## _cr1320 — IMF staff report (selected chapter content)

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### Extended Arrangement and financing
- Four-year Extended Arrangement under the Extended Fund Facility approved on March 15, 2012:
  - SDR 23.79 billion (2,159 percent of quota; €28 billion) total.
  - Equally phased purchases of SDR 1.4 billion (about €1.65 billion).
  - First purchase made at approval; second and third purchases equivalent to SDR 2.8 billion (€3.3 billion) proposed upon completion of combined first and second reviews.
- Euro area partner disbursements and support:
  - Euro area countries disbursed €73.9 billion shortly after program approval (of €144.6 billion committed) and about a further €34.3 billion in mid-December 2012.
  - Partners agreed to: lower interest rate on the Greek Loan Facility, lengthen maturities on official lending, transfer ECB profits on Greek debt back to Greece, bring forward financing to support buyback completed December 18, 2012.
  - Partners committed to provide roughly €26 billion in additional financing for 2012–16; remaining gap of €5½–9½ billion in 2015–16 contingent on implementation.

### Recent macroeconomic performance and outlook
- Growth and output:
  - GDP contracted by 6½ percent y–on–y in the first three quarters of the year.
  - Cumulative output decline about 19½ percent (including GDP revisions shaving over 1½ percent off reported growth in 2010–11).
  - Projected to contract by 6 percent in 2012 and 4¼ percent in 2013.
  - Medium-term projections (percent of GDP unless indicated): Real GDP growth: 2012 -6.0; 2013 -4.2; 2014 0.6; 2015 2.9; 2016 3.7; 2017 3.5; 2018 3.3; 2019 3.0; 2020 2.6.
  - Cumulative output growth 2012–2020 projected to be 5 percent less than at program approval.
- Prices, wages, and competitiveness:
  - Nominal wages declined by an average of 7½ percent y-o-y in Q2.
  - Firm-level and individual agreements saw declines of about 20 percent.
  - ULC-based REER fell by 14 percent through September from its peak in 2009.
  - Headline HICP inflation 0.4 percent y-on-y in November; CPI-based REER improvement 6 percent.
- Labor market:
  - Unemployment reached 26 percent at end-October (Labour Force Survey basis projections: 2012 24.4; 2013 26.6).
  - Falling disposable income compounded demand weakness.
- External adjustment:
  - Trailing 12-month current account deficit reached 5 percent of GDP through end-September (compared with 10 percent same period in 2010–11).
  - Current account projected to achieve balance on an accrual basis by 2015; current account (percent of GDP) projections: 2012 -4.2; 2013 -1.2; 2014 -0.3; 2015 0.4; 2016 0.7; 2020 1.8.

### Fiscal adjustment, package, and institutions
- Recalibration and timeline:
  - Fiscal adjustment path lengthened by two years to reach primary surplus of 4½ percent of GDP in 2016.
  - Targeted adjustment in 2013 drops from 3 percent to 1½ percent of GDP (structural primary balance: 4½ to 3 percent of GDP).
  - Needed measures for 2013–14: €13½ billion (including €3 billion replacing measures with declining yields and €10½ billion net new measures); possible additional €2–4 billion in 2015–16.
  - Without extension, required measures for 2013–14 would have been €20 billion.
- Composition and quantified package (Percent of GDP):
  - Total 2013–14: 7.15; 2015–16: 0.06.
  - Expenditure Measures 2013–14: 5.10; 2015–16: 0.04.
  - Revenues Measures 2013–14: 2.06; 2015–16: 0.02.
  - Detailed line items preserved in source tables (e.g., Social security transfers 2013–14: 3.23).
- Spending and social protection implications:
  - Total primary spending expected to fall to 41 percent of GDP by 2014.
  - Revenues expected around 43 percent of GDP.
  - Pension measures reduce pension spending from 17 percent to about 14 percent of GDP in 2013.
  - Measures to protect vulnerable groups:
    - Pensions below €1000 per month exempted; cuts increase to 20 percent for pensions exceeding €3000 per month.
    - Effective tax free income raised to €10,000 from €5,000 via overall tax credit.
    - Expanded unemployment insurance benefits (pilot); leverage structural funds for training.
- Fiscal institutions and revenue administration:
  - Tax administration reform stalled; leadership vacuum (no Secretary General for 10 months) impeded performance.
  - Commitments: adopt law to establish semi-autonomous tax agency by end-February 2013; agency fully operational by March 2014.
  - Operational steps: immediate transfer of 150 staff to large taxpayer work; hiring and internal transfers during H1 2013; new Tax Procedure Code by end-June 2013; income tax law simplification by mid-2013.
  - Targets: hire 200 external auditors by March 2013; increase audit staff by 2,000 by June 2013 (authorities' plans).

