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El programa del Fondo Monetario Internacional para Grecia
GREECE: Memorandum of Understanding on
SPECIFIC ECONOMIC POLICY CONDITIONALITY
May 2, 2010
The quarterly disbursements of bilateral financial assistance from euro area Member States
will be 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 the
MEFP and in this Memorandum, which specifies the detailed criteria that will be assessed
for the successive reviews, up to the end of 2011. The detailed criteria for the years 2012
and 2013 will be specified at the occasion of the spring 2011 review.
The authorities commit to consult with the European Commission, the ECB and the IMF
on adoption of policies that are not consistent with this memorandum. They will also
provide them with all requested information for monitoring progress during program
implementation and the economic and financial situation (Annex 1). Prior to the release of
the instalments, the authorities shall provide a compliance report on the fulfilment of the
conditionality.
1. Actions for the first review (to be completed by end Q2-2010)
i. Fiscal consolidation
Progress with the implementation of the 2010 budget and fiscal measures adopted
thereafter. Progress is assessed against the (cumulative) quarterly deficit ceilings in the
MEFP (including the TMU). The authorities take the following measures, generating
savings for a total amount of 2.5% of GDP in 2010:
− Increase in VAT rates, with a yield of at least EUR 1800 million for a full year
(EUR 800 million in 2010);
− Increase in excises for fuel, tobacco and alcohol, with a yield of at least
EUR 1050 million for a full year (EUR 450 million in 2010);
− Reduction in the public wage bill by reducing the Easter, summer and
Christmas bonuses and allowances paid to civil servants, with net savings
amounting to EUR 1500 million for a full year (EUR 1100 million in 2010);
− Elimination of the Easter, summer and Christmas bonuses paid to pensioners,
while protecting those receiving lower pensions, with net savings amounting to
EUR 1900 for a full year (EUR 1500 million in 2010);
− Cancel budgetary appropriations in the contingency reserve with the aim of
saving EUR 700 million;
− Reduce the highest pensions with the aim of saving EUR 500 million for a full
year (EUR 350 million in 2010);
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− Abolish most of the budgetary appropriation for the solidarity allowance
(except a part for poverty relief) with the aim of saving EUR 400 million;
− Reduce public investment by EUR 500 million compared to plans;
− Parliament adopts, as planned in the stability programme of January 2010, a
Law introducing a progressive tax scale for all sources of income and a
horizontally unified treatment of income generated from labour and assets;
− Parliament adopts, as planned in the stability programme of January 2010, a
Law abrogating exemptions and autonomous taxation provisions in the tax
system, including income from special allowances paid to civil servants. The
law applies retroactively from January 1, 2010.
ii. Structural Fiscal Reforms
Government adopts by end June 2010 a law that requires the monthly publication by the
General Accounting Office (GAO) of timely monthly statistics (on a cash basis) on
revenue, expenditure and financing for the State, as well as on spending pending of
payment, including arrears.
iii. Financial sector regulation and supervision
The Bank of Greece, on behalf of the Government, establishes an independent Financial
Stability Fund, with a strong governance structure, to deal with potential solvency issues
and to preserve the financial sector’s soundness and its capacity to support the Greek
economy, by providing equity support to banks as needed (Annex 2).
Start implementation of intensified supervision of banks, including by allocating more
human resources, also with a view to the take-over of insurance supervision, frequent
reporting under tighter deadlines and quarterly solvency stress tests.
Review the private sector bankruptcy law to ensure consistency with ECB observations.
iv. Structural reforms
Authorities undertake reforms to modernise public administration:
Parliament adopts legislation reforming public administration at the local level, notably by
merging municipalities, prefectures and regions with the aim of reducing operating costs
and wage bill.
Parliament adopts legislation requiring online publication of all decisions involving
commitments of funds in the general government sector.
To strengthen labour market institutions:
Government starts discussions with social partners in order to revise private sector wage
bargaining and contractual arrangements.
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To enhance competition in open markets:
Government adopts law to simplify the start-up of new businesses.
Government adopts the horizontal legislation on the Services Directive.
Government adopts a recovery plan for the railway sector with a timetable for measures
which:
− specify how operational activities will be made profitable, including by closing
loss-making lines;
− ensure the effective implementation of EU Directives allowing for competition
amongst providers of railway services;
− provide for the restructuring of holding company, including the sale of land and
other assets.
To raise the absorption rates of Structural and Cohesion Funds:
Government will put in place measures, including the implementation of Law 3840/2010,
the establishment of a "fast-track project production”, to achieve the six-monthly targets
for payment claims targets in the absorption of Structural and Cohesion Funds set down in
the table below. Compliance with the targets shall be measured by certified data. The
government will take steps to achieve an annual target of submitting 10 major projects
applications to Commission services.
Programming period 2007-2013 Payment claims to be submitted
between 2010 and 2013
(in million of euro) 2010 2011 2012 2013
European Regional Fund and Cohesion
Fund 2330 2600 2850 3000
European Social Fund 420 750 880 890
Target of first half of the year 1105 1231 1284
Target of second half of the year 2245 2499 2606
Total annual target 2750 3350 3730 3890
Government establishes a technical task force in direct contact with Commission services,
to ensure rapid implementation of a) major projects in transport sectors, b) environmental
projects; c) financial engineering instruments and d) public administration reform, relying
on increased technical assistance.
Government shall have completed steps to ensure that budgetary appropriations for the
national co-financing of Structural and Cohesion Funds are channelled to a special central
account that cannot be used for any other purposes and which should be available to
provide co-financing to all entities in the general government.
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2. Actions for the second review (to be completed by end Q3-2010)
i. Fiscal consolidation
Rigorously implement the budget for 2010 and the fiscal consolidation measures
announced afterwards, including those in this Memorandum. Progress is assessed against
the (cumulative) quarterly deficit ceilings in the MEFP (including the TMU).
Government submits the draft budget for 2011 to Parliament. The budget provides
information and reliable projections on the entire general government sector and targets a
further reduction of the general government deficit in line with the MEFP. It includes a
detailed presentation of fiscal consolidation measures amounting to at least 3.2% of GDP
(4.3% of GDP, if carryovers from measures implemented in 2010 are considered), and
detailed information on the situation of public enterprises.
