 175.8 -- 9.9 -- 113.5 5,800.0

Total 50.6 3,193.8 1,554.9 1,102.3 243.5 -- 1,004.1 52,900.0 Source: Commission services.

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

1. Introduction

7

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."

European Commission


8

Table 3. Member States guarantees

to the EFSF

EFSF contribution

key (%)

AT 2.98

BE 3.72

CY 0.21

DE 29.07

EE 0.27

EL 0.00

ES 12.75

FI 1.92

FR 21.83

IE 0.00

IT 19.18

LU 0.27

MT 0.10

NL 6.12

PT 0.00

SI 0.50

SK 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

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

1. Introduction

9

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.

2. MACROECONOMIC DEVELOPMENTS

10

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

10

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Forecast% change, y-o-y

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.

2. Macroeconomic developments

11

Graph 2. Business and Consumer Surveys

60

65

70

75

80

85

90

95

100

105

110

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Economic sentiment

-100

-80

-60

-40

-20

0

20

40


Total construction confidence Consumer confidence

Industrial confidence Retail trade confidence

Services confidence

Sources : European Commission Sources : European Commission

Graph 3. Equipment

Graph 4. Housing investment

-40

-30

-20

-10

0

10

20

30

40

50

-40

-30

-20

-10

0

10

20

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

%

Industrial confidence (lhs)

Equipment investment (% y-o-y change QNA) (rhs)

-35

-30

-25

-20

-15

-10

-5

0

5

-30

-20

-10

0

10

20

30

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

%%

House loans (% change y-o-y)(lhs)

Building permits (% change y-o-y)(12m.Ac.)(lhs)

Housing investment (% change y-o-y)(rhs)

Sources : EL.STAT and European Commission 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.

European Commission


12

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

70

75

80

85

90

95

100

2000 2002 2004 2006 2008 2010 2012

2000=

100

Source: European Commission.

Graph 6. Exports and non-domestic industrial

orders

Graph 7. Industrial production and capacity utilisation

-60

-45

-30

-15

0

15

30

45

60

75

-40

-30

-20

-10

0

10

20

30

40

50

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

%%

Exports of goods (% change, y-o-y, lhs)

Industrial non-domestic orders (% change, rhs)

64

66

68

70

72

74

76

78

-14

-11

-8

-5

-2

1

4

7

10

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

%

Industrial production (3m.m.a., %change, y-o-y) (lhs)

Capacity utilisation (rhs)

Sources: EL.STAT and Bank of Greece. Sources: EL.STAT and European Commission


13

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)

-3

-2

-1

0

1

2

3

4

5

6

7

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

%

GR: constant-tax inflation

GR: headline inflation

EA17: constant-tax inflation

Source: EL.STAT.

Graph 9. HICP inflation: main drivers

(% change, y-o-y)

-30

-20

-10

0

10

20

30

40

50

0

1

2

3

4

5

6

7

8

9


%%

Core inflation (lhs)

Processed food (lhs)

Energy (rhs)

0

4

8

12

16

20

24

0

2

4

6

8


%

Headline inflation (lhs)

Transport (lhs)

Alcohol (rhs)

Source: EL.STAT. Source: EL.STAT.

European Commission


14

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

Graph 11. Nominal unit labour cost

(annual growth rate)

0

5

10

15

20

25

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

Employment (% change, y-o-y) (lhs)

Unemployment rate (rhs)

-10

-5

0

5

10

15

2001 2003 2005 2007 2009 2011 2013 2015

%

Greece European Union forecast

Source : EL.STAT (Labour force survey; these data may slightly differ from

national accounts data which appear in other tables of this report). Source : Commission services.


15

Table 4. Macroeconomic scenario

main features

2009 2010 2011 2012 2013 2014

Real GDP (growth rate) -3.2 -3.5 -6.9 -4.7 0.0 2.5

Final domestic demand contribution* -3.6 -7.0 -10.0 -7.2 -1.4 1.5

Net trade contribution 3.1 3.1 2.8 2.3 1.4 1.2

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

HICP inflation at constant taxes 1.1 1.4 1.2 -1.2 -0.8 0.1

Current account balance (percent of GDP) -14.3 -12.3 -10.3 -6.9 -5.3 -4.6

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

3. FINANCIAL MARKETS AND FINANCIAL SECTOR

DEVELOPMENTS

16

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

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000


Ind

ex

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 13.8 at the end of 2010 to 11.9 percent for banks in Greece and from 12.2 at the end of

3. Financial markets and financial sector developments

17

2010 to 10.4 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

Rating Effective Rating Effective Rating Effective

Sovereign C* 2-Mar-12 RD** 9-Mar-12 SD*** 27-Feb-12

ATE Caa2 23-Sep-11 B- 14-Jul-11 --- ---

NBG Caa2 23-Sep-11 B- 14-Jul-11 CCC 15-Jun-11

Eurobank Caa2 23-Sep-11 B- 14-Jul-11 CCC 15-Jun-11

Alpha bank Caa2 23-Sep-11 B- 14-Jul-11 CCC 15-Jun-11

Piraeus Caa2 23-Sep-11 B- 14-Jul-11 CCC 15-Jun-11

Standard & Poor'sMoody's FitchLT Issuer Rating

* 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

Graph 14. Greek banks' borrowing from the

Eurosystem via monetary policy operations

0

50

100

150

200

250

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

EUR billion

Total deposits Sight deposits

0

5

10

15

20

25

30

35

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Borrowing from the Eurosystem excluding

ELA (EUR million) (lhs)

Borrowing from the Eurosystem (EUR

million) (lhs)

as % of liabilities (rhs)

Source: Bank of Greece *Note: Estimate including ELA and ANFA

Source: IMF-IFS

European Commission


18

Graph 15. Credit to private sector

(per cent change, y-o-y)

Graph 16. Non-performing loans ratio

-10

-5

0

5

10

15

20

25

30


%

Households

Enterprises

Private sector(total)

4

6

8

10

12

14

16

18

2007 2008 2009 2010 2011

%

Source: Bank of Greece Source: Bank of Greece

3. Financial markets and financial sector developments

19

Graph 17. Loan to deposit ratio by bank

Sep-10

Dec-10Sep-10

Sep-10

Sep-10Sep-11

Sep-11

Sep-11

Sep-11

Sep-11

80

90

100

110

120

130

140

150

160

170

NBG Alpha Eurobank Piraeus ATE

Source : Banks' financial statements

Table 6. Banking sector soundness indicators

Aggregation

basis (1)2007 2008 2009 2010 2011 Q3

Capital adequacy ratio consolidated 11.3 9.5 11.9 12.3 10.5

solo 12.7 10.7 13.3 13.9 12.0

Tier I ratio consolidated 9.3 8.1 10.9 11.2 9.6

solo 9.4 8.8 12.3 12.5 10.8

Return on assets (after tax) consolidated 1.4 0.7 0.1 -0.3 -1.9

solo 1.0 0.2 -0.1 -0.6 -2.1

Return on equity (after tax) consolidated 17.8 10.0 2.3 -4.2 -28.2

solo 14.6 3.1 -1.7 -8.6 -34.2

Loan to deposit ratio (2) consolidated 106.0 114.0 113.8 121.9 132.7

Non-performing loans (3) solo 4.7 5.1 8.1 10.8 15.5

Coverage ratio (4) solo 53.9 49.5 42.1 46.3 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 non-

performing loans. Source: Bank of 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

European Commission


20

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 Inter-

Ministerial 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.

4. PROGRAMME IMPLEMENTATION AND POLICY DISCUSSIONS

21

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 Comments

Fiscal policy Partially observed

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.

Privatisation and

structural fiscal reforms Partially observed

The quantitative cumulative criterion on privatisation receipts for end-

December was missed by a small margin; several transactions for 2012-

13 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.

Financial sector policy Largely observed

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.

Growth-enhancing

structural reforms Partially observed

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

European Commission


22

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)

Data Criterion 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

end Sep. 2011 end Dec. 2011

Source: Commission services.

Graph 18. State primary payments - 2011

(cumulative, EUR million)

Outcomes and quarterly criteria

Graph 19. Government primary balance – 2011

(cash basis, cumulative balance, EUR million)

Outcomes and quarterly criteria

-7500

-6500

-5500

-4500

-3500

-2500

-1500

-500

500

1500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Outcome

Performance criteria Ceilings

0

10000

20000

30000

40000

50000

60000

70000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Performance criteria

Outcome

Source: GAO and Commission services. Source : GAO and Commission services..

21. The indicative criterion of non-accumulation of arrears was missed by a small margin. 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 95 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.

4. Program implementation and policy discussions

23

Table 9. Implementation monitoring.

Estimated yield of fiscal measures agreed in June and October 2011

2011 2012 2011 2012 2011 2012

Total measures 7 570 18 186 6 729 18 740 -840 554

% of GDP 3.5 8.5 3.1 8.9 -0.4 0.3

Wage bill 743 1 712 735 1 663 -8 -49

% of GDP 0.3 0.8 0.3 0.8 0.0 0.0

Operational expenses 180 262 180 262 0 0

% of GDP 0.1 0.1 0.1 0.1 0.0 0.0

Extra-budgetary funds 304 396 297 404 -7 8

% of GDP 0.1 0.2 0.1 0.2 0.0 0.0

State-owned enterprises 0 414 0 414 0 0

% of GDP 0.0 0.2 0.0 0.2 0.0 0.0

Defence expenditure 0 0 0 0 0 0

% of GDP 0.0 0.0 0.0 0.0 0.0 0.0

Health care 53 267 11 225 -42 -42

% of GDP 0.0 0.1 0.0 0.1 0.0 0.0

Pharmaceutical spending 372 601 372 356 0 -245

% of GDP 0.2 0.3 0.2 0.2 0.0 -0.1

Social benefits 967 2 329 828 2 406 -139 77

% of GDP 0.4 1.1 0.4 1.1 -0.1 0.0

Investment spending 800 804 950 504 150 -300

% of GDP 0.4 0.4 0.4 0.2 0.1 -0.1

Other expenditure 150 360 150 611 0 251

% of GDP 0.1 0.1 0.1 0.3 0.0 0.1

Tax policy 4 001 11 042 3 207 11 895 -794 853

% of GDP 1.8 5.2 1.5 5.6 -0.4 0.4

Oct. 2011 Feb. 2012 Difference(*)

(*) 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.


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.

European Commission


24

Graph 20. Government revenue, expenditure and gross debt

(% of GDP)

100

120

140

160

180

35

40

45

50

55

2007 2008 2009 2010 2011 2012 2013

% of GDP

Expenditure (lhs)

Revenue (lhs)

Debt (rhs)

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 715,882 683,627 664,223

Central government 465,609 446,789 428,041

Legal entities 6,971 6,034 5,490

Local government 95,585 93,194 98,790

Hospitals 88,230 88,564 89,838

Social security funds 31,519 29,471 26,855

SOEs chapter A 22,975 19,565 15,209

Other 4,993 10 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-than-

envisaged 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.


25

Table 11. Main fiscal indicators 2010-14

(EUR billions, unless otherwise noted)

2011 2012 2013 2014

-5.2 -2.0 -4.0 -2.3% of GDP -2.4 -1.0 -2.0 -1.1

General government primary balance target -2.0 3.7 9.4% of GDP -1.0 1.8 4.5

-20.0 -14.8 -17.0 -16.1% of GDP -9.3 -7.3 -8.4 -7.7

-14.8 -9.4 -4.4% of GDP -7.3 -4.6 -2.1

ESA 95 general government balance (consistent with

primary targets)

ESA 95 general government primary balance (projections at

unchanged policies)

ESA 95 general government balance (projections at

unchanged policies)


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).

European Commission


26

Table 12. Deficit and measures accounting:

from the deficit in one year to the next

2009 deficit (outcome) 36 624 15.8

primary deficit drift in 2010 5 681 2.5

change in interest expenditure 894 0.4

measures in 2010 1/ 19 074 8.4

impact on ratio of nominal GDP growth -- 0.3

2010 deficit (outcome) 24 125 10.6


change in interest expenditure 1 964 0.9

measures in 2011 1/ 16 680 7.7


2011 deficit (estimate) 20 002 9.3


change in interest expenditure -2 032 -1.0

measures identified for 2012 1/ 13 191 6.5


2012 deficit (projection) 14 799 7.3




measures to be identified in 2013 7 639 3.8


2013 deficit (target) 2/ 9 359 4.6




measures to be identified for 2014 4 016 1.9

impact on ratio of nominal GDP growth -- -0.1

2014 deficit (target) 2/ 4 404 2.1

EUR million % of GDP

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.


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

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


27

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

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.

European Commission


28

! 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)

60

80

100

120

140

160

180

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

Baseline

autumn 2011 baseline

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.

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


29

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

60

80

100

120

140

160

180

2007 2012 2017 2022 2027

Baseline

Primary surplus not exceeding 1.5

% of GDP

Primary surplus not exceeding 2.5

% of GDP

Stronger growth (+1%)

Low growth (-1%)

Unsuccesful privatisation

30

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4. Programme implementation and policy discussions

31

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 Date of deal Stake sold

Remaining

stakes owned

by the Greek

Government

Proceeds

(cash, EUR

million)

Cumulative

since 2011

(EUR million)

Delayed

payment

OTE July 2011 10% 4% 392 392 -

OPAP 1 (license

extension 2020-

30)

October 2011 - - 375 767 85

(by Q4 2013)

OPAP 2 (sale of new

license for

VLTs)

October 2011 - - 474 1 241 85

(by Q4 2013)

Mobile

Telephony

Spectrum (license

extension)

December

2011 - - 317 1 558 -

Four aircraft

(sale)

February and

March 2012 - - - 1 558

31

(end-March

2012)

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Table 14: Planned privatisation receipts

Cumulative receipts,

cumulative since

2011

By the end of:

(EUR million)

2012 Q1 1 558

Q2 1 558

Q3 2 700

Q4 5 200

2013 9 200

2014 14 000

2015 19 000


33

Table 15: Privatisation - transactions in the pipeline

Project Transferred Advisors Intermediate steps

to Fund by contracted by

I. State-owned enterprise/share sale

2012 Q1 Public Gas (DEPA) 1/ $ Call for tender launched in February 2012.

Q1 Public Gas (DESFA) 1/ $ Call for tender launched in February 2012.

Q1 Football Betting (OPAP) $ $ State aid clearance.

Q2 Hellenic Defense Systems (EAS) 1/ $ Clearance by Ministry of Defense. Adopt restructuring law by

April 2012. State aid clearance.

Q2 Hellenic Petroleum (HELPE) March 2012 2/ March 2012 Sign MoU with Paneuropean April 2012.

Q2 Horse Racing (ODIE) March 2012 2/ $ Adopt restructuring law and establish time-bound concession

rights by March 2012. State aid clearance.

Q2 Athens Water (EYDAP) March 2012 March 2012 Establish regulator and pricing policy by June 2012. Extend

Q2 Thessaloniki Water (EYATH) March 2012 March 2012 Establish regulator and pricing policy by June 2012. Extend

Q2 Mining and Metallurgical Company March 2012 2/ $ Adopt restructuring law by March 2012.

Q2 Hellenic Post (ELTA) 1/ March 2012 Adopt law determining the public service by February 2012.

Q2 Casino Mont Parnes 1/ March 2012 State aid clearance.

Q2 Electricity Company (PPC) 1/ March 2012 Restructuring to be decided by June 2012.

Q3 Hellenic Vehicle Industry (ELVO) 1/ March 2012 Adopt restructuring law by June 2012.

Q4 Railways (Trainose) 1/ August 2012 Ongoing restructuring and last phase of state aid clearance by

June 2012.

2013 Q1 Athens Airport (AIA) March 2012 2/ $

II. Concessions

2011 Q4 Hellenic Motorways $ March 2012 Complete negotiations. Parliamentary ratification of changes in

the concession. Establish regulatory framework by end of 2012.

Q4 State Lottery $ $ Expected financial offer from the three bidders by April 2012.

2012 Q2 Egnatia Odos $ March 2012 Unbundling into services/motorway rights. Establish regulatory

framework by end of 2012.

Q2 Small ports and marinas 1/ $ Identify proper policy. First lot of rights to be transferred by

March 2012. Establish regulatory framework by September

2012.

Q3 Regional airports $ March 2012 Identify proper policy. Establish regulatory framework by

September 2012.

Q4 Thessaloniki Port (OLTH) March 2012 2/ March 2012 Identify proper policy. All port shares voting rights to be

transferred by March 2012. Establish regulatory framework by

September 2012.

Q4 Piraeus Port (OLP) March 2012 2/ March 2012 Identify proper policy. All port shares voting rights to be


September 2012.

Q4 Large regional ports 1/ March 2012 Identify proper policy. All port shares voting rights to be


September 2012.

Q4 South Kavala Gas Storage $ March 2012 Clear legal obstacles by September 2012.

Mining rights

Digital Dividend

III. Real Estate

2011 Q4 Hellenikon 1 March 2012 2/ $ Adopt law on land use by March 2012.

2012 Q1 Sale/repo N buildings $ $ Government to sign rental contracts by May 2012. Transfer

clean title to the HRADF by May 2012.

Q1 Real Estate IBC March 2012 $ Strategic environmental study. ESCHADA to be issued by June

2012. 3/

Q1 Real Estate/Astir Vouliagmenis 1/ $ Negotiations with NBG. ESCHADA to be issued. Process led

by NBG by June 2012.

Q1 Real Estate/Cassiopi March 2012 $ Move NATO radar. ESCHADA to be issued by June 2012.

Q1 Real Estate lot 1 (Afantou) 1/ $ ESCHADA to be issued by June 2012.

Q2 Real Estate lot 2 1/ $ Identify assets by June 2012.

Q3 Real Estate lot 3 1/ $ 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.

Timing of Privatization

(Launch of Tender)

To be determined

To be determined

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34

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;


35

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)

31-Dec-10 31-Mar-11 30-Jun-11 31-Jul-11 30-Sep-11 31-Dec-11

Total State 866.2 1 071.5 980.0 949.9 924.7 588.9

Local Government 577.0 852.8 917.4 955.8 928.5 817.8

Hospitals 1 522.9 1 687.1 1 848.6 1 747.4 1 700.8 1 281.2

Social Security Funds 2 086.4 2 388.0 2 594.8 2 684.1 2 716.1 2 825.6

Other government entities 284.4 245.0 230.3 221.9 233.7 219.1

Total General Government 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

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36

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-than-

expected 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


37

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 short-

to 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

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38

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.


39

Graph 21. Recourse to arbitration to settle

negotiations disputes

0

5

10

15

20

25

30

35

National occupationalagreements

Local occupationalagreements

Sector agreement Firm-level agreement

%

% of agreements set through arbitration(1995-2010)

Source: Greek Government and Commission services calculations

Graph 22. Nominal Unit Labour Cost

(2001=100)

90

100

110

120

130

140

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 and Commission services calculations

European Commission


40

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

Luxembourg 1 274 1 467 1 590 1 662 1 704 1 758

Hungary 158 231 283 266 264 287

Malta 539 558 617 635 660 665

Netherlands 1 167 1 265 1 346 1 390 1 412 1 430

Poland 211 209 325 297 319 348

Portugal 390 437 497 525 554 566

Romania 49 82 138 146 139 158

Slovenia 391 490 553 589 666 748

Slovakia 102 168 255 296 308 317

United Kingdom 994 1 161 1 196 1 054 1 123 1 112

Greece 548 668 794 840 863 870 Source: Eurostat

47. The recently legislated reforms will give a big push to the re-negotiation of collective

agreements. In particular:

! 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-sector-

like tenure and very generous automatic wage increases. Such conditions will be aligned with

those in the wider private sector.


41

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

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42

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

0

1

2

3

4

5

6

Bel

giu

m

Ger

man

y

Slo

vak

Rep

.

Net

her

lan

ds

Den

mar

k

Fra

nce

Sw

eden

Lu

xem

bo

…

Aust

ria

U.K

Hungar

y

Slo

ven

ia

EU

Spai

n

Ital

y

Fin

lan

d

Irel

and

Pola

nd

Est

on

ia

Port

ugal

Cze

ch R

ep.

Gre

ece

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


43

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 e-

filing 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 end-

March 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.

European Commission


44

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 short-

term 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)

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

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)

4.05%

3.98%

3.75%

4.1%4.1%

3.85%

4.1% 4.06% 4.62% 4.58%4.50%

4.56% 4.61%4.63% 4.68%

4.64%

4.61%

4.65%

4.82%

4.54%

4.82%

4.9%

4.64%

4.75%

4.8% 4.88% 4.96% 4.90%

4.85%

4.80% 4.86%

4.89%4.95%

4.90%

4.86%

4.80%

0.0

1.0

2.0

3.0

4.0

5.0

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

13w T-bills 26w T-bills

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


45

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

Interest to be

reimbursed to Greece

(2nd

amendment of

facility agreement)

15 June 2010 3.423% 0.039 -

15 September 2010 3.719% 0.138 -

15 December 2010 3.879% 0.207 -

15 March 2011 4.026% 0.250 -

15 June 2011 4.173% / 2.673%** 0.408 0.147

15 September 2011 4.494% / 2.994%** 0.506 0.170

15 December 2011 4.528% / 3.028%** 0.539 0.179

15 March 2012* 4.426% / 2.926%** 0.527 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.

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47

So

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.

European Commission


48

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.


49

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)

CategoryTotal Outstanding

Principal Amount EUR

Tendered for Exchange

and Vote In Favour

EUR

Consent and Vote

In Favor

%

Reject and Vote

Against

EUR

Reject and

Vote Against

%

GGB Greek Law € 177,252,131,542.39 € 152,042,932,772.40 85.8% € 9,308,013,293.14 5.3%

GGB Foreign Law € 18,644,227,751.00 € 12,680,381,327.41 68.0% € 588,146,961.51 3.1%

SOE € 9,671,766,956.00 € 6,832,321,956.00 70.6% € 462,762,000.00 4.9%

SOE Greek Law € 6,701,326,956.00 € 6,366,276,956.00 95.0% € 0.00 0.0%

SOE Foreign Law € 2,970,440,000.00 € 466,045,000.00 15.7% € 462,762,000.00 15.6%

Total € 205,568,126,249.39 € 171,555,636,055.81 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.

4.5. 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

European Commission


50

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.

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ex

pen

dit

ure

po

lici

es a

gre

ed i

n t

his

an

d p

rev

iou

s m

emo

ran

da

wit

h t

he

aim

of

min

imis

ing

any

def

icit

in

exce

ss o

f th

e d

efic

it c

eili

ng

of

EU

R 1

7 0

65

mil

lio

n i

n 2

01

1,

and

to

red

uce

th

e 2

01

2 d

efic

it t

o b

elo

w

EU

R 1

4 9

16 m

illi

on

, as

est

abli

shed

in t

he

Co

un

cil

Dec

isio

n.

Pa

rtia

lly

ob

serv

ed.

Th

e 2

01

1 g

ov

ern

men

t d

efic

it (

ES

A)

is c

urr

entl

y e

stim

ated

to

hav

e b

een

cl

ose

to

E

UR

2

0

bil

lio

n;

i.e.

ab

ov

e th

e ce

ilin

g

esta

bli

shed

in

May

20

10.

Ho

wev

er,

mo

st p

erfo

rman

ce c

rite

ria

for

Q4

-20

11

hav

e b

een

ob

serv

ed.

Qu

art

erly

per

form

an

ce c

rite

ria (

EU

R b

illi

on

)

C

rite

ria

A

ctu

al

Flo

or

on

the

mod

ifie

d g

ener

al g

ov

ern

men

t p

rim

ary

cas

h b

alan

ce

-5.1

-4

.8

Ob

serv

ed.

Cei

lin

g o

n S

tate

Bu

dg

et p

rim

ary

sp

end

ing

6

0.8

5

9.1

O

bse

rved

.

Cei

lin

g o

n t

he

ov

eral

l st

ock

of

cen

tral

go

ver

nm

ent

deb

t 3

94

.0

37

1.0

O

bse

rved

.

Cei

lin

g o

n t

he

new

gu

aran

tees

gra

nte

d b

y t

he

centr

al g

over

nm

ent

1.0

0

.6

Ob

serv

ed.

Cei

lin

g o

n t

he

accu

mu

lati

on

of

new

ex

tern

al p

aym

ents

arr

ears

on

ex

tern

al d

ebt

con

trac

ted

or

gu

aran

teed

by

gen

eral

go

ver

nm

ent

0

0

O

bse

rved

.

Flo

or

on

pri

vat

isat

ion r

ecei

pts

1

.7

1.6

P

art

iall

y o

bse

rved

(se

e b

elo

w)

Th

e G

ov

ern

men

t ad

op

ts a

nd

im

ple

men

ts t

he

foll

ow

ing

mea

sure

s p

rior

to t

he

sixth

dis

bu

rsem

ent

(i.e

. in

Dec

emb

er 2

01

1):

-A r

edu

ctio

n i

n t

ax e

xem

pti

on

s, i

n p

arti

cula

r th

e ta

x-f

ree

per

son

al i

nco

me

thre

sho

lds,

wit

h t

he

aim

of

incr

easi

ng

rev

enu

e by

at

leas

t E

UR

2 8

31 m

illi

on i

n 2

01

2;

-A p

erm

anen

t le

vy

on r

eal

esta

te,

coll

ecte

d t

hro

ugh t

he

elec

tric

ity

invoic

es,

wit

h t

he

aim

of

coll

ecti

ng a

t le

ast

EU

R 1

667

mil

lio

n i

n 2

01

1, an

d i

ncr

easi

ng

am

ou

nts

in

su

bse

qu

ent

yea

rs;

-An

im

med

iate

im

ple

men

tati

on

of

the

rev

ised

wag

e g

rid

fo

r ci

vil

ser

van

ts,

wh

ich

co

ntr

ibu

tes

to r

edu

ce e

xp

endit

ure

by

at

leas

t

EU

R 1

01

mil

lio

n i

n 2

01

1,

and

wit

h a

car

ry o

ver

of

at l

east

EU

R 5

52

mil

lio

n f

or

20

12

, ad

dit

ional

to

sav

ing

s p

rov

ided

in

th

e

MT

FS

(M

ediu

m-T

erm

F

isca

l S

trat

egy

th

rou

gh

2

01

5,

of

Jun

e 2

01

1).

T

his

re

form

sh

ou

ld co

ver

al

l g

ener

al g

ov

ern

men

t

emp

loy

ees,

exce

pt

tho

se c

over

ed b

y s

pec

ial

wag

e re

gim

es.

Th

ese

net

sav

ing

s ta

ke

into

acc

ou

nt

the

imp

act

of

this

mea

sure

on

inco

me

tax

an

d s

oci

al s

ecuri

ty c

oll

ecti

on,

as w

ell

as b

on

use

s to

be

pai

d t

o s

pec

ific

em

plo

yee

cat

ego

ries

;

-A c

ut

in m

ain,

and

su

pp

lem

enta

ry,

pen

sio

ns,

as

wel

l as

in l

um

p s

um

s pai

d o

n r

etir

emen

t, w

ith t

he

aim

of

savin

g a

t le

ast

EU

R

21

9 m

illi

on i

n 2

01

1 w

ith

a c

arry

ov

er o

f E

UR

446

mil

lio

n i

n 2

012

, ad

dit

ional

to s

avin

gs

pro

vid

ed f

or

in t

he

MT

FS

;

-Sp

end

ing

by

the

Gre

en F

un

d i

s ca

pp

ed a

t 5 p

erce

nt

of

thei

r dep

osi

ts,

wit

h t

he

aim

of

sav

ing

EU

R 3

60

mil

lio

n i

n 2

01

2.

Ob

serv

ed.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

52

Th

e G

ov

ern

men

t al

so a

do

pts

th

e fo

llo

win

g

acts

(w

hic

h c

on

cern

mea

sure

s in

clu

ded

in

the

MT

FS

), p

rior

to t

he

sixth

dis

bu

rsem

ent:

-Min

iste

rial

Dec

isio

ns

or

circ

ula

rs t

o s

tart

co

llec

tio

n o

f ex

cise

s o

n n

atu

ral

gas

, hea

tin

g o

il a

nd v

ehic

le t

ax m

easu

res;

-Min

iste

rial

Dec

isio

ns

to u

nif

orm

ly r

egu

late

hea

lth

ben

efit

s fo

r so

cial

sec

uri

ty f

un

ds;

-Leg

isla

tio

n f

or

the

coll

ecti

on

of

the

soli

dar

ity

surc

har

ge

thro

ug

h w

ith

ho

ldin

g;

-Min

iste

rial

Dec

isio

ns

that

in

itia

te c

losi

ng

, m

erg

ing

or

sub

stan

tial

ly d

ow

nsi

zin

g e

nti

ties

are

ad

opte

d.

Th

is a

ffec

ts K

ED

, E

TA

,

OD

DY

, N

atio

nal

Yo

uth

In

stit

ute

, E

OM

EX

, IG

ME

, O

SK

, D

EP

AN

OM

, T

HE

MIS

, E

TH

YA

GE

an

d E

RT

, an

d 3

5 o

ther

sm

alle

r

enti

ties

sp

ecif

ied i

n t

he

'sec

on

d i

mp

lem

enta

tio

n b

ill';

-Min

iste

rial

Dec

isio

ns

spec

ify

ing t

he

dis

abil

ity

cri

teri

a co

nsi

sten

t w

ith

ach

ievin

g t

he

MT

FS

sav

ing o

bje

ctiv

es;

-A L

aw t

o f

reez

e th

e in

dex

atio

n o

f m

ain a

nd

su

pp

lem

enta

ry p

ensi

on

s th

rou

gh

20

15

;

-Fin

alis

e th

e p

osi

tiv

e li

st f

or

ph

arm

aceu

tica

ls t

hat

est

abli

sh p

rice

s ch

arg

ed t

o s

oci

al s

ecu

rity

fu

nd

s.

Ob

serv

ed.

Th

e G

ov

ern

men

t p

rep

ares

th

e b

ud

get

fo

r 2

01

2 [

No

vem

ber

20

11]

in l

ine

wit

h t

he

MT

FS

tar

get

s, t

his

Mem

ora

nd

um

, an

d t

he

Co

un

cil

Dec

isio

n's

def

icit

cei

ling

s. I

nfo

rmat

ion

on

th

e se

ver

al m

easu

res

pro

vid

ed f

or

in t

he

MT

FS

wil

l b

e u

pd

ated

an

d m

ade

pu

bli

c.

Th

e se

ver

al t

ax a

nd

ex

pen

dit

ure

leg

isla

tive

acts

th

at a

re n

eces

sary

to

im

ple

men

t th

e b

ud

get

are

ado

pte

d a

t th

e sa

me

tim

e o

f

the

bu

dget

. [D

ecem

ber

2011]

Ob

serv

ed.

In o

rder

to

pre

par

e th

e m

easu

res

that

wil

l b

e ad

op

ted

wit

h t

he

201

3 a

nd

20

14 b

ud

get

s, t

he

Go

ver

nm

ent

init

iate

s a

rev

iew

of

pu

bli

c ex

pen

dit

ure

pro

gra

mm

es t

hat

sh

ou

ld b

e co

mp

lete

d b

y J

un

e 2012,

wit

h t

he

aim

of

iden

tify

ing m

easu

res

amo

un

tin

g t

o 3

per

cent

of

GD

P (

incl

udin

g o

ne

per

cen

t o

f G

DP

in

co

nti

ng

ency

mea

sure

s).

The

revie

w w

ill

dra

w o

n e

xte

rnal

tec

hn

ical

assi

stan

ce a

nd

wil

l fo

cus

on

pen

sio

ns

and

so

cial

tra

nsf

ers

(in

a m

ann

er t

hat

wil

l p

rese

rve

bas

ic s

oci

al p

rote

ctio

n);

def

ence

spen

din

g w

ithout

pre

judic

e to

th

e def

ence

cap

abil

ity

of

the

countr

y;

and r

estr

uct

uri

ng o

f ce

ntr

al a

nd l

oca

l ad

min

istr

atio

ns.

By

the

sam

e d

ate,

ad

just

men

ts t

o s

pec

ial

wag

e re

gim

es;

furt

her

rat

ional

izat

ion

of

ph

arm

aceu

tica

l sp

end

ing

an

d o

per

atio

nal

spen

din

g o

f h

osp

ital

s, a

nd w

elfa

re c

ash

ben

efit

s w

ill

also

be

spec

ifie

d.

No

t ye

t a

ppli

cable

.

Th

e M

inis

try

of

Fin

ance

en

sure

s a

tig

ht

sup

ervis

ion

of

exp

end

iture

co

mm

itm

ents

by

the

go

ver

nm

ent

dep

artm

ents

, in

clu

din

g

extr

a-b

ud

get

ary

fu

nd

s, p

ub

lic

inv

estm

ent

bu

dg

et,

soci

al s

ecu

rity

fu

nd

s an

d h

osp

ital

s, l

oca

l g

ov

ern

men

ts a

nd

sta

te-o

wn

ed

ente

rpri

ses,

an

d a

n e

ffec

tive

tax

co

llec

tio

n,

in o

rder

to

sec

ure

th

e p

rog

ram

me

qu

anti

tati

ve

crit

eria

(A

rtic

le 1

(2

an

d 3

) o

f th

e

Co

un

cil

Dec

isio

n,

and o

f th

e M

EF

P).

Th

e G

ov

ern

men

t st

and

s re

ady

to d

efin

e an

d e

nac

t ad

dit

ional

mea

sure

s, i

f n

eed

ed,

in o

rder

to

res

pec

t th

e b

ud

get

ary

cei

lin

gs

esta

bli

shed

in t

he

Co

un

cil

Dec

isio

n.

Ob

serv

ed.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

53

Tab

le A

2-S

tru

ctu

ral

Ref

orm

s

C

om

men

ts

Ass

et m

an

ag

emen

t a

nd

pri

vati

sati

on

Th

e G

ov

ern

men

t im

ple

men

ts t

he

pri

vat

isat

ion p

rog

ram

me

wit

h t

he

aim

of

coll

ecti

ng

EU

R 3

5 b

illi

on

by

en

d-2

01

4 a

nd

EU

R

50

bil

lio

n b

y e

nd-2

01

5 (

see

cum

ula

tive

quar

terl

y t

arget

s in

Annex

1,

plu

s th

e ban

k e

quit

y a

cquir

ed t

hro

ug

h r

ecap

ital

isat

ion

).

Th

e G

ov

ern

men

t st

and

s re

ady

to

off

er f

or

sale

its

rem

ain

ing

sta

kes

in

sta

te-o

wn

ed e

nte

rpri

ses,

if

nec

essa

ry i

n o

rder

to r

each

the

pri

vat

isat

ion o

bje

ctiv

es.

Pu

bli

c co

ntr

ol

wil

l b

e li

mit

ed o

nly

to

cas

es o

f cr

itic

al n

etw

ork

in

fras

truct

ure

.

Pa

rtia

lly

ob

serv

ed.

Co

mp

ared

to t

he

targ

et o

f E

UR

1 7

00 m

illi

on (

whic

h w

as

def

ined

io

n a

cas

h b

asis

), t

he

Go

ver

nm

ent

coll

ecte

d E

UR

1 5

58

mil

lio

n i

n c

ash

(si

nce

Ju

ne

20

11

).

To

en

sure

that

the

pla

n o

bje

ctiv

es a

re a

chie

ved

, th

e G

over

nm

ent

conti

nuousl

y t

ransf

ers

asse

ts t

o t

he

Hel

len

ic R

epub

lic

Ass

et

Dev

elopm

ent

Fund (

HR

AD

F).

