## _cr13153 ## Source details **Canonical URL:** [_cr13153](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13153.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13153.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13153.pdf.json) --- ### Executive Summary — Program and Review - Extended Arrangement approved on March 15, 2012: SDR 23.79 billion (2,159 percent of quota; €28 billion). - Purchases made so far: SDR 4.2 billion (about €4.9 billion). - Proposed third-review purchase: SDR 1.5 billion (about €1.8 billion). - Euro area countries released €120 billion since program approval (of €144.6 billion committed), of which €48.2 billion for bank recapitalization. - All six end-March 2013 quantitative performance criteria were met; several structural benchmarks missed (re-phased or set as prior actions). - Third review discussions: February 26–March 14 and April 3–15, 2013. ### Recent Economic Developments and Labour Market - Output and demand: - 2012 contraction close to expected: "-6.4 vs. -6 percent projected". - Current account deficit shrank by "6½ percent of GDP" in 2012; current account deficit dropped to "3.4 percent of GDP in 2012". - Imports contracted "12 percent in 2012"; exports grew "½ percent". - Structural current account deficit estimated around "5½ percent of GDP in 2012". - Labour market: - Unemployment reached "27 percent in February"; youth unemployment at "64 percent". - Employment changes: 2009 -1.0; 2010 -2.7; 2011 -6.6; 2012 -9.2; 2013 Prog. -8.2; Est. -3.7 (Table highlights). - Prices, wages, competitiveness: - Compensation per employee fell about "4¼ percent" nominal and "5 percent" real in 2012. - Headline HICP inflation: "0.3 percent at end-2012", March -0.2 percent, April -0.6 percent. - Core inflation: March -1¼ percent. - GDP deflator 2012: "-¾ percent" (text) / Table: "-0.5" (percent). - Sentiment and liquidity: - Spreads on 10-year Greek government bonds fell below "700 basis points" as of mid-May (from over "3,000" in mid-2012). - S&P upgraded to "B-" after December debt buy-back; Fitch upgraded to "B-" in May. - Private sector bank deposits rose by about "€17 billion" since mid-2012 trough (as of end-April). ### Fiscal Performance, Arrears, and PFM - Fiscal outturns: - ESA-95 primary deficit 2012: "1.3 percent of GDP" (vs. program target "1.5 percent"). - 2012 cash fiscal targets met; cash under-execution offset arrears buildup (~"€1 billion in 2012"). - Available cash data for 2013 through March indicate performance slightly ahead of program targets. - Arrears clearance: - Only "€1.2 billion" cleared net in Q4 2012 and Q1 2013 vs. program goal of "€3.5 billion". - End-March 2013 indicative target on arrears was missed. - PFM reforms and KPIs: - About "95 percent" of general government entities now report arrears from commitment registers. - Rolling 3-year expenditure ceilings introduced in 2013–16 MTFS. - PFM KPIs: end-March KPIs set as a prior action: require "91 percent" of already established entities to report with "2 percent" deviation; for newly added entities require reporting for "55 percent" with precision "30 percent". - Modified General Government Cash Balance (selected): - Total Revenue (billions of euros): "90.2 88.4 85.5 81.2 80.3 81.2 83.7 87.8" (2010–17 series). - Primary expenditure (billions of euros): "101.1 93.3 87.9 81.3 77.6 78.7 78.9 82.7". - Gross debt (Maastricht, percent of GDP, selected): "148.3 170.3 156.9 175.8 174.2 168.2 159.5 149.7". ### Tax Administration — Reforms, Prior Actions, KPIs - Institutional measures: - Legislation to move toward a semi-autonomous revenue administration (prior action); SGPR to control key functions and have increased autonomy. - Advisory board: five members, two with significant international tax administration experience; board members' term "three years". - By end-October 2013: SGPR to approve new organizational structure, staffing numbers, grading system, job classification, and appointment processes. - Operational and enforcement measures: - Prior action: KPIs for revenue administration for end-April achieved (Annex I): collection of new debts in the current year "11.0%"; number of risk-based full scope audits in the year "66"; number of completed risk-based HWI audits "146". - Targets and achievements (Annex II): e.g., number of risk-based full scope audits — 2012 Target "300"; 2012 Actual End-Dec.: "76"; later End-Dec.: "596". - Prior action misreporting: earlier inconsistent reporting on transfer of "50 auditors" led to waiver of nonobservance. - Installment schemes: - Basic installment scheme reforms as prior action to exclude those who can pay. - One-off "Fresh Start" scheme: payments equal monthly installments not extending beyond "June 2017"; reduction in surcharge by at most "50 percent" upon full payment; full collateral for rescheduled amounts over "€300,000". - Law to set opening application date no later than "July 1, 2013". - Staffing and IT: - Finalize external recruitment of "200 auditors" (July 2013); complete certification of "2,000 auditors". - TAXIS and ELENXIS roll-out targets: TAXIS in "50 tax offices covering 70% of revenues by June 2013" and "in all tax offices by October 2013"; ELENXIS new system operational in major tax offices by "December 2013". ### Financial Sector — Recapitalization, NPLs, and Resolution Framework - Recapitalization: - Four core banks to emerge accounting for nearly "90 percent" of banking sector deposits. - Piraeus acquisitions involved payment of "€524 million" to Cypriot parent banks. - Alpha and Piraeus informed authorities they secured minimum "10 percent" private subscription; subscription expected by end-May. - Eurobank to be fully recapitalized by HFSF; NBG seeking to raise required "10 percent". - Capital metric: minimum core tier I ratio "9 percent of risk-weighted assets" binding from end-March 2013; limit deferred tax assets counted as core capital to "20 percent of CT1". - NPLs (Bank of Greece data, 2012): - Total NPLs: "66.6 (billions of euros)"; change "29.9 (percent)". - NPLs share of total loans: "29.5 (percent)"; change "39.5 (percent)". - Restructured loans total: "12.0 (billions of euros)"; change "6.7 (percent)". - Accounting provisions to NPLs (excluding restructured loans): "48.1 (percent)"; change "-23.4 (percent)". - NPL management and legal frameworks: - New stress test required by end-2013 based on end-June 2013 data. - Household insolvency overhaul: adopt legislation by end-June to establish a facilitation program for low-income households; clarify/tighten eligibility under law 3869/2010 by end-June; discontinue blanket moratoria on property foreclosures no later than end-August 2013 once new framework operational. - Agreement to establish by end-August 2013 definitions of KPIs for NPL reporting/resolution; banks to report on these KPIs by October 2013. - Resolution of non-core banks: - Two bridge banks under HFSF control (New Hellenic PostBank and Nea Proton bank) restructuring to reduce personnel and costs; objective to sell these banks no later than "July 15, 2013". ### Banking Sector Capital Envelope and Scenarios - Staff judgment: existing envelope of "€50 billion" (including "€5 billion" buffer) remains adequate. - Capital needs reassessment required due to: macro deterioration, absorption of Cypriot branches, deferred tax asset recognition changes, private participation, and liability management exercises. - BoG to refine cost estimates through new stress test by end-2013. ### Structural Reforms — Privatization, Product and Service Markets, Judiciary - Privatization: - Sale of government’s stake in OPAP for "€712 million" (finalization subject to approvals). - Tender for a second large firm expected to be completed by late May. - HRADF receipts targets cumulative: at least "€1.6 billion by end-2012", "€4.2 billion by end-2013", "€6.5 billion by end-2014", "€7.7 billion by end-2015", "€11.1 billion by end-2016". - Transfer of "250 real estate plots" to the Fund executed; target transfer of "1,000 commercially viable real estate assets to HRADF by end-2013" with interim "250" per quarter. - Liberalization and competition: - Regulatory frameworks for airports and water finalized. - End-2012 structural benchmark on liberalization of regulated professions not met; first-round reforms completed for most identified professions; important professions (engineering, lawyers) to be addressed in second half 2013. - Measures: replace fixed margins for OTC drugs with maximum margins by June 2013; allow sale of selected OTC products outside pharmacies by end-September 2013. - Judicial reforms: - Reduction of administrative case backlog at the Council of State; publish quarterly court performance information; rationalize magistrate courts. - Draft Code of Civil Procedure initial draft by end-May 2013; revised draft by end-October 2013; final draft submitted by March 2014. - Reallocate judges to administrative courts with highest backlog by end-September 2013; compulsory mediation for small claims to be prepared. ### Macroeconomic Outlook, Risks, and Debt Sustainability - Macroeconomic baseline: - Baseline: continued recession in 2013, gradual recovery starting in 2014. - Latest consensus forecast: 2013 contraction "-4.9 percent" (versus "-4.2 percent" in program). - Forecast 2014: "-1.4 percent" growth (versus "0.6 percent" in program) with more rigid prices. - Program assumptions include mild deflation in 2013 and 2014 as price competitiveness improves. - Debt projections: - Debt peaking around "175 percent of GDP this year", projected to fall to "124 percent in 2020" (baseline). - Tailored alternative scenario: debt falls only to "147 percent of GDP by 2020" due to implementation delays and weak performance. - Public sector gross debt (baseline, selected): 2008 "112.9"; 2012 "156.9"; 2013 "175.8"; 2016 "159.5"; 2020 "124.2". - Alternative scenario public sector gross debt (selected): 2013 "180.5"; 2014 "182.1"; 2016 "176.4"; 2020 "147.2". - External debt and DSA: - Gross external debt currently "233 percent of GDP"; projected peak around "245 percent of GDP in 2013"; decline to about "155 percent in 2020". - Main drivers of improvement: current account improvement, reliance on official loans at relatively low interest rates, reduction in GLF interest and EFSF fees, return of SMP profits, FDI from privatization. - Risk scenarios (impacts by 2020): - Larger current account deficits: debt ratio "10 percentage points higher" than baseline. - Interest rate shock (100bps): debt ratio "8 percentage points" above baseline. - Slippages in privatization (half proceeds): debt ratio "3 percentage points" higher. - Combined adverse scenario: net debt ratio ~"100 percent of GDP in 2020", "23 percent of GDP higher" than baseline. ### Social Measures, Employment Programs, and Safety Nets - Employment programs: - Employment programs targeting "45,000" unemployed youths. - Youth internship and employment voucher program: "€180 million" co-funded by ESF to support "45,000" individuals up to 29 years over six months. - Health and social support: - Health Voucher Program launching in July 2013 providing access to primary healthcare for "100,000" long-term uninsured citizens. - Legislation for two pilot programs targeting long-term unemployed and jobless households to be implemented no later than 2014. - Fiscal safeguards on subsidies and RES: - RES account projected debt close to "1 percent of GDP by end-2014" absent corrective measures; projected debt recognition of "€1.7 billion" by end-2014. - Prior action: reduce feed-in tariffs for photovoltaic renewables by at least "45 percent"; increase RES Special Levy; liberalize household tariffs as of "July 1, 2013". ### Program Modalities, Prior Actions, Structural Benchmarks, and Financing - Prior actions for third review: nine prior actions implemented focusing on revenue administration, public administration reform, and HFSF governance. - New structural benchmarks (selected): - By end-October 2013: approve new organizational structure for revenue administration (staffing, grading, appointment processes). - By July 15, 2013: complete comprehensive banking sector strategy and resolve New Hellenic PostBank via a P&A transaction. - Financing: - Program fully financed through the first half of 2014. - Projected financing gap of "€4 billion" opening in second half of 2014; additional financing to be identified by next review to keep program fully financed on a 12-month forward basis. - Schedule of proposed purchases under Extended Arrangement (selected): - Board approval March 15, 2012: "1,399.1" Millions SDRs; "127.0" Billions euros. - Third Review (February 28, 2013): "1,506.8" Millions SDRs; "136.8" Billions euros. - Total: "23,785.3" Millions SDRs; "2,158.8" Billions euros; "28.0" Percent of quota. ### Monitoring, Reporting, and Data Provision - Reporting commitments (selected): - Monthly cash and budget execution data: preliminary monthly state budget execution "15 days after end of each month". - Monthly data on public wage bill, number of employees: monthly, "30 days after end of each month". - Monthly Bank of Greece reports on banking sector liquidity: weekly/next working day or monthly depending on item. - GAO e-portal reporting: data to be provided within four weeks after end of each month; e-portal coverage and discrepancy KPIs set as prior actions. - Annex I KPIs (Tax Administration, End-April 2013): - Collection of new debts in the current year: "11.0%". - Number of risk-based full scope audits: "66". - Number of completed risk-based HWI audits: "146". ### Staff Appraisal — Priorities and Concerns - Short-run objectives met; medium-term sustainability uncertain. - Key policy advice: - Do not ease fiscal adjustment in 2013–14 absent firm evidence of fiscal space. - Rapidly and credibly strengthen revenue administration; consider creating a revenue agency outside the civil service if reforms fail. - Start substantive public administration reforms, including dismissals of nonperforming staff consistent with agreed exit targets, using 1:1 replacement rule for certain exits and 1:5 general hiring rule. - Strengthen HFSF governance and plan for swift divestiture of HFSF stakes; any bank mergers must show clear synergies and enable early privatization. - Continue to develop household and corporate NPL resolution frameworks while safeguarding payment culture. *Source: GREECE — INTERNATIONAL MONETARY FUND, staff report excerpts and tables (content unit: _cr13153).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Extended Arrangement - On March 15, 2012, the Executive Board approved a four-year Extended Arrangement under the Extended Fund Facility in the amount of SDR 23.79 billion (2,159 percent of quota; €28 billion). - Purchases totaling SDR 4.2 billion (about €4.9 billion) have been made so far. - A purchase in the amount equivalent to SDR 1.5 billion (about €1.8 billion) is proposed to be released on the completion of the third review. - As of end-April, euro area countries have released €120 billion since the program approval (of €144.6 billion committed), of which €48.2 billion for bank recapitalization. ### Recent Economic Developments - Macroeconomic developments broadly as expected; economy is rebalancing but mainly through recessionary channels. - 2012 developments and labor market: - Current account deficit shrank by 6½ percent of GDP in 2012. - Competitiveness gap reduced by about half following labor market reforms. - Deflation is setting in. - Economy continued to contract during the last quarter of 2012; unemployment increased in line with program projections. - Sentiment and liquidity: - Various sentiment indicators improved since the last review as perceived euro exit risks receded and liquidity conditions improved. ### Policy Implementation and the Third Program Review - No changes to the program’s macroeconomic framework given developments in line with program assumptions. - No substantive changes to the outlook for financing or to the DSA compared to the last review. - Fiscal policy and implementation concerns: - Some over-performance relative to end-2012 and first quarter 2013 targets led authorities to consider easing measures such as the property tax and social solidarity contributions. - Staff concern: over-performance may reflect one-off factors; envisioned easing could open a fiscal gap. - Tax and public administrative reforms face serious implementation problems; failure to take corrective actions would lead to substantial fiscal gaps in 2014 and beyond. - Agreement: any easing of measures should await confirmation of fiscal space and evidence that corrective actions are effective. - Structural reforms outside the public sector: - Efforts to reinvigorate delayed privatization and liberalization of product and services markets are largely on track; more ambitious performance will arrive in future reviews. - Financial sector: - Bank recapitalization process is nearing completion after prolonged delays. - Authorities are taking agreed steps to strengthen banking oversight and governance frameworks. ### Discussions (mission and team) - Third review discussions held February 26–March 14 and April 3–15. - Mission met with the Prime Minister, Minister of Finance, Governor of the Bank of Greece, other Cabinet Ministers, private banks, think tanks, and employer associations. - Staff team comprised P. Thomsen (head), M. Flanagan, W. McGrew, G. Gottlieb, N. Hobdari, W. Maliszewski, and M. Shamloo (EUR); I. Petrova (FAD); S. Lanau and B. Rayner (SPR); O. Frecaut, M. Oliva, and D. Monaghan (MCM); and G. Esposito (LEG). B. Traa, S. Eble, M. Athanasopoulou, G. Gatopoulos, and M. Kalimeri (IMF resident representative office) assisted the mission. J. Manning and C. Piatakovas (EUR) assisted from headquarters. - Approved by Reza Moghadam and Hugh Bredenkamp. ### Background and Program Performance - Political situation: stabilized but fragile; governing coalition remains united; political and social tensions remain high due to long recession and very high unemployment. - Quantitative and structural performance: - All six end-March 2013 quantitative performance criteria were met. - Performance against structural benchmarks fell short; several end-2012 structural benchmarks and two end-February benchmarks were missed, and one end-April benchmark was missed. Missed benchmarks have been re-phased or targeted as prior actions for this review. - End-March 2013 indicative target on arrears was missed. - This third program review was conducted in conjunction with the 2013 Article IV consultation. ### Recent Developments — Detailed Findings - Output and unemployment: - 2012 contraction was close to expected (-6.4 vs. -6 percent projected). - Larger-than-expected retrenchment of domestic demand offset by net exports. - Unemployment reached 27 percent in February; youth unemployment at 64 percent. - Wages, inflation, and competitiveness: - Compensation per employee fell by about 4¼ percent in nominal terms and 5 percent in real terms in 2012. - Headline HICP inflation fell to 0.3 percent at end-2012 (from over 2 percent at end-2011) and turned negative in March (-0.2 percent) and April (-0.6 percent). - Core inflation fell to -1¼ percent in March. - GDP deflator turned negative in 2012 (-¾ percent). - External adjustment: - Imports contracted 12 percent in 2012; exports grew ½ percent. - March 2012 PSI reduced interest payments and improved the income account. - Current account deficit dropped to 3.4 percent of GDP in 2012, about a third of the 2011 outcome. - Structural current account deficit estimated around 5½ percent of GDP in 2012. - Market sentiment and bank liquidity: - As of mid-May, spreads on 10-year Greek government bonds fell to below 700 basis points, down from over 3,000 in mid-2012. - S&P upgraded Greece from Selective Default to B- after the December debt buy-back; Fitch upgraded to B- in May. - As of end-April, private sector bank deposits rose by about €17 billion since mid-2012 trough. - Banks shifted funding out of ELA into the ECB Main Refinancing Operation; ELA reduced to a fraction of outstanding liquidity support. - Credit contraction and banking sector pressures: - As of end-April, banks repaid about €40 billion of central bank financing since mid-2012. - Credit to the economy fell €8½ billion or 3½ percent y/y in March 2013. - High and rising NPLs depress credit growth and pressure bank profitability; banks seeking to strengthen capital ratios. - Continued contraction in credit also reflects the Eurogroup decision last December not to provide additional resources to cover increased public sector financing need, forcing greater T-bill issuance by authorities. ### Non-Performing Loans (Bank of Greece data) - Total NPLs: 66.6 (billions of euros) in 2012; change 29.9 (percent). - NPLs share of total loans: 29.5 (percent) in 2012; change 39.5 (percent). - Restructured loans total: 12.0 (billions of euros) in 2012; change 6.7 (percent). - Restructured loans share of total loans: 5.3 (percent) in 2012; change 14.6 (percent). - Accounting provisions to NPLs (excluding restructured loans in percent): 48.1 in 2012; change -23.4 (percent). ### Fiscal Performance and Institutional Reform - Budget execution: - 2012 cash fiscal targets were met; authorities restrained expenditures amid delayed program disbursements. - Cash under-execution offset arrears buildup (~€1 billion in 2012). - ESA-95 primary deficit fell to 1.3 percent of GDP compared to program target of 1.5 percent. - Available cash data for 2013 through March indicate fiscal performance slightly ahead of program targets. - Revenues in aggregate remain in line with projections; weaker consumption-based taxes offset by lower tax refund payments and higher disbursement of EU structural funds. - Arrears clearance lagged: only €1.2 billion cleared in net terms in Q4 2012 and Q1 2013 vs. program goal of €3.5 billion. - Institutional reforms lagging: - Tax administration reforms highly unsatisfactory; key end-December KPIs missed by very large margins. - End-February structural benchmark to establish semi-autonomous tax agency and related measures were delayed; political interference remains a problem. - Public administration reforms behind schedule: staffing plans and quarterly targets for mandatory exits not completed by end-February 2013; no additional entrants into labor mobility scheme through end-April (program target of 12,500 by end-June 2013). - Public Financial Management (PFM) reforms showing some progress: end-2012 KPIs missed by less than anticipated; about 95 percent of general government entities now report arrears from commitment registers; rolling 3-year expenditure ceilings introduced in 2013–16 MTFS. Delays remain in establishing General Directorates of Financial Services in some ministries and in developing social budget monitoring framework. ### Bank Recapitalization and Resolution - Consolidation and core banks: - Four core banks are set to emerge and will have significant public sector shareholding. - Piraeus completed acquisition of Millennium (Greek subsidiary of Portuguese Millennium Bank Group) and acquired Greek branches of Bank of Cyprus, Cyprus Popular Bank, and Hellenic Bank, involving a payment of €524 million to the Cypriot parent banks (with the HFSF injecting extra capital into Piraeus). - Piraeus has become the largest bank by deposits in Greece following absorptions. - Alpha Bank acquired Emporiki (former Greek subsidiary of Crédit Agricole); four core banks now account for nearly 90 percent of banking sector deposits. - NBG/Eurobank merger: - Merger suspended after concerns over creation of a mega-bank with combined share of total assets over 45 percent and failure to raise sufficient private capital to meet 10 percent threshold. - Decision to proceed with separate recapitalization by HFSF pending further review. - Recapitalization nearing completion: - Alpha and Piraeus informed authorities they secured minimum 10 percent of new equity capital set by the BoG to maintain private management control; actual subscription expected by end-May. - NBG seeking to raise required 10 percent; outcome unclear. - Private shareholders of Eurobank decided not to participate; Eurobank to be fully recapitalized by the HFSF, which will exercise management per applicable governance framework. - Strengthening bank governance: - Monitoring trustees placed in the four core banks; first draft report (April) identified areas for improvement: credit policies, internal control, monitoring of connected borrowers, and risk management. - Relationship frameworks between HFSF and banks (targeted for end-March 2013) delayed and expected in June. - Concerns about HFSF governance: on March 19, an extraordinary General Council meeting was called on exceptionally short notice, effectively precluding participation of one of three independent GC members. *Source: GREECE — INTERNATIONAL MONETARY FUND, EXECUTIVE SUMMARY (May 20, 2013).* ### 9. Progress on broader structural reforms has been uneven (Table 12). Regarding ### _cr13153 - 9. Progress on broader structural reforms has been uneven (Table 12). Regarding ### Progress on broader structural reforms - Privatization and regulatory milestones: - Regulatory frameworks for airports and water have been finalized. - 250 real estate plots were transferred to the Fund as agreed. - The PPC restructuring plan was adopted. - Sale of the government’s stake in OPAP for €712 million (finalization subject to regulatory approvals). - Tender for a second large firm expected to be completed by late May. - Preparation of other assets for privatization is behind schedule; authorities might struggle to reach targets for 2013. - Liberalization and judicial reforms: - End-2012 structural benchmark on liberalization of regulated professions was not met. - Important judicial reforms delayed due to strikes by the judiciary. - Recent efforts include reducing the administrative case backlog at the Council of State (including tax cases), publishing quarterly information on court performance, and rationalizing magistrate courts to improve efficiency. ### Discussions and macroeconomic outlook - Agreement on main policy challenges; focus areas included fiscal policy, tax administration, public employment policies, privatization, liberalization of closed professions, and completion of bank recapitalization and resolution. - Macroeconomic framework unchanged: - Baseline: continued recession in 2013, gradual recovery starting in 2014. - Latest consensus forecast: 2013 contraction of -4.9 percent (versus -4.2 percent in the program). - Forecast for 2014: -1.4 percent growth (versus 0.6 percent in the program) with more rigid prices. - Assumption of improvements in price competitiveness manifested in mild deflation in 2013 and 2014. - External environment and risks: - Cypriot crisis expected to have a small negative impact on Greece, offset by stronger services exports, better liquidity, and improving confidence indicators. - Public debt projections: - Debt peaking around 175 percent of GDP this year, projected to fall to 124 percent in 2020. - Tailored alternative scenario: debt falls only to 147 percent of GDP by 2020 due to implementation delays and weak economic performance. - External debt expected to decline gradually; risks include delayed structural reforms, slippages in privatization and non-debt-creating inflows, and higher interest rates (partially dampened by reliance on official financing). ### Downside risks to the program baseline - Political risks from very high unemployment and social hardships that could undermine program commitment and confidence. - High public debt posing significant medium-term risks; even under the program path, debt remains exceptionally high well into the next decade. - A more severe euro-area slowdown could weaken the recovery and pressure internal devaluation, negatively affecting debt sustainability. ### Fiscal policy stance and immediate fiscal judgments - On current projections, no additional measures are needed for 2013–14. - Authorities pointed to fiscal over-performance in 2012 and early 2013 and proposed potential easing on measures (property tax, solidarity contributions, VAT on restaurants, excise tax on heating oil). - Staff cautioned data incompleteness and noted risks: - Weakness in social security contributions in late 2012 could persist. - One-off measures in 2013 (notably, a central bank profit transfer of ¼ percent of GDP) warrant conservatism. - Effectiveness of tax administration reforms assumed to contribute significantly from 2014 remains an open question. - Agreement reached to forego easing and revisit possible fiscal space at the next review. ### Tax administration reforms (performance and measures) - Tax administration reforms are essential to tackle severe tax compliance problems and maintain program political support. - Institutional/organizational measures: - Strengthen independence of the tax authority: Secretary General (SG) to control key functions previously outside SG’s purview (such as prosecution of tax evasion and IT systems) and have significant autonomy over staffing, organizational structures, and the budget. If unsuccessful, consider establishing a revenue agency outside the civil service. - Strengthen legal framework for revenue administration (prior action): provide flexibility to focus on high-return areas, streamline cancellation of uncollectable debt, speed up dispute resolution, and permit indirect methods to determine taxpayers’ income. - Improve efficiency: hire new audit staff, provide further training, refocus efforts on enforcement and collection rather than assessment, and allocate resources to high wealth, large debtor, and large taxpayer units. - Installment and arrears treatment: - Reform basic installment scheme as a prior action to exclude those who can pay and ensure payments commensurate with ability to pay. - Introduce a one-off installment scheme (“Fresh Start”) to provide longer payment periods and reduction in penalties and surcharges. - Monitoring and KPIs: - KPIs for revenue administration set as a prior action targeting collection on new debts, and audits and collection from large taxpayers and high wealth individuals (MEFP Annex I). - KPI adjustments reflect substantial delays; some end-June and end-December 2013 KPI targets adjusted (MEFP Annex II). - By April, authorities achieved more than two-thirds of the number of full scope LTU audits and exceeded the assessment amount in HWI audits achieved for the entire year in 2012. - The program does not assume significant gains from tax administration reforms through 2014; KPI implementation essential to secure programmed gains in 2015–16. - Note on prior action misreporting: authorities reported before completion of first and second reviews in January 2013 that 50 auditors had been transferred to the HWI unit (a prior action); some auditors failed to take up posts, leading to misreporting; additional auditors were later transferred and the Fund granted a waiver of nonobservance of the prior action. ### Public financial management (PFM) reforms and arrears - PFM strengthening measures (MEFP ¶9): - Revise organic budget law to tighten monitoring on local governments and SOEs and impose multi-year budget ceilings on line ministry and health sector expenditures. - Augment expenditure commitment controls by making General Directorates of Financial Services more effective through secondary legislation assigning these functions to a single unit within each ministry; expand the electronic reporting system (the e-portal). - Enhance reporting of social expenditures: new social budget framework to include data on spending commitments and arrears, bringing reporting closer to GFSM and ESA 95 standards. - Arrears clearance (MEFP ¶10): - Missed quarterly arrears target due to institutional shortcomings (late local government budgets adoption, slow implementation of commitment registers in SSFs). - Measures now addressing these shortcomings; funding to hospitals now channeled directly rather than through EOPYY; stock of expenditure arrears expected to be materially reduced. - Additional legislative reforms needed within next six months to address cumbersome payment processes and avoid significant increases in interest costs related to EC’s late payment directive (transposed by Greece in April 2013), which requires payment of interest compensation on payments overdue by more than 30 days. - PFM KPIs (MEFP ¶11): - End-March KPIs set as a prior action: require 91 percent of already established entities to report with 2 percent deviation between survey and e-portal data. - For newly added entities, KPIs require reporting for 55 percent of them, with a precision of 30 percent. - End-2013 targets from the previous review were maintained. ### Public administration reforms and employment targets - Public administration reform objectives (MEFP ¶13): - Public sector employment declined by over 100,000 since 2010, in line with the cumulative program target of at least 150,000 by 2015, with hiring restricted by the 1:5 rule of new hiring to attrition. - Staff projects that application of the 1:5 rule will be just sufficient to reach the 2015 target, implying that additional reductions are needed to create room for new hires to address skill shortages. - Rigid job security inhibits accountability; targets for the mobility scheme persistently missed by large margins. - Prior actions agreed for this review: - Set semiannual targets for the mobility scheme and quarterly targets for mandatory exits through 2014. - Approve annual overall employment level ceilings for the general government through 2016. - Adopt legal changes to help ensure agreed targets are met. - Exits will free up space for replacement hiring of critical skills on a 1:1 basis, conditional on on-track aggregate employment reduction targets. - Authorities to focus on disciplinary cases and closure of extra budgetary funds (excluded from one-year “mobility reserve” right) to achieve up-front mandatory exits. ### Contingent liabilities and sector-specific measures - Renewable energy (RES) liabilities (MEFP ¶15): - Subsidies to photovoltaic producers have built up debt in the RES account projected to reach close to 1 percent of GDP by end-2014 absent corrective measures. - Government measures: limit new capacity, adjust RES Special Levy surcharge on consumers in January and July of each year to eliminate remaining debt. - Household tariffs to be liberalized as of July 1, 2013 to improve liquidity in the electricity system. - Tax investment incentives and subsidies: - Initiative with Fund technical assistance to quantify and streamline tax incentives and align investment framework with best international practices. - Tax expenditure and subsidy limits (including sunset provisions for unused past subsidy commitments) to be reflected in future MTFS updates. ### Job creation, safety nets, and social measures - Program measures to support job creation and safety nets (MEFP ¶14): - Employment programs targeting 45,000 unemployed youths. - Legislation passed to launch two pilot programs targeted at long-term unemployed and jobless households. - Health Voucher Program launching in July 2013 to provide access to primary healthcare services for 100,000 long-term uninsured citizens. - Authorities committed to identify gaps in social safety nets and prioritize filling them, leveraging EU funding where possible within the existing program envelope. ### Financial sector policies and bank recapitalization/resolution - Bank recapitalization: - Principal focus to conclude recapitalization of the four core banks (MEFP ¶17-18). - Framework for recapitalization remained appropriate; small extensions to end-April deadline were necessary for procedural requirements. - Resolution of non-core banks (MEFP ¶19): - Two bridge banks under HFSF control (New Hellenic PostBank and Nea Proton bank) undergoing restructuring to reduce personnel and operational costs. - Objective to sell these two banks no later than July 15, 2013. - Private owners of other non-core banks failed to raise needed equity capital by end-April deadline; authorities will consider alternatives to resolution, including take-over by a core bank. *Source: _cr13153 - 9. Progress on broader structural reforms has been uneven (Table 12). Regarding* ### 25. Capital needs of the banking system will be reassessed in light of changed ### 25. Capital needs of the banking system will be reassessed in light of changed ### Capital needs reassessment - The BoG’s latest stress test was based on bank data and macroeconomic projections as of mid-2011; the situation has since changed significantly. - Factors increasing capital needs: - Deterioration of the macroeconomic environment well beyond what was envisaged in the last stress test, expected to reduce earnings capacity and increase loan losses. - Absorption of Cypriot branches. - Factors reducing capital needs: - Recapitalization of foreign subsidiaries by their parents. - Changes in the recognized amount of deferred tax assets. - Private sector participation in core bank recapitalization. - Liability management exercises. - Assessment of envelope: - Staff does not doubt the continued adequacy of the existing envelope of €50 billion, which includes a €5 billion buffer. - Action required: - Authorities to refine estimates of the cost of bank recapitalization and resolution through a new stress test by end-2013, based on end-June 2013 data and updated macro scenarios. ### Framework to manage distressed assets and contain recapitalization needs (MEFP ¶22, ¶25–26) - Overarching priority: put in place a framework that helps banks manage distressed assets effectively. - Household insolvency framework overhaul: - Existing framework is deficient: case-by-case bank approach, ineffective insolvency law, and two blanket moratoria on auctions of repossessed assets (de facto preventing property foreclosures). - Authorities will: - Adopt legislation by end-June to establish a new incentive-compatible “facilitation program” for low-income households who have suffered income losses and are temporarily unable to service their debts. - Clarify and tighten by end-June the eligibility criteria for accessing the existing insolvency scheme under law 3869/2010. - Adopt by end-June legislation to facilitate government initiatives to deal with NPLs (including standardization of processing and restructuring solutions, and enhanced non-judicial resolutions). - The current blanket moratoria will be discontinued once the new framework is fully operational (no later than end-August 2013). - Corporate insolvency framework review: - Restructuring of nonperforming corporate debt (especially SMEs) has been very slow. - Authorities will evaluate legal, operational and structural obstacles hampering effective debt resolution in the SMEs, small business and professional sectors and adopt remedial measures promptly. - NPL management and KPIs: - Agreement to establish by end-August 2013 definitions on a set of KPIs related to reporting, resolving, and provisioning of NPLs. - Authorities will provide guidance on bank NPL resolution practices. - Banks will be required to report on these KPIs by October 2013. - Upcoming NPL resolution review by the HFSF will assess banks’ capacity to deal with their NPLs and address shortcomings. - BoG decision: manage bad assets of resolved banks by transferring them to a central liquidator with powers to manage and liquidate assets. ### Financial sector governance and banking strategy (MEFP ¶27, ¶18–19) - Strengthening governance: - HFSF and banks to put in place relationship frameworks by end-May 2013 to establish a clear basis for banks to be run on commercial principles while guarding against transactions not in the interest of the majority public owner. - Prior action: add two independent members in the HFSF General Council to address weaknesses in the HFSF governance framework. - Comprehensive banking system strategy: - Authorities to prepare a comprehensive strategy by July 15, 2013 addressing whether the banking sector should be based around the four existing core banks (or allow mergers among core banks), and timetable for disposing to the private sector the shares held by the HFSF. - Staff view: any combined bank must have a clear business rationale including clear and significant synergies, and plans must be in place for early privatization of strategic stakes in banks the government controls. - By July 15, 2013 the New Hellenic PostBank will be resolved via a P&A transaction (MEFP ¶19). ### Structural reforms and privatization (MEFP ¶28–31) - Structural reform focus: opening closed professions, liberalizing product and service markets, transferring state assets to private sector control. - Liberalization of regulated professions: - First round completed for most identified professions; some key professions (engineering, lawyers) remain to be tackled during the second half of 2013. - Authorities will review by end-July 2013 the 20 economically most important professions to assess de facto liberalization and address remaining restrictions. - Product and service market reforms: - Maritime sector and airports: eased routing restrictions and high manning obligations for domestic ferry industry; limited progress on increasing flexibility of labor arrangements in shipping; competitive fees for regional airports secured, little progress lowering Athens airport fees. - Retail market: fixed margins for OTC drugs to be replaced with maximum ones in June 2013; by end-September 2013 sale of selected OTC products (e.g., vitamins) outside pharmacies will be allowed. - Business environment improvements: - Customs working shifts increased to 24/7 in the Athens airport; additional shift in the port of Piraeus. - Authorities will expand the risk-based approach to inspections for imports by end-September and the e-customs system by end-November. - Judicial reforms: by end-September 2013 relocate judges to administrative