The budget includes the following measures (in exceptional circumstances, measures
yielding comparable savings could be considered in close consultation with European
Commission, IMF and ECB staff):
− Implement the rule of replacing only 20 percent of retiring employees in the
public sector (central government, municipalities, public companies, local
governments, state agencies and other public institutions);
− Reduction in intermediate consumption of the general government by at least
EUR 300 million compared to the 2010 level, on top of savings envisaged in
the context of reforming public administration and the reorganisation of local
government (see next measure);
− Government starts implementing legislation reforming public administration
and the reorganisation of local government with the aim of reducing costs by at
least EUR 1500 million from 2011 to 2013, of which at least EUR 500 million
in 2011.
− Freeze in the indexation of pensions, with aim of saving EUR 100 million;1
− Reduction in domestically-financed investments by at least EUR 1000 million,
by giving priority to investment projects financed by EU structural and
cohesion funds;
− Temporary "crisis levies" on highly profitable firms, yielding at least EUR 600
million in additional revenue per year in 2011, 2012 and 2013;
− Incentives to regularise land-use violations, yielding at least EUR 1500 million
from 2011 to 2013, of which at least EUR 500 million in 2011;
− Enforce the presumptive taxation of professionals, with a yield of at least
EUR 400 million in 2011 and increasing returns in 2012 and 2013;
− Broaden the VAT base by including services that are currently exempted and
move a significant proportion (at least 30%) of the goods and services currently
subject to the reduced rate to the normal rate, with a yield of at least EUR 1000
million;
− Start phasing in a "green tax" on CO2 emissions, with a yield of at least EUR
300 million in 2011;
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Adjustments may be needed in case of negative inflation.
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− Collect revenue from the licensing of gaming: at least EUR 500 million in sales
of licences and EUR 200 in royalties;
− Expand the base of the real estate tax by updating asset values to yield at least
EUR 500 million additional revenue;
− Increase taxation of wages in kind, including by taxing car lease payments (at
least EUR 150 million);
− Initiate the collection of a special tax on unauthorised establishments (at least
EUR 800 million per year);
− Increase taxes on luxury goods by at least EUR 100 million;
− The budget will establish detailed expenditure ceilings for each line-ministry,
local governments, and social security funds consistent with the general
government deficit target. This also pertains to the medium-term fiscal
framework for 2012-2013;
− The budget will contain indicative information on monthly revenue per
category, and expenditure per Ministry. Updated figures will be regularly made
available online.
Parliament adopts modifications to the organic budget law, if necessary, to ensure that the
draft budget law for 2011 onwards contains detailed information on outturn and plans of
the entire general government sector – including local government, social security,
hospitals and legal entities. An annex to the budget will present key figures on the financial
performance of the largest public enterprises, concomitant budgetary and tax expenditures,
and related fiscal risks.
ii. Structural fiscal reforms
Parliament adopts legislation to improve the efficiency of the tax administration and
controls, implementing recommendations provided by the European Commission and IMF.
In particular, they put in place an effective project management arrangement (including
tight MOF oversight and taskforces) to implement the anti-evasion plan to restore tax
discipline through: strengthened collection enforcement and recovery of tax arrears
(coordinated with the social security funds) of the largest debtors; a reorganized large
taxpayer unit focused on the compliance of the largest revenue contributors; a strong audit
program to defeat pervasive evasion by high-wealth individuals and high income self-
employed, including prosecution of the worst offenders; and a strengthened filing and
payment control program.
Parliament adopts a reform of the pension system to ensure its medium- and long-term
sustainability. It should limit the increase of public sector spending on pensions, over the
period 2010-2060, to under 2.5 percent of GDP. The reform will be designed in close
consultation with European Commission, IMF and ECB staff, and its estimated impact on
long-term sustainability will be validated by the EU Economic Policy Committee. The
parameters of the system will ensure long-term actuarial balance, as determined by the
National Actuarial Authority. The reform should include the following elements:
− Simplification of the fragmented pension system by merging the existing
pension funds in three funds and introducing a unified new system for all
current and future employees. The new universally binding rules on
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entitlements, contributions, accumulation rules and indexation of pension rights
shall be applied pro rata to everybody from 1 January 2013;
− Introduction of a unified statutory retirement age of 65 years, including for
women in the public sector (phased in immediately after adoption), to be
completed by December 2013;
− Gradual increase in the minimum contributory period for retirement on a full
benefit from 37 to 40 years by 2015;
− Amendment of the pension award formula in the contributory-based scheme to
strengthen the link between contributions paid and benefits received, with
accrual rate limited to an average annual rate of 1.2%, and pensions indexed to
prices;
− Introduction of an automatic adjustment mechanism that, every three years and
starting in 2020, will increase the (minimum and statutory) retirement age in
line with the increase in life expectancy at retirement;
− Extend the calculation of the pensionable earnings from the current last five
years to the entire lifetime earnings (while retaining acquired rights);
− Reduction of the upper limit on pensions;
− Introduction of a means-tested minimum guaranteed income for elderly people
(above the statutory retirement age), to protect the most vulnerable groups,
consistent with fiscal sustainability;
− Measures to restrict access to early retirement. In particular, increase the
minimum early retirement age to 60 years by 1st January 2011, including for
workers in heavy and arduous professions and those with 40 years of
contributions. Abolish special rules for those insured before 1993 (while
retaining acquired rights). Substantial revision of the list of heavy and arduous
professions;
− Reduction of pension benefits (by 6% per year) for people entering retirement
between the ages of 60 and 65 with a contributory period of less than 40 years;
− Introduction of stricter conditions and regular re-examination of eligibility for
disability pensions;
− Until the entry into force of the new rules on the retirement age (January 1,
2011), new demands for pensions will be frozen and requests for retirement will
be considered on the basis of the new eligibility rules.