### Privatization strategy, targets, and governance
- Revised proceeds and timelines:
  - Cumulative proceeds now set at €6 billion by 2014, €10 billion by 2016, and €23.5 billion through 2020 (including €1.6 billion realized to date).
  - Alternative schedule in memorandum (different points): cumulative expected proceeds (from June 2011): at least €5.9 billion through 2014; €10.5 billion through 2016; €25.6 billion through 2020.
  - Authorities identified pool of 3,150 properties with estimated market value of €10 billion; transfer of 1,000 fully identified assets to HRADF in 2013 planned.
  - HRADF objective: tender 21 objects by June 2013 (compared to seven since HRADF setup).
- Institutional and legal measures:
  - Transfer ownership of assets to HRADF; assets ready for sale held off-balance sheet to maximize flexibility.
  - Legal impediments being removed (golden shares, state-aid clearance); 40 real estate assets to be transferred to HRADF by March 2013.
  - Political/Parliamentary oversight risk: amendment allows Parliamentary Economic Committee recommendations prior to privatization; contingent steps agreed to eliminate ex-ante parliamentary review and change Board if delays persist.
- Transparency obligations:
  - HRADF to publish semi-annual Asset Development Plan updates and quarterly reports and financial accounts within 60 days after quarter end.

### Financial sector: recapitalization, resolution, and supervision
- Banking sector pressures and recapitalization needs:
  - Deposits outflow accelerated to €15.9 billion in May–June 2012; private sector deposits as of end-November 2012 were 10.6 percent lower than end-2011.
  - NPLs including restructured loans reached 23.8 percent of total loans in Q1; preliminary Q2 rise to 24 percent for four largest banks.
  - Provisioning coverage ratio declined to 41.4 percent in Q1 from 45.2 percent at end-2011.
  - Central bank funding €129 billion as of mid-December, up from €121 billion at end-2011; much via ELA.
  - Private sector credit declined by almost 5 percent y-on-y in November.
  - Estimated recapitalization envelope about €50 billion (source estimates).
- Recapitalization framework and timeline:
  - Deadline for recapitalization of core banks extended from end-September 2012 to end-April 2013.
  - CT1 targets revised from 10 to 9 percent to align with EBA recommendation; Pillar II 7 percent under adverse stress scenario.
  - Three-step capitalization:
    - HFSF bridge capital to bring core banks up to 9 percent CT1 before end-2012; HFSF commit to subscribe to remaining needs.
    - By end-January 2013 HFSF subscribe to convertible instruments.
    - By end-April 2013 core banks complete rights issues; unsubscribed shares acquired by HFSF.
  - Noncore banks must be fully capitalized with private resources or merge before end-April 2013; resolution timeline extended to end-June 2013.
- Governance and safeguards:
  - HFSF-hired auditors to review related party lending; monitoring trustees to be placed in banks; EC and ECB observers to have increased access; HFSF to publish semi-annual operational details.
  - BoG to strengthen supervision: revise supervisory model, intensify onsite inspections, require standardized asset quality disclosure; new Basel Core Principles assessment planned for 2014 (last October 2006).
  - Stress test and top-down verification of capital needs by end-December 2013; follow-up stress test to assess capitalization through 2014 based on end-June 2013 performance.
- Specific bank actions and restructuring:
  - ATE resolved in July 2012 via P&A by Piraeus Bank with HFSF upfront cost €7.2 billion.
  - Hellenic Postbank resolution no later than end-January 2013 (prior structural benchmark).
  - NBG-Eurobank merger allowed to proceed; if completed new NBG would control around 40 percent of system deposits.