In

par

ticu

lar,

pri

or

to t

he

sixth

dis

bu

rsem

ent,

it

wil

l tr

ansf

er t

o t

he

pri

vat

isat

ion

fun

d t

he

foll

ow

ing

ass

ets:

Alp

ha

Ban

k (

0.6

19

% o

f sh

ares

);

Nat

ion

al B

ank o

f G

reec

e (1

.23

4%

of

shar

es);

Pir

aeu

s B

ank (

1.3

08

% o

f sh

ares

);

Pir

aeu

s P

ort

Au

tho

rity

(2

3.1

% o

f sh

ares

);

Th

essa

lon

iki

Po

rt A

uth

ori

ty (

23.3

% o

f sh

ares

);

Ele

fsin

a, L

avri

o,

Igo

um

ents

ia,

Ale

xan

dro

po

uli

s, V

olo

s, K

aval

a, C

orf

u,

Pat

ras,

Raf

ina,

Her

akli

on p

ort

auth

ori

ties

(1

00

%);

Ath

ens

Wat

er a

nd

Sew

erag

e C

om

pan

y (

27.3

%);

Thes

salo

nik

i W

ater

and S

ewer

age

Co

mp

any

(4

0%

);

Reg

ional

sta

te a

irport

s (t

ransf

er o

f co

nce

ssio

n r

igh

ts);

Off

-sh

ore

nat

ura

l g

as s

tora

ge

faci

lity

'So

uth

Kav

ala'

(tr

ansf

er o

f ri

gh

ts o

f cu

rren

t an

d f

utu

re c

once

ssio

ns)

;

Hel

lenic

mo

torw

ays

(tra

nsf

er o

f ec

on

om

ic r

ights

of

curr

ent

and

futu

re c

once

ssio

ns)

;

Eg

nat

ia o

do

s (1

00

%);

Hel

lenic

Po

st (

90

%);

OP

AP

, S

A (

29%

)

4 s

tate

buil

din

gs.

Th

e le

gal

, te

chn

ical

an

d f

inan

cial

ad

vis

ors

fo

r at

lea

st f

ou

rtee

n o

f th

ese

tran

sact

ion

s th

at a

re p

lan

ned

un

til

end

-20

12 a

re

app

oin

ted

pri

or

to t

he

sixth

dis

bu

rsem

ent.

Ob

serv

ed.

Fo

r th

e oth

er t

ran

sact

ion

s pla

nn

ed f

or

20

12, ad

vis

ors

are

ap

po

inte

d b

y e

nd

-Novem

ber

2011

Pa

rtia

lly

ob

serv

ed.

10

ou

t o

f th

e 1

4 p

roje

cts

for

20

12

an

d 6

ou

t o

f 1

7 p

roje

cts

for

2013 a

re f

ull

y s

taff

ed

Th

e G

ov

ern

men

t co

nti

nu

es c

om

pil

ing

an

d p

ubli

shin

g a

n i

nven

tory

of

stat

e-o

wn

ed a

sset

s, i

ncl

ud

ing s

tak

es i

n l

iste

d a

nd

no

n-

list

ed e

nte

rpri

ses

and

co

mm

erci

ally

via

ble

rea

l es

tate

an

d l

and t

o e

nsu

re i

t is

co

mp

reh

ensi

ve.

Th

e in

ven

tory

wil

l be

pu

bli

shed

in

su

cces

siv

e st

ages

by

en

d-2

011,

mid

-2012 a

nd

en

d-2

012.

On

go

ing

.

Th

e st

rate

gic

pla

n f

or

the

dev

elo

pm

ent

of

real

est

ate

asse

ts

wh

ich

incl

ud

es c

ateg

ori

zati

on o

f re

al e

stat

e as

sets

in

gro

up

s is

exp

ecte

d t

o b

e co

mp

lete

d b

y J

une

20

12

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

54

Th

e G

ov

ern

men

t ac

cele

rate

s st

ate

lan

d o

wn

ersh

ip r

egis

trat

ion

, an

d a

do

pts

sec

on

dar

y l

egis

lati

on

on t

ou

rism

ho

usi

ng

an

d o

n

land u

se [

Q4

-201

1].

Pa

rtia

lly

ob

serv

ed.

Th

e F

irst

Im

ple

men

tati

on B

ill

(Ch

apte

r 2

, A

rts

10

-17

) in

clu

des

the

dev

elo

pm

ent

of

stat

e p

rop

erty

(p

ub

lic

lan

d).

Sti

ll p

end

ing:

Rev

isio

n o

f M

inis

teri

al D

ecis

ion

on S

trat

egic

Spat

ial

Pla

nnin

g

Fra

mew

ork

fo

r T

ou

rism

; an

d r

evis

ion

of

Law

on l

and

-use

pla

nn

ing.

A n

ew G

ener

al S

ecre

tari

at o

f P

ub

lic

Pro

per

ty i

s es

tab

lish

ed a

nd m

ade

oper

atio

nal

wit

h t

he

aim

of

impro

vin

g m

anag

emen

t of

real

est

ate

asse

ts,

clea

rin

g t

hem

of

encu

mb

rance

s an

d p

repar

ing t

hem

fo

r p

rivat

isat

ion

. T

he

real

est

ate

enti

ties

KE

D a

nd

ET

A

are

mer

ged

an

d p

rofe

ssio

nal

ly m

anag

ed i

n c

oo

rdin

atio

n w

ith

th

e H

RD

AF

. T

he

HR

DA

F c

reat

es s

ix r

eal

esta

te p

ort

foli

os.

[Q4

-20

11

].

Pro

ceed

s fr

om

pri

vat

isat

ion o

f fi

nan

cial

an

d n

on

-fin

anci

al a

sset

s d

o n

ot

sub

stit

ute

fis

cal

con

soli

dat

ion

eff

ort

s an

d w

ill

not

be

con

sid

ered

wh

en a

sses

sin

g c

om

pli

ance

of

the

annu

al g

ener

al g

over

nm

ent

def

icit

wit

h t

he

ceil

ing e

stab

lish

ed i

n t

he

Co

un

cil

Dec

isio

n (

see

tech

nic

al m

emora

ndum

of

under

stan

din

g).

When

res

truct

uri

ng s

tate

-ow

ned

ente

rpri

ses

wit

h a

vie

w t

o p

rep

arin

g t

hem

fo

r p

rivat

isat

ion,

spec

ific

att

enti

on w

ill

be

giv

en

to a

tim

ely

cle

aran

ce o

f st

ate

aid i

ssues

.

Ob

serv

ed.

Th

e G

ener

al S

ecre

tari

at o

f P

ub

lic

Pro

per

ty h

as b

een

est

abli

shed

.

KE

D a

nd

ET

A h

ave

bee

n m

erged

(E

TA

D).

The

HR

AD

F h

as

crea

ted t

he

six

rea

l es

tate

po

rtfo

lios.

Fig

hti

ng

wa

ste

in p

ub

lic

ente

rpri

ses

an

d o

ther

pu

bli

c en

titi

es

Th

e le

gal

act

on t

he

tran

sfer

to t

he

Sta

te o

f th

e m

ob

ile

and i

mm

ob

ile

asse

ts o

f en

titi

es t

hat

are

clo

sed i

s ad

opte

d.

[en

d-2

011]

O

bse

rved

.

Th

e as

sets

are

tra

nsf

erre

d t

o t

he

Sta

tes

acco

rdin

g t

o e

ach

act

s

that

clo

ses

pu

bli

c en

titi

es.

Tar

iffs

in

OA

SA

, O

SE

gro

up a

nd o

ther

sta

te-o

wned

ente

rpri

ses

incr

ease

by

at

leas

t 2

5 p

erce

nt,

wh

ile

thei

r b

usi

nes

s p

lan

s ar

e

app

rop

riat

ely

upd

ated

. [Q

1-2

01

3]

No

t ye

t a

ppli

cable

.

Tax p

oli

cy a

nd r

even

ue

adm

inis

trati

on

ref

orm

s

In l

ine

wit

h t

he

anti

-tax

evas

ion

act

ion p

lan, th

e G

ov

ern

men

t w

ill

step

up a

udit

s o

f la

rge-

scal

e ta

x p

ayer

s, h

igh

-wea

lth

ind

ivid

ual

s an

d s

elf-

emp

loy

ed,

it w

ill

acce

lera

te t

he

reso

luti

on o

f ta

x a

rrea

rs,

and b

ette

r in

teg

rate

anti

-lau

nder

ing t

ools

in

to

the

stra

tegy

. P

rog

ress

wil

l be

mon

ito

red b

y q

uan

tita

tiv

e in

dic

ato

rs.

Thes

e q

uan

tita

tiv

e in

dic

ato

rs a

nd

co

mp

lian

ce w

ith

thes

e

targ

ets

wil

l be

monit

ore

d a

nd m

ade

pu

bli

c.

Th

e au

dit

s o

f 1 7

00

hig

h-w

ealt

h a

nd

sel

f-em

plo

yed

in

div

idual

s id

enti

fied

by

th

e an

ti-e

vas

ion t

ask f

orc

e w

ill

be

init

iate

d

imm

edia

tely

.

Ob

serv

ed w

ith

del

ay

.

To

ad

van

ce t

he

refo

rms

of

rev

enue

adm

inis

trat

ion

, th

e G

ov

ern

men

t:

- ac

tiv

ates

a l

arge-

tax

pay

ers

unit

; [e

nd

-Oct

ob

er 2

011]

- re

mo

ves

bar

rier

s to

eff

ecti

ve

tax

ad

min

istr

atio

n b

y i

mp

lem

enti

ng t

he

key

ref

orm

s o

f th

e n

ew t

ax l

aw,

incl

ud

ing r

epla

cin

g

man

ager

s w

ho

do

no

t m

eet

per

form

ance

tar

get

s [e

nd

-2011],

rea

sses

sin

g t

ax a

udit

ors

’ q

ual

ific

atio

ns

[en

d-2

011]

and h

irin

g

new

au

dit

ors

in t

he

cou

rse

of

20

12

- m

akes

op

erat

ion

al t

he

new

ly c

reat

ed f

ast-

trac

k a

dm

inis

trat

ive

dis

pu

te r

eso

luti

on

bo

dy

to

dea

l ra

pid

ly w

ith l

arge

dis

pu

te

case

s (i

.e.

wit

hin

90

day

s).

[No

vem

ber

20

11

]

- ce

ntr

alis

es t

he

fu

nct

ion

s o

f, a

nd m

erg

es, at

lea

st 3

1 t

ax o

ffic

es b

y e

nd

-Oct

ob

er 2

011,

and m

erg

es,

31 t

ran

sfer

s

com

pet

ence

s, e

lim

inat

es m

anag

emen

t posi

tions

and c

lose

s so

me

20

0 l

oca

l ta

x o

ffic

es i

den

tifi

ed a

s in

effi

cien

t, i

n t

he

cours

e of

20

12

-

puts

in p

lace

a n

ew I

T s

yst

em t

hat

in

terc

on

nec

ts a

ll t

ax o

ffic

es.

Pa

rtia

lly

ob

serv

ed.

31

tax

off

ices

clo

sed

or

mer

ged

an

d k

ey f

un

ctio

ns

con

soli

dat

ed

Per

form

ance

-bas

ed c

ontr

acts

fo

r au

dit

ors

hav

e b

een

ap

pro

ved

.

Rea

sses

smen

t o

f ta

x a

udit

ors

’ q

ual

ific

atio

ns

is o

ng

oin

g.

Th

e la

rge

tax

pay

er u

nit

has

bee

n e

stab

lish

ed,

but

not

yet

full

y

staf

fed

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

55

Th

e p

rep

arat

ion o

f th

e n

ew I

T s

yst

em i

nv

olv

es t

he

foll

ow

ing

mai

n s

tep

s in

rel

atio

n t

o t

he

new

dat

a ce

ntr

e, w

eb-f

acin

g a

nd

bac

k-o

ffic

e ap

pli

cati

on

s:

-15

new

ele

ctro

nic

ser

vic

es a

nd e

nh

ance

men

ts a

re r

un

nin

g b

y e

nd

-Dec

emb

er 2

01

1.

Thes

e co

nce

rn m

ain

ly t

he

corp

ora

te

inco

me

tax.

- th

e n

ew d

ata

cen

tre

har

dw

are

is i

n p

lace

an

d r

unn

ing

by

en

d-M

arc

h 2

01

2;

- 2

0 m

ore

new

ele

ctro

nic

ser

vic

es a

nd

en

han

cem

ents

by

en

d-J

un

e 2012.

Th

ese

con

cern

mai

nly

tax

es w

ith

hel

d a

t so

urc

e.

-dat

abas

e an

d a

pp

lica

tio

n d

esig

n a

nd

im

ple

men

tati

on

, b

y e

nd

-Oct

ob

er 2

01

2;

-8 r

emai

nin

g n

ew e

lect

ron

ic s

erv

ices

an

d e

nh

ance

men

ts b

y e

nd

-Dec

emb

er 2

01

2.

Thes

e co

nce

rn f

orm

s fi

led

lat

e w

ith

a f

ine,

real

-est

ate

tax,

and

VA

T a

dm

inis

trat

ion.

-sy

stem

an

d u

ser

test

s, u

ser

trai

nin

g,

and m

igra

tion

of

all

tax o

ffic

es t

o t

he

centr

aliz

ed d

atab

ase:

by

en

d-D

ecem

ber

20

12

;

-op

erat

ion

al u

se o

f th

e n

ew I

T i

nfr

astr

uct

ure

by

all

tax

off

ices

: 1 J

an

ua

ry 2

01

3.

Ob

serv

ed.

or

No

t ye

t a

ppli

cable

.

To

sp

eed u

p t

ax-r

elat

ed j

ud

icia

l ap

pea

ls, th

e gover

nm

ent

has

cre

ated

the

poss

ibil

ity

of

ded

icat

ed c

ourt

cham

ber

s fo

r ta

x c

ases

;

24

ch

amb

ers

are

exp

ecte

d t

o b

e op

erat

ion

al b

y e

nd

-2011.

O

bse

rved

.

Th

e G

over

nm

ent

pre

par

es a

tax

ref

orm

th

at a

ims

at s

impli

fyin

g t

he

tax s

yst

em,

elim

inat

ing e

xem

pti

ons,

incl

udin

g a

nd

bro

aden

ing b

ases

, th

us

allo

win

g r

edu

ctio

ns

in t

ax r

ates

in a

pru

den

t an

d f

isca

lly

-neu

tral

man

ner

. T

his

rel

ates

to

th

e p

erso

nal

inco

me

tax

, co

rpo

rate

in

com

e ta

x a

nd

VA

T, as

wel

l as

so

cial

co

ntr

ibu

tio

ns.

Th

e re

form

wil

l al

so s

imp

lify

th

e C

od

e o

f B

oo

ks

and

Rec

ord

s. [

Ma

rch

20

12

]

No

t ye

t a

ppli

cable

Pu

bli

c fi

na

nci

al

ma

na

gem

ent

refo

rms

A p

lan

for

the

clea

rance

of

arre

ars

is p

ub

lish

ed i

n N

ov

emb

er 2

01

1.

The

Go

ver

nm

ent

ensu

res

that

the

sto

ck o

f ar

rear

s st

ead

ily

dec

lin

es f

rom

the

sixth

dis

bu

rsem

ent

on

wa

rds.

Dat

a o

n a

rrea

rs a

re p

ub

lish

ed m

on

thly

wit

h a

lag

of

no

t m

ore

th

an 2

0 d

ays

afte

r th

e en

d o

f ea

ch m

on

th.

No

t o

bse

rved

.

Th

e del

ays

in t

he

sist

h d

isb

urs

emen

t d

id n

ot

allo

w p

rep

arin

g a

pla

n f

or

the

clea

ran

ce o

f ar

rear

s. H

ow

ever

, av

aila

ble

dat

a

ind

icat

ed t

hat

the

sto

ck o

f ar

rear

s to

su

pp

lier

s d

ecli

ned

in t

he

fou

rth

qu

arte

r o

f 2

01

1.

To

str

ength

en e

xp

end

itu

re c

ontr

ol,

th

e G

ov

ern

men

t:

app

oin

ts p

erm

anen

t fi

nan

cial

acc

ou

nti

ng

off

icer

s in

all

Min

istr

ies

[en

d-N

ov

emb

er 2

01

1];

conti

nues

the

pro

cess

of

esta

bli

shin

g c

om

mit

men

t re

gis

trie

s, w

hic

h s

ho

uld

co

ver

th

e w

ho

le g

ener

al g

ov

ern

men

t; [

Q1

-20

12

]

enfo

rces

th

e o

bli

gat

ion o

f a

cco

un

tin

g o

ffic

ers

to r

epo

rt c

om

mit

men

ts, in

clu

din

g b

y e

nac

tin

g s

anct

ion

s to

enti

ties

not

sub

mit

tin

g t

he

dat

a an

d d

isci

pli

nar

y a

ctio

n f

or

acco

un

tin

g o

ffic

ers;

[Q

1-2

01

2]

tab

les

legis

lati

on s

trea

mli

nin

g t

he

pro

ced

ure

fo

r su

bm

issi

on

an

d a

pp

rov

al o

f su

pp

lem

enta

ry b

ud

get

s. [

Feb

ruary

2012]

Ob

serv

ed.

or

No

t ye

t a

ppli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

56

To

mo

der

nis

e pu

bli

c a

dm

inis

tra

tio

n

Fu

nct

ion

al

revi

ews

Th

e G

ov

ern

men

t as

sess

es t

he

resu

lts

of

the

firs

t ph

ase

of

the

indep

end

ent

fun

ctio

nal

rev

iew

of

cen

tral

ad

min

istr

atio

n.

This

asse

ssm

ent

wil

l re

sult

in

an

act

ion

pla

n f

or

the

imp

lem

enta

tio

n o

f o

per

atio

nal

po

licy

rec

om

men

dat

ion

s. T

hes

e

reco

mm

end

atio

ns

sho

uld

det

erm

ine

ho

w t

o a

chie

ve

a m

ore

str

eam

lin

ed a

nd

eff

ecti

ve

pu

bli

c se

rvic

e, t

o d

efin

e cl

ear

resp

on

sib

ilit

ies

and

co

mm

and

lin

es o

f m

inis

teri

al d

epar

tmen

ts,

elim

inat

ing

over

lapp

ing

co

mp

eten

ces,

an

d t

o i

mp

rov

e in

ter-

and

intr

a- m

ob

ilit

y.

[Oct

ob

er 2

01

1]

A s

eco

nd

phas

e o

f th

e re

vie

w w

ill

lead

to

an

act

ion

pla

n a

nd t

o t

he

dra

ftin

g o

f fr

amew

ork

leg

isla

tion

by

en

d-2

011.

On

go

ing

.

Th

e O

EC

D R

epo

rt o

n c

entr

al a

dm

inis

trat

ion r

eform

s w

as

pu

bli

shed

in

Dec

emb

er 2

01

1.

The

reco

mm

end

atio

ns

of

this

rep

ort

are

bei

ng

co

nsi

der

ed b

y t

he

auth

ori

ties

.

A r

oad

map

has

bee

n i

den

tifi

ed t

o i

mp

lem

ent

thes

e re

form

s

thro

ug

ho

ut

20

12.

A d

raft

law

is

bei

ng

pre

par

ed.

Th

e o

ng

oin

g f

unct

ional

rev

iew

of

exis

tin

g s

oci

al p

rog

ram

mes

is

final

ised

[Q

4-2

01

1].

A s

eco

nd

phas

e w

ill

incl

ude

a m

ore

det

aile

d r

evie

w o

f sp

ecif

ic s

oci

al p

rog

ram

mes

, ai

min

g a

t re

du

cin

g e

xce

ssiv

e

frag

men

tati

on

, gen

erat

ing

sav

ings

and

cre

atin

g e

ffic

ien

cies

. [Q

1-2

01

2]

On

go

ing

.

A j

oin

t O

EC

D-I

MF

Tec

hn

ical

Ass

ista

nce

tea

m h

as c

oll

ecte

d

dat

a on s

oci

al p

rogra

mm

es f

rom

all

lin

e m

inis

trie

s. A

fin

al

rep

ort

is

expec

ted

sh

ort

ly.

Th

e se

con

d p

has

e w

ill

be

mer

ged

wit

h t

he

fun

ctio

nal

rev

iew

and

the

fin

al r

epo

rt w

ill

be

read

y s

ho

rlty

.

Pu

bli

c se

cto

r w

ag

es a

nd

hu

ma

n r

eso

urc

e m

an

ag

emen

t

Th

e G

ov

ern

men

t p

ub

lish

es a

med

ium

-ter

m s

taff

ing

pla

n [

end

-Dec

emb

er 2

01

1]

for

the

per

iod

up t

o 2

01

5,

in l

ine

wit

h t

he

rule

of

1 r

ecru

itm

ent

for

5 e

xit

s. T

he

recr

uit

men

t/ex

it r

ule

ap

pli

es t

o g

ener

al g

ov

ern

men

t as

a w

ho

le w

ith

out

sect

ora

l

exce

pti

on

s.

No

t o

bse

rved

.

Med

ium

-ter

m s

taff

ing

pla

ns

iden

tify

ing t

he

recr

uit

men

t nee

ds

of

each

min

istr

y h

ave

no

t y

et b

een

pu

bli

shed

.

Bef

ore

en

d-2

011,

abo

ut

15 0

00

sta

ff c

urr

entl

y e

mp

loy

ed b

y v

ario

us

go

ver

nm

ent

enti

ties

are

tra

nsf

erre

d t

o t

he

labo

ur

rese

rve,

wh

ile

abo

ut

15

00

0 w

ill

be

pla

ced

in

pre

-ret

irem

ent.

Sta

ff i

n t

he

lab

ou

r re

serv

e, a

nd

in

pre

-ret

irem

ent,

wil

l be

pai

d a

t 6

0

per

cent

of

thei

r b

asic

wag

e (e

xcl

ud

ing

ov

erti

me

and o

ther

extr

a pay

men

ts)

for

not

more

th

an 1

2 m

on

ths,

aft

er w

hic

h t

hey

wil

l

be

dis

mis

sed

. T

his

per

iod o

f 1

2 m

on

ths

may

be

exte

nd

ed u

p t

o 2

4 m

on

ths

for

staf

f cl

ose

to r

etir

emen

t. P

aym

ents

to s

taff

wh

ile

in t

he

lab

ou

r re

serv

e ar

e co

nsi

der

ed p

art

of

thei

r se

ver

ance

pay

men

ts.

No

t o

bse

rved

.

Appro

xim

atel

y, 10 0

00 e

mplo

yee

s le

ft t

he

publi

c se

ctor

under

the

pre

-ret

irem

ent

sch

eme.

As

a re

sult

of

mer

ges

an

d c

lose

rs,

63

0 e

mp

loy

ees

wer

e sh

ifte

d i

n t

he

lab

ou

r re

serv

e.

Ad

dit

ion

al r

edu

nd

ant

staf

f w

ill

be

tran

sfer

red

to

the

lab

ou

r re

serv

e in

the

cou

rse

of

20

12,

in c

on

nec

tio

n w

ith t

he

iden

tifi

cati

on

of

enti

ties

or

unit

s th

at a

re c

lose

d o

r d

ow

nsi

zed

, an

d i

n c

ase

the

recr

uit

men

t ru

le i

s v

iola

ted

. S

taff

tra

nsf

erre

d t

o t

he

Go

ver

nm

ent

from

eit

her

sta

te-o

wn

ed e

nte

rpri

ses

or

oth

er e

nti

ties

un

der

res

truct

uri

ng

are

co

nsi

der

ed a

s n

ew r

ecru

itm

ents

. T

he

sam

e ap

pli

es t

o s

taff

in

th

e la

bo

ur

rese

rve

that

is

tran

sfer

red t

o o

ther

go

ver

nm

ent

enti

ties

, af

ter

scre

enin

g o

f p

rofe

ssio

nal

qu

alif

icat

ion

s by

AS

EP

un

der

its

reg

ula

r ev

alu

atio

n c

rite

ria.

The

ov

eral

l in

take

in t

he

pro

fess

ional

sch

ools

(e.

g.

mil

itar

y a

nd

po

lice

aca

dem

ies)

is

adju

sted

in

lin

e w

ith

the

staf

fin

g p

lan

s.

No

t ye

t a

ppli

cable

.

Th

e st

affi

ng p

lan

s p

er M

inis

try

an

d e

ach

gro

up o

f p

ub

lic

enti

ties

wil

l in

clu

de

tig

hte

r ru

les

for

tem

po

rary

sta

ff,

cance

llat

ion

of

vac

ant

job p

ost

an

d r

eall

oca

tio

n o

f q

ual

ifie

d s

taff

to

pri

ori

ty a

reas

an

d t

akes

in

to a

cco

un

t th

e ex

ten

sio

n o

f w

ork

ing h

ou

rs i

n

the

pu

bli

c se

cto

r. T

he

staf

fin

g p

lan

s an

d m

on

thly

dat

a o

n s

taff

mo

vem

ents

(en

trie

s, e

xit

s, t

ran

sfer

s am

on

g e

nti

ties

) o

f th

e

sev

eral

go

ver

nm

ent

dep

artm

ents

are

pu

bli

shed

on t

he

web

. [m

on

thly

sta

rtin

g e

nd

-No

vem

ber

20

11

]

No

t o

bse

rved

.

Med

ium

-ter

m s

taff

ing

pla

ns

iden

tify

ing t

he

recr

uit

men

t nee

ds

of

each

min

istr

y h

as n

ot

yet

bee

n p

rep

ared

.

Th

e G

ov

ern

men

t co

mm

issi

on

s an

ex

per

t as

sess

men

t of

the

new

wag

e gri

d.

[en

d-2

011]

Th

is a

sses

smen

t w

ill

focu

s o

n t

he

wag

e d

rift

that

is

emb

edd

ed i

n t

he

new

pro

mo

tio

n m

ech

anis

m.

If t

he

asse

ssm

ent

rev

eals

any

exce

ssiv

e w

age

dri

ft,

the

pro

mo

tio

n r

ule

s ar

e ad

just

ed b

efo

re e

nd

-2012.

No

pro

mo

tio

n t

akes

pla

ce b

efo

re t

he

asse

ssm

ent

and

adju

stm

ent

to t

he

pro

mo

tio

n r

ule

s.

No

t o

bse

rved

or

not

yet

appli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

57

Pu

bli

c p

rocu

rem

ent

Th

e G

ov

ern

men

t la

unch

es t

he

dev

elo

pm

ent

of

an e

-pro

cure

men

t IT

pla

tfo

rm a

nd s

ets

inte

rmed

iate

mil

esto

nes

in l

ine

wit

h t

he

acti

on

pla

n.

Thes

e m

iles

ton

es i

ncl

ud

e te

stin

g a

pil

ot

ver

sio

n,

avai

lab

ilit

y o

f al

l fu

nct

ional

itie

s fo

r al

l co

ntr

acts

an

d p

has

ing

-in

of

the

man

dat

ory

use

of

e-p

rocu

rem

ent

syst

em f

or

suppli

es,

serv

ices

and w

ork

s. [

Oct

ob

er 2

01

1]

Ob

serv

ed.

Th

e co

ntr

act

to d

evel

op a

n e

-pro

cure

men

t p

latf

orm

was

sig

ned

on

14

Oct

ober

20

11

. T

he

firs

t m

od

ule

on e

-au

ctio

ns

is e

xp

ecte

d

to b

e o

per

atio

nal

in

Mar

ch 2

01

2. T

he

e-p

rocu

rem

ent

pla

tfo

rm i

s

for

sup

pli

es o

nly

. It

wil

l at

a l

ater

sta

ge

acco

mm

od

ate

serv

ices

and

even

tual

ly, p

ub

lic

wo

rks.

A t

ho

rou

gh

rev

iew

of

the

syst

em o

f re

dre

ss a

gai

nst

aw

ard p

roce

du

res

and t

he

role

to

co

nfe

r to

th

e S

PP

A i

s ca

rrie

d o

ut,

in

agre

emen

t w

ith t

he

Eu

ropea

n C

om

mis

sio

n. [Q

4-2

01

1]

On

goin

g.

Th

e C

om

mis

sio

n h

as r

ecei

ved

so

me

dat

a o

n a

ppea

ls l

od

ged

thro

ug

ho

ut

the

var

iou

s st

ages

of

the

life

of

pro

cure

men

t

con

trac

ts b

ased

on

a q

ues

tio

nnai

re s

ub

mit

ted t

o 5

00

pu

bli

c

bo

die

s. D

ata

refe

r to

20

10 a

nd t

o t

he

firs

t hal

f of

20

11

to

pro

cure

men

t o

f g

oo

ds

and

ser

vic

es.

Lo

okin

g f

orw

ard

, dat

a

sho

uld

als

o i

nd

icat

e am

on

g o

ther

s, h

ow

man

y a

ppea

ls r

each

the

jud

icia

l sy

stem

an

d c

ov

er o

ther

ty

pes

of

pro

cure

men

t co

ntr

acts

,

such

as

wo

rks.

Th

e M

inis

try

of

Dev

elo

pm

ent,

Co

mp

etit

iven

ess

and

Sh

ipp

ing

is

wo

rkin

g o

n d

raft

leg

isla

tio

n t

o r

edu

ce t

he

nu

mb

er o

f st

eps

wit

hin

the

life

of

a p

rocu

rem

ent

con

trac

t w

her

e dec

isio

ns

of

the

con

trac

tin

g a

uth

ori

ties

th

at c

an b

e ap

pea

led

.

Th

e G

ov

ern

men

t u

nd

erta

kes

a r

evie

w i

den

tify

ing

are

as t

o i

ncr

ease

th

e ef

fici

ency

of

the

pu

bli

c p

rocu

rem

ent

syst

em o

uts

ide

the

SP

PA

, as

spec

ifie

d i

n t

he

Act

ion P

lan

. T

he

revie

w i

ncl

udes

co

ncl

usi

ons

and a

ctio

ns

in a

gre

emen

t w

ith t

he

Euro

pea

n

Co

mm

issi

on

. [Q

4-2

011]

On

goin

g.

Gre

ece

has

alr

eady

su

bm

itte

d a

pre

lim

inar

y s

tudy

whic

h m

aps

nu

mer

ou

s o

ther

pu

bli

c b

od

ies

wit

h p

ub

lic

pro

cure

men

t

com

pet

ence

s an

d p

oin

ts t

o p

oss

ible

fri

ctio

ns

wit

h t

he

man

dat

e

of

the

Sin

gle

Publi

c P

rocu

rem

ent

Auth

ori

ty (

SP

PA

). T

he

Tas

kfo

rce

Gre

ece

(TF

GR

) is

rea

dy

to

pro

vid

e te

chn

ical

assi

stan

ce o

n p

ub

lic

pro

cure

men

t co

mm

itm

ents

an

d i

n t

his

resp

ect,

a s

tudy

sy

nth

esis

ing m

ain

pro

vis

ion

s o

f nat

ional

pu

bli

c

pro

cure

men

t le

gis

lati

on i

s b

ein

g p

rep

ared

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

58

Th

e G

ov

ern

men

t is

sues

dec

isio

ns,

in c

on

sult

atio

n w

ith

the

Co

mm

issi

on

ser

vic

es

- to

pro

vid

e fo

r th

e in

stit

uti

on

and

est

abli

shm

ent

of

posi

tions

for

the

SP

PA

’s p

erso

nnel

, as

wel

l as

for

the

org

anis

atio

n o

f hu

man

res

ou

rces

an

d s

erv

ices

of

the

Au

tho

rity

in a

cco

rdan

ce w

ith t

he

pro

vis

ion

s o

f th

e la

w o

n t

he

SP

PA

; [O

ctob

er 2

011]

- to

ap

po

int

the

mem

ber

s o

f th

e S

PP

A;

[O

ctob

er 2

011]

- to

pro

vid

e fo

r th

e oper

atio

nal

reg

ula

tion o

f th

e S

PP

A.

[Q4

-20

11

]

Th

e S

PP

A s

tart

s it

s o

per

atio

ns

wit

h t

he

nec

essa

ry r

eso

urc

es t

o f

ulf

il i

ts m

and

ate,

obje

ctiv

es,

com

pet

ence

s an

d p

ow

ers

as

def

ined

in t

he

law

on t

he

SP

PA

and t

he

Act

ion P

lan a

gre

ed w

ith t

he

Eu

ropea

n C

om

mis

sio

n i

n N

ov

emb

er 2

01

0.

Th

is i

ncl

ud

es

the

adopti

on o

f th

e oper

atio

nal

reg

ula

tion o

f th

e S

PP

A.

[Ja

nu

ary

20

12

]

No

t o

bse

rved

.

Th

e e-

pro

cure

men

t pla

tfo

rm i

s fu

lly

oper

atio

nal

, an

d a

co

mm

on

web

site

is

crea

ted

fo

r th

e p

ubli

cati

on

of

all

pro

cure

men

t

pro

ced

ure

s an

d o

utc

om

es.

[Oct

ob

er 2

01

2]

No

t ye

t a

ppli

cable

.

To

com

ple

te t

he

pen

sio

n r

efo

rm

Th

e N

atio

nal

Act

uar

ial

Au

tho

rity

(N

AA

) co

nti

nues

th

e su

bm

issi

on

of

lon

g-t

erm

pro

ject

ion

s o

f p

ensi

on

ex

pen

dit

ure

up

to

20

60

un

der

th

e ad

op

ted

ref

orm

. T

he

pro

ject

ion

s en

com

pas

s th

e m

ain

su

pp

lem

enta

ry (

aux

ilia

ry)

sch

emes

(E

TE

AM

, T

EA

DY

,

MT

PY

), b

ased

on

co

mp

reh

ensi

ve

dat

a co

llec

ted a

nd e

labora

ted b

y t

he

NA

A.

The

pro

ject

ion

wil

l b

e p

eer-

revie

wed

an

d

val

idat

ed b

y t

he

EU

Eco

no

mic

Po

licy

Co

mm

itte

e an

d t

he

Eu

ropea

n C

om

mis

sio

n,

EC

B, an

d I

MF

sta

ff.

Fo

r th

e re

mai

nin

g

sup

ple

men

tary

sch

emes

, th

e sa

me

pro

ced

ure

is

foll

ow

ed. [e

nd

-No

vem

ber

20

11

]

Ob

serv

ed.

Lo

ng

-ter

m p

roje

ctio

ns

of

pen

sion

ex

pen

dit

ure

wer

e su

bm

itte

d

and

pre

sente

d a

t th

e A

WG

, p

eer-

rev

iew

ed a

nd e

ndo

rsed

by

the

AW

G o

f th

e E

con

om

ic P

oli

cy C

om

mit

tee.

Th

e li

st o

f h

eavy

an

d a

rdu

ou

s p

rofe

ssio

ns

is r

evis

ed a

nd

its

co

ver

age

is r

edu

ced

to

les

s th

an 1

0 p

erce

nt

of

emplo

ym

ent.

The

new

lis

t o

f dif

ficu

lt a

nd

haz

ard

ous

occ

up

atio

ns

(Law

38

63

/20

10

) is

pu

bli

shed

by

en

d-O

ctob

er 2

011 a

nd

ap

pli

es

imm

edia

tely

to a

ll w

ork

ers.

No p

rofe

ssio

n w

ill

be

added

to

the

list

aft

er i

ts r

evis

ion

.

Ob

serv

ed.

Th

e li

st h

as b

een r

evis

ed w

ith c

ateg

ori

es b

ein

g r

emo

ved

an

d

som

e n

ew o

nes

ad

ded

in.