Government adopts a reform of the GAO, including the following elements:
− Strengthening of the role of the GAO in budget planning and control;
− Provision of the necessary resources in terms of high-level personnel,
infrastructure and equipment support, managerial organisation and information-
sharing systems;
− Provision of safeguards for GAO staff against political interference, and
personal accountability in the provision of reliable data;
− Strengthen the institutional mechanisms for providing reliable and plausible
official budgetary forecasts that take into account available recent execution
developments and trends; to this end, the official macroeconomic forecasts
should be reviewed by external experts;.
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Government takes the following measures to ensure timely provision of reliable fiscal
accounts and statistics:
− GAO starts, in June 2010, the publication of timely monthly statistics (on a cash
basis) on revenue, expenditure and financing and spending arrears for the
"available general government" and its sub entities (state, social security,
hospitals, local governments and legal entities);
− Government adopts a detailed time-bound action plan, to be agreed with
Eurostat, to improve collection and processing of general government data
required under the existing EU legal framework, in particular by enhancing the
mechanisms that ensure the prompt and correct supply of these data, and ensure
personal responsibility in cases of misreporting; and seek appropriate resident
technical assistance to ensure rapid progress;
− Government starts to publish timely information on the financial situation in
public enterprises (at least the 10 largest loss-making ones) and other public
entities not classified in the general government (including detailed income
statements, balance sheets and data on employment and the wage bill). To this
end, a regular and timely reporting mechanism is introduced.
iii. Financial sector regulation and supervision
The Bank of Greece and the Government ensure that the Financial Stability Fund is fully
operational.
Review the adequacy of the insolvency framework, for banks as well as for non-financial
entities.
iv. Structural reforms
Progress with reforms to modernise public administration:
Government launches the process, including the principles and timetable, for establishing a
simplified remuneration system covering basic wages and allowances. It shall apply to all
public sector employees, and be part of an overall reform of Human Resource
management. This should lead to a system where remuneration reflects productivity and
tasks.
Government launches independent functional reviews of the public administration at
central level and of existing social programmes. It is to be conducted by internationally
renowned and external experts. The Terms of Reference for the reviews will be agreed
with European Commission, IMF and ECB staff. The objectives of the reviews are:
− To take stock of the use of resources, including human resources, to carry out
government functions (e.g., employment, goods and services) in the central
government and subordinated public institutions;
− To identify actions to rationalize the organisation of public administration and
generate productivity gains, and quantify possible fiscal savings from
implementation of these actions;
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− To assess effectiveness and appropriateness of existing social programmes and
make proposals for reform or cancellation of the least effective ones, while
quantifying possible fiscal savings from implementation of these actions.
To strengthen competition in open markets
Authorities make the General Commercial Registry (GEMI) fully operational
Under the Services Directive, the government finalizes the review of existing sectoral
legislation (screening), ensures that the point(s) of single contact is(are) operational.
Government adopts a law on road freight transport that removes restrictions not provided
for in Directive 96/26/EC of 29 April 1996 on admission to the occupation of road haulage,
including minimum fixed prices.
Issue a Ministerial Decree for the liberalisation of wholesale electricity market and a
Ministerial Decision on rationalisation of electricity consumer tariffs.
Promoting investments and exports
Government takes measures, in line with EU competition rules, to facilitate FDI and
investment in innovation in strategic sectors (green industries, ICT etc...) through a
revision of the Investment Law, the adoption of measures to facilitate PPPs, action to fast-
track large FDI projects and measures to strengthen export promotion policy.
3. Actions for the third review (to be completed by end Q4-2010)
i. Fiscal consolidation
Government achieves the programme target for the 2010 general government deficit.
Parliament adopts draft budget for 2011 targeting a further reduction of the general
government deficit and including the consolidation measures specified in this
Memorandum.
Government prepares a privatization plan for the divestment of state assets and enterprises
with the aim to raise at least 1 billion euros a year during the period 2011-2013.
ii. Structural fiscal reforms
Government adopts draft legislation to strengthen the fiscal framework, following
discussions with European Commission and IMF staff. The following elements should be
part of the reform:
− Introduce a medium-term fiscal framework covering the general government
based on rolling three-year expenditure ceilings for the State, social security
entities and local governments;
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− Strengthen the position of the Finance Minister vis-à-vis line ministers in both
budget preparation and execution phases (giving him/her veto power on
spending decisions and execution);
− Introduce a compulsory contingency reserve in the budget, corresponding to 10
percent of total appropriations government departments other than wages,
pensions and interest; the use of the contingency reserve will be decided by the
Finance Minister;
− Ensure that Parliament does not modify the overall size of the budget at the
approval stage, and focus on the composition of public expenditure and
revenue, and reliability of projections for expenditure and revenue;
− Introduce stronger expenditure monitoring mechanisms, particularly by
implementing an appropriate control of spending commitments, through which
spending entities (line ministries, local authorities, social security funds,
hospital and legal entities) would report on a regular basis to the Treasury on
their outstanding expenditure commitments against their authorised
appropriations in the budget law;
− Introduce a revenue rule for the general government, according to which the
allocation of higher-than-expected revenues should be specified ex-ante in the
budget law;
− Creation of a fiscal agency attached to Parliament providing independent advice
and expert scrutiny on fiscal issues, and reporting publicly on the budgetary
plans and execution of the spending entities of the general government, and on
macroeconomic assumptions used in the budget law.
Parliament adopts reform of the public wage legislation consistent with this Memorandum.
iii. Structural reforms
To reform and modernise public administration:
Government adopts all necessary legislation and decree for the full entry into force of the
local administration reform.
Government completes the creation of a Single Payment Authority for the payment of
wages in the public sector. The Ministry of finance publishes a detailed report, based on
information and in collaboration with the Single Payment Authority, on the structure and
levels of compensation and the volume and dynamics of employment in the general
government.
Authorities complete the first phase of the public procurement system reform, with a
central procurement authority and involving a swift implementation of the electronic
platform for public procurement and introducing the use of e-auctioning system. It should
ensure a common approach and tendering procedures, ex ante and ex post controls.
Government adopts legislation and measures needed to implement the Better Regulation
agenda.
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To modernise the health care systems:
Government adopts legislation on the institutional framework for health supplies (Law
3580/2007), establishes new systems for the management of drugs that favour more use of
generic medicines, including a new system for the electronic monitoring of doctors'
prescriptions.