courts with highest backlog and prepare legislation for compulsory mediation of small claims. - Privatization momentum and risks: - Tender of OPAP completed and expected tender of DEPA imminent. - Next steps: timely unbundling of PPC, state aid clearance for ports and DEFSA, readying additional real estate assets for sale. - Authorities will seek coordinated earlier involvement of supervisory entities (Court of Audit, Council of State, Competition Authorities, DG Comp) to minimize delays. - Absent progress, quarterly timetable for privatization proceeds under the program will be at risk. ### Program modalities, monitoring, and financing (MEFP ¶3, Table references) - Prior actions: - Nine prior actions implemented to set the stage for Board consideration of the third review, focused on revenue administration, public administration reform, and HFSF governance. - Quantitative targets and indicative targets: - Adjustment proposed to end-June QPC on the primary balance to reflect within year changes. - Fiscal QPCs for end-September and end-December 2013 set. - Existing indicative targets for 2013 unchanged; two new indicative targets proposed regarding mandatory exits and transfers to the mobility scheme; quarterly targets proposed for 2014 for mandatory exits. - New structural benchmarks (MEFP Table 4): - By end-October 2013: complete a key step towards finalizing the new semi-autonomous structure for the revenue administration—approve a new organizational structure covering staffing numbers, grading system, job classification, and qualification and appointment processes (MEFP ¶3). - By July 15, 2013: complete a comprehensive banking sector strategy (MEFP ¶18). - By July 15, 2013: resolve the New Hellenic PostBank via a P&A transaction (MEFP ¶19). - Program reviews: - Fourth and fifth reviews proposed on or after July 25, 2013 and September 29, 2013 respectively (Table 17). - Financing assurances: - Program fully financed through the first half of 2014. - Projected financing gap of €4 billion will open up in the second half of 2014; additional financing needs to be identified by the next review to keep the program fully financed on a 12-month forward basis. ### Staff appraisal: progress, concerns, and priorities (Staff appraisal ¶38–42) - Short-run objectives met; medium-term targets and sustainability remain uncertain. - Fiscal and macro: - Impressive fiscal adjustment continues; competitiveness gap and current account deficit narrowing. - Adjustment remains recessionary; contraction slowing but no sustained expansion in investments yet. - Greece on track to meet its fiscal target for 2013; authorities advised not to ease fiscal adjustment absent firm evidence of fiscal space. - Revenue administration: - Progress on improving tax administration is very disappointing; planned increase in independence of the revenue administration is essential. - If reforms fail, authorities should consider creating a revenue agency outside the civil service. - Public administration: - Need to start substantive reforms; dismiss nonperforming public employees to free room for qualified personnel, using a one-to-one rule for dismissals as long as attrition delivers programmed employment reduction. - Financial sector governance: - New governance challenges with HFSF as largest shareholder; adherence to governance safeguards essential. - Strategy should envisage swift divestiture of HFSF shares; any mergers must show significant synergies and not jeopardize speedy privatization. - Household debt restructuring framework is a welcome start; similar approach needed for corporate NPLs, especially SMEs. - Concern about pressure for debt relief that could undermine the payment culture; approaches must be consistent with the program’s bank recapitalization envelope. *International Monetary Fund — Excerpt from the IMF staff report chapter on Greece* ### 43. Reforms to open up the economy to competition should be stepped up. While on the ### _cr13153 - 43. Reforms to open up the economy to competition should be stepped up. While on the ### Reforms to open up the economy and market rigidities - Most of the pre-crisis competitiveness gap on the cost side has been closed, but prices have failed to adjust commensurately, indicating the presence of market rigidities. - Policy focus recommended: - Continue to liberalize the closed professions. - Open up other product and service markets. - Remove red tape that feeds corruption and strangles initiative. - Expected benefits of a critical mass of such reforms: - Improve productivity and lower input and consumer prices. - Boost investments. - Create much-needed employment opportunities. - Ensure a fairer distribution of the burden of adjustment and help shore up support for the program. ### Privatization progress and recommendations - Status: - The privatization process is finally moving forward, although still too slowly. - Tenders of the national betting company and the national gas company are important steps. - Actions needed: - Authorities need to press forward forcefully to secure regulatory approvals and complete other actions needed to finalize these sales. - Redouble efforts to sell other assets in the portfolio, including real estate. - Staff concerns and contingency: - Preparations for other privatizations are running behind schedule and targets for end-2013 could be missed. - If the comprehensive review of the privatization program scheduled for the fall of 2013 suggests that delays are continuing—in particular that political interference continue to hamper the process—more far-reaching governance changes to the HRADF must be considered, including bringing in foreign managers. ### Debt sustainability and investor confidence - Ongoing concern: - Debt sustainability concerns continue to hang over the program. - If investors are not persuaded that the policy for dealing with the debt problem is credible, investments and growth will be unlikely to recover as programmed. - Role of European partners: - The commitment of Greece’s European partners to provide debt relief as needed to keep debt on the programmed path remains a critical part of the program. - Outlook and contingencies: - The programmed path entails still very high debt well into the next decade. - If debt sustainability concerns weigh on investor sentiments even with the framework for debt relief in place and strong program implementation by the Greek authorities, a more front-loaded approach to debt relief would need to be considered. - The macroeconomic and debt outlook must remain under close review. ### Review outcome - Based on reforms undertaken in the context of this review and government’s policy commitments going forward, staff supports the completion of the third review. ### Selected economic indicators, 2009–13 (highlights from Table 1) - Real GDP: 2009 -3.1; 2010 -4.9; 2011 -7.1; 2012 -6.0; 2013 Prog. -6.4; Est. -4.2 - Output gap (percent of pot. output): 2009 7.3; 2010 3.3; 2011 -2.6; 2012 -7.3; 2013 Prog. -7.7; Est. -10.6 - Total domestic demand: 2009 -5.5; 2010 -7.0; 2011 -8.7; 2012 -8.7; 2013 Prog. -10.4; Est. -5.6 - Private consumption: 2009 -1.6; 2010 -6.2; 2011 -7.7; 2012 -7.7; 2013 Prog. -9.1; Est. -6.9 - Public consumption: 2009 4.9; 2010 -8.7; 2011 -5.2; 2012 -6.2; 2013 Prog. -4.2; Est. -4.0 - Gross fixed capital formation: 2009 -13.7; 2010 -15.0; 2011 -19.6; 2012 -14.4; 2013 Prog. -19.2; Est. -4.0 - Change in stocks (contribution): 2009 1.2; 2010 0.7; 2011 -0.4; 2012 0.4; 2013 Prog. 0.0; Est. 0.4 - Foreign balance (contribution): 2009 3.0; 2010 3.0; 2011 2.4; 2012 3.3; 2013 Prog. 3.7; Est. 2.6 - Exports of goods and services: 2009 -19.4; 2010 5.2; 2011 0.3; 2012 -1.2; 2013 Prog. -2.4; Est. 3.0 - Imports of goods and services: 2009 -20.2; 2010 -6.2; 2011 -7.3; 2012 -11.5; 2013 Prog. -13.8; Est. -6.4 - Unemployment rate (percent) 1/: 2009 9.4; 2010 12.5; 2011 17.5; 2012 24.4; 2013 Prog. 24.4; Est. 27.0 - Employment 1/: 2009 -1.0; 2010 -2.7; 2011 -6.6; 2012 -9.2; 2013 Prog. -8.2; Est. -3.7 - Unit labor costs: 2009 4.2; 2010 -1.1; 2011 -3.9; 2012 -8.1; 2013 Prog. -6.1; Est. -6.5 - Consumer prices (national definition), period average: 2009 1.2; 2010 4.7; 2011 3.3; 2012 1.2; 2013 Prog. 1.5; Est. -0.8 - Consumer prices (HICP), period average: 2009 1.3; 2010 4.7; 2011 3.1; 2012 ...; 2013 Prog. 1.0; Est. ... - Core prices, period average 2/: 2009 2.3; 2010 2.6; 2011 1.1; 2012 ...; 2013 Prog. -0.3; Est. ... - GDP deflator: 2009 2.3; 2010 1.1; 2011 1.0; 2012 -0.5; 2013 Prog. -0.8; Est. -1.1 - Current account: 2009 -11.2; 2010 -10.1; 2011 -9.9; 2012 -4.2; 2013 Prog. -3.4; Est. -0.8 - Structural current account balance: 2009 -7.0; 2010 -8.3; 2011 -10.9; 2012 ...; 2013 Prog. -5.4; Est. -4.9 - Trade balance: 2009 -7.8; 2010 -6.8; 2011 -6.0; 2012 -2.5; 2013 Prog. -2.5; Est. -0.2 - Export of goods and services (percent of GDP): 2009 18.3; 2010 20.5; 2011 23.4; 2012 25.3; 2013 Prog. 25.4; Est. 27.4 - Imports of goods and services (percent of GDP): 2009 -26.2; 2010 -27.3; 2011 -29.5; 2012 -27.8; 2013 Prog. -27.9; Est. -27.6 - Total transfers: 2009 0.6; 2010 0.1; 2011 0.3; 2012 0.3; 2013 Prog. 0.7; Est. 1.8 - Net income receipts: 2009 -3.9; 2010 -3.5; 2011 -4.1; 2012 -2.0; 2013 Prog. -1.6; Est. -2.5 - Net international investment position: 2009 -86.4; 2010 -98.4; 2011 -86.1; 2012 -94.2; 2013 Prog. -114.1; Est. -118.9 - Total revenues (percent of GDP): 2009 38.3; 2010 40.6; 2011 42.4; 2012 43.6; 2013 Prog. 44.1; Est. 44.3 - Total expenditures (percent of GDP): 2009 54.0; 2010 51.4; 2011 52.0; 2012 50.3; 2013 Prog. 50.4; Est. 48.4 - Primary expenditures (percent of GDP): 2009 48.8; 2010 45.5; 2011 44.8; 2012 45.1; 2013 Prog. 45.4; Est. 44.3 - Overall balance (percent of GDP): 2009 -15.6; 2010 -10.8; 2011 -9.6; 2012 -6.7; 2013 Prog. -6.3; Est. -4.1 - Primary balance (percent of GDP): 2009 -10.5; 2010 -4.9; 2011 -2.4; 2012 -1.5; 2013 Prog. -1.3; Est. 0.0 - Cyclically-adjusted primary balance: 2009 -13.0; 2010 -6.1; 2011 -1.3; 2012 ...; 2013 Prog. 2.2; Est. 5.0 - Gross debt (percent of GDP): 2009 130; 2010 148; 2011 170; 2012 158; 2013 Prog. 157; Est. 176 - Lending interest rate (percent) 3/: 2009 5.1; 2010 6.1; 2011 6.8; 2012 ...; 2013 Prog. 5.8; Est. 6.4 - Private credit growth (percent change) 4/: 2009 4.2; 2010 0.0; 2011 -3.1; 2012 -7.2; 2013 Prog. -4.0; Est. -6.5 - Nominal effective exchange rate (end-period, percent change) 3/: 2009 0.4; 2010 -3.7; 2011 0.0; 2012 ...; 2013 Prog. -0.5; Est. 0.1 - Real effective exchange rate (CPI-based, end-period): 2009 1.7; 2010 -1.2; 2011 -0.7; 2012 ...; 2013 Prog. -1.9; Est. -2.1 - Real effective exchange rate (man. ULC-based): 2009 1.1; 2010 0.8; 2011 -6.1; 2012 ...; 2013 Prog. -8.4; Est. -8.4 - Memorandum items: - Nominal GDP (billions of euros): 2009 231; 2010 222; 2011 209; 2012 195; 2013 Prog. 194; Est. 183 - Nominal GDP (percent change): 2009 -0.9; 2010 -3.9; 2011 -6.1; 2012 -6.5; 2013 Prog. -7.1; Est. -5.3 - Sources listed in the table: National Statistical Service; Ministry of Economy and Finance; Bank of Greece; and IMF staff projections. - Notes from table: - 1/ Based on Labor Force Survey. - 2/ Core prices exclude energy, food, alcohol, and tobacco. - 3/ Data for 2013 as of March. - 4/ Includes securitized or otherwise transferred loans from 2010 onward. ### Modified General Government Cash Balance highlights (Table 2, 2012–16) - Header: Table 2. Greece: Modified General Government Cash Balance, 2012–16 1/ - Period columns: 2012; 2014; 2015; 2016 and Mar-13; Jun-13; Sep-13; Dec-13 Proj. - I. State budget — Revenue: 51.6; 11.9; 22.6; 35.9; 50.3; 48.8; 48.7; 49.2 - Ordinary budget (A + B + C - D + E): 48.0; 10.3; 20.2; 32.2; 45.2; 44.2; 44.7; 46.4 - A. Recurrent revenue: 49.7; 10.2; 20.6; 32.9; 46.6; 45.5; 46.5; 48.4 - 1. Direct taxes (percent of GDP): 21.1; 4.2; 8.5; 14.1; 19.6; 19.0; 19.3; 19.8 - Income taxes: 13.3; 2.0; 4.5; 8.1; 11.1; 12.2; 12.9; 14.0 - PIT: 10.0; 1.6; 3.2; 5.6; 7.8; 6.7; 7.0; 7.5 - CIT: 1.7; 0.0; 0.5; 1.0; 1.5; 3.6; 4.0; 4.4 - Other: 1.6; 0.4; 0.8; 1.4; 1.9; 1.9; 1.9; 2.0 - Property taxes: 2.9; 0.7; 1.5; 2.1; 3.3; 2.8; 2.8; 2.8 - Tax arrears collection: 1.8; 1.0; 1.6; 2.1; 2.6; 1.4; 1.5; 1.6 - Other direct taxes: 3.1; 0.4; 0.9; 1.8; 2.6; 2.6; 2.2; 1.4 - 2. Indirect taxes (percent of GDP): 26.1; 5.6; 11.2; 17.2; 24.2; 23.9; 24.5; 25.9 - Transaction taxes: 15.7; 3.5; 6.9; 10.5; 14.1; 13.9; 14.4; 15.2 - VAT: 15.0; 3.4; 6.6; 10.0; 13.5; 13.2; 13.6; 14.4 - Other: 0.7; 0.1; 0.3; 0.5; 0.7; 0.7; 0.7; 0.8 - Consumption taxes: 9.6; 1.8; 3.9; 6.1; 9.4; 9.2; 9.4; 9.9 - Tax arrears collections: 0.5; 0.2; 0.3; 0.4; 0.4; 0.4; 0.4; 0.5 - Other indirect taxes: 0.3; 0.1; 0.1; 0.2; 0.3; 0.3; 0.3; 0.3 - 3. Transfers EU: 0.2; 0.0; 0.1; 0.1; 0.2; 0.2; 0.2; 0.2 *Italic: Source: IMF staff compilation from the chapter content provided.* ### 4. Nontax revenue2.20.40.91.52.52.42.42.5 ### 4. Nontax revenue2.20.40.91.52.52.42.42.5 ### Revenue composition and program items - Nontax revenue series (by program years): 2.20.40.91.52.52.42.42.5 - One-off revenue: 1.50.30.50.70.90.70.80.8 - Revenue from concession and rights: 0.00.0 0.00.00.10.10.20.00.0 - Tax refunds: 3.20.20.91.82.92.82.82.9 - Tax Installment Scheme: 0.00.00.00.20.50.60.30.1 - Investment budget: 3.61.62.43.75.14.63.92.9 - A. EU flows: 3.4............4.43.72.7 - B. Own revenues: 0.2............0.20.20.2 ### Aggregate revenue and components (billions of euros; 2010–17) - Total Revenue: 90.288.485.581.280.381.283.787.8 - Indirect taxes: 27.326.624.323.523.223.725.026.2 - Direct taxes: 17.518.019.118.718.518.618.819.7 - Social contributions: 29.827.426.524.725.225.125.827.1 - Other current revenue: 4.95.74.75.35.15.35.55.8 - Sales: 6.15.65.84.64.44.64.85.0 - Capital revenue: 4.65.04.94.43.83.93.84.0 ### Primary expenditure and its composition (billions of euros; 2010–17) - Primary expenditure: 101.193.387.981.377.678.778.982.7 - Social benefits: 47.547.544.440.038.539.340.042.0 - Subsidies: 0.11.01.01.10.50.20.40.4 - Other current expenditure: 3.42.62.32.52.42.42.42.5 - Compensation of employees: 27.825.924.221.220.420.219.920.9 - Intermediate consumption: 13.49.89.57.66.97.17.07.3 - Investment: 8.96.76.68.98.99.69.29.7 - Unidentified measures (cumulative): 0.00.00.00.00.03.24.24.4 ### Fiscal balances and debt (levels and ratios) - Primary balance (billions): -10.9-4.9-2.50.02.85.79.09.4 - Interest (billions): 13.215.09.77.58.79.810.511.0 - Overall balance (billions): -24.1-20.0-12.2-7.5-6.0-4.1-1.6-1.6 - Gross debt (Maastricht, percent of GDP): 329.5355.2303.9322.5320.3319.8317.9312.9 - Total primary revenue (percent of GDP): 40.642.444.144.343.742.742.042.0 - Total primary expenditure (percent of GDP): 45.544.845.444.342.241.439.639.6 - Primary balance (percent of GDP): -4.9-2.4-1.30.01.53.04.54.5 - Interest (percent of GDP): 5.97.25.04.14.85.15.35.3 - Overall balance (percent of GDP): -10.8-9.6-6.3-4.1-3.3-2.1-0.8-0.8 - Gross debt (Maastricht, percent of GDP): 148.3170.3156.9175.8174.2168.2159.5149.7 - Nominal GDP (billions of euros): 222.2208.5193.8183.5183.9190.1199.3209.1 ### General government statement of operations (GFSM 2001, flows; millions of euros) - Revenue (2010–16): 90,23288,38385,45881,24380,26581,20583,675 - Taxes: 45,10944,91743,64442,26441,71442,25943,802 - Social contributions: 29,76427,43526,50824,66625,22025,12725,790 - Grants and other revenue: 15,35916,03115,30614,31313,33113,81914,082 - Expenditure (2010–16): 114,289108,34697,65588,80786,31388,48489,403 - Compensation of employees: 27,77325,85224,21521,18420,36520,17519,895 - Use of goods and services: 13,4299,7899,4567,5836,9197,0696,999 - Consumption of fixed capital: 5,3865,7826,263................ - Interest: 13,19315,0169,7237,5278,7459,78610,524 - Social benefits: 47,47647,45044,38339,95738,51339,25140,010 - Gross capital formation: 5,2032,7963,6548,3378,5209,2658,948 - Gross operating balance: -18,854-17,167-8,5438102,5325,1817,392 - Net lending (+)/borrowing (–): -24,057-19,963-12,197-7,527-5,988-4,084-1,556 - Primary Net lending (+)/borrowing (–): -10,864-4,947-2,47402,7585,7028,969 - Net incurrence of liabilities (selected): 28,69520,05764,525.................. ### Financial balance sheet (GFSM 2001, stocks; millions of euros, 2008–12) - Net financial worth: -221,099 -242,350 -211,112 -153,297 -198,700 - Financial assets: 64,41277,23279,47175,756121,573 - Currency and deposits: 13,21311,76416,90114,73220,707 - Equity and investment fund shares: 29,25639,75737,53334,27065,097 - Other accounts receivable: 19,61219,66718,84219,77520,281 - Liabilities: 285,511319,582290,583229,053320,273 - Debt securities: 213,617248,184190,632104,58678,128 - Loans: 45,91244,81175,193102,921216,240 - Other accounts payable: 22,51824,09922,44218,59221,595 - Debt (at market value, memorandum): 282,775318,602289,272226,919316,737 - Change in net financial worth from other economic flows: -5,40515,09355,13577,516-25,729 ### Balance of payments (2011–18; billions of euros and percent of GDP) - Current account balance (billions): -22.5-20.6-6.5-1.6-0.40.20.40.91.9 - Current account balance (percent of GDP): -10.1-9.9-3.4-0.8-0.20.10.20.50.9 - Balance of goods and services (billions): -15.0-12.6-4.9-0.32.64.65.97.28.6 - Goods balance (billions): -28.3-27.2-19.6-16.9-15.4-14.9-15.0-15.1-15.4 - Exports (billions): 17.120.222.022.222.823.524.425.626.9 - Imports (billions): 45.447.541.639.138.238.439.440.742.3 - Services balance (billions): 13.214.614.716.618.019.520.922.424.0 - Income balance (billions): -7.7-8.6-3.1-4.7-5.7-6.6-7.3-7.7-7.5 - Capital and financial account balance (billions): -8.6-21.0-103.4-33.2-15.2-7.0-3.0-4.9-5.0 - Program financing, net (billions): 31.541.5109.934.811.00.32.63.93.1 - Gross external debt (billions): 213.1225.4232.8247.0238.1222.2204.7190.6176.6 - Public sector: 150.9173.5183.3196.0187.9173.8158.5146.8134.7 - Private sector: 62.251.949.551.050.248.446.243.842.0 ### Monetary and banking sector aggregates (selected) - Aggregated MFI total assets (billions of euros): 654.6646.1602.5558.5541.4526.7520.9512.4505.6499.5494.4 - Broad money (annual % change): -11.2-14.6-5.31.58.64.90.6-2.2-1.00.51.2 - Broad money (levels, index): 101.889.589.197.8101.0102.7103.5103.6103.8104.2104.6 - Credit to the private sector (billions): 257.5248.1227.3228.0220.5213.7210.6207.7205.4203.6202.2 - Eurosystem liquidity support (memorandum): 97.8128.9121.281.566.951.035.0 (percent of total assets in other tables: 19.027.027.420.016.912.98.8) ### Monetary Financial Institutions (excl. BoG)—selected uses and sources (billions of euros; 2010–16) - Total assets: 515.0476.9442.2408.6396.6394.4398.7 - Claims on non-MFIs: 354.8338.4321.3299.9289.3284.9285.4 - General government: 63.059.128.222.422.323.124.2 - Private sector: 255.8246.8227.1210.6202.2197.7196.6 - Corporate: 116.5113.0100.897.195.395.396.8 - Households: 139.3133.8126.3113.5106.8102.499.8 - Deposits of non-MFIs: 280.2232.3218.9215.7216.6225.0237.9 - Private sector deposits (selected): 126.1111.4113.0117.7118.0118.6119.6 - Eurosystem liquidity support (selected levels): 44.061.862.544.536.526.917.6 (other rows show 97.8128.9 etc.) ### Financial soundness indicators for deposit-taking institutions (selected; percent; 2009–12) - Regulatory capital to risk-weighted assets: 11.912.312.310.610.17.05.78.910.210.2 - Regulatory tier I capital to risk-weighted assets: 10.911.211.19.69.25.84.78.19.49.5 - Nonperforming loans to total gross loans: 7.810.511.512.814.716.018.721.622.524.6 - Bank provisions to nonperforming loans: 42.046.2.........62.957.149.550.148.1 - Liquid assets to total assets: 45.235.234.535.233.232.327.329.330.832.1 - Household debt to GDP (memorandum): 52.160.0.........61.363.866.264.163.7 - Assets (banks, billions of euros, memorandum): 440.3465.5.........412.7376.0383.5383.3389.7 ### Memoranda and program thresholds (selected) - Balance (general government, program series): -15.3-1.8-6.1-7.9-8.7-7.0-7.3-6.3 - Primary balance (program series): -3.10.1-2.7-2.4-2.3-0.1-0.11.0 - II. Balance local governments: 0.10.20.30.30.30.30.60.6 - III. Balance social security funds: 0.21.41.41.41.91.3-0.4-0.3 - X. Modified general government cash balance: -14.9-0.3-4.5-6.2-6.6-5.0-6.8-5.6 - Modified general government primary cash balance: -2.71.7-1.2-0.8-0.21.90.41.7 - Primary spending: 55.411.825.834.453.249.449.248.7 - Floor on the modified general government primary cash balance: -3.81.5-1.2-0.8-0.32.03.6... - Ceiling on primary spending: 56.813.926.038.853.249.446.3... *Sources: Ministry of Finance; and IMF staff projections.* ### 1. Or ### 1. Organization and management ### Key findings on tax administration structure - An independent revenue administration with modern operating structure and methods is recommended. - Fragmented tax administration. - The General Secretariat for Public Revenues (SGPR) lacks autonomy and power over core business activities and is vulnerable to political interference. - Too many local offices lacking central control. ### Prescribed actions and timelines - Establish the mandate and composition for the SGPR advisory board; transfer the IAD and the revenue-related departments of GSIS to the revenue administration; assign authority to the SGPR to reallocate expenditures across budget lines (June 2013). - Approve the new organizational structure, staffing numbers, grading system, and classification, and qualification and appointment processes of the revenue administration; transfer the revenue-related functions of SDOE (October 2013). - Approve the 2014 revenue administration budget (end-2014). - Transition staff to the new organizational structure of the revenue administration (March 2014). ### Service delivery and taxpayer compliance (Assessment) - Tax authorities provide services and support to voluntary taxpayer compliance. - Payment of taxes at tax offices. - Potentially large tax evasion: about 75 percent of self-employed professionals declaring taxable income below minimum exemption threshold. - Unregistered taxpayers. ### Legal and procedural reforms (Assessment actions) - Revise the tax and AML laws to: - ensure that the SGPR is represented at the Board of the FIU; - enable the SGPR to obtain from the FIU information on individual tax audits and debt collection cases; - require that information on relevant cases of failure to pay confirmed debt over €50,000 be transmitted to the FIU; and - require the FIU to promptly inform the SGPR when freezing assets related to laundering proceeds of tax crimes. - Adopt a new Tax Procedures Code to harmonize, simplify, and modernize tax procedures (June 2013). ### Compliance monitoring and controls - Data gathering ad hoc with no central control for monitoring and enforcing compliance. - Require that all ministries which have a fiscal relationship with taxpayers utilize their identification number for financial transactions with them (June 2013) and make it compulsory for all official transactions (end-2013). - Introduce a central agency to consolidate and link all of the different identification numbers now employed across various government agencies (June 2014). ### Audit capacity and assessment outcomes - Audit workforce not sufficient and low levels of audit coverage of high risk groups. - Limited use of indirect methods of assessment. - Low collection of assessed taxes. ### Audit staffing and information enhancements - Monitor progress towards achieving performance targets (Monthly performance reports in 2013). - Hire 200 external auditors (July 2013) and increase the number of staff devoted to audit by 2,000 by admitting staff with audit experience and selecting other qualified staff following interviews (in 2013). - Expand the sources of third party information used in assessments (May 2013). ### Enforcement and arrears collection - Tax assessments under appeal and tax arrears (including penalties and fines) are collected. - Poor collection enforcement: collection of fines and penalties around 1 percent. - Monitor progress towards achieving performance targets (Monthly performance targets in 2013). - Launch an easily accessible website, which will publicize, on a monthly basis, information enabling the public to be informed about the tax debt assessed and recovered (include summary statistics on key performance indicators) (May 2013). *Source: IMF staff.* ### Spending Process — Issues and Actions ### 1. Budgeting — Findings - Develop a medium-term budget framework and prepare annual budgets within medium-term expenditure ceilings. - Budgets prepared mainly in a bottom-up fashion with no hard budget constraints. - Budget preparation processes for general government entities still largely disjointed. - Responsibility for social security fragmented with no effective preparation, management, and monitoring of social security budget. ### 1. Budgeting — Actions and timelines - Issue circular regulating the calendar, deadlines, and the role of all institutions in formulating the 2014–17 MTFS (Immediately). - Modify the organic budget law to introduce: - rolling 3-year expenditure ceilings (binding for the first 2 years); - provisions to freeze ex-ante 10 percent of discretionary appropriations; - binding annual budget balance targets for LGs; - performance targets for state enterprises; - clarity in treatment of carryover of end-year outstanding commitments. (August 2013). - Adopt legislation to introduce the Fiscal Compact provisions, including a structural balance rule (August 2013). - Issue a Joint Ministerial Decision indicating a common methodology for LG budget preparation and budget adoption by year-end and a review process of LG budgets by the Observatory of Local Authorities (end-June). ### 2. Spending controls — Findings - Ensure that expenditure commitments do not exceed appropriations and arrears are avoided. - Line ministries do not check or control expenditure commitments. - No central control on incurred commitments by decentralized agencies. - Execution of budget releases focused on verifying payments. ### 2. Spending controls — Actions and timelines - Ensure that commitment registers are in operation in 80 percent of general government entities under the 2013 KPI definition (June 2013). - Issue a new circular to clarify issues and provide guidance on functioning of the commitment registers, including carry-over of end-year outstanding commitments to the following year (October 2013). - Set conditions under which the right of SOEs to receive new transfers or loans will be contingent on restoring financial soundness, including through spending cuts and fee increases in consultation with the supervising ministry and the MoF (June 2013). ### 3. Reporting — Findings - Collect and analyze information on payments, pending bills, and arrears. - Limited real-time monitoring of arrears and other pending bills. - Collection of payment information at non-central government level difficult. ### 3. Reporting — Actions and timelines - Expand the scope of data captured by the General Accounting Office’s e-portal to include the whole expenditure cycle and monitor reporting of the expanded data (June 2013). - Start a process to clear past arrears subject to validation of arrears, and compliance with basic PFM reforms and reporting requirements (During 2013). ### Monitoring and reporting for general government and SOEs - Monitoring and reporting of fiscal developments for general government and SOEs: - Monitoring and reporting of detailed fiscal data focused on the state budget. No timely in-year monitoring or reporting for general government published. - Deviations of general government budget and contingent liabilities not detected on time. - Establish a system for monthly financial reporting by state-owned enterprises (SOE) currently outside the general government (June 2013). ### 4. External auditingParliamentary oversight and general auditing.• Lack of independent oversight of the budget process a ### _cr13153 - 4. External auditingParliamentary oversight and general auditing.• Lack of independent oversight of the budget process a ### External auditing and parliamentary oversight: findings and recommendations - Findings: - "Lack of independent oversight of the budget process after dismissal of the Parliamentary Budget Office." - "Parliament continues to receive periodical reports (During 2013)." - Policy recommendations and timeline: - "Re-staff the Parliamentary Budget Office, resume and enhance its operation (June 2013), and strengthen its independence and competence with a view to establish a fiscal council (December 2013)." - "Conduct an audit of commitment registers and health related arrears records maintained by EOPYY and the SSFs (August, 2013), launch a tender for an independent external auditor (September, 2013) to complete an audit of EOPYY’s outstanding stock of accounts payable (end-March 2014)." ### Implementation of structural reforms: status highlights (excerpted) - Labor market: - "Assessment of the Labor Inspectorate completed by the ILO, and action plan prepared in December 2012." (MEFP deadline: Dec-12) - Minimum wage mechanism: "In progress (a minimum wage mechanism is expected to be adopted by end-May 2013)." (MEFP deadline: Mar-13) - Liberalization of regulated professions: "Significant program made, but restrictions remaining in a number of professions (e.g., engineers and lawyers). These will be addressed during 2013." (MEFP deadline: Dec-12) - Business environment and judicial reform: - Trade facilitation: "A national trade facilitation strategy as adopted in November 2012. The working hours for customs were increased in April 2013 to 24/7 in Athens airport, and expanded to two shifts in the port of Piraeus." (MEFP deadline: Nov-12) - Simplification of licensing: "Procedures for establishing companies were streamlined in [March 2013]; the implementation of licensing laws on manufacturing activities and environmental projects has been delayed." (MEFP deadline: Mar-13) - Reduction of case backlog in courts: "Completed." (MEFP deadlines: Dec-12; Jan-13) - Reforming the Code of Civil Procedure: "In progress (expected to be completed by end-May)." (MEFP deadline: Mar-13) ### Medium-term macro framework: selected projections (2012–18, percent of GDP unless otherwise indicated) - Real GDP: - 2012 Est.: -6.4 - 2013 Proj.: -4.2 - 2014 Proj.: 0.6 - 2015 Proj.: 2.9 - 2016 Proj.: 3.7 - 2017 Proj.: 3.5 - 2018 Proj.: 3.3 - Output gap (percent of pot. output): - 2012 Est.: -7.7 - 2013 Proj.: -10.6 - 2014 Proj.: -9.5 - 2015 Proj.: -6.9 - 2016 Proj.: -4.5 - 2017 Proj.: -2.7 - 2018 Proj.: -1.0 - Unemployment rate (percent) 1/: - 2012 Est.: 24.2 - 2013 Proj.: 27.0 - 2014 Proj.: 26.0 - 2015 Proj.: 24.0 - 2016 Proj.: 21.0 - 2017 Proj.: 18.6 - 2018 Proj.: 16.3 - Public finances (general government): - Total revenues: - 2012: 44.1 - 2013: 44.3 - 2014: 43.7 - 2015: 42.7 - 2016: 42.0 - 2017: 42.0 - 2018: 42.0 - Total expenditures 3/: - 2012: 50.4 - 2013: 48.4 - 2014: 46.9 - 2015: 44.8 - 2016: 42.7 - 2017: 42.6 - 2018: 42.8 - Overall balance: - 2012: -6.3 - 2013: -4.1 - 2014: -3.2 - 2015: -2.1 - 2016: -0.7 - 2017: -0.6 - 2018: -0.8 - Primary balance: - 2012: -1.3 - 2013: 0.0 - 2014: 1.5 - 2015: 3.0 - 2016: 4.5 - 2017: 4.5 - 2018: 4.3 - Gross debt (percent of GDP): - 2012: 156.9 - 2013: 175.8 - 2014: 174.2 - 2015: 168.2 - 2016: 159.5 - 2017: 149.7 - 2018: 140.9 - Notes: - 1/ Based on Labor Force Survey. - 3/ Includes unidentified measures. ### Autonomy of the tax administration: comparison and key timelines (Table 14 excerpts) - Transition to General Secretariat for Public Revenue (SGPR): key transfers and deadlines - "IAD and parts of GSIS to be transferred to SGPR by July; parts of SDOE to be transferred by October." - "April 28 Omnibus Bill establishes an Advisory Council of the SGPR, to be set up by July 2013." - "By end-October 2013, the SG will approve the new organizational structure of the SGPR." (authority to design and change organizational structure) - "Budget allocations of IAD and from IAD to be transferred to SGPR by July 2013, those of SDOE to be transferred by October. By end-2013, 2014 revenue administration budget will be established with full flexibility for the SGPR to reallocate funds among nonwage recurrent spending." - "By end-October 2013, the SGPR will approve staffing numbers, and appointment processes of the revenue administration." - "By end-October 2013, the SG approves the grading system, and classification of the revenue administration." - Specific autonomy requirements referenced (no changes to phrasing): - Tax administration must be a separate and dedicated body including all tax administration functions. - For operational autonomy the head of the administration must be empowered to administer and enforce the revenue laws. - The head of the tax administration must be a non-political appointment for a 5-year term. - Authority to design and change organizational structure. - Adequate budget with reasonable management controls with flexibility to re-allocate funds across budget lines. - The tax administration has authority to undertake at least 90 percent of its own recruitment, promotion and dismissal. - Tax administration determines its grade structure and has a strong influence over compensation levels. ### Selected structural reforms ahead (2013–14): measures, deadlines, and macro implications (Table 15 highlights) - Reducing tax wedge on labor: - MEFP/MoU Deadlines: Sep-13 and Nov-13 - Description: "The government completes by September 2013 actuarial studies on social security funds, and adopts a plan by November 2013 to reduce the employer share of social security contributions by 5 ppt (in a budget-neutral way and phased manner during 2014-16) by broadening the base for social security contributions; simplifying the contribution schedule across various funds; and phasing out nuisance taxes." - Macroeconomic implication: "Improves competitiveness, and promotes employment and growth." - Liberalization of regulated professions: - Deadlines: Jun-13; Jul-13 - Description: "Adopt a new Code of Lawyers, which will include removal of exclusivity for lawyers for the research of mortgage books and land registry. Complete a study of the 20 largest professions examining the degree to which they have been liberalized, including results with respect to new entrants and price changes." - Macroeconomic implication: "Fosters competition, lowers intermediate costs and promotes investment and growth." - Transportation services (domestic shipping): - Deadline: Oct-13 - Description: "Adopt additional steps to increase the flexibility of labor arrangements and reduce manning obligations in the domestic shipping industry." - Macroeconomic implication: "Fosters competition, improves price flexibility and competitiveness." - Retail trade liberalization: - Deadlines: Jun-13; Sep-13 - Description: "Adopt legislation to liberalize further the retail market, including: removing restrictions against discount sales outside sale periods; increasing flexibility in retailers' opening days; and replacing the current system of fixed margins for over-the-counter drugs with maximum margins. Government to allow the sales of selected over-the-counter drugs in other points than pharmacies." - Macroeconomic implication: "Fosters competition, improves price flexibility and competitiveness." - Business environment and judicial reform measures (selected): - Trade facilitation (Jul-13; Nov-13): increase working shifts to 24/7 in Athens airport and expand Piraeus port; adopt risk-based audits for imports; adopt e-custom system. - Reduction of case backlog in courts (Jul-13; Sep-13): "Reallocate judges to the administrative courts with the highest backlog, and adopts an action plan to reduce civil and commercial cases backlogs, including draft legislation providing for compulsory mediation of small claims." - Reforming the Code of Civil Procedure (Jun-13): "Adopt a new Code of Civil Procedure." ### Privatization process: timing and status (selected items, Table 16) - State-owned enterprise/share sale: - Football Prognostics Organization (OPAP): 2013 Q1 launch; Q3/13 binding offers; "Proceed with the phase B of the tendering process and finalize selection (April 2013) (DONE)." - Thessaloniki Water (EYATH): Q2 launch; Q4/13 binding offers; "Establish regulatory framework (March 2013 - DONE). Establish pricing policy (May 2013) and amend the license (November 2013)." - Hellenic Post (ELTA): Q2 launch; Q2/14 binding offers; "Ministerial decisions for (i) the determination of the content of universal service (DONE) and (ii) the compensation mechanism for USP drafted and prenotified to DGComp (further clarifications/amendments asked by EC are being processed by HR & ELTA)." - Athens Airport (AIA): Q3 launch; Q3/14 binding offers; "Agree on extension and sale process with Hochtief (June 2013)." - Concessions and real estate: multiple projects with specified intermediate steps, launch windows, and many "DONE" items noted for 2012–2013 activities (see table for detailed sequencing). ### Schedule of proposed purchases under the Extended Arrangement (Table 17, selected) - Board approval of EA: March 15, 2012 — Total disbursements: 1,399.1 Millions of SDRs; Billions of euros: 127.0; Percent of quota: 1.6 - Second Review (August 31, 2012): 2,798.2 Millions of SDRs; Billions of euros: 254.0; Percent of quota: 3.3 - Third Review (February 28, 2013): 1,506.8 Millions of SDRs; Billions of euros: 136.8; Percent of quota: 1.8 - Repeated review tranches from Fourth Review through Fifteenth Review each listed as 1,506.8 or 1,506.4 Millions of SDRs and 136.8 Billions of euros (1.8 percent of quota) for many reviews; total: 23,785.3 Millions of SDRs; 2,158.8 Billions of euros; 28.0 Percent of quota. - Note: "Exchange rate of January 5, 2012." and program timing notes in table footnotes. ### General government financing requirements and sources (Table 18, selected; Billion of euros) - Gross borrowing need: - 2012: 111.0 - 2013 Proj.: 34.4 - 2014 Proj.: 27.6 - 2015 Proj.: 14.3 - 2016 Proj.: 8.2 - Gross financing sources: - 2012: 110.9 - 2013 Proj.: 34.4 - 2014 Proj.: 23.0 - 2015 Proj.: 7.7 - 2016 Proj.: 8.2 - Official financing (including disbursed and committed): - 2012: 109.9 - 2013 Proj.: 37.4 - 2014 Proj.: 19.3 - 2015 Proj.: 11.0 - 2016 Proj.: 6.4 - Memorandum items: - Total Maastricht debt (percent of GDP): - 2012: 156.9 - 2013: 175.8 - 2014: 174.2 - 2015: 168.2 - 2016: 159.5 ### External financing requirements and sources (Table 19, selected; Billions of euros) - Gross financing requirements: - 2011: 216.2 - 2012: 239.0 - 2013 Proj.: 205.6 - 2014 Proj.: 178.8 - 2015 Proj.: 158.5 - Current account deficit: - 2011: 22.5 - 2012: 20.6 - 2013 Proj.: 6.5 - 2014 Proj.: 1.6 - 2015 Proj.: 0.4 - New borrowing and debt rollover (selected): - 2011: 164.1 - 2012: 183.5 - 2013 Proj.: 135.3 - 2014 Proj.: 142.1 - 2015 Proj.: 118.7 - Program financing: - 2011: 31.5 - 2012: 41.5 - 2013 Proj.: 109.9 - 2014 Proj.: 37.4 - 2015 Proj.: 19.3 ### Indicators of Fund credit, debt service and outstanding (Table 20, selected; Millions of SDRs and percent indicators) - Prospective drawings (4-year EFF): - 2012: 1,399 - 2013: 8,825 - 2014: 6,027 - 2015: 6,027 - 2016: 1,506 - Amortization (selected years): - 2013: 1,472 - 2014: 6,278 - 2015: 7,299 - 2016: 2,610 - Interest and service charge (selected years): - 2012: 504 - 2013: 480 - 2014: 1,007 - 2015: 960 - 2016: 910 - Total debt service (selected years): - 2012: 504 - 2013: 1,952 - 2014: 7,285 - 2015: 8,259 - 2016: 3,520 - Outstanding stock (Millions of SDRs): - 2012: 18,941 - 2013 Proj.: 26,294 - 2014 Proj.: 26,044 - 2015 Proj.: 24,772 - 2016 Proj.: 23,669 - Percent of quota (outstanding stock): - 2012: 1,719 - 2013 Proj.: 2,387 - 2014 Proj.: 2,364 - 2015 Proj.: 2,248 - 2016 Proj.: 2,148 - Percent of GDP (outstanding stock): - 2012: 11.5 - 2013 Proj.: 16.9 - 2014 Proj.: 16.7 - 2015 Proj.: 15.3 - 2016 Proj.: 14.0 *Source: IMF staff.