It n

ow

co

ver

s le

ss t

han

10

per

cen

t o

f

curr

ent

emp

loy

men

t.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

59

In a

dd

itio

n t

o a

n i

nit

ial

cut

(see

above)

, th

e G

over

nm

ent

pro

ceed

s w

ith

an i

n-d

epth

rev

isio

n o

f th

e fu

nct

ion

ing o

f

seco

nd

ary

/su

pp

lem

enta

ry p

ubli

c p

ensi

on

fu

nd

s, i

ncl

ud

ing w

elfa

re f

un

ds

and l

um

p-s

um

sch

emes

. T

he

aim

of

the

revis

ion

is

to

stab

ilis

e p

ensi

on e

xp

endit

ure

, g

uar

ante

e th

e b

ud

get

ary

neu

tral

ity

of

thes

e sc

hem

es,

and e

nsu

re m

ediu

m-

and

lo

ng-t

erm

sust

ainab

ilit

y o

f th

e sy

stem

. T

he

revis

ion a

chie

ves

:

- a

furt

her

red

uct

ion

in t

he

nu

mb

er o

f ex

isti

ng f

und

s;

- th

e el

imin

atio

n o

f im

bal

ance

s in

th

ose

fu

nd

s w

ith

def

icit

s;

- th

e st

abil

isat

ion

of

the

curr

ent

spen

din

g a

t su

stai

nab

le l

evel

, th

rou

gh

ap

pro

pri

ate

adju

stm

ents

to b

e m

ade

fro

m 1

Jan

uar

y

20

12

;

- th

e lo

ng

-ter

m s

ust

ain

abil

ity

of

seco

nd

ary

sch

emes

thro

ug

h a

str

ict

lin

k b

etw

een

co

ntr

ibu

tio

ns

and

ben

efit

s. [

Q4-2

01

1]

Th

e re

form

of

the

seco

ndar

y/s

upp

lem

enta

ry s

chem

es i

s d

esig

ned

in

co

nsu

ltat

ion

wit

h E

uro

pea

n C

om

mis

sio

n,

EC

B a

nd

IM

F

staf

f, a

nd

its

est

imat

ed i

mp

act

on l

on

g-t

erm

su

stai

nab

ilit

y i

s v

alid

ated

by

the

EU

Eco

no

mic

Po

licy

Co

mm

itte

e. T

he

par

amet

ers

of

the

new

sec

on

dar

y n

oti

onal

def

ined

-co

ntr

ibuti

on

syst

em e

nsu

re l

on

g-t

erm

act

uar

ial

bal

ance

, as

ass

esse

d b

y t

he

NA

A.

[leg

isla

tion

: Q

4-2

01

1;

imple

men

tati

on

: Q

1-2

01

2]

Ob

serv

ed w

ith

del

ay

.

The

NA

A p

roje

ctio

ns

show

that

ther

e ar

e su

bst

anti

al d

efic

its

in

sup

ple

men

tary

pen

sio

n f

un

ds

(clo

se t

o 0

.4%

of

GD

P)

wh

ich

wil

l in

crea

se o

ver

tim

e if

no r

efo

rm t

oo

k p

lace

.

A f

ram

ework

law

to r

eform

su

pp

lem

enta

ry p

ensi

on

sch

emes

was

ad

op

ted i

n F

ebru

ary

20

12

Th

e G

ov

ern

men

t id

enti

fies

the

sch

emes

fo

r w

hic

h l

um

p s

um

s p

aid o

n r

etir

emen

t ar

e o

ut

of

lin

e w

ith

co

ntr

ibu

tio

ns

pai

d,

[No

vem

ber

20

11

] an

d a

dju

sts

the

pay

men

ts.

[Q1-2

01

2]

No

t o

bse

rved

.

Ho

wev

er, th

ere

has

alr

eady

bee

n a

dju

stm

ent

to l

um

p s

um

s p

aid

on

ret

irem

ent.

Th

e re

form

co

ntr

ibu

tes

to a

chie

vin

g t

he

over

arch

ing

tar

get

of

red

uci

ng

th

e o

ver

all

(bas

ic,

contr

ibu

tory

, su

pp

lem

enta

ry a

nd

any

oth

er r

elat

ed s

chem

e, i

ncl

ud

ing

lu

mp

sum

s at

ret

irem

ent)

in

crea

se o

f p

ub

lic

sect

or

pen

sio

n s

pen

din

g,

over

th

e per

iod

20

09

-60

, to

un

der

2.5

per

cen

tag

e p

oin

ts o

f G

DP

. If

the

pro

ject

ions

by

the

NA

A s

how

th

at, ev

en a

fter

th

e re

form

s o

f th

e

sup

ple

men

tary

sch

emes

, th

e pro

ject

ed i

ncr

ease

in t

he

tota

l p

ub

lic

pen

sio

n e

xpen

dit

ure

exce

eds

the

lim

it o

f 2.5

per

cen

tag

e

po

ints

of

GD

P o

ver

20

09

-60,

The

Go

ver

nm

ent

rev

ises

als

o t

he

mai

n p

aram

eter

s o

f th

e pen

sio

n s

yst

em p

rov

ided

by

Law

38

63

/20

10

. [Q

4-2

01

1]

No

t ye

t a

ppli

cable

.

Th

e H

ealt

h C

om

mit

tees

set

up b

y L

aw 3

86

3/2

01

0 w

ill

star

t o

per

atin

g t

he

pla

nn

ed r

evis

ion

of

dis

abil

ity

sta

tus

and

pro

du

ce a

firs

t q

uar

terl

y r

epo

rt o

f it

s ac

tiv

itie

s by

en

d-D

ecem

ber

20

11.

Pa

rtia

lly

ob

serv

ed.

Th

e C

om

mit

tee

has

sta

rted

oper

atin

g w

ith s

ub

stan

tial

del

ay

com

par

ed t

o i

nit

ial

tim

etab

le a

nd h

as j

ust

sta

rted

rev

isin

g t

he

dis

abil

ity

cat

egori

es. T

he

rep

ort

has

no

t bee

n s

ub

mit

ted

.

Th

e o

bje

ctiv

e is

to

red

uce

th

e d

isab

ilit

y p

ensi

on

s to

no

t m

ore

than

10

per

cent

of

the

ov

eral

l n

um

ber

of

pen

sio

ns.

Fo

r th

is

pu

rpo

se,

the

def

init

ion

of

dis

abil

ity

an

d r

esp

ecti

ve

rule

s w

ill

be

revis

ed, an

d t

he

centr

al e

val

uat

ion

off

ice

is o

per

atio

nal

sin

ce

Sep

tem

ber

2011

.

Pa

rtly

ob

serv

ed.

Cen

tral

eval

uat

ion

off

ice

is i

n o

per

atio

n b

ut

no

rep

ort

has

bee

n

pro

du

ced

.

Th

e G

ov

ern

men

t im

ple

men

ts t

he

refo

rm o

f th

e se

con

dar

y/s

up

ple

men

tary

pen

sio

n s

chem

es,

by

mer

gin

g f

un

ds

and s

tart

ing

th

e

calc

ula

tio

n o

f ben

efit

s o

n t

he

bas

is o

f th

e n

ew n

oti

on

al d

efin

ed-c

ontr

ibu

tio

n s

yst

em.

The

Gover

nm

ent

free

zes

no

min

al

sup

ple

men

tary

pen

sio

ns

and

red

uce

s th

e re

pla

cem

ent

rate

s fo

r ac

cru

ed r

ights

in f

und

s w

ith

def

icit

s, b

ased

on

th

e ac

tuar

ial

study

pre

par

ed b

y t

he

NA

A.

In c

ase

the

actu

aria

l st

udy

is

not

read

y,

repla

cem

ent

rate

s ar

e re

duce

d,

star

ting f

rom

1 J

anuar

y

20

12

, to

av

oid

def

icit

s. A

ll f

un

ds

set

up a

co

mp

ute

rise

d s

yst

em o

f in

div

idual

pen

sion a

ccounts

. [Q

1-2

012]

Th

e B

ank

of

Gre

ece

com

mit

s n

ot

to g

rant

pen

sio

n p

riv

ileg

es t

o i

ts s

taff

an

d t

o r

evis

e th

e m

ain p

aram

eter

s of

its

pen

sion

sch

eme,

so

th

at t

hey

rem

ain a

lig

ned

to t

ho

se o

f IK

A.

No

t ye

t a

ppli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

60

To

mo

der

nis

e th

e h

ealt

h c

are

sys

tem

Th

e G

ov

ern

men

t co

nti

nu

es t

o i

mp

lem

ent

the

com

pre

hen

siv

e re

form

of

the

hea

lth c

are

syst

em s

tart

ed i

n 2

01

0 w

ith t

he

ob

ject

ive

of

kee

pin

g p

ub

lic

hea

lth

ex

pen

dit

ure

at

or

bel

ow

6 p

erce

nt

of

GD

P,

wh

ile

mai

nta

inin

g u

niv

ersa

l ac

cess

and

imp

rov

ing

th

e qu

alit

y o

f ca

re d

eliv

ery

. P

oli

cy m

easu

res

incl

ud

e th

e in

teg

rati

on o

f p

rim

ary

hea

lthca

re,

stre

ng

then

ing c

entr

al

pro

cure

men

t an

d e

-hea

lth c

apac

ity

.

On

go

ing

wit

h d

elay

.

Th

e re

form

is

con

tin

uin

g a

nd

th

ere

has

bee

n s

om

e p

rog

ress

.

Ho

wev

er, th

ere

hav

e bee

n d

elay

s an

d i

n s

om

e ar

eas,

lik

e

ph

arm

aceu

tica

ls,

ther

e has

bee

n a

lac

k o

f p

oli

cy i

mp

lem

enta

tio

n

i.e.

ag

reed

mea

sure

s h

ave

no

t b

een

im

ple

men

ted.

Th

e G

ov

ern

men

t co

nti

nu

es t

o u

nd

erta

ke

mea

sure

s y

ield

ing

sav

ings

on

ph

arm

aceu

tica

ls o

f at

lea

st E

UR

2 b

illi

on r

elat

ive

to

the

20

10 l

evel

, of

wh

ich

at

leas

t E

UR

1 b

illi

on i

n 2

01

1. T

his

wil

l b

rin

g a

ver

age

pub

lic

spen

din

g o

n o

utp

atie

nt

ph

arm

aceu

tica

ls t

o a

bo

ut

1 p

erce

nt

of

GD

P (

in l

ine

wit

h t

he

EU

aver

age)

by

en

d 2

01

2.

Pa

rtia

lly

ob

serv

ed.

Th

ere

has

bee

n a

red

uct

ion i

n o

utp

atie

nt

phar

mac

euti

cal

exp

end

itu

re o

f al

mo

st E

UR

1 b

illi

on

sin

ce 2

00

9 b

ut

the

red

uct

ion

in 2

011

co

mp

ared

to 2

01

0 w

as n

egli

gib

le.

Th

is h

as

bee

n d

ue

to t

he

lack

of

imp

lem

enta

tio

n o

f st

ruct

ura

l an

d g

oo

d

pra

ctic

e re

form

s re

gar

din

g p

har

mac

euti

cals

wh

ich a

re c

om

mo

n

in o

ther

EU

co

un

trie

s. T

he

red

uct

ion

in s

pen

din

g w

as m

ain

ly

du

e to

a o

ne-

off

acr

oss

-th

e-b

oar

d c

ut

in p

rice

s an

d e

ntr

y f

ees

for

the

po

siti

ve

list

.

Ad

dit

ion

al m

easu

res

wer

e le

gis

late

d i

n F

ebru

ary

an

d M

arch

20

12

.

Th

e p

rovis

ion

s of

Art

icle

31

an

d 3

2 o

f L

aw 3

86

3/2

01

0 a

re i

mp

lem

ente

d.

In p

arti

cula

r, t

he

Hea

lth

Ben

efit

Co

ord

inat

ion

Co

un

cil

(SY

SP

Y):

- co

nti

nu

es t

he

wo

rk o

n e

stab

lish

ing

new

cri

teri

a an

d t

erm

s fo

r th

e co

ncl

usi

on

s o

f co

ntr

acts

by

soci

al s

ecuri

ty f

unds

wit

h a

ll

hea

lth

care

pro

vid

ers,

an

d a

ll o

ther

act

ion

s en

vis

aged

in A

rtic

le 3

2 w

ith

th

e ai

m o

f ac

hie

vin

g t

he

targ

eted

red

uct

ion i

n

spen

din

g;

- in

itia

tes

join

t pu

rch

ase

of

med

ical

ser

vic

es a

nd

go

od

s to

ach

iev

e su

bst

anti

al e

xp

end

itu

re r

educt

ion

of

at l

east

25

per

cent

com

par

ed t

o 2

010

th

rou

gh

pri

ce-v

olu

me

agre

emen

ts. [Q

4-2

01

1]

On

go

ing

.

New

ty

pes

of

con

trac

ts h

ave

bee

n e

stab

lish

ed a

nd

so

me

pri

ce-

vo

lum

e ag

reem

ents

hav

e b

een

mad

e. T

he

wo

rk n

eed

s to

sp

eed

up

an

d i

nte

nsi

fy.

Th

e G

ov

ern

men

t eq

ual

ises

th

e co

mm

on

ben

efit

pac

kag

e fo

r th

e in

sure

rs o

f E

OP

YY

, w

ith t

he

aim

of

full

eq

ual

isat

ion o

f

ben

efit

s an

d c

ontr

ibu

tio

ns

acro

ss f

un

ds

by

Dec

emb

er 2

011.

Ob

serv

ed.

Contr

ibuti

ons

pai

d b

y O

GA

mem

ber

s ar

e pro

gre

ssiv

ely

equal

ised

to t

hose

of

oth

er m

ember

s of

EO

PY

Y,

as e

nvis

aged

in t

he

med

ium

-ter

m f

isca

l st

rate

gy

. T

he

pro

cess

of

equal

isat

ion o

f co

ntr

ibu

tio

ns

is l

egis

late

d b

y e

nd

-2011,

imp

lem

ente

d i

n J

an

uary

20

12

an

d w

ill

be

com

ple

ted

in

30 m

on

ths.

O

ngoin

g.

EO

PY

Y s

tart

s o

per

atin

g b

y e

nd

-Oct

ob

er 2

011

. T

he

new

fu

nd

wil

l le

ad t

o a

su

bst

anti

al r

edu

ctio

n o

f ad

min

istr

ativ

e st

aff

of

at

leas

t 5

0 p

erce

nt

and

of

con

trac

ted

do

cto

rs o

f at

lea

st 2

5 p

erce

nt

as c

om

par

ed t

o t

he

fou

r o

rigin

atin

g f

un

ds

com

bin

ed.

Th

e ai

m

is t

o a

chie

ve

a ra

tio

of

pat

ients

per

do

cto

r in

lin

e w

ith

the

Euro

pea

n a

ver

age.

On

go

ing

wit

h d

elay

.

EO

PY

Y h

as n

om

inal

ly s

tart

ed t

o o

per

ate

on

ly i

n J

anu

ary

20

12

,

wit

h s

ign

ific

ant

del

ay, an

d o

nly

a m

ino

r par

t of

the

adm

inis

trat

ive

staf

f al

loca

ted

to

EO

PY

Y h

as p

hy

sica

lly

mo

ved

to i

ts o

ffic

es a

nd s

tart

ed w

ork

ing f

ull

tim

e in

EO

PY

Y.

Th

ere

has

bee

n a

dec

reas

e in

the

nu

mber

of

contr

acts

wit

h d

oct

ors

,

tho

ug

h t

he

nu

mb

er o

f d

oct

ors

un

der

co

ntr

act

rem

ain

s v

ery

hig

h

by

EU

sta

ndar

ds.

Th

e G

ov

ern

men

t re

vo

kes

mar

ket

reg

ula

tio

n 4

0 (

17

.12

.19

90

) to

abo

lish

the

0.4

per

cen

t co

ntr

ibu

tio

n o

f w

ho

lesa

le s

ales

pri

ces

in f

avo

ur

of

the

Pan

hel

len

ic P

har

mac

euti

cal

Ass

oci

atio

n. [Q

4-2

011

] O

bse

rved

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

61

An

act

ion

pla

n i

s ad

op

ted

by

ear

ly N

ovem

ber

20

11

, b

ased

on

the

final

rep

ort

of

the

task

forc

e (s

ee b

elow

), i

ncl

udin

g a

tim

etab

le f

or

con

cret

e ac

tio

ns.

[Q

4-2

01

1]

On

go

ing

wit

h d

elay

.

Ther

e w

as a

del

ay i

n t

he

subm

issi

on o

f th

e fi

nal

rep

ort

of

the

Tas

k F

orc

e (s

ubm

itte

d i

n J

anuar

y 2

01

2).

As

a co

nse

qu

ence

,

ther

e h

as b

een n

o g

ov

ern

men

t ac

tio

n p

lan

so f

ar.

Pri

cin

g o

f m

edic

ines

an

d m

edic

al

serv

ices

Th

e G

ov

ern

men

t u

pd

ates

the

com

ple

te p

rice

lis

t fo

r th

e m

edic

ines

in t

he

mar

ket

, usi

ng a

new

pri

cing m

echan

ism

bas

ed o

n t

he

thre

e E

U c

ountr

ies

wit

h t

he

low

est

pri

ces.

Th

e li

st w

ill

be

up

dat

ed o

n a

qu

arte

rly

bas

is.

[Novem

ber

2011]

Ob

serv

ed w

ith

del

ay

.

Fee

s fo

r m

edic

al s

erv

ices

ou

tso

urc

ed t

o p

riv

ate

pro

vid

ers

are

revie

wed

wit

h t

he

aim

of

reduci

ng

rel

ated

co

sts

by

at

leas

t 1

5

per

cent

in 2

01

1, an

d b

y a

n a

dd

itio

nal

15 p

erce

nt

in 2

01

2. [Q

4-2

011

]

On

go

ing

wit

h d

elay

.

Lim

ited

red

uct

ion

in

th

e p

rice

of

serv

ices

co

ntr

acte

d t

o p

rivat

e

pro

vid

ers

has

bee

n r

eali

sed

so

far

in

so

me

area

s bu

t n

eed

to

be

exte

nded

to o

ther

are

as.

Ad

dit

ion

al m

easu

res

wer

e le

gis

late

d i

n F

ebru

ary

an

d M

arch

20

12

.

Sta

rtin

g f

rom

20

12

, th

e p

har

mac

ies'

pro

fit

mar

gin

s ar

e ca

lcu

late

d a

s a

flat

am

ou

nt

or

flat

fee

com

bin

ed w

ith a

sm

all

pro

fit

mar

gin

wit

h t

he

aim

of

red

uci

ng t

he

over

all

pro

fit

mar

gin

to n

o m

ore

than

15 p

erce

nt,

incl

ud

ing o

n t

he

mo

st e

xp

ensi

ve

dru

gs

as d

efin

ed i

n l

aw 3

81

6/2

01

0. [Q

1-2

01

2]

No

t ye

t a

ppli

cable

.

Pre

scri

bin

g a

nd m

on

ito

rin

g

Th

e G

ov

ern

men

t:

- p

ub

lish

es b

ind

ing

pre

scri

pti

on g

uid

elin

es f

or

phy

sici

ans

def

ined

by

EO

F o

n t

he

bas

is o

f in

tern

atio

nal

pre

scri

pti

on

gu

idel

ines

to e

nsu

re a

co

st-e

ffec

tive

use

of

med

icin

es;

[No

vem

ber

20

11

]

- p

ub

lish

es a

nd

co

nti

nu

ou

sly

up

dat

es t

he

po

siti

ve

list

of

reim

bu

rsed

med

icin

es u

sing

th

e re

fere

nce

pri

ce s

yst

em d

evel

op

ed b

y

EO

F.

[No

vem

ber

20

11

]

Pa

rtia

lly

ob

serv

ed.

On

ly a

bo

ut

15

0 g

uid

elin

es h

ave

bee

n p

ubli

shed

(w

ith

sub

stan

tial

del

ays)

. N

o g

uid

elin

e h

as b

een i

mp

lem

ente

d o

r m

ade

bin

din

g s

o f

ar.

A p

osi

tive

list

of

reim

bu

rsed

med

icin

es h

as b

een

pu

bli

shed

but

it d

oes

no

t w

ork

as

a st

and

ard "

refe

ren

ce p

rice

mec

han

ism

" fo

r re

imb

urs

emen

t. I

t is

use

d a

s a

list

of

pro

duct

s

reim

bu

rsed

by

the

Sta

te,

wit

h a

n e

ntr

y f

ee c

har

ged

to

new

med

icin

es o

n t

he

list

.

Ad

dit

ion

al m

easu

res

wer

e le

gis

late

d i

n F

ebru

ary

an

d M

arch

20

12

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

62

Th

e G

ov

ern

men

t ta

kes

fu

rther

mea

sure

s to

ex

ten

d i

n a

co

st-e

ffec

tive

way

th

e e-

pre

scri

bin

g o

f m

edic

ines

, dia

gn

ost

ics

and

doct

ors

' ref

erra

ls t

o a

ll s

oci

al s

ecuri

ty f

un

ds,

hea

lth

cen

tres

an

d h

osp

ital

s. I

n c

om

pli

ance

wit

h E

U p

rocu

rem

ent

rule

s, t

he

Go

ver

nm

ent

cond

uct

s th

e nec

essa

ry t

end

erin

g p

roce

du

res

to i

mp

lem

ent

a co

mp

reh

ensi

ve

and

unif

orm

hea

lth c

are

info

rmat

ion

syst

em (

e-hea

lth s

yst

em).

[Q

4-2

01

1]

Pa

rtia

lly

ob

serv

ed.

Th

e te

nd

er f

or

e-p

resc

rip

tio

n h

as b

een

lau

nch

ed w

ith

sig

nif

ican

t

del

ays

and

is

ong

oin

g. T

her

e has

bee

n s

om

e ex

ten

sio

n o

f th

e e-

pre

scri

pti

on

sy

stem

bu

t ver

y l

imit

ed a

nd

un

succ

essf

ul:

les

s th

an

40 p

erce

nt

of

doct

ors

pre

scri

be

elec

tro

nic

ally

an

d t

he

shar

e o

f

ou

tpat

ien

t p

har

mac

euti

cal

exp

endit

ure

co

ver

ed b

y e

-pre

scri

pti

on

is 1

2 p

erce

nt.

Ther

e is

no

eff

ecti

ve

contr

ol

of

vo

lum

e an

d v

alu

e

of

pre

scri

pti

on a

nd

do

cto

rs' b

ehav

iou

r.

EO

PY

Y a

nd t

he

rem

ainin

g s

oci

al s

ecuri

ty f

un

ds

esta

bli

sh a

pro

cess

to

reg

ula

rly

ass

ess

the

info

rmat

ion

ob

tain

ed t

hro

ug

h t

he

e-p

resc

ribin

g s

yst

em a

nd p

rod

uce

reg

ula

r re

po

rts,

at

leas

t o

n a

quar

terl

y b

asis

, to

be

tran

smit

ted t

o t

he

com

pet

ent

auth

ori

ties

in t

he

Min

istr

y o

f L

abo

ur,

Min

istr

y o

f H

ealt

h,

Min

istr

y o

f F

inan

ce a

nd E

LS

TA

T. M

onit

ori

ng a

nd

ass

essm

ent

is c

arri

ed o

ut

thro

ug

h a

ded

icat

ed c

om

mo

n u

nit

un

der

SY

SP

Y. F

eed

bac

k i

s p

rov

ided

to

eac

h p

hy

sici

an a

t le

ast

ever

y q

uar

ter

and a

yea

rly

rep

ort

is

pu

bli

shed

. S

anct

ion

s an

d p

enal

ties

wil

l b

e en

forc

ed a

s a

foll

ow

-up

to t

he

asse

ssm

ent.

[Q

4-2

01

1]

No

t o

bse

rved

.

Th

e ded

icat

ed u

nit

has

no

t y

et b

een

cre

ated

in E

OP

YY

. ID

IKA

has

do

ne

a bas

ic a

sses

smen

t o

f th

e n

um

ber

an

d v

alu

e o

f

pre

scri

pti

on

s by

dif

fere

nt

fun

ds.

Fee

db

ack a

nd s

anct

ion

s re

mai

n

spo

rad

ic. N

ever

thel

ess,

new

co

ntr

acts

bet

wee

n E

OP

YY

and

pri

vat

e p

hy

sici

ans

are

mo

re s

trin

gen

t re

gar

din

g p

resc

rip

tio

n

beh

avio

ur.

Th

e G

ov

ern

men

t st

arts

to

pro

duce

a s

emi-

ann

ual

rep

ort

on t

he

pre

scri

pti

on a

nd c

on

sum

pti

on

of

med

icin

es a

nd d

iagn

ost

ic

test

s. T

his

rep

ort

in

clu

des

info

rmat

ion o

n t

he

reb

ate

rece

ived

fro

m p

har

mac

ies

and

fro

m p

har

mac

euti

cal

com

pan

ies

and

on

the

volu

me

and v

alu

e o

f m

edic

ines

. T

he

Min

istr

y o

f H

ealt

h p

rov

ides

a f

eed

bac

k r

epo

rt t

o a

ll p

hy

sici

ans

on t

hei

r pre

scri

pti

on

vo

lum

e an

d v

alue,

at

leas

t o

n a

quar

terl

y b

asis

. M

on

ito

rin

g a

nd

rep

ort

ing

of

mis

con

du

ct a

nd

co

nfl

ict

of

inte

rest

in

pre

scri

pti

on

beh

avio

ur

are

inte

nsi

fied

. [Q

4-2

01

1]

No

t o

bse

rved

.

E-p

resc

ribin

g c

ov

ers

all

med

ical

act

s (m

edic

ines

, re

ferr

als,

dia

gn

ost

ics,

su

rger

y)

in b

oth

NH

S f

acil

itie

s an

d p

rovid

ers

con

trac

ted b

y E

OP

YY

an

d t

he

soci

al s

ecuri

ty f

unds.

Det

aile

d m

onth

ly a

udit

ing r

eport

s ar

e pro

duce

d b

y N

HS

fac

ilit

ies

and b

y

pro

vid

ers.

[Q

1-2

01

2]

No

t ye

t a

ppli

cable

.

Incr

easi

ng u

se o

f gen

eric

med

icin

es

Ad

dit

ion

al m

easu

res

are

tak

en t

o p

rom

ote

the

use

of

gen

eric

med

icin

es t

hro

ug

h:

- se

ttin

g t

he

max

imu

m p

rice

of

gen

eric

s to

60

per

cen

t o

f th

e bra

nded

med

icin

e w

ith

sim

ilar

act

ive

sub

stan

ce;

[Nov

emb

er

20

11

]

- es

tabli

shin

g a

nd

mo

nit

ori

ng

com

pu

lso

ry e

-pre

scri

pti

on b

y a

ctiv

e su

bst

ance

an

d o

f le

ss e

xpen

sive

gen

eric

s w

hen

av

aila

ble

;

[Q4

-20

11

] -

asso

ciat

ing a

low

er c

ost

-sh

arin

g r

ate

to g

ener

ic m

edic

ines

th

at h

ave

a si

gnif

ican

tly

lo

wer

pri

ce t

han

the

refe

ren

ce p

rice

(lo

wer

than

60 p

erce

nt

of

the

refe

ren

ce p

rice

) o

n t

he

bas

is o

f th

e ex

per

ience

of

oth

er E

U c

ou

ntr

ies.

[Q

1-2

01

2]

Pa

rtia

lly

ob

serv

ed.

Th

e p

rice

of

gen

eric

s w

as 6

3 p

erce

nt

of

the

bra

nded

at

the

end

of

2011.

A D

ecem

ber

2011 d

ecis

ion s

et t

he

pri

ce a

t 55 p

erce

nt

of

the

bra

nded

med

icin

e, b

ut

it i

s st

ill

a fi

xed

pri

ce n

ot

a

max

imu

m p

rice

. A

s a

resu

lt t

her

e is

no

co

mp

etit

ion

in

th

is

mar

ket

, th

at c

ou

ld l

ead

to

lo

wer

pri

ces

over

tim

e.

Th

ere

is n

o c

om

pu

lso

ry p

resc

ripti

on

by

act

ive

sub

stan

ce I

NN

,

no

gen

eric

su

bst

itu

tio

n i

n p

har

mac

ies

and

no g

uid

elin

es

ensu

rin

g t

he

less

ex

pen

sive

med

icin

e is

pro

vid

ed

Th

ere

hav

e bee

n n

o c

han

ges

in

co

st-s

har

ing

wh

ich

is

par

tly

rela

ted

to

th

e fa

ct t

hat

th

ere

is n

o r

eal

refe

rence

pri

ce s

yst

em f

or

reim

bu

rsem

ent.

Ad

dit

ion

al m

easu

res

wer

e le

gis

late

d i

n F

ebru

ary

an

d M

arch

20

12

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

63

Th

e G

ov

ern

men

t ta

kes

fu

rther

mea

sure

s to

en

sure

th

at a

t le

ast

50 p

erce

nt

of

the

vo

lum

e o

f m

edic

ines

use

d b

y p

ubli

c hosp

ital

s

is c

om

po

sed

of

gen

eric

s w

ith a

pri

ce b

elo

w t

hat

of

sim

ilar

bra

nd

ed p

rod

uct

s an

d o

ff-p

aten

t m

edic

ines

, in

par

ticu

lar

by

mak

ing

com

pu

lso

ry t

hat

all

pu

bli

c h

osp

ital

s p

rocu

re p

har

mac

euti

cal

pro

du

cts

by

act

ive

sub

stan

ce.

[Q4

-201

1]

On

go

ing

.

Ab

ou

t 3

0 p

erce

nt

of

the

exp

end

itu

re o

n p

har

mac

euti

cals

in

ho

spit

als

is m

ade

of

gen

eric

s an

d t

his

can

sti

ll g

o u

p.

NH

S (

ESY

) se

rvic

e pro

visi

on

A p

lan

for

the

reo

rgan

isat

ion

an

d r

estr

uct

uri

ng i

s p

rep

ared

for

the

sho

rt a

nd

med

ium

ter

m w

ith

a v

iew

to

red

uci

ng

ex

isti

ng

inef

fici

enci

es,

uti

lisi

ng

eco

no

mie

s o

f sc

ale

and

sco

pe,

an

d i

mp

rov

ing

qu

alit

y o

f ca

re f

or

pat

ien

ts.

Th

e ai

m i

s to

red

uce

ho

spit

al c

ost

s by

at

leas

t 1

0 p

erce

nt

in 2

01

1 a

nd

by

an

ad

dit

ion

al 5

per

cen

t in

201

2 i

n a

ddit

ion t

o t

he

pre

vio

us

yea

r. T

his

is

to

be

ach

iev

ed t

hro

ug

h:

- in

crea

sin

g t

he

mo

bil

ity

of

hea

lth

care

sta

ff (

incl

ud

ing

do

cto

rs)

wit

hin

an

d a

cro

ss h

ealt

h f

acil

itie

s an

d h

ealt

h r

egio

ns.

[Q

4-

20

11

] -

adju

stin

g p

ub

lic

ho

spit

al p

rov

isio

n w

ith

in a

nd b

etw

een h

osp

ital

s w

ith

in t

he

sam

e d

istr

ict

and

hea

lth

reg

ion

; [Q

4-2

01

1]

- re

vis

ing t

he

acti

vit

y o

f sm

all

hosp

ital

s to

war

ds

spec

iali

sati

on

in

are

as s

uch

as

reh

abil

itat

ion,

cance

r tr

eatm

ent

or

term

inal

care

wh

ere

rele

van

t; [

Q4

-20

11

]

Pa

rtia

lly

ob

serv

ed.

Ho

spit

al o

per

atio

nal

ex

pen

dit

ure

was

red

uce

d b

y 1

3.4

per

cent

sin

ce 2

00

9 (

7.2

per

cen r

educt

ion i

n 2

01

1 c

om

par

ed t

o 2

01

0).

Ho

spit

al a

dm

inis

trat

ion

s h

ave

bee

n m

erg

ed (

82 r

ath

er t

han

13

1

ho

spit

al b

oar

ds)

bu

t n

ot

nec

essa

rily

the

ho

spit

als

wit

hin

eac

h

adm

inis

trat

ion

. T

he

nu

mb

er o

f ho

spit

al b

eds

has

bee

n r

edu

ced

.

So

me

faci

liti

es h

ave

bee

n c

lose

d o

r tr

ansf

orm

ed. N

o p

rog

ress

reg

ard

ing m

ob

ilit

y o

f st

aff.

A s

yst

em f

or

com

par

ing

ho

spit

al p

erfo

rman

ce (

ben

chm

ark

ing

) is

set

up

on t

he

bas

is o

f a

com

pre

hen

siv

e se

t o

f in

dic

ato

rs.

[Q4

-20

11

] A

nn

ual

rep

ort

s w

ill

be

pu

bli

shed

as

of

Q1

-20

12.

On

goin

g.

On

th

e bas

is o

f E

SY

.net

a b

asic

set

of

fin

anci

al a

nd

act

ivit

y

ind

icat

ors

is

now

co

mp

iled

fo

r al

l N

HS

ho

spit

als.

A f

irst

rep

ort

is d

ue

by

Mar

ch 2

01

2.

Wa

ges

an

d h

um

an

res

ou

rce

ma

na

gem

ent

in t

he

hea

lth c

are

sec

tor

Th

e M

inis

trie

s of

Hea

lth

an

d L

abo

ur,

in c

oo

per

atio

n w

ith

th

e M

inis

try

of

Fin

ance

, p

rep

are

the

firs

t d

raft

rep

ort

pre

sen

tin

g t

he

stru

ctu

re (

age,

sp

ecia

lty

, g

rad

e, r

egio

nal

dis

trib

uti

on

), l

evel

s o

f re

mu

ner

atio

n (

incl

udin

g f

ees

pro

vis

ions

to c

on

sult

ants

an

d

do

cto

rs)

and t

he

vo

lum

e an

d d

ynam

ics

of

emp

loy

men

t in

ho

spit

als,

hea

lth c

entr

es, an

d h

ealt

h f

un

ds.

Th

is r

epo

rt w

ill

be

up

dat

ed a

nn

ual

ly a

nd

wil

l b

e u

sed

as

a h

um

an r

eso

urc

e pla

nn

ing

in

stru

men

t. T

he

20

11

rep

ort

wil

l pre

sen

t pla

ns

for

the

allo

cati

on

an

d r

e-q

ual

ific

atio

n o

f h

um

an r

eso

urc

es f

or

the

per

iod u

p t

o 2

01

3.

It w

ill

also

pro

vid

e g

uid

ance

fo

r th

e ed

uca

tio

n

syst

em a

nd i

t w

ill

spec

ify

a p

lan

to r

eall

oca

te q

ual

ifie

d a

nd s

upport

sta

ff w

ith

in t

he

NH

S a

nd

hea

lth

fu

nd

s. [

Q4

-20

11]

On

go

ing

.

A b

asic

rep

ort

has

bee

n d

on

e p

rese

nti

ng

th

e n

um

ber

of

phy

sici

ans,

nu

rses

, au

xil

iary

an

d a

dm

inis

trat

ive

staf

f by

reg

ion,

by

ag

e an

d b

y e

du

cati

on

lev

el.

The

stu

dy

is

bei

ng

up

gra

ded

for

spec

ialt

y.

Th

e G

ov

ern

men

t ex

ten

ds

the

use

of

capit

atio

n p

aym

ents

of

phy

sici

ans,

curr

entl

y u

sed

by

OA

EE

, to

all

co

ntr

acts

bet

wee

n

soci

al s

ecu

rity

fu

nd

s an

d t

he

doct

ors

th

ey c

ontr

act.

Th

e n

ew p

aym

ent

mec

han

ism

sta

rts

for

each

new

co

ntr

act

renew

ed i

n

2011 a

nd f

or

all

contr

acts

fro

m 2

012.

It d

efin

es a

min

imu

m n

um

ber

of

pat

ien

ts p

er d

oct

or,

on t

he

bas

is o

f th

e ex

per

ien

ce o

f

oth

er E

U c

ou

ntr

ies.

The

new

sy

stem

wil

l le

ad t

o a

red

uct

ion i

n t

he

ov

eral

l co

mp

ensa

tio

n c

ost

(w

ages

an

d f

ees)

of

phy

sici

ans

by

at

leas

t 1

0 p

erce

nt

in 2

01

1,

and

an

ad

dit

ion

al 1

5 p

erce

nt

in 2

012

, as

co

mp

ared

to

th

e p

revio

us

yea

r. [

Novem

ber

2011]

Pa

rtia

lly

ob

serv

ed.

Th

e ca

pit

atio

n s

yst

em h

as b

een

exte

nd

ed t

o a

lmost

all

co

ntr

acts

bet

wee

n E

OP

YY

an

d p

rivat

e p

hy

sici

ans

and

a r

edu

ctio

n i

n

pay

roll

has

bee

n o

bse

rved

. H

ow

ever

, th

e n

um

ber

of

pat

ien

ts p

er

doct

or

is s

till

ver

y h

igh b

y E

U s

tandar

ds

and t

her

e ar

e m

any

spec

iali

st p

hy

sici

ans

com

par

ed t

o g

ener

al p

ract

itio

ner

s an

d

pae

dia

tric

ians.

Acc

ou

nti

ng

an

d c

on

tro

l

Inte

rnal

co

ntr

oll

ers

are

assi

gn

ed t

o a

ll m

ajor

ho

spit

als.