Government completes the programme of hospital computerisation, upgrading hospital
budgeting systems, and the reform of management, the accounting (including double-entry
accrual accounting) and financing systems.
Government ensures greater budgetary and operational oversight of health care spending
by the Finance Minister, the publication of audited accounts and improvement in pricing
and costing mechanisms.
To strengthen labour market institutions:
Following dialogue with social partners, the government proposes and parliament adopts
legislation to reform wage bargaining system in the private sector, which should provide
for a reduction in pay rates for overtime work and enhanced flexibility in the management
of working time. Allow local territorial pacts to set wage growth below sectoral
agreements and introduce variable pay to link wages to productivity performance at the
firm level.
Government amends regulation of the arbitration system, (Law 1876/1990), so that both
parties can resort to arbitration if they disagree with the proposal of the mediator.
Following dialogue with social partners, government adopts legislation on minimum wages
to introduce sub-minima for groups at risk such as the young and long-term unemployed,
and put measures in place to guarantee that current minimum wages remain fixed in
nominal terms for three years.
Government amends employment protection legislation to extend the probationary period
for new jobs to one year, to reduce the overall level of severance payments and ensure that
the same severance payment conditions apply to blue- and white-collar workers, to raise
the minimum threshold for activation of rules on collective dismissals especially for larger
companies, and to facilitate greater use of temporary contracts and part-time work.
To enhance competition in open markets:
Government adopts changes to existing (sectoral) legislation in key services sectors such as
tourism, retail and education services. New legislation should facilitate establishment, by
significantly reducing requirements covered by Articles 15 and 25 of the Services
Directive, in particular requirements relating to quantitative and territorial restrictions,
legal form requirements, shareholding requirements, fixed minimum and/or maximum
tariffs and restrictions to multidisciplinary activities. It should also facilitate the provision
of cross-border services by implementing the freedom to provide services clause in Article
16 of the Service Directive through an approach ensuring legal certainty for services
providers, i.e. by clearly setting out in the respective (sectoral) legislation which
requirements can and which requirements cannot be applied to cross-border services.
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Government proposes legislation to remove restrictions to trade in restricted professions
including:
− the legal profession, to remove unnecessary restrictions on fixed minimum
tariffs, the effective ban on advertising, territorial restrictions on where lawyers
can practice in Greece;
− the pharmacy profession, covering limits on the number of pharmacies and
minimum profit margins;
− the notary profession, covering fixed tariffs, limits on the number of notaries,
territorial restrictions on where notaries can practice and the effective ban on
advertising;
− architects, covering fixed minimum tariffs;
− engineers, covering fixed minimum tariffs;
− auditing services, covering fixed tariffs.
Government adopts legislation and takes all necessary measures to complete the full and
effective transposition of EU rules on recognition of professional qualifications, including
the transposition of the Professional Qualifications Directive (Directive 2005/36/EC)
including compliance with ECJ rulings.
Government adopts legislation to simplify and accelerate the process of licensing
enterprises, industrial activities and professions, which inter alia revises Law 3325/05,
makes Law 3335/05 for business areas, and operationalises the spatial plan.
Government adopts a law modifying the existing institutional framework of the Hellenic
Competition Commission (HCC) which abolishes the notification system for all
agreements falling within the scope of Article 1 of Law 703/1977, gives the HCC the
power to reject complaints, to increase the independence of HCC members, and to
establish reasonable for the investigation and issuance of decisions.
Promoting investments and exports
Government carries out in depth evaluation of all R&D and innovation actions, including
in various Operational Programmes, in order to adjust the national strategy.
Government creates an external advisory council financed through the 7th R&D
programme, to consider how to foster innovation, how to strengthen links between public
research and Greek industries and the development of regional industrial clusters.
To raise the absorption rates of Structural and Cohesion Funds
Government to meet targets for payment claims (to be measured against certified data) and
for the submission of large projects.
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4. Actions for the fourth review (to be completed by end Q1-2011)
i. Fiscal consolidation
Rigorously implement the budget for 2011 in line with this memorandum, and the fiscal
consolidation measures in the budget. Progress is assessed against the (cumulative)
quarterly deficit ceilings in the MEFP (including the TMU).
ii. Structural fiscal reforms
Parliament adopts legislation to strengthen the fiscal framework, consistent with this
memorandum.
iii. Structural reforms
To reform and modernise public administration:
Government completes effective transposition of Directive 2007/66/EC on public
procurement regarding remedies, and at the same time ensures that responsibility for the
review of award procedures be vested with the administrative courts. Government
completes the transposition of Directives 2009/81 on defence and security expenditure.
Reforms to improve the business environment:
Government fully implements the recovery plan for the railway sector to make operational
activities profitable, implement EU Directives and restructure the holding company.
Parliament adopts legislation unbundling electricity and gas activities.
Government adopts measures, in line with EU requirements to strengthen the independence
and capacity of the Energy Regulatory Authority and further unbundle the transmission
system operators DESMIE (electricity) and DESFA (gas), including by bringing forward
transparent criteria and procedure to govern the selection of the chair and members of
RAE.
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5. Actions for the fifth review (to be completed by end Q2-2011)
i. Fiscal consolidation
Rigorously implement the budget for 2011 in line with this memorandum, and the fiscal
consolidation measures in the budget. Progress is assessed against the quarterly deficit
ceilings in the MEFP (including the TMU).
ii. Structural reforms
Reforms to modernise public administration:
Government adopts legislation/decrees establishing a simplified remuneration system
covering basic wages and allowances that applies to all public sector employees ensuring
that remuneration reflects productivity and tasks: this reform should be part of an overall
reform of Human Resource management in the public sector.
On the findings of the external and independent functional review of public administration
at central level, the government adopts legislation and measures to rationalize the use of
resources, the organisation of the public administration and social programmes.
Authorities take the following measures to strengthen labour market institutions:
Government completes the reform to strengthen the Labour Inspectorate, which should be
fully resourced with qualified staff and has quantitative targets on the number of controls
to be executed.
Government adapts the legislation on tackling undeclared work to require the registration
of new employees before they start working.
Review the scope for improvements in the targeting of social expenditures to enhance the
social safety net for the most vulnerable.