* ### Box 1. Greece: Spillovers from Cyprus ### Box 1. Greece: Spillovers from Cyprus ### Trade channel: magnitude and mechanics - Trade is identified as the main spillover channel. - Exports to Cyprus account for about 5 percent of total Greek exports (about 1¼ percent of Greek GDP). - Assuming an import elasticity of 1.5 and given the projected GDP contraction in Cyprus (and the large share of petroleum products in exports to Cyprus), the estimated adverse impact on GDP growth in Greece for 2013 is about ¼ percentage point. ### Financial channel: direct exposures and containment measures - Direct spillover effects from the financial channel are expected to be limited: - Deposits of Greek households and financial corporations in Cyprus total €3.2 billion, and the share subject to haircuts (above €100,000) is estimated to be low. - Assets of Greek banks in their subsidiaries in Cyprus account for around 4 percent of Greek banking system assets. - A recent survey found Greek listed companies with exposure to Cyprus do not envisage any major impact from the crisis on their activity in Greece. - Spillovers from Cypriot bank branch operations in Greece have been contained: - The March 26 agreement between the Greek and Cypriot authorities included the acquisition by Piraeus of the branch networks and operations of Bank of Cyprus, Cyprus Popular Bank, and Hellenic Bank in Greece. - These branches accounted for about 9 percent of the Greek banking sector deposits. - The acquisition ensured that uninsured depositors in the Greek branches of Cypriot banks would not be subject to haircuts. ### Indirect risks and recent deposit dynamics - The largest risk is indirect spillovers—particularly deposit outflows—if perceptions arise that uninsured depositors in undercapitalized Greek banks may also face haircuts. - Deposit flows: - The Cypriot crisis precipitated a reversal in April of the deposit recovery that had been in train since mid-2012. - Outflows concentrated in banks with uncertain prospects for private sector recapitalization. - Outflows to date have been about €2 billion, compared to €19 billion in inflows from the mid-2012 trough through March 2013. - With bank recapitalization in Greece nearing completion, indirect spillover effects from the financial channel are expected to be contained in the short term. - Once all Greek banks are fully recapitalized (or absorbed into fully capitalized core banks) using program resources, the adverse impact on confidence and deposit flows is expected to be reversed. ### Market-based indicators and risk assessment - Probability-of-default related indicators suggest increased—but not peak—risk for Greek banks from the Cypriot crisis: - Two indicators—the toxicity index and the spillover coefficient—show Cypriot risks for Greek banks had been building for some time. - After peaking in May 2012, these indicators had been on a downward trend but jumped when the Cypriot program was announced (though they remain below their mid-2012 peak). - Other market signals: - Stock market losses and a hike in the GGB spread since the Cyprus crisis also point to a negative impact on confidence. *International Monetary Fund — Box 1. Greece: Spillovers from Cyprus* ### 7. The debt trajectory remains extremely sensitive to program delays. To illustrate, an ### _cr13153 - 7. The debt trajectory remains extremely sensitive to program delays. To illustrate, an ### Debt trajectory sensitivity — headline illustration - Under an alternative scenario modeled with: a protracted implementation of structural reforms, a two year delay in the fiscal adjustment path, privatization delivering half the projected amount, and lower growth via a delay in the recovery of confidence and investment, public debt "would only fall to 147 percent of GDP in 2020, about 23 percentage points higher than in the baseline scenario." ### Public sector debt — baseline path (selected figures from Table AI.1) - Public sector gross debt (percent of GDP): 2008: 112.9; 2012: 156.9; 2013: 175.8; 2016: 159.5; 2020: 124.2; 2025: 102.2; 2030: 86.2. - Change in public sector debt (percent of GDP, selected years): 2009: 16.8; 2010: 18.6; 2011: 22.0; 2012: -13.5; 2013: 18.9; 2016: -8.7; 2020: -8.1. - Primary deficit (percent of GDP, selected years): 2009: 10.5; 2012: 1.3; 2014: 0.0; 2016: -4.5; 2020: -4.3; 2025: -4.0; 2030: -4.0. - Revenue and grants (percent of GDP): 2008: 40.7; 2012: 44.1; 2016: 42.0; 2020–2030: 42.0 (constant). - Gross financing need (percent of GDP): 2008: 9.9; 2012: 18.9; 2013: 21.1; 2016: 18.6; 2020: 8.7; 2025: 5.4; 2030: 4.0. - Key macro assumptions (selected): Real GDP growth (percent): 2008: -0.2; 2012: -4.2; 2014: 0.6; 2016: 3.7; 2020: 2.6; 2025: 1.9; 2030: 1.8. Average nominal interest rate on public debt (percent): 2008: 5.0; 2012: 2.7; 2016: 3.2; 2020: 3.5; 2025: 4.1; 2030: 4.9. ### Public sector debt — alternative scenario (selected figures from Table AI.2) - Public sector gross debt (percent of GDP) shown in the alternative scenario: 2008: 112.9; 2012: 156.9; 2013: 180.5; 2014: 182.1; 2016: 176.4; 2018: 161.6; 2020: 147.2; 2025: 126.0; 2030: 111.3. - Change in public sector debt (percent of GDP, selected): 2013: 23.7; 2014: 1.6; 2016: -5.3; 2018: -8.1; 2020: -6.6. - Identified debt-creating flows (percent of GDP, selected): 2012: 65.3; 2013: 22.1; 2016: -7.0; 2020: -9.2. - Automatic debt dynamics (percent of GDP, selected): 2012: 18.0; 2013: 17.1; 2014: 6.0; 2016: -3.0; 2020: -1.5. - Privatization receipts (negative, percent of GDP): 2012: -0.1; 2013: -1.4; 2014: -1.1; 2016: -1.2; 2018: -1.6; 2020: -1.9. - Gross financing need (percent of GDP): 2012: 18.9; 2013: 21.7; 2016: 19.8; 2018: 12.4; 2020: 9.6; 2025: 5.9; 2030: 4.4. - Key macro assumptions (selected): Real GDP growth (percent): 2013: -4.2; 2014: 0.6; 2016: 3.7; 2017: 3.5; 2018: 3.3; 2020: 2.6. Average nominal interest rate on public debt (percent): 2013: 2.5; 2016: 3.2; 2020: 3.5; 2025: 4.1; 2030: 4.9. ### External sector DSA — baseline projections and drivers - Gross external debt: currently at 233 percent of GDP; projected peak at around 245 percent of GDP in 2013; decline to about 155 percent in 2020. - Net external debt: fall from about 130 percent of GDP in 2012 to around 75 percent in 2020. - Main drivers of improvement: quick current account improvement as competitiveness is restored; continued reliance on official loans at relatively low interest rates; agreed reduction in GLF interest rate and EFSF fees; return of SMP profits; FDI inflows related to privatization as a non-debt-creating financing source. ### Macroeconomic shocks and policy slippages — individual impacts on external debt by 2020 - Larger current account deficits (slow competitiveness improvements or terms-of-trade shock): baseline current account projections worsen by around 1.5 percent of GDP; debt ratio would be 10 percentage points higher than in the baseline by 2020. - Interest rate shock (100bps shock to Bund rates): would worsen the income account; 2020 debt ratio 8 percentage points above baseline. - Slippages in privatization (only half of projected privatization proceeds): reduce non-debt-creating flows; debt ratio in 2020 around 3 percentage points higher than baseline. - Combined adverse scenario (lagged program implementation, weak competitiveness, and higher interest rates): net debt ratio would reach about 100 percent of GDP in 2020, 23 percent of GDP higher than in the baseline. ### External debt table highlights (selected from Table AI.3) - Baseline external debt (percent of GDP, selected): 2007: 70.5; 2011: 148.3; 2012: 130.6; 2013: 135.0; 2016: 115.4; 2020: 77.0; 2021: 70.7. - Change in external debt (percent of GDP, selected): 2012: -17.7; 2013: 4.4; 2014: -3.0; 2015: -7.4; 2016: -9.1; 2020: -9.2. - Current account deficit, excluding interest payments (percent of GDP, selected): 2008: 9.1; 2011: 3.7; 2012: -0.6; 2013: -3.8; 2016: -5.9; 2020: -6.4. - Gross external financing need (billions of euros): 2008: 122.9; 2012: 205.6; 2013: 178.8; 2016: 119.5; 2020: 78.4; 2021: 72.1. - Key macro assumptions (selected): Real GDP growth (percent): 2007: 3.0; 2012: -4.2; 2014: 0.6; 2016: 3.7; 2020: 2.6. Nominal external interest rate (percent): 2008: 4.4; 2012: 1.6; 2016: 2.6; 2020: 3.1. - Projected current account balance (percent of GDP): 2013: -0.8; 2014: -0.2; 2015: 0.1; 2016: 0.2; 2018: 0.9; 2020: 1.4. *Source: International Monetary Fund; IMF staff estimates (from the provided IMF country report tables and text).* ### Appendix II. Fund Relations ### Appendix II. Fund Relations ### Membership and Exchange Rate Arrangements - Membership Status: Joined December 27, 1945. It has accepted the obligations of Article VIII, Sections 2, 3, and 4. - Exchange Rate Arrangements: - Greece’s currency is the euro, which floats freely and independently against other currencies. - Maintains an exchange system free of restrictions apart from those resulting from European Council regulations, last notified to the Fund in accordance with Decision 144 under EBD/08/35, 4/08. ### General Resources Account and SDR Department - General Resources Account (SDR Million; Percent Quota): - Quota: 1,101.80 — 100.00 - Fund holdings of currency: 22,600.14 — 2,051.20 - Reserve position in Fund: 240.82 — 21.86 - SDR Department (SDR Million; Percent Allocation): - Net cumulative allocation: 782.36 — 100.00 - Holdings: 553.49 — 70.75 ### Outstanding Purchases and Loans; Latest Financial Arrangements - Outstanding Purchases and Loans (SDR Million; Percent Quota): - Stand–by Arrangements: 17,541.80 — 1,592.10 - Extended Arrangements: 4,197.30 — 380.95 - Latest Financial Arrangements (Type / Date of Expiration / Amount Approved (SDR Million) / Amount Drawn (SDR Million)): - EFF, Mar 15, 2012 — Mar 14, 2016 — Amount Approved: 23,785.30 — Amount Drawn: 4,197.30 - Stand-By, May 09, 2010 — Mar 14, 2012 — Amount Approved: 26,432.90 — Amount Drawn: 17,541.80 ### Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs) - Forthcoming principal, charges/interest, and totals by year: - 2013: - Principal: 1,471.81 - Charges/Interest: 532.65 - Total: 2,004.46 - 2014: - Principal: 1,277.79 - Charges/Interest: 658.44 - Total: 1,936.23? (Note: total column in source shows aggregated multi-year totals; individual row totals provided above for years) - 2015: - Principal: 7,299.09 - Charges/Interest: 364.27 - 2016: - Principal: 2,609.70 - Charges/Interest: 129.96 - 2017: - Principal: 466.37 - Charges/Interest: 61.73 - Source table totals as presented: Total 2,004.46, 6,936.23, 7,663.36, 2,739.66, 528.09 (presented across columns in source). ### Safeguards Assessment - An update safeguards assessment of the Bank of Greece (BoG) was finalized in August 2012 in connection with the current Extended Fund Facility. - Findings: - BoG has strengthened its safeguards framework since the 2010 assessment. - Financial reporting and external audit practices adhere to international standards. - Recent amendments to the BoG’s Statute are expected to enhance governance and the central bank’s autonomy from private shareholders. - Emergency lending operations are subject to established legal and control frameworks. - Recommendation: - The assessment recommends a compliance review by the BoG’s internal audit department. ### Article IV Consultations and Third Review under the Extended Arrangement - Last Article IV mission: - Discussions for the 2013 Article IV Consultation held in Athens during April 3–15, 2013. - The Staff Report for the 2013 Article IV will be considered by the Executive Board at the same time with the Staff Report for the third review under the Extended Arrangement on May 31, 2013. - Article IV Consultations with Greece are on a 24–month consultation cycle. - Third Review under the Extended Arrangement: - Discussions held during February 26–March 14, and April 3–15, 2013. - Mission met with Prime Minister, Minister of Finance, Governor of the Bank of Greece, other Cabinet Ministers, private banks, think tanks, employer associations. - Staff team members listed in source; IMF resident representative office staff assisted. ### Technical Assistance (Departments, Purposes, Dates — selected entries as listed) - MCM: Banking supervision — March 2010 - FAD: Public financial management: initial analysis and priority reforms — April 2010 - FAD: Revenue administration: initial analysis and reform priorities — April 2010 - STA: Data quality and misreporting (K-1 Report) — April 2010 - FAD: General tax policy — May 2010 - MCM/FAD/LEG: Financial instruments — May 2010 - FAD: Expenditure Policy — June 2010 - FAD: Public financial management: follow-up on priority reforms — June 2010 - LEG/MCM: Implementation/review of financial sector components of the SBA program — June 2010 (multiple entries) - FAD: Tax administration: design of the anti-evasion plan — July 2010 - Numerous subsequent TA missions across FAD, STA, MCM, LEG through April 2013 covering: tax administration (anti-evasion, strategic planning, IT Audit Techniques, organizational reform, tax audit case selection, collection and compliance analysis), public financial management (PFM, accounting officers, budget preparation, expenditure policy), government finance statistics/fiscal reporting, AML and anti-tax evasion, legal framework for privatization, review of bank resolution frameworks, and balance of payments statistics. - Resident Representatives: - Mr. Bob Traa (Senior Resident Representative) and Ms. Stephanie Eble (Deputy Resident Representative) assumed their positions in October 2010. ### Letter of Intent — Key Program Progress and Requests (Athens, May 20, 2013) - General assessment: - Economic sentiment improved since January review, but significant challenges remain. - Program implementation seen as key to restoring market confidence and returning to growth and employment. - Program performance: - Met all end-March 2013 quantitative performance criteria; missed one indicative target (on domestic arrears). - Some structural benchmarks were not observed. - Fiscal developments and prior actions: - Over-performed on the cash fiscal deficit target for 2012 and Q1 2013. - For 2012 in ESA-1995 terms, over-performed the program fiscal deficit target by 0.2 percent of GDP. - Prior actions taken to ensure fiscal targets for 2013 and 2014; measures to accelerate clearance of domestic arrears; committed to eliminate stock of arrears by end-2013. - Fiscal-institutional reforms: - Passed legislation to move towards a semi-autonomous revenue administration. - Adopted key tax administration procedural reforms. - Reformed installment schemes for taxes and social security contributions. - Met key performance indicators on public financial management and revenue administration for end-March and end-April respectively. - Banking sector: - Recapitalization of each of the four core banks approved by shareholders and in process of implementation. - Commitment to return core banks promptly to the private sector; resolution of undercapitalized noncore banks proceeding. - Strengthening of banks’ governance framework (monitoring trustees in all four core banks; additional independent board members in the HFSF). - New framework to restructure debts of financially distressed households to be finalized soon, within recapitalization envelope. - Structural reforms and social support: - Progress on liberalizing regulated professions and preparing assets for privatization. - Plans to leverage EU structural funds for employment creation, especially among the young. - Plan to expand support programs for unemployed within existing budget envelope. - Financing and requests: - Program fully financed through June 2014; firm commitments from euro area members thereafter conditional on compliance. - On track to receive first phase of conditional debt relief as described in Eurogroup statements on November 27 and December 13, 2012. - Request completion of the third review under the EFF and third purchase in the amount of SDR 1,506.8 million. - Propose quantitative performance criteria and targets for end-September 2013 and end-December 2013; add, reset, and modify specified structural benchmarks; request rephasing of fourth and fifth reviews and associated purchases. ### Memorandum of Economic and Financial Policies — Outlook, Strategy, and Fiscal Institutional Reforms - Outlook and Strategy: - Recent macro developments broadly in line with program projections. - Economy continues to contract; unemployment at unacceptably high level. - Following resumption of program disbursements in December, liquidity conditions and confidence indicators improved. - Fiscal consolidation continued; current account improved reflecting better trade balance and lower interest payments after 2012 debt restructuring. - Inflation continues to decline and is expected to become negative in 2013, placing it the lowest among euro area member countries. - Expect growth to turn positive in 2014 based on firm program implementation. - Will monitor possible fallouts from developments in Cyprus; no significant modifications to macro framework at this juncture. - Main priorities for the review: - Improving tax administration to improve revenue collection and avoid socially-difficult measures. - Supporting economic growth and employment by clearing spending and tax refund arrears, adopting frameworks for restructuring viable debtors, finalizing bank recapitalization and restructuring, and implementing structural reforms to improve competition and investment. - Strengthening the social safety net and leveraging EU structural funds for employment creation; expand support programs for unemployed within existing budget envelope. - Fiscal Institutional Reforms — Revenue Administration (2-step approach and timelines): - Prior action (legislation to be adopted) will: - Transfer to the revenue administration the Ministry of Finance internal affairs department, and all tax and customs administration related functions within the General Secretariat for Information Systems and within the Corps for the Prosecution of Financial Crimes. - Create a five member advisory board to be appointed by the Minister of Finance (two members with significant international tax administration experience). - Provide that any advice of MAREG to the revenue administration on organizational matters must be given within a 14 day time frame. - Enable the Secretary General for Public Revenue Administration (SGPR) to determine the conditions for hiring under the control of ASEP. - Create a budget code encompassing all organizational units of the revenue administration to enable a separate and unified budget allocation for approval by parliament starting with the 2014 budget. - Establish a small financial management unit in the revenue administration to coordinate preparation and implementation of the revenue administration’s budget (while maintaining GDFS role as overall budget coordinator and financial controller for the Ministry of Finance’s aggregate budget appropriation). - Authorize the SGPR to determine a grading and promotion system for the revenue administration, subject to approval of the Minister of Finance. - Reconvene the institutional reform working group (IRWG), to be chaired by the SGPR, with reports shared with the Minister of Finance and the EC/ECB/IMF. The TMU specifies the prior action in more detail. - Implementation steps and structural benchmarks: - By end-July: establish mandate and composition for advisory board and hold first meeting; transfer personnel functions and budget allocations of the IAD and revenue-related departments of GSIS to the revenue administration; draft and implement service-level agreement between SGPR and GSIS; review delegation of competencies to SGPR and GDFS and, if necessary, assign authority to SGPR to reallocate expenditures across budget lines per Organic Budget Law 2362/1995; complete screening and adopt legislation addressing constraints to autonomy of revenue administration. - By end-October 2013 (structural benchmark): SGPR to approve new organizational structure, staffing numbers, grading system and classification, and qualification and appointment processes of the revenue administration; transfer revenue-related functions, personnel, and budget allocation of SDOE under the revenue administration. - By end-2013: approve the 2014 revenue administration budget — with full flexibility for the SGPR to reallocate funds among non-wage recurrent spending. - By end-March 2014: transition staff to the new organizational structure of the revenue administration. *Appendix II. Fund Relations (As of April 30, 2013)* ### 4. We are also continuing our efforts to strengthen the legal framework governing tax ### _cr13153 - 4. We are also continuing our efforts to strengthen the legal framework governing tax ### Strengthening legal framework for tax administration (prior actions) - Pass legislation to: - simplify the procedure to classify debt as uncollectable, and suspend collection activities on uncollectable debt (subject to a joint decision with the Court of Audit for amounts more than €1.5 million); - remove the legal requirement to audit all tax declarations for the previous 10 years, and allow audit cases to be selected on the basis of modern risk analysis; - implement indirect audit methods and allow their application to any open tax audit (to bring wealth and expenditures into the determination of taxable income); - replace the quasi-judicial review committee with a full internal review process within the revenue administration (the Internal Review Unit will be operational by end-August 2013); - reduce the payment requirement to file a VAT return to a minimum. - Revise the AML legislation by end-June 2013 to: - ensure that the General Secretariat of public revenues (GSPR) is represented at the Board of the Financial Intelligence Unit (FIU); - enable the GSPR to obtain from the FIU information relevant to individual tax audits and debt collection cases; - require that information on relevant cases of failure to pay confirmed debt over €50,000 be transmitted to the FIU (for purposes of implementing the AML law); - require the FIU to promptly inform the GSPR when assets are frozen in relation to the laundering of proceeds of tax crimes. ### Revenue administration — operational efficiency measures - Audit activities: - expanded third party data collection to financial institutions to facilitate audit in past years; - consolidated the audit of capital remittance cases in the HWI unit, and started targeted selection of cases; - by end-June, all line ministries having a financial relationship with taxpayers or beneficiaries will utilize their tax identification number in financial transactions with them; - use of tax identification numbers will be made compulsory for all official transactions with the whole public administration by end-2013. - Debt collection: - assigned additional staff and expanded the case base of the large debtor unit (LDU) to debts exceeding €1.5 million; - complete consolidation of debt collection functions into the largest DOYs by end-September 2013; - monitor collection performance of the LDU and establish a second LDU once effective; - complete development of an IT system allowing immediate access to information about existence of bank accounts held by taxpayers and current balances: pilot by end-July 2013, full implementation by end-September 2013. - Personnel management: - finalize by end-July 2013 the external recruitment of 200 auditors; - commence delivery of basic audit training and complete certification of 2,000 auditors; - appointed the head of the HWI unit and will assign additional supervisors to the LTU and HWI units by mid-June; - amending the law for performance assessment; SGPR has specified and implemented new criteria for assessment of auditors; - published a strategic anti-corruption plan and a code of ethics for the revenue administration addressing conflict of interest and whistleblower protection. ### Tax refunds and collection in exceptional circumstances - Tax refund backlog: - backlog of gross tax refund claims reached €2.7 billion at end-February; - repaid €721 million since end-November 2012; - develop systems to process refund requests more quickly: targeted VAT refund audit selection developed in March; develop systems for income taxes by July; electronic submissions of VAT tax refund claims by August. - Installment schemes (no new amnesty schemes; strengthen enforce collection): - Basic installment plan features: - tightened eligibility (proof of viability and tax compliance required); - payment of market interest rates plus a premium on outstanding balances; - enforced collection upon default on a payment; - maximum of 12 monthly installments (except a specific list of taxes of a non-current or extraordinary nature for which installments of up to 24 months would be allowed). - Fresh start plan (one-time, parallel to economic normalization): - allow payment of pre-existing tax and SSC debts (not already subject to an installment arrangement) and consolidation of debt from other schemes; - payments in equal monthly installments not extending beyond June 2017; - reduction in the surcharge by at most 50 percent upon full payment of the debt; - reduced documentation requirements for tax and SSC debts below €75,000; - compliance with current tax and SSC obligations mandatory; full collateral required for large rescheduled amounts (over €300,000); enforced collection upon default will apply. - Implementation and timing: - as a prior action adopt legislation regulating the conditions of these installment schemes; law to set date of opening application into the new scheme no later than July 1, 2013; - entry into existing tax and SSC debt instalment schemes that do not extend past June 30, 2017 and do not offer more generous terms and conditions than the fresh start scheme will be allowed up until June 30, 2013; - law will specify which schemes remain open until June 30, 2013; entry into all other schemes discontinued upon submission of this legislation to parliament; - entry into these two installment schemes disallowed for debtors in default on another scheme after submission of the law to parliament; - include provisions for the basic installment plan regarding taxes in the tax procedural code by end-June 2013; - no further changes in the terms and conditions of installment schemes, and no new special schemes will be introduced; - conduct an audit of the implementation of installment schemes by the revenue administration by end-December 2013. ### Strengthening collection capacity in social security funds (SSFs) - Established a special working group to: - examine the arrears stock across the four largest SSFs, assess collectability, and identify collectible arrears for transferring them to the new single collection entity by end-June 2013; - develop a framework for coordination and integration of tax and SSC arrears collection. - Introduce a revised surcharge regime for late payment of SSC by June 2013 that combines a penalty and an above market interest rate. - Repeal application of the Code for Collection of Public Revenue for collection of SSC, and enact a new legal framework for public revenue collections in line with international best practice by end-February 2014. ### Monitoring, KPIs, and public accountability - Establish a process within the SGPR to monitor and report on administrative and operational requirements set out in the MEFP. - Set monthly targets for key performance indicators (KPIs) on debt collection and audit of large taxpayers and high-wealth individuals; meeting these KPI targets for end-April is a prior action for the review (Annex I). - Propose to eliminate the target on the number of tax cases submitted to the state prosecutor, revise the amount of old debt for end-June, and revise the number of completed risk-based full-scope audits for large taxpayers and audits for HWI for end-June and end-December (Annex II). - Launched a public website to publish statistics on KPIs, including tax evasion cases sent to the FIU. ### Public Financial Management (PFM) reforms - Budgeting (by August 2013 modify organic budget law to strengthen MTFS): - establish three-year expenditure ceilings for line ministries and the health care sector (on a rolling basis and binding for the first two years); - establish binding annual budget balance targets for local governments; - identify performance targets for state enterprises; - require that in future budgets 10 percent of discretionary state budget appropriations be frozen ex-ante (and released in the second half of the year provided general government fiscal targets are met); - strengthen functioning of commitment registers, including treatment of carryover of end-year outstanding commitments. - By end-June issue a Joint Ministerial Decision indicating a common methodology for local government budget preparation and adoption and establish a review process by the Observatory of Local Authorities to ensure consistency with MTFS targets. - Spending controls: - expand number of entities with functioning commitment registers (focus on all 41 social security funds) and expand registers to public investment budgets; - finalize by end-June 2013 with a joint ministerial decree the organizational structures of the General Directorates of Financial Services (GDFS) and fully staff the GDFSs in all line ministries; - fill accounting officer positions that have recently become vacant; - issue a new circular by October to clarify functioning of commitment registers, including carry-over of end-year outstanding commitments. - Fiscal reporting: - develop a social budget monitoring framework covering EOPYY, SSFs, hospitals, and the Manpower Agency; - roll out detailed fiscal reporting system to the SSFs by end-September and EOPYY by end-2013 to ensure GFSM- and ESA95-consistent fiscal reporting; - from May, publish in the monthly general government budget execution bulletin the amount of disbursed tax refunds and payments on expenditure arrears as cash payments within the fiscal balance; - in the third quarter of 2013 begin reporting to the EC/ECB/IMF (on accrual basis) all existing tax refund claims according to the date in which they were incurred. ### Arrears clearance and process improvements - Despite Ministry of Finance financing of €3.2 billion to general government entities, missed end-March indicative target for domestic arrears ceiling. - Targeted measures to accelerate clearance: - directly disburse funds to hospitals once their arrears claims are cleared for payment; - accelerate efforts to help spending agencies meet conditions for arrears clearance, activate legislation to sanction SSFs and other general government entities that do not utilize commitment registers and do not report on the e-portal; - established a working group, reporting with IMF and TFGR technical advisors, to streamline arrears payment processes and achieve conformity with Directive 2011/7/EU on combating late payments; - by June 2013 identify actions to immediately shorten procedures; by October 2013 draw medium-term recommendations, including accompanying legislation where required; - Ministry of Finance to conduct an audit of commitment registers and health related arrears records maintained by EOPYY and the SSFs by August, 2013; - launch a tender for an independent external auditor by September 2013 to complete an audit of EOPYY’s outstanding stock of accounts payable towards third parties by end-March 2014 (including predecessor SSF’s before creation of EOPYY on January 2012). ### PFM monitoring — KPIs and structural benchmarks - As a prior action set KPIs for end-March for: - percentage of government entities reporting on the e-portal; - discrepancy between arrears reported on the e-portal and through monthly surveys; - these end-March KPI targets have been met (Annex III). - Will continue to monitor implementation through structural benchmarks for end-June and end-December 2013 (Annex IV). ### Fiscal policy commitments for 2013–14 - Prior action: adopt legislation to extend collection of the real estate tax through 2013 via PPC, introducing: - a reduction of 15 percent in the rate; - imposition of the tax on buildings not legally exempted from municipal duties; - calculation of tax on buildings outside urban planning zones on a different basis (based on average legal value for the relevant municipality); - implementation of the tax on all buildings which are leased to the state by non-exempted private owners. - Adopt a new law on taxation of real estate by end-June; the new regime will consolidate separate taxes and be designed to deliver revenue consistent with real estate tax projections in the adopted MTFS. - Commitments: - fully implement all other agreed fiscal measures for 2013–14 not yet in place (such as the solidarity contribution for the self employed in 2014), or fully offset them if agreed during program reviews; - remove all remaining ineligible pensioners from the pension rolls by end-June 2013. - Consider reduction in certain tax rates (e.g., VAT on food and catering) provided over-performance generates sustainable fiscal space; fiscal space to be assessed in next program review. ### Public administration reform, staffing, and exits - Prior actions for the review: - adopt consistent staffing plans for government entities covering 206,000 employees; - approve quarterly plans for 15,000 mandatory exits cumulative through end-2014, including 4,000 by end-2013 (with a significant fraction frontloaded); - approve annual overall employment ceilings for the general government through 2016 (consistent with the approved MTFS); - vote necessary legislative changes to streamline and accelerate the disciplinary procedure; - implement a permanent monitoring mechanism for the disciplinary procedure and provide data on pending cases and pace of dealing with the stock of cases; - eliminate legal provision forcing the state to put personnel of legal entities of private law, whose positions are abolished, in the mobility scheme. - Exit mechanisms: - exits to result from disciplinary cases; due diligence evaluation of legal entities leading to mergers and abolishment; evaluation of personnel using the mobility scheme (including before reallocation) to remove unmotivated or less qualified personnel; voluntary exits from the mobility scheme (excluding personnel within 3 years of retirement); lapse of a 12-month period in the mobility scheme. - 2013 targets and staffing plans: - ensure cumulatively 12,500 employees placed in the mobility scheme by end-June 2013; - complete staffing plans for 450,000 employees (cumulative) by end-June; - complete staffing plans for all general government entities by end-December 2013; - complete assessment of individual employees by end-2013. - Hiring ratios: - hire one new employee for each mandatory exit through the various channels noted above; if off-track, reduce this hiring ratio; - for all other attrition, hiring ratio will remain 1:5 as envisioned in the program. - define detailed hiring plans for 2013 by end-June 2013 in consultation with the EC/ECB/IMF. *International Monetary Fund — selected excerpt from _cr13153* ### 14. We will continue to strengthen the social safety net, to cushion the crisis impact on the ### 14. We will continue to strengthen the social safety net, to cushion the crisis impact on the most vulnerable segments of our society ### Employment programs - Commit to expand public and social work programs and training programs to fight long-term and youth unemployment and support jobless households. - Leverage EU funding and involve the private sector to the extent possible. - Introduced in April a youth internship and employment voucher program under the Youth Action Plan. - Program with €180 million co-funded by the European Social Fund. - Will support vocational training and internships for 45,000 individuals up to 29 years of age over a six-month period. - Aim to increase entrants into apprenticeship and vocational training programs, such as the professional schools for apprenticeship of the Manpower Employment Organization (OAED). ### Social protection - Passed legislation to launch two pilot programs to be implemented no later than 2014: - An income-tested program that targets long-term unemployed and provides income payable for a year. - A minimum income guarantee scheme for families in areas with a difficult socioeconomic profile. - Implement the new child benefit law, with first payments no later than end-June 2013. - Launch in July 2013 a Health Voucher Program to provide 100,000 long-term uninsured citizens with access to primary healthcare services. - With funding from the European Social Fund, plan to extend the program to more beneficiaries while expanding coverage of healthcare services. - Commit to fill any other gaps in social safety nets that become apparent, within the existing overall budget envelope, and to identify additional resources to frontload and expand the various programs. ### Fiscal safeguards to limit quasi-fiscal risks - Tax investment incentives: - Streamline tax investment incentives, fold them into the income tax law through an amendment by September 2013, and incorporate their cost in the medium term fiscal framework. - By end-July 2013, catalog and quantify all tax incentives currently existing in legislation and private contracts. - Subsidies: - Establish sunset provisions for all earlier subsidy commitments if not claimed within three years of approval, and put limits on the overall envelope of future subsidies. - Renewable energy (RES) reforms and measures to eliminate projected RES debt: - Recognize projected debt of €1.7 billion in the RES account by end-2014. - As a prior action, adopt legislation to: - (i) a reduce the feed in tariffs for photovoltaic renewables by at least 45 percent, - (ii) increase the solidarity contribution by an average of 7 percent for new projects; - (iii) introduce new feed in tariffs for CHP systems (relevant MD to be issued by July 2013; - (iv) introduce mandatory letters of guarantee (relevant MD to be issued by March 2014); - (v) allow investors to receive back their letters of guarantee when they withdraw projects; - (vi) levy a fee on production licenses (relevant MD to be issued by April 2014). - Increase on July 1, 2013 the RES Special Levy consistent with the law requiring RES debt to be eliminated by end-2014. - Fully liberalize low voltage end-user tariffs by July 1 to improve liquidity in the electricity system, reduce arrears, and cut subsidies. ### Financial Sector Policies — recapitalization and bank viability - Capital metrics: - Aligned capital metrics to a minimum core tier I ratio of 9 percent of risk-weighted assets, binding from end-March 2013. - Limit share of deferred tax assets that can count as core capital to 20 percent of CT1 as calculated using EBA methodology. - Liability management: - Banks initiated in April 2013 a new round of liability management exercises on remaining subordinated instruments to seek additional private capital (which will not count as part of the minimum 10 percent of private sector capital subscription required to maintain private control). ### Recapitalization status and procedures - Nearing completion of recapitalization of the core banks; banking system anchored on four pillar banks assessed as viable by the Bank of Greece. - Each of the four core banks sent invitations in April for shareholders to join extraordinary general meetings to increase capital as notified by the Bank of Greece in December 2012. - All four meetings with quorum have taken place; following approvals, the subscription period of 15 calendar days as prescribed by law will start. - Two of the four core banks expect to raise 10 percent of the capital in the form of common shares from private sources to remain under private management. - A third expects the HFSF to fully subscribe the capital share increase. - Private sector participation in the fourth bank remains uncertain until the subscription period concludes. - Bank management instructed by the BoG to focus on finalizing recapitalization and day-to-day management until recapitalization is finalized. ### Comprehensive financial sector strategy - By no later than July 15, develop a comprehensive banking sector strategy (structural benchmark) by the HFSF, the BoG, and the MoF, in cooperation with the EC/ECB/IMF. - Interim: four pillar banks may continue to act as integrators of smaller domestic banks as appropriate. - Only upon finalization of the banking sector strategy could consolidation in the form of merger among the four pillar banks be considered. - Strategy will include options and operational steps for the HFSF to promptly proceed with disposal of shares to the private sector of core banks that do not remain under private control. ### Resolution of undercapitalized noncore institutions - HFSF-controlled bridge banks: - Established a second bridge bank, the New Hellenic Postbank, in January 2013 with HFSF as sole shareholder. - HFSF to reduce operational costs (including significant reduction in number of employees) and restructure loan portfolio to make the bank attractive to purchasers and conclude its sale by July 15, 2013 (rephased structural benchmark from end-January 2013). - Sale of Nea Proton bank deadline shifted from May to July 15, 2013 to increase chances of acquisition through open bid. - Other undercapitalized noncore banks: - Timeline unchanged; BoG will take appropriate measures in coordination with HFSF for noncore banks not meeting capital requirements. - Assess options to minimize cost to taxpayers, including purchase and assumption transactions by any of the four core banks, while guaranteeing the security of depositors. - Cooperative banks: - Revise legal and regulatory frameworks for cooperative banks by end-September 2013 to align with best international practices. ### Safeguards and supervision - No fiscal policy actions that would undermine bank solvency; Law 3723/2008 amended to ensure banks will not be required to pay any dividends on preference shares, or fees in lieu of this, unless banks are profitable. - BoG to continue enhanced supervision of banks, including resolved and publicly controlled banks; ensure banks do not take discretionary corporate actions increasing capital needs. - Stress testing: - Finalize by end-July a new stress testing methodology, determined in consultation with the EC/ECB/IMF, with specific focus on adequacy of loan loss provisioning. - Stress testing envisaged to be completed by end-2013 under the program. - Banking system liquidity: - BoG stands ready to continue disbursing adequate and appropriate emergency liquidity support following Eurosystem procedures and rules. - BoG will request standardized quarterly balance sheet forecasts (funding plans) from banks, based on program macroeconomic forecasts. - Funding plans to set a path to achieve a sustainable funding model by broadening funding base and reducing reliance on extraordinary central bank liquidity support; used by BoG to monitor aggregate consistency with program macroeconomic framework. ### Asset management, insolvency framework, and NPLs - Improve management of assets in liquidation: - By May 2013 revise regulatory framework and remove operational restrictions identified in the end-February 2013 Bain&Company assessment report published by the BoG. - By June 2013 adopt amendments to existing special liquidation laws following consultation with EC/ECB/IMF staff. - Widen range of options to facilitate timely, cost effective disposal and/or restructuring of assets. - BoG to adopt a reporting framework with quarterly updates on progress starting in June 2013. - Enhance legal regime for household insolvency: - Establish a framework to assist distressed borrowers by end-June 2013, in consultation with EC/ECB/IMF staff; take effect as soon as necessary regulations can be put in place (at the latest by end-August 2013). - Introduce measures to deter applications for court cases under Law 3869/2010; borrowers subject to laws 3869/2010 and 4128/2013 will be subject to new framework once implemented. - By end-June 2013, pass legislation to introduce a new “Facilitation Program” targeted at low-income individuals in deep financial distress. Key features: - (i) eligibility criteria that take into account debtor’s income and assets (supported by verification procedures); - (ii) oversight of the facilitation program by the BoG; - (iii) borrower repayment defined using criteria based on affordability; - (iv) periodic review of financial conditions of participating debtors to assess continued eligibility and proper level of payments; - (v) a clear timetable to close the window of the program. - BoG will assess implementation within six months of adoption. - By end-June 2013, revise law 3869/2010 to address implementation shortfalls; introduce a definition of acceptable living expenses and a standard definition of cooperating borrowers. - By end-June 2013, adopt enabling legislation to establish a framework, consistent with the recapitalization framework, to provide long-term solutions for over-indebted borrowers; regulations to be specified by end-August and include: - (i) address shortfalls in existing laws limiting effectiveness of debt resolution activities; - (ii) standardize assessment procedure for borrower cases; - (iii) introduce a standard list of loan restructuring tools for banks; - (iv) enhance access to free budgeting and legal advice services for citizens; - (v) encourage borrowers and lenders to participate in debt resolutions through non-judicial means. - Steps to reduce excessive court waiting times and ensure eligible debtors choose to participate in the facilitation program. - Minimize risks from rapid deterioration of loan portfolios: - BoG, in cooperation with HFSF and in consultation with EC/ECB/IMF will: - (i) assess by end-September 2013, with assistance of an independent third party, the effectiveness of frameworks and policies to deal with troubled assets; - (ii) establish key performance indicators (KPIs) covering troubled assets portfolio status, operational response by banks, and follow-up resolution actions (KPI definitions set no later than August 2013; bank reporting starts by October 2013 on a quarterly-basis); - (iii) closely monitor banks’ NPL resolution strategy, policy and operational targets, and intervene where necessary to ensure distressed borrowers receive prompt and sustainable long-term solutions. ### Governance of financial institutions - HFSF governance: - Support HFSF in ambitious operational restructuring of banks in which it has significant stake to reduce operational costs and increase profitability, minimizing taxpayer cost. - HFSF governance reforms adopted by parliament to add 2 independent members to the HFSF General Council, increasing members from 5 to 7 (prior action). - Amend HFSF internal regulations to rationalize division of tasks and responsibilities between General Council and Executive Board. - Amend legislation to clarify the non-public nature of the Fund to strengthen HFSF independence. - Relationship frameworks and accountability: - Publish relationship frameworks between HFSF and banks that received capital infusion from HFSF as soon as amount of injection is known, upon completion of subscription period, and in any case no later than May 31st. - Frameworks define HFSF role as shareholder based on best international practices, ensure limited influence in bank commercial decisions, define managers' responsibilities and HFSF veto rights, and ensure banks not remaining under private management remain separate economic units with independent powers of decision. - Develop and publish no later than end-May 2013 a memorandum of understanding governing HFSF-BoG relationship regarding oversight of banks that received state aid. - Due diligence and remedial actions: - BoG to adopt measures addressing governance weaknesses identified in due diligence of core banks. - Banks to submit to BoG by end-May 2013 plans to address operational governance weaknesses—including safeguards on related-party loans and risk concentration—with clear timetables for full implementation by end-December 2013. - If plans are inadequate, BoG may remove board members and managers, and/or suspend private shareholders (preventing participation in recapitalization). ### Structural reforms — labor market, product and service markets, and red tape reduction - Labor market: - Adopt before end-May a framework for future statutory minimum wage setting, in line with program commitments. - Complete comprehensive review by end-July and significantly streamline labor reporting requirements by end-September to reduce administrative burden. - Adjust sanctions for violations of labor law by end-July to better link punishments to severity; focus detection on more severe cases. - Compile a Labor Code by end-2013 to eliminate inconsistencies and increase transparency. - Product and service market liberalization: - Regulated professions: - Made substantial progress towards end-2012 structural benchmark on regulated professions; eliminated restrictions including minimum fees, specific entry restrictions, and mandatory use of services for several professions and activities (including bake-off installations, welfare units, outdoor trading, and tourist guides). - Adopt by end-June 2013 a new Code of Lawyers removing reference to "exclusivity" for research of mortgage books and land registry, and liberalize trading petroleum. - By mid-July issue secondary legislation to liberalize chartered valuers and actuaries. - In second half of 2013 take steps to liberalize engineering professions. - Government will not introduce additional restrictions in regulated professions and will guard against public administration decisions that effectively restore them. - Complete by July 2013 a study of the 20 largest professions examining degree of liberalization, including results for new entrants and price changes. - Transportation services: - Clarify by end-June that individual labor contracts can be negotiated freely once collective agreement has expired (to assist shipping sector). - For domestic ferry services: increased routing flexibility, reduced manning obligations, and by end-June will reduce and limit to fewer categories mandatory ticket discounts. - Assess impact by end-October and adopt further steps to increase sector competitiveness. - Cap on airport fees for regional airports slated for privatization to keep fees in line with regional competitors; continue work to improve Athens airport effectiveness. - Retail trade: - By end-June adopt a new law to further liberalize retail market, including removing restrictions against discounts outside sale periods and increasing flexibility in retailers' opening days. - For over-the-counter (OTC) products, replace fixed margins with maximum ones. - By end-September 2013 allow sales of selected products (e.g., vitamins) in outlets other than pharmacies. - Reducing red tape and customs facilitation: - Pilot increased working shifts in Athens airport to 24/7 and expanded service in Piraeus port to two shifts for exports; extend same for imports in July 2013. - Simplified export and custom procedures using risk-based audits in line with EU best practices; extend risk-based audits to imports in November. - E-customs system supports electronic submission of all export declarations; introduce e-signature for exports and implement same system for imports by November 2013. - Continue reducing regulatory barriers to competition; based on an OECD assessment prepare draft legislative amendments by end-September 2013 covering construction materials, retail and food processing industries, and tourism sector. - Based on Standard Cost Model (SCM) application by OECD in 13 key sectors, propose by end-October 2013 needed legislative amendments to reduce administrative burdens. *Italicized: IMF staff report excerpt as provided in the source content.* ### 30. Reforms to strengthen market-supporting institutions will focus on the following: ### _cr13153 - 30. Reforms to strengthen market-supporting institutions will focus on the following: ### Judicial reforms - Progress made: - Reduced the administrative case backlog at the Council of State (including tax cases). - Published quarterly information on court performance. - Rationalized the system of magistrate courts to improve efficiency. - Planned actions and deadlines: - Prepare draft amendments to the Code of Civil Procedure aimed at streamlining the judicial process; present to EC/IMF/ECB by end-May 2013. - Reallocate judges to the administrative courts with the highest backlog by end-September 2013. - Adopt an action plan to reduce civil and commercial case backlogs, including draft legislation providing for compulsory mediation for small claims. - Present to EC/IMF/ECB a first assessment of the operation of the magistrates’ courts by end-July 2013. ### Anti-corruption - Statement of intent: - Government determined to aggressively tackle corruption, which undermines public trust, the business environment, and the efficiency of government operations. - Actions taken and planned: - Published an anti-corruption action plan (program commitment). - By end-June 2013, the Government will: - (i) submit draft legislation to bring the anti-corruption legal framework in line with relevant international standards; - (ii) initiate under the National Anti-Corruption coordinator the implementation of the relevant actions contained in the anti-corruption action plan. ### Privatization program: status, next steps, and transparency measures - Progress: - Finalized regulatory frameworks for airports and water. - Transferred a further 250 real estate plots to the Fund. - Published the quarterly financial statement of the HRADF together with its balance sheet to increase transparency. - Next steps and targets: - Aim to complete the state aid clearance for the ports, and DEFSA. - Adopted a plan for: - full ownership unbundling of ADMIE and PPC; - creation and privatization of a new electricity company based on some PPC assets; - privatization of PPC itself with a view to starting the process within 2013 and completing it by January 1, 2016. - HRADF will tender the 40 real estate assets transferred to the Fund in early 2013. - Compensatory measures for transaction delays: - HRADF will: - (i) accelerate other sales (which could include buildings and certain land plots, as well as moving forward some tenders, e.g. small ports and marinas); - (ii) take steps to expedite approvals by working with the Court of Auditors, Council of State, and Competition Committee to reduce required time. - Examine scope for raising private sector funds by targeting international investors through the securitization of real estate assets: - Assets examined for such operations will fall outside the universe of those foreseen for privatization through 2020. - Ensure such securitizations do not in any way slow down the privatization process foreseen in the current program. ### Quantitative performance framework — selected figures and targets - Table 1a (Mar-13, Billions of euros, unless otherwise indicated) — select performance criteria (Program / Actual where shown): - 1. Floor on the modified general government primary cash balance 1/: -3.8 / -2.8 ; 1.5 / 1.7 - 2. Ceiling on state budget primary spending 1/: 56.8 / 55.4 ; 13.9 / 11.8 - 3. Ceiling on the overall stock of central government debt: 340 / 311 ; 347 / 313.3 - 4. Ceiling on the new guarantees granted by the central government 2/: 0.2 / 0.1 ; 0.2 / 0.2 - 5. Ceiling on the accumulation of new external payments arrears on external debt contracted or guaranteed by general government 3/: 0.0 / 0.0 ; 0.0 / 0.0 - 6. Ceiling on the Stock of Domestic Arrears (narrow definition): 3.6 / 2.9 ; 3.0 / 2.6 - Indicative targets — Ceiling on the Stock of Domestic Arrears (General Government Definition): 8.0 / 7.6 ; 4.5 / 7.0 - 8. Floor on privatization receipts 4/: 3.20 / 0.00 ; 0.1 / 0.1 - Notes: - 1/ Applies cumulatively from start of the target's calendar year. - 2/ Applies cumulatively from Oct 1, 2012. - 3/ Applies on a continuous basis from program approval. - 4/ For 2012, cumulative from program approval. For 2013, cumulative January 1, 2013. - Table 1b (Program Quantitative Performance Criteria, Billions of euros, unless otherwise indicated) — selected future targets: - Performance criteria (Dec-13, Dec-14, Dec-15 shown as column headers in table): - 1. Floor on the modified general government primary cash balance 1/: -1.2 ; -0.8 ; -0.3 - 2. Ceiling on state budget primary spending 1/: 26.0 ; 38.8 ; 53.2 - 3. Ceiling on the overall stock of central government debt: 347 ; 335.0 ; 335.0 - 4. Ceiling on the new guarantees granted by the central government 2/: 0.0 ; 0.0 ; 0.0 - 5. Ceiling on the accumulation of new external payments arrears on external debt contracted or guaranteed by general government 3/: 0.0 ; 0.0 ; 0.0 - 6. Ceiling on the stock of domestic arrears (narrow definition): 2.0 ; 1.0 ; 0.0 - 7. Floor on Privatization Receipts 4/: ... ; 1.8 ; ......... - Indicative targets (selected): - 1. Floor on the modified general government primary cash balance 1/: ......... ; 2.0 ; 3.6 - 2. Ceiling on state budget primary spending 1/: ......... ; 49.4 ; 46.3 - 3. Ceiling on the overall stock of central government debt: .........330330 - 8. Floor on privatization receipts 4/: 1.1 ; ... ; 2.5 ; 4.3 ; 6.3 - 9. Mandatory Exits (head count, in thousands) 4/ 5/: ... ; 2.0 ; 4.0 ; 15.0 ; ... - 10. Transfers to the Mobility Scheme (head count, in thousands) 4/: 12.5 ; ... ; 25.0 ; ... ; ... - Notes: - 1/ Applies cumulatively from start of the target's calendar year. - 2/ Cumulative from April 1, 2013. - 3/ Applied on a continuous basis since program approval. - 4/ Cumulative from January 1, 2013. - 5/ For the Mandatory Exits, quarterly targets have also been set for 2014 (cumulative from April 1, 2013): Q1: 5000; Q2: 9,000; Q3: 11,000, and Q4: 15,000. ### Structural benchmarks, prior actions, and sequencing - Table 2 (Structural Benchmarks, December 2012 – April 2013) — selected measures and status at End-December 2012: - 1. Government to meet quantified quarterly performance indicators for revenue administration. — Not observed. See prior action (Table 3). - 2. Government to meet quantified quarterly performance indicators for public financial management. — Not observed. See prior action (Table 3). - 3. Government to complete the screening and cleaning of existing legislation covering the list of professions and economic activities covered in Annex II of KEPE’s “Second Report on the Impact of Liberalizing Regulated Professions.” — Not observed. A few actions pending for engineers, lawyers, pharmacies and petroleum traders. - 4. Government to reform the governance of the BoG, to provide for collegial decision-making at the level of executives (Governor and Deputy Governor) and expanded internal oversight by nonexecutive of the exiting General Council and to revise the structure and rights of BoG shareholders to eliminate possible conflicts of interest in the Bank of Greece’s public policy role. — Observed. - 5. Hellenic Postbank to be resolved with the transfer of its good assets, all deposits and ECB/ELA financing to a core bank (via a P&A), and weak assets to be left in a bad bank. (End-January 2013) — Not observed. Structural benchmark reset (See Table 4 and ¶19). - 6. Adopt a law establishing a new semi-autonomous tax agency, which will specify the degree of autonomy, the governance framework, accountability, and initial staffing of the organization. — Not observed. See prior action (Table 3). - 7. Government to complete staffing plans for line ministries and utilize these to identify redundant positions and employees, and on this basis to set quarterly targets for mandatory exits through end-2014. — Not observed. See prior action (Table 3). - 8. All four core banks to meet the capital requirements set by the Bank of Greece. (IMF country report No 13/20, MEFP ¶19). — Not observed (due to technical/legal requirements). Completion expected before 4th review. - Table 3 (Prior Actions) — select macro-critical prior actions: - Fiscal institutional reforms: - 1. Government to meet end-April quantified key performance indicators for revenue administration (Annex I). — Macro relevance: Fiscal sustainability (revenue). - 2. Government to meet end-March quantified key performance indicators for public financial management (Annex III). — Macro relevance: Fiscal sustainability (budget). - 3. Adopt legislation on key tax administration procedural reforms to: suspend collection activities on uncollectable debt, remove the legal requirement to audit all tax declarations for the previous 10 years; and implement indirect audit methods (¶4). — Macro relevance: Fiscal sustainability (revenue). - 4. Issue a ministerial decision that regulates the conditions of the existing basic and a new transitional installment scheme for tax and social security contributions debt (¶6). — Macro relevance: Fiscal sustainability (revenue). - 5. Adopt legislation to achieve a semi-autonomous revenue administration (¶3, TMU¶27). — Macro relevance: Fiscal sustainability (revenue). - Fiscal measures and financial sector items (select): - 6. Adopt legislation to extend collection of the real estate tax through 2013 via PPC (¶12). — Macro relevance: Fiscal sustainability. - 7. Government to adopt staffing plans, approve quarterly targets on mandatory exits, approve annual overall employment ceilings for the general government through 2016; and adoption of legislation to streamline and accelerate the disciplinary procedure, and remove restrictions for placing in the mobility scheme personnel of legal entities of private law whose positions are abolished (¶13). — Macro relevance: Fiscal sustainability (spending) and government efficiency. - 9. Add 2 independent members to the HFSF General Council (¶27). — Macro relevance: Financial stability. ### Existing and proposed structural benchmarks (selected timetable) - End-June 2013: - 1. Government to meet quarterly performance indicators for revenue administration (¶8 and Annex II). — Macro critical relevance: Fiscal sustainability (revenue). - 2. Government to meet quarterly performance indicators for public financial management (IMF country report No. 13/20, MEFP ¶41). — Macro critical relevance: Fiscal sustainability (budget). - 3. Adopt a new Tax Procedures Code and simplify income tax legislation (IMF country report No. 13/20, MEFP ¶35). — Proposed to be rephased from end-May 2013. — Macro critical relevance: Fiscal sustainability (revenue). - 4. Complete resolution of all undercapitalized or insolvent non–core banks (IMF country report No 13/20, MEFP ¶20). — Macro critical relevance: Financial sustainability (revenue). - July 15, 2013: - 5. Complete a comprehensive banking sector strategy (¶18). — Proposed. — Macro critical relevance: Financial stability. - 6. Hellenic Postbank to be resolved with the transfer of its good assets, all deposits and ECB/ELA financing to a core bank (via a P&A), and weak assets to be left in a bad bank (¶19). — Proposed to be re-phased from end-January 2013. — Macro critical relevance: Financial stability. - End-July 2013: - 7. Banks to update their restructuring plans and submit them for validation by DG-Competition (IMF country report No 13/20, MEFP ¶23). — Macro critical relevance: Financial stability. - End-September 2013: - 8. Ministry of Finance to produce a comprehensive list of nuisance taxes and levies, and eliminate them or transfer them (and the associated spending) to the central government budget (IMF country report No 13/20, MEFP ¶9). — Macro critical relevance: Growth/competitiveness (business environment). - End-October 2013: - 9. Approve the new organizational structure of the Revenue Administration, staffing numbers, grading system, and classification, and qualification and appointment processes of the revenue administration (¶3). — Proposed. — Macro critical relevance: Fiscal sustainability (revenue). - End-November 2013: - 10. Adopt legislation to reform the system of social security contributions to: (i) broaden the contribution base; (ii) simplify the contribution schedule across the various funds; and (iii) reduce contribution rates by 3.9 percentage points. The reforms will be fully phased in by January 1, 2016 and will be revenue neutral and preserve the actuarial balance of the various funds (IMF country report No 13/20, MEFP ¶10). — Macro critical relevance: Growth/competitiveness (business environment). - End-December 2013: - 11. Government to meet quarterly performance indicators for revenue administration (¶8, Annex II). — Macro critical relevance: Fiscal sustainability (revenue). - 12. Government to meet quarterly performance indicators for public financial management (IMF country report No. 13/20, MEFP ¶41). — Macro critical relevance: Fiscal sustainability (budget). - 13. Bank of Greece to complete a follow-up stress test for banks based on end-June 2013 data, using a methodology designed in consultation with the EC, ECB, and the IMF, and to update banks’ capital needs on this basis (IMF country report No. 13/20, MEFP ¶23). — Macro critical relevance: Financial sustainability. - 14. Ministry of Finance to complete a targeted audit of general government accounts payable, to verify whether any arrears remain, and to review compliance with the conditions set for clearing arrears (IMF country report No. 13/20, MEFP ¶39). — Macro critical relevance: Fiscal sustainability (debt). ### Schedule of proposed purchases under the Extended Arrangement (selected figures) - Board approval of EA: March 15, 2012 — Total disbursements: 1,399.1 Millions of SDRs ; 127.0 Billions of euros ; 1.6 Percent of quota. - Second Review: August 31, 2012 — 2,798.2 Millions of SDRs ; 254.0 Billions of euros ; 3.3 Percent of quota. - Third Review: February 28, 2013 — 1,506.8 Millions of SDRs ; 136.8 Billions of euros ; 1.8 Percent of quota. - Subsequent periodic reviews (Fourth through Fifteenth) each show 1,506.8 or 1,506.4 Millions of SDRs and 136.8 Billions of euros ; 1.8 Percent of quota for each scheduled review. - Total: 23,785.3 Millions of SDRs ; 2,158.8 Billions of euros ; 28.0 Percent of quota. - Note: Exchange rate of January 5, 2012 used for euro conversions. ### Annex I — Prior Action: Key Performance Indicators on Tax Administration (End-April 2013) - Debt collection: - Collection of new debts in the current year (percent of new debt in the year): 11.0% - Tax audits and collection of large tax payers: - Number of risk-based full scope audits in the year: 66 - Number of risk based temporary audits in the year: 134 - Audits and collection of high wealth individuals: - Number of completed risk-based audits in the year: 146 ### Annex II — Key Performance Indicators on Tax Administration (2012 and 2013 targets and outcomes) - Debt collection (selected): - Collection of tax debts as of the end of the previous year: 2012 Target 1/: 2,000 ; 2012 Actual End-Dec.: 1,099 ; End-Jun. 2012: 1,140 ; End-Dec. (year unspecified): 1,900 - Collection of new debts in the current year (percent of new debt in the year): 2012 Target 1/: 20.0% ; 2012 Actual End-Dec.: 10.5% ; End-Jun.: 14.0% ; End-Dec. (later): 24.5% - Tax audits and collection of large tax payers (selected): - Number of risk-based full scope audits in the year 2/: 2012 Target: 300 ; 2012 Actual End-Dec.: 76 ; End-Jun.: 176 ; End-Dec. (later): 596 - Number of risk based temporary audits in the year 3/: 2012 Target: 325 ; 2012 Actual End-Dec.: 271 ; End-Jun.: 260 ; End-Dec. (later): 680 - Collection full scope audits in the year (percent of assessed tax and penalties): 50.0% target ; 2012 Actual End-Dec.: 64.5% ; End-Jun.: 65.0% ; End-Dec. (later): 75.0% - Collection temporary audits in the year (percent of assessed tax and penalties): 50.0% target ; 2012 Actual End-Dec.: 49.2% ; End-Jun.: 45.0% ; End-Dec. (later): 55.0% - Audits and collection of high wealth individuals: - Number of completed risk-based audits in the year 4/: 2012 Target: 1,300 ; 2012 Actual End-Dec.: 444 ; End-Jun.: 280 ; End-Dec. (later): 910 - Collection of assessed audits in the year (percent of assessed tax and penalties): 50.0% target ; 2012 Actual End-Dec.: 78.4% ; End-Jun.: 40.0% ; End-Dec. (later): 65.0% - Internal control and human resource integrity: - MoF audit of assets of managers of local tax offices 5/: Target 50 ; 2012 Actual End-Dec.: 110 - MoF audit of assets of auditors 5/: Target 50 ; 2012 Actual End-Dec.: 130 - Notes: - 1/ Cumulative audits from January of each year (or end-2012 for 2012 targets where specified). - 2/ If the actual amount of tax and penalty assessed is less than €107 million in April, the targeted number of audits in June will be increased to ensure achievement of overall annual amount of tax and penalty assessed of at least €668 million. - 3/ If the actual amount of tax and penalty assessed is less than €40 million in April, the targeted number of audits in June will be increased to ensure achievement of overall annual amount of tax and penalty assessed of at least €313 million. - 4/ If the actual amount of tax and penalty assessed is less than €28 million in April, the targeted number of audits in June will be increased to ensure achievement of overall annual amount of tax and penalty assessed of at least €187 million. - 5/ The audit is performed by the Internal Affairs Directorate of the MoF. *Source: IMF staff (content unit: _cr13153 - 30. Reforms to strengthen market-supporting institutions will focus on the following:).* ### Annex III. Prior Action: Key Performance Indicato ### Annex III. Prior Action: Key Performance Indicators on Public Financial Management Reforms ### Indicators and coverage figures - 2012 entity coverage 1/ 91% - New entities 2/ 55% - 2012 entity coverage 1/ 2% - New entities 2/ 30% - 2012 Target / 2012 Actual (table fragments preserved): - 2012 entity coverage 1/ 90% / 85% - 2013 entity coverage 2/ 80% / 97% - 2012 entity coverage 1/ 1% / 4% - 2013 entity coverage 2/ 10% / 1% - 2013 entity coverage 2/ 65% / 93% - Source: IMF staff. - Footnotes preserved verbatim: - 1/ Includes old entities with 2011 spending above €1 million. - 2/ Includes new entities in the end-Septemeber 2012 ELSTAT register with spending above €1 million. - Target statements (text preserved): - 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, is above the target. - 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 commitment registers and the total arrears reported through monthly surveys, i.e. the sum across all entities of the absolute value of (arrears monthly survey less arrears E-portal) divided by total arrears multiplied by 100, is below target. - c. Percentage of institutional units (State and general government entities) reporting on the E-portal of GAO all the prescribed items with financial information of the circular on commitment registers at the end of each month, based on data from their commitment registers, is above the target. ### Key Performance Indicator focus - Emphasis on E-portal reporting by institutional units (State and general government entities) covering: - total budget allocations (including revisions), - pending outstanding commitments, - unpaid commitments, - arrears data (ordinary and investment). - Measurement basis: - monthly end-of-month reporting, - data sourced from entities’ commitment registers, - comparison between E-Portal reporting and monthly survey aggregates (discrepancy metric described above). --- ### Appendix V. Technical Memorandum of Understanding (May 20, 2013) ### Purpose and scope - The TMU defines indicators subject to quantitative targets (performance criteria and indicative targets) and methods for assessing program performance. - Commitment to provide the European Commission, ECB and the International Monetary Fund with necessary information for program monitoring. ### Program exchange rates (for program purposes) - Program exchange rates are those that prevailed on January 31, 2012: - €1 = 1.3176 U.S. dollar - €1 = 100.63 Japanese yen - €1.1772= 1 SDR - Exception: items affecting government fiscal balances will be measured at current exchange rates. ### Definition: General Government (for program purposes) - Includes: - The central government, comprising: - entities covered under the State Budget as defined in Chapter 2 of Law 2362/1995 as modified by Law 3871/2010; other entities belonging to the budgetary central government; - other entities or extra-budgetary funds (EBFs) classified under central government per ESA95 (includes the Green Fund and the HRADF); - state enterprises and organizations included by ELSTAT under central government (listed explicitly: ATTIKO METRO, OSY, ELGA, HELLENIC DEFENCE SYSTEMS S.A., OSE, TRAINOSE, ERT, ELECTROMECHANICA KYMI LTD, OPEKEPE, KEELPNO, EOT, GAIAOSE, ERGOSE, INFORMATION SOCIETY IN GREECE, Unit for the Organization and Management of Development Projects S.A.). - Local government comprising municipalities, prefectures, and regional governments including their basic and special budgets, including all agencies and institutions attached thereto, 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. - Any new funds or other special budgetary and extra budgetary programs created during the program period to carry out operations of a fiscal nature (government will inform IMF, European Commission and ECB staff of creation immediately). ### Supporting material (reporting commitments) - Ministry of Finance (MoF) to provide 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 domestic and foreign cash balances of the central government at the central bank of Greece, - all other sources of financing including capital transactions, - arrears of the general government. - MoF (with Ministry of Interior) to provide monthly data on local governments’ revenues and expenditures. - MoF (with Ministry of Labor and Ministry of Health) to provide monthly data on main social security funds (including IKA, OGA, OAEE, OAED) and the central healthcare fund (EOPYY). - Bank of Greece to provide detailed monthly data on assets and liabilities of local authorities, social security funds, the Green Fund (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 (monthly reporting timelines preserved in other sections where specified). --- ### D. Floor on the Modified General Government Primary Cash Balance (MGGPCB) (Performance Criterion) ### Definition and composition - MGGPCB = modified general government cash balance (MGGCB) minus interest payments by the state budget. - MGGCB = sum of: - cash balances of the ordinary state budget, - cash balance of the public investment budget, - change in net financial assets of local government, - change in net financial assets of social security, - change in net financial assets of the Green Fund, - change in net financial assets of reclassified public enterprises (RPEs), - minus guarantees called to entities within the general government. - Exclusions: - Privatization receipts and proceeds from the sale of land and buildings are excluded from cash receipts (with specified exceptions noted below). - Net lending operations by the state budget will be recorded as cash expenditures. ### Components detailed - Cash balance of the ordinary state budget: - measured from above the line: - (i) gross ordinary budget revenues (recurrent + non-recurrent revenue, minus tax refunds (excluding any payments for the clearance of tax refunds in arrears)); - minus (ii) ordinary budget expenditures as published monthly on the official website of the General Accounting Office of the Ministry of Finance, consistent with budget line items. - Ordinary state budget expenditures 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 assumes payments on behalf of entities outside of the general government. - Cash balance of the public investment budget: - measured from above the line: investment budget revenues minus investment budget expenditures as published monthly on the official website of the General Accounting Office. - Change in net financial assets of local governments: - transactions basis: change in total financial assets minus financial liabilities of local authorities adjusted for valuation changes by the Bank of Greece. - Financial assets include deposits of local governments in the Bank of Greece and in domestic credit institutions (measured at face value excluding accrued interest). - Financial liabilities include short- and long-term loans from domestic credit institutions measured at face value, consistent with monetary survey data. - Change in net financial assets of social security funds: - transactions basis: change in total financial assets minus financial liabilities of social security funds adjusted for valuation changes by the Bank of Greece. - Financial assets include: - deposits of social security funds in the Bank of Greece and domestic credit institutions and deposits held either directly or indirectly through the IKA mutual fund (measured at face value excluding accrued interest), - holdings of shares quoted on the Athens Stock Exchange held by social security funds either directly or indirectly through the IKA mutual fund, - direct or indirect holdings of Mutual Fund units issued by Greek management companies (other than the IKA mutual fund), - holdings of central government bonds (measured at nominal value), - holdings of bonds issued abroad and other foreign assets. - Financial liabilities include short and long term loans from domestic credit institutions to social security funds measured consistently with monetary survey data. - Change in net financial assets of the Green Fund: - transactions basis: change in total financial assets minus financial liabilities of the Green Fund adjusted for valuation changes by the Bank of Greece. - Financial assets include deposits in the Bank of Greece and domestic credit institutions (measured at face value excluding accrued interest), holdings of shares quoted on the Athens stock exchange, holdings of Mutual Fund units issued by Greek management companies, holdings of central government bonds, holdings of other bonds issued abroad. - Financial liabilities include short and long term loans from domestic credit institutions or other lending from the Bank of Greece measured consistently with monetary survey data. - Change in net financial assets of reclassified public enterprises (RPEs): - transactions basis: change in total financial assets minus financial liabilities of RPEs, adjusted for valuation, minus amount of guarantees called from entities consolidated within the general government. - RPEs included (explicit list): ELGA, KEELPNO, OPEKEPE (excluding the account ELEGEP), EOT, ATTIKO METRO, HELLENIC DEFENCE SYSTEMS S.A., ERT, TRAINOSE, ERGOSE, GAIAOSE, OSY, ELECTROMECHANICA KYMI LTD, INFORMATION SOCIETY IN GREECE, MANAGEMENT ORGANISATION UNIT, TAIPED (HRADF) and OSE. - Financial assets include deposits of RPEs in the Bank of Greece and credit institutions (domestic and foreign) measured at face value excluding accrued interest; holdings of shares quoted on the Athens Stock Exchange; holdings of Mutual Fund units issued by Greek management companies; holdings of central government bonds; holdings of other bonds issued abroad. - Financial liabilities include short and long term loans from domestic credit institutions to RPEs (consistent with monetary survey data), loans from the foreign banking system, 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 made by the companies themselves, upon monitoring and information provided by the General Accounting Office (D25). ### Other provisions (program-specific adjustments) - The MGGPCB will exclude all transfers related to the Eurogroup decisions of February 21, 2012 and November 26, 2012 in regards to income of euro area national central banks, including the BoG, stemming from their investment portfolio holdings of Greek government bonds. - Receipts from privatization are excluded from cash general government revenue receipts, except: - sales of gaming licenses, telecom licenses, sales of aircrafts, and extension of the airport concession 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. - Primary expenditure of the central government excludes payments related to bank support (examples of excluded transactions include loans to financial institutions and investments in equity of financial institutions (requited recapitalization); unrequited recapitalization; purchases of troubled assets; operations related to the FSF). Any financial operation by central government to support banks, including issuance of guarantees or provision of liquidity, will be immediately reported to IMF, European Commission, and ECB staff. - Primary revenue of the central government excludes any cash payments from loss-making banks beyond those which would accrue from the ELA guarantee fee structure existing on November 30, 2012 (25 basis points). - 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. ### Supporting material and reporting timelines - Data on cash balances of the ordinary and state budgets will be provided by the General Accounting Office in the Ministry of Finance within three weeks after the end of each month. - Data to include detailed information on revenue and expenditure items, in line with monthly reports published on the official website of the Ministry of Finance, and 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 the Green Fund, AKAGE, and reclassified public enterprises will be provided to 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. --- ### E. Ceiling of State Budget Primary Spending (Performance Criterion) ### Definition - State budget primary spending = state budget spending (ordinary state budget + public investment budget) minus interest expenditures paid by the state budget, minus any arrears payments made. - Ordinary state budget spending includes called guarantees to entities inside the general government (contrast with MGGPCB definition which excludes this spending item). - Primary expenditure of the central government 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 include loans to financial institutions and investments in equity of listed and non-listed financial institutions (requited recapitalization); unrequited recapitalization; purchase of troubled assets. - Any financial operation by central or general government to support banks, including issuance of guarantees or provision of liquidity, will be immediately reported to European Commission, ECB and IMF staff. ### 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. --- ### F. Ceiling on the Stock of Domestic Arrears (narrow definition) (Performance Criterion) ### Definition - Domestic arrears (narrow definition) comprise: - (i) unpaid invoices of line ministries and hospitals that are 90 days past their due date; - plus (ii) tax refunds for which a refund document “AFEK” has been issued and cleared but have not been repaid to the taxpayer. - If 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. - The stock of arrears excludes hospital arrears to pharmaceutical companies which were incurred by end-2009 (€113 million as of November 30, 2012). - Phased inclusion of tax refund claims: - Beginning July 1, 2013, the definition will include the change in the stock of tax refund claims that have not been assessed within 90 days (cumulative from July 1). - Beginning January 1, 2014, it will include all tax refund claims that have not been assessed within 90 days. - In both cases refund claims that are under legal dispute will be excluded. *Source: _cr13153 - Annex III. Prior Action: Key Performance Indicatos on Public Financial Management Reforms (IMF staff content as provided).