[D

ecem

ber

2011]

Ob

serv

ed.

By

en

d-O

ctob

er 2

011

, th

e G

ov

ern

men

t st

arts

pu

bli

shin

g t

he

month

ly r

eport

wit

h a

nal

ysi

s an

d d

escr

ipti

on o

f det

aile

d d

ata

on

hea

lth

care

ex

pen

dit

ure

by

all

so

cial

sec

uri

ty f

un

ds

wit

h a

lag

of

thre

e w

eeks

afte

r th

e en

d o

f th

e re

spec

tiv

e m

on

th.

O

bse

rved

.

Mo

nth

ly d

ata

are

avai

lab

le f

or

all

soci

al s

ecu

rity

sch

emes

.

So

cial

sec

uri

ty f

un

ds

star

t p

ubli

shin

g a

n a

nn

ual

rep

ort

on m

edic

ine

pre

scri

pti

on.

Th

e an

nual

rep

ort

an

d t

he

ind

ivid

ual

pre

scri

pti

on

rep

ort

s ex

amin

e p

resc

rip

tio

n b

ehav

iou

r w

ith

par

ticu

lar

refe

ren

ce t

o t

he

mo

st c

ost

ly a

nd m

ost

use

d m

edic

ines

.

[Q1

-20

12

]

All

ho

spit

als

adop

t co

mm

itm

ent

reg

iste

rs. [Q

1-2

01

2]

No

t ye

t a

ppli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

64

Ho

spit

al

com

pu

teri

sati

on

an

d m

on

ito

rin

g s

yste

m

Th

e nec

essa

ry t

end

erin

g p

roce

dure

s ar

e ca

rrie

d o

ut

to d

evel

op

th

e fu

ll a

nd i

nte

gra

ted

sy

stem

of

ho

spit

als'

IT

sy

stem

s. [

Q4

-

20

11

]

On

go

ing

wit

h d

elay

.

Th

e M

inis

try

of

Hea

lth h

as p

rep

ared

the

term

s o

f re

fere

nce

.

Th

e M

inis

try

of

Hea

lth c

om

ple

tes

the

ER

P (

ente

rpri

se-r

eso

urc

e p

lan

nin

g)

pro

gra

mm

e o

f h

osp

ital

co

mp

ute

risa

tio

n a

nd

exte

nd

s co

ver

age

of

the

web

-bas

ed p

latf

orm

ES

Y.n

et t

o a

ll h

osp

ital

s. [

Q4

-20

11

] O

ng

oin

g w

ith

del

ay

. P

lan

ned

fo

r M

arch

20

12

Fu

rth

er m

easu

res

are

taken

to

im

pro

ve

the

acco

un

tin

g,

bo

ok

-kee

pin

g o

f m

edic

al s

up

pli

es a

nd

bil

lin

g s

yst

ems,

th

rou

gh

:

- fi

nal

isin

g t

he

intr

od

uct

ion o

f do

ub

le-e

ntr

y a

ccru

al a

cco

un

tin

g s

yst

ems

and t

he

reg

ula

r an

nual

pub

lica

tio

n o

f bal

ance

sh

eets

in a

ll h

osp

ital

s;

- th

e ca

lcula

tio

n o

f st

ock

s an

d f

low

s o

f m

edic

al s

up

pli

es i

n a

ll t

he

ho

spit

als

usi

ng t

he

unif

orm

codin

g s

yst

em f

or

med

ical

suppli

es d

evel

oped

by

the

Hea

lth P

rocu

rem

ent

Com

mis

sion (

EP

Y)

and

th

e N

atio

nal

Cen

tre

for

Med

ical

Tec

hn

olo

gy

(EK

EV

YL

) fo

r th

e purp

ose

of

pro

curi

ng

med

ical

su

pp

lies

;

- t

imel

y i

nvoic

ing o

f tr

eatm

ent

cost

s (n

o l

ater

th

an 2

mo

nth

s) t

o G

reek

so

cial

sec

uri

ty f

unds,

oth

er E

U c

ountr

ies

and p

rivat

e

hea

lth

in

sure

rs f

or

the

trea

tmen

t o

f n

on

-nat

ion

als/

no

n-r

esid

ents

. [Q

4-2

011

]

Pa

rtia

lly

ob

serv

ed.

Do

ub

le-e

ntr

y a

cco

un

tin

g s

yst

em h

as b

een f

inal

ised

.

Th

e ca

lcula

tio

n o

f st

ock

an

d f

low

s co

ver

s 8

0 p

erce

nt

of

the

pro

ced

ure

s,

NH

S f

acil

itie

s ar

e n

ow

tim

ely

in

voic

ing t

reat

men

t co

sts.

Ho

wev

er, th

ese

inv

oic

es c

ov

er o

nly

par

tial

ly t

he

cost

s of

trea

tmen

t an

d w

ill

be

up

dat

ed w

hen

DR

Gs

are

in p

lace

.

Th

e p

rog

ram

me

of

ho

spit

al c

om

pu

teri

sati

on

all

ow

s fo

r a

mea

sure

men

t o

f h

osp

ital

and h

ealt

h c

entr

es a

ctiv

ity

. T

he

Go

ver

nm

ent

def

ines

a c

ore

set

of

acti

vit

y a

nd e

xpen

dit

ure

in

dic

ators

in

lin

e w

ith

Eu

rost

at,

OE

CD

an

d W

HO

hea

lth d

atab

ases

.

EL

ST

AT

sta

rts

pro

vid

ing d

ata

in l

ine

wit

h t

he

Sy

stem

of

Hea

lth

Acc

ou

nts

(jo

int

qu

esti

on

nai

re c

oll

ecti

on e

xer

cise

). [

Q4

-

20

11

]

On

go

ing

wit

h d

elay

.

Th

e p

rog

ram

me

of

ho

spit

al c

om

pu

teri

sati

on

all

ow

s fo

r th

e se

ttin

g u

p o

f a

bas

ic s

yst

em o

f pat

ien

t el

ectr

onic

med

ical

rec

ord

s.

[Q4

-20

11

]

On

go

ing

.

Bas

ic p

atie

nt

reco

rds

exis

t in

55 p

erce

nt

of

the

NH

S h

osp

ital

s.

In a

ll N

HS

ho

spit

als,

th

e G

ov

ernm

ent

pil

ots

a s

et o

f D

RG

s (d

iagnost

ic-r

elat

ed g

roups)

, w

ith a

vie

w t

o d

evel

opin

g a

mo

der

n

ho

spit

al c

ost

ing s

yst

em f

or

con

trac

tin

g (

on t

he

bas

is o

f p

rosp

ecti

ve

blo

ck c

on

trac

ts b

etw

een

EO

PY

Y a

nd

NH

S).

To s

up

po

rt

the

dev

elo

pm

ent

of

DR

Gs,

the

gov

ern

men

t d

evel

op

s cl

inic

al g

uid

elin

es. [Q

4-2

01

1]

On

goin

g.

DR

Gs

hav

e b

een p

ilo

ted

an

d a

re n

ow

bei

ng

rev

ised

as

a

con

seq

uen

ce.

Cen

tra

lise

d p

rocu

rem

ent

Th

e G

ov

ern

men

t w

ill

mo

ve

tow

ard

s a

new

cen

tral

ised

pro

cure

men

t o

f p

har

mac

euti

cals

an

d m

edic

al g

oo

ds

for

the

NH

S

thro

ug

h t

he

Su

pp

lies

Co

ord

inat

ion

Co

mm

itte

e w

ith

the

sup

po

rt o

f th

e S

pec

ific

atio

ns

Co

mm

itte

e, u

sin

g t

he

un

ifo

rm c

od

ing

syst

em f

or

med

ical

su

pp

lies

an

d p

har

mac

euti

cals

. [Q

1-2

01

2]

No

t ye

t a

ppli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

65

Ind

epen

den

t ta

sk f

orc

e o

f h

ealt

h p

oli

cy e

xper

ts

Th

e in

dep

enden

t ta

sk f

orc

e o

f hea

lth p

oli

cy e

xp

erts

pro

du

ces,

in c

oo

per

atio

n w

ith t

he

Eu

rop

ean

Com

mis

sio

n,

EC

B a

nd

IM

F,

a fi

rst

dra

ft o

f it

s p

oli

cy r

epo

rt,

wit

h s

pec

ific

rec

om

men

dat

ion

s o

n p

oli

cies

to

be

imp

lem

ente

d. [e

nd

-Oct

ob

er 2

01

1]

Th

e

rep

ort

an

d p

oli

cies

pro

po

sals

co

ver

the

foll

ow

ing

are

as:

- h

ealt

h s

yst

em g

ov

ern

ance

to

red

uce

th

e fr

agm

enta

tio

n o

f th

e sy

stem

;

- fi

nan

cin

g:

po

oli

ng

, co

llec

tio

n a

nd

dis

trib

uti

on

of

fun

ds;

- h

arm

on

isat

ion o

f h

ealt

h p

ackag

es a

cro

ss f

un

ds;

- se

rvic

e p

rovis

ion

an

d i

nce

nti

ves

fo

r p

rov

ider

s in

clu

din

g:

!in

tegra

tio

n b

etw

een

pri

vat

e an

d p

ub

lic

pro

vis

ion

;

!p

rim

ary

car

e v

is-à

-vis

sp

ecia

list

and h

osp

ital

car

e;

!ef

fici

ency

in

the

pro

vis

ion o

f h

osp

ital

ser

vic

es;

!p

har

mac

euti

cal

con

sum

pti

on

;

!hum

an r

esourc

es;

- p

ub

lic

hea

lth

pri

ori

ties

, hea

lth

pro

mo

tio

n a

nd

dis

ease

pre

ven

tio

n;

- d

ata

coll

ecti

on

, h

ealt

h t

ech

no

logy

ass

essm

ent

and

ass

essm

ent

of

per

form

ance

;

- ex

pen

dit

ure

con

tro

l m

echan

ism

s.

Th

e re

po

rt w

ill

pro

vid

e p

reli

min

ary

qu

anti

tati

ve

targ

ets

in t

he

fiel

ds

abo

ve,

in o

rder

to

co

ntr

ibute

to k

eep

pu

bli

c h

ealt

h

exp

end

itu

re -

-con

stan

t at

, o

r b

elow

, 6

per

cen

t o

f G

DP

.

Th

e ta

sk f

orc

e o

f h

ealt

h p

oli

cy e

xp

erts

pro

du

ces

the

final

co

mp

rehen

siv

e p

oli

cy r

epo

rt,

wit

h s

pec

ific

rec

om

men

dat

ion

s o

n

po

lici

es t

o b

e im

ple

men

ted.

[en

d-N

ov

emb

er 2

011

]

Ob

serv

ed w

ith

del

ay

.

Th

e fi

rst

dra

ft w

as s

ub

mit

ted

at

end

No

vem

ber

and

th

e fi

nal

dra

ft b

y m

id-J

anu

ary

. A

n i

nte

rnal

wo

rksh

op

to

ok

pla

ce t

o

dis

cuss

th

e re

po

rt a

nd t

he

rep

ort

has

bee

n g

iven

to

th

e M

inis

try

of

Hea

lth

. T

he

rep

ort

pro

vid

es a

n o

ver

vie

w o

f th

e m

easu

res

imp

lem

ente

d a

nd

rec

om

men

dat

ion

s fo

r fu

ture

mea

sure

s.

On

th

e bas

is o

f th

is r

epo

rt, th

e G

ov

ern

men

t ad

op

ts a

n a

ctio

n p

lan

by

en

d-2

011,

incl

ud

ing a

tim

etab

le f

or

concr

ete

acti

on

s.

No

t o

bse

rved

. S

ince

th

e re

po

rt w

as d

elay

ed,

the

Min

istr

y o

f H

ealt

h i

s n

ow

pre

par

ing t

he

acti

on

pla

n.

Th

e ta

skfo

rce

pro

du

ces

an i

mp

lem

enta

tio

n r

epo

rt, re

vis

ing t

he

poli

cies

im

ple

men

ted s

o f

ar.

[Q2

-201

2]

No

t ye

t a

ppli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

66

Ta

ble

A3

- F

isca

l se

cto

r re

gu

lati

on

an

d s

up

erv

isio

n

C

om

men

ts

Ea

ch q

ua

rter

, th

e G

ov

ern

men

t tr

ansf

ers

EU

R 1

00

0 m

illi

on t

o a

ded

icat

ed g

ov

ern

men

t ac

cou

nt

op

ened

by

the

Gen

eral

Acc

ounti

ng O

ffic

e. F

unds

from

this

acc

ount

are

regula

rly

pai

d t

o t

he

HF

SF

(H

elle

nic

Fin

anci

al S

tab

ilit

y F

un

d)

to e

nsu

re t

he

latt

er k

eep

s a

cash

bal

ance

of

EU

R 1

50

0 m

illi

on a

nd

if

pro

gra

mm

e re

vie

ws

of

ban

k c

apit

al s

ug

ges

t th

at t

he

reso

urc

es a

re

nec

essa

ry.

The

rele

ase

of

the

fund

s fr

om

th

at a

cco

un

t is

su

bje

ct t

o a

gre

emen

t by

the

Eu

ropea

n C

om

mis

sio

n,

EC

B a

nd

IM

F

staf

f. A

ny

su

pp

ort

pro

vid

ed w

ith

HF

SF

res

ou

rces

wil

l co

nti

nue

to b

e in

lin

e w

ith

sta

te a

id r

ule

s.

Ob

serv

ed.

To

tal

EU

R 3

000

mil

lio

n h

ave

bee

n t

ran

sfer

red

to

th

e ac

cou

nt.

The

Ban

k o

f G

reec

e an

d t

he

HF

SF

com

ple

te a

mem

ora

nd

um

of

un

der

stan

din

g t

o f

urt

her

str

eng

then

th

eir

coo

per

atio

n,

incl

ud

ing s

har

ing

of

appro

pri

ate

sup

erv

iso

ry i

nfo

rmat

ion

, p

rior

to t

he

sixth

dis

bu

rsem

ent.

O

bse

rved

.

Ov

er t

he

med

ium

ter

m,

ban

ks

wil

l nee

d t

o r

educe

thei

r re

lian

ce o

n E

uro

syst

em b

orr

ow

ing

an

d g

over

nm

ent

gu

aran

tees

.

Reg

ula

r u

pd

ates

of

med

ium

-ter

m f

un

din

g p

lan

s u

nd

er g

uid

ance

of

the

Ban

k o

f G

reec

e w

ill

be

an i

mport

ant

too

l to

en

sure

th

at

this

pro

cess

pro

ceed

s at

a p

ace

con

sist

ent

wit

h t

he

pro

gra

mm

e’s

mac

roec

on

om

ic,

fisc

al, an

d f

inan

cial

fra

mew

ork

. T

he

nex

t

up

dat

e is

fin

alis

ed b

y e

nd

-2011.

Ob

serv

ed.

Ban

ks’

co

nso

lidat

ed c

ore

tie

r 1

min

imu

m r

egu

lato

ry c

apit

al r

equir

emen

t w

ill

be

set

at 1

0 p

erce

nt

fro

m J

an

ua

ry 2

01

2 o

n.

The

core

tie

r 1 c

apit

al r

equir

emen

ts w

ill

excl

ud

e hy

bri

d c

apit

al,

bu

t w

ill

incl

ud

e p

refe

ren

ce s

har

es i

ssu

ed b

y b

ank

s an

d s

ub

scri

bed

by

th

e G

reek

gov

ern

men

t at

th

e o

nse

t o

f th

e g

lobal

fin

anci

al c

risi

s in

20

08

-09.

Rev

ised

.

Th

e B

ank

of

Gre

ece

ensu

res

an e

qu

ival

ent

capit

al t

reat

men

t o

f ri

sks

rela

ted t

o G

reek

go

ver

nm

ent

bond e

xposu

res

acro

ss a

ll

inst

itu

tio

ns

(wit

h r

efer

ence

to

the

NP

V r

edu

ctio

n o

f th

e P

SI)

. In

th

is c

on

text,

th

e B

ank

of

Gre

ece

upd

ates

its

las

t P

illa

r II

asse

ssm

ent

[on

e m

on

th]

afte

r co

mp

leti

on

of

the

PS

I.

Ob

serv

ed.

Th

e dia

gn

ost

ic o

f b

ank

lo

an p

ort

foli

os

com

mis

sio

ned

by

th

e B

ank o

f G

reec

e w

ill

be

concl

uded

by

en

d-D

ecem

ber

20

11.

The

Ban

k o

f G

reec

e w

ill

ensu

re t

hat

any

exis

tin

g u

nder

-pro

vis

ion

ing r

evea

led b

y t

his

ex

erci

se w

ill

be

reco

gn

ized

in

ban

ks'

pro

fit

and

lo

ss a

cco

unts

. T

he

Ban

k o

f G

reec

e, i

n c

oo

per

atio

n w

ith

th

e C

om

mis

sio

n,

the

EC

B, an

d t

he

IMF

sta

ff t

eam

s w

ill

use

th

e

dia

gnost

ic r

esult

s to

det

erm

ine

capit

al n

eeds

ov

er t

he

thre

e y

ear

hori

zon

, b

ased

on

a m

inim

um

co

re t

ier

1 t

arg

et c

apit

al r

atio

of

6 p

erce

nt

un

der

an a

dver

se s

tres

s te

st s

cen

ario

. T

he

cap

ital

nee

ds

wil

l be

asse

ssed

per

ban

k a

nd d

iscl

ose

d t

o t

he

mar

ket

by

end

-Feb

ruary

2012.

Rev

ised

.

Fo

llo

win

g t

he

add

itio

nal

cap

ital

nee

ds

asse

ssm

ent

bas

ed o

n t

he

dia

gnost

ic s

tudy

, ban

ks

may

be

giv

en t

ime

to r

aise

this

add

itio

nal

cap

ital

on

th

e m

ark

et. If

th

e B

ank o

f G

reec

e det

erm

ines

th

at a

per

iod

of

tim

e sh

ou

ld b

e al

low

ed f

or

a b

ank

to

mee

t

cap

ital

req

uir

emen

ts, th

e re

lev

ant

ban

k w

ill

be

asked

to p

rese

nt,

by

en

d-A

pri

l 2

01

2,

a v

iab

le 3

-yea

r b

usi

nes

s p

lan

to

th

is e

nd.

Any

ban

k i

n t

his

cir

cum

stan

ce w

ill

hav

e to

mee

t ca

pit

al r

equ

irem

ents

by

no

lat

er t

han

en

d-A

ugu

st 2

012.

Any

cap

ital

to

be

rais

ed t

o t

his

en

d s

ho

uld

co

nsi

st o

f in

stru

men

ts q

ual

ify

ing a

s T

ier

I ca

pit

al.

No

t ye

t a

ppli

cable

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

67

Th

e g

over

nan

ce a

rran

gem

ents

of

fin

anci

al o

ver

sigh

t ag

enci

es w

ill

be

revie

wed

in c

on

sult

atio

n w

ith t

he

Eu

rop

ean

Co

mm

issi

on

, E

CB

, an

d I

MF

sta

ff:

the

org

anis

atio

nal

arr

angem

ents

fo

r th

e B

ank o

f G

reec

e to

en

sure

th

at t

hey

are

in l

ine

wit

h b

est

inte

rnat

ion

al p

ract

ice

and

th

at

any

po

ten

tial

con

flic

t o

f in

tere

st i

n i

ts e

xp

anded

su

per

vis

ion

an

d r

eso

luti

on r

ole

is

avo

ided

;

the

corp

ora

te g

over

nan

ce a

rran

gem

ents

for

the

HF

SF

(in

cludin

g t

he

nee

d f

or

inte

rnat

ional

ly r

eco

gniz

ed p

rofe

ssio

nal

s w

ith

ban

kin

g e

xp

erie

nce

to

be

mem

ber

s o

f th

e b

oar

d w

ith

vo

tin

g r

igh

ts);

an

d

the

go

ver

nan

ce a

rran

gem

ents

fo

r th

e H

DIG

F (

to a

ddre

ss p

ote

nti

al c

onfl

icts

of

inte

rest

).

Th

e en

actm

ent

of

legis

lati

on

to

ad

dre

ss a

ny

outs

tan

din

g i

ssu

es i

n t

hes

e ar

eas

wil

l b

e co

mp

lete

d b

y e

nd

-2011.

Ob

serv

ed.

Th

e g

over

nm

ent

com

mit

s to

full

y s

ub

scri

be

its

shar

e in

cas

h i

n A

TE

ban

k,

and t

o p

urc

has

e an

y o

ther

un

sub

scri

bed

sh

ares

(aft

er n

oti

fica

tion

to

th

e E

uro

pea

n C

om

mis

sio

n).

An

ap

pro

pri

ate

amo

un

t o

f fu

nd

s w

ill

be

set

asid

e fo

r th

is p

urp

ose

. T

his

cap

ital

incr

ease

wil

l be

refl

ecte

d i

n A

TE

’s r

estr

uct

uri

ng

pla

n,

an u

pd

ate

of

wh

ich

wil

l be

resu

bm

itte

d t

o t

he

Eu

ropea

n

Com

mis

sion b

y e

nd

-Oct

ob

er 2

011.

Ob

serv

ed..

Reg

ard

ing t

he

Hel

len

ic C

on

sig

nm

ent

and L

oan

Fu

nd

(H

CL

F),

an

im

ple

men

tin

g d

ecre

e an

d c

om

mit

men

ts t

o c

om

ply

wit

h

stat

e ai

d r

ule

s w

ill

clar

ify

th

e fu

ture

tas

ks

of

the

rem

ain

ing

act

ivit

ies

of

the

HC

LF

, en

suri

ng

th

at t

hes

e w

ill

no

t b

e in

com

pet

itio

n w

ith c

om

mer

cial

act

ivit

ies.

A m

ore

det

aile

d s

ched

ule

fo

r tr

ansf

erri

ng

th

e co

mm

erci

al a

ctiv

itie

s an

d t

he

abo

ve-

men

tio

ned

co

mm

itm

ents

wil

l be

spec

ifie

d b

y e

nd

-Oct

ob

er 2

01

1 a

nd

wil

l th

erea

fter

be

end

ors

ed b

y a

n I

nte

r-M

inis

teri

al

Dec

isio

n.

The

dis

po

sal

of

the

com

mer

cial

act

ivit

ies

bra

nch

wil

l be

com

ple

ted

on o

r b

efo

re e

nd

-Ju

ly 2

012.

Any

support

pro

vid

ed b

y t

he

HD

IGF

and t

he

HF

SF

in t

he

fram

ewo

rk o

f re

solu

tio

n w

ill

be

no

tifi

ed t

o t

he

Eu

ropea

n

Com

mis

sion u

nder

sta

te a

id r

ule

s.

Ob

serv

ed.

Th

e B

ank

of

Gre

ece

wil

l re

quir

e ca

pit

al s

ho

rtag

es t

o b

e ad

dre

ssed

by

en

d-N

ov

emb

er 2

01

1,

[or

tak

e th

e ap

pro

pri

ate

acti

on

s to

dea

l w

ith t

he

situ

atio

n (

by

en

d-N

ov

emb

er 2

01

1)]

in

lin

e w

ith E

U s

tate

aid

ru

les.

Un

til

cap

ital

sho

rtag

es h

ave

bee

n r

eso

lved

,

the

Ban

k o

f G

reec

e w

ill

clo

sely

mo

nit

or

affe

cted

ban

ks

and c

onti

nuousl

y e

nfo

rce

appro

pri

ate

rem

edia

l m

easu

res.

Ob

serv

ed.

Act

ion

tak

en o

n T

ban

k a

nd F

BB

ank

.

Th

e B

ank

of

Gre

ece

com

mit

s to

co

nti

nu

e ef

fort

s to

red

uce

rem

un

erat

ion o

f it

s st

aff

in l

igh

t o

f th

e ov

eral

l ef

fort

of

fisc

al

con

soli

dat

ion

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

68

Ta

ble

A4

- G

row

th e

nh

an

cin

g s

tru

ctu

ra

l re

form

s

C

om

men

ts

To

str

eng

then

lab

ou

r m

ark

et i

nst

itu

tio

ns

Wa

ge

sett

ing

Th

e G

ov

ern

men

t in

itia

tes

dis

cuss

ion

s [Q

4-2

01

1]

wit

h s

oci

al p

artn

ers

to e

xam

ine

all

lab

ou

r m

ark

et p

aram

eter

s th

at a

ffec

t th

e

com

pet

itiv

enes

s o

f th

e co

mp

anie

s an

d t

he

eco

nom

y a

s a

wh

ole

. T

he

goal

is

to c

on

clu

de

a n

atio

nal

tri

par

tite

ag

reem

ent

wh

ich

add

ress

es t

he

mac

roec

on

om

ic c

hal

len

ges

to

su

pp

ort

str

on

ger

co

mpet

itiv

enes

s, g

row

th a

nd e

mp

loy

men

t.

Ob

serv

ed.

Th

e G

ov

ern

men

t in

itia

ted

dis

cuss

ions

wit

h s

oci

al p

artn

ers.

Ho

wev

er,

since

th

e o

utc

om

e w

as n

ot

sati

sfac

tory

, th

e

Go

ver

nm

ent

adop

ted

leg

isla

tio

n t

o r

edu

ce l

abo

ur

cost

s.

Mo

reo

ver

, b

ased

on

a d

ialo

gu

e w

ith

so

cial

par

tner

s an

d t

akin

g i

nto

acc

ou

nt

the

ob

ject

ive

of

crea

tin

g a

nd

pre

serv

ing

jo

bs

and

imp

rov

ing

th

e fi

rms’

co

mp

etit

iven

ess,

th

e G

ov

ernm

ent

ado

pts

fu

rth

er m

easu

res

to a

llo

w t

he

adap

tati

on

of

wag

es t

o

eco

no

mic

co

nd

itio

ns.

In p

arti

cula

r:

"th

e ex

ten

sio

n o

f o

ccu

pat

ional

an

d s

ecto

ral

coll

ecti

ve

agre

emen

ts i

s su

spen

ded

unti

l en

d-2

01

4;

"th

e so

-cal

led

fav

ou

rab

ilit

y p

rin

cip

le i

s su

spen

ded

th

rou

gh

ou

t th

e M

TF

S p

erio

d,

in s

uch

a m

ann

er t

hat

fir

m-l

evel

agre

emen

ts t

ake

pre

ceden

ce o

ver

sec

tora

l an

d o

ccu

pat

ional

ag

reem

ents

;

"fi

rm-l

evel

co

llec

tive

contr

acts

can

be

sig

ned

eit

her

by

tra

de

unio

ns

or,

wh

en t

her

e is

no f

irm

-lev

el u

nio

n,

by

work

counci

ls

or

oth

er e

mp

loy

ees'

rep

rese

nta

tio

ns,

irr

espec

tiv

e o

f th

e fi

rms'

siz

e.

Th

ese

amen

dm

ents

are

leg

isla

ted p

rior

to t

he

sixth

dis

bu

rsem

ent.

Ob

serv

ed.

Fig

hti

ng u

nd

ecla

red

wo

rk

Qu

anti

tati

ve

targ

ets

on

th

e n

um

ber

of

con

tro

ls o

f un

dec

lare

d w

ork

to

be

exec

ute

d a

re s

et f

or

the

Lab

ou

r In

spec

tora

te.

A p

ilot

stu

dy

is

imp

lem

ente

d i

n o

rder

to v

erif

y t

he

fav

oura

ble

fin

anci

al n

et i

mp

act

on

the

ov

eral

l so

cial

sec

uri

ty b

udget

of

a dis

count

of

up

to 1

0 p

erce

nt

on

so

cial

co

ntr

ibu

tio

ns

for

those

en

terp

rise

s in

tro

du

cin

g t

he

labo

ur

card

. T

he

pil

ot

study

cover

s a

lim

ited

scope

of

firm

s (m

axim

um

100),

over

a s

hort

per

iod o

f ti

me

(max

imum

four

month

s). [D

ecem

ber

2011]

An a

sses

smen

t on t

he

effe

ctiv

enes

s of

the

Lab

our

Insp

ecto

rate

law

wil

l b

e m

ade

six

mo

nth

s af

ter

its

imp

lem

enta

tion

. [Q

4-

20

11

] S

ho

uld

the

law

pro

ve

inef

fect

ive,

an a

pp

rop

riat

e am

end

men

t w

ill

be

ado

pte

d.

In p

arti

cula

r, a

ny

wid

er-s

cale

ap

pli

cati

on

of

a dis

cou

nt

of

up

to

10 p

erce

nt

on

so

cial

co

ntr

ibu

tio

ns

for

tho

se e

nte

rpri

ses

intr

od

uci

ng

th

e la

bo

ur

card

wil

l be

con

dit

ion

al

on

th

e p

ilot

stu

dy

sh

ow

ing s

uff

icie

nt

evid

ence

of

a fa

vo

ura

ble

fin

anci

al i

mp

act

of

the

dis

cou

nt

on t

he

over

all

soci

al s

ecuri

ty

bu

dg

et.

No

t o

bse

rved

.

Th

ere

has

bee

n n

o p

ilo

t st

udy

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

69

To

im

pro

ve t

he

bu

sin

ess

envi

ron

men

t a

nd

en

ha

nce

com

pet

itio

n i

n o

pen

ma

rket

s

Reg

ula

ted

pro

fess

ion

s

In t

he

imp

lem

enta

tio

n o

f L

aw 3

91

9/2

01

1, an

y d

ecis

ion

to

rei

nst

ate

a re

stri

ctio

n c

on

sid

ers

the

nee

d t

o p

rom

ote

co

mp

etit

ion

and

tak

es i

nto

acc

ou

nt

inte

rnat

ional

bes

t p

ract

ice.

Th

e G

ov

ern

men

t co

nsu

lts

wid

ely

, an

d i

n p

arti

cula

r w

ith

th

e H

elle

nic

Co

mp

etit

ion C

om

mis

sio

n.

[no

t la

ter

than

en

d-Q

4 2

01

1]

On

goin

g.

As

of

mid

-Feb

ruar

y 2

01

2,

the

Min

istr

y o

f F

inan

ce r

ecei

ved

req

ues

ts f

or

der

og

atio

n o

f ch

apte

r A

of

law

39

19/2

01

1 f

or

53

pro

fess

ion

s. I

n g

ener

al,

the

Hel

lenic

Co

mp

etit

ion C

om

mis

sio

n

has

iss

ued

op

inio

ns

agai

nst

th

ose

req

ues

ts b

arri

ng

th

e ca

ses

of

i) m

anu

fact

uri

ng a

nd

mar

ket

ing o

f w

eap

on

s an

d e

xp

losi

ves

,

ii)

pri

vat

e p

rim

ary

an

d s

eco

nd

ary

sch

oo

ls,

iii)

tu

tori

ng

cen

tres

an

d l

ang

uag

e sc

ho

ols

,

iv)

vo

cati

onal

tra

inin

g i

nst

itu

tes,

v)

vo

cati

on

al t

rain

ing

cen

tres

,

vi)

po

st-s

eco

ndar

y e

du

cati

on c

entr

es,

vii

) li

ber

al a

rts

stu

dio

s w

her

e th

e m

ain

ten

ance

of

the

pri

or

auth

ori

zati

on

reg

ime

wer

e d

eem

ed t

o b

e w

arra

nte

d.

Th

e G

ov

ern

men

t re

pea

ls M

inis

teri

al D

ecis

ion 6

48/2

01

1 a

nd i

ssu

es a

new

Jo

int

Min

iste

rial

Dec

isio

n s

ign

ific

antl

y r

edu

cin

g

the

val

ue

of

a tr

ansa

ctio

n a

bo

ve

wh

ich

the

nota

ries

' pro

rata

fee

fo

r d

raft

ing

co

ntr

acts

is

the

max

imu

m p

erm

issi

ble

fee

. In

add

itio

n,

the

new

Min

iste

rial

Dec

isio

n d

efin

es p

ro r

ata

fee

s fo

r tr

ansa

ctio

ns

bel

ow

th

is m

axim

um

val

ue

at s

ucc

essi

vel

y

dec

reas

ing

rat

es i

n i

nver

se p

rop

ort

ion

to

the

gra

du

ated

in

crea

se, en

suri

ng

a s

har

p r

edu

ctio

n o

f th

e fe

es a

lrea

dy

ch

arg

ed. T

o

this

en

d,

the

new

min

iste

rial

dec

isio

n r

edu

ces

pro

rata

fee

s by

at

leas

t 3

0 p

erce

nt

in t

he

firs

t tw

o t

ran

ches

def

ined

in

Min

iste

rial

Dec

isio

n 6

48

/20

11

, w

ith

lar

ger

cu

ts i

n t

he

pro

rata

fee

s ap

pli

cable

to s

ub

seq

uen

t tr

anch

es.

The

new

Jo

int

Min

iste

rial

Dec

isio

n a

lso

lo

wer

s fe

es f

or

copie

s an

d f

or

addit

ional

pag

es.

[Q4

-20

11

]

Ob

serv

ed.

A j

oin

t m

inis

teri

al d

ecis

ion r

educe

d n

ota

ries

' fee

s by

27

% i

n t

he

firs

t tw

o t

ranch

es c

om

par

ed t

o t

he

20

11

dec

isio

n. It

als

o

red

uce

d f

ees

for

cop

ies

and

for

add

itio

nal

pag

es b

y E

UR

1ea

ch

and

pro

vid

ed t

hat

sta

rtin

g f

rom

EU

R 2

0 m

illi

on t

he

fee

def

ined

in t

he

dec

isio

n i

s th

e m

axim

um

fee

(co

mp

ared

to E

UR

30

mil

lio

n b

efo

re).

Fo

r th

e le

gal

pro

fess

ion

, th

e G

over

nm

ent

issu

es a

Pre

sid

enti

al D

ecre

e re

vis

ing

the

per

cen

tag

es a

ppli

cab

le t

o t

he

refe

ren

ce

amo

un

ts (

Art

icle

96

(2)

of

the

Cod

e o

f L

awy

ers,

as

amen

ded

), w

hic

h s

ets

pre

pai

d a

mounts

for

each

pro

ced

ura

l ac

t o

r co

urt

app

eara

nce

s (i

.e.,

it

sets

a s

yst

em o

f p

rep

aid

fix

ed/c

on

trac

t su

ms

for

each

pro

ced

ura

l ac

t o

r ap

pea

rance

by

a l

awy

er w

hic

h i

s

no

t li

nked

to

a s

pec

ific

‘re

fere

nce

am

ou

nt’

). [

Q4

-20

11

]

On

goin

g.

As

of

mid

-Feb

ruar

y 2

01

2 a

dra

ft P

resi

den

tial

Dec

ree

had

bee

n

pre

par

ed,

but

it n

eed

ed f

urt

her

ref

inem

ents

to

be

in l

ine

wit

h t

he

law

on

fai

r tr

ial

and

den

ial

of

just

ice

ado

pte

d b

y t

he

Hel

len

ic

Par

liam

ent

on

6 M

arch

20

12.

An

au

dit

is

lau

nch

ed t

o a

sses

s to

wh

at e

xte

nt

the

con

trib

uti

on

s o

f la

wy

ers

and e

ng

inee

rs t

o c

over

the

op

erat

ing c

ost

s o

f th

eir

pro

fess

ion

al a

sso

ciat

ion

s ar

e re

aso

nab

le,

pro

po

rtio

nat

e an

d j

ust

ifie

d. [Q

4-2

01

1]

Pa

rtia

lly

ob

serv

ed.

Th

e M

inis

try

of

Infr

astr

uct

ure

has

pro

vid

ed i

nfo

rmat

ion

to t

he

Co

mm

issi

on

ser

vic

es o

n t

he

pro

fit

and

lo

ss a

cco

un

t o

f th

e

Tec

hnic

al C

ham

ber

of

Gre

ece.