To strengthen competition in open markets:
Government adopts specific legislation to in restricted professions including for the legal
profession, the pharmacy profession, the notary profession, architects, engineers and
auditing services.
To raise the absorption rates of Structural and Cohesion Funds:
Government to meet targets for payment claims to be measured against certified data.
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6. Actions for the sixth review (to be completed by end Q3-2011)
i. Fiscal consolidation
Rigorously implement the budget for 2011 in line with this memorandum, and the fiscal
consolidation measures in the budget. Progress is assessed against the quarterly deficit
ceilings in the MEFP (including the TMU).
Government adopts draft budget for 2012 aiming at a further reduction of the general
government deficit in line with the programme and including the detailed presentation of
consolidation measures amounting to at least 2.2% of GDP, including the following
measures (in exceptional circumstances, measures yielding comparable savings could be
considered in close consultation with European Commission, IMF and ECB):
− Reduce public employment on top of the rule of 1 recruitment for each 5
retirements in the public sector; the reduction in public employment on top of
the 5-to-1 rule should allow savings of at least EUR 600 million;
− Establish excises for non alcoholic beverages, for a total amount of at least
EUR 300 million;
− Continue the expansion of the base of the real estate tax by updating asset
values to yield at least EUR 200 million additional revenue;
− Continue the reorganisation of local government, to generate at least EUR 500
million in savings;
− Nominal freeze in pensions;
− Continue to increase the effectiveness of the presumptive taxation of
professionals, with the aim of collecting at least additional EUR 100 million;
− Reduction of transfers to public enterprises by at least EUR 800 billion
following their restructuring;
− Make unemployment benefits means-tested (aiming at savings of EUR 500
million);
− Collect further revenue from the licensing of gaming: at least EUR 225 million
in sales of licences and EUR 400 in royalties;
− Further broadening of VAT base, by moving goods and services from the
reduced to the normal rate, with the aim of collecting at least additional EUR
300 million.
ii. Structural reforms
Reforms to modernise public administration:
Government ensures full operation of the Better Regulation Agenda to reduce administrative
burden by 20% compared with 2008 level, and sends report to the Commission.
Improve the business environment:
Government changes legislation to mitigate tax obstacles to mergers and acquisitions such
as the non-transfer of accumulated losses, together with the company and the complex
computation of "excessive benefit" (Law 3522/2006, Article 11) in the transfer of private
limited companies.
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Government takes decisions to simplify the process to clear customs for exports and
imports and give larger companies or industrial areas the possibility to be certified to clear
cargo for the customs themselves; Government abolishes the requirement of registration
with the exporter’s registry of the chamber of commerce for obtaining a certificate of
origin.
7. Actions for the seventh review (to be completed by end Q4-2011)
i. Fiscal consolidation
Government achieves the programme target for the 2011 general government deficit.
Parliament adopts draft budget for 2012 a further reduction of the general government
deficit and including consolidation measures amounting to at least 2.2% of GDP, in line
with Memorandum.
ii. Structural reforms
To raise the absorption rates of Structural and Cohesion Funds:
Government to meet targets for payment claims (to be measured against certified data) and
for the submission of large projects.
Introduced of web-based open-access monitoring tool of procedures for approval of project
proposals and for implementation of public projects.
Ensure that the managerial capacity of all Managing Authorities and Intermediate Bodies
of operational programmes under the framework of the National Strategy Reference
Framework 2007-2013 has been certified by the International Organization for
Standardization according to the standard ISO 9001:2008 (Quality Management).
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Annex 1. Provision of data
During the programme, the following indicators and reports shall be made available to the
European Commission, the ECB and the IMF by the authorities on a regular basis. In
general, reporting information provided to other multilateral and bilateral lenders involved
in the programme of financial assistance of which the assistance provided by the
Community forms part shall at the same time also be provided to the Commission, unless
the Commission has indicated that this is not specifically required. The authorities shall
provide the Commission and the ECB with compliance reports on the fulfilment of
conditionality immediately after test dates.
To be provided by the Ministry of Finance
Preliminary monthly data on the state budget execution (including
functional breakdown by main categories of revenue and expenditure
and by line ministry)
Monthly, 15 days after the end
of each month; these data should
also be included in subsequent
transmissions in case of revision
Updated monthly plans for the state budget execution for the remainder
of the year, including functional breakdown by main categories of
revenue and expenditure and by line ministry
Monthly, 30 days after the end
of each month
Preliminary monthly cash data on general government entities other
than the State Monthly, 30 days after the end
of each month, these data should
also be included in subsequent
transmissions in case of revision
Monthly data on the public wage bill (of general government,
including a functional breakdown in nominal wage and allowances
paid to government employees per line ministry and public entity),
number of employees (including a functional breakdown per ministry
and public entities outside the central government) and average wage
(including the relative shares of the base wage, allowances and
bonuses). A functional breakdown of these data into the main public
entities will be added.
Monthly, 30 days after the end
of each month (starting in June
2010)
Quarterly data on general government accounts, and general
government debt as per the relevant EU regulations on statistics Quarterly accrual data, 90 days
after the end of each quarter
Weekly information on the Government's cash position with indication
of sources and uses as well of number of days covered as well as
information on the main government spending and receipt items
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 be
included in subsequent
transmissions in case of revision
Data on expenditure pending payment (including arrears) of the
general government, including the State, local government, social
security, and legal entities
Quarterly, within 55 days after
the end of each quarter
Data on expenditure pending payment (arrears) of the State and
hospitals Monthly, 30 days after the end
of each month
Public debt, and new guarantees issued by the general government to
public enterprises and the private sector Monthly, within one month
Income and expenditure statement and balance sheets of 30 largest
public enterprises by total expenditures Quarterly, three months after the
end of the quarter
17
Data on EU project grants (reimbursements and advances), capital
expenditures and subsidies covered by EU advances or eligible for EU
reimbursement on EU supported projects specifically agreed with the
EU
Monthly, within three weeks of
the end of each month
Monthly statement of the transactions through off-budget accounts Monthly, at the end of each
month
Monthly statements of the operations on the special account Monthly, at the end of each
month
Report on progress with fulfilment of policy conditionality Monthly, at the end of each
month
To be provided by the National Bank of Greece
Assets and liabilities of the Bank of Greece Weekly, next working day
Assets and liabilities of the Greek banking system - aggregate
monetary balance sheet of credit institutions Monthly, 30 days after the end
of each month
Evolution of the external funding provided by Greek banks to their
subsidiaries abroad2 Monthly, 15 days after the end
of each month
External funding flows for the banking, corporate and government
sector, including also expected developments in the 12 months ahead Monthly, 30 days after the end
of each month
Report on banking sector liquidity situation Weekly, next working day
Report on the evolution of financial stability indicators Quarterly, 15 days after the end
of each quarter depending on
data availability
Report on results from the regular quarterly solvency stress tests Quarterly, 15 days after the end
of each quarter depending on
data availability
Detailed report on the balance sheet of the Financial Stability Fund
with indication and explanation of changes in the accounts Weekly, next working day
2
All forms of debt instruments and capital, as well as net deposits provided to subsidiaries abroad.