### Debt sustainability, DSA inputs, and projections
- DSA baseline and official measures:
  - Upfront voluntary buyback completed December 18, 2012: €31.8 billion of bonds retired at cost €10.8 billion, financed via EFSF support.
  - Revised official financing terms assumed in DSA: reduce GLF margin from 150 bps to 50 bps; cancel 10 bps EFSF fee; receipt of SMP profits (approx. €9.3 billion through 2020); deferral and capitalization of interest payments on EFSF and future ESM loans until 2022; eurogroup committed to an additional 4 percent of GDP in debt reduction after 2014 conditional on Greece achieving primary surplus.
  - These measures projected to bring headline public debt to 128 percent of GDP by 2020 (first-step), with partners committing to bring debt to 124 percent of GDP by 2020 and substantially below 110 percent by 2022 contingent on further fiscal performance.
- Baseline public debt trajectory (selected figures preserved):
  - Public sector debt (percent of GDP): 2012 157.5; 2013 178.5; 2014 174.5; 2015 170.0; 2016 162.7; 2020 124.0; 2025 101.2; 2030 83.6.
  - Baseline: debt projected to peak near 180 percent of GDP in 2013 (near-term) then decline to 124 percent by 2020 under the package.
  - Debt-stabilizing non-interest current account: -4.6.
- External debt and net-debt projections:
  - Gross external debt at 235 percent of GDP; projected to peak around 260 percent in 2013 and drop to 170 percent in 2020.
  - Net external debt projected to fall from 109–110 percent of GDP in 2012 to 59.3 percent by 2020 (selected table: 2020 59.3).
- Financing needs and additional support:
  - Estimated additional balance of payments financing needs 2012–16: €32 billion.
  - Debt buyback added about €9.8 billion to needs during 2012–16 (with €10.8 billion upfront); other measures reduced needs by about €10 billion.
  - Agreed new financing roughly €26 billion, leaving gap €5.5–9.5 billion falling in 2015–16.
  - Specific agreed measures: deferral and capitalization of EFSF interest payments (estimated €11.5 billion through 2016); ECB preliminary agreement to rollover maturing Greek bonds held by national central banks (ANFA) generating about €5.6 billion through 2016 (or member states to provide equivalent relief).
- Sensitivity and stress tests:
  - Alternative DSA scenarios indicate fiscal transfers of about 3 percent of GDP per year (€6 billion) between 2013–2020 or an upfront haircut of about 25 percent on EFSF loans, GLF loans, and ECB SMP holdings would be needed to return Greece to program debt trajectory under adverse shocks.
  - Stress scenarios: combined-shock/program-delay scenario could raise debt to around 147 percent by 2020 (23 percentage points above baseline).

### Program monitoring, prior actions, and structural benchmarks
- Prior actions implemented as condition for reviews:
  - Ten prior actions across restoring competitiveness, preserving financial stability, and restoring fiscal sustainability (liberalization in retail, fuel, transportation services and regulated professions; reductions in severance and other nonwage costs; bank recapitalization steps; adoption of revenue and expenditure consolidation measures; improvements in commitment controls and arrears reporting).
- Quantitative targets and definitions:
  - Proposed revisions to QPCs and indicators to reflect understandings (e.g., floor on modified general government primary cash balance, ceilings on state budget primary spending, ceilings on stock of domestic government arrears).
  - Definitions revised for program accounting: exclude cash payments from loss-making banks from central government primary revenue; add verified tax refunds not paid to domestic arrears; exclude arrears already subject to QPC from primary balance QPC.
- New structural benchmarks (selection and deadlines):
  - Hellenic Postbank resolved by end-January 2013.
  - By end-April 2013 all four core banks required to meet capital adequacy requirements.
  - By end-June 2013 all noncore undercapitalized or insolvent banks to be resolved.
  - By end-February 2013 law to establish semi-autonomous tax agency adopted.
  - By end-February 2013 authorities to complete staffing plans and specify targets for mandatory exits from public sector.
  - By end-June 2013 new Tax Procedure Code to be adopted; income tax law further simplified by end-2013.
  - By end-2013 Ministry of Finance to complete audit of accounts payable to verify arrears clearance modalities.