The

Min

istr

y o

f Ju

stic

e st

ill

has

to

pro

vid

e si

mil

ar i

nfo

rmat

ion

for

the

legal

pro

fess

ion.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

70

Th

e G

ov

ern

men

t p

ub

lish

es a

rep

ort

, by

mid

-No

vem

ber

20

11, on t

he

imple

men

tati

on o

f L

aw 3

919/2

011,

incl

udin

g:

1.

the

list

of

pro

fess

ion

s fa

llin

g u

nder

the

sco

pe

of

the

law

;

2.

the

list

of

pro

fess

ion

s ex

emp

ted f

rom

th

e li

ftin

g o

f re

stri

ctio

ns

by

Pre

siden

tial

Dec

ree

and

th

e ju

stif

icat

ion

s fo

r su

ch

exem

pti

on

s;

3.

an a

sses

smen

t on

wh

eth

er f

urt

her

mea

sure

s ar

e nee

ded

on

th

e ru

les

on

acc

ess

to, an

d e

xer

cise

of

the

pro

fess

ion,

and

on

pri

cin

g t

o a

lig

n G

reek

leg

isla

tion

wit

h E

U l

aw a

nd

co

mp

etit

ion r

ule

s;

4.

a ti

met

able

to

scr

een

ex

isti

ng l

egis

lati

on a

nd t

o a

do

pt

the

nec

essa

ry c

han

ges

to t

he

exis

tin

g s

pec

ific

reg

ula

tio

ns

of

the

pro

fess

ion

s (i

.e., P

resi

den

tial

Dec

rees

, M

inis

teri

al D

ecis

ion

s an

d C

ircu

lars

) to

mak

e th

em f

ull

y c

om

pat

ible

wit

h L

aw

39

19

/20

11

, E

U l

aw a

nd c

om

pet

itio

n r

ule

s.

Pa

rtly

ob

serv

ed.

Th

e th

ird a

nd

fou

rth

ele

men

ts h

ave

no

t b

een

co

mp

lied

wit

h.

Ch

ang

es t

o P

resi

den

tial

Dec

rees

, M

inis

teri

al D

ecis

ion

s an

d C

ircu

lars

fo

llo

win

g t

he

scre

enin

g o

f le

gis

lati

on a

re a

do

pte

d.

[Ma

rch

20

12

].

No

t ye

t a

ppli

cable

.

Mea

sure

s ar

e id

enti

fied

to e

nsu

re t

hat

pro

vid

ers

of

serv

ices

are

not

sub

ject

to

req

uir

emen

ts w

hic

h o

bli

ge

them

to e

xer

cise

a

giv

en s

pec

ific

act

ivit

y e

xcl

usi

vel

y,

or

wh

ich

res

tric

t th

e ex

erci

se j

oin

tly

or

in p

artn

ersh

ip o

f dif

fere

nt

acti

vit

ies,

ex

cep

t in

the

circ

um

stan

ces

and

un

der

th

e co

nd

itio

ns

set

in t

he

Ser

vic

es D

irec

tiv

e. [

Dec

emb

er 2

01

1]

No

t o

bse

rved

.

Th

e G

ov

ern

men

t id

enti

fies

mea

sure

s to

rem

ov

e co

mp

lete

pro

hib

itio

ns

on c

om

mer

cial

com

mu

nic

atio

ns

by

th

e re

gula

ted

pro

fess

ion

s an

d t

o e

nsu

re t

hat

pro

fess

ion

al r

ule

s on

co

mm

erci

al c

om

mu

nic

atio

ns

are

no

n-d

iscr

imin

ato

ry, ju

stif

ied

by

an

ov

erri

din

g r

easo

n r

elat

ing t

o t

he

pu

bli

c in

tere

st a

nd

pro

po

rtio

nat

e. [

Q4

-20

11

]

Pa

rtly

ob

serv

ed.

Th

e m

ain o

uts

tan

din

g c

ase

of

com

ple

te b

ans

on

ad

ver

tise

men

t

app

lied

to t

he

leg

al p

rofe

ssio

n (

nam

ely

, to

law

yer

s, l

aw f

irm

s

and

no

tari

es).

PD

95

/20

11

an

d A

rt.

6 o

f L

aw 4

03

8/2

01

2al

low

mo

re f

lex

ibil

ity

in t

he

com

mer

cial

co

mm

un

icat

ion

s o

f n

ota

ries

and

law

yer

s,

resp

ecti

vel

y.

How

ever

, la

w 4

03

8/2

01

2 k

eep

s a

com

ple

te b

an o

n

TV

, ra

dio

an

d b

illb

oar

ds,

wh

ich a

pp

ears

co

ntr

ary

to

Art

. 2

4 o

f

the

Ser

vic

es D

irec

tiv

e an

d t

o t

he

Eu

rop

ean

Co

urt

of

Just

ice

case

law

.

Th

e G

ov

ern

men

t id

enti

fies

mea

sure

s to

rei

nfo

rce

tran

spar

ency

in t

he

fun

ctio

nin

g o

f p

rofe

ssio

nal

bod

ies

by

req

uir

ing t

hem

to

pu

bli

sh a

n a

nn

ual

rep

ort

on t

hei

r w

ebp

age

reg

ardin

g t

hei

r fi

nan

cial

per

form

ance

and

sta

tist

ics

on d

isci

pli

nar

y a

ctio

ns

in

def

ence

of

con

sum

ers'

inte

rest

s. [

No

vem

ber

20

11]

Pa

rtly

ob

serv

ed

(obse

rved

only

fo

r th

e le

gal

pro

fess

ion)

Law

40

38

/20

12 p

rov

ides

fo

r th

e p

ub

lica

tio

n o

f th

e an

nual

acco

unts

of

the

bar

ass

oci

atio

ns

in G

reec

e as

wel

l as

of

agg

reg

ate

info

rmat

ion

on

dis

cipli

nar

y p

roce

du

res.

Th

e p

rin

ciple

of

tran

spar

ency

sh

ould

ho

wev

er,

be

app

lied

to a

ll

oth

er r

egu

late

d p

rofe

ssio

ns.

Th

e G

ov

ern

men

t m

on

ito

rs t

he

imp

lem

enta

tio

n o

f L

aw 3

91

9/2

01

1 a

nd

lau

nch

es a

stu

dy

on

ho

w e

ffec

tive

such

a l

aw i

s in

incr

easi

ng

co

mp

etit

ion

an

d r

edu

cin

g p

rice

s [O

ctob

er 2

01

1].

The

stu

dy

is

reg

ula

rly

up

dat

ed,

wit

h t

he

firs

t re

sult

s av

aila

ble

by

end

-Dec

emb

er 2

01

1.

If n

eces

sary

, ad

just

men

ts t

o t

he

law

wit

h t

he

aim

of

incr

easi

ng

co

mp

etit

ion a

re a

do

pte

d b

y M

arc

h

20

12.

Ob

serv

ed.

Th

e st

udy

is

bei

ng

car

ried

ou

t by

KE

PE

, a

Gre

ek t

hin

k-

tan

k.

An

in

teri

m r

epo

rt w

as c

om

ple

ted a

nd

pre

sente

d i

n D

ecem

ber

20

11

.

Th

e G

ov

ern

men

t p

rese

nts

th

e re

sult

s o

f sc

reen

ing o

f th

e re

gu

lati

on

s o

f th

e m

ain r

egu

late

d p

rofe

ssio

ns

to a

sses

s th

e

just

ific

atio

n a

nd t

he

pro

po

rtio

nal

ity

of

the

req

uir

emen

ts r

eser

vin

g c

erta

in a

ctiv

itie

s to

pro

vid

ers

wit

h s

pec

ific

pro

fess

ion

al

qual

ific

atio

ns.

[N

ov

emb

er 2

01

1]

No

t o

bse

rved

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

71

Th

e G

ov

ern

men

t p

rep

ares

act

s by

en

d-2

011,

to b

e ad

op

ted

by

Q1

-20

12

, at

th

e la

test

, in

ord

er t

o:

1.

abo

lish

pro

vis

ion

s o

f th

e re

gula

tio

ns

of

the

pro

fess

ion

al c

ham

ber

s o

n a

cces

s to

, an

d e

xer

cise

of,

the

pro

fess

ion

an

d o

n

pri

cin

g,

that

are

ag

ain

st L

aw 3

919

/20

11

an

d E

U l

aw i

ncl

ud

ing c

om

pet

itio

n r

ule

s;

No

t o

bse

rved

.

Th

ere

are

on

-goin

g d

iscu

ssio

ns

on s

pec

ific

pro

vis

ion

s o

f th

e

cod

e o

f la

wy

ers

reg

ard

ing m

inim

um

lev

els

of

rem

un

erat

ion

app

lica

ble

to

sal

arie

d l

awy

ers

and

on

are

as r

eser

ved

to t

he

leg

al

pro

fess

ion

.

2.

ensu

re t

hat

pro

vid

ers

of

serv

ices

are

not

subje

ct t

o r

equir

emen

ts w

hic

h o

bli

ge

them

to

exer

cise

a g

iven

sp

ecif

ic a

ctiv

ity

excl

usi

vel

y,

or

wh

ich

res

tric

t th

e ex

erci

se j

oin

tly

or

in p

artn

ersh

ip o

f dif

fere

nt

acti

vit

ies,

exce

pt

in t

he

circ

um

stan

ces

and

un

der

the

con

dit

ion

s se

t in

the

Ser

vic

es D

irec

tiv

e;

No

t o

bse

rved

.

(Th

is f

oll

ow

s fr

om

lac

k o

f co

mp

lian

ce w

ith t

he

iden

tifi

cati

on

of

rest

rict

ion

s to

mu

ltid

isci

pli

nar

y a

ctiv

itie

s re

ferr

ed t

o a

bo

ve)

3.

rem

ov

e co

mp

lete

pro

hib

itio

ns

on c

om

mer

cial

com

mu

nic

atio

ns

by

th

e re

gula

ted

pro

fess

ion

s an

d t

o e

nsu

re t

hat

pro

fess

ional

rule

s on c

om

mer

cial

com

munic

atio

ns

are

no

n-d

iscr

imin

ato

ry, ju

stif

ied

by

an

over

ridin

g r

easo

n r

elat

ing

to

the

pu

bli

c in

tere

st a

nd

pro

port

ion

ate;

Pa

rtly

ob

serv

ed

Ob

serv

ed f

or

the

legal

pro

fess

ion (

i.e.

, nota

ries

, la

wy

ers

and l

aw

firm

s).

4.

rein

forc

e tr

ansp

aren

cy i

n t

he

fun

ctio

nin

g o

f p

rofe

ssio

nal

bo

die

s;

Ob

serv

ed

for

the

legal

pro

fess

ion (

i.e.

, la

wy

ers)

.

No

t o

bse

rved

for

oth

er p

rofe

ssio

ns.

.

5.

set

up

co

ntr

ibu

tio

ns

of

law

yer

s an

d e

ng

inee

rs t

o t

hei

r p

rofe

ssio

nal

ass

oci

atio

ns

that

ref

lect

th

e o

per

atin

g c

ost

s o

f th

e

serv

ices

pro

vid

ed b

y t

ho

se a

sso

ciat

ion

s. T

hes

e co

ntr

ibu

tio

ns

are

pai

d p

erio

dic

ally

an

d a

re n

ot

lin

ked

to

pri

ces

char

ged

by

pro

fess

ion

s;

No

t o

bse

rved

.

6.

sim

pli

fy t

he

requ

irem

ents

res

ervin

g c

erta

in a

ctiv

itie

s to

the

leg

al a

nd

en

gin

eeri

ng

pro

fess

ion

s th

at a

re n

ot

just

ifie

d o

r

pro

po

rtio

nat

e;

No

t o

bse

rved

. T

o d

ate,

dis

cuss

ions

hav

e o

nly

sta

rted

wit

h t

he

Min

istr

y o

f Ju

stic

e re

gar

din

g c

erta

in r

eser

ved

act

ivit

ies

in

fav

ou

r o

f G

reek

law

yer

s co

ver

ing

med

iati

on

an

d m

and

ato

ry

pre

sen

ce i

n c

on

trac

ts w

her

e n

ota

ries

' par

tici

pat

ion

are

als

o

req

uir

ed.

7.

amen

d A

rtic

le 6

of

Law

39

19

/201

1 t

o p

rovid

e fo

r th

e fr

eedom

of

inco

rpora

tion o

f la

w f

irm

s an

d t

he

free

do

m t

o t

he

op

enin

g o

f b

ranch

es i

nsi

de

Gre

ece.

O

bse

rved

.

8.

abo

lish

Art

icle

7.1

b)

of

Law

39

19

/20

11

, re

gar

din

g t

he

po

wer

s o

f th

e T

ech

nic

al C

ham

ber

of

Gre

ece

to m

onit

or

and t

o

op

en d

isci

pli

nar

y p

roce

edin

gs

for

un

usu

ally

lo

w f

ees.

O

bse

rved

.

9.

tack

le a

ny

oth

er i

ssu

es i

den

tifi

ed i

n t

he

asse

ssm

ent

of

the

imple

men

tati

on o

f L

aw 3

919/2

011.

Th

e G

ov

ern

men

t re

qu

ests

th

e H

elle

nic

Co

mp

etit

ion

Co

mm

issi

on

to

iss

ue

an o

pin

ion o

f th

e p

rop

ose

d a

cts.

[Q

4-2

01

1]

Ob

serv

ed.

Rec

og

nit

ion o

f pro

fess

ion

al

qu

ali

fica

tio

ns

All

the

nec

essa

ry m

easu

res

are

tak

en t

o e

nsu

re t

he

effe

ctiv

e im

ple

men

tati

on o

f E

U r

ule

s o

n t

he

reco

gn

itio

n o

f p

rofe

ssio

nal

qu

alif

icat

ion

s, i

ncl

ud

ing c

om

pli

ance

wit

h E

CJ

ruli

ng

s (i

nte

r a

lia,

rela

ted

to

fra

nch

ised

dip

lom

as).

The

Gover

nm

ent:

- u

pd

ates

the

info

rmat

ion

on

th

e n

um

ber

of

pen

din

g a

ppli

cati

ons

for

the

reco

gnit

ion

of

pro

fess

ional

qual

ific

atio

ns,

an

d s

end

s

it t

o t

he

Co

mm

issi

on

; [O

ctob

er 2

011]

- p

rese

nts

dra

ft l

egis

lati

on

by

Oct

ob

er 2

011, to

be

ado

pte

d b

y e

nd

-yea

r, i

n o

rder

to

rem

ov

e th

e p

roh

ibit

ion t

o r

ecog

nis

e th

e

pro

fess

ion

al q

ual

ific

atio

ns

der

ived

fro

m f

ran

chis

ed d

egre

es.

Ho

lder

s o

f fr

anch

ised

deg

rees

fro

m o

ther

Mem

ber

Sta

tes

should

hav

e th

e ri

gh

t to

wo

rk i

n G

reec

e u

nd

er t

he

sam

e co

nd

itio

ns

as h

old

ers

of

Gre

ek d

egre

es.

Pa

rtia

lly

ob

serv

ed

Info

rmat

ion

on t

he

nu

mb

er o

f p

end

ing

ap

pli

cati

on

s fo

r

reco

gn

itio

n o

f p

rofe

ssio

nal

qual

ific

atio

ns

was

tra

nsm

itte

d t

o t

he

Co

mm

issi

on

in

Dec

emb

er 2

01

1.

Th

e d

raft

leg

isla

tio

n p

rovid

ing

for

the

reco

gn

itio

n o

f fr

anch

ised

dip

lom

as f

or

pro

fess

ion

al i

s p

endin

g.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

72

Ser

vice

s D

irec

tive

Th

e G

ov

ern

men

t co

mp

lete

s th

e ad

op

tio

n o

f ch

anges

to

ex

isti

ng s

ecto

ral

legis

lati

on

in

key

ser

vic

es s

ecto

rs s

uch

as

reta

il (

e.g

.

op

en a

ir m

ark

ets

and

outd

oo

r tr

ade)

, w

ho

lesa

le (

e.g

. ce

ntr

al m

ark

ets)

, ag

ricu

ltu

re (

e.g

. v

eter

inar

y s

erv

ices

), e

mp

loy

men

t

(em

plo

ym

ent

agen

cies

), a

nd

tec

hn

ical

ser

vic

es.

Th

e G

ov

ern

men

t al

so a

do

pts

chan

ges

to

th

e re

mai

nin

g s

ecto

ral

regu

lati

on,

ensu

rin

g f

ull

com

pli

ance

wit

h t

he

dir

ecti

ve.

Reg

ula

tio

ns

shou

ld:

"fa

cili

tate

th

e es

tab

lish

men

t by

:

!ab

oli

shin

g o

r am

end

ing

req

uir

emen

ts w

hic

h a

re p

roh

ibit

ed b

y t

he

Ser

vic

es D

irec

tiv

e;

!ab

oli

shin

g o

r am

end

ing

un

just

ifie

d a

nd

dis

pro

po

rtio

nat

e re

qu

irem

ents

, in

clu

din

g t

ho

se r

elat

ing t

o q

uan

tita

tiv

e an

d t

erri

tori

al

rest

rict

ion

s, l

egal

fo

rm r

equir

emen

ts,

shar

ehold

ing

req

uir

emen

ts,

fix

ed m

inim

um

and/o

r m

axim

um

tar

iffs

and r

estr

icti

ons

to

mu

ltid

isci

pli

nar

y a

ctiv

itie

s.

"fa

cili

tate

th

e p

rov

isio

n o

f cr

oss

-bo

rder

ser

vic

es, so

that

pro

vid

ers

of

cross

-bord

er s

ervic

es a

re r

equir

ed t

o c

om

ply

wit

h

spec

ific

req

uir

emen

ts o

f th

e G

reek

leg

isla

tio

n o

nly

in e

xce

pti

on

al c

ases

(w

hen

adm

itte

d b

y A

rtic

les

16

or

17

of

the

Ser

vic

es

Dir

ecti

ve)

.

"p

rov

ide

leg

al c

erta

inty

fo

r p

rovid

ers

of

cro

ss-b

ord

er s

erv

ices

by

set

tin

g o

ut

in t

he

resp

ecti

ve

(sec

tora

l) l

egis

lati

on w

hic

h

req

uir

emen

ts c

an,

and w

hic

h r

equ

irem

ents

can

not,

be

app

lied

to

cro

ss-b

ord

er s

erv

ices

. [Q

4-2

01

1]

Ess

enti

all

y o

bse

rved

.

Sin

ce t

he

pre

vio

us

rev

iew

th

ere

has

bee

n g

oo

d p

rog

ress

in

the

ado

pti

on o

f se

cto

ral

leg

isla

tio

n d

eriv

ing f

rom

th

e

imp

lem

enta

tio

n o

f th

e se

rvic

es d

irec

tiv

e. T

her

e is

ho

wev

er

pen

din

g l

egis

lati

on i

n t

he

fiel

d o

f em

plo

ym

ent

(to r

emo

ve

inte

r

ali

a, m

inim

um

fee

s in

em

plo

ym

ent

agen

cies

) an

d o

n t

ech

nic

al

pro

fess

ion

s (i

.e., a

ser

ies

of

Pre

sid

enti

al D

ecre

es s

imp

lify

ing t

he

acce

ss a

nd

ex

erci

se o

f a

nu

mb

er o

f te

chn

ical

pro

fess

ion

s su

ch a

s

elec

tric

ian

s, p

lum

ber

s, m

ach

ine

oper

ato

rs,

etc.

).

Th

e G

ov

ern

men

t en

sure

s:

"th

at t

he

po

int

of

sin

gle

co

nta

ct (

PS

C)

is f

ull

y o

per

atio

nal

in a

ll s

ecto

rs c

ov

ered

by

th

e S

erv

ices

Dir

ecti

ve;

"th

at t

he

PS

C d

isti

ng

uis

hes

bet

wee

n p

roce

du

res

app

lica

ble

to s

ervic

e p

rov

ider

s es

tab

lish

ed i

n G

reec

e an

d t

ho

se a

ppli

cab

le t

o

cro

ss-b

ord

er p

rov

ider

s (i

n p

arti

cula

r fo

r th

e re

gu

late

d p

rofe

ssio

ns)

;

"th

at t

her

e is#a

deq

uat

e co

nn

ecti

on

bet

wee

n t

he

PS

C a

nd

oth

er r

elev

ant

auth

ori

ties

(in

clu

din

g o

ne-

sto

p s

ho

ps,

pro

fess

ion

al

asso

ciat

ion

s an

d t

he

reco

gn

itio

n o

f p

rofe

ssio

nal

qual

ific

atio

ns)

. [Q

4-2

011]

On

goin

g.

Sin

ce t

he

last

rev

iew

ther

e h

as a

lso

bee

n g

ood

pro

gre

ss t

ow

ard

s

the

com

ple

tio

n o

f th

e P

oin

t o

f S

ing

le C

onta

ct (

PS

C).

Ho

wev

er,

the

Gre

ek P

SC

nee

ds

to i

mp

rov

e to

incr

ease

the

info

rmat

ion

avai

lab

le i

n E

ngli

sh a

s w

ell

as t

he

nu

mb

er o

f p

roce

du

res

that

can

be

com

ple

ted

on

line.

It

has

bee

n e

stim

ated

that

in

30

% o

f

the

case

s, t

he

PS

C p

rov

ides

in

form

atio

n o

nly

an

d i

n a

lmo

st 2

0%

of

the

pro

cedure

s, t

he

PS

C d

oes

not

pro

vid

e an

y i

nfo

rmat

ion (

or

acce

ss t

o t

he

elec

tro

nic

co

mp

leti

on

of

pro

ced

ure

s) a

t al

l.

Sec

tora

l g

row

th d

rive

rs

Th

e G

ov

ern

men

t p

ub

lish

es r

epo

rts

anal

ysi

ng:

- th

e p

ote

nti

al c

on

trib

uti

on o

f th

e to

uri

sm s

ecto

r to

gro

wth

an

d j

ob

s. I

n a

n A

ctio

n P

lan

, th

e G

ov

ern

men

t id

enti

fies

leg

isla

tive,

adm

inis

trat

ive

and

oth

er o

bst

acle

s h

ind

erin

g c

om

pet

itio

n a

nd m

ark

et e

ntr

y t

o t

he

real

isat

ion

of

sect

or

pote

nti

al;

[No

vem

ber

20

11

]

- th

e p

ote

nti

al c

on

trib

uti

on o

f th

e re

tail

sec

tor

to p

rice

fle

xib

ilit

y,

gro

wth

an

d j

ob

s. I

t sh

ou

ld i

den

tify

leg

isla

tiv

e,

adm

inis

trat

ive

and

oth

er o

bst

acle

s h

ind

erin

g c

om

pet

itio

n a

nd m

ark

et e

ntr

y t

o t

he

real

isat

ion

of

sect

or

pote

nti

al. [N

ov

emb

er

20

11

]

No

t o

bse

rved

(to

uri

sm)

Pa

rtly

ob

serv

ed (

reta

il).

Th

e M

inis

try

of

Dev

elo

pm

ent,

Co

mp

etit

iven

ess

and

Sh

ipp

ing

(MD

CS

) su

bm

itte

d i

n D

ecem

ber

20

11

a l

ist

of

acti

on

s ta

ken

or

to b

e ta

ken

in

res

po

nse

to

the

study

on

ret

ail

carr

ied

ou

t by

McK

inse

y.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

73

Th

e nec

essa

ry l

egal

act

s an

d o

ther

str

uct

ura

l ac

tion

s ar

e ad

op

ted

[Q

4-2

01

1]

to i

mp

lem

ent

the

fin

din

gs

of

thes

e re

port

s.

Ob

serv

ed (

reta

il).

As

of

Feb

ruar

y 2

01

2,

leg

isla

tio

n h

ad b

een

ad

op

ted

to

lif

t

con

stra

ints

on

the

sale

by

oth

er r

etai

lers

of

curr

entl

y r

estr

icte

d

pro

du

ct c

ateg

ori

es,

such

as

bab

y m

ilk

. T

her

e w

as a

lso

dra

ft

leg

isla

tio

n r

eady

i)

to a

llo

w t

he

sale

of

bak

e o

ff b

read

th

rou

gh

reta

iler

s oth

er t

han

bak

erie

s; i

i) t

o s

imp

lify

the

syst

em o

f

sub

mis

sio

n o

f w

ho

lesa

le a

nd r

etai

l p

rice

lis

ts,

cost

ele

men

ts a

nd

con

trac

ts t

o t

he

Min

istr

y o

f C

om

pet

itiv

enes

s.

Th

e G

ov

ern

men

t in

itia

tes

add

itio

nal

stu

die

s o

n m

anu

fact

uri

ng,

ener

gy

, an

d w

ho

lesa

le s

ecto

rs w

ith a

vie

w t

o r

emo

vin

g

rem

ain

ing

ob

stac

les

to g

row

th i

n t

hes

e se

cto

rs.

On

th

e b

asis

of

thes

e st

ud

ies,

the

Go

ver

nm

ent

pre

par

es c

oncr

ete

acti

ons

and a

tim

etab

le f

or

imp

lem

enta

tio

n [

Ma

rch

20

12].

No

t ye

t a

ppli

cable

Busi

nes

s en

viro

nm

ent

Th

e G

ov

ern

men

t p

ub

lish

es a

pla

n [

Oct

ob

er 2

01

1]

for

a "B

usi

nes

s-F

rien

dly

Gre

ece"

tac

kli

ng 3

0 r

emai

nin

g r

estr

icti

on

s to

busi

nes

s ac

tivit

ies,

inves

tmen

t an

d i

nn

ov

atio

n.

Th

e p

lan

id

enti

fies

hu

rdle

s to

in

nov

atio

n a

nd e

ntr

epre

neu

rsh

ip -

ran

gin

g f

rom

com

pan

y c

reat

ion

to

co

mp

any

liq

uid

atio

n -

an

d p

rese

nts

the

corr

esp

on

din

g c

orr

ecti

ve

acti

on

s. T

he

pla

n i

ncl

udes

mea

sure

s,

among o

ther

s, i

n o

rder

to:

"si

mp

lify

an

d r

edu

ce c

ost

s li

nk

ed t

o c

om

pan

y p

ub

lica

tio

n r

equ

irem

ents

;

"co

mp

lete

th

e se

ttin

g-u

p o

f th

e G

ener

al C

om

mer

cial

Reg

istr

y (

GE

MI)

by

pro

mp

tly

tak

ing

mea

sure

s su

ch a

s th

e tr

ainin

g o

f

OS

S a

nd

GE

MI

use

rs,

the

com

ple

tio

n o

f th

e G

EM

I d

atab

ase,

the

furt

her

dev

elo

pm

ent

of

web

ser

vic

es a

nd

use

of

elec

tro

nic

sig

nat

ure

s, t

he

inte

rco

nnec

tio

n o

f G

EM

I to

the

Cham

ber

's i

nfo

rmat

ion

sy

stem

s an

d t

o t

he

PS

C, in

ord

er t

o e

nsu

re a

cces

s to

on

lin

e co

mp

leti

on

of

pro

ced

ure

s b

oth

fo

r co

mp

any

fo

rmat

ion a

nd

fo

r an

y a

dm

inis

trat

ive

pro

ced

ure

s n

eces

sary

fo

r th

e

exer

cise

of

thei

r ac

tiv

itie

s;

"si

mp

lify

lo

cati

on

, en

vir

on

men

tal,

bu

ildin

g a

nd

op

erat

ing

per

mit

s;

"el

imin

ate

dis

tort

ion

s in

fu

el d

istr

ibu

tio

n;

"d

evel

op

a "

sin

gle

ele

ctro

nic

win

do

w"

cen

tral

izin

g s

tan

dar

diz

ed t

rad

e-re

late

d i

nfo

rmat

ion

an

d s

imp

lify

ing t

he

nu

mb

er o

f

do

cum

ents

nee

ded

to e

xp

ort

;

"ad

dre

ss r

estr

icti

on

s in

th

e tr

ansp

ort

sec

tor,

incl

ud

ing

the

tran

spo

rt o

f em

pty

co

nta

iner

s an

d o

f n

on

-haz

ard

ou

s w

aste

;

"#r

edu

ce t

he

com

ple

xit

y o

f th

e C

od

e o

f B

oo

ks

and

Rec

ord

s an

d p

rov

ide

clar

ity

on

all

cat

ego

ries

of

no

n-d

edu

cted

ex

pen

ses.

Pa

rtia

lly

ob

serv

ed.

Alt

ho

ug

h a

dra

ft p

lan e

xis

ts,

it h

as n

ot

yet

bee

n p

ub

lish

ed.

Th

e G

ov

ern

men

t co

ncl

ud

es t

he

scre

enin

g o

f M

inis

teri

al D

ecis

ion A

2-3

39

1/2

00

9 o

n m

arket

reg

ula

tio

ns,

as

wel

l as

any

oth

er

rela

ted

reg

ula

tion

s. T

he

scre

enin

g i

s ca

rrie

d o

ut,

in

co

op

erat

ion w

ith

the

Hel

lenic

Co

mp

etit

ion C

om

mis

sio

n,

wit

h a

vie

w t

o

iden

tify

ing

ad

min

istr

ativ

e b

urd

ens

and

un

nec

essa

ry b

arri

ers

to c

om

pet

itio

n t

o b

e el

imin

ated

, an

d d

evel

op

ing a

lter

nat

ive,

les

s

rest

rict

ive,

poli

cies

to

ach

iev

e g

ov

ernm

ent

obje

ctiv

es.

A d

raft

pro

posa

l o

f m

arket

reg

ula

tio

n i

s re

ady

by [

end

-Dec

emb

er

20

11

].

On

go

ing

.

Th

e M

inis

try

of

Dev

elo

pm

ent

Com

pet

itiv

enes

s an

d S

hip

pin

g i

s

exp

ecte

d t

o i

ssu

e in

Ap

ril

20

12

a n

ew M

inis

teri

al D

ecis

ion o

n

mar

ket

reg

ula

tion

s to

rep

lace

Min

iste

rial

Dec

isio

n A

2-

33

91

/20

09

. D

raft

sec

tio

ns

of

the

new

dec

isio

n o

n m

arket

reg

ula

tio

ns

–co

ver

ing

fre

sh f

oo

ds,

mea

t an

d f

ish

– a

re t

reat

ed a

s

a p

ilo

t an

d a

re e

xp

ecte

d t

o b

e av

aila

ble

fo

r dis

cuss

ion

in

Mar

ch

20

12

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

74

A c

om

pre

hen

sive

list

of

no

n-r

ecip

roca

tin

g c

har

ges

in

fav

ou

r o

f th

ird

par

ties

is

pre

sen

ted,

iden

tify

ing

ben

efic

iari

es a

nd

qu

anti

fies

co

ntr

ibu

tio

ns

pai

d b

y c

on

sum

ers

in f

avo

ur

of

tho

se b

enef

icia

ries

. [O

cto

ber

20

11

]

Ob

serv

ed.

Th

e M

inis

try

of

Fin

ance

su

bm

itte

d a

co

mp

rehen

siv

e li

st o

f n

on

-

reci

pro

cati

ng

char

ges

to t

he

Co

mm

issi

on

ser

vic

es i

n N

ov

emb

er

20

11

. T

he

list

has

to

be

furt

her

ref

ined

to

quan

tify

th

e

con

trib

uti

on

s an

d t

o b

ette

r id

enti

fy b

enef

icia

ries

.

Th

e G

ov

ern

men

t re

vie

ws

and

co

dif

ies

the

legis

lati

ve

fram

ewo

rk o

f ex

po

rts

(i.e

., L

aw 9

36/7

9 a

nd L

aw O

rder

3999/5

9),

sim

pli

fies

the

pro

cess

to

cle

ar c

ust

om

s fo

r ex

po

rts

and

im

po

rts

and

giv

es l

arger

com

pan

ies

or

ind

ust

rial

are

as t

he

po

ssib

ilit

y

to b

e ce

rtif

ied t

o c

lear

car

go

fo

r th

e cu

sto

ms

them

selv

es. T

he

ob

ligat

ion o

f re

gis

trat

ion

wit

h t

he

expo

rter

s’ r

egis

try

of

the

Ch

amb

er o

f C

om

mer

ce i

s ab

oli

shed

. [D

ecem

ber

20

11

], w

hil

e th

e e-

cust

om

s sy

stem

is

full

y o

per

atio

nal

. [J

un

e 2

012

]

On

go

ing

.

As

of

Feb

ruar

y 2

01

2,

the

Go

ver

nm

ent

had

su

bm

itte

d t

o

Par

liam

ent

dra

ft l

egis

lati

on r

epla

cin

g L

aw 9

36/7

9 a

nd

Law

Ord

er 3

99

9/5

9 a

nd

ab

oli

shin

g t

he

nee

d t

o r

egis

ter

wit

h t

he

exp

ort

ers’

reg

istr

y o

f th

e C

ham

ber

of

Co

mm

erce

.

Reg

ard

ing t

he

sim

pli

fica

tio

n o

f cu

sto

ms'

pro

ced

ure

s, t

he

Min

istr

y o

f F

inan

ce i

ssued

a M

inis

teri

al D

ecis

ion a

llo

win

g t

he

exp

ort

er t

o g

et a

n a

uth

ori

zati

on t

o e

xp

ort

wit

ho

ut

pri

or

sub

mis

sio

n o

f cu

sto

m d

ecla

rati

ons

and

wit

ho

ut

pre

sen

tati

on

of

the

go

od

s to

th

e cu

sto

ms

pre

mis

es.

An

oth

er D

ecis

ion

pro

vid

es

for

a si

mp

lifi

ed i

mp

ort

cle

aran

ce p

roce

du

re a

nd f

or

clea

rin

g t

he

go

od

s in

the

imp

ort

er's

pre

mis

es. T

he

sim

pli

fied

pro

ced

ure

s ar

e

tho

se i

n C

om

mu

nit

y C

ust

om

s' r

egu

lati

on

s.

In o

rder

to

hel

p a

ttra

ct i

nves

tmen

t in

key

sec

tors

, th

e G

ov

ern

men

t sp

eeds

up t

he

rev

iew

of

pro

ject

ap

pli

cati

on

s in

the

pip

elin

e

of

the

pro

cedure

for

larg

e in

ves

tmen

ts f

or

at l

east

th

ree

larg

e in

ves

tmen

t p

roje

cts

by

en

d-N

ov

emb

er 2

01

1, w

ith

tw

o m

ore

pro

ject

s o

ne

mo

nth

lat

er.

Ob

serv

ed.

Th

e in

term

inis

teri

al c

om

mit

tee

for

stra

teg

ic i

nves

tmen

t

app

rov

ed t

he

incl

usi

on

in t

he

pro

ced

ure

s of

fast

-tra

ck t

hre

e

inv

estm

ent

pro

ject

s in

ren

ewab

le e

ner

gy

.

Fo

ur

pro

ject

s h

ave

com

ple

ted t

hei

r el

ectr

onic

su

bm

issi

on

in

stra

tegic

in

ves

tmen

t.

Th

e D

ecre

es n

eces

sary

fo

r th

e im

ple

men

tati

on

of

the

law

on f

ast-

trac

k l

icen

sin

g p

roce

du

re f

or

man

ufa

ctu

rin

g a

ctiv

itie

s an

d

busi

nes

s par

ks

are

imple

men

ted. [O

cto

ber

20

11

]

On

goin

g.

As

of

mid

-Feb

ruar

y 2

01

2,

thre

e im

ple

men

tin

g r

egu

lati

on

s

der

ivin

g f

rom

this

law

hav

e b

een i

ssu

ed.

Th

e m

ajo

rity

of

the

imp

lem

enti

ng d

ecis

ion

s is

, n

on

eth

eles

s,

pen

din

g.

Th

e G

ov

ern

men

t ac

cele

rate

s [Q

4-2

01

1]

the

com

ple

tio

n o

f th

e la

nd r

egis

try

, w

ith

a v

iew

to:

"te

nd

erin

g c

adas

tral

pro

ject

s fo

r ad

dit

ional

4 m

illi

on

rig

hts

by

Dec

emb

er 2

01

1;

"d

igit

alis

ing

th

e o

per

atio

ns

of

all

mo

rtg

age

and n

ota

ries

' off

ices

and

co

nv

eyin

g a

ll n

ewly

reg

iste

red d

eed

s to

th

e ca

das

tre

by

20

15

;

"ex

clusi

vel

y-o

per

atin

g c

adas

tral

off

ices

fo

r la

rge

urb

an c

entr

es b

y 2

01

5;

"es

tab

lish

ing a

co

mp

lete

cad

astr

al r

egis

ter

and

excl

usi

vel

y o

per

atin

g c

adas

tral

off

ices

nat

ion

wid

e by

20

20

.