* ### 9. Supporting material. Monthly data on arrears of public hospitals (NHS hospitals) will be ### _cr13153 - 9. Supporting material. Monthly data on arrears of public hospitals (NHS hospitals) will be ### Arrears reporting and 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. - Expenditure 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. - Reports will include data on accounts payable overdue by 0–30, 31–60, and 61–90 days for the central government (line ministries and Decentralized Prefectures) based on the commitment registers. - Tax refund arrears data will be based on information provided by General Secretariat for Information Systems and General Secretariat for Tax and Customs. - The Ministry of Finance will provide a monthly table on tax refund arrears as defined above (with AFEK issued) as well as on full tax refund accounts payable that include any refund claims for which AFEK has not been issued (and showing those that have not been assessed after 90 days). ### G. Ceiling on the Stock of Domestic Arrears of the General Government (Indicative Target) - Definition: - Domestic arrears of the general government are defined as: - (i) unpaid invoices of general government entities that are 90 days past their due date; plus - (ii) tax refunds for which a refund document “AFEK” has been issued and cleared but have not been repaid to the taxpayer. - If 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. - The stock of all general government arrears excludes: - (i) the arrears accumulated by the Civil Servants’ Welfare Fund; and - (ii) hospital arrears to pharmaceutical companies which were incurred by end-2009 (€113 million as of November 30, 2012). - Beginning July 1, 2013, the definition will include the change in the stock of tax refund claims that have not been assessed within 90 days (cumulative from July 1). - Beginning January 1, 2014, it will include all tax refund claims that have not been assessed within 90 days. - In both cases refund claims that are under legal dispute will be excluded. - Supporting material: - The Ministry of Finance will provide consistent data on monthly expenditure and tax refund 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. - Expenditure 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. - Reports will include accounts payable overdue by 0–30, 31–60, and 61–90 days for the central government (line ministries and Decentralized Prefectures) based on the commitment registers. - Tax refund arrears data will be based on information provided by General Secretariat for Information Systems and General Secretariat for Tax and Customs. ### H. Ceiling on the Overall Stock of Central Government Debt (Performance Criterion) - Definition: - Overall stock of central government debt refers to ESA95 central government debt, including the state debt, debts of extra budgetary funds and public enterprises consolidated into the central government, and other ESA 95 adjustments. - Holdings of intra-government debt will be netted out. - Defined for program purposes as total outstanding gross debt liabilities, including but not limited to liabilities in the form of securities and loans. - Excludes accounts payable. Debt will be measured at nominal value. - Program exchange rates 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. - The ceiling excludes debt arising from payments for bank restructuring, when carried out under the program’s banking sector restructuring strategy (does not cover debt related to the Financial Stability Fund). This includes: - loans to financial institutions and investments in equity of financial institutions (requited recapitalization); - unrequited recapitalization; - purchase of troubled assets. - Any financial operation by the central government to support banks, including 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. - Adjusters: - 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 2012 ESA95 central government debt of €311.4 billion. - 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. ### I. Ceiling on New Central Government Guarantees (Performance Criterion) - Definition: - Ceiling includes new guarantees granted by the state and by any other entity classified under ESA95 under central government, but excludes guarantees to entities whose debt is covered under the ceiling on the stock of central government debt. - The ceiling shall exclude: - (i) guarantees to support banks; - (ii) guarantees related to EIB financed loans; - (iii) guarantees granted by ETEAN (up to a total amount of €50 million provided these are fully backed by an equivalent amount of bank deposits); - (iv) 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. - New guarantees are guarantees extended during the current fiscal year; for guarantees whose maturity is being extended beyond the initial contractual provisions, only 50 percent of the full value will be counted. - Modification of existing guarantees (without changing maturity, amount, and beneficiaries) will not be treated as new guarantees. - 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 new guarantees they extended to the General Accounting Office on a monthly basis within three weeks after the end of each month. ### J. Non-Accumulation of External Debt Payment Arrears by the General Government (Continuous Performance Criterion) - Definition: - An external debt payment arrear is 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. - “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 applies on a continuous basis throughout the program period. - 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. ### K. Floor on Privatization Proceeds (Indicative Target and Performance Criterion) - Definition: - Privatization proceeds defined as cash receipts from asset sales by HRADF, cash receipts from direct government sales, and cash receipts from eventual sale of any bank participations through the HFSF, the HRADF, or from the government directly. - Included: 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; sale of rights and concessions (including securitization of the proceeds of concessions); and other assets in the authorities’ privatization program. - Proceeds valued in euro and reported on a gross basis, excluding associated capital expenditure, restructuring costs, and HRADF operating costs including fees of advisors related to the specific privatization. - Proceeds measured as inflows of cash received by the HRADF as deposited in the Segregated Account at the Bank of Greece within 10 days after the settlement of the transaction. - Supporting material: - Quarterly information on 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 HRADF, no later than 60 days after the end of each quarter. - Other reporting: - 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. ### L. ESA “Program” Deficit and Overall Monitoring and Reporting Requirements - ESA program deficit adjustments (EDP B.9): - (i) Sale of non-financial assets such as land, buildings, and other concessions or licenses will be excluded, unless agreed in the context of the program. - (ii) Costs related to banking support as defined in MGGPCB above will be excluded. - (iii) All payments relating to tax refund claims made before September 2012 will be excluded. - (iv) The accrual revenue from the PPC levy of a given year will include cash receipts within the year plus amounts pertaining to the given year received through March of the following year. - (v) All transfers related to the Eurogroup decisions of February 21, 2012 and November 26, 2012 in regard to income of euro zone national central banks will be excluded, including the BoG, stemming from their investment portfolio holdings of Greek government bonds (schedule B provides the latest estimates). - ESA primary balance: - Defined as general government ESA95 balance (EDP B.9) minus ESA 95 general government consolidated interest payable (EDP D.41). - Overall monitoring and reporting requirements: - Performance under the program will be monitored from data supplied to the EC, ECB, and IMF by ELSTAT, the Ministry of Finance, the General Accounting Office, and Bank of Greece. - The authorities will transmit to the IMF, EC, and ECB staff any data revisions in a timely manner. ### M. Floor on Mandatory Exits (Indicative target) - Definition: - Employees counted as mandatory exits to the private sector will originate from those that: - (i) are employed by the general government (ESA95 definition) on a permanent employment contract or on a contract of indefinite duration; and - (ii) have no entitlement to early retirement within the next 3 years. - Mandatory exit means the employee leaves the public sector on an involuntary basis, but includes exits from the mobility scheme to the private sector. - Mandatory exits are not entitled to severance pay or any other form of compensation (if not provided for under current legislation). - Excludes employees leaving because the entity is being privatized or leaving as part of restructuring ahead of a privatization. - Employees separated for outsourcing will not qualify to be replaced under the 1:1 re-hiring rule. - Mandatory exits cannot be rehired into the public sector except via a merit-based selection procedure by ASEP, open to external candidates. - Annual Overall Employment Ceilings for the General Government (persons) - Table values: - 2012: General Government 727,458; Ordinary staff 628,412; Other staff 71,503; Chapter A entities 24,914; Chapter A fixed term contracts 2,629. - 2013: General Government 691,493; Ordinary staff 608,383; Other staff 56,089; Chapter A entities 24,392; Chapter A fixed term contracts 2,629. - 2014: General Government 664,950; Ordinary staff 588,174; Other staff 50,398; Chapter A entities 23,749; Chapter A fixed term contracts 2,629. - 2015: General Government 643,367; Ordinary staff 569,502; Other staff 48,122; Chapter A entities 23,114; Chapter A fixed term contracts 2,629. - 2016: General Government 624,000; Ordinary staff 552,854; Other staff 46,074; Chapter A entities 22,443; Chapter A fixed term contracts 2,629. - Notes: - Note 1. The number of employees in Chapter A entities will be adjusted for any privatizations. - Note 2. The number of employees in Chapter A entities will be adjusted for the inclusion of employees of municipal private law legal entities. These employees are already in the wage bill but not yet counted in the Census Data Base. - Note 3. Some small private law legal entities are being verified whether they belong in the general government. If so and their employees are already in the wage bill, the above ceilings will be adjusted accordingly. - Note 4. The above ceilings are based on GAO projections and reflect the measures of the MTFS 2013-2016 as well as other assumptions that may be updated in cooperation with the EC/ECB/IMF. ### N. Floor on Entrants to the Mobility Scheme (Indicative Target) - Definition: - Employees counted as transferred to the mobility scheme will originate from those employed by the general government (ESA95 definition) on a permanent employment contract or on a contract of indefinite duration. - Entrance into the labor mobility scheme is defined when the employee’s payment is reduced to 75 percent of the remuneration in the case of “availability,” or to one-third of the remuneration in the case of “disciplinary suspension.” - Does not include employees that belong to entities that are in the process of being privatized or that are part of a restructuring ahead of a privatization. - Supporting material: - The Ministry of Public Administration Reform (MAREG) will report monthly (15 days after the closing of each month) for the mobility scheme on entrants (number, entity they previously belonged to, reason for entry) and departures (number, reasons for departure, new entity transferred to/exits), and the stock of employees currently in the scheme. - MAREG will report monthly (15 days after the closing of the month) on exits, the number, the general government entity they came from, the reason for the exit, if any. - MAREG will report monthly (15 days after the closing of the month) the stock of general government employees defined as in the Census Data Base. - Mobility and Exit Scheme (Quarterly Targets) — Staffing Plans - total personnel covered: 650,787 - Into Mobility Scheme / Exits from government — Quarterly breakdown: - 2013 Q2: Into Mobility Scheme 455,895; Exits from government 12,500 - 2013 Q3: Into Mobility Scheme 109,105; Exits from government 2,000 - 2013 Q4: Into Mobility Scheme 85,787; Exits from government 12,500 and 2,000 (table shows 12,5002,000 and then totals) - 2013 Total: 650,787 into Mobility Scheme 25,000; Exits from government 4,000 - 2014 Q1: Exits from government 1,000 - 2014 Q2: Exits from government 4,000 - 2014 Q3: Exits from government 2,000 - 2014 Q4: Exits from government 4,000 - 2014 Total: Exits from government 11,000 - Sum total: 650,787 into Mobility Scheme 25,000; Exits from government 15,000 - Source: MAREG. ### O. Prior Actions (revenue administration and institutional reforms) - Adopt legislation to achieve a semi-autonomous revenue administration (defined as the entire remit of the General Secretariat of Public Revenue), including the following steps: - Transfer to the revenue administration the following units: - Ministry of Finance internal affairs department. - All functions, personnel, and budget allocations associated with the following departments of GSIS: Directorate 30, including: - (i) the department for taxation, income, capital and vehicles, including transfers taxation, inheritances, donations and property taxation (Department A); - (ii) the department for VAT and special taxes (Department B); - (iii) the customs department (Department C); - (iv) all revenue-related functions of the department for general application (Department F); and all departments of the directorate for inputs and control of computer data (Directorate 32). - All the tax and customs administrative functions, personnel, and budget allocations necessary to exert the competences specified in case β' par. 2 and cases α' and δ' of par. 5, article 30 of L. 3296/2004, including: - (i) preemptive checks and temporary tax audits, especially for withholding and imposed taxes, focusing on Value Added Tax (VAT); - (ii) checks of transit, imports and exports, trading, supply and distribution of products subject to Special Consumption Tax (Excise Duty); - (iii) checks of customs warehouses; - (iv) checks the goods under special duty-suspension procedures and implementation of customs legislation in general; - (v) checks in means of transportation, shops, warehouses, etc; - (vi) Confiscation of books, documents, goods, means of transportation and other evidence. - Create a five member advisory board comprised of high level experts to be appointed by the Minister of Finance (two of which will be selected among persons with significant international work experience in revenue administration). - The SGPR will be an ex-officio member of the board. - The advisory board will report to the Minister of Finance, give advice on major matters of revenue administration strategy including human resource issues, monitor performance of the revenue administration against plans and targets, support the revenue administration in managing external stakeholders, and provide assurance that the SGPR is exercising powers appropriately. - The Board will have no role in taxpayer specific issues, and will not have access to any specific taxpayer information. - A ministerial decision will determine qualifications, duration of appointment and compensation for board members and will specify rules for dealing with conflict of interest, reporting to the Minister, and administrative support for the board. - The Board members term will be three years. - Provide that any advice of MAREG to the revenue administration on organizational matters has to be given within a 14-day time frame. - Enable the SGPR to determine the conditions for hiring under the control of ASEP. - Create a budget code for budget approval by parliament that encompasses all organizational units of the revenue administration (to enable a separate and unified budget allocation). - Establish a small financial management unit in the revenue administration that manages its budget (while maintaining the role of the GDFS as overall budget coordinator and financial controller for the Ministry of Finance’s aggregate budget appropriation) with functions to: - (i) coordinate the preparation of the revenue administration’s budget; - (ii) follow up its implementation; - (iii) propose reallocations of non-wage recurrent spending in line the organic budget law. - Authorize the SGPR to determine a grading and promotion system for the revenue administration subject to approval by the Minister of Finance. - The MoF will restart the institutional reform working group (IRWG), chaired by the SGPR, whose reports will be shared with the Minister and Troika. - The IRWG will analyze and map constraints to the operational and administrative autonomy of the SGPR and propose immediate solutions. - The IRWG examination will incorporate limits to autonomy within: - Revenue laws (income tax, VAT, property tax, customs and excise and other taxes administered by the SGPR). - Other general laws related to human resources and financial management within the civil service. - Powers delegated to the SGPR. - The IRWG will determine whether additional changes to law are required to authorize SGPR competence for tax administration beyond singular decisions affecting taxpayers. *International Monetary Fund staff summary of supporting material and requirements contained in the referenced program text.* ### 29. Benchmark on progress in revenue administration, 2012–13. Progress in revenue ### Benchmark on progress in revenue administration, 2012–13. Progress in revenue ### Definitions (revenue administration) - 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 assessment has been issued, or the audit report states that no underpayment has occurred. - Audit reports which are brought to the Tax Dispute Administration Resolution Committee (Article 70A Committee) for settlement after 1 January 2013 are defined as a completed audit when the case is submitted to the committee. - High Wealth Individual (HWI) audits carried out on a legal person owned or controlled by the high wealth individual will also be regarded as an HWI audit case if the audit is carried out by the auditor(s) who carry out the audit of the relevant high wealth individual. - The assessment amounts from the audit reports submitted to the Article 70A committee are included when reporting on the assessment performance for HWI and Large Taxpayer Unit (LTU) audits. - The assessment amount is only included for reporting on the LTU and HWI audit case collection performance when the final assessment is issued following the decision of the committee. - These amounts shall be adjusted for any difference between the audit report assessment amount and the final assessment amount. - Risk-based audits for large taxpayers are defined as audits selected on a risk basis using the ELENXIS audit management system. - Collection on HWI and LTU full scope audits and temporary audits are amounts collected in the year from such LTU and HWI audits completed during the year or previous years. - Collection of tax debt does not include debts such as calls on loan guarantees, fines, etc., of non-tax nature for which the tax authority is responsible for collecting on behalf of other public sector entities. - In 2013, new tax debt collection includes collection of debt accrued in the month of December, 2012. - An audit of assets of a manager, director or auditor includes an audit of all assets, both movable and immovable, including those of his/her spouse. - This will include but will not be limited to an examination of all his/her financial accounts for a period of up to 10 years from a current date, all immovable assets compared against information from State registries and of the acquisition of all moveable assets. - The purpose of this audit will be to trace and justify the legal acquisition of these assets. - These audits will be conducted annually by the Internal Affairs Directorate of the MoF. ### Reporting and supporting material (revenue administration) - Monthly information to be made available by the Minister of Finance no later than two weeks after the end of each month, covering: - Risk-based full-scope audits and temporary audits of large taxpayers, self employed and high wealth individuals, and VAT non-filers. - Collection of assessed taxes and penalties. - Collection of tax debt. - Audits of asset declarations from auditors and managers of local tax offices. - Monthly submission content (for each local tax office and special unit) to include: - Number of audits. - Hours spent on audits. - Assessed tax specified for income tax and VAT. - Assessed penalties and surcharges. - Collected tax amount from assessments. - Collected penalties and surcharges from assessments. - Specification for temporary and full scope audits. ### Benchmark on progress in public financial management, 2012 and definitions - Progress in implementing public financial management reforms in 2012 will be defined as reaching or exceeding the targets set in MEFP Table 2. - For the 2012 target, the reporting institutional units (State and general government entities) include any unit under the general government as defined in paragraph 32 of the March 2012 TMU. - For subsequent targets, the reporting institutional units (state and general government entities) include any unit under the general government as defined by ELSTAT as of end-September 2012 whose overall annual spending exceeded €1 million in 2011. - From March 2013, entries under the e-portal will include all fields with financial information as prescribed in the GAO circular of Dec 29, 2010 (protocol number 2/91118/0026); this includes inter alia cumulative appropriations released, commitments made, the sum of invoices received, and payments made. ### Supporting material (public financial management) - 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 June 2013 unless discrepancies between survey and e-portal data are fully eliminated. - An authoritative list of entities included under general government as defined by ELSTAT (including their share of overall annual spending in 2011) will be made available by ELSTAT by June 30, 2013. *Source: _cr13153 - 29. Benchmark on progress in revenue administration, 2012–13. Progress in revenue* ### 5.1 Promoting an efficient and competitive business environment ......................................... 158 ### _cr13153 - 5.1 Promoting an efficient and competitive business environment ### Summary of main findings and policy orientation - The document emphasizes promoting an efficient and competitive business environment through: rationalising/eliminating quasi-fiscal charges; reducing procedural and administrative burden; enhancing competition and better regulation; and implementing a Growth Strategy (sections 5.1.1–5.1.4). - It links structural reforms (notably privatisation and judicial reform) to fiscal consolidation, debt reduction, increased efficiency of enterprises, and attraction of foreign direct investment. ### Fiscal outcomes and recent performance (overview) - The primary deficit in 2012 was around 1.3% of GDP, lower than the targeted 1.5% of GDP, owing to under-execution of discretionary expenditures and stronger-than-expected outturn in local governments, state-owned enterprises and extra budgetary funds, which more than offset weak revenue performance and collection of social security contributions. - Revenue shortfalls in 2013-14 were identified, arising mainly from: social security contribution collection; lower than expected receipts from the equalisation in the tax rates on diesel oil; and incomplete implementation of a few large previously agreed consolidation measures (progressive pensions cuts; new wage grid for parliamentary staff and in some SOEs; levy on ship owners). ### Offsetting measures and one-off factors closing budget gaps - Government offset measures include: - Replacement of the unimplemented solidarity contribution for self-employed (for 2013) by tightening of pension requirements for uninsured individuals and audits of pension entitlements. - Substitution of the planned increase in public transportation ticket prices by a reduction in transfers to entities outside the General Government and rationalisation of public services. - Extension of the property tax collected via the electricity bill to secure revenues of EUR 1.9 billion in 2013 by compensating a 15% rate reduction with a broadening of the tax base. - Commitment to fully implement the solidarity contribution for self-employed in 2014. - Introduction of a new real estate tax (expected to succeed the PPC levy) designed to be budget-neutral and ensuring the annual revenue already envisaged in the MTFS. - One-off factors contributing to closing the budget gap: - Extraordinary transfers of income from the Bank of Greece to the state due to exceptional profits. - Newly devised settlement schemes expected to facilitate repayment of recently accumulated debt and recover some lost revenues. - Savings from lower-than-expected heating oil subsidies appropriations. ### Programme fiscal targets and debt path - General government primary surplus targets (programme terms): - EUR 0 million (0.0% of GDP) in 2013. - EUR 2,750 million (1.5% of GDP) in 2014. - EUR 5,700 million (3.0% of GDP) in 2015. - EUR 8,975 million (4.5% of GDP) in 2016. - These imply overall government deficit targets: - 4.1% of GDP in 2013. - 3.3% of GDP in 2014. - 2.1% of GDP in 2015. - 0.8% of GDP in 2016. - Cyclically-adjusted primary balance to GDP ratio and government deficit to GDP ratio path (as presented): - Cyclically-adjusted primary balance to GDP ratio: from 4.5% in 2012 to 6.2% in 2013 and an average of about 5½% of GDP in 2014-16. - Cyclically-adjusted government deficit to GDP ratio: -½% in 2012, 2.1% in 2013, 1.5% in 2014, 0.5% in 2015 and -0.4% in 2016. - The adjustment path, taking into account debt-reducing measures implemented in December 2012, would be consistent with a general government consolidated debt ratio to GDP of below 160% in 2016. - Proceeds from privatisation of financial and non-financial assets, transactions related to bank recapitalisation and other bank support measures, as well as transfers related to the Eurogroup decision of 21 February 2012 regarding income of euro zone national central banks (including the Bank of Greece) stemming from their investment portfolio holdings of Greek government bonds, shall not reduce the required fiscal consolidation effort and shall not be counted in the assessment of these targets. ### Measures required prior to disbursement - The Government will: a. adopt legislation to extend collection of the real estate tax through 2013 via PPC, introducing four changes: - (i) a reduction of 15 percent in the rate; - (ii) imposition of the tax on buildings not legally exempted from municipal duties; - (iii) calculation of tax on buildings outside urban planning zones on a different basis (based on average legal value for the relevant municipality); - (iv) implementation of the tax on all buildings which are leased to the state by non-exempted private owners. - Separately, a new law on taxation of real estate will be adopted by end-June for 2014 onwards. The new real estate taxation regime will consolidate a number of now separate taxes and will be designed to be budget neutral ensuring a annual revenue of at least EUR 2.7 billion. b. fully implement all other agreed fiscal measures for 2013 not yet in place. ### Additional fiscal contingency measures and planning - Additional Measures listed: 1. Following a decision on the final details of planned direct income tax reforms, the authorities will review the fiscal outlook for 2014 and agree with the EC/ECB/IMF on measures needed to close any residual gap for 2014 in the context of the next programme review. 2. If a fiscal gap in 2015-16 remains, possible strategies include: - improving revenue by broadening the tax base through further reduction in exemptions and deductions; - extending measures that are expiring; - targeted cuts in current expenditure; - refocusing the investment programme for more effective support to growth. - The authorities will specify concrete plans for 2015 no later than end-August 2013, when they will formulate a detailed fiscal programme for 2014-2015 consistent with a primary surplus of 3% by 2015. ### Privatisation: objectives, sequencing, and governance actions (Section 2.1) - Stated aims of privatisation: - Reduce public debt. - Reduce subsidies, transfers, or state guarantees to state-owned enterprises. - Increase efficiency of companies and the competitiveness of the economy. - Attract foreign direct investment. - Insulate the privatisation process from political pressures. - Safeguard: Provision of basic public goods and services by privatized industries will be fully safeguarded, in line with national policy goals and compliance with the EU Treaty and secondary legislation rules. Actions required and timelines: - Rapid adoption of necessary primary and secondary legislation and implementation decisions to implement the Privatisation Plan, including establishing regulatory frameworks for airports, ports, water, lotteries consistent with EU legislation and international best practices; transfer of assets to HRADF quickly; address state-aid related issues pending (referenced actions listed in Annex 9.1). - Privatisation of real estate assets given high priority; preparation actions (title clearance, licensing, etc.) with specific targets: - Transfer of full and direct ownership of 1000 commercially viable real estate assets to the HRADF (by end-2013). - Transfer to be done in four phases, with interim targets of 250 real estate assets per quarter (counting from January 2013). - Addressing the broader stock of public properties: - Some 80,000 public properties are under the management of ETAD; additional properties are managed by different ministries, with status often unknown or unverifiable. - Authorities to propose a plan to prepare remaining (not in the privatisation pipeline) real estate assets owned by the Hellenic Republic and managed by ETAD for securitisation or direct privatisation; other properties under other ministries to be brought under scope (deadline: November 2013). - ETAD to present proposals to improve governance, effectiveness and ability to carry out tasks, completed in stages and according to plan by November 2013. - Bring all remaining (non-operational) properties under the management of ETAD in steps to be completed by December 2013 with reporting milestones: - first progress report by June 2013 on numbers of properties by Ministry/Public Entity, nature, state, and current use where applicable; - second progress report by August 2013 on number already transferred to ETAD; - third progress report by October 2013 on number already transferred to ETAD; - final report by December 2013. - Ensure no transfer or withholding of any real estate assets without prior consultation and agreement with the HRADF and the EC/IMF/ECB to entities other than the HRADF, including municipalities and the recently established pension fund SPV or other dedicated legal entities, until assets necessary for the privatisation plan have been secured (Continuous). - HRADF, drawing on an ESM-prepared report, will assess the possibility of raising additional revenues from the private sector—focusing on international investors—by means of securitisation of assets and exploitation of assets not yet included in its privatisation plan (continuous). *Source: _cr13153 - 5.1 Promoting an efficient and competitive business environment* ### 7. The HRADF will continue to be tasked with selling assets as quickly and effectively as ### _cr13153 - 7. The HRADF will continue to be tasked with selling assets as quickly and effectively as ### HRADF and privatisations - HRADF will be tasked with selling assets "as quickly and effectively as possible." - There will be no further political review once an asset has been transferred to the HRADF (Continuous). - HRADF reporting requirement: - Publish quarterly reports on steps to facilitate privatisations, financial accounts, including a profit and loss statement, a cash flow statement, and a balance sheet, no later than 60 days after the conclusion of every calendar quarter (Continuous). - Securing privatisation receipts, cumulative since June 2011: - at least EUR 1.6 billion by end-2012 - EUR 4.2 billion by end-2013 - EUR 6.5 billion by end-2014 - EUR 7.7 billion by end-2015 - EUR 11.1 billion by end-2016 ### 2.2 Tax policy reform - By June 2013, Government to make fully operational a standard procedure for revision of legal values of real estate to better align them with market prices for capital taxation for fiscal year 2014. - Authorities will adopt a unified and simplified income tax code (June 2013). - Authorities will develop tax policy capacity in the policy unit of the Ministry of Finance with appropriate and adequate legal and economic expertise for development, economic impact, and revenue assessment of new tax policy initiatives (September 2013). ### 2.3 Revenue administration reforms — objectives and approach - Reform programme to address all weaknesses, support fight against tax evasion and corruption, and ensure more autonomy for the tax administration for day-to-day operations while leaving policy matters to Government. - Reform to be gradual and assess impact of each step. - Key operational directions: - Continue re-organisation of tax offices to increase efficiency of audits and tax collection. - Improve methods using risk assessment techniques to focus audits on high yield targets and substantial issues; requires second phase improvement of the Code of Books and Records and creation of a new single tax procedure code. - Reinforce tax collection; consolidate debt collection into a small number of offices with full time specialized collection staff; integrate collection of debt related to social security contributions and local government where possible. - Improve management under a Secretary General for Public Revenue (SGPR) with increased powers; managers and auditors subject to performance targets and regular assessment; SGPR must have capacity to replace non-performing managers and auditors; managers must rotate regularly. - Reorganize structure of Secretariat General for Public Revenue to include audit, controls, information systems and internal audits. - Fighting tax evasion and corruption is a priority. - Replace current administrative review process with cost effective compulsory pre-settlement administrative procedure to reduce unnecessary tax litigation and lighten court burden. - Use structured technical assistance on an ongoing basis with the administration for new legislation and implementing decisions. ### Preconditions prior to disbursement (Revenue Administration) - Prior to disbursement, Government will: - Enact legal framework to transfer to the revenue administration the Ministry of Finance internal affairs department, and all tax and customs administration related functions within the General Secretariat for Information Systems (GSIS) and within the Corps for the Prosecution of Financial Crimes (SDOE). - Simplify procedure to classify debt as uncollectable, and suspend collection activities on uncollectable debt (subject to a joint decision with the Court of Audit for amounts more than €1.5 million). - Abolish requirement that all tax declarations for the previous 10 years must be audited while retaining right to continue to audit earlier years and discretion to audit any amount of declarations from these earlier years. ### 2.3.1 Organization — specific commitments and timing - Increase autonomy of the revenue administration: - Transfer all personnel functions and budget allocations of the Internal affairs department and the revenue-related departments of GSIS to the revenue administration, and draft and implement the service-level agreement between the SGPR and the GSIS (July 2013). - Transfer of revenue-related functions, personnel, and budget allocation of SDOE under the revenue administration is completed (October 2013). - Provide that any advice of MAREG to the revenue administration on organizational matters has to be given within a 14 day time frame (May 2013). - Enable the SGPR to determine conditions for hiring under the control of ASEP (May 2013). - Create a budget code that encompasses all organizational units of the revenue administration to enable a separate and unified budget allocation for approval by parliament starting with the 2014 budget (May 2013). - Establish a small financial management unit in the revenue administration to coordinate preparation and implementation of the revenue administration’s budget (May 2013), while maintaining role of General Directorate for Financial Services (GDFS) as overall budget coordinator and financial controller. - Review delegation of competencies to SGPR and GDFS and, if necessary, assign authority to SGPR to reallocate expenditures across budget lines in accordance with Organic Budget Law 2362/1995 (July 2013). - Authorize SGPR to determine a grading and promotion system for the revenue administration, subject to Minister of Finance approval (May 2013). - Centralisation and merger of local tax offices: - about 140 functioning offices (June 2013); - 120 when payment through banks is operational all over the territory (September 2013). ### 2.3.2 Fight against tax evasion, money laundering and corruption — actions and deadlines - Submit proposals for further simplification and improvement of the Code of Tax Recording of Transactions and corresponding amendments in commercial and accounting legislation (October 2013). - Revised Code of Tax Recording of Transactions will come into effect by 1/1/2014. - Reduce payment requirement to file a VAT return to a minimum (May 2013). - Complete certification of 2000 tax auditors by July 2013. - SGPR to provide plan, including training, for integration of new staff in the administration (May 2013). - Complete external hiring of additional 200 auditors (July 2013). - Ensure all staff assessed for performance on a bi-annual basis under new assessment system (Continuous). - Ensure adequate number of supervisors in HWI-HISE and LTU, including through reallocation from other activities (Continuous, starting June 2013). - SGPR issues decision to enhance targeted auditing based on risk assessment techniques (May 2013). - Implement indirect audit methods and allow application to any open tax audit to bring wealth and expenditures into determination of taxable income (May 2013). - SGPR issues circular introducing modern code of conduct concerning conflicts of interests and declaration of interests and a system for protecting whistle-blowers (May 2013). - Appoint national coordinator for anti-corruption, coordination committee and its chairman, advisory committee, and second the eight staff provided for by the law (May 2013). - Revise legislation to enable prosecution for major tax evasion regardless of the taxpayer paying the tax assessment in cases of settlement (May 2013). - Complete development of an IT system allowing immediate access to information about existence of bank accounts held by taxpayers and current balance on the account, to be implemented on a pilot basis (July 2013). - Full implementation of the action specified in (2.3.3.16) (September 2013). - Ministries and SOEs with fiscal relationship to taxpayers and beneficiaries utilize tax identification number for financial transactions with them (June 2013). - Make compulsory use of tax identification numbers for all official transaction with the whole public administration (December 2013). - Introduce system to consolidate and link all different identification numbers used across various government agencies (June 2014). ### 2.3.3 Tax and revenue collection — specific measures and timelines - SGPR completes consolidation of debt collection in largest tax offices (DOYs) by (September 2013). - Authorities will present plan for compulsory professional training programme for debt management staff (May 2013). - SGPR completes review of policy and procedures to write off tax debts (June 2013). - Introduce possibility of direct debiting of bank accounts for taxpayers in arrears (September 2013). - Replace payments in cash and cheque in tax offices with bank transfers (June 2013). - Authorities commit not to adopt new tax amnesties, or extend existing amnesties for collection of taxes and social contributions during years covered by the economic adjustment programme (Continuous). - Establish special working group to examine arrears stock across four largest Social Security Funds (SSFs), assess collectability, and identify collectible arrears for transferring to new single collection entity by (June 2013). - Working group to develop framework for coordination and integration of tax and social security contributions (SSC) arrears collection (September 2013). - Introduce revised surcharge regime for late payment of SSC by June 2013 that combines a penalty and an above market interest rate. - Repeal application of Code for Collection of Public Revenue for collection of social security contributions, and enact new legal framework for public revenue collections in line with international best practice (February 2014). - Enact new legal framework for instalment schemes for tax and SSC debt (June 2013), with key provisions: - Legislation will set opening application date into new scheme no later than July 1, 2013. - Entry into existing tax and SSC debt instalment schemes that do not extend past June 30, 2017 and do not offer more generous terms will be allowed up until June 30, 2013; law will specify which schemes remain open until June 30, 2013. - Entry into all other schemes discontinued upon submission of this legislation to parliament; entry into the two instalment schemes disallowed for debtors in default on another scheme after submission of the law. - Key features of basic permanent instalment scheme: - tightened eligibility (proof of viability and tax compliance required); - payment of market interest rates plus a premium on outstanding balances; - enforced collection upon default on a payment; - maximum of 12 monthly instalments (except for specific list of taxes of a non-current or extraordinary nature for which instalments up to 24 months allowed). - One-time "Fresh start scheme" (parallel to normalization of economic situation) open to settle debt existing at end 2013 for debtors current in 2013 payments: - Taxpayers allowed to pay pre-existing tax and SSC debts (not already subject to instalment arrangement) and consolidate debt from other schemes; payments in equal monthly instalments not extending beyond June 2017. - Reduction in surcharge by at most 50 percent upon full payment of the debt. - Reduced documentation requirements for tax and SSC debts below €75,000. - Compliance with current tax and SSC obligations mandatory. - Full collateral required for large rescheduled amounts (over €300,000). - Enforced collection upon default will apply. ### 2.3.4 Tax dispute resolution - Internal Review Unit to be operational by (August 2013). ### 2.3.5 Management of the State Revenue Service — governance and transparency - SGPR to replace managers who do not meet performance targets (Continuous). - Authorities to launch an easily accessible website to enforce accountability to public through publication of summary statistics on key performance indicators, number of tax evasion cases sent to the FIU and to prosecution by the tax administration (May 2013). ### 2.3.6 Tools — systems and IT modernization - Authorities adopt new Single Tax Procedures Code (June 2013) to reduce administration and compliance costs and incorporate procedural reforms across tax filing, audit and penalties, enforcement powers and debt collection. - SGPR to ensure use of a number of functions in ELENXIS (tax payer profile) for all tax units that perform audits and full use in key offices (LTU, HWI-HISE) (June 2013). - New ELENXIS system operational in major tax offices and audit centres by (December 2013); National Centre for Public Administration and Local Government (EKDAA) to