### Key program risks, downside scenarios, and mitigation
- Main downside risks:
  - Political failure and weakening support for reforms amid deep recession; potential for implementation delays, political crisis, default and/or euro exit.
  - Delayed recovery of confidence causing weaker investment and growth, higher fiscal multipliers, and risk of a self-reinforcing high-debt low-growth trap.
  - Transmission risks: higher fiscal multipliers (multipliers increased to around one; possible multipliers up to 1.75 in some episodes) and crowding out from heavier Treasury bill holdings on bank balance sheets.
  - Banking sector and liquidity risks if ECB accommodation not maintained; government not planning to reduce T-bill exposure by €9 billion in 2013 as originally assumed.
- Contingent responses and additional financing needs:
  - Upfront policy implementation, tighter fiscal rules, protection for vulnerable groups, reinforcement of structural reforms.
  - If macro risks materialize, additional debt relief and financing from euro-area partners required: fiscal transfers of about 3 percent of GDP per year (€6 billion) 2013–2020 or upfront haircut ~25 percent on certain official claims.
- Capacity to repay and IMF exposure:
  - Total debt service to the Fund peaks at about 5 percent of GDP in 2015 (compared to 4½ percent under EFF-supported program).
  - Peak access projection remains 2,501 percent of quota.
  - Fund’s preferred creditor status provides protection but absorption capacity limited given credit outstanding surpassing 200 percent of projected Fund precautionary balances in 2013.

### Structural reform priorities (labor, product markets, judicial, business environment)
- Regulated professions and product markets:
  - Over 500 regulated professions account for about one-third of employment; sector-by-sector approach to eliminate specific restrictions; target to complete liberalization of regulated professions by end-2012 (cover remaining 20 percent) with follow-on work in Q1 for transportation services.
  - Retail liberalization: allow supermarkets to sell more pre-packaged foods and non-foods, eliminate minimum space restrictions; address fuel market and transportation services to increase competition and reduce high airport charges.
- Labor market:
  - Phased minimum wage reform: government given power to set minimum wages; single minimum wage not fully adopted immediately; review in early 2014.
  - Severance pay reform: notification period reduced from 6 to 4 months; maximum severance reduced from 24 to 12 months with grandfathering.
  - Plan to reduce tax wedge rephased to 2013–15; focus on reducing nonwage costs to achieve upfront ULC reductions.
- Judicial and business environment reforms:
  - Judicial reform to reduce case backlogs remains behind schedule; measures rescheduled and monitoring strengthened.
  - Licensing and trade facilitation reforms: licensing framework for manufacturing and projects with environmental impact rescheduled for Q1 2013; single integrated information system and one-stop shop for export facilitation targeted for 2013–15.
- Next 12-month priorities:
  - In-depth assessment of 13 key sectors to eliminate barriers; objective to reduce red tape cost by one quarter (OECD estimate: about 7 percent of GDP a year).
  - Eliminate nuisance taxes in 2014 budget (structural benchmark September 2013).