Ob

serv

ed.

7 m

illi

on r

igh

ts w

ere

ten

der

ed i

n D

ecem

ber

20

11.

A M

inis

teri

al D

ecis

ion

on m

ark

et r

egu

lati

on

s is

iss

ued

fo

llo

win

g t

he

scre

enin

g l

aun

ched

in

Q2

-20

11

. [Q

4-2

01

1]

On

go

ing

.

See

co

mm

ent

abo

ve

on

th

e sc

reen

ing

of

Min

iste

rial

Dec

isio

n o

n

mar

ket

reg

ula

tion

s.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

75

An e

x p

ost

im

pac

t as

sess

men

t is

pre

sen

ted i

n o

rder

to e

val

uat

e L

aw 3

85

3/2

01

0 o

n t

he

sim

pli

fica

tion

of

pro

ced

ure

s fo

r th

e

esta

bli

shm

ent

of

com

pan

ies

in t

erm

s of

savin

gs

in t

ime

and

co

st t

o s

et u

p a

bu

sin

ess,

as

wel

l as

to

ver

ify

th

at a

ll s

eco

nd

ary

leg

isla

tio

n i

s in

fo

rce.

[Q

1-2

01

2]

No

t ye

t a

ppli

cable

Tra

nsp

ort

Lib

eral

isat

ion

of

tou

rist

coac

hes

is

imm

edia

tely

eff

ecti

ve

afte

r pas

sin

g l

egis

lati

on

in e

arly

Au

gu

st 2

01

1.

Sec

on

dar

y l

egis

lati

on

esta

bli

shin

g t

he

cost

s an

d t

he

tim

e re

quir

ed f

or

issu

ing

new

lic

ence

s is

ad

op

ted

by

en

d-O

ctob

er 2

011.

Su

ch c

ost

s w

ill

no

t

exce

ed t

he

adm

inis

trat

ive

cost

s an

d t

he

req

uir

ed t

imin

g w

ill

no

t ex

ceed

20

bu

sines

s d

ays

in t

ota

l.

Ob

serv

ed.

Th

e G

ov

ern

men

t su

bm

its

a p

oli

cy p

aper

, in

dic

atin

g h

ow

all

reg

ional

air

po

rts

wil

l be

mer

ged

in

to g

rou

ps

ensu

rin

g t

hat

reg

ion

al a

irp

ort

s b

eco

me

eco

no

mic

ally

via

ble

in

co

mp

lian

ce w

ith s

tate

-aid

rule

s, i

ncl

ud

ing r

eali

stic

pro

ject

ion

s id

enti

fied

by

the

app

oin

ted

fin

anci

al a

dv

iso

rs. [Q

4-2

01

1]

Aft

er e

nsu

rin

g t

hat

reg

ion

al a

irp

ort

s ar

e ec

on

om

ical

ly v

iab

le, th

e G

over

nm

ent

lau

nch

es a

n e

ffec

tive

tran

sact

ion s

trat

egy

lea

din

g t

o t

hei

r p

rivat

isat

ion

. [Q

1-2

01

2]

On

go

ing

wit

h d

elay

.

Th

e P

rivat

isat

ion

Fu

nd

is

pre

par

ing t

he

poli

cy p

aper

.

A r

epo

rt i

s su

bm

itte

d o

n t

he

fun

ctio

nin

g o

f th

e re

gu

lar

pas

sen

ger

tra

nsp

ort

ser

vic

es (

KT

EL

), p

rese

nti

ng

op

tio

ns

for

lib

eral

isat

ion

. [Q

4-2

01

1]

On

go

ing

wit

h d

elay

.

Co

nsu

ltan

ts w

ork

ing

on

th

e re

port

. F

inal

res

ult

s ex

pec

ted

to b

e

read

y b

y M

arch

20

12

.

Th

e tr

ansi

tio

nal

per

iod

est

abli

shed

in

Law

38

87/2

01

0 f

or

the

red

uct

ion i

n c

ost

s fo

r is

suin

g n

ew r

oad

tra

nsp

ort

op

erat

or

lice

nce

s is

bro

ugh

t to

an e

nd o

n 1

Jan

uar

y 2

01

2.

Th

e n

eces

sary

sec

on

dar

y l

egis

lati

on

as

fore

seen

in

th

at l

aw (

Art

icle

14

(11

))

is a

do

pte

d,

spec

ify

ing t

he

cost

for

issu

ing

new

road

tra

nsp

ort

oper

ato

r li

cen

ces.

This

co

st i

s tr

ansp

aren

t, o

bje

ctiv

ely

cal

cula

ted

in r

elat

ion

to

the

nu

mb

er o

f veh

icle

s o

f th

e ro

ad t

ran

spo

rt o

per

ato

r an

d d

oes

not

exce

ed t

he

rele

van

t ad

min

istr

ativ

e co

st.

[Q4

-

20

11

]

Ob

serv

ed.

In l

ine

wit

h t

he

po

licy

ob

ject

ives

of

Law

39

19

/201

1 o

n r

egula

ted p

rofe

ssio

ns,

the

Go

ver

nm

ent

rem

ov

es e

ntr

y b

arri

ers

to t

he

tax

is m

ark

et (

in p

arti

cula

r, r

estr

icti

on

s o

n t

he

num

ber

of

lice

nce

s an

d p

rice

of

new

lic

ence

s), in

lin

e w

ith i

nte

rnat

ion

al b

est

pra

ctic

e. [

Q4

-201

1]

No

t o

bse

rved

.

Dra

ft l

aw i

s st

ill

un

der

dis

cuss

ion.

En

erg

y

Th

e G

ov

ern

men

t fi

nal

ises

the

rem

edie

s to

en

sure

th

e ac

cess

of

thir

d-p

arti

es t

o l

ignit

e-fi

red

ele

ctri

city

gen

erat

ion

. [O

cto

ber

20

11

] N

ot

ob

serv

ed.

Th

e G

ov

ern

men

t en

sure

s th

at n

etw

ork

act

ivit

ies

are

effe

ctiv

ely

unb

un

dle

d f

rom

sup

ply

act

ivit

ies.

In p

arti

cula

r, f

or

elec

tric

ity

:

- al

l th

e nec

essa

ry t

ran

sfer

s o

f st

aff

and a

sset

s o

f th

e tr

ansm

issi

on

sy

stem

op

erat

or

(TS

O)

are

com

ple

ted;

the

TS

O

man

agem

ent,

it

sup

erv

iso

ry b

ody

an

d t

he

com

pli

ance

off

icer

are

ap

po

inte

d i

n a

ccord

ance

wit

h t

he

Ele

ctri

city

Dir

ecti

ve

2009/7

2/E

C;

[Q4-2

011]

- al

l nec

essa

ry t

ran

sfer

s o

f st

aff

and

ass

ets

to t

he

leg

ally

un

bu

nd

led

dis

trib

uti

on

sy

stem

op

erat

or

(DS

O)

are

com

ple

ted

; [Q

1-

20

12

]

- th

e u

nb

un

dle

d T

SO

is

cert

ifie

d b

y t

he

Gre

ek e

ner

gy

reg

ula

tor.

[Q

2-2

012

]

On

goin

g.

Th

e Q

4-2

01

1 d

ead

line

for

the

tran

sfer

of

asse

ts a

nd

per

son

nel

to

the

un

bu

ndle

d T

SO

was

par

tly

co

mp

lied

wit

h b

y t

he

end

of

20

11

, b

ut

is l

ikel

y t

o b

e co

mp

lied

fu

lly

in Q

1-2

01

2.

It i

s al

so l

ikel

y t

hat

th

e Q

1-2

01

2 d

ead

lin

e fo

r th

e

imp

lem

enta

tio

n o

f th

e D

SO

un

bu

nd

lin

g w

ill

be

obse

rved

.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

76

Fo

r g

as:

- o

wn

ersh

ip u

nbu

nd

lin

g i

s im

ple

men

ted

as

fore

seen

in t

he

Gre

ek e

ner

gy

law

. [Q

1-2

01

2]

No

t o

bse

rved

.

In D

ecem

ber

201

1 t

he

Gre

ek a

uth

ori

ties

in

tro

duce

d a

n

amen

dm

ent

to L

aw 4

00

1/2

01

1 o

n t

he

op

erat

ion o

f g

as a

nd

elec

tric

ity

mar

ket

s as

wel

l as

the

exp

lora

tio

n a

nd

pro

du

ctio

n o

f

hy

dro

carb

on

s, t

o a

llo

w f

or

the

imple

men

tati

on o

f th

e IT

O-

mo

del

fo

r th

e gas

TS

O,

DE

SF

A. T

his

all

ow

s al

so f

or

DE

PA

an

d

DE

SF

A t

o b

e so

ld a

s a

ver

tica

lly

in

teg

rate

d c

om

pan

y (

as

op

po

sed

to

sel

ling

bo

th c

om

pan

ies

sep

arat

ely

, w

hic

h w

as t

he

po

licy

ori

gin

ally

pro

vid

ed f

or

in t

he

ener

gy

law

, in

ten

tio

nal

ly

neg

oti

ated

wit

h t

he

Gre

ek a

uth

ori

ties

an

d i

ncl

uded

in

th

e

pre

vio

us

updat

e of

the

MoU

). O

wner

ship

unbundli

ng s

till

rem

ain

s an

op

tion

fo

r th

e u

nb

un

dli

ng

of

the

gas

TS

O.

- t

he

un

bu

ndle

d T

SO

is

cert

ifie

d b

y t

he

Gre

ek e

ner

gy

reg

ula

tor.

[Q

2-2

01

2]

N

ot

yet

ap

pli

cable

.

Th

e G

ov

ern

men

t st

arts

im

ple

men

tin

g t

he

mea

sure

s en

suri

ng

the

acce

ss b

y t

hir

d p

arti

es t

o l

ign

ite-

fire

d e

lect

rici

ty g

ener

atio

n.

[Q4

-20

11

]

No

t o

bse

rved

.

Th

is f

oll

ow

s fr

om

th

e la

ck o

f co

mpli

ance

wit

h t

he

dea

dli

ne

to

fin

aliz

e th

e re

med

ies

to g

rant

acce

ss t

o 4

0%

of

lign

ite

fire

d

cap

acit

y i

n G

reec

e to

co

mp

etit

ors

of

PP

C.

Det

aile

d p

lan

s ar

e p

rese

nte

d f

or

ensu

rin

g a

max

imu

m m

ark

et o

pen

ing

as

reg

ard

s th

e n

on

-inte

rconnec

ted s

yst

em,

cover

ing

among o

ther

s, a

cces

s of

suppli

ers

to t

he

no

n-

inte

rco

nn

ecte

d s

yst

em m

ark

ets

in p

arti

cula

r in

Rhodes

and C

rete

. T

he

Go

ver

nm

ent

sub

mit

s a

req

ues

t fo

r d

ero

gat

ion u

nder

cer

tain

co

nd

itio

ns

of

Art

icle

44 o

f D

irec

tiv

e 2

009

/72

fo

r sm

all

iso

late

d

syst

ems.

[Q

4-2

01

1]

Pa

rtia

lly

ob

serv

ed.

Gre

ece

has

su

bm

itte

d i

n J

anuar

y 2

01

2 a

req

ues

t fo

r der

og

atio

n

for

the

no

n-i

nte

rco

nn

ecte

d i

slan

ds

to t

he

Co

mm

issi

on

.

Ho

wev

er, th

e co

de

for

ensu

ring m

axim

um

mar

ket

open

ing o

n

the

no

n-i

nte

rco

nn

ecte

d i

slan

ds

has

no

t y

et b

een

ad

op

ted

.

Leg

isla

tio

n i

s ad

op

ted

to

aw

ard

th

e hy

dro

res

erves

man

agem

ent

to a

n i

nd

epen

den

t b

ody

. [Q

4-2

01

1]

No

t o

bse

rved

.

Fo

llo

win

g a

nn

oun

cem

ents

of

the

Gre

ek m

inis

try

of

env

iro

nm

ent,

the

Min

istr

y o

f E

ner

gy

is

con

sider

ing

th

e o

pti

on

of

sell

ing

lig

nit

e p

lan

ts w

ith

hyd

ro p

lants

in t

he

con

tex

t o

f th

e

pri

vat

izat

ion

of

PP

C.

Dep

end

ing o

n h

ow

it

is i

mp

lem

ente

d,

this

mea

sure

co

uld

hel

p t

o s

olv

e th

e la

ck o

f co

mp

etit

ion

on

the

gen

erat

ion s

ide

of

the

elec

tric

ity

mar

ket

, w

her

e to

dat

e P

PC

kee

ps

pri

vil

eged

acc

ess

to b

oth

ener

gy

so

urc

es, an

d h

ence

, an

un

fair

ad

van

tag

e o

ver

oth

er e

lect

rici

ty p

roduce

rs t

hat

rel

y

excl

usi

vel

y o

n g

as a

nd

ren

ewab

les,

wh

ich a

re r

elat

ivel

y m

ore

expen

sive.

This

mea

sure

could

als

o b

e an

alt

ern

ativ

e so

luti

on

to

awar

din

g t

he

man

agem

ent

of

hy

dro

res

erves

to a

n i

nd

epen

den

t

bo

dy

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

77

Th

e G

ov

ern

men

t re

mo

ves

reg

ula

ted

tar

iffs

fo

r cu

sto

mer

s ex

cep

t ho

use

ho

lds

and

sm

all

ente

rpri

ses

(as

def

ined

in

the

seco

nd

and

thir

d e

ner

gy

lib

eral

isat

ion

pac

kag

es).

[Q

4-2

01

1]

Ob

serv

ed.

A M

inis

teri

al D

ecre

e w

as i

ssu

ed i

n J

anu

ary

20

12

wh

ich

der

egu

late

s m

ediu

m v

olt

age

con

sum

ers.

Fu

rth

er m

easu

res

are

ado

pte

d t

o e

nsu

re t

hat

th

e en

ergy

co

mp

on

ent

of

reg

ula

ted t

arif

fs f

or

ho

use

hold

s an

d s

mal

l en

terp

rise

s

refl

ects

, at

the

late

st b

y J

une

20

13

, w

ho

lesa

le m

ark

et p

rice

s, e

xce

pt

for

vuln

erab

le c

on

sum

ers.

[Q

4-2

01

1]

On

go

ing

.

Oo

ther

mea

sure

s h

ave

bee

n u

nder

tak

en t

o b

rin

g t

he

rem

ainin

g

reg

ula

ted

cu

stom

ers

(lo

w-v

olt

age

cust

om

ers,

i.e

. m

ain

ly

ho

use

ho

lds

and

sm

all

bu

sin

esse

s) c

lose

r to

th

e m

ark

et p

rice

.

Reg

ula

ted

pri

ces

wer

e in

crea

sed b

y 3

% a

t th

e beg

innin

g o

f

20

12

.

Th

e G

over

nm

ent

com

ple

tes

the

imple

men

tati

on o

f th

e m

easu

res

to e

nsu

re a

cces

s by

co

mp

etit

ors

of

PP

C t

o l

ign

ite-

fire

d

elec

tric

ity

gen

erat

ion.

Thir

d p

arti

es c

an e

ffec

tiv

ely

use

lig

nit

e-fi

red

gen

erat

ion i

n t

he

Gre

ek m

ark

et. [Q

2-2

01

2]

No

t ye

t a

ppli

cable

.

R&

D a

nd

in

no

vati

on

Th

e G

ov

ern

men

t p

urs

ues

an u

p-t

o-d

ate

and i

n-d

epth

eval

uat

ion o

f al

l R

&D

an

d o

ng

oin

g i

nn

ovat

ion a

ctio

ns,

in

clu

din

g i

n

var

iou

s o

per

atio

nal

pro

gra

mm

es w

ith

thei

r co

sts

and b

enef

its.

It

pre

sents

a s

trat

egic

act

ion p

lan f

or

poli

cies

aim

ed a

t

enh

anci

ng

the

qu

alit

y a

nd t

he

syn

erg

ies

bet

wee

n p

ub

lic

and p

riv

ate

R&

D a

nd

in

nov

atio

n,

as w

ell

as t

erti

ary

ed

uca

tio

n.

This

acti

on

pla

n i

den

tifi

es a

cle

ar t

imet

able

for

rele

van

t m

easu

res

to b

e ta

ken

, ta

kin

g t

he

budget

ary

im

pac

t in

to a

ccount

and

har

mo

nis

ing

th

ese

acti

on

s w

ith

oth

er r

elev

ant

init

iati

ves

in t

hes

e ar

eas,

in

par

ticu

lar

the

inves

tmen

t la

w. [F

ebru

ary

2012]

On

goin

g.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

78

Bet

ter

reg

ula

tion

Th

e G

ov

ern

men

t ta

ble

s le

gis

lati

on

[N

ov

emb

er 2

01

1]

to i

mp

rov

e re

gu

lato

ry g

over

nan

ce c

over

ing,

in p

arti

cula

r:

"th

e p

rinci

ple

s of

bet

ter

reg

ula

tion

;

"th

e o

bli

gat

ion

s o

f th

e re

gula

tor

for

the

fulf

ilm

ent

of

tho

se p

rin

cip

les;

"th

e to

ols

of

bet

ter

reg

ula

tio

n,

incl

ud

ing

the

cod

ific

atio

n,

reca

st,

con

soli

dat

ion,

rep

eal

of

ob

sole

te l

egis

lati

on,

sim

pli

fica

tio

n

of

legis

lati

on

, sc

reen

ing o

f th

e en

tire

bo

dy

of

exis

tin

g r

egula

tio

n, ex

-an

te a

nd e

x-post

im

pac

t as

sess

men

ts a

nd p

ubli

c

con

sult

atio

n p

roce

sses

;

"th

e tr

ansp

osi

tion

an

d i

mp

lem

enta

tion o

f E

U l

aw a

nd

excl

usi

on o

f g

old

pla

tin

g;

"th

e se

ttin

g-u

p o

f b

ette

r re

gu

lati

on

str

uct

ure

s in

eac

h m

inis

try

as

wel

l as

the

crea

tion

of

a C

entr

al B

ette

r R

egula

tio

n u

nit

;

"th

e re

quir

emen

t th

at d

raft

law

s an

d t

he

mo

st i

mp

ort

ant

dra

ft l

egis

lati

ve

acts

(P

resi

den

tial

Dec

rees

an

d M

inis

teri

al D

ecis

ion

s)

are

acco

mp

anie

d b

y a

n i

mp

lem

enta

tio

n t

imet

able

;

"el

ectr

onic

acc

ess

to a

dir

ecto

ry o

f ex

isti

ng

leg

isla

tio

n a

nd a

n a

nnu

al p

rog

ress

rep

ort

on

Bet

ter

Reg

ula

tio

n.

On i

mpac

t as

sess

men

ts,

legis

lati

on p

rovid

es t

hat

:

"im

ple

men

tin

g l

egis

lati

on

wit

h p

ote

nti

ally

lar

ge

signif

ican

t im

pac

t is

als

o s

ub

ject

to

th

e re

quir

emen

t to

pro

du

ce a

n i

mp

act

asse

ssm

ent;

"im

pac

t as

sess

men

ts a

dd

ress

th

e co

mp

etit

iven

ess

and

oth

er e

con

om

ic e

ffec

ts o

f le

gis

lati

on b

y m

akin

g u

se o

f th

e C

om

mis

sio

n

Imp

act

Ass

essm

ent

guid

elin

es a

nd

th

e O

EC

D C

om

pet

itio

n A

sses

smen

t to

olk

it;

"th

e C

entr

al B

ette

r R

egu

lati

on U

nit

can

see

k t

he

op

inio

n o

f o

ther

min

iste

rial

dep

artm

ents

an

d i

nd

epen

den

t au

thori

ties

fo

r

reg

ula

tio

ns

that

fal

l u

nd

er t

hei

r re

spec

tive

com

pet

ence

s so

as

to i

mp

rov

e th

e q

ual

ity

of

imp

act

asse

ssm

ent;

"#

an i

ndep

enden

t au

tho

rity

an

d t

he

Cen

tral

Bet

ter

Reg

ula

tion U

nit

car

ry o

ut

qual

ity

chec

ks

of

impac

t as

sess

men

ts.

"#

the

Cen

tral

Bet

ter

Reg

ula

tio

n U

nit

co

nsu

lts

the

Hel

len

ic C

om

pet

itio

n C

om

mis

sio

n w

hen

fo

rmu

lati

ng

an

d d

raft

ing

the

guid

elin

es t

o b

e im

ple

men

ted b

y t

he

min

istr

ies'

bet

ter

reg

ula

tio

n u

nit

s;

"#

impac

t as

sess

men

ts a

re p

ubli

shed

.

On

goin

g.

A d

raft

law

has

bee

n t

able

d i

n P

arli

amen

t; i

t la

rgel

y c

om

pli

es

wit

h t

he

Mo

U c

rite

ria.

Th

e G

ov

ern

men

t id

enti

fies

pri

ori

ty a

reas

to c

odif

y a

nd

sim

pli

fy e

xis

tin

g l

egis

lati

on

wit

hin

the

bet

ter

reg

ula

tio

n a

gen

da.

[Dec

emb

er 2

011

]

On

ad

min

istr

ativ

e b

urd

en r

educt

ion

, th

e G

over

nm

ent

subm

its

a li

st o

f 1

3 s

elec

ted

pri

ori

ty a

reas

to t

he

Eu

ropea

n C

om

mis

sio

n

that

wil

l b

e su

bje

ct t

o m

easu

rem

ent.

It

also

set

s dea

dli

nes

fo

r th

e co

mp

leti

on o

f m

easu

rem

ents

in

eac

h a

rea,

fo

r th

e

iden

tifi

cati

on o

f p

rop

osa

ls t

o r

edu

ce b

urd

ens

and f

or

the

amen

dm

ent

of

the

regula

tions.

This

poli

cy i

nit

iati

ve

sho

uld

red

uce

adm

inis

trat

ive

bu

rden

s by

25 p

erce

nt

(co

mp

ared

wit

h t

he

bas

elin

e y

ear

20

08

) in

the

13

pri

ori

ty a

reas

. [D

ecem

ber

2011]

No

t o

bse

rved

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

79

To

ra

ise

the

ab

sorp

tio

n r

ate

s o

f st

ruct

ura

l a

nd

co

hes

ion

fu

nd

s

The

Gover

nm

ent

mee

ts t

arget

s fo

r pay

men

t cl

aim

s an

d m

ajo

r p

roje

cts

in t

he

abso

rpti

on

of

EU

str

uct

ura

l an

d c

ohes

ion

fu

nd

s

set

do

wn

in t

he

tab

le.

Co

mp

lian

ce w

ith t

he

targ

ets

shal

l be

mea

sure

d b

y c

erti

fied

dat

a.

Ob

serv

ed.

Th

e g

over

nm

ent

has

met

th

e an

nu

al t

arget

for

the

subm

issi

on o

f

15

lar

ge

pro

ject

s. M

ore

over

, p

aym

ent

clai

ms

of

appro

xim

atel

y

EU

R 3

30

1 m

illi

on

wer

e d

ecla

red

to

th

e C

om

mis

sio

n i

n 2

01

1

agai

nst

th

e an

nual

tar

get

of

EU

R 3

35

0 m

illi

on,

imp

lyin

g t

hat

ov

eral

l co

mp

lian

ce s

too

d a

t 9

8.6

% o

f th

e an

nu

al t

arg

et.

By

ty

pe

of

fun

d, th

e E

uro

pea

n R

egio

nal

Dev

elo

pm

ent

Fu

nd

(ER

DF

)/C

oh

esio

n F

un

d t

arget

of

EU

R 2

.6 b

illi

on

was

ex

ceed

ed

by

4.5

% (

wit

h p

aym

ent

clai

ms

of

aro

un

d E

UR

2 7

18

mil

lio

n),

wh

erea

s E

uro

pea

n S

oci

al F

und (

ES

F)

pay

men

t cl

aim

s

(am

ou

nti

ng

to a

to

tal

of

EU

R 5

83

.8 m

illi

on

) w

ere

at 7

8%

of

the

ann

ual

tar

get

.

In m

eeti

ng a

bso

rpti

on

rat

e ta

rget

s, r

eco

urs

e to

no

n-t

arg

eted

sta

te a

id m

easu

res

is g

rad

ual

ly r

educe

d.

The

Go

ver

nm

ent

pro

vid

es d

ata

on e

xp

endit

ure

fo

r ta

rget

ed a

nd

no

n-t

arg

eted

de

min

imis

sta

te a

id m

easu

res

co-f

inan

ced

by

th

e st

ruct

ura

l fu

nd

s

in 2

01

0 [

Oct

ob

er 2

01

1]

and

in

20

11

[Q

4-2

01

1].

No

t o

bse

rved

.

Dat

a o

n n

on

-tar

get

ed d

e m

inim

is s

tate

aid

fo

r 20

11

hav

e n

ot

bee

n p

rovid

ed.

Leg

isla

tio

n i

s ad

op

ted

, an

d i

mm

edia

tely

im

ple

men

ted

, to

sh

ort

en d

ead

lin

es a

nd s

imp

lify

pro

ced

ure

s o

n c

ontr

act

awar

d a

nd

lan

d e

xp

rop

riat

ion

s, i

ncl

ud

ing t

he

dea

dli

nes

nee

ded

fo

r th

e re

lev

ant

leg

al p

roce

edin

gs.

[Q

4-2

01

1]

No

t o

bse

rved

.

Th

e G

ov

ern

men

t ea

rmar

ks

app

rop

riat

e am

ou

nts

to

:

"co

mp

lete

unfi

nis

hed

pro

ject

s in

clu

ded

in t

he

200

0-0

6 o

per

atio

nal

pro

gra

mm

e cl

osu

re d

ocu

men

tati

on

(ca

. E

UR

260

mil

lio

n),

as w

ell

as a

n a

ppro

pri

ate

amo

un

t fo

r th

e re

st o

f th

e im

ple

men

tati

on

an

d c

losu

re o

f th

e 2

00

0-0

6 c

ohes

ion

-fu

nd

pro

ject

s;

"to

co

ver

th

e re

qu

ired

nat

ional

co

ntr

ibu

tio

n,

incl

ud

ing

no

n-e

lig

ible

ex

pen

dit

ure

(i.

e. l

and a

cqu

isit

ion

s) i

n t

he

fram

ewo

rk o

f

the

20

07

-13 o

per

atio

nal

pro

gra

mm

es.

[Q4

-20

11

]

On

goin

g.

Th

e G

ov

ern

men

t id

enti

fies

EU

R 5

00

mil

lio

n f

rom

ER

DF

wit

hin

th

e 2

00

7-1

3 o

per

atio

nal

pro

gra

mm

es f

or

the

crea

tio

n o

f a

gu

aran

tee

fun

d f

or

smal

l an

d m

ediu

m-s

ized

ente

rpri

ses.

[Q

1-2

01

2]

O

bse

rved

.

Th

e G

ov

ern

men

t la

unch

es a

web

-bas

ed m

on

ito

ring

to

ol

of

pro

cedu

res

for

the

app

rov

al o

f p

roje

ct p

rop

osa

ls a

nd f

or

the

imp

lem

enta

tio

n o

f p

ub

lic

pro

ject

s, [

Oct

ob

er 2

011

], w

hic

h s

ho

uld

be

full

y o

per

atio

nal

by

en

d-2

011.

Ob

serv

ed.

Th

e m

anag

eria

l ca

pac

ity

of

all

man

agin

g a

uth

ori

ties

an

d i

nte

rmed

iate

bo

die

s o

f o

per

atio

nal

pro

gra

mm

es u

nd

er t

he

fram

ewo

rk

of

the

Nat

ional

Str

ateg

ic R

efer

ence

Fra

mew

ork

20

07

-13

is

cert

ifie

d a

cco

rdin

g t

o t

he

stan

dar

d I

SO

90

01

:20

08

(q

ual

ity

man

agem

ent)

. [Q

4-2

01

1]

La

rgel

y o

bse

rved

.

Th

e G

ov

ern

men

t p

rov

ides

an

im

pac

t as

sess

men

t of

mea

sure

s si

nce

20

10

, in

ord

er t

o a

ccel

erat

e th

e ab

sorp

tio

n o

f st

ruct

ura

l

and

co

hes

ion

fun

ds

ado

pte

d s

ince

May

20

10,

and i

t in

dic

ates

any

ad

dit

ional

mea

sure

s. [

Q4-2

01

1]

Ob

serv

ed.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

80

Wit

h t

he

aim

of

acce

lera

tin

g t

he

abso

rpti

on

of

EU

fin

anci

ng

an

d i

n o

rder

to a

dap

t it

self

to t

he

incr

ease

in

th

e E

U c

o-f

inan

cin

g

rate

s, t

he

Go

ver

nm

ent

wil

l, b

y D

ecem

ber

20

11:

- es

tabli

sh p

rio

rity

pro

ject

s p

er o

per

atio

nal

pro

gra

mm

e, i

ncl

ud

ing,

wh

ere

app

rop

riat

e m

ajo

r pro

ject

s, w

hic

h w

ill

hav

e a

sig

nif

ican

t im

pac

t o

n c

ohes

ion

, gro

wth

an

d e

mp

loy

men

t, a

nd

thei

r re

spec

tiv

e es

tim

ated

all

oca

tio

n. T

hes

e p

roje

cts

sho

uld

be

op

erat

ion

al b

y 2

01

5;

[Dec

emb

er 2

01

1]

- ac

tiv

ate

or

elim

inat

e sl

eep

ing p

roje

cts

(i.e

. p

roje

cts

alre

ady

ap

pro

ved

in t

he

op

erat

ional

pro

gra

mm

es b

ut

no

t y

et c

on

trac

ted

wit

hin

the

tim

efra

mes

as

def

ined

at

the

nat

ion

al l

evel

). F

or

tho

se p

roje

cts

wh

ich a

re r

etai

ned

, it

in

dic

ates

wh

ich c

ond

itio

ns

mu

st b

e m

et i

n o

rder

that

th

e co

-fin

anci

ng

is

up

hel

d;

[Dec

emb

er 2

011] #

- cr

eate

a c

entr

al d

atab

ase

mo

nit

ori

ng

com

pen

sati

on a

nd t

he

tim

e el

apse

d f

or

the

com

ple

tio

n o

f ex

pro

pri

atio

ns

incu

rred

in t

he

fram

ewo

rk o

f th

e im

ple

men

tati

on

of

pro

ject

s co

-fin

ance

d b

y t

he

ER

DF

an

d t

he

Co

hes

ion

Fu

nd

; [Q

1-2

01

2]

- si

mp

lify

tas

ks

rela

tin

g t

o p

roje

ct i

mp

lem

enta

tio

n b

y m

app

ing

res

po

nsi

bil

itie

s an

d r

emo

vin

g u

nn

eces

sary

ste

ps

in a

cco

rdan

ce

wit

h t

he

man

agem

ent

and c

on

trol

syst

ems

wh

ile

also

co

nso

lidat

ing m

anag

emen

t ca

pac

itie

s w

her

e ap

pro

pri

ate

(e.g

. w

aste

trea

tmen

t). [Q

2-2

01

2]

Ob

serv

ed (

for

the

pro

pri

ety

pro

ject

s)

On

goin

g (

for

the

iden

tifi

cati

on o

f sl

eepin

g p

roje

cts)

No

t ye

t a

ppli

cable

.

To u

pgra

de

the

edu

cati

on

sys

tem

Th

e G

ov

ern

men

t p

rep

ares

, an

d s

tart

s im

ple

men

ting

, an

act

ion p

lan f

or

the

imp

rov

emen

t o

f th

e ef

fect

iven

ess

and

eff

icie

ncy

of

the

edu

cati

on s

yst

em,

takin

g i

nto

acc

ount

the

mea

sure

s re

com

men

ded

by

the

ind

epen

den

t ta

sk f

orc

e's

rep

ort

. [e

nd

-Oct

ob

er

20

11

]

Pa

rtia

lly

ob

serv

ed.

Th

e ac

tio

n p

lan n

eed

s im

pro

vin

g.

Bas

ed o

n t

he

reco

mm

end

atio

ns

of

the

blu

epri

nt

and

th

e ac

tio

n p

lan

, th

e ex

isti

ng l

egal

/in

stit

uti

on

al f

ram

ewo

rk f

or

pri

mar

y,

seco

nd

ary

an

d t

erti

ary

ed

uca

tio

n w

ill

be

amen

ded

wit

h a

vie

w t

o i

ncr

easi

ng t

he

effi

cien

cy a

nd

eff

ecti

ven

ess

of

the

edu

cati

on

syst

em. T

he

Go

ver

nm

ent

star

ts p

ub

lish

ing

a b

i-an

nu

al p

rog

ress

rep

ort

on t

he

imple

men

tati

on o

f th

e la

w o

n q

ual

ity

ass

ura

nce

in H

igh

er E

duca

tio

n. [Q

4-2

01

1]

On

go

ing

wit

h d

elay

.

Leg

al f

ram

ewo

rk s

till

un

der

pre

par

atio

n.

Th

e new

ter

tiar

y e

du

cati

on f

ram

ewo

rk l

aw, ai

med

at

red

uci

ng

ex

cess

ive

cost

s an

d a

t im

pro

vin

g i

ts o

ver

all

effi

cien

cy a

nd

effe

ctiv

enes

s, i

s im

ple

men

ted

. [Q

2-2

01

2].

N

ot

yet

ap

pli

cable

.

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

81

To r

eform

th

e ju

dic

ial

syst

em

In o

rder

to

im

pro

ve

the

funct

ionin

g o

f th

e ju

dic

ial

syst

em,

wh

ich i

s es

sen

tial

for

the

pro

per

an

d f

air

fun

ctio

nin

g o

f th

e

eco

no

my

, an

d w

ith

ou

t pre

judic

e to

the

con

stit

uti

on

al p

rin

ciple

s an

d t

he

indep

end

ence

of

just

ice,

the

Go

ver

nm

ent:

(i)

ensu

res

effe

ctiv

e an

d t

imel

y e

nfo

rcem

ent

of

contr

acts

, co

mp

etit

ion

ru

les

and

ju

dic

ial

dec

isio

ns;

(ii)

in

crea

ses

effi

cien

cy b

y b

road

enin

g t

he

skil

ls' b

ase

of

sen

ior

jud

ges

to

wh

om

co

urt

man

agem

ent

task

s h

ave

bee

n

assi

gn

ed;

(iii

) sp

eed

s u

p t

he

syst

em b

y e

lim

inat

ing

bac

klo

g o

f co

urt

s ca

ses

and

by

fac

ilit

atin

g o

ut-

of-

cou

rt s

ettl

emen

t

mec

han

ism

s.

Sp

ecif

ical

ly,

the

Go

ver

nm

ent:

- la

un

ches

[O

cto

ber

20

11

], j

oin

tly

wit

h a

n e

xte

rnal

bo

dy

of

exp

erts

, a

stu

dy

of

the

bac

klo

g o

f n

on

-tax

cas

es i

n c

ou

rts.

Th

e st

udy

incl

udes

th

e S

up

rem

e C

ou

rt a

nd t

he

Sup

rem

e A

dm

inis

trat

ive

Co

urt

, w

ith d

ata

avai

lab

le b

y e

nd

-Ma

rch

20

12 a

nd t

he

anal

ysi

s by

en

d-J

un

e 2012.

- p

uts

in

pla

ce i

mp

lem

enti

ng r

ule

s fo

r L

aw 3

89

8/2

01

0 o

n m

edia

tion

in

civ

il a

nd

com

mer

cial

mat

ters

; [O

cto

ber

20

11

]

- id

enti

fies

do

rman

t ca

ses,

i.e

. ca

ses

pen

din

g b

efo

re t

he

civ

il c

ou

rts

in w

hic

h t

he

rele

van

t co

urt

’s f

ile

reco

rds

that

they

hav

e bee

n p

ost

po

ned

or

nev

er r

ecei

ved

a h

eari

ng d

ate

and n

o p

arty

act

ivit

y f

or

rece

ivin

g a

hea

rin

g d

ate

has

tak

en

pla

ce f

or

at l

east

18 m

onth

s; [

Oct

ob

er-2

01

1]

Ob

serv

ed.