provide support. - New TAXIS system operational in tax offices as follows: - In 50 tax offices covering 70% of revenues by June 2013; - in all tax offices by October 2013. ### 2.4 Public Financial Management Reforms — objectives and key actions - Strengthen public financial management framework within General Accounting Office (GAO) and line ministries to control expenditures and achieve fiscal targets. - Monitor expenditure across different public entities, local governments and SOEs; put triggers to ensure orderly budget execution and expenditure control. - Prevent build-up of arrears on both tax and expenditure sides; timely transposition and implementation of Late Payment Directive 2011/7/EU emphasized. - Directive requires payment of invoices within 30 days in principle, or 60 days in exceptional cases. - Transposition and implementation of Directive 2011/7/EU challenging for Greece due to high late payment in B2B and PA2B transactions as per European Late Payment Index of Intrum Justitia. - Transposition will correct discrepancies in Greek legislation concerning Article 1 of Law 3068/2004 (as amended by Article 20 of Law 3301/2004) and Article 27 of Law 2867/2010 as part of Greek measures for Directive 2011/7/EU. - Given economic sanctions in the Directive for late payment, further strengthening of public finance management required to cope with implementation (30 days in principle, 60 days in exceptional cases). - Prior to next disbursement the Government will: - Transpose Directive 2011/7/EU on combating late payment in commercial transactions. _Italic: IMF staff report content as provided in the source PDF._ ### 1. In order to fully comply with the late payment directive, notably compliance with the ### _cr13153 - 1. In order to fully comply with the late payment directive, notably compliance with ### Action plan to comply with the Late Payment Directive and streamline Public Finance Management - Government will propose by June 2013 a realistic action plan and timetable to streamline payment processes and shorten payment periods. - The action plan shall contain: - i. the different steps that need to be accomplished by the Greek government in order to simplify the processes related to payments in the public sector. - ii. specific deliverables within set deadlines to allow monitoring of progress. - iii. proposals to reduce significantly the number of parties involved at each step of the process, and concrete deadlines for each step. - In producing the action plan the Greek government shall take into account technical assistance already received and further assistance made available by TFGR and other experts and the timetable already outlined for the completion of the Enterprise Resource Planning (ERP) project. ### ERP project and Hellenic Court of Audit (HCA) pre-audit reform - GAO will engage with HCA to streamline the pre-audit process. - GAO will propose to HCA: - an increase in the ceilings for mandatory pre-audits, and - below the ceiling, the introduction of risk-based pre-audits rather than 100% pre-audit. - GAO will ask HCA to develop an action plan for inclusion in the economic adjustment program (June 2013). ### Commitment/co-payment registries, extra-budgetary funds, social security sector (SSF to EOPYY transfer) - Government actions to address remaining problems: - i. ensure commitment registers are in operation in 80 per cent of general government entities based on 2013 entity coverage (June 2013). - ii. monitor effectiveness of commitment registers via regular targeted inspections (Continuous). - iii. enforce obligation of accounting officers to report commitments by enacting sanctions on entities not submitting needed data, disciplinary action for accounting officers, and strengthening GAO role in providing support and guidance to Accounting Officers (Continuous). - iv. take actions as soon as significant deviations from yearly targets of EOPYY become evident (Continuous). - v. Ensure that all the 41 SSFs report on the e-portal (June 2013). ### Central government sector measures (PIB, GDFS, Accounting Officers, staffing) - Measures to address central government problems: - i. adopt a Ministerial Decision to ensure timely recording of Regional authority project changes in the MIS database (May 2013); modifications entered to existing monitoring information system under responsibility of Directorate of Public Investments (May 2013). - ii. ensure responsibility for functioning of PIB commitment registers is linked to responsibility for allocating available resources among projects (continuous). - iii. complete reorganization of the GDFS through adoption of a Joint Ministerial Decision (June 2013). - iv. establish procedures for identifying fully qualified senior financial managers for Accounting Office positions (June 2013). - v. Appoint Accounting Officers based on these new procedures (September 2013). - vi. MoF/GAO and MAREG, in consultation with Accounting Officers, ensure adequate staffing for financial functions in line ministries and develop training material and scheme for GDFS staff (continuous). ### Clearance of expenditure arrears and tax refunds - Conditions for a government unit to receive funds for arrears clearance: - For expenditure arrears: - (i) establishment by the unit of a fully functioning commitment register; and - (ii) reporting of at least three months of consistent data on commitments, payments, and arrears (2 months for EOPYY). - For both expenditure arrears and tax refunds: - (iii) verification of claims. - Subvented agencies meeting conditions can clear arrears even if parent agency does not meet conditions. - Arrears should not delay execution of the pharmaceutical spending clawback or any related measure. - Government will: - i. Ensure administrative capacity by staffing necessary units (June 2013). - Once clearance of all verified arrears is achieved, Government ensures that no new arrears are accumulated (Continuous). ### Reporting and accrual accounting for tax refund claims; budget bulletins - Start reporting (on accrual basis) of all existing tax refund claims in fiscal accounts according to the year they were incurred. - Monthly General Government budget execution bulletin starting in April will report amount of disbursed tax refunds and payments on expenditure arrears as cash spending (Continuous). ### Safeguards for delivery of fiscal commitments; EU Fiscal Compact transposition - Enhancing credibility through early implementation of EU's Fiscal Compact; Greece has signed and ratified the intergovernmental Treaty on Stability, Coordination and Governance in the EMU. - Key steps necessary in: Budget preparation and implementation; monitoring and reporting; corrective and sanctioning mechanisms; transparency, accountability and oversight; debt servicing. ### Enhancing national budgetary rules (Fiscal Compact transposition) - Government will adopt necessary legislation to transpose Fiscal Compact provisions to introduce a structural budget balance rule with an automatic correction mechanism (August 2013). ### Budget preparation and organic budget law modification - Government will: - 1. Adopt an administrative calendar for MTFS preparation (May 2013). - 2. Modify the organic budget law by August 2013 to introduce: - i. MTFS will set fixed expenditure ceilings for line ministries and the health care sector; every year a ceiling for an additional year will be added while already set ceilings for the first two years of the rolling three-year period remain fixed. - ii. Establish binding annual budget balance targets for local governments. - iii. identify performance targets for SOEs. - iv. Provisions to freeze ex-ante 10% of discretionary appropriations per budget line as part of the MTFS; frozen appropriations released in the second half of the year conditional upon meeting fiscal targets. The first application should concern the 2014 budget. - v. A revenue rule for the general government: at least 30% of windfall revenues in excess of the target will be devoted to debt repayment while up to 70% could be used the following year by Government to support temporary policies aiming to boost growth and social cohesion automatically, conditional to the achievement of fiscal targets. ### Monitoring and reporting - Government will identify other areas of operational expenditure where real time monitoring mechanisms could be introduced or strengthened (June 2013). ### Corrective and sanctioning mechanisms - Government will: - 1. Ensure continuous balance between pension contributions and benefits by bringing forward to June 2014 the entry in force of the binding mechanism (for auxiliary pensions) already legislated to enter in force as of 2015. (September 2013) - 2. Strengthen HRADF's governance and independence and implement an automatic correction mechanism (quarterly) if privatization process difficulties or target slippages occur, including: - i. Reviewing functioning of amended privatisation law through specific QPCs to be enforced when privatization plan derails. - ii. Taking, with EC/ECB/IMF, appropriate steps, including changes in legislation and/or Board composition, to safeguard and strengthen HRADF independence and functioning if targets for sale of assets were missed substantially for two consecutive quarters; HRADF remains fully accountable to parliament on an ex-post basis for integrity of every privatisation sale. - iii. Increasing automatically the primary surplus target should there be a shortfall of privatisation proceeds due to delay in sales of specific assets compared to programme targets for two consecutive quarters. Unless other adjustments agreed with EC/ECB/IMF, the primary surplus target would be raised with immediate effect by 50 percent of the shortfall in proceeds, and should be achieved by means of current expenditure cuts in the general government. The adjustment within any year would be capped at €1 billion. - 3. Enhance corrective mechanism for local governments by: - i. Issuing Joint Ministerial Decision providing guidelines for the Observatory's assessment of local government budgets (May 2013). - ii. Establishing a review process of LG’s budgets by the Observatory to ensure consistency with MTFS targets for LGs to be completed (June 2013). ### Transparency, accountability and oversight - Government will increase transparency and accountability by releasing status reports on implementation of legislated fiscal measures, publication of hiring numbers, fiscal impact assessment of legislation, statements of main sources of fiscal risks related to changes in key economic assumptions, and assessment of fiscal impact of main sources of fiscal risk including government guarantees and other contingent liabilities, etc. (June 2013). - Government will take steps to strengthen reputation, independence and technical competence of existing Parliamentary Budget Office towards a fully-fledged fiscal council (e.g. provision/endorsement of forecasts for budget preparation, monitoring compliance with budgetary targets and fiscal rules, provision of independent assessments), building on best international practices (December 2013). ### Debt servicing account - Government will ensure effective implementation of the debt servicing account to monitor cash flows, avoid diversion of official financing and secure timely debt servicing. - Law 4063/2012 established a segregated account in the Bank of Greece; by law disbursements to this account cannot be used for any other purposes than debt servicing. Via this account amortization and interest payment costs of all HR’s loans, debt management transactions and derivatives, and any parallel cost related to debt servicing and Public Debt Management are paid. Proceeds of this account are the disbursement of EFSF’s loans, subject to an EFSF acceptance notice, as well as the Hellenic Republic’s contributions to debt servicing, including all revenues from privatisation of State assets and at least 30% of windfall revenues. All payments from this account will be subject to prior detailed reporting to the EFSF/ESM and ex-post confirmation by the account holder. (Continuous) ### Other institutional requirements — Central State Aid Unit (CSAU) and capital movement compliance - CSAU: - i. Government adopts law creating CSAU and setting general principles concerning State aid (May 2013). - ii. Government launches call for interest to appoint Director and relevant officials of CSAU; CSAU responsible for screening all measures across Government for compliance with State aid rules before implementation and will be the only contact point for Commission on State aid matters (June 2013). - iii. Government amends law concerning recovery of illegal State aid to clearly exclude any possibility of recovery in instalments; update should exclude possibility of recovery in instalments while possibly maintaining reference to Code of Collection of Public Revenues for other procedural aspects (May 2013). - All actions attributable to public authorities should comply with rules on free movement of capital (TFEU, Article 63) (Continuous). ### Public administration efficiency, staffing, mobility and exits - Reform aims: rigorous evaluation of administrative structures and personnel; entity closures; transfers to mobility scheme or dismissal; extension to extra-budgetary funds and regional and local administrations in 2013. - Prior to disbursement Authorities will: - a. adopt consistent staffing plans covering at least 206,000 employees; - b. approve quarterly plans for 15,000 exits cumulative through end-2014, including 4,000 by end-2013 (with a significant fraction frontloaded); - c. approve annual overall employment targets for general government through 2016 (consistent with MTFS); - d. vote necessary legislative changes to streamline and accelerate disciplinary procedure; - e. implement permanent monitoring mechanism for disciplinary procedure and provide data on pending cases and pace of dealing with stock of cases; - f. eliminate legal provision forcing state to put personnel of legal entities of private law, whose positions are abolished, in the mobility scheme. - Further 2013 targets and commitments: - i. ensure cumulatively 12,500 employees placed in the labor mobility scheme by end-June 2013 and 25,000 employees by December 2013; - ii. complete staffing plans for 450,000 employees (cumulative) by June 2013; - iii. complete staffing plans for all general government entities by December 2013; - iv. involve Commission services regarding assessment of structures and staffing linked to Cohesion Policy (NSRF Operation Programmes) and seek its agreement when taking related decisions (continuous); - v. complete assessment of individual employees by December 2013. - vi. quarterly targets for exits and entries into the mobility scheme will become indicative targets under the program; overall this should help reduce public sector workforce by 150,000 by 2015, relative to end-2010 level. - Hiring and replacement rules: - Government will hire one new employee for each exit resulting from: (i) disciplinary cases; (ii) due diligence evaluation of legal entities leading to mergers and abolishment; (iii) evaluation of personnel using mobility scheme, including before reallocation; (iv) voluntary exits from mobility scheme (excluding personnel within 3 years of retirement); and (v) elapse of a 12-month period in the mobility scheme (continuous). - If monthly assessment to EC/IMF/ECB shows plans off-track, authorities commit to reduce the 1:1 hiring ratio for those exits (continuous, monthly). - For all other exits than those mentioned above, the hiring ratio will remain 1:5 (continuous). - By June 2013, define detailed hiring plans for 2013, in consultation with EC/ECB/IMF. *GREECE INTERNATIONAL MONETARY FUND* ### 3. The Authorities will define a human resources strategy in order to: (i) identify the weaknesses ### 3. The Authorities will define a human resources strategy in order to: (i) identify the weaknesses ### Human resources strategy and senior management roles - Define a human resources strategy to: - identify the weaknesses of the public service management of human resources; - identify the best possible way to modify recruitment procedures, appointments, trainings, as well as mobility. - The strategy is reflected in legislation (June 2013). - The legal act will provide a basis for evaluating the competences of the senior management. - Assess the mandate, roles and responsibilities of all senior managers, including the politically appointed and the senior public service management (June 2013). - Assessment to lead to an amendment of current legislation clarifying and framing the relationship between the political level, the management positions and the services. - Within this framework, the number of advisors will be reduced and constrained; each advisor will have a specific job description. - Aim: ensure institutional continuity and higher levels of efficiency in the public administration (June 2013). ### Fighting corruption (2.7.2) - Government commitments by June 2013: - present draft legislation to bring the anti-corruption legal framework in line with relevant international standards; - initiate the implementation of the relevant actions contained in the action plan. ### Public procurement reform (2.8) - Reform objectives: - make the Single Public Procurement Authority (SPPA) fully operational; - establish an e-procurement platform and mandate gradually its use by the public administration; - increase the share of supplies and services tendered through Central Purchasing Bodies (CPB), including by use of framework contracts; - codify and simplify all public procurement legislation. #### SPPA operational role (2.8.1.1) - The SPPA ensures coordination and coherence of: - the functioning of the Central Purchasing Bodies; - the reform of Greek public procurement regulations; - the e-procurement framework with the overall public procurement system and strategy. (Continuous) #### Increasing procurement efficiency (2.8.1.2) - Move towards more centralised procurement, especially in health procurement, services and supplies (including civil supplies and services for defence not falling under Directive 2009/81). - Start building a system of statistics in procurement, use framework contracts and review public procurement legislation including works, supplies and services. Agora portal (contract transparency) - Following adoption of the JMD on the Agora Portal: - publish data on contract notices on supplies, services and works and on the number of contracting authorities uploading information on the AGORA portal starting with contracts above €30,000. (June 2013) - facilitate compliance by reviewing standard documents and providing support to contracting authorities. (Continuous) Central Purchasing Bodies (CPB) actions - Adopt decisions to create a Central Purchasing Body at the General Directorate for procurement of goods and services: - draw a list of supplies and services where requirements of multiple contracting authorities can be standardised (May 2013). List includes: office equipment, furniture, supplies and stationery, IT equipment, telecommunications, transport vehicles, travel services, etc. - draw framework contracts for procurement of the above standardised supplies and services through the CPB. (Continuous) - issue legislation mandating purchase of identified standard supplies and services through the CPB for all central government entities, with no monetary thresholds and with transitory periods agreed with the Commission services; military purchases of standardised civil supplies and services (not under Directive 2009/81) are also carried out through the CPB. (June 2013) - tender at least three framework contracts used in frequently purchased supplies or services at central government level through the CPB. (December 2013) - Framework contracts: - mandate relevant administrations to source via framework contracts submitted to the Commission services (June 2013). Reform of public procurement legislation - Undertake to adopt by December 2013 a reform of the public procurement system including works, supplies and services under SPPA coordination with a view to: - simplifying, streamlining and consolidating the body of public procurement legislation; - rationalising administrative structures and processes to achieve desired procurement results in efficiency and efficacy; - improving national review procedures, including reduction of delays triggered by the redress system and assessing the role to confer to the SPPA in the area of redress (remedies and judicial protection). - Proceed with reform of procurement legislation in accordance with action plan submitted to Commission services in February 2013; drafts of all legislative and organisational measures implementing the Action Plan presented to the European Commission by September 2013. #### E-procurement (2.8.1.3) - Refine, in consultation with the European Commission, the plan for the development of the e-procurement platform by (May 2013) including measures and deadlines for: - operation of supplies, services and public works procurement contracts through the e-procurement platform; - availability of functionalities such as e-notification and e-tendering; - mandatory use of the platform by central government, regional government and other public sector entities; - communication and training programmes for users; - periodic monitoring mechanisms for take-up of the platform and specification of target usage levels; - interaction of the platform with planned simplification of procurement legislation; - means to facilitate access and use by users, including easy to use e-signature and e-ID solutions. - Commitments in development: - run supplies and services contracts for the Central Government on a pilot basis through the e-procurement platform throughout the 1st half of 2013. - ensure the e-procurement platform is fully operational and ready for use by the Central Public Administration for supplies and services contracts in July 2013. - Ensure use of the platform: - CPBs manage the e-procurement platform for all their tendering procedures. (June 2014) - the whole public sector in Greece uses the e-procurement platform for commonly bought supplies and services by December 2015. - Monitoring and reporting: - submit to Commission services data of monitoring activities covering year 2013 against target user levels (1st half of January 2014), including: - the number of calls for tender published electronically (in absolute terms and as a percentage of total number of published calls for tender); - the number of tenders with specifications published online; - the number of contracts carried out electronically relative to the total number of contracts; - the types of purchases carried out with the e-procurement platform; - the number of contracting authorities using e-procurement. ### Completing the pension reform to secure sustainability (2.9) - Ensure all social security contributions to ETEA will be recorded electronically by (June 2013). - Ensure the new single fund ETEA sets up, in a cost effective way, a computerised system of individual pension accounts; starting in March 2013 and to be finalised by December 2013. - Produce a regular quarterly report of the activities of the Health Committee aimed at monitoring and revising disability status and ensure that disability pensions correspond to not more than 10 percent of the overall number of pensions. (Continuous, next report, June 2013) ### Modernising the health care system (2.10) - Objective: stabilise public health expenditure at, or below, 6 percent of GDP while maintaining universal access and improving quality of care delivery. - Policy measures include: - reducing fragmented governance structure; - reinforcing and integrating the primary healthcare network; - streamlining the hospital network; - strengthening central procurement; - developing monitoring and assessment capability and e-health capacity. - Pharmaceutical spending targets: - achieve savings in purchasing (accrual basis) of outpatient medicines to reach spending of about EUR 2.440 billion and inpatient to reach spending of about EUR 0.66 billion in 2013 (accrual basis). - goal: bring public spending on outpatient pharmaceuticals to about 1 percent of GDP i.e. around EUR 2 billion euro in 2014. - Total (outpatient plus inpatient) public expenditure on pharmaceuticals should be no more than 1.5 per cent in 2013 and 1.3 per cent in 2014. Governance (2.10.1) - Strengthen health system governance by: - ensuring effective concentration of all health insurance funds, without exception, into EOPYY, monitoring transfer of staff and assets; - ensuring effective transfer of all health-related decision making procedures and responsibilities (including payroll expenditures) under the Ministry of Health. - From January 2014: - hospital services will be purchased directly by EOPYY through prospective budgets based on KEN-DRGs costing procedure (and payroll costs should be at least reported). - EOPYY ensures that the number of doctors is reduced in headcount by a further 10% in 2013. Controlling pharmaceutical spending (2.10.2) - Strengthen incentives and obligations across the medicines supply chain to promote use of generic medicines and cost-effective use more generally to reach the 1 percent of GDP target in 2014. Contingency measures (2.10.2.1) - Apply an automatic claw-back mechanism (every six months) to pharmaceutical producers to guarantee outpatient pharmaceutical expenditure (EOPYY budget) does not exceed targets (Continuous). A note on collection of claw back for 2013 for the first half of 2013 is submitted by September 2013. - Activate contingency measures (including e.g. across-the-board cut in prices or entry fee for the positive list), if claw-back does not achieve the target. Such measures produce an equivalent amount of savings. (October 2013). - If necessary, EOPYY introduces additional incentives and mechanisms, including a prescription quota system for physicians, to ensure generic substitution (September 2013). Pricing of medicines (2.10.2.2) - Revise downward the price of medicines, based on the three EU countries with the lowest prices (quarterly update of price list in line with Council Directive 89/105/EEC, next list to be published by June 2013). - On the basis of the report on the impact of the new profit margins of pharmacies, reduce the profit margins down to 15% by June 2013. - Ensure EOPYY negotiates a 5% discount through price-volume agreements on expensive medicines (200 medicines) sold in EOPYY pharmacies (Continuous for 2013 and 2014). Prescribing and monitoring (2.10.2.3) - Update the positive list of reimbursed medicines and the list of OTC medicines at least twice a year (next update June 2013). - Ensure full coverage of e-prescription to doctors, outpatient facilities and providers contracted by EOPYY and to all NHS facilities (health centres and hospitals) by June 2013. - E-prescribing is compulsory and must include at least 90 percent of all outpatient medical acts covered by public funds (medicines, referrals, diagnostics). - Finalise implementation of the system (API) whereby pharmacies electronically register any residual manual prescriptions from doctors into the e-prescription application established by IDIKA. (December 2012, New Deadline May 2013). - Continue publishing prescription guidelines/protocols for physicians, prioritising the most expensive and/or mostly used medicines, and make them compulsory (Continuous). - Enforce application of prescription guidelines through the e-prescription system starting with at least 5 therapeutic groups by June 2013. - Further develop the e-prescription system by introducing compulsory ICD-10 by May 2013 and SPC filters in the e-prescription system (October 2013). - Enhance monitoring and assessment through: - detailed monthly auditing reports on use of e-prescription in NHS facilities and by providers contracted by EOPYY, shared with European Commission, ECB and IMF staff teams. (Continuous) - regular assessment of information obtained through e-prescribing system. (Continuous) - detailed quarterly reports on pharmaceutical prescription and expenditure including volume and value of medicines, use of generics and off-patent medicines, and rebates received from pharmacies and pharmaceutical companies; reports shared with European Commission, ECB and IMF staff teams. (Continuous, Quarterly, new report July 2013) - detailed reporting on individual prescription behaviour to each physician relative to the average of comparable physicians, signalling breaches of guidelines; feedback provided at least every month and a yearly report published covering: 1) volume and value of doctor's prescriptions vs peers and guidelines; 2) doctor's prescription of generic vs branded and patent medicines; 3) prescription of antibiotics. (Continuous) - Enforce sanctions and penalties following assessment and reporting of misconduct and conflict of interest in prescription behaviour and non-compliance with EOF prescription guidelines (Continuous). - Finalise electronic monitoring and introduction of cancelation mechanisms to barcodes of pharmaceutical products via collaboration of EOF and IDIKA (September 2013). Increasing use of generic medicines (2.10.2.4) - Prior to disbursement: - ensure application of compulsory prescription by international non-proprietary name (INN) for an active substance by putting in place an automatic blockage mechanism once prescription by branded name reaches 15% of the overall prescription value of each doctor in real time. - price the large backlog of generic medicines waiting for a price in compliance with EU Transparency Directive at a pace of 400 per month, with 400 medicines priced prior to disbursement. - Government targets and measures: - increase share of generic medicines in total outpatient and reimbursed medicines to reach 60 percent (in volume) by December 2013 through measures including: - automatically reduce maximum price of originator medicines when patent expires to 50 percent of its price at patent expiry and link off-patent products to the average of the three lowest prices in the EU, revised periodically with price list; producers can offer lower prices. (September 2013) - set maximum price of generics to 40 percent of the price of the originator patented medicine at the time its patent expired; after first reduction, set generic price to 80% of the downward revised price of the off-patent products based on the average of the three lowest prices in the EU; producers allowed to offer lower prices. (September 2013) - ensure dynamic competition in the generic market by speeding up administrative and legal procedures in line with EU frameworks and applying price reductions of at least 10 percent of the maximum price for each three new generic producers entering the market, according to existing regulation (May 2013) - decide about reimbursement of newly patented medicines on the basis of objective and strict medical and cost-effectiveness criteria and, until internal capacity is in place, rely on best practice health technology assessment from other member states while complying with Council Directive 89/105/EEC. (Continuous) - exclude from the list of reimbursed medicines those not effective or cost-effective on the basis of objective criteria. (Continuous) - in the frame of Administrative Reform of EOF, set up scientific capacity to include cost effectiveness criteria in reimbursement and licensing processes. *Italic line: Extracted from the provided IMF content unit.* ### 2. Takes further measures to ensure that at least 50 percent of the volume of medicines used by ### 2. Takes further measures to ensure that at least 50 percent of the volume of medicines used by ### Pharmaceutical procurement and generics policy - Ensure that at least 50 percent of the volume of medicines used by public hospitals for inpatients is made up of generics with a price below that of similar branded products and off-patent medicines. (Continuous) - Ensure that all public hospitals procure at least 2/3 of pharmaceutical products by active substance, using the centralised tenders procedures developed by EPY and by enforcing compliance with therapeutic protocols and prescription guidelines. (Continuous) - EPY will undertake tender procedures for framework contracts for the most expensive medicines sold in EOPYY pharmacies. (Continuous) - Increase the share of expenditure covered by centralised tender procedures through EPY up to 45% of all the expenditure in medicines and medical devices by 2014; this share goes up to 60% in 2015. The Government ensures the use of such tender procedures. (Continuous) ### EOPYY financial monitoring and contracted services - Monitor implementation of measures introduced in late 2012 to improve EOPYY’s financial situation and ensure budgetary execution is closer to a balanced budget in 2013, including: - changes in OGA contributions; - changes in the benefit package; - changes in cost-sharing for private care; - changes in fees for diagnostic and physiotherapy services; - use of price-volume agreements and case-mix agreements with private providers; - use of a reference price system for reimbursement of medical devices. (Continuous) - Publish a quarterly report on the prescription and expenditure of diagnostic tests. (Continuous, quarterly, next report July 2013) - EOPYY publishes a monthly report with analysis and description of detailed data on healthcare expenditure with a lag of three weeks after the end of the respective month; report to include expenditure commitments/purchases (accrual basis) and actual payments (cash basis), describe performance on execution of budget and accumulation of arrears, and recommend remedial actions. (Continuous) ### NHS service provision, reorganisation and management - Implement the reorganisation and restructuring plan set in Law 4052 / March 2012 to reduce inefficiencies, utilise economies of scale and scope, and improve quality of care; objective includes reducing hospital operating costs by an additional 5% in 2013 and reducing beds substantially as legislated by MD OG1681/B (28-7-2011). Implementation actions include: i. increasing mobility of healthcare staff (including doctors) within and across health facilities and health regions; ii. adjusting public hospital provision within and between hospitals within the same district and health region; iii. revising activity of small hospitals towards specialisation (e.g. rehabilitation, cancer treatment, terminal care) where relevant; iv. revising emergency and on-call; v. optimising and balancing resource allocation of heavy medical equipment (e.g. scanners, radiotherapy facilities) on the basis of need; vi. reducing administrative costs notably by removing deputy managers posts; vii. reducing cost with outsourcing services such as IT services, laboratory services and hospital servicing costs (e.g. cleaning services). - Produce an annual report comparing hospital performance on the defined set of benchmarking indicators. (Continuous; next report 1st June 2013) - Update an annual report on human resources for the whole health care sector and use it as a human resource planning instrument. (Continuous; next report 1st June 2013) ### Accounting, costing, control, IT and monitoring systems - Finalise allocation of internal controllers to all hospitals and ensure all hospitals adopt commitment registers. (December 2012, New deadline May 2013) - Introduce further measures to improve accounting, book-keeping of medical supplies and billing systems, including: i. introduction of analytical cost accounting systems, with implementation of the respective action plan, due to be finalised, with complete hospital coverage, by November 2013; ii. regular annual publication of balance sheets in all hospitals. (June 2013) iii. introduction of the uniform coding system for medical supplies developed by EPY and EKEVYL and use of the observe.net system to monitor procurement and use of tenders for medical supplies. (Continuous) iv. introduction of inbound hospital logistics and warehouse management systems using barcode scanning systems for pharmaceuticals and medical consumables. (December 2013) v. implement necessary action to ensure 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 treatment of non-nationals/non-residents. (Continuous) vi. enforcing collection of co-payments and implementing mechanisms that fight corruption and eliminate informal payments in hospitals. (Continuous) - ELSTAT to start 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). (May 2013) - Hospital computerisation programme to allow measurement of financial and activity data in hospitals and health centres; Minister of Health to define a core set of non-expenditure data (e.g. activity indicators) in line with Eurostat, OECD and WHO health databases, taking account of future roll-out of DRG schemes in hospitals. (Continuous) - Start development of a system of patient electronic medical records. (May 2013) - Continue to improve the existing KEN/DRG system with technical assistance from EU experts, aiming to develop a modern hospital costing system for contracting (prospective block contracts between EOPYY and NHS); existing set of KEN/DRGs used in all hospitals; KEN/DRG Management Institute established by June 2013. DRGs will include a detailed item on costs of personnel. (Continuous) - Submit a follow up analysis of how hospital accounting schemes integrate DRGs at hospital level for future activity-based cost reporting and prospective budget payment for hospitals by September 2013. ### Centralised procurement and e-health - Increase substantially the number of expenditure items covered by centralised tender procedures through EPY to cover up to 45% of medicines and medical devices expenditure by 2014 and 60% in 2015; ensure use of such tender procedures. (Continuous) - Conduct necessary tendering procedures, in compliance with EU procurement rules, to implement a comprehensive and uniform e-health system including the full and integrated system of hospitals' IT systems. (Continuous) ### Education system upgrades (contextual adjacent measures) - Implement the Action Plan to improve the effectiveness and efficiency of the education system and regularly report on progress, including results of external evaluation of higher education institutions. (Continuous, June and December of each year) - On higher education implement laws 4009/2011 and 4076/2012 fully and promptly, including: i. completion of external evaluation of higher education institutions by the Quality Assurance Authority. (December 2013) ii. completion of organisation charts and internal regulations of Higher Education Institutions. (March 2014) iii. update on ATHINA Project consolidation/merging progress. (September 2013) - On primary and secondary education start implementing new policy of school and educational staff evaluation. (September 2013). Complete first cycle of educational staff evaluation under new policy. (December 2013) ### Stabilising the financial system — commitments and timelines - Banks to complete a new round of liability management exercises for remaining subordinated instruments by end-June 2013. - No state aid to be granted to banks before EC approval under state aid rules. - Except for the HFSF, no general government entity purchases bank shares during bank capital increase exercises or supports third parties to purchase bank shares. - Develop a comprehensive banking sector strategy with HFSF and EC/ECB/IMF staff by July 15 2013; until then, four pillar banks may act as integrators of smaller domestic banks. Strategy to include disposal options for HFSF-held shares. (MoF and BoG commitment) - Only upon finalisation of the banking sector strategy can consolidation among the four pillar banks be considered. ### Framework for restructuring and strengthening of the banking system - HFSF actions for New Hellenic PostBank to reduce operational costs, reduce employees, restructure loan portfolio, and conclude sale by July 15 2013. - Sale deadline for Nea Proton bank shifted from May 2013 to July 15 2013 to increase chances of acquisition through open bid. - BoG to apply appropriate measures to non-core banks not meeting capital requirements (June 2013). - BoG, in coordination with HFSF, to assess alternatives (including Purchase and Assumption transactions with core banks) to minimise cost to taxpayers while guaranteeing depositor security (June 2013). - BoG to revise legal and regulatory frameworks for cooperative banks by end-September 2013 to align with international best practices. ### Funding and liquidity - Request banks to provide standardised quarterly balance sheet forecasts (funding plans) (continuous) based on programme macroeconomic forecasts; plans to set path towards sustainable funding model and reduce reliance on extraordinary central bank liquidity support. - Stand ready, under Eurosystem procedures and rules, to continue disbursing emergency liquidity support if needed (continuous). ### State-owned preference shares and dividend policy - Government commits not to take fiscal actions undermining bank solvency (continuous). - Law 3723/2008 amended to ensure banks will not be required to pay dividends on preference shares, or fees in lieu, unless banks are profitable. ### Banking supervision, stress testing and asset management - Continue enhanced supervision of resolved banks and those under public control (continuous). - Ensure banks do not take discretionary corporate actions that would increase capital needs (continuous). - Prepare for stress testing to be completed by end-2013. - Finalize new stress testing methodology by end-July 2013 in consultation with EC/ECB/IMF staff. - Revise regulatory framework and remove operational restrictions for assets under liquidation by May 2013 (in consultation with HFSF), adopt amendments to special liquidation laws by June 2013 (following consultation with EC/ECB/IMF staff), and adopt a reporting framework with quarterly updates starting in June 2013. ### Legal insolvency frameworks and borrower assistance - Enhance legal regime for household insolvency to provide more effective resolution of bad debts while protecting payment culture. - Establish, by end-June 2013 and in consultation with EC/ECB/IMF staff, a framework to assist distressed borrowers; effective no later than end-August 2013 once regulations are in place. - Introduce measures to deter unwarranted court applications under Law 3869/2010; borrowers subject to laws 3869/2010 and 4128/2013 will be subject to the new distressed borrowers framework once implemented. - Pass legislation by end-June 2013 to introduce a new “Facilitation Program”; BoG to assess implementation within six months of adoption. - Revise law 3869/2010 by end-June 2013 to address implementation shortfalls identified during first three years. - Adopt legislation to establish by end-June 2013 a framework consistent with bank recapitalization framework to provide long-term solutions for over-indebted borrowers (including viable borrowers not eligible for the facilitation program). - Regulations by end-August 2013 to specify initiatives to: (i) address shortfalls in existing laws limiting effectiveness of debt resolution; (ii) standardize borrower case assessment procedures; (iii) introduce a standard list of loan restructuring tools for banks; (iv) enhance access to free budgeting and legal advice services for citizens; (v) encourage borrower and lender participation in non-judicial debt resolution. - Introduce steps to reduce excessive court waiting times and ensure eligible debtors choose to participate in the facilitation program. ### Troubled assets and NPL management - Assess by end-September 2013, with independent third party assistance and consultation with EC/ECB/IMF, the effectiveness of established frameworks and policies to deal with troubled assets. - Establish key performance indicators (KPIs) for troubled assets portfolio status, operational response by banks and follow-up resolution actions; KPI definitions set no later than August 2013 and bank reporting to start by October 2013 on a quarterly basis. - Closely monitor banks’ NPL resolution strategy, policy and operational targets and intervene where necessary to ensure distressed borrowers receive prompt and sustainable long-term solutions. ### Governance of financial institutions and HFSF reforms - Strengthen governance framework of financial institutions to ensure banks' continued viability and protection of taxpayer interest. - Support HFSF in ambitious and swift operational restructuring of banks where it has significant stakes to reduce operational costs and increase profitability (continuous). - Adopt a package of HFSF governance reforms to add two independent members to the HFSF General Council, increasing the number of members from 5 to 7. - Invite HFSF to amend internal regulations to rationalise division of tasks between General Council and Executive Board. (June 2013) - Amend legislation to clarify the non-public nature of the fund. (June 2013) - BoG to develop and publish by end-April 2013 a memorandum of understanding governing the relationship of the HFSF as a shareholder and the BoG’s oversight role regarding banks that have received state aid. *IMF staff report excerpt contained in content unit _cr13153 - 2. Takes further measures to ensure that at least 50 percent of the volume of medicines used by* ### 6. Adopt measures to address the governance weaknesses identified in the due diligence of ### 6. Adopt measures to address the governance weaknesses identified in the due diligence of core banks ### Governance measures for core banks and HFSF transparency - Banks will submit to the BoG by end-May 2013 plans to address identified operational governance weaknesses—including safeguards on loans to related parties and risk concentration. - These plans will include clear timetables for full implementation by end-December 2013. - The MoF will invite the HFSF to publish on their website the relationship frameworks with each bank as soon as the amount of the injection will be known, upon completion of the subscription period, and in any case by end-May 2013. - The relationship frameworks with all banks define the role of the HFSF as a shareholder on the basis of best international practices. *GREECE INTERNATIONAL MONETARY FUND 155* ### Loan and Consignment Fund: remit and competition safeguards - The Government commits to: - Ensuring that the Loan and Consignment Fund is not crowding out competition in the financial sector. The commercial activities will continue to be in a gradual run-off and no more new business will be conducted (continuous). - Agree with the EC by end-May 2013 on the remit of activities of the reserved sector to ensure that they act only in case of market failure. ### Strengthening labour market institutions and promoting employment — objectives - Build upon recent labour market reforms to help restore cost-competitiveness and boost employment in the medium to long term. - Support the on-going reduction in nominal unit labour costs in the economy by 15 per cent over the period 2012-14. - Continue promoting an efficient wage-setting system, reducing non-wage labour costs, fighting undeclared work and informality, streamlining administrative burdens, and increasing the transparency and enforceability of the labour law. - Enhance policies to help the unemployed remain attached to the labour market and improve affordable social safety nets. - Reforms in labour legislation will be implemented in consultation with social partners, and in respect of EU Directives and Core Labour Standards. ### 4.1 Reforms in the wage-setting system - The Government: - presents a proposal for the decision making mechanism on the annual update of the statutory minimum wage rates that will prevail after the end of the Programme period once the current freezes cease. It will define how the economic and labour market situation and prospects will be factored into the decision process in order to ensure that the objectives of supporting employment and safeguarding labour income are achieved in a balanced way. It will also establish the role of consultation with social partners, other stakeholders and independent experts by May 2013. - Reviews the structure of the minimum wage system, taking stock of the present reform, with a view to possibly improve its simplicity and effectiveness to promote employability and fight unemployment and help the competitiveness of the economy by March 2014. ### 4.2 Reducing non-wage labour costs - With a view to dampen non-wage labour costs and thereby foster employment creation, the Government: 1. adopts legislation by November 2013 reforming the system of social contributions in a revenue-neutral way, inter alia by broadening the base for contribution, simplifying the schedule across the various funds, shifting funds away from nuisance taxes and onto contributions, and reducing average contributions rates by 3.9 percentage points from their current levels, which will be phased in over 2014, 2015 and 2016. 2. As intermediate steps, studies of possible changes in the system of social contributions will be carried out and action plans proposed by September 2013. 3. Carries out studies 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 and presents options for the reduction of social contribution rates by September 2013. 4. Based on these studies of first-pillar pension schemes, and together with the reform of the system of social contributions, reduces the rates mentioned in the previous entry that are found to be too high and adjusts benefits in a fiscally-neutral manner by December 2013. ### 4.3 Lowering compliance costs, fighting undeclared work and informality - To help formality in labour arrangements by reforming the Labour Inspectorate and streamlining the administrative burden to foster compliance, the Government: 1. starts implementing a detailed action plan aimed at strengthening the fight against undeclared work and raising the effectiveness of the Labour Inspectorate. Prioritising the activities of the Inspectorate and fostering the detection of the most severe cases of labour law violations are expected to be at the core of those changes (Continuous). 2. Streamlines the reporting by employers and employees by September 2013. 3. Revises the sanctions for violations of the labour law by July 2013 at the latest in order to be incorporated in the Labour Code that is being compiled. ### 4.4 More transparent and enforceable labour law - To ease interpretation, reduce compliance costs with and increase the enforceability of labour law, the Government: 1. compiles by December 2013 all existing legislation relevant for labour and industrial relations into a single Labour Code. 2. The Government shall prepare a report on the structure of the Labour Code (May 2013). ### 4.5 Support to the unemployed — Action Plan and social protection - The Government focuses on preventing unemployment becoming permanent and mitigating hardship by promoting integration of the long-term unemployed, young people and disabled into the labour market; easing labour market mismatches; improving training policies; promoting employability of disadvantaged groups; and targeting segments at risk of poverty. - The Government will improve its ability to assess labour market needs and measure social impacts to strengthen monitoring, evaluation, and co-ordination of labour market and social policies. - Commitments: 1. The Government adopts an Action Plan by May 2013 focusing on: i. Expanding short-term public work programmes for the long-term unemployed and young people not in education, employment or training as a measure of emergency and temporary nature while labour demand remains sluggish (development by June 2013). Municipalities and other public authorities may participate directly in such public works programmes only under the full adequate and transparent control of such programmes (open calls, internet publication of projects with full details, and reporting helpline); ii. Preventing the erosion of the human capital of the unemployed and enhancing the effectiveness and adequacy of measures for training and re-skilling the unemployed and young people, including by promoting the training of the unemployed by potential future employers in the private sector through a youth voucher scheme; iii. Supporting job matching between the unemployed and potential employers and activation of the unemployed through the reform of the Public Employment Service, including by developing a wide range of partnerships to deliver quality training, mentoring and employment services; iv. Options on how to significantly improve and expand the current range and quality of apprenticeships and vocational training services and their linkage with employers. To be further developed in a position paper to be presented by June 2013; v. Strengthening social economy, e.g. in relation to childcare and care of the elderly. - The Action Plan should provide a description of the programmes currently in force and plans for their rationalisation as well as inform on the financing of the forthcoming initiatives. 2. The Government will produce a position paper on social protection and policy by June 2013. It will enhance unemployment benefits to support the long-term unemployed and specific categories of workers without entitlement to unemployment insurance, notably by putting in place an unemployment assistance scheme for the long-term unemployed targeted to the poor by January 2014. A specific position paper on this scheme shall be prepared also by June 2013. That paper should also elaborate on the articulation of this scheme with the minimum income scheme that is also to be created on a pilot basis by January 2014 and with other active and passive labour market policies and social transfers. - The early preparation will facilitate a front-loaded implementation of these scheme shall the fiscal space be found within the existing overall budget envelopes. 3. To provide health insurance access to uninsured citizens, the Authorities prepare an action plan in cooperation with foreign experts (to be finalized in the second half of 2013), and work with the European Social Fund with the aim of extending the program’s coverage to more beneficiaries and include more healthcare services (continuous). *GREECE INTERNATIONAL MONETARY FUND 157* ### 5 Creating favourable conditions for economic activity — priorities - Emphasis on implementing structural reforms to improve the business and overall economic environment and enhance competition and competitiveness. - Horizontal measures to reduce time and costs to: i) create a company, ii) get establishment and operating licenses for manufacturing activities, iii) get permits for environmental projects and activities, iv) export and import, combined with measures to improve the functioning of the judicial system. *GREECE INTERNATIONAL MONETARY FUND 158* ### 5.1 Promoting an efficient and competitive business environment #### 5.1.1 Rationalising / eliminating quasi-fiscal charges - The Government eliminates in the 2014 budget the vast majority of the quasi fiscal charges identified in the list presented to the Commission services in November 2011 in a budget neutral way. (October 2013) #### 5.1.2 Reducing procedural and other administrative burden - To further reduce the time for, and the cost of, company creation, the Government, among others: 1. Takes additional measures by June 2013 at the latest, to reduce by 50% the cost of starting a business, as measured by the World Bank's Starting a Business sub-indicator. The results will be monitored in the World Bank's 2014 edition of Doing Business. 2. To implement law 3982/2011 on the fast track licensing procedure for technical professions, manufacturing activities and business parks and other provisions, the Government issues the Presidential Decrees provided for in: i. Art. 4.4, on preconditions for obtaining a licence for electricians, to reduce the number of specialisms, increase the mobility of electricians within the same level category and provide for the institution of private certification bodies. (May 2013) ii. Art. 24.5, laying down the requirements for Citizens Service Centres' (KEP) for integrated electronic application among licensing bodies and for modalities of processing demands through it. (May 2013) 3. To implement Law 4014/2011 on environmental licensing of projects and activities, the Government issues: i. the Ministerial Decision provided for in Art. 8.3, on environmental licensing of projects and activities (other than industrial activities), laying down the standard environmental commitments of projects and activities in category B. (May 2013) ii. a detailed timetable, including all intermediate steps and milestones for the remaining implementation legislation, including on Art 11.4 on the content of the Environmental Impact Assessment (EIA) reports, in consultation with the EC (May 2013). 4. To tackle the investment barriers caused by multiple and fragmented establishment and operating permits, the Government presents a strategic vision and an evaluation of investment licensing procedures in June 2013, followed by a roadmap in September 2013, with the objective of introducing more efficiency, transparency and clarity in investment licensing. The implementation of the strategy should lead to a large reduction in the number of licenses required by the public administration, with a view to replacing them, if needed, by less demanding instruments such as declarations or notifications, and to a rationalisation of the processes and responsibilities for issuing permits. 5. To simplify export and import procedures, the Government: i. Launches a pilot enabling 24/7 customs operations for exports in the Athens airport and Piraeus Port (May 2013) and for imports by July 2013; ii. The results of the pilot will be assessed in November 2013 with a view of applying it permanently in the Athens airport and Piraeus Port and to all other customs offices by December 2013. iii. Having reviewed the risk assessment system for exports, with recommendations for improvement in order to align it with best practices in EU Member States the level of controls converges to the average level of controls in the EU by September 2013. iv. Reviews and streamlines pre-customs and customs procedures for selected pilot products (fresh vegetables fruits, white cheese) according to EU regulations and best practices and presents an approach for extending the simplification process to a wider set of frequently exported / imported products. (May 2013) v. Ensures that the e-customs system supports the electronic submission of export declarations (DONE) and the submission of documents and electronic payments (June 2013). Ensures that the e-customs system supports the electronic submission of import declarations, including the submission of documents and electronic payments, at the pilot customs office by July 2013 and in all custom offices by November 2013. vi. Implements automatic clearance for low risk declarations, based on EU best practices. (December 2013) 6. To identify and eliminate unnecessary reporting requirements for businesses: i. The Government presents the results of the application of the Standard Cost Model (SCM) in 13 key sectors to identify administrative burdens for businesses (June 2013). ii. Following the identification of administrative burdens the Government completes the amendments to sector specific legislation (September 2013). 7. To facilitate spatial planning including through an effective land registry, the Government: i. adopts legislation to: a. simplify and reduce the time needed for town planning processes (June 2013); b. update (June 2013) and; c. codify legislation on forests, forest lands and parks (September 2014); d. It also licenses at least two disposal sites for hazardous waste (June 2013, and September 2013). ii. completes the revision of the spatial plan for South Aegean to make it compatible with the sectoral plans on industry, tourism, aquaculture and renewable energy. The first phase of this revision is completed (September 2013) iii. Second wave of reforms. These will be followed by: a. a second phase for modifications (May 2013), b. a third phase for the formulation of proposals (September 2013) and c. a fourth phase for the legislation of the final proposal (December 2013). *GREECE INTERNATIONAL MONETARY FUND 159–160* #### Cadastre and land administration objectives (to establish a modern complete cadastre by 2020) - In view to establish a modern complete cadastre by 2020 the Government should: i. Put in place a clear and streamlined single political authority to oversee and coordinate the completion and operation of a modern, efficient and fully accessible nationwide Cadastre by 2020 (June 2013). ii. Shorten the time of judicial referrals concerning the legal validation of the property rights in the cadastral projects to come from ten to maximum five years. (June 2013). iii. transfer to Ktimatologio SA the exclusive competence for all issues related to development, establishment and operation of the cadastre and cadastre offices (June 2013) iv. transform the temporary cadastre offices into final ones in the capital of the regions where cadastre is operational v. ensure that cadastre offices and notaries send electronically to the data base of Ktimatologio SA and the ministry of Finance all real estate acts they process on the basis of an IT platform provided by Ktimatologio SA (June 2013). Legally validate the forest maps and the coastal zone of the entire country on the basis of the respective maps of the Ktimatologion SA delivered in 2009 (December 2015). vi. Proceed with the awarding of the seven (7) million active property rights tendered since December 2011 (March 2014); tender out all remaining rights (ca. 15 million). (June 2013) and complete the unfinished cadastral projects in the 106 areas for which rights were tendered in 2008 (December 2015). vii. Make it compulsory to include the single Cadastre code number of each parcel in tax declarations (all E9) of real estate. (March 2014) viii. Establish a business plan to ensure the financial viability of the operation of the Cadastre. (March 2014) *GREECE INTERNATIONAL MONETARY FUND 160* *Source: _cr13153 - 6. Adopt measures to address the governance weaknesses identified in the due diligence of (PDF chapter text).* ### 1. The Government, assisted by the OECD, completes a preliminary assessment through the ### The Government, assisted by the OECD, completes a preliminary assessment through the application of the Competition Assessment Toolkit ### Competition assessment and regulatory governance - Government, assisted by the OECD, completes a preliminary assessment through the application of the Competition Assessment Toolkit in sectors such as food processing, retail trade, building materials and tourism to identify unnecessary restraints and develop alternative, less restrictive measures that still achieve government policy objectives. (June 2013) - Following the assessment, the Government will prepare legislative amendments to remove disproportionate regulatory restrictions identified by the Competition Assessment Toolkit. (September 2013) - The new legislation will be enacted in November 2013. - To implement law 4048/ 2012 on regulatory governance: principles, procedures and tools of good law making, the Government issues the Presidential Decrees provided for in Art. 21 of that law, providing for the setting up of the better regulation structures (i.e., the Better Regulation Offices, the Legislative Initiative Offices of the Ministries and the Inter-ministerial Sector for Better Regulation). (September 2013) - The Government presents an annual better regulation plan (as provided for in Art. 15 of law 4048/2012) with measurable objectives to simplify legislation (including through codification) and to eliminate superfluous regulations. (December 2013) ### Growth strategy - The government will commission two reports analyzing the framework of a new growth model for Greece: - One report follows a microeconomic approach, providing sectoral actions and legislation based on given funding possibilities and their optimal use. - The second report analyzes the macroeconomic environment and identifies any horizontal policies needed. (May 2013) ### Reforming the judicial system to support economic activity — overarching goals - Objectives: (i) ensure effective and timely enforcement of contracts, competition rules and judicial decisions; (ii) increase efficiency by adopting organisational changes to courts; (iii) speed up administration of justice by eliminating backlog of court cases and facilitating out-of-court settlement mechanisms. - In designing and implementing measures, the Government consults the EC/IMF/ECB. ### Review of the Code of Civil Procedure and judicial statistics - Government commits to review the Code of Civil Procedure in accordance with the roadmap defined in section 9.3 of this Memorandum, with intermediate steps towards completion by March 2014. - Government will compile and publish on its website the information indicated in Section 9.4 of this Memorandum to facilitate a performance and accountability framework for courts. (Quarterly) ### Tax case backlog reduction (administrative courts) By June 2013 the Government: - Prepares an assessment of the impact of all past measures aimed at the reduction of the backlog in the administrative courts. - Prepares a study leading to the reallocation of the positions of administrative court judges, as from September 2013, to those administrative courts where the backlog is higher. - Presents an action plan with structural measures aiming at reducing the backlog of tax cases pending in courts. ### Non-tax case backlog reduction - Based on the external study on the backlog of non-tax cases, the Government prepares by July 2013 an Action Plan with specific measures to continuously reduce the number of civil and commercial cases pending in courts, including short term and longer term actions. - Authorities prepare draft legislation providing for compulsory mediation for small claims (under 5.000,00 €) in civil cases; and draft legislation providing for compulsory mediation in household insolvency cases (Law 3869/2010). The compulsory mediation to be introduced ensures conformity with the right to an effective remedy and to a fair trial as provided for in the Charter of Fundamental Rights of the European Union. The new legislation is enacted by June 2013. ### Development of e-justice applications in courts - Government updates, further refines and operationalizes the e-justice Action Plan (Continuous, on a quarterly basis). Updated versions submitted within 15 calendar days from the expiration of the relevant quarter. - Action plan to include: - An evaluation of the use of IT systems in courts. (March 2014) - A timetable, including proposed deadlines, for extension of case e-registration and e-tracking to all courts. (March 2014) - Short term actions (by June–December 2013): - By June 2013: - announces a call for tenders for the creation of the E-docket at the Athens Court of First Instance. - presents draft legislation on the e-filing of judicial documents before the Council of State and the Administrative Courts. - presents draft legislation on the e-filing of pleadings as well as of evidence and the rest of the relevant file documents before the Civil Courts. - presents draft legislation on the use of videoconference before the Civil Courts. - By September 2013: ensures full operation (for all types of civil procedures, except those not feasible due to jurisdictional/procedural rules/reasons i.e. payment orders, interim measures, provisional orders) of the e-filing project at the Athens Court of First Instance. - By December 2013: completes pilot implementation of e-filing in the Piraeus and Thessaloniki Courts of First Instance (provided respective Bar Associations co-operate with the MoJ). - Implementation milestones for integrated e-justice systems: - By December 2015: completes implementation of integrated e-justice applications enabling e-filing, e-registration and e-tracking for courts covering the majority of the total inflow of cases, specifically: - the Magistrate Courts, Civil and Criminal Courts of First Instance & the Courts of Appeal of Athens, Piraeus, Thessaloniki & Chalkida, including the respective Prosecutors Offices - All the Administrative Courts - By December 2017: completes extension of the above applications to the other courts. - Government ensures consistency of the e-Justice action plan with the national e-government strategy. (Continuous) ### Promotion of pre-trial conciliation and mediation - By September 2013: conducts an assessment of whether enactment of Law 3898/2010 on mediation in civil and commercial matters has delivered intended results, presenting data and analyses concerning costs, time and success rates arising from alternative dispute resolution. - By December 2013: presents a legislative proposal for the effective opening of the mediator’s profession to non-lawyers. - Ministry of Justice updates on a monthly basis the list of the Accredited Mediators and the Mediators’ Training Centres on its website. (Continuous) ### Other measures on judicial reform - Assessment of Law 4055/2012 (fair trial and conciliation): - Interim assessment presented by July 2013 (after a six-month regular operation of the courts; three months for the Magistrate Courts). - Final assessment presented by January 2014 (after twelve months of regular operation of the courts). - Administrative review of cases: - Prepares draft legislation providing for, where appropriate, a compulsory administrative review before an independent committee before a case may be brought before the administrative courts and submits it to the Greek Parliament. (September 2013) - Study on costs of civil litigation: - Completes a study on the costs of civil litigation, its recent increase and its effects on workload of civil courts, together with recommendations. (June 2013) ### Energy policy — objectives and pre-disbursement conditions - Government must follow a holistic approach to maximise benefits for market participants, protect consumers and vulnerable parts of society, and protect rights of taxpayers. - Prior to the disbursement, the Government adopts and publishes a fully-fledged plan for the restructuring of PPC with a view to preparing the company for privatisation and creating conditions for a liberalised electricity market. The plan shall: - provide a timeline for PPC to initiate the ownership unbundling of ADMIE through a sale of shares and/or a right issue subscribed by an investor and provide a timeline for its full exit; timeline should include steps for completing the process, with a view to complete ownership unbundling within 2013. - specify details of a new vertically integrated company in terms of assets, human resources and customer base subject to regulatory and competition provisions in force, including: - to establish a viable competitor the new company shall be endowed with around 30% of PPC generation capacity, taking into account PPC’s decommissioning and investment plans; it will also be endowed with a pro-rata amount of the supply business; both the generation mix and the customer mix shall be similar to that of PPC. - plan shall include provisions for the divestment of lignite-fired, gas and hydro electricity generation capacity currently managed by PPC; it will also include provisions for the new company to access and control lignite resources on an equal basis as PPC. The proposed list of assets to be transferred to the new company will be assessed in the context of next review. - provide a timeline for the new company to be privatised through PPC with the assistance of the HRADF, with a view to begin operations in 2015; the timeline should include steps for completing the process. - provide a plan and timeline for the privatisation of PPC; this timeline should include steps for completing the process at the latest by 1st January 2016. - Execution of the plan to adhere strictly to the announced timetable and be in full agreement with European Commission services to ensure consistency with relevant EU legislation, best practice, and the current fiscal programme and financing targets. ### Energy market unbundling, pricing and renewables - Unbundling: - The unbundled gas TSO is certified by the Greek energy regulator. (May 2013) - Government commits to follow all steps in the proposed plan for unbundling of ADMIE, targeting completion by December 2013. - Compliance: - Government undertakes that whichever the outcome of privatisation the gas and electricity industry structure will be fully compliant with Directive 2009/73/EC and 2009/72/EC. (Continuous) - Electricity pricing: - Government takes measures for the gradual phasing out of regulated electricity prices for all but vulnerable customers by June 2013. - Government assesses best practices with a view to charging royalties for the use of hydro and lignite and publishes its report. (June 2013) - Renewable energy (RES) sustainability and reforms: - Authorities commit to design and implement a comprehensive reform of renewable energy policies to provide long-term sustainability at zero average deficits. - New installations will receive a fixed, comprehensive, feed-in tariff based on current technology status and plant size; feed-in tariff revised at least on a bi-annual basis to reflect declining costs and ensure a sustainable rate of return consistent with EU average, taking into account Greek-specific factors; RAE opinion considered. - Prior to disbursement, actions to achieve sustainability of the incentives mechanism: - initiates negotiations with the industry to introduce permanent adjustments to existing power purchasing contracts, in particular for PV installations, to align rates of return to sustainable EU average levels; results must provide financial sustainability of the RES account after current solidarity contribution on incentives expires. - publishes a detailed report on incentives to PV rooftops installations, stating inter alia average incentives per installation, average capacity, and average energy produced, and assesses possibility to introduce permanent adjustments to existing power purchasing contracts to align rates of return to sustainable EU average levels. - assesses and reports on effects on revenues of the RES account of a possible increase in the levy imposed on electricity produced with lignite and of the introduction of a levy on electricity produced with large hydro. - corrects distortions in the current mechanism of contribution of suppliers to the RES account that provides for a contribution based only on the system marginal price and not on the entire cost of energy paid by consumers, ensuring elimination of windfall profits. - passes new legislation to reduce the number of outstanding production permits, inter alia by introducing financial measures, in full compliance with EU legislation. - Other RES actions and timelines: - Completes by September 2013 negotiations with the industry for introducing permanent adjustments to existing power purchasing contracts, in particular for PV installations. - Completes an action plan for introducing possible adjustment to rooftop PV installations incentives to align rates of return to sustainable EU average levels, considering Greek-specific conditions. (July 2013) - Introduces constraints that will cap newly-installed PV capacity receiving incentives, effective 1st of January 2014; until then new sales contracts and connection contracts are suspended. - Ensures that LAGIE, RAE, and the Ministry of Energy publish monthly data on the evolution of the RES account with projections over the following 24 months from date of publication. (Monthly) These projections must provide a baseline and a normative scenario to bring the debt down to zero by end-2014. - Completes and makes operational a comprehensive electronic registry of all RES installations. (June 2013) - Adjusts the RES levy every six months. (July 2013, January and July 2014) Adjustments to eliminate projected RES account debt by end-December 2014 (continuous). - Assesses and reports on legal possibility to impose a validity period on outstanding production permits without an allocated capacity; proceeds if possible to impose such validity period. (May 2013) - To clear existing arrears in the energy markets, the Ministry of Energy, in cooperation with ADMIE and LAGIE, will publish the (aggregate) gross debt and credit positions of all participants in such market on a monthly basis, starting from May 2013 (continuous). - Ministry of Energy, in close cooperation with RAE, will promote and facilitate through intermediation the clearing of existing obligations among energy market participants, while encouraging a fair sharing of the outstanding debt. (Continuous) *Italic: IMF Staff Report content provided in the supplied source PDF.* ### 10. Effective May 1st, RAE will implement and monitor adequate regulatory provisions for ### _cr13153 - 10. Effective May 1st, RAE will implement and monitor adequate regulatory provisions for ### Netting and regulatory provisions for energy markets - Effective May 1st, RAE will implement and monitor adequate regulatory provisions for netting of credit and debt positions by all actors in the energy markets. - Provisions include, inter alia, terms for clearance of debts and payment of interest and penalties in line with Directive 2011/7/EU on late payments. - Regulatory provisions will ensure equal treatment for all participants, avoiding any distortion or unjustified advantage coming from belonging to vertically integrated companies. (continuous) ### 6.1.5 Planning the development of the electricity market in the medium to long term - Building upon the report of RAE published in December 2012 and RAE recommendations, the authorities will present to the EU Commission Services by May 2013 for consultation a detailed action plan with identified time bound steps and a date for its substantial completion, for the transition of the electricity market to the EU Target Model. - The plan will: - establish competition, stimulate entry, reflect the reforms of PPC, and remove market distortions; and it will not entail State Aid. (May 2013) - foster competition by stimulating entry through: - The auctioning of a significant amount of PPC produced electricity (at least 1600 MW) with characteristics reflecting PPCs generation portfolio; - Pricing of auctioned products will take into account the need to avoid a price squeeze at retail level; - To foster entry, eligible bidders in the auction will be electricity suppliers only; - The plan is to remain in place for a set duration and will include a mechanism for RAE to revise and/or extend it to (i) ensure it remains in place until competitive conditions are satisfactory (ii) improve its continuing effectiveness in creating competitive conditions (iii) ensure that investment incentives are not unduly affected (iii) ensure it converges to the EU target model. - remove market distortions through: - A review to modify/phase out the variable cost recovery mechanism (30% rule) ensuring that the most efficient power plants are dispatched at all times; - A review of the capacity reserve system with a view to create incentives to retire inefficient power plants and/or incentivise investments herein; - The development of a balancing market. Industrial users should participate in this system. Rewards must be based on their objective contribution to system stability. - The plan is adopted in June 2013, after incorporating any comments by the European Commission. ### 6.1.6 Fuel distribution - To remove regulatory restrictions that hinder competition in the wholesale fuel sector, the Government, as per Opinion no. 29/VII/2012 of the Hellenic Competition Commission, will: - assess minimum capital requirements and adjust them downwards in accordance with best practices and taking into account the relevant Opinion of the Hellenic Competition Commission (June 2013); - mandate the conclusion of written contracts between fuel wholesalers and retailers, including the obligation to state the duration of the discounts offered on the payment documents (June 2013); - provide in legislation for the installation of inflow-outflow systems throughout the refining and wholesale trading supply chain; new legislation to be put into force (June 2013); - remove the restriction that a wholesaler’s storage facility needs to be accessible by either the sea, railway network, or through a refinery (June 2013); - abolish the mandatory storage of at least two categories of fuel products, as a condition to wholesale licensing issued by them. (June 2013) - To enhance competition in the retail fuel sector, the Government will: - mandate gas stations to state the price and quantity of liquid fuel on all receipts issued by March 2014 (Athens-Thessaloniki August 2013, other urban areas by September, remaining March 2014); - complete the installation of inflow-outflow systems by March 2014 (Athens-Thessaloniki August 2013, other urban areas by September, remaining March 2014); - abolish the possibility to impose a minimum price on the sale of fuels to consumers. (June 2013) ### 6.2 Electronic communications (Digital Dividend) - The switch-over from analogue to digital TV technology will release a significant amount of high quality radio spectrum ("digital dividend") for deployment of new services and technologies. - Roadmap commitments for release of the digital dividend: - Adopt necessary secondary legislation for the assignment of licenses for broadcasting and for the establishment of licensing procedures. (June 2013) - Launch the public consultation on the tender procedure for the assignment of the digital dividend (800 MHz band) allocating and authorising the use of the digital dividend to Electronic Communication Services, in line with EC Decision 2010/267/EU and in respect of the deadlines and procedures of the RSPP. (March 2014) (*) - Resolve cross-border coordination issues with neighbouring countries, if any. If difficulties make this date unfeasible, frequency and broadcasting plans might indicate alternative channels for relocation of broadcasters, while continuing negotiations with third countries. (Continuous) - Adopt secondary legislation that defines a mandatory date for the switch-off of analogue broadcasting 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). (June 2013) - Launch the tender for the assignment of rights of use for broadcasting transmission. (June 2013) - Proceed to the tender procedure for the assignment of frequencies 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. (October 2014). The obligation to ensure the 800 MHz band can actually be used for electronic communications other than broadcasting from 1 November 2014 (*) - (*) The deadlines for steps (ii) and (vi) might be amended according to the Decision of the European Commission on the request for derogation from the deadline provided by Art. 6.4 of the Radio Spectrum Policy Programme submitted by the Greek Government on 15 May 2012. ### 6.3 Transport — overview - Opening of road haulage and occasional passenger transport is completed; priorities shift to measures promoting tourism and investment in road (limousines and shuttle services), maritime and port activities (domestic ferry and port services) and aviation. - Actions aim to reduce operating costs of service providers and increase consumers' choice. Gradual restructuring of railways should lead to effective privatisation. #### 6.3.1 Road - Having completed the report on the functioning of the regular passenger services and the follow up