18
Annex 2. Financial Stability Fund
General
- The purpose of the Financial Stability Fund (the ‘Fund’) is to maintain the stability of
the Greek banking system by providing equity capital in case of a significant decline of
capital buffers.
- The Fund will not provide liquidity support, which will be provided under existing
arrangements.
- The equity will be provided in the form of preference shares to credit institutions
authorised to operate in Greece by license from the Bank of Greece. The preference
shares will be convertible into ordinary shares at a later stage under certain conditions
to be further specified in the legislation establishing the Fund.
- Participation in the Fund will be based on a trigger linked to the minimum required
level of capital adequacy requirements, as established for specific credit institutions by
the Bank of Greece, in its capacity as the competent supervisory authority, if no private
solution has been found.
- The Fund will be established by specific Greek legislation.
- An initial lifespan of [7] years would be envisaged for the Fund. After the end of the
lifespan of the Fund any acquired ownership rights fall to the Greek State.
Legal status
- The Fund will be established as a private law legal entity in order to enhance its
flexibility and efficiency (e.g., to facilitate the recruitment and remuneration of
appropriately qualified staff).
- The legal structure of the Fund should allow for private participation.
Funding
- The Fund will be exclusively financed through its own resources lent by the Greek
Government of up to EUR 10 billion. [Specifically, financing will be provided by the
Greek Government using part of the proceeds of the loans granted in the EU/IMF
programme. This implies that the risk of losses arising out of the Fund’s operations
would lie exclusively with the Greek Government, as the primary shareholder in the
Fund, which would also be obliged to repay the loans granted in the EU/IMF
programme. The purchase of preference shares shall be done in cash]
Organizational issues
- The Fund would be managed by a Governing Council composed of (1) a Chairperson,
a Chief Executive and two directors appointed by the Governor of the Bank of Greece;
(2) a director appointed by the Governor of the Bank of Greece on the nomination of
the European Commission (without prejudice to the application by the Commission of
state aid and competition rules); and (3) two ex officio directors who represent the
Minister of Finance and the Governor of the Bank of Greece. The ECB will nominate
an observer who would have a right to participate, without voting, in meetings of the
Governing Council.
19
- The Chairperson, Chief Executive and the non-ex officio directors will be required by
law to be persons of recognised standing in banking or financial matters in Greece, the
EU or internationally.
- Each of the Chairperson and the non-ex officio directors will be appointed to a five
year term of office and may only be compulsorily removed from office by an
appropriate Greek court on application of the Governor of the Bank of Greece where
(1) no longer capable of fulfilling the conditions required for the performance of the
duties of office or (2) guilty of serious misconduct.
- No member of the Governing Council may be represented on the board of directors of
any credit institution.
- The legislation establishing the Fund will provide that, when exercising the powers and
carrying out the tasks and duties conferred upon them under the legislation, neither the
Governor of the Bank of Greece nor the members of the Governing Council of the
Fund shall seek or take instructions from the Greek Government or any other State
entity, institution, body or undertaking.
- The Governing Council will present a semi-annual report to the Greek Parliament, the
European Commission, the ECB and the IMF.
- The operating expenses will be covered by the Fund.
Powers of the Fund
- In order to fulfil its purposes the Fund will enjoy certain powers over credit institutions
receiving capital from the Fund, including without limitation the power:
o to require a credit institution to provide the Fund with all information necessary
for the Fund to fulfil its tasks;
o to appoint a member of the Board of Directors of a credit institution;
o to require a credit institution to present a restructuring plan;
o to veto key decisions of a credit institution (e.g., business strategy, dividend
distributions, salary caps, liquidity and asset-liability management, etc.);
o to call a general shareholders’ meeting for a credit institution in accordance
with Greek company law;
o to require conversion of preference shares into ordinary shares insofar as a
credit institution fails to meet (1) the minimum required level of capital
adequacy requirements established for credit institutions generally under
applicable regulatory requirements or (2) certain financial conditions to be
further specified in the legislation establishing the Fund; and
o to conduct diagnostic studies and special audits with the help of outside
consultants to assess the solvency of a credit institution where the Fund
considers this necessary.
- Each of the Bank of Greece, in its capacity as the competent authority for the
supervision of credit institutions, and the Fund will be authorised to exchange
confidential information with one another to the fullest extent permitted by EU law.
- The powers of the fund are without prejudice to the supervisory powers of the bank of
Greece.
Conditions applicable to capital increases
- The conditions applicable to any capital increases should be aligned with the
Commission Decision of 19.11.2008 (N 560/2008 support measures for the credit
20
institutions in Greece). The granting of equity capital is made subject to the following
conditions in particular:
- The credit institutions will be expected to pay a market-oriented, non-cumulative
remuneration unless an analysis of the restructuring plan warrants an alternative
approach. A market-oriented, non-cumulative remuneration can either be 10% as
stipulated in the above decision or depending on the risk profile of the credit institution
and the quality of the capital, between 7% and 9.3%, whereas core tier 1 capital for
fundamentally sound credit institutions should normally be remunerated at at least 9%.