Th

e ex

tern

al b

ody

of

exper

ts h

as b

een

ap

po

inte

d a

nd

th

e st

udy

is o

ng

oin

g.

Th

e fo

llo

win

g i

mp

lem

enti

ng

ru

les

hav

e b

een

ad

op

ted

:

Pre

sid

enti

al D

ecre

e N

o 1

23

/20

11 o

f 9 D

ecem

ber

20

11

an

d

Dec

isio

ns

No

109

08

7 a

nd

10

90

88

of

the

Min

istr

y o

f Ju

stic

e,

Tra

nsp

aren

cy a

nd

Hu

man

Rig

hts

dat

ed 1

2 D

ecem

ber

20

11

.

Th

e jo

int

min

iste

rial

dec

isio

ns

un

der

Art

icle

s 5

(3),

6(2

), 6

(3)

and

9(2

) o

f L

aw 3

89

8/2

01

0 a

nd t

he

dec

isio

ns

of

the

Min

istr

y o

f

Just

ice,

Tra

nsp

aren

cy a

nd

Hu

man

Rig

hts

un

der

Art

icle

s 6

(5)

and

12

(3)

of

Law

38

98

/20

10

are

pen

din

g.

Reg

ula

r re

po

rtin

g o

f d

orm

ant

case

s w

ill

be

req

ues

ted

sta

rtin

g

fro

m e

nd

-Ju

ne

20

12

.

Th

e G

ov

ern

men

t p

rese

nts

a w

ork

ing

pla

n f

or

the

clea

ran

ce o

f th

e bac

klo

g o

f ta

x c

ases

in

all

ad

min

istr

ativ

e tr

ibu

nal

s an

d

adm

inis

trat

ive

cou

rts

of

appea

l by

th

e en

d o

f Ju

ly 2

01

3,

wh

ich

pro

vid

es f

or

inte

rmed

iate

tar

get

s fo

r re

du

cin

g t

he

bac

klo

g b

y

at l

east

15

per

cen

t by

Dec

emb

er 2

011

, 5

0 p

erce

nt

by

Ju

ly 2

012 a

nd

80

per

cent

by

Dec

emb

er 2

012;

[Q4

-20

11

]

Ob

serv

ed.

Th

e G

ov

ern

men

t m

et t

he

15 p

erce

nt

red

uct

ion

tar

get

on t

he

bas

is o

f it

s in

terp

reta

tio

n o

f b

acklo

g c

lear

ance

th

at i

t eq

uat

es

wit

h t

he

fixin

g o

f a

hea

rin

g d

ate.

In

par

ticu

lar,

a h

eari

ng d

ate

was

fix

ed u

nti

l 31

Dec

emb

er 2

011

fo

r 2

4 7

80

ou

t o

f 1

56

86

2

case

s th

at w

ere

pen

din

g o

n 3

1 A

ugust

2011 a

t fi

rst

inst

ance

lev

el,

and

3 2

60

ou

t o

f 8 5

90

cas

es t

hat

wer

e pen

din

g a

t ap

pea

l

lev

el.

Th

e G

ov

ern

men

t p

rep

ares

a w

ork

ing

pla

n f

or

the

use

of

e-re

gis

trat

ion

, e-

trac

kin

g o

f th

e st

atu

s o

f in

div

idu

al c

ases

in a

ll c

ou

rts

of

the

cou

ntr

y,

and

fo

r e-

fili

ng

. T

he

wo

rk p

lan

in

clu

des

dea

dli

ne

for

the

eval

uat

ion a

nd

co

mple

tio

n o

f cu

rren

t pil

ot

pro

ject

s

(e.g

. e-

fili

ng)

and

th

eir

exte

nsi

on t

o a

ll c

ou

rts.

The

pla

n [

Q4

-20

11]

env

isag

es t

hat

e-r

egis

trat

ion,

and

e-t

rack

ing

is

exte

nd

ed t

o

all

cou

rts

by

en

d-2

01

3;

Pa

rtly

ob

serv

ed a

nd

on

go

ing.

A t

ech

nic

ally

det

aile

d w

ork

pla

n h

as b

een s

ub

mit

ted

pre

senti

ng

the

curr

ent

stat

e o

f af

fair

s. H

ow

ever

, th

e fo

rwar

d-l

oo

kin

g p

art

of

the

pla

n w

ith d

eadli

nes

for

the

eval

uat

ion/c

om

ple

tio

n/e

xte

nsi

on

of

curr

ent

pil

ot

pro

ject

s (e

.g.

e-

fili

ng

) is

mis

sin

g.

Ther

e is

no i

nfo

rmat

ion

co

nce

rnin

g t

he

exte

nsi

on o

f e-

reg

istr

atio

n a

nd e

-tra

ckin

g t

o a

ll c

ou

rts

by

en

d-

20

13

.

Th

e G

ov

ern

men

t im

pro

ves

alt

ernat

ive

dis

pu

te r

eso

luti

on

fo

r o

ut-

of-

cou

rt s

ettl

emen

t an

d a

ctiv

ely

pro

mo

tes

pre

-tri

al

con

cili

atio

n,

med

iati

on,

and

arb

itra

tio

n,

wit

h a

vie

w t

o e

nsu

rin

g t

hat

a s

ign

ific

ant

amo

un

t o

f ci

tize

ns

and

bu

sin

esse

s m

ake

use

of

the

new

leg

al f

ram

ewo

rk f

or

med

iati

on

; [Q

4-2

01

1]

Ob

serv

ed.

Th

e M

inis

try

of

Just

ice

has

sta

rted

pro

mo

tin

g a

lter

nat

ive

dis

pu

te r

eso

luti

on

, es

pec

iall

y m

edia

tio

n,

in c

lose

co

op

erat

ion

wit

h c

ham

ber

s of

com

mer

ce.

Eu

rop

ea

n C

om

mis

sio

n

A

NN

EX

1

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

82

Th

e G

ov

ern

men

t p

rod

uce

s an

ev

alu

atio

n o

r im

pac

t as

sess

men

t o

f ex

isti

ng

an

d r

equ

ired

ad

dit

ional

eff

icie

ncy

mea

sure

s (s

uch

as t

he

fast

-lan

e pro

ced

ure

at

the

Ath

ens

Co

urt

of

Fir

st I

nst

ance

) in

ord

er t

o r

edu

ce t

he

pro

cess

ing

tim

e o

f ca

ses,

in

clu

din

g

furt

her

sim

pli

fyin

g c

ase

regis

trat

ion

, fu

rther

rat

ional

izin

g d

ock

et m

anag

emen

t w

ith a

vie

w t

o a

llo

win

g t

he

reso

luti

on o

f

do

cket

ed c

ases

, an

d p

rov

idin

g i

ncr

ease

d c

om

pu

ter

sup

po

rt t

o j

ud

ges

in

ord

er t

o a

llo

w t

he

issu

ance

of

wri

tten

dec

isio

ns

in a

ll

cou

rts

wit

hin

tw

o w

eek

s fr

om

the

jud

ge

tak

ing t

he

dec

isio

n;

[Q4

-20

11

]

On

goin

g.

Th

e M

inis

try

of

Just

ice

is o

f th

e v

iew

that

th

e ex

pla

nat

ory

mem

ora

ndum

of

the

law

addre

ssin

g i

ssu

es o

f fa

ir t

rial

an

d

den

ial

of

just

ice

wo

uld

su

ffic

e to

mee

t th

is r

equir

emen

t. T

he

req

uir

ed e

val

uat

ion

/im

pac

t as

sess

men

t is

ex

pec

ted t

o b

e

avai

lab

le s

ho

rtly

.

Th

e G

ov

ern

men

t ta

kes

the

nec

essa

ry m

easu

res

in o

rder

to b

e ab

le t

o p

ub

lish

quar

terl

y r

epo

rts

on

rec

ov

ery

rat

es b

y b

aili

ffs

and

no

tari

es,

du

rati

on a

nd c

ost

s of

corp

ora

te i

nso

lven

cy c

ases

an

d t

ax c

ases

. F

or

the

pu

rpo

ses

of

this

Mem

ora

nd

um

,

‘rec

ov

ery

rat

e’ r

efer

s to

the

rati

o o

f th

e am

ou

nt

coll

ecte

d b

y t

he

cred

ito

r in

en

forc

emen

t p

roce

edin

gs

-fo

llo

win

g t

he

issu

ance

of

an e

nfo

rcea

ble

tit

le-

to t

he

amo

un

t ad

jud

icat

ed b

y t

he

cou

rt;

[Q4-2

011]

On

goin

g.

Th

e F

eder

atio

n o

f C

ou

rt B

aili

ffs

of

Gre

ece

and t

he

Nat

ion

al

Counci

l of

Gre

ek N

ota

ries

hav

e in

form

ed t

he

Min

istr

y o

f

Just

ice

that

co

urt

bai

liff

s an

d n

ota

ry a

sso

ciat

ion

s do

no

t co

llec

t

dat

a o

n r

eco

ver

y r

ates

by

bai

liff

s o

r n

ota

ries

. S

tati

stic

s o

n t

ax

case

s an

d c

orp

ora

te i

nso

lven

cy c

ases

wil

l b

e re

ques

ted

to

be

com

pil

ed a

nd

pub

lish

ed s

tart

ing f

rom

th

e fi

rst

qu

arte

r o

f 2

01

2

for

tax c

ases

an

d t

he

thir

d q

uar

ter

of

20

12 f

or

corp

ora

te

inso

lven

cy c

ases

.

Th

e G

ov

ern

men

t co

nd

uct

s an

ass

essm

ent

on

wh

eth

er t

he

refo

rm o

f th

e C

od

e o

f A

dm

inis

trat

ive

Pro

ced

ure

has

del

iver

ed t

he

resu

lts

that

th

e le

gis

lati

on h

ad s

et o

ut

to d

o;

[Q4

-20

11

] O

bse

rved

.

Th

e G

ov

ern

men

t in

crea

ses

the

cost

s o

f ci

vil

lit

igat

ion

in l

ine

wit

h t

he

po

licy

un

der

lyin

g t

he

incr

ease

of

liti

gat

ion c

ost

s in

adm

inis

trat

ive

mat

ters

; [Q

4-2

01

1]

On

goin

g.

Th

e la

w a

dd

ress

ing

iss

ues

of

fair

tri

al a

nd d

enia

l of

just

ice

that

was

ad

op

ted b

y t

he

Hel

len

ic P

arli

amen

t o

n 6

Mar

ch 2

01

2

pro

vid

es f

or

the

incr

ease

of

the

cost

s o

f ci

vil

lit

igat

ion,

esp

ecia

lly

fo

r li

tig

ants

wh

o a

re d

efea

ted

at

the

appea

l st

age.

Th

e

Go

ver

nm

ent

expec

ts t

hat

the

dra

ft l

aw w

ill

be

adop

ted

du

rin

g

the

curr

ent

par

liam

enta

ry t

erm

.

Th

e G

ov

ern

men

t es

tabli

shes

a t

ask

fo

rce

wit

h a

man

dat

e to

des

ign a

per

form

ance

fra

mew

ork

fo

r co

urt

s w

ith

a v

iew

to

con

sid

erin

g l

inks

to r

eso

urc

e al

loca

tio

n i

n f

utu

re r

evis

ion

s o

f th

is M

emo

ran

du

m.

Th

e ta

sk f

orc

e w

ill

dev

elo

p b

y S

epte

mb

er

20

12

: i)

a d

epen

dab

le d

ata

man

agem

ent

syst

em, a

wo

rklo

ad m

easu

rem

ent

syst

em, an

d a

man

agem

ent

stru

cture

, th

at i

s

con

du

cive

to a

mo

re e

ffec

tive,

res

po

nsi

ble

, an

d a

cco

unta

ble

ju

dic

ial

man

agem

ent;

ii)

a f

ull

y o

per

atio

nal

an

d p

ub

licl

y

avai

lab

le d

atab

ase

wit

h c

ase

dat

a fo

r ea

ch c

ou

rt (

as w

ell

as c

on

soli

dat

ed d

ata

for

all

cou

rts)

, giv

ing

bas

ic p

erfo

rman

ce d

ata,

incl

ud

ing n

um

ber

of

jud

ges

an

d s

taff

, num

ber

of

case

s (i

ncl

udin

g b

y c

ase

type)

an

d b

ack

log

s; i

ii)

a w

ork

pla

n o

n

ben

chm

ark

ing c

ases

fo

r w

ork

load

mea

sure

men

t, i

ncl

udin

g f

ocu

sing o

n d

elay

s in

cas

e pro

cess

ing, an

d t

he

types

of

case

s

wh

ere

such

del

ays

are

mo

st a

cute

. [

Q4

-20

11

]

Ob

serv

ed o

r o

ng

oin

g.

Th

e G

ov

ern

men

t es

tabli

shed

a w

ork

ing

gro

up

man

dat

ed t

o

des

ign

a p

erfo

rman

ce a

nd a

cco

unta

bil

ity

fra

mew

ork

for

court

s.

Th

e w

ork

ing g

rou

p h

as i

nit

iall

y b

een

set

up u

nti

l 3

1 M

ay 2

01

2

and

wil

l al

so b

e re

spo

nsi

ble

for

the

pro

ject

on s

tati

stic

s fo

r

just

ice

conta

ined

in

th

e D

ecem

ber

20

11

e-j

ust

ice

wo

rk p

lan

.

In o

rder

to

im

pro

ve

the

effi

cien

cy o

f co

urt

s, t

he

Go

ver

nm

ent

amen

ds

Law

17

56

/19

88

on

the

org

anis

atio

n o

f th

e co

urt

s an

d

the

situ

atio

n o

f co

urt

off

icia

ls, an

d r

elev

ant

imple

men

ting r

ule

s, a

lway

s re

spec

tin

g t

he

ind

epen

den

ce o

f ju

stic

e, s

o a

s to

all

ow

and

fac

ilit

ate

the

intr

od

uct

ion o

f h

um

an r

esourc

e m

anag

emen

t m

easu

res

in c

ourt

s, s

uch

as

mobil

ity

of

court

off

icia

ls,

ince

nti

ves

fo

r th

e ef

fici

ent

adm

inis

trat

ion o

f co

urt

s an

d c

onti

nu

ou

s m

anag

emen

t tr

ain

ing

pro

gra

mm

es f

or

cou

rt o

ffic

ials

wit

h

man

agem

ent

task

s; [

Q1

-20

12

]

On

goin

g.

Th

e la

w a

dd

ress

ing

iss

ues

of

fair

tri

al a

nd d

enia

l of

just

ice

pro

vid

es f

or

an a

men

dm

ent

of

Law

17

56

/19

88

. In

par

ticu

lar,

the

dra

ft l

aw a

men

ds

pro

vis

ion

s re

gula

tin

g m

atte

rs s

uch

as

leav

e,

pro

mo

tio

n,

tran

sfer

, ca

reer

rev

iew

an

d d

isci

pli

nar

y a

ctio

n.

Th

e G

ov

ern

men

t im

po

ses

add

itio

nal

dis

suas

ive

mea

sure

s ag

ain

st n

on

-coo

per

ativ

e deb

tors

in e

nfo

rcem

ent

case

s; [

Q1-2

01

2]

On

goin

g.

In t

he

area

of

enfo

rcem

ent,

the

law

ad

dre

ssin

g i

ssu

es o

f fa

ir t

rial

and

den

ial

of

just

ice

sho

rten

s st

atu

tory

tim

e p

erio

ds

and

tig

hte

ns

Eu

rop

ea

n C

om

mis

sio

n

The

ec

on

om

ic a

dju

stm

en

t p

rog

ram

me

fo

r G

ree

ce

83

con

dit

ion

s u

nd

er w

hic

h e

nfo

rcem

ent

acti

on

may

be

susp

end

ed

Th

e G

ov

ern

men

t p

rese

nts

a q

ual

itat

ive

stu

dy

on r

eco

ver

y r

ates

in e

nfo

rcem

ent

pro

ceed

ing

s, e

val

uat

ing

th

e su

cces

s ra

tes

and

the

effi

cien

cy o

f th

e var

iou

s m

odes

of

enfo

rcem

ent.

[Q

1-2

01

2]

On

goin

g.

Th

e M

inis

try

of

Just

ice

pla

ns

to c

on

tact

the

Pre

siden

t o

f th

e

Nat

ion

al C

ou

nci

l o

f G

reek

No

tari

es, th

e F

eder

atio

n o

f C

ou

rt

Bai

liff

s o

f G

reec

e an

d s

ever

al h

igh s

tree

t ban

ks

for

the

pu

rpo

se

of

this

stu

dy

.

Th

e G

ov

ern

men

t d

ecid

es o

n t

he

dat

e by

wh

en i

t w

ill

open

acc

ess

to t

he

reg

ula

ted

pro

fess

ion

of

med

iato

r to

no

n-l

awy

ers

in

lin

e w

ith

th

is m

emo

ran

du

m c

on

dit

ion

alit

y o

n r

egula

ted

pro

fess

ion

s an

d p

rese

nts

an

act

ion

pla

n e

nsu

rin

g t

hat

no

n-l

awy

ers

may

off

er m

edia

tio

n s

ervic

es o

n t

hat

dat

e. [

Q1

-201

2]

Th

e G

ov

ern

men

t es

tabli

shes

a t

ask

fo

rce

that

is

bro

adly

rep

rese

nta

tiv

e o

f th

e le

gal

co

mm

un

ity

, in

clu

din

g,

but

not

lim

ited

to,

acad

emia

, p

ract

isin

g l

awy

ers,

in

-ho

use

law

yer

s, l

awy

ers

fro

m o

ther

EU

Mem

ber

Sta

tes

esta

bli

shed

or

off

erin

g t

hei

r se

rvic

es

in G

reec

e, a

imed

at

revie

win

g t

he

Co

de

of

Civ

il P

roce

du

re a

nd b

rin

g i

t in

lin

e w

ith i

nte

rnat

ion

al b

est

pra

ctic

es o

n, in

ter

ali

a,

(i)

judic

ial

case

man

agem

ent,

incl

ud

ing t

he

po

ssib

ilit

y o

f re

mo

vin

g d

orm

ant

case

s fr

om

co

urt

reg

iste

rs;

(ii)

rel

iev

ing j

ud

ges

fro

m n

on

-ad

jud

icat

ory

wo

rk,

such

as

pre

-mo

rtg

agin

g o

f im

mo

vab

le p

rop

erty

, fo

rmat

ion a

nd d

isso

luti

on

of

inco

rpo

rate

d

enti

ties

an

d c

on

sen

sual

/no

n-l

itig

ious

fam

ily

law

appli

cati

ons,

(ii

i) t

he

enfo

rcem

ent

of

dec

isio

ns

and o

f o

rder

s to

pay

, in

par

ticu

lar

smal

l cl

aim

s ca

ses

wit

h a

vie

w t

o r

educi

ng

th

e ro

le o

f th

e ju

dge

in t

hes

e p

roce

du

res,

an

d (

iv)

enfo

rcin

g s

tatu

tory

dea

dli

nes

fo

r co

urt

pro

cess

es,

in p

arti

cula

r fo

r in

jun

ctio

n p

roce

du

res

and

deb

t en

forc

emen

t an

d i

nso

lven

cy c

ases

. F

or

the

pu

rpo

ses

of

this

Mem

ora

nd

um

, ju

dic

ial

case

man

agem

ent

shal

l m

ean t

he

poss

ibil

ity

of

judges

to b

e in

volv

ed e

arly

in

iden

tify

ing

th

e pri

nci

pal

fac

tual

an

d l

egal

iss

ues

in

dis

pu

te b

etw

een

th

e p

arti

es,

requ

ire

law

yer

s an

d l

itig

ants

to a

tten

d p

re-

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European Commission ANNEX 2


85

Annex 2: Macroeconomic forecast

Annual % change 2009 2010 2011 2012 2013 2014

1. Private consumption expenditure -1.3 -3.6 -7.2 -5.7 -1.1 0.9

2. Government consumption expenditure 4.8 -7.2 -9.5 -11.0 -9.5 -4.7

3. Gross fixed capital formation -15.2 -15.0 -17.0 -6.6 6.7 9.8

4. Final domestic demand -3.1 -6.2 -9.1 -6.7 -1.3 1.4

5. Change in inventories + net acquisitions of

valuables -1.1 -0.5 0.2 0.0 0.0 0.0

6. Domestic demand -5.0 -5.7 -8.6 -6.9 -1.3 1.4

7. Exports of goods and services -19.5 4.2 3.0 3.2 5.5 7.0

7a. - of which goods -15.7 5.4 2.5 3.2 4.0 7.0

7b. - of which services -22.5 3.2 3.5 3.2 6.8 7.0

8. Final demand -8.0 -4.2 -6.6 -5.0 0.1 2.6

9. Imports of goods and services -20.2 -7.2 -7.0 -5.1 0.0 2.4

9a. - of which goods -21.0 -10.7 -7.0 -5.1 0.3 2.4

9b. - of which services -16.5 7.0 -7.2 -5.1 -1.0 2.4

10. Gross domestic product at market prices -3.2 -3.5 -6.9 -4.7 0.0 2.5

Contribution to change in GDP


12. Change in inventories + net acq. of valuables -2.3 0.6 0.7 -0.2 0.0 0.0

13. External balance of goods and services 3.1 3.1 2.8 2.3 1.4 1.2

Annual % change 2009 2010 2011 2012 2013 2014

1. Private consumption expenditure -1.1 0.7 -4.4 -6.1 -1.3 1.1

2. Government consumption expenditure 12.6 -12.7 -12.2 -12.8 -10.5 -4.7

3. Gross fixed capital formation -11.3 -14.4 -16.2 -6.2 6.9 10.3


5. Change in inventories + net acquisition of valuables

6. Domestic demand -2.7 -4.0 -7.1 -7.1 -1.5 1.7

7. Exports of goods and services -20.2 9.9 6.1 3.0 5.2 6.9

7a. - of which, goods -18.9 13.8 5.5 2.9 3.8 6.9

7a. - of which, services -21.2 6.8 6.6 3.0 6.5 6.9

8. Final demand -5.7 -2.0 -4.9 -5.3 -0.2 2.8

9. Imports of goods and services -19.1 -2.4 -3.7 -5.1 0.7 3.7

9a. - of which goods -20.2 -5.2 -3.7 -5.1 1.0 3.7

9a. - of which, services -13.9 9.2 -3.8 -5.1 -0.4 3.6

10. Gross domestic product at market prices -0.8 -1.9 -5.3 -5.4 -0.4 2.5

11. Gross national income -0.3 -2.2 -5.5 -4.2 -0.2 2.2

12. Compensation of employees 2.6 -5.1 -8.8 -12.4 -1.5 0.7

13. Gross operating surplus and mixed income -1.0 -1.5 -3.6 -1.0 0.0 3.8

14. Gross value added at basic prices 0.5 -3.0 -5.7 -5.5 -0.5 2.7

14a. - of which, labour costs, including self-employed 2.9 -5.1 -8.8 -12.4 -1.5 0.7

15. Taxes net of subsidies -10.0 6.6 -1.7 -3.6 1.2 1.7

16. - taxes on products -9.8 6.1 -1.4 -3.4 1.2 1.8

17. - subsidies on products 76.7 -16.4 20.0 2.6 2.6 2.6

Table A1: USE AND SUPPLY OF GOODS AND SERVICES (volume)

Table A2: USE AND SUPPLY OF GOODS AND SERVICES (value)



86

% change in implicit price deflator 2009 2010 2011 2012 2013 2014

1. Private consumption expenditure 1.1 4.5 3.0 -0.4 -0.3 0.2

2. Government consumption expenditure 2.0 -6.0 -3.0 -2.0 -1.0 0.0

3. Gross fixed capital formation -0.2 0.7 1.0 0.4 0.2 0.4

3a. - of which, construction 0.3 0.3 0.9 0.4 0.1 0.4

3b. - of which, equipment -0.6 1.3 0.8 0.4 0.0 0.4

4. Final domestic demand 1.3 2.0 1.8 -0.4 -0.2 0.2

5. Domestic demand 1.4 1.8 1.6 -0.3 -0.2 0.2

6. Exports of goods and services -0.2 5.5 3.0 -0.2 -0.2 -0.1

6a. - of which, goods -1.1 7.9 3.0 -0.2 -0.2 -0.1

6b. - of which, services 0.5 3.5 3.0 -0.2 -0.2 -0.1

7. Final demand 1.3 2.3 1.8 -0.3 -0.2 0.2

8. Imports of goods and services -0.7 5.2 3.5 0.0 0.6 1.3

8a. - of which, goods -2.1 6.1 3.5 0.0 0.7 1.3

8b. - of which, services 6.2 2.1 3.7 0.0 0.6 1.2

9. Gross domestic product at market prices 1.6 1.7 1.6 -0.7 -0.4 0.0

10. Terms of trade of goods and services 0.4 0.3 -0.5 -0.2 -0.9 -1.4

10a. - of which, terms of trade of goods 1.0 1.7 -0.5 -0.2 -0.9 -1.4

10b. - of which, terms of trade of services -5.3 1.4 -0.7 -0.2 -0.8 -1.3

11. HICP 1.3 4.7 3.1 -0.5 -0.3 0.1

11a. -at constant taxes 1.1 1.4 1.2 -1.2 -0.8 0.1

Annual % change 2009 2010 2011 2012 2013 2014

1. Gross value added at 1995 basic prices -1.4 -3.6 -8.0 -5.0 -0.2 2.6

2. Employment ('000) -0.7 -1.9 -6.3 -4.8 -0.2 1.6

3. GVA per occupied person -0.7 -1.7 -1.8 -0.2 0.0 1.0

4. Compensation of employees (per employee) 3.6 -3.3 -2.7 -8.0 -1.3 -0.9

5. Unit labour costs (1995=100) 4.3 -1.6 -1.0 -7.8 -1.3 -1.9

6. Total population 0.4 0.2 0.4 0.4 0.4 0.4

7. Population of working age (15-64 years) 0.1 0.0 -0.2 -0.3 -0.2 -0.2

8. Total labour force 1.1 1.2 -1.5 -2.5 -0.3 0.2

9. Total employment -0.7 -1.9 -6.3 -4.8 -0.2 1.6

9(a). - of which, employees -0.9 -1.9 -6.3 -4.8 -0.2 1.6

9(b). - of which, self-employed -0.3 -1.9 -6.3 -4.8 -0.2 1.6

10. Unemployment 24.4 33.0 34.5 9.5 -0.7 -6.3

10a. Calculated unemployment rate (%) 9.1 11.7 15.9 17.9 17.8 16.7

Table A4: LABOUR MARKET AND LABOUR COST

Table A3: COSTS AND PRICES



87

levels 2009 2010 2011 2012 2013 2014

1. Private consumption expenditure 168.2 169.4 161.9 152.1 150.1 151.7

2. Government consumption expenditure 47.3 41.3 36.3 31.6 28.3 27.0

3. Gross fixed capital formation 44.1 37.8 31.7 29.7 31.8 35.0

4. Final domestic demand (1+2+3) 259.7 248.5 229.9 213.4 210.2 213.7

5. Change in inventories + net acquisition of valuables as % of GDP -1.7 -1.0 0.0 0.0 0.0 0.0

6. Domestic demand (4+5) 257.9 247.5 229.9 213.4 210.2 213.7

7. Exports of goods and services 44.5 48.9 51.9 53.4 56.2 60.1

7a. - of which, goods 20.1 22.8 24.1 24.8 25.7 27.5

7a. - of which, services 24.4 26.1 27.8 28.6 30.5 32.6

8. Final demand (6+7) 302.4 296.4 281.7 266.9 266.4 273.8

9. Imports of goods and services 70.8 69.1 66.5 63.1 63.5 65.9

9a. - of which goods 57.1 54.2 52.1 49.5 49.9 51.8

9a. - of which, services 13.6 14.9 14.3 13.6 13.6 14.0

10. Gross domestic product at market prices ( 8-9 ) 231.6 227.3 215.2 203.8 202.9 207.9

11. - of wich, external balance of goods and services -26.3 -20.2 -14.6 -9.7 -7.3 -5.8

12. Balance of primary income with rest of the world -5.6 -6.2 -6.4 -3.6 -3.1 -3.7

13. Gross national income at market prices (10+12) 226.0 221.1 208.9 200.2 199.7 204.2

14. Compensation of employees 86.4 82.0 74.7 65.5 64.5 64.9

15. Gross operating surplus and mixed income 122.4 120.6 116.3 115.1 115.1 119.4

16. Gross value added at basic prices 206.6 200.6 189.0 178.4 177.3 181.9

16a. - of which, labour costs, including self-employed 131.5 124.8 113.8 99.7 98.2 98.9

17. Taxes net of subsidies (18-19) 25.03 26.69 26.2 25.3 25.6 26.0

18. - taxes on products 25.6 27.1 26.8 25.8 26.1 26.6

19. - subsidies on products 0.5 0.4 0.5 0.5 0.6 0.6

20. Gross domestic product at market prices ( 16 + 17 ) 231.6 227.3 215.2 203.7 202.9 207.9

levels 2009 2010 2011 2012 2013 2014

1. Gross value added at 1995 basic prices 180.3 173.9 160.1 152.1 151.8 155.8

2. Employment ('000) 4834.8 4743.4 4444.6 4231.2 4222.8 4290.3

3. GVA per occupied person (1:2) 37.3 36.7 36.0 36.0 36.0 36.3

4. Compensation of employees (per employee) 27.2 26.3 25.6 23.6 23.3 23.0

5. Unit labour costs (4:3) (1995=100) 72.9 71.8 71.1 65.5 64.7 63.5

6. Total population 11287.8 11310.1 11349.7 11389.4 11429.3 11469.3

7. Population of working age (15-64 years) 7542.0 7539.6 7524.5 7501.9 7486.9 7471.9

8. Total labour force 5305.9 5369.9 5287.3 5154.0 5139.1 5148.9

9. Calculated activity rate (%) (8:7) 70.4 71.2 70.3 68.7 68.6 68.9

10. Total employment 4762.7 4743.4 4444.6 4231.2 4222.8 4290.3

11. Total employment 4762.7 4743.4 4444.6 4231.2 4222.8 4290.3

11(a). - of which, employees 3174.9 3114.6 2918.4 2778.3 2772.8 2817.1

11(b). - of which, self-employed 1587.7 1628.8 1526.2 1452.9 1450.0 1473.2

12. Calculated employment rate (11:7) 64.1 62.9 59.1 56.4 56.4 57.4

13. Unemployment (8 - 11) 471.1 626.5 842.7 922.7 916.3 858.5

13a. Calculated unemployment rate (%) (13:8) 8.9 11.7 15.9 17.9 17.8 16.7

Table B1: USE AND SUPPLY OF GOODS AND SERVICES (value, in EUR billion)

Table B2: LABOUR MARKET AND LABOUR COST (in EUR billion unless otherwise stated)



88

levels 2009 2010 2011 2012 2013 2014

1. Exports of goods (fob) 20.1 22.8 24.1 24.8 25.7 27.5

2. Imports of goods (fob) 57.1 54.2 52.1 49.5 49.9 51.8

3. Trade balance (goods, fob/fob) (1-2) -37.1 -31.3 -28.1 -24.7 -24.2 -24.3

3a. p.m. (3) as % of GDP -16.0 -13.8 -13.0 -12.1 -11.9 -11.7

4. Exports of services (a) 24.4 26.1 27.8 28.6 30.5 32.6

5. Imports of services (a) 13.6 14.9 14.3 13.6 13.6 14.0

6. Services balance (a) (4-5) 10.8 11.2 13.5 15.0 17.0 18.6

6a. p.m. 6 as % of GDP 4.6 4.9 6.2 7.4 8.4 8.9

7. External balance of goods & services (3+6) -26.3 -20.2 -14.6 -9.7 -7.3 -5.8

7a. p.m. 7 as % of GDP -11.4 -8.9 -6.8 -4.7 -3.6 -2.8

8. Balance of primary incomes and current Transfers -6.8 -7.8 -7.5 -4.4 -3.5 -3.8

8a. - of which, balance of primary income -5.6 -6.2 -6.4 -3.6 -3.1 -3.7

8b. - of which, net current Transfers -1.2 -1.6 -1.1 -0.8 -0.4 -0.1

8c. p.m. 8 as % of GDP -3.0 -3.5 -3.5 -2.2 -1.7 -1.8

9. Current external balance (7+8) -33.1 -28.0 -22.1 -14.1 -10.8 -9.6

9a. p.m. 9 as % of GDP -14.3 -12.3 -10.3 -6.9 -5.3 -4.6

10. Net capital transactions 2.4 3.9 4.2 4.3 4.5 4.7

11. Net lending (+)/ net borrowing (-) (9+10) -30.8 -24.1 -18.0 -9.7 -6.3 -4.9

11a. p.m. 11 as % of GDP -13.3 -10.6 -8.3 -4.8 -3.1 -2.4

Table B3: EXTERNAL BALANCE



89

2009 2010 2011 2012 2013 2014

Total revenue 88.1 89.8 88.5 86.3 85.5 86.9

Indirect taxes 26.2 27.3 27.8 26.1 26.0 26.1

Direct taxes 19.1 17.5 17.8 19.9 19.0 19.8

Social contributions 29.5 29.8 27.3 25.1 25.2 25.8

Sales 5.2 5.5 5.2 5.0 5.0 5.1

Other current resources 4.9 5.1 5.3 5.0 5.1 5.3

Capital transfers received 3.2 4.6 5.0 5.2 5.2 4.8

Total expenditure 124.7 113.9 108.5 101.1 102.5 103.0

Intermediate consumption 17.1 14.0 11.2 10.7 10.9 10.9

Compensation of employees 31.0 27.5 26.2 24.0 23.8 23.4

Social transfers other than in kind 49.0 47.2 46.2 43.3 43.9 43.8

Interest 12.0 12.9 14.8 12.8 13.0 13.8

Subsidies 0.1 0.1 0.1 0.1 0.1 0.1

Other current expenditure 3.5 3.3 2.8 2.7 3.2 3.3

Gross fixed capital formation 7.3 6.6 4.7 5.1 5.3 5.4

Other capital expenditure 4.9 2.3 2.3 2.3 2.3 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 -2.0 -4.0 -2.3

Primary target balance -2.0 3.7 9.4Measures to be identified 0.0 -7.6 -11.7

Total revenue 38.0 39.5 41.1 42.3 42.2 41.8

Indirect taxes 11.3 12.0 12.9 12.8 12.8 12.6

Direct taxes 8.3 7.7 8.3 9.8 9.4 9.5

Social contributions 12.7 13.1 12.7 12.3 12.4 12.4

Sales 2.3 2.4 2.4 2.4 2.4 2.5

Other current resources 2.1 2.2 2.5 2.5 2.5 2.6

Capital transfers received 1.4 2.0 2.3 2.6 2.6 2.3

Total expenditure 53.8 50.1 50.4 49.6 50.5 49.5

Intermediate consumption 7.4 6.1 5.2 5.3 5.4 5.2

Compensation of employees 13.4 12.1 12.2 11.8 11.7 11.3

Social transfers other than in kind 21.1 20.8 21.5 21.3 21.6 21.1

Interest 5.2 5.7 6.9 6.3 6.4 6.6

Subsidies 0.1 0.1 0.0 0.0 0.0 0.0

Other current expenditure 1.5 1.5 1.3 1.3 1.6 1.6

Gross fixed capital formation 3.1 2.9 2.2 2.5 2.6 2.6

Other capital expenditure 2.1 1.0 1.1 1.1 1.1 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

Primary target balance -1.0 1.8 4.5

Measures to be identified 0.0 -3.8 -5.6

C1: FISCAL ACCOUNTS AND FORECAST

% of GDP

Levels (in EUR billion)



90

2009 2010 2011 2012 2013 2014

Debt 299.5 329.4 355.8 327.0 333.0 335.0

Change in debt 36.4 29.9 26.4 -28.8 6.0 2.0

Government deficit (level) -36.6 -24.1 -20.0 -14.8 -9.4 -4.4

Stock-flow adjustment -0.2 5.8 6.4 -43.6 -3.4 -2.4

Debt 129.3 144.9 165.3 160.5 164.2 161.1

Change in the ratio 16.5 15.6 20.4 -4.7 3.6 -3.0

Contributions:

Primary balance (+ is a deficit) 10.6 5.0 2.4 1.0 -1.8 -4.5

“Snow-ball” effect 5.9 8.1 15.0 15.7 7.1 2.6

Stock-flow adjustment -0.1 2.5 3.0 -21.4 -1.7 -1.2

C2: GOVERNMENT DEBT

levels (EUR billion)

% GDP

91

Annex 3: Updated programme documents

Letter of Intent 92

Memorandum of Economic and Financial Policies 94

Memorandum of Understanding on Specific Economic Policy conditionality 126

Technical Memorandum of Understanding 176



92

Athens, 11 March 2012

Mr. Jean-Claude Juncker,

President,

Eurogroup,

Brussels.