### Selected quantitative highlights and monitoring data (preserved as in source)
- Macroeconomic projections (selected): Primary balance: 2012 -1.5; 2013 0.0; 2014 1.5; 2015 3.0; 2016 4.5; Gross debt: 2012 157.5; 2013 178.5; 2020 124.0.
- Banking sector: HFSF provided €18 billion in “bridge capital” in June 2012; HFSF upfront costs for ATE resolution €7.2 billion.
- Privatization receipts projections (MEFP ¶17): Cumulative proceeds €6 billion by 2014; €10 billion by 2016; €23.5 billion through 2020 (including €1.6 billion realized to date).
- Public sector gross external debt and financing (selected): Gross external financing need (billions of euros) — 2012: 202.8; 2013: 185.8; 2020: 121.7.

*Italic: Source: IMF staff report content extracted from _cr1320 (EXECUTIVE SUMMARY and selected chapters/appendices).*

### 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 equivalent to SDR 23.79 billion (2,159 percent of quota; €28 billion) with equally phased purchases of SDR 1.4 billion (about €1.65 billion).
- The first purchase was made at the time of approval of the arrangement; the second and third purchases in the amount equivalent to SDR 2.8 billion (€3.3 billion) are proposed to be released on the completion of the combined first and second reviews.
- Euro area countries disbursed €73.9 billion shortly after program approval (of €144.6 billion committed) and about a further €34.3 billion in mid-December 2012.

### Recent Developments and Macroeconomic Performance
- The program ran off track due to a severe political crisis; the extended election period put on hold macro-structural reforms, the privatization process, and fiscal-institutional reforms.
- Several performance criteria, indicative targets and structural benchmarks were not observed; time was required to restart reforms and reach understandings with the authorities and Greece’s European partners on measures to place debt on a sustainable trajectory.
- GDP and growth
  - GDP contracted by 6½ percent y–on–y in the first three quarters of the year.
  - Cumulative output decline has reached about 19½ percent (including GDP revisions that shaved over 1½ percent off reported growth in 2010–11).
  - Projected to contract by 6 percent this year and 4¼ percent in 2013.
- Internal devaluation and prices
  - Nominal wages declined by an average of 7½ percent y-o-y in Q2.
  - Firm-level and individual wage agreements saw declines of about 20 percent.
  - ULC-based REER has fallen by 14 percent through September from its peak in 2009.
  - Headline HICP inflation was 0.4 percent y-on-y in November; CPI-based REER improvement is 6 percent.
- Labor market and income
  - Unemployment reached 26 percent at end-October.
  - Falling disposable income compounded demand weakness due to faster-than-expected wage cuts.
- Fiscal adjustment and arrears
  - Trailing 12-month cash central government primary balance was close to zero through end-October (compared to a deficit of 3 percent of GDP one year ago).
  - Cash shortages contributed to a buildup of arrears in 2012 of some ¾ percent of GDP, bringing the stock to almost 5 percent of GDP at end-October.
  - Some expenditure policy reforms lagged; only 200 employees were placed in the labor reserve during 2012 versus an end-2012 target of 15,000.
- External adjustment
  - Trailing 12-month current account deficit reached 5 percent of GDP through end-September (compared with 10 percent during the same period in 2010–11).
  - The March 2012 debt exchange improved the income account balance by 1½ percent of GDP.
- Banking sector pressures
  - Deposits outflow accelerated to €15.9 billion in May and June 2012; total private sector deposits as of end-November were 10.6 percent lower than at the end of 2011.
  - NPLs (including restructured loans) reached 23.8 percent of total loans in Q1, an increase of almost 10.5 percentage points from end-2010; preliminary Q2 data for the four largest banks shows a further rise to 24 percent.
  - Provisioning coverage ratio declined to 41.4 percent in Q1 from 45.2 percent at end-2011.
  - Central bank funding amounted to €129 billion as of mid-December, up from €121 billion at end-2011; much of the funding was in the form of ELA after ECB disqualification of most Greek banks from monetary policy operations.
  - Private sector credit declined by almost 5 percent y-on-y in November.
  - System consolidation: two smaller banks were acquired by two core banks; merger steps between NBG and EFG are underway.
  - HFSF provided €18 billion in “bridge capital” in June 