- The credit institutions will not pay dividends or coupon on hybrid capital, unless they
are legally obliged to do so, which is typically the case when a credit institution is
profit making (the credit institution should however not be allowed to use reserves to
book a profit).
- Preference shares shall be repurchased by the credit institution for an amount that is
equivalent to the amount originally invested in the credit institution. After five years
the shares shall be repurchased or be remunerated at penal rates. If they cannot be
repurchased because the capital adequacy requirements are not fulfilled, the preference
shares shall be converted into ordinary shares.
Approval of restructuring plan by European Commission
- Any restructuring plan needs to be in accordance with State aid rules and approved by
decision of the European Commission ensuring that the credit institutions will restore
viability at the end of the restructuring period, burden sharing of shareholders is
achieved and distortion of competition is limited.
Follow-up
- The Greek authorities would prepare the necessary legislation implementing the details
of the above by the end of June 2010, at the latest.
21
Annex 3. Fiscal measures to be implemented over 2011-2014
2010
in million EUR % of GDP
Revenue 0.5
Increase in VAT rates 800 0.3
Increase in excise tax on fuel 200 0.1
Increase in excise tax on cigarettes 200 0.1
Increase in excise tax on alcohol 50 0.0
Expenditure 1.9
Wage bill cut by reducing the Easter, summer and
Christmas bonuses and allowances 1100 0.5
Intermediate consumption 700 0.3
Pension cuts (highest pensions) 350 0.1
Elimination of solidarity allowance (second instalment) 400 0.2
Pensions cut by reducing the Easter, summer and
Christmas bonuses 1500 0.6
Public investment reduction 500 0.2
TOTAL ANNUAL IMPACT 5800 2.5
22
2011
in million EUR % of GDP
Carry over from last year 1.1
Increase the VAT rates 1000 0.4
Increase in excise tax on fuel 250 0.1
Increase in excise tax on cigarettes 300 0.1
Increase in excise tax on alcohol 50 0.0
Wage bill cut by reducing the Easter, summer and
Christmas bonuses and allowances 400 0.2
Pensions cut by reducing the Easter, summer and
Christmas bonuses 500 0.2
Revenue 2.2
Taxation on unauthorised establishments 800 0.4
Luxury goods tax 100 0.0
Book specification of income 50 0.0
Gaming royalties 200 0.1
Gaming licenses 500 0.2
Special levy on profitable firms 600 0.3
Levies on illegal buildings 500 0.2
VAT - changes in the sub-categories and broadening base 1000 0.4
Green tax 300 0.1
Presumptive taxation 400 0.2
Increase of legal values of real estate 400 0.2
Taxation of wage in kind (cars) 150 0.1
Expenditure 1.0
Intermediate consumption 300 0.1
Savings from the introduction of unified public sector
wages 100 0.0
Pension freeze 100 0.0
Kalikrates savings 500 0.2
Pension cuts (highest pensions) 150 0.1
Public investment reduction 500 0.2
TOTAL ANNUAL IMPACT 9150 4.1
23
2012
in million EUR % of GDP
Revenue 0.7
Excise non-alcoholic beverages 300 0.1
Gaming licenses 225 0.1
Gaming royalties 400 0.2
VAT - broadening base 300 0.1
Presumptive taxation 100 0.0
Increase of legal values of real estate 200 0.1
Expenditure 1.2
Reduction in public employment in addition to the 5-to-1
replacement rule 600 0.3
Means test unemployment benefit 500 0.2
Pension freeze 250 0.1
Kalikrates savings 500 0.2
Cut transfers to public entities 800 0.4
Public investment reduction 500 0.2
Unidentified cuts in operational expenditure 900 0.4
TOTAL ANNUAL IMPACT 5575 2.4
24
2013
in million EUR % of GDP
Revenue -0.3
Presumptive taxation 100 0.0
Gaming licenses -725 -0.3
Expenditure 0.5
Reduction in public employment in addition to the 5-to-1
replacement rule 500 0.2
Pension freeze 200 0.1
Kalikrates savings 500 0.2
Unidentified measures 4200 1.8
TOTAL ANNUAL IMPACT 4775 2.0
25
2014
in million EUR % of GDP
Temporary measures -0.4
Special levy on profitable firms (discontinuation of
temporary measures) -600 -0.2
Levies on illegal buildings (discontinuation of temporary
measures) -450 -0.2
Unidentified measures 5750 2.4
TOTAL ANNUAL IMPACT 4700 1.9
TOTAL MEASURES 2010 - 2014 30000 13.0
26
Annex 4. Structural reforms conditionality
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
PUBLIC ADMINISTRATION REFORMS
Simplify the remuneration system for public
sector employees
- launch a process to create a simplified remuneration system to
cover basic wages and all allowances applying to all public sector
employees and ensuring that remuneration reflects productivity
and tasks
- establish a fully operational Single Payment Authority to
centralize the payment of all salaries paid to civil servants at all
levels of government,
- adopt legislation for a simplified remuneration system
September 2010
December 2010
June 2011
Public procurement
- complete the first phase of the public procurement system for all
sectors and levels of government with a fully operational
electronic platform introducing the use of e-auctioning systems
- implement EU Directives and have an effective appeals system
December 2010
March 2011
Transparency of public spending decisions
- adopt legislation to ensure transparency by requiring online
publication of all government expenditure decisions
June 2010
Local administration reform
- adopt legislation reforming public administration at the local
level
- adopt all legislation and decrees for full entry force of the reform
on 1 January 2011 involving transfer of responsibilities and
resources across entities
June 2010
December 2010
27
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
Independent functional review of the central
government
- launch an independent and external review of the organization
and functioning of the central administration
- adopt legislation and measures to rationalize the use of resources,
the organisation of the public administration and the effectiveness
of social programmes.