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 well-

capitalized 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

! 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/_______________ _______________/s/_______________

Evangelos Venizelos George Provopoulos

Deputy Prime Minister and Minister of Finance Governor of the Bank of Greece



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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:

! 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 short-term 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.



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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.

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.

" 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.

" 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

state-owned 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.

" 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.

! 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:

" 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



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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.

" 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 1% 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.

! 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.

! 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:

! 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).

! 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.



100

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 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:

" 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.

" 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.

" 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.

" 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

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:

" 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.

" Consolidating tax administration operations. We plan to close a total of

200 underutilized local tax offices by end-December 2012.

" 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.



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" 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 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:

! 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).

! 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.

! 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.

! 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.



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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 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.

" 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.

" 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.

" 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



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technical details of the banks' recapitalization framework, embodying these

principles, by end-March 2012 (proposed as a structural benchmark).

" 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.

! 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-

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.



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21. The government will enact legislation to strengthen governance arrangements

in financial oversight agencies (prior action):

! Hellenic Financial Stability Fund:

" 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 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 BoG, MoF 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.

" We will introduce legislation to changes 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 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.

" 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 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. 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 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.



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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.

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



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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:

" 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 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.

" 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.

" 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.

" 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):

" 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.

" 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:

" 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 pensions (with protections for low-income pensioners), and

broaden the base for contribution collections (proposed as a structural

benchmark).

" 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.



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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:

" 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 in the Export Registry and simplifies export legislation.

" 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

medium-term 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:

! 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



116

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

1 See: www.greekbonds.gr

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)

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 end-June 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.



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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

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:

" Pass law and issue MDs to set maximum price of generics to 40 percent and for off-

patented products to 50 percent of patented products.

" 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.

" 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.

" 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.



120

" 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.

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.

Ann

ex I

V.

Pri

vat

izat

ion

Pro

gra

m

Pro

ject

Tra

nsfe

rre

dA

dvis

ors

Inte

rme

dia

te s

tep

s

Pri

va

tiza

tio

n (

lau

nch

)to

Fu

nd

co

ntr

acte

d

I. S

tate

-ow

ne

d e

nte

rpri

se

/sh

are

sa

le

20

12

Q1

Pu

blic G

as (

DE

PA

)!

!C

all f

or

ten

de

r la

un

ch

ed

in

Fe

bru

ary

20

12

.

Q1

Pu

blic G

as (

DE

SFA

)!

!C

all f

or

ten

de

r la

un

ch

ed

in

Fe

bru

ary

20

12

.

Q

1Fo

otb

all B

ett

ing (

OP

AP

)!

!Sta

te a

id c

lea

ran

ce

.

Q2

He

lle

nic

De

fen

se

Syste

ms (

EA

S)

1/

!C

lea

ran

ce

by M

inis

try o

f D

efe

nse

. A

do

pt

restr

uctu

rin

g la

w b

y A

pri

l 2

01

2.

Sta

te a

id c

lea

ran

ce

.

Q2

He

lle

nic

Pe

tro

leu

m (

HE

LP

E)

Ma

rch

20

12

2/

Ma

rch

20

12

Sig

n M

oU

wit

h P

an

eu

rop

ea

n b

y A

pri

l 2

01

2.

Q2

Ath

en

s W

ate

r (E

YD

AP

)!

Ma

rch

20

12

Esta

blish

re

gu

lato

r a

nd

pri

cin

g p

olicy b

y J

un

e 2

01

2.

Exte

nd

co

nce

ssio

n.

Q2

Ho

rse

Ra

cin

g (

OD

IE)

Ma

rch

20

12

2/

!A

do

pt

restr

uctu

rin

g la

w a

nd

esta

blish

tim

e-b

ou

nd

co

nce

ssio

n r

igh

ts b

y M

arc

h 2

01

2.

Sta

te a

id c

lea

ran

ce

.

Q2

Ath

en

s W

ate

r (E

YD

AP

)M

arc

h 2

01

2M

arc

h 2

01

2E

sta

blish

re

gu

lato

r a

nd

pri

cin

g p

olicy b

y J

un

e 2

01

2.

Exte

nd

co

nce

ssio

n.

Q2

Th

essa

lon

iki W

ate

r (E

YA

TH

)M

arc

h 2

01

2M

arc

h 2

01

2E

sta

blish

re

gu

lato

r a

nd

pri

cin

g p

olicy b

y J

un

e 2

01

2.

Exte

nd

co

nce

ssio

n.

Q2

Min

ing a

nd

Me

tallu

rgic

al C

om

pa

ny (

LA

RC

O)

Ma

rch

20

12

2/

!A

do

pt

restr

uctu

rin

g la

w b

y M

arc

h 2

01

2.

Q2

He

lle

nic

Po

st

(ELT

A)

1/

Ma

rch

20

12

Ad

op

t la

w d

ete

rmin

ing t

he

pu

blic s

erv

ice

by F

eb

rua

ry 2

01

2.

Q2

Ca

sin

o M

on

t P

arn

es

1/

Ma

rch

20

12

Sta

te a

id c

lea

ran

ce

.

Q2

Ele

ctr

icit

y C

om

pa

ny (

PP

C)

1/

Ma

rch

20

12

Re

str

uctu

rin

g t

o b

e d

ecid

ed

by J

un

e 2

01

2.

Q3

He

lle

nic

Ve

hic

le I

nd

ustr

y (

ELV

O)

1/

Ma

rch

20

12

Ad

op

t re

str

uctu

rin

g la

w b

y J

un

e 2

01

2.

Q4

Ra

ilw

ays (

Tra

ino

se

)1

/A

ugu

st

20

12

On

go

ing r

estr

uctu

rin

g a

nd

la

st

ph

ase

of

sta

te a

id c

lea

ran

ce

by J

un

e 2

01

2.

Q4

Ath

en

s A

irp

ort

(A

IA)

Ma

rch

20

12

2/

!R

e-a

pp

roa

ch

Ho

ch

tie

f A

irp

ort

s b

y J

un

e 2

01

2.

II.

Co

nce

ssio

ns

20

11

Q4

He

lle

nic

Mo

torw

ays

!M

arc

h 2

01

2C

om

ple

te n

ego

tia

tio

ns.

Ra

tify

ch

an

ge

s in

co

nce

ssio

n.

Esta

blish

re

gu

lato

ry f

ram

ew

ork

by e

nd

-20

12

.

Q4

Sta

te L

ott

ery

!!

Exp

ecte

d f

ina

ncia

l o

ffe

r fr

om

th

e t

hre

e b

idd

ers

by A

pri

l 2

01

2.

20

12

Q2

Egn

ati

a O

do

s!

Ma

rch

20

12

Un

bu

nd

lin

g in

to s

erv

ice

s/m

oto

rwa

y r

igh

ts.

Esta

blish

re

gu

lato

ry f

ram

ew

ork

by e

nd

20

12

.

Q3

Sm

all p

ort

s a

nd

ma

rin

as

1/

!Id

en

tify

po

licy.

Fir

st

lot

of

righ

ts t

ran

sfe

rre

d b

y M

arc

h 2

01

2.

Est.

re

gu

lato

ry f

ram

ew

ork

by S

ep

t. 2

01

2

Q3

Re

gio

na

l a

irp

ort

s

!M

arc

h 2

01

2Id

en

tify

pro

pe

r p

olicy.

Esta

blish

re

gu

lato

ry f

ram

ew

ork

by S

ep

tem

be

r 2

01

2.

Q4

Th

essa

lon

iki P

ort

(O

LT

H)

Ma

rch

20

12

2/

Ma

rch

20

12

Ide

nti

fy p

olicy.

All s

ha

re v

oti

ng r

igh

ts t

ran

sfe

rre

d b

y M

arc

h 2

01

2.

Est.

re

g.

fra

me

wo

rk b

y S

ep

t. 2

01

2

Q4

Pir

ae

us P

ort

(O

LP

)M

arc

h 2

01

2 2

/M

arc

h 2

01

2Id

en

tify

po

licy.

All s

ha

re v

oti

ng r

igh

ts t

ran

sfe

rre

d b

y M

arc

h 2

01

2.

Est.

re

g.

fra

me

wo

rk b

y S

ep

t. 2

01

2

Q4

La

rge

re

gio

na

l p

ort

s1

/M

arc

h 2

01

2Id

en

tify

po

licy.

All s

ha

re v

oti

ng r

igh

ts t

ran

sfe

rre

d b

y M

arc

h 2

01

2.

Est.

re

g.

fra

me

wo

rk b

y S

ep

t. 2

01

2

Q4

So

uth

Ka

va

la G

as S

tora

ge

!M

arc

h 2

01

2C

lea

r le

ga

l o

bsta

cle

s b

y S

ep

tem

be

r 2

01

2.

Min

ing r

igh

ts!

Dig

ita

l d

ivid

en

d

III.

Re

al E

sta

te

20

11

Q4

He

lle

nik

on

1M

arc

h 2

01

2 2

/!

Ad

op

t la

w o

n la

nd

use

by M

arc

h 2

01

2.

20

12

Q1

Sa

le/re

po

N b

uild

ings

!!

Go

ve

rnm

en

t to

sig

n r

en

tal co

ntr

acts

by M

ay 2

01

2.

Tra

nsfe

r cle

an

tit

le t

o t

he

HR

AD

F b

y M

ay 2

01

2.

Q1

Re

al E

sta

te I

BC

Ma

rch

20

12

!Str

ate

gic

en

vir

on

me

nta

l stu

dy.

ESC

HA

DA

to

be

issu

ed

by J

un

e 2

01

2.

3/

Q1

Re

al E

sta

te/A

sti

r V

ou

lia

gm

en

is1

/!

Ne

go

tia

tio

ns w

ith

NB

G.

ESC

HA

DA

to

be

issu

ed

. P

roce

ss le

d b

y N

BG

by J

un

e 2

01

2.

Q1

Re

al E

sta

te/C

assio

pi

Ma

rch

20

12

!M

ove

NA

TO

ra

da

r. E

SC

HA

DA

to

be

issu

ed

by J

un

e 2

01

2.

Q1

Re

al E

sta

te lo

t 1

(A

fan

tou

)1

/!

ESC

HA

DA

to

be

issu

ed

by J

un

e 2

01

2.

Q2

Re

al E

sta

te lo

t 2

1/

!Id

en

tify

asse

ts b

y J

un

e 2

01

2.

Q3

Re

al E

sta

te lo

t 3

1/

!Id

en

tify

asse

ts b

y S

ep

tem

be

r 2

01

2.

So

urc

e:

HR

AD

F u

pd

ate

on

pro

jects

un

de

r d

eve

lop

me

nt.

1/ T

ran

sfe

r o

f a

sse

ts/ri

gh

ts a

t th

e p

oin

t o

f p

riva

tiza

tio

n.

2/ S

ha

res h

ave

alr

ea

dy b

ee

n t

ran

sfe

rre

d, b

ut

no

t ye

t vo

tin

g r

igh

ts.

3/ E

SC

HA

DA

= Z

on

ing a

nd

la

nd

pla

nn

ing p

erm

it.

Tim

ing o

f

To

be

de

term

ine

d

To

be

de

term

ine

d

Table

1.

Gre

ece:

Quart

erly P

erf

orm

ance C

rite

ria (

2012-1

5 P

rogra

m)

(bill

ions o

f euro

s,

unle

ss o

therw

ise indic

ate

d)

2013

2014

2015

Mar-

12

Jun-1

2S

ep-1

2D

ec-1

2D

ec-1

3D

ec-1

4D

ec-1

5

Pro

gr.

1/

Pro

gr.

1/

Pro

gr.

1/

Pro

gr.

1/

Pro

gr.

3/

6/

Pro

gr.

4/

6/

Pro

gr.

5/

6/

Perf

orm

an

ce C

rite

ria (

un

less o

therw

ise in

dic

ate

d)

1.

Flo

or

on the m

odifie

d g

enera

l gove

rnm

ent pri

mary

cash b

ala

nce

-2.5

-6.0

-6.3

-7.0

-0.2

8.8

8.1

2.

Ceili

ng o

n S

tate

Budget pri

mary

spendin

g13.9

29.2

44.4

60.4

52.6

43.8

43.0

3.

Ceili

ng o

n the o

vera

ll sto

ck o

f centr

al g

ove

rnm

ent debt

340

340

340

340

....

..

4.

Ceili

ng o

n the n

ew

guara

nte

es g

rante

d b

y the c

entr

al gove

rnm

ent

0.0

0.0

0.0

0.0

0.0

0.0

0.0

5.

Ceili

ng o

n the a

ccum

ula

tion o

f new

ext

ern

al p

aym

ents

arr

ears

on

ext

ern

al debt contr

acte

d o

r guara

nte

ed b

y g

enera

l gove

rnm

ent 7

/0.0

0.0

0.0

0.0

0.0

0.0

0.0

6.

Ceili

ng o

n the a

ccum

ula

tion o

f new

dom

estic

arr

ears

by H

ospita

ls a

nd

Lin

e M

inis

trie

s 7

/0.0

0.0

0.0

0.0

0.0

0.0

0.0

Ind

icati

ve T

arg

ets

7.

Ceili

ng o

n the a

ccum

ula

tion o

f new

dom

estic

arr

ears

by the g

enera

l

gove

rnm

ent 7/

0.0

0.0

0.0

0.0

0.0

0.0

0.0

8.

Flo

or

on p

riva

tization r

eceip

ts 8

/0.0

30.0

31.2

03.2

7.5

11.0

16.0

1/

Cum

ula

tive

ly f

rom

January

1,

2012 (

unle

ss o

therw

ise indic

ate

d).

3/

Cum

ula

tive

ly f

rom

January

1,

2013 (

unle

ss o

therw

ise indic

ate

d).

4/

Cum

ula

tive

ly f

rom

January

1,

2014 (

unle

ss o

therw

ise indic

ate

d).

5/

Cum

ula

tive

ly f

rom

January

1,

2015 (

unle

ss o

therw

ise indic

ate

d).

6/

Indic

ativ

e targ

ets

.

7/

Applie

s o

n a

continuous b

asis

fro

m p

rogra

m a

ppro

val.

8/

Calc

ula

ted o

n a

cum

ula

tive b

asis

fro

m J

anuary

1,

2012 a

nd a

pplie

d o

n a

continuous b

asis

fro

m p

rogra

m a

ppro

val.

2012

Eu

rop

ea

n C

om

mis

sio

n

AN

NEX

ES

Th

e e

co

no

mic

ad

just

me

nt

pro

gra

mm

e f

or

Gre

ec

e

1

24

Table

2.

Gre

ece:

Prior

Actions

Mea

sure

sM

acro

crit

ical

rele

vanc

eS

tatu

s

Fisc

al

1. G

over

nmen

t to

fully

impl

emen

t all

over

due

MT

FS m

easu

res

(Ann

ex 1

).T

o he

lp re

stor

e fis

cal s

usta

inab

ility

.P

ropo

sed.

2. G

over

nmen

t to

enac

t and

impl

emen

t mea

sure

s ne

eded

to re

ach

the

fisca

l def

icit

targ

et in

201

2 (A

nnex

II).

To

help

rest

ore

fisca

l sus

tain

abili

ty.

Pro

pose

d.

3. G

over

nmen

t to

impl

emen

t mea

sure

s to

stre

ngth

en ta

x ad

min

istra

tion

oper

atio

ns (A

nnex

III).

To

impr

ove

tax

colle

ctio

n.P

ropo

sed.

Str

uctu

ral

4. G

over

nmen

t to

legi

slat

e m

easu

res

to le

vel t

he p

layi

ng fi

eld

in c

olle

ctiv

e ba

rgai

ning

, inc

ludi

ng: (

i) re

mov

al o

f the

'afte

r effe

cts'

of

cont

ract

exp

iratio

n; (i

i) re

mov

al o

f 'te

nure

' in

all e

xist

ing

lega

cy c

ontra

cts;

(iii)

a fr

eeze

of '

mat

urity

' in

all p

rivat

e co

ntra

cts;

(iv)

elim

inat

ion

of

com

puls

ory

arbi

tratio

n.

To

prom

ote

com

petit

iven

ess

and

empl

oym

ent.

Pro

pose

d.

5. G

over

nmen

t to

legi

slat

e a

real

ignm

ent o

f the

min

imum

wag

e le

vel d

eter

min

ed b

y th

e na

tiona

l col

lect

ive

agre

emen

t by

22 p

erce

nt;

freez

e it

until

the

end

of th

e pr

ogra

m p

erio

d, a

nd a

furth

er 1

0 pe

rcen

t dec

line

for y

outh

, whi

ch w

ill a

pply

gen

eral

ly w

ithou

t any

rest

rictiv

e

cond

ition

s.

To

prom

ote

com

petit

iven

ess

and

empl

oym

ent.

Pro

pose

d.

6. G

over

nmen

t to

clos

e sm

all s

ocia

l sec

urity

fund

s an

d re

duce

oth

er n

on-p

riorit

y so

cial

sec

urity

spe

ndin

g to

allo

w a

fully

-fund

ed re

duct

ion

in s

ocia

l sec

urity

con

tribu

tion

rate

s.

To

prom

ote

com

petit

iven

ess

and

empl

oym

ent.

Pro

pose

d.

7. G

over

nmen

t to

enac

t sec

onda

ry le

gisl

atio

n es

tabl

ishi

ng li

cens

e pr

ices

for r

oad-

haul

age

in li

ne w

ith a

dmin

istra

tive

cost

s, a

nd to

scr

een

spec

ific

serv

ice

sect

or le

gisl

atio

n an

d re

peal

or m

odify

unn

eces

sary

and

out

date

d re

gula

tions

for a

n ad

ditio

nal 2

0 hi

gh v

alue

and

/or

high

ly re

stric

ted

prof

essi

ons

to e

nsur

e fu

ll co

nsis

tenc

y w

ith th

e la

w li

bera

lizin

g re

stric

ted

prof

essi

ons

(391

9).

To

effe

ctiv

ely

dere

gula

te k

ey s

ervi

ce s

ecto

rs.

Pro

pose

d.

Fina

ncia

l

8. B

ank

of G

reec

e to

und

erta

ke a

com

preh

ensi

ve a

sses

smen

t of b

anks

’ cap

ital n

eeds

.Fi

nanc

ial s

tabi

lity

Pro

pose

d.

9. M

inis

try o

f Fin

ance

to c

ompl

ete

a de

taile

d st

udy

on h

ow to

add

ress

AT

E, b

ased

on

wor

k by

the

com

mis

sion

ed e

xter

nal a

udit

firm

s.Fi

nanc

ial s

tabi

lity

Pro

pose

d.

10. G

over

nmen

t to

enac

t leg

isla

tion

to im

prov

e th

e fra

mew

ork

for r

esol

utio

n an

d re

capi

taliz

atio

n to

: (i)

enab

le th

e B

ank

of G

reec

e to

set

new

ban

k ca

pita

l sta

ndar

ds th

roug

h re

gula

tion,

and

to u

se th

is p

ower

to e

stab

lish

new

Cor

e T

ier 1

requ

irem

ents

; (ii)

rem

ove

impe

dim

ents

to a

flex

ible

man

agem

ent o

f em

ploy

men

t con

tract

s in

the

cont

ext o

f ban

k re

solu

tions

; (iii

) ens

ure

the

use

of c

onse

rvat

ive

asse

t val

uatio

ns

for f

aile

d ba

nks;

(iv)

allo

w th

e us

e of

con

tinge

nt c

onve

rtibl

e bo

nds

in re

capi

taliz

atio

n; (v

) int

rodu

ce th

e po

ssib

ility

of r

estr

ictio

ns o

n H

FSF

votin

g rig

hts;

and

(vi)

vest

reso

lutio

n re

spon

sibi

litie

s in

a s

epar

ate

depa

rtmen

t in

the

BoG

and

sys

tem

ic re

stru

ctur

ing

resp

onsi

bilit

ies

in

the

HFS

F.

To

supp

ort e

ffect

ive

reca

pita

lizat

ion

of b

anks

Pro

pose

d.

11. G

over

nmen

t to

enac

t leg

isla

tion

to im

prov

e th

e fin

anci

al o

vers

ight

fram

ewor

k. In

par

ticul

ar, c

over

ing

refo

rms

to: (

i) es

tabl

ish

two

depa

rtmen

ts in

the

HFS

F m

anda

ted,

resp

ectiv

ely,

to m

anag

e th

e go

vern

men

t's o

wne

rshi

p of

ban

ks a

nd in

terim

cre

dit i

nstit

utio

ns; (

ii)

revi

se th

e H

FSF'

s go

vern

ance

stru

ctur

e to

incl

ude

a G

ener

al C

ounc

il an

d an

Exe

cutiv

e B

oard

; and

(iii)

add

ress

HD

IGF

fund

ing

arra

ngem

ents

, and

to e

limin

ate

poss

ible

con

flict

s of

inte

rest

with

in th

e H

DIG

F.

To

stre

ngth

en g

over

nanc

e ar

rang

emen

ts fo

r

finan

cial

ove

rsig

ht a

genc

ies.

Pro

pose

d.

1

25

Table

3.

Gre

ece:

Pro

posed S

tructu

ral C

onditio

nalit

y—

Str

uctu

ral B

enchm

ark

s

Mea

sure

sM

acro

crit

ical

rele

vanc

eSt

atus

End-

Mar

ch 2

012

1. A

min

iste

rial d

ecre

e sh

all b

e is

sued

to p

rovi

de th

e te

chni

cal d

etai

ls o

f the

ban

ks' r

ecap

italis

atio

n fra

mew

ork

To s

treng

then

fina

ncia

l sec

tor r

esilie

nce

Prop

osed

.

2. B

ank

of G

reec

e to

com

plet

e a

stra

tegi

c as

sess

men

t of b

anks

' bus

ines

s pl

ans.

To s

treng

then

fina

ncia

l sec

tor r

esilie

nce

Prop

osed

.

End-

June

201

2

3. G

over

nmen

t to

adop

t a b

udge

t-neu

tral t

ax re

form

pac

kage

, inc

ludi

ng: (

i) th

e re

peal

of t

he C

ode

of B

ooks

and

Rec

ords

and

its

repl

acem

ent b

y si

mpl

er le

gisl

atio

n; (i

i) th

e el

imin

atio

n of

sev

eral

tax

exem

ptio

ns a

nd p

refe

rent

ial r

egim

es; (

iii) s

impl

ifica

tion

of th

e VA

T an

d

of th

e pr

oper

ty ta

x ra

te s

truct

ure;

(iv)

a m

ore

unifo

rm ta

x tre

atm

ent o

f ind

ivid

ual c

apita

l inc

ome;

and

(v) a

sim

plifi

ed p

erso

nal a

nd

corp

orat

e in

com

e ta

x sc

hedu

le.

To s

impl

ify th

e ta

x sy

stem

, im

prov

e its

effi

cien

cy,

and

broa

den

the

tax

base

.

Prop

osed

.

4. G

over

nmen

t to

com

plet

e th

e re

view

s of

soc

ial s

pend

ing

prog

ram

s to

iden

tify

1 pe

rcen

t of G

DP

in s

avin

gs, w

hile

at t

he s

ame

time

mak

ing

prop

osal

s to

stre

ngth

en c

ore

safe

ty n

et p

rogr

ams.

To h

elp

achi

eve

med

ium

-term

fisc

al ta

rget

s.Pr

opos

ed.

5. G

over

nmen

t to

com

plet

e th

e re

view

s of

pub

lic a

dmin

istra

tion

to id

entif

y 1

perc

ent o

f GD

P in

sav

ings

. To

hel

p ac

hiev

e m

ediu

m-te

rm fi

scal

targ

ets.

Prop

osed

6. G

over

nmen

t to

mee

t qua

ntifi

ed q

uarte

rly p

erfo

rman

ce in

dica

tors

for r

even

ue a

dmin

istra

tion

To im

prov

e ta

x co

llect

ion

Prop

osed

.

7. G

over

nmen

t to

mee

t qua

ntifi

ed q

uarte

rly p

erfo

rman

ce in

dica

tors

pub

lic fi

nanc

ial m

anag

emen

t.To

con

tain

arre

ars

End-

Sept

embe

r 201

2

8. G

over

nmen

t to

com

plet

e th

e st

rate

gy fo

r stre

ngth

enin

g so

cial

sec

urity

col

lect

ions

.To

impr

ove

soci

al s

ecur

ity c

olle

ctio

ns.

Prop

osed

.

9. G

over

nmen

t to

adju

st p

ensi

ons,

with

pro

tect

ions

for l

ow in

com

e pe

nsio

ners

, and

the

soci

al s

ecur

ity c

ontri

butio

n ba

se, t

o pe

rmit

a fu

lly-

fund

ed re

duct

ion

in ra

tes

(cum

ulat

ivel

y 5

perc

ent f

rom

Jan

uary

1, 2

012)

To

impr

ove

unit

labo

r cos

ts a

nd c

ompe

titiv

enes

s

End-

Dec

embe

r 201

2

10. G

over

nmen

t to

mee

t qua

ntifi

ed q

uarte

rly p

erfo

rman

ce in

dica

tors

for r

even

ue a

dmin

istra

tion

To im

prov

e ta

x co

llect

ion

Prop

osed

.

11. G

over

nmen

t to

mee

t qua

ntifi

ed q

uarte

rly p

erfo

rman

ce in

dica

tors

for p

ublic

fina

ncia

l man

agem

ent

To c

onta

in a

rrear

s

12. G

over

nmen

t to

com

plet

e th

e sc

reen

ing

and

clea

ning

of e

xistin

g le

gisl

atio

n co

verin

g th

e lis

t of p

rofe

ssio

ns a

nd e

cono

mic

act

iviti

es

cove

red

in A

nnex

II o

f KEP

E’s

“Sec

ond

Rep

ort o

n th

e Im

pact

of L

iber

alizi

ng R

egul

ated

Pro

fess

ions

.”

To im

prov

e co

mpe

titiv

enes

s Pr

opos

ed.

13. G

over

nmen

t to

refo

rm th

e go

vern

ance

of t

he B

oG, t

o pr

ovid

e fo

r col

legi

al d

ecis

ion-

mak

ing

at th

e le

vel o

f exe

cutiv

es (G

over

nor a

nd

Dep

uty

Gov

erno

rs) a

nd e

xpan

ded

inte

rnal

ove

rsig

ht b

y no

nexe

cutiv

es o

f the

exis

ting

Gen

eral

Cou

ncil,

and

to re

vise

the

stru

ctur

e an

d

right

s of

BoG

sha

reho

lder

s to

elim

inat

e po

ssib

le c

onfli

cts

of in

tere

st in

the

Bank

of G

reec

e’s

publ

ic p

olic

y ro

le.

To s

treng

then

fina

ncia

l sec

tor s

tabi

lity

Prop

osed

.

End-

June

201

3

14. B

ank

of G

reec

e w

ill co

mpl

ete

an a

dditi

onal

ass

essm

ent o

f cap

ital n

eeds

bas

ed o

n en

d-20

12 d

ata.

To a

lign

capi

tal b

uffe

rs to

ban

ks’ i

ndiv

idua

l ris

k

prof

iles

Prop

osed

.

European Commission ANNEXES


126

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.

FISCAL CONSOLIDATION

127

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:

! 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 election-

related 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 (2000-

06) projects, 2007-13 operational programmes, and non-eligible expenditure

related to the above projects, including TEN-T projects).

FISCAL CONSOLIDATION

128

! 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.

STRUCTURAL FISCAL REFORMS

129

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 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 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


130

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.


131

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 anti-

money 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 self-

employed 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:

! 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;


132

! 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:

! 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]

2.6 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 end-

March 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 medium-

term 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–end-

2015. 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 e-

procurement 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. [Q2-

2012]

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 defined-

contribution 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. [Q1-

2012]

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. [Q1-

2012]

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


139

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

! takes further measures to extend in a cost-effective way the current e-

prescribing 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 e-

prescription. This mechanism will make use of the web-based e-

prescription 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 cost-

effective use of medicines and are made effectively binding. [Q1-2012]

! enforces the application of prescription guidelines also through the e-

prescription 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


140

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. [Q2-

2012]

! 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-the-

board 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 end-

2012, 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


141

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. [Q1-

2012]

! 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 non-

proprietary name for an active substance, rather than the brand name. [Q1-

2012]

! 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]


142

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 re-

qualification 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. [Q4-

2012]

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]


143

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, book-

keeping 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. [Q2-

2012]

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]


144

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]

FINANCIAL SECTOR REGULATION AND SUPERVISION

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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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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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! 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:

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.


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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.

GROWTH-ENHANCING STRUCTURAL REFORMS

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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 cost-

competitiveness, 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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! 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 anti-

corruption 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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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).


154

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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! 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:

! 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


156

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

! 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


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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) pre-

customs 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 single-

window 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


159

number of licences and price of new licences), in line with international best practice. [Q1-

2012]

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. [Q4-

2012]

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:

! 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]


160

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 [Q2-

2013]

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.


161

! 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 non-

discriminatory 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):

! 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). [Q1-

2012].

! 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-


162

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. [Q2-

2013]

R&D and innovation

The Government pursues an up-to-date and in-depth evaluation of all R&D and on-

going 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.


163

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]


164

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.


165

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 self-

evaluations 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/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 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]


166

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 end-

May 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]


167

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]


168

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.

ANNEX 2

169

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:

[email protected]

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).

(Data compiled by the Ministry of Finance)

Monthly, 15 days after the end of

each month; these data should also

be included in subsequent

transmissions in case of revision.

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.



each month.

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).

(Data compiled by the Ministries of

Interior and Finance)


each month (starting in June 2010).

Preliminary monthly cash data on general

government entities other than the state.



each month, these data should also


transmissions in case of revision.

ANNEX 2

170

Monthly data on staff: number of employees,

entries, exits, transfers among government entities;

and from and into the labour reserve, per entity.

(Data compiled by the Ministries of Interior and

Finance)

Monthly, 30 days after the

end of each month.

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 on below-the-line financing for the general

government.


Monthly, no later than 15

days after the end of each

month; these data should also


transmissions in case of

revision.

Data on expenditure pending payment (including

arrears) of the general government, including the

State, local government, social security, hospitals

and legal entities.

(Data compiled by the Ministry of Finance on the

basis of basic data from the several line ministries)

Quarterly, within 55 days

after the end of each quarter.

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).

Data on planned monthly interest outflows.


Monthly, within one month.

ANNEX 2

171

Data on assets privatised and proceeds collected.


Monthly.

Data on state-owned enterprises: revenue, costs,

payroll, number of employees and liabilities

(including maturities of public enterprises' debts)


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 statement of the transactions through off-

budget accounts.

(Data compiled by the Ministries of Finance and

Education)

Monthly, at the end of each

month.

Monthly statement of the operations on the special

accounts.


Monthly, at the end of each

month.

Report on progress with fulfilment of policy

conditionality.

(Report prepared by the Ministry of Finance)

Quarterly before the

respective review starts.

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)

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 2

172

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.


end of each month.

Evolution of the external funding

provided by Greek banks to their

subsidiaries abroad.


end of each month.

Report on banking sector liquidity

situation. Weekly, next working day.

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.

ANNEX 2

173

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.

Weekly, next working day.

ANNEX 2

174

Annex 2: Statistics to be published by the Ministry of Justice or Ministry of Finance

(a) 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.

(b) 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.

(c) 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;

(d) by end-December 2012, quarterly updates of the information in (a) to (c) above.

175

Abbreviations

ASEP Supreme Council for Staff Selection

CPB Central Purchasing Bodies

DEPA Public Gas Corporation

DRG Diagnostic-Related Group

DSO Distribution System Operator

ECB European Central Bank

EEA European Economic Area

EETT Hellenic Telecommunications and Post Commission

EFSF European Financial Stability Facility

EKEVYL National Centre for Medical Technology

ELSTAT Hellenic Statistical Authority

EOF National Organisation for Medicines

EOPYY National Organisation for the provision of Health services

EPY Health Procurement Commission

ERDF European Regional Development Fund

ESA European System of Accounts

ESF European Social Fund

ESY National Health System

EU European Union

GDP Gross Domestic Product

GEMI General Commercial Registry

HRADF Hellenic Republic Asset Development Fund

IDIKA E-governance of social insurance

IMF International Monetary Fund

KTEL Joint Fund for Bus Receipts

LNG Liquefied Natural Gas

LTV Loan-to-value

MEFP Memorandum of Economic and Financial Policies

MTFS Medium-Term Fiscal Strategy

NHS National Health System

OASA Athens Urban Transport Organisation

OECD Organisation for Economic Cooperation and Development

OGA Agricultural Insurance Organisation

OSE Railway Organisation of Greece

OTE Hellenic Telecommunication Company

PPC Public Power Corporation

PSC Point of Single Contact

RAE Regulatory Authority for Energy

RSPP Radio Spectrum Policy Programme

SPA Single Payment Authority

SPPA Single Public Procurement Authority

TAP trans-Adriatic pipeline

TEN-T Trans European Transport network

TSO Transmission System Operator

WHO World Health Organisation

176

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:

" 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.

" 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.

" 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

177

Projects S.A.). References to individual companies are understood to include

all of their subsidiaries which are to be consolidated under IFRS requirements.

! 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.

178

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.

179

! 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.

" 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.

" 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.

" 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.

" 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.

180


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.

" 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.


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.

" Financial liabilities include the short and long term loans from the domestic

credit institutions to RPEs, measured consistently with monetary survey data.

181

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).

! 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.

5. Other provisions.

" 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 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.

" 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.

182

2013 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. 2/ Progr. 3/ Progr. 4/

Payments made from the special budget allocation for clearance of arrears 0 0 1.3 4.0 0.0 0.0 0.0

1/ Cumulatively from January 1, 2012.




2012

Schedule A: Payments made from the special budget allocation for clearance of arrears.

(in billions of Euro)

7. 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.

B. 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 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.

183

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 non-accumulation 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 also exclude €5.34 billion hospital

arrears to pharmaceutical companies which were incurred by end-2009 to the extent these are

still outstanding.

184

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

185

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 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 asset-related 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

186

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.

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).

2012 2013 2014 2012-14 2015 2016 2017 2018 2019 2020 2015-20 Total

Total 729.0 600.6 470.4 1,800.0 612.7 521.4 420.6 324.5 260.7 160.1 2,300.0 4,100.0

o/w: from the BoG 305.3 275.8 236.2 817.3 331.5 312.7 289.3 271.3 234.7 150.7 1,590.2 2,407.5

Source: ECB

Schedule B: Amounts to be Transferred to the Greek Government by Eurosystem National Central Banks.

(in millions of Euro)

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,

187

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.

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 e-portal. 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

Debt collection

a. Collection of tax debt as of end-December 2011 (million of euros)1,000 2,000

b. Collection of new debt accumulated in 2012

(percent of new debt)20% 20%

Tax audits and collection of large taxpayers

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

Of which field audits 25 100

c. Collection of assessed tax and penalties from all risk-based full scope

and temporary audits

(percent of assessed tax and penalties)

50% 50%

Audits and collection for high wealth individuals

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%

Audits and collection for VAT non filers

a. Number of completed risk-based VAT audits of VAT non-filers 5,000 10,000

b. Collection of all assessed tax and penalties

(percent of assessed tax and penalties)20% 20%

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

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.

70% 90%

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)

25% 1%

1/ Cumulative target from January 1, 2012.

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