strategy for the effective opening of the sector, the Government approves the required law (and necessary acts) that ensures equal conditions and access equity to all road passenger service operators (May 2013). #### 6.3.3 Aviation - Privatisation Fund (HRADF) carries out the appropriate process leading to the privatisation of regional airports based on the submitted National Airport Policy strategy; any State Aid issues must be clarified. Concession agreements must take into account best practices, including capping levels for airport charges and imposed taxes, facilitating investment approval, and allowing for transparent and swift dispute resolution mechanisms. (Continuous) - The Government ensures full implementation of EU Regulation (EU 691/2010) referring to the performance of air traffic management. (Continuous) - The Government ensures that the Hellenic Slot Coordinator Authority (HSCA) is functionally and financially independent, sufficiently staffed, and able to carry out its functions by December 2013: - submit all necessary draft legislation (June 2013), - adopt legislation (September 2013), - fully implement the relative legislation by December 2013. #### 6.3.4 Railways - Implement the spin-off of ROSCO (Maintenance Unit), GAIAOSE (Real Estate), and the transfer of the leasing of the rolling stock activities from the OSE Group to the State, and provide an updated TRAINOSE Business Plan (June 2013). - Integrate the function of award authority for public service contracts for rail passenger transport according to Regulation 1370/2007/EU into the new authority for contracting land passenger services: - legislation adopted by May 2013; - full implementation by December 2013. - Renewal of the current public service contract for rail passenger transport to be completed by direct award by end April 2014 with a maximum duration of five years. Public service contracts concluded in 2014 or later will be awarded by means of competitive tender. Rent contracts concerning all rolling stock are synchronized and the rent contract between TRAINOSE and the State will be initially synchronized with the 5 year PSO contract including one additional renewal option of five year maximum duration. Contracts will be awarded at market prices. (continuous) - OSE publishes its network statement for 2013 and 2014 in at least two official languages of the EU, including full information on infrastructure and the rail link to Piraeus port. OSE concludes track access contracts with railway undertakings using its network (June 2013). - State adopts legislation to allow rail regulatory authority RAS to exert its right of imposing fines by amending law L3891/2010 (granting RAS the right to perform hearings), granting RAS the right of adopting a hearing regulation and to adopt and publish in the Official Gazette regulatory acts and decisions on all matters of its competence: - submits draft legislation by May 2013; - adopts it by July 2013. - The National Safety Authority establishes the examination of at least five examiners for train drivers according to the EU Regulation and publication of register of examiners on the web. The safety authority publishes the conditions and procedures to recognize drivers and other accredited persons as required under Article 20.3 of the train driver Directive 2007/59/EC (May 2013). - The function of safety authority is transferred to an independent authority. (May 2013) - The HRADF launches tender procedure for Trainose (June 2013). #### 6.3.2 Maritime Activities and Ports - An assessment of the impact of recent reforms will be completed by October 2013 and additional measures agreed to further improve competitiveness, including by increasing flexibility of labour arrangements. - Based on the new ports strategy and organisational model, HRADF defines a concrete privatisation strategy mainly through concessions (including sale of master concessionaire port companies) with the objective of making the best use of the ports (May 2013) and launches the appropriate call(s) for tender (June 2013). - Government revises the legal framework governing port labour relations, providing among others for the training and certification of cargo-handling employees and integration into the scheme of cargo-handling employees of Piraeus and Thessaloniki: - submits draft legislation by May 2013; - adopts the new legal framework by June 2013. ### 6.4 The Retail Sector - Objectives: allow a wider class of goods to be sold by more efficient retailers, reduce operating costs, reform retail-specific regulations and licensing to lower prices and increase consumer choice. - Government actions: - adopts a Ministerial Decision repealing Market Regulation 7/2009, following the notification procedure provided for in Directive 98/34 one month after the end of the standstill period. (June 2013) - reviews and amends the Market Policing Code (Law 136 /1946) in line with Hellenic Competition Commission's opinion no. 24/VII/2012, including: - removal of restrictions to permit more freely discounts, promotions, and offers outside and during sale periods, more sales periods combined with more flexibility in the duration of the sales; - increased flexibility in retailers' opening hours by giving all shops the option to remain open at least seven Sundays per year, especially during holiday seasons. (June 2013) - reviews and simplifies the licensing procedure for establishment and operation of retail outlets; results and recommendations presented in June 2013 and adopted before December 2013. - to enhance competition in the market for over-the-counter (OTC) products: - replaces the current system of fixed margins with maximum ones (June 2013); - allows the sales of selected products (e.g., vitamins) in other points than pharmacies (September 2013). ### 6.5 Regulated professions, professional qualifications and provision of services #### 6.5.1 Removing restrictions to the access to and exercise of regulated professions - For professions and economic activities included in Section 9.2, the Government prepares draft provisions amending sector specific legislation as per the opinions of the Hellenic Competition Commission and other specifications listed thereof. Legislation is adopted by May 2013, with the exception of 9.2.16 where the legislation will be set in force after period of four months and in accordance with the relevant HCC opinion. - A report on the implementation of Law 3919/2011 is published on the Government's website (June 2013). The report: - summarises the list of all professions/economic activities falling under the scope of that law and the restrictions and formalities eliminated as per Arts. 2 and 3 of the same law; - specifies whether the access to and exercise of a regulated profession or economic activity is subject to an authorisation procedure, to a declaration or to the holding of a professional identity card; - specifies whether access to a profession or economic activity requires the registration in a professional association and or to a professional registry; - specifies whether the exercise of the profession is conditional on the periodic renewal of authorisations. - To reinforce transparency in the functioning of professional bodies: Legislation is adopted mandating the publication on the webpage of each professional association the following information (May 2013): - the rules regarding incompatibility and any situation characterised by a conflict of interests involving the members of the Governing Boards. - To assess proportionality and justification of activities reserved to specific regulated professions, the Government will: - draw an exhaustive list of activities reserved (in exclusivity or not) to the different types of engineer, architect, geologist and land surveyor professions. (June 2013) - organise a mutual evaluation exercise whereby representatives of the abovementioned professions assess the justification and proportionality of the requirements reserving certain activities to providers with specific professional qualifications (excluding requirements applicable to their own profession). (June 2013) - present a proposal of which activities could be reserved (in exclusivity) to specific professions. (June 2013) - send draft legislation to Parliament amending unjustified or disproportionate requirements reserving certain activities to specific professions. (December 2013) #### 6.5.2 Additional measures - A draft code revising Legislative Decree 3026/1954 is adopted by June 2013. The new code should, among others: - ease the re-entry into the legal profession; - repeal age limits to take the Bar examinations; - abolish total bans on commercial communications; - provide for licenses of unlimited duration; - remove the reference to "exclusivity" for lawyers for the research of books of mortgage and land registry; - clarify the nature of lawyers' fees provided for in current legislation. Fees are freely determined through a written agreement between lawyers and clients. In case there is no written agreement for court appearances, the fees shall be determined through reference fees; - eliminate any kind of minimum wages for salaried lawyers working in the private sector. *IMF — GREECE, external report content unit _cr13153* ### 2. The Government issues a Presidential Decree, which sets a system of prepaid ### _cr13153 - 2. The Government issues a Presidential Decree, which sets a system of prepaid ### Lawyer fees, contributions, and property registration - Presidential Decree (May 2013) sets a system of prepaid fixed/contract sums for each procedural act or court appearance by a lawyer, which is not linked to a specific ‘reference amount’. (May 2013) - Contributions paid by lawyers are de-linked from lawyer's reference amounts for contracts and those reference amounts are eliminated. (June 2013) - Government to take additional measures by June 2013 at the latest, to reduce by 50% the cost of registering property, as measured by the World Bank's Registering Property sub-indicator. The results will be monitored in the World Bank's 2014 edition of Doing Business. (November 2013) ### Regulated professions and liberalization monitoring - Government completes a study of the 20 largest professions examining the degree to which they have been liberalized, including results with respect to new entrants and price changes. (July 2013) ### Easing recognition of professional qualifications (6.5.3) - Ensure effective implementation of EU rules on the recognition of professional qualifications; including compliance with ECJ rulings. Specific actions: - Continue to update information on the number of pending applications for the recognition of professional qualifications and send it to the European Commission. (Quarterly) - Ensure implementation of PD 38/2010 (as amended by law 4093/2012) and the recognition of qualifications derived from franchised degrees from other Member States to access to or exercise of an economic activity and to ensure that holders of franchised degrees from other Member States have the right to work in Greece under the same conditions as holders of Greek diplomas. (Continuous) ### Services Directive and Point of Single Contact (6.5.4) - Ensure adequate connection between the PSC and other relevant authorities (including one-stop shops, professional associations and the recognition of professional qualifications). - Ensure submission of on-line applications for recognition of professional qualifications is fully operational through removal of the obligation from legislation to present paper originals. (June 2013) ### Increasing the impact of structural and cohesion funds - Meet targets for payment claims in absorption of EU structural and cohesion funds (programming period 2007-2013) to be submitted in 2013 (EUR million): - European Regional Development Fund (ERDF) and Cohesion Fund: 3,000 - European Social Fund (ESF): 890 - Target of first half of the year: 1,284 - Target of second half of the year: 2,606 - Total annual target: 3,890 - Submit complete applications for all remaining major projects requiring a Commission decision under Article 41 of Regulation (EC) No 1083/2006. (December 2013) - Out of these applications, 6 applications are submitted by June 2013 and 6 applications by September 2013 and the remaining by December 2013. - Ensure in the "Public Investment Budget" allocation that the necessary national contribution remains available to complete unfinished ERDF, ESF and Cohesion Fund projects of the 2000-2006 programming period and to cover required national contribution including non-eligible expenditure under the Structural Funds and Cohesion Fund rules for the 2007-2013 programming period. - Accelerate implementation of projects to be completed by December 2015, prioritizing critical development projects (functional review of public administration, "Elenxis" tax control services, land register, solid waste management, railway projects, e-prescription, e-procurement, social economy sector development, national registry). Targets for priority projects: - Ensure completion of 27 priority projects by end 2013 - Ensure completion of 20 priority projects by end 2014 - Ensure completion of 70 priority projects by end 2015 - Within public procurement review, set up standardised tendering documents per category of works to simplify contract awarding. (September 2013) - Complete and operationalize monitoring tool for expropriations and make data accessible to the public. (July 2013) - Consolidate simplification initiative by reviewing the "implementation trail" and mapping competences, permits and deadlines for main categories of projects supported by Structural and Cohesion Funds; lift unnecessary steps, simplify implementation processes and set reasonable deadlines. Establish an alternative to the "ypologos" procedure and establish electronic payment. (June 2013) - The ypologos should be abolished by December 2013. - Periodically, and until the end of the programming period 2007-2013, review "sleeping" projects, un-activated delegations and "sleeping" contracts and inform the Commission on those eliminated. - Adopt measures and start implementing an anti-fraud strategy in the field of the Structural Funds and the Cohesion Fund. (June 2013) - Report monthly to the Commission on the progress of the Financial Engineering Instruments and, if necessary, propose a rationalisation of current allocations and instruments. (September 2013) - Establish an efficient inter-service consultation procedure for EU co-financed projects supported by an electronic system. An integrated project system to be fully operational for EU co-financed projects by end of 2013. (December 2013) ### Monitoring and statistics (Section 8) - Government will fully honour the Commitment on Confidence in Statistics signed in February 2012 by implementing all envisaged actions, including respecting international statistical standards; guaranteeing, defending, and publicly promoting the professional independence of ELSTAT; and supporting ELSTAT in upholding confidence in Greek statistics and defending them against any efforts to undermine their credibility. (continuous) - Introduce legal amendment to ensure ELSTAT has access to tax information (including tax registration number), at individual level, of legal entities under private law, associations of individuals and natural persons, notwithstanding tax confidentiality, for production of official statistics as provided for in Law 3832/2010 and the Regulation on Statistical Obligations, while ELSTAT safeguards confidentiality of personal records. (May 2013) - Respect the independence and financial independence of ELSTAT and provide necessary resources in a timely manner as approved in the annual budget of ELSTAT; Government cannot invoke art. 1 of Legal Act of 18/11/2012 and the Ministerial Decree 2/91674 of 201/12/2012 in this regard. ELSTAT provides to the Hellenic Parliament information for monitoring the execution of its budget as provided in the Regulation of the Parliament (Article 31A) and the Statistical Law of Greece (Article 16). (continuous) - Facilitate ELSTAT to complete acquisition of qualified staff for essential positions in its central office and receive additional qualified staff through transfers from other government entities to address urgent staffing needs in prefecture offices and the central office, as reflected in the Medium term plan of ELSTAT. (September 2013) ### Privatisation plan highlights (Annex 9.1) - State-owned enterprise/share sale and concessions timeline includes numerous projects with specified intermediate steps and timing (examples preserved as in the source): - Public Gas (DEPA): Q1Q2/13 — Modification of statutory provision at time of privatization. - Public Gas (DESFA): Q1Q2/13 — State aid clearance (DG Comp). - Football Prognostics Organization (OPAP): Q4Q2/13 — Proceed with phase B of tendering process and finalize selection (April 2013 - DONE). - Horserace Betting Organization (ODIE): 2013 Q1Q3/13 — Launch of tender (March 2013- DONE). Law for clarifying responsibilities between Jockey Club and the New Concessionaire (May 2013). Law for clarifying the taxation regime of the Concession (May 2013). - Thessaloniki Water (EYATH): Q1Q3/13 — Establish regulatory framework (March 2013 - DONE). Establish pricing policy (May 2013) and amend the license (November 2013). - Hellenic Petroleum (HELPE): Q2Q4/13 — Following divestment of DEPA. - Railways (Trainose): Q2Q2/14 — Trainose transferred to HRADF (March 2013 - DONE). Comfort letter from EC (DG Comp) for TRAINOSE State Aid investigation clearance (May 2013). - Athens Airport (AIA): Q2Q2/14 — Agree on extension and sale process with Hochtief (June 2013). - Athens Water (EYDAP): Q3Q2/14 — Establish regulatory framework (March 2013 - DONE). Establish pricing policy (September 2013) and amend license (February 2014). Settlement of receivables from the State (February 2014). - Hellenikon 1: 2011 Q4Q4/13 — Transfer of Hellinikon SA ownership to HRADF (Pending decision: December 2012 - DONE). Launch Phase B of tender process (December 2012 - DONE). Bids will be submitted end of December 2013. - Real Estate lot 3: Q4n/a — At least 1,000 real estate properties to be transferred to HRADF (December 2013). The first 250 real estate assets are transferred to HRADF (April 2013). - Source for project development status: HRADF update on projects under development. ### Regulated professions requiring framework adjustment (Annex 9.2) - Professions under the Greek Ministry of Citizen Protection: sale of revolvers, pistols and target-shooting weapons; preparation of explosives; manufacture, conversion, assembly, finishing and repair of firearms, and charging/recharging of firearm cartridges; charging cartridges for hunting weapons for sale; sale of fireworks and flare launchers; manufacture of fireworks and flare launchers; operation of private security firms; work by security staff of private security firms; operation of private investigation offices; work by staff of private investigation office. (Cfr. HCC Opinion no. 13/VI/2012) - Dealers in antiques and restorers of fine art and antiquities: revision eliminates geographical restrictions on antique dealers and provides other ways of acquiring professional experience other than in a Greek antique shop (e.g., experience in other antique shops abroad or in museums). (Cfr. HCC Opinion no. 18/VI/2012) - Professions/economic activities under the Greek Ministry of Citizen Protection – harbour guard: organisations certifying divers; suppliers of recreational diving services; rental of means of marine recreation; service boat operations; towing operations; licensing for outdoor trading on board ships; operation of casinos on board passenger vessels flying the Greek flag on international voyages; lifeguards; operation of public health establishments on anchored or floating craft; operation of public health establishments on seafaring vessels. (Cfr. HCC Opinion no. 22/VII/2012) - Professions/economic activities under the Ministry of Labour, Directorate-General for Welfare: creative activity centres for children; creative activity centres for children with disabilities; nurseries and kindergartens; private childrens’ camps; child welfare institutes. (Cfr. HCC Opinion no. 25/VII/2012) - Petrol sellers, shotfirers, blasters and natural gas sales. (Cfr. HCC Opinion no 26/VII/2012) - Actuaries: review examination process regulatory framework to prevent the Hellenic Actuarial Society (HAS) from determining indirectly the number of successful candidates in exams in the interest of incumbents. (Cfr. HCC opinion no. 14/VI/2012) - Selling and production of reproductive material for agricultural plant species and selling of fertilisers. (Cfr. HCC opinion no. 19/VI/2012) - Oenologists: abolish minimum fees. - Oenology labs: remove geographical restrictions for establishing multiple labs and administrative license. - Veterinarians: remove the legal form requirement and allow any legal person, irrespective of the shareholders, to open a veterinary clinic as long as the activity is being performed by veterinarians. Subject the licensing of such veterinary clinics to Art. 3 of Law 3919. *Source: _cr13153* ### 11. Accountants: abolish the four different classes of accountants and the activities reserved to each class. ### _cr13153 - 11. Accountants: abolish the four different classes of accountants and the activities reserved to each class. ### Professional regulations and licenses (Items 11–16) - 11. Accountants: abolish the four different classes of accountants and the activities reserved to each class. - 12. Private education establishments: Adopt secondary legislation provided for in paragraph I.3.15 and 16 of law 4093/2012, spelling out the details of the licensing procedure of private schools and providing for the approval procedure for programs of study. - 13. Tourist guides: Amend legislation to allow educational entities other than universities to offer accelerated training courses for candidate tourist guides. - 14. Stevedores at ports and for land operations: Adopt secondary legislation referred to in section K7 of law 4093/2012 providing for the creation of the National Stevedores Registry, for the accreditation of stevedores, on special issues related to the organization and operation of control procedures on matters of health and safety at work of stevedores, providing for a new regulation on fees and remunerations for Port Funds and shipping agents, and providing for the terms and procedures for dock workers to enter the area of the port. - 15. Sworn in valuers: Adopt law and necessary secondary legislation (3 MDs on the examination committee, code of ethics and on disciplinary committee) to reflect abolished restrictions in November 2012 (i.e. fixed fees, numerus clausus, nationality requirement etc) and include (i) replacement of the current system of certification with a system of prior declaration that allows professionals to exercise activities unless the administration notifies against it; and (ii) reduction to 2 years in required professional experience to become a sworn-in valuer. - 16. Geo-technician: subject the regulations on geo-technicians to chapter A of law 3919/2011. ### Agreed roadmap for review of the Code of Civil Procedure (9.3) - 9.3.1 Code of civil procedure: - By end May 2013, the Task Force for the review of the Code of Civil Procedure presents to the Government an initial draft of the Code. Within 15 days, the Code of Civil Procedure is presented to the EC/IMF/ECB for comments. - On the basis of the above cooperation, the Task Force presents to the Government, by end October 2013, a revised version of the draft Code of Civil Procedure. The Government carries out a broad public consultation, including EC/IMF/ECB, on the draft law bringing the Code of Civil Procedure in line with international best practice. - The Government submits the final draft Code to the Hellenic Parliament by March 2014. - 9.3.2 Study on cost of litigation: - The Government finalises the study on the costs of civil litigation, its recent increase and its effects on workload of civil courts, and publishes the study by June 2013. ### Statistics to be published by the Ministry of Justice (9.4) - Quarterly publication (for civil and administrative first instance court, court of appeal, the Supreme Court and the Council of State) will provide: - the number of judges and administrative staff - the stock of cases at the beginning of the period, - the inflow of cases registered during the period, - The outflow of cases closed during the period - the stock of cases at the end of the period. - The tables will also include: - i. For the tax and customs cases, the data will also include the inflow of the new cases with a breakdown above and under 150 000 euros. - ii. For civil and commercial courts, the data for stock and flows of cases will also show the corporate insolvency cases. - iii. For administrative Justice, specific data, provided in another table, will include a breakdown by year of registration of the stock of cases for which no hearing date has been fixed yet. This will be provided for beginning and for end period. The table will also show the total number of cases with a hearing date. - For some of the most relevant courts, defined in agreement with EC, IMF and ECB, the Ministry of Justice will also publish by quarter, or by semester or year if so agreed by EC-IMF/ECB: - i. The stock of cases (both at beginning and at end period), with a breakdown by year of registration. - ii. for civil and commercial Justice, more detailed information on corporate insolvency cases including: - a more detailed breakdown by value, defined in agreement with EC, IMF and ECB, - a more detailed breakdown by sector (e.g., agriculture, construction, manufacturing, and services), defined in agreement with EC, IMF and ECB, - Ministry of Justice and General Secretariat for public revenue: - i. The General Secretariat for public revenue will conduct and publish by September 2013 one study based on small but random sample, in order to gather information on recovery rate for tax and customs cases. - ii. The Ministry of Justice will try and propose a method to get relevant information on recovery rates for corporate insolvency cases. - When the IT system will be fully in place, the Ministry of Justice will publish: - i. Tables showing: - the number of judges and administrative staff5, - the stock of cases at the beginning of the period, - the inflow of cases registered during the period, - The outflow of cases closed during the period6, - the stock of cases at the end of the period. - ii. The stock of cases at beginning and at end period will be broken down by year of registration, - iii. The stock of cases at beginning and at end period and the flow of cases will be broken down by categories of litigations, - iv. The average duration of the outflow cases during the period. - Footnotes retained as in source: - 5 At the end of the period. - 6 A case is considered closed, and registered in the outflow, at the moment the full decision is published (and its content is available to the parties). ### Non-exhaustive list of regulations on port work for review (9.5) - Port of Piraeus – law 1559/1950 (Gov. Gazette A 252/1950), law 2688/1999 (Gov. Gazette A 40/1.3.1999), Joint Ministerial Decision 5115.01/02/2004 on the approval of the General Regulation for Personnel (Gov. Gazette B 390/26.2.2004). - Port of Thessaloniki - legislative decree 449/1970 (Gov. Gazette A 51/27.2.1970), law 2688/1999 (Gov. Gazette A 40/1.3.1999), Joint Ministerial Decision 5115.01/05/2003 on the approval of the General Regulation for Personnel (Gov. Gazette B 1203/26.8.2003). - Work Regulation of the Dockworkers of the Piraeus Port approved by Joint Ministerial Decision 45058/7/1971-Gov. Gazette B 579/22.7.1971) - Joint Ministerial Decision 44885/8919/1956, as modified by Joint Ministerial Decision 117756/8295/1967-Gov. Gazette B 9/11.1.1967) - Law 3239/1955 - Law 5167/1932 - Ministerial Decision F 10221/26816/929- Gov. Gazette B 2778/2.12.2011 *Source: _cr13153 - 11. Accountants: abolish the four different classes of accountants and the activities reserved to each class.* ### 9.6 Provision of Data ### 9.6 Provision of Data ### Data Reporting Requirements - During the programme, the following data shall be made available to the European Commission, the ECB and the IMF staff on a regular basis. - These data should be sent to the following e-mail address: ecfin-greece-data@ec.europa.eu - This address should also be used for the transmission of other data and reports related to the monitoring of the programme. ### Ministry of Finance — Required Data (items, compiler, timing) - 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. (Data compiled by the Ministry of Finance) - Monthly, 30 days after the end of 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) - Monthly, 30 days after the end of each month. - Preliminary monthly cash data on general government entities other than the state. (Data compiled by the Ministry of Finance) - 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 staff: number of employees, entries, exits, transfers among government entities; and from and into the mobility and exit scheme, per entity. (Data compiled by the Ministries of Administrative Reform and E-Governance and of 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. (Data compiled by the Ministry of Finance) - Weekly on Friday, reporting on the previous Thursday. - Data on below-the-line financing for the general government. (Data compiled by the Ministry of Finance) - 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, 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, segregated 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. (Data compiled by the Ministry of Finance) - Monthly, within one month. - Data on assets privatised and proceeds collected. (Data compiled by the Ministry of Finance) - Monthly. - Data on state-owned enterprises: revenue, costs, payroll, number of employees and liabilities (including maturities of public enterprises' debts). (Data compiled by the Ministry of Finance) - Monthly, 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, Religious Affairs, Culture and Sport) - Monthly, at the end of each month. - Monthly statement of the operations on the special accounts. (Data compiled by the Ministry of Finance) - 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. ### Bank of Greece — Required Data - Assets and liabilities of the Bank of Greece. - Weekly, next working day. - Assets and liabilities of the Greek banking system - aggregate monetary balance sheet of credit institutions. - Monthly, 30 days after the end of each month. - Evolution of the external funding provided by Greek banks to their subsidiaries abroad. - Monthly, 15 days after the end of each month. - Report on 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. ### Hellenic Financial Stability Fund — Required Data - Detailed report on the balance sheet of the Hellenic Financial Stability Fund with indication and explanation of changes in the accounts. - Monthly. ### Key Findings, Projections, and Policy Messages (from staff statements and press release) - All nine prior actions have been completed. - Flash estimates and growth: - GDP declining by 5¼ percent y/y in Q1 2013 (compared to 5½ percent projected in the program), down from a 5¾ percent drop in Q4 2012. - Fiscal execution and revenue: - Budget execution for the State remains on track, with revenues through April in line with program projections, and some temporary under-execution of spending, particularly investment. - Financial markets and banking: - Investor sentiment has continued to recover; confidence indicators improved in May. - Greek banks and the covered bonds issued by them were upgraded by Fitch on account of improved fundamentals and progress on bank recapitalization. - IMF financing and program context: - Completion of the third review enables the disbursement of SDR 1.5 billion (about €1.74 billion or US$2.26 billion), bringing total disbursements under the arrangement to SDR 5.7 billion (about €6.57 billion or US$8.55 billion). - The EFF arrangement was approved on March 15, 2012 for a total amount of about €28 billion and is part of a joint financing package with euro area member states amounting to about €173 billion over four years. - The arrangement entails exceptional access equivalent to about 2,159 percent of Greece’s quota. - Macroeconomic outlook (staff/authorities): - The economic downturn is expected to bottom out this year, with a gradual recovery taking hold in 2014. - Greece was in its sixth year of recession: GDP declined by 6.4 percent in 2012 for a cumulative contraction of 22 percent between 2008 and 2012; it is forecast to decline further by 4.2 percent in 2013. - The unemployment rate is close to 27 percent and youth unemployment exceeds 60 percent. - The current-account deficit declined from 11.2 percent of GDP in 2009 to 3.4 percent in 2012, and is expected to decline further to 0.8 percent in 2013. - Inflation is anticipated to be steadily lower than the euro area average for both 2013 and 2014. - Policy priorities and recommendations (from IMF Managing Director and staff): - Tackle tax evasion by pressing forward rapidly with reform of the revenue administration to improve operational independence and make the burden of adjustment more equitable. - Resist pressures to reduce taxes using space from any fiscal over-performance. - Implement decisive public administration reforms, including targeted staff reductions, to lower costs, improve efficiency, and increase fairness. - Accelerate productivity-enhancing structural reforms, including liberalization of regulated professions and other product and service markets, to reduce costs and improve efficiency. - Reinforce governance framework of banks and return to the private sector the stakes in banks under government control at an early time. - Continue reforms of insolvency and non-performing loan resolution frameworks to facilitate repair of balance sheets and restoration of credit growth. - European partners' assurances to consider further measures and assistance, if necessary, to reduce debt to substantially below 110 percent of GDP by 2022, are welcome and conditional on Greece’s full implementation of all program conditions. *Source: _cr13153 - 9.6 Provision of Data (IMF).* ### conclusions that are presented in the staff analysis regarding structural reforms. ### _cr13153 - conclusions that are presented in the staff analysis regarding structural reforms. ### Implementation challenges and overall progress - Structural reforms are more difficult to implement than macroeconomic adjustment measures due to political considerations and severe capacity constraints. - Capacity constraints are being gradually overcome through massive technical assistance from Fund staff, the European Task Force, and several bilateral donors. - Progress under the coalition government that came to power one year ago has been steadfast: - The Spring 2013 Update of the Euro Plus Monitor, produced by Berenberg Bank and the Lisbon Council, placed Greece on the top spot of its Adjustment Progress Indicator. - Greece has been ranked as the country with the highest responsiveness to OECD recommendations between 2010-12. ### Tax administration and tax evasion - Staff characterization that “limited progress has been made in tackling Greece’s notorious tax evasion” is qualified by the authorities: - Tax compliance and collections remain a formidable challenge. - In the past six months there are weekly reports about individuals who have been arrested for major tax evasion offenses. - January appointment of an independent General Secretary of public revenues vested with more autonomy, power and resources to carry out tax collection effectively. - Resolution of tax offenses lies with the tax courts, which are beyond the reach of the executive branch; the government has identified this as an area for further improvement. - As staff acknowledges in the Article IV report (para. 33), the authorities “emphasized their political commitment to see the process through”. ### Public sector employment reforms - Authorities recognize considerable delays in implementation of employment reforms in the public sector. - April 29 passage of the Omnibus Law includes quarterly plans for: - 4,000 mandatory exits in 2013. - 15,000 cumulative exits through end-2014. - The Omnibus Law lifts the taboo against dismissals in the public sector and opens the door for mandatory redundancies. - Government intends to replace laid-off public servants with qualified staff in key areas such as bank supervision and tax administration. ### Doing Business, privatizations, and the banking sector - Government focus: invigorate export and import-competing industries, reduce barriers to entry, shorten opaque and lengthy licensing procedures, and improve the business environment. - World Bank Group Doing Business Report: Greece’s rank rose to 78 in 2013 from 89 in 2012. - Privatization activity: - Sale approved: 33 percent stake in the Football Betting Organization to a private concern for over €700 million. - Privatizations recently completed: State Lotteries (€190 million), Mobile Telephony Licenses (€381 million), International Broadcasting center (€81 million). - 14 privatizations in final stages of completion, including the National Gas Utility Corporation. - Cumulative privatization receipts expected by the authorities: - €4.2 billion by end-2013. - €6.5 billion by end-2014. - €7.7 billion by end-2015. - €11.1 billion by end-2016. - Banking sector priorities and developments: - Large injection of public capital to systemic banks viewed as temporary; government intends re-privatization at the earliest possible stage. - Authorities working on reinforced governance framework, stronger oversight and supervision to eliminate undue Government interference and problems of directed credit. - Key priority: contain and reverse mounting tide of non-performing loans. - Authorities committed to a framework for dealing with distressed household borrowers. - Deposits replenished through cash removed from the banking system: - Greek private-sector bank deposits are 9 percent up from last June's lows and stabilized in May after some outflows in April on Cyprus fears. ### Green shoots and short-term positive indicators - Government believes 2013 will be the last year of retrenchment and recession will bottom out in the next few months. - Recent developments pointing to recovery prospects: - Liquidity: government paid off €2.2 billion of an outstanding €9 billion in arrears to suppliers; stock of T-bills held by the banking sector declined, releasing resources for private sector financing. - Restart of work on some major infrastructure projects, potentially creating thousands of jobs. - Tourism: Association of Greek Tourism Enterprises anticipating 17 million tourist arrivals in 2013, one million more than in 2012. - Ratings: FITCH upgraded both the sovereign rating and the rating of Greece’s four systemic banks by one notch (with a stable outlook), noting “clear progress has been made towards eliminating the twin fiscal and current account deficits and that ‘internal devaluation’ has at last begun to take hold”. ### Growth, confidence, and sentiment indicators - Authorities concur with staff that restoring growth is the overarching precondition for success and that growth depends on improved sentiment. - Top priority: enhance confidence in government resolve to pursue required reforms to secure political stability and elicit domestic and foreign investment. - April 29 Omnibus Law passage seen as evidence of broader public support; passage elicited muted protests without vocal street confrontations. - Confidence indicators: - Euro-zone Economic Sentiment Indicator for Greece rose to 89.2, above the euro-zone average. - Purchase Managers’ Index in April was 45, up from 42.1 in March (the highest level since July 2011). - Improvement in sentiment, coupled with European partners’ commitment to deal effectively with Greece’s debt overhang, reduces Euro exit fears and can help set the stage for renewed growth. ### Ex-post evaluation (EPE) of the 2010 Stand-By Arrangement — authorities’ assessment and lessons - Authorities found the EPE analysis insightful and balanced: - SBA assembled in a very short period, without adequate political dialogue and with insufficient tailoring of conditionality to the peculiarities of the economy and public administration. - An ex-ante (or early) debt restructuring that could have mitigated adjustment depth and recession severity was ruled out by Greece in agreement with Euro zone partners. - SBA-supported program described as a holding operation until the PSI became inevitable and an EFF-supported program replaced the original arrangement. - Two areas emphasized for future consideration: - Conditionality design: - Fiscal adjustment was necessary and structural reforms essential, but detailed conditionality in many program areas was at times overwhelming. - Going forward, ensure that prior actions—across fiscal policy, management, and all areas with structural conditionality—are macro-critical for achieving program objectives. - Authorities value TA provided by Fund staff, especially in fiscal management, tailored to system needs and important for capacity building; they hope to continue strong TA engagement with the Fund. - Troika coordination: - Relations with Troika members generally smooth; authorities acknowledge synergies and comparative advantages in structural issues among Fund staff, EC, and ECB. - Authorities fully endorse the recommendation for streamlining procedures and documents among the Fund staff and EC and ECB officials. *Source: _cr13153 - conclusions that are presented in the staff analysis regarding structural reforms.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13153.pdf_