September 2010
June 2011
Better Regulation
-adopt legislation to implement the Better Regulation agenda
- ensures full implementation to reduce administrative burden by
20compared with 2008 level and submit a progress report to the
Commission
December 2010
September 2011
LABOUR MARKET and WAGES
Start discussion with social partners
To prepare the revision of private sector wage bargaining and
contractual arrangements
June 2010
Reform Employment Protection Legislation
- extend the probationary period for new jobs to one year
- reduce the overall level of severance payments which should
apply equally to blue and white collar workers,
- raise the minimum threshold for activating rules on collective
dismissals especially for larger companies,
- put measures in place to guarantee that current minimum wages
remain fixed in nominal terms for 3 years
- facilitate use of temporary contracts and part-time work
December 2010
Reform minimum wages
- following dialogue with social partners, government adopts
legislation on minimum wages to introduces sub-minima for
groups at risk such as the young and long term unemployed,
December 2010
28
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
- guarantee that current minimum wages remain fixed in nominal
terms for three years
Reform private wage bargaining system to ensure
wage moderation
- adopts legislation to reform wage bargaining system in the
private sector, including local territorial pacts to set wage growth
below sectoral agreements
- introduce variable pay to link wages to productivity performance
at the firm level
- amend regulation of the arbitration system
December 2010
Increase the flexibility of working hours
- adjust legislation to introduce annual time accounts and reduce
overtime pay
December 2010
Fight undeclared work
- strengthen legislation to enforce the registration of new
employees
- ensure the Labour Inspectorate is fully staffed and quantitative
controls targets are in place
June 2011
Review social safety net
Review the scope for improvements in the targeting of social
expenditures to enhance the social safety net for the most
vulnerable
June 2011
PENSIONS
Reform pension system
Government adopts a new simplified system (pro rata) for all
current and future employees including:
- by December 2015, a unified statutory retirement age of 65
years, including for those insured before 1 Jan 1993.
- increase retirement age of women in the public sector to 65 by
2013
June 2010
29
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
- strengthened link between contributions and benefits
- pension earnings calculated on the entire lifetime
- an average annual accrual rate of 1.2
- price indexation of pensions
- an automatic adjustment mechanism that links the retirement age
with increases in life expectancy at retirement
- an increased minimum contribution period from 37 to 40 years
by 2015
- restricted access to early retirement and increased minimum
retirement age of 60 years by 1st January 2011, including for
workers in heavy and arduous professions, and those with 40 years
of contributions
- revised disability scheme
- reduced (by 6 per year) pension benefits for people retiring
between the ages of 60 and 65 with less than 40 years of
contribution
- No special rules for those insured before 1 Jan 1993
- substantial cuts in the list of heavy and arduous professions (to
no more than 10 of employees)
- a means-tested minimum guaranteed pension for people aged
above 65 years of age
- a reduction in the number of funds to 3
Parliament adopts the pension reform
September 2010
HEALTHCARE
Healthcare reform
Complete reforms to improve management and procurement
systems of health system: complete move to double accounting
systems, establish operational oversight by the Finance Minister,
the publication of audited accounts
December2010
BUSINESS ENVIRONMENT
Facilitate business start ups June 2010
30
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
Simplify the start up of new businesses and make the General
Commercial Registry (GEMI) fully operational
September 2010
Simplify the licensing of industrial units and
reduce the costs of doing business
- simplify and accelerate the process of licensing enterprises,
industrial activities and professions through legislation and by
making the spatial plans operational
- Government changes legislation to mitigate tax obstacles to
mergers and acquisitions, and lower costs associated with customs
December 2010
September 2011
Implement the Services Directive
- adopt horizontal legislation, finalize screening of sectoral
legislation,
make single points of contact operational
-adopt measures in key service sectors such as tourism, retail and
education
June 2010
September 2010
December 2010
Open up restricted professions
- propose sector-specific legislation to remove restrictions to trade
in the legal profession, the pharmacy profession, the notary
profession, architects, engineers, auditing services
- implement the Professional Qualifications Directive so that
qualifications from third countries are recognized
-adopt legislation to open up restricted professions
December 2010
December 2010
June 2011
Road freight transportation
Liberalize road freight transport by removing all unnecessary
restrictions on admission to the occupation of road haulage,
including minimum fixed prices
September 2010
31
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
Competition policy framework
Modify the existing institutional framework of the Hellenic
Competition Commission, including to allow prioritisation on
important cases and to strengthen the independence of HCC
members
December 2010
Railways
- Prepare a recovery plan for the railway sector to restore
profitability to operational services, ensure compliance with EU
Directives, and -specify a timetable for the restructuring of the
holding company including the sale of land and other assets
- Implement fully the recovery plan for the railway sector
June 2010
March 2011
Energy
-Decisions on the liberalization of wholesale electricity market and
to commence the rationalization of consumer tariffs
-Adopt legislation to unbundle electricity and gas activities,
including measures
- Adopt measures to strengthen the independence and capacity of
the Energy Regulatory Authority
September 2010
March 2011
March 2011
PROMOTING INVESTMENT AND
EXPORTS
Promoting FDI and investment in strategic
sectors
Government takes measures to facilitate FDI and investment in
innovation in strategic sectors (green industries, ICT etc...),
through a revision of the Investment Law, the adoption of
measures to facilitate PPPs, action to fast-track large FDI projects
and measures to strengthen export promotion policy
September 2010
R&D and innovation - Carry out in depth evaluation of all R&D and innovation actions, December 2010
32
STRUCTURAL REFORMS: CONDITIONALITY
Action Time frame
including in various Operational Programmes, in order to adjust
the national strategy
- Create an Advisory Council financed through the 7th R&D
programme, to consider how to foster innovation, how to
strengthen links between public research and Greek industries and
the development of regional industrial clusters
December 2010
STRUCTURAL AND COHESION FUNDS
Increase absorption of Structural and Cohesion
Funds
- put in place measures to achieve binding targets for payment
claims of Structural and Cohesion Funds and for submission of
large projects
- establish Task Force with the Commission to speed-up the
development of high quality projects, through better coordination
and other actions
- complete steps to prioritize public investment spending for
projects benefiting from EU funds, including the introduction of a
central bank account
- meet targets for payment claims (measured against certified data)
and large projects
- introduction of a web-based open access monitoring tool of
procedures for approval of project proposals and for
implementation of public projects;
- ensure that the managerial capacity of all Managing Authorities
and Intermediate Bodies of operational programmes
June 2010
December 2010 and every six
months thereafter
December 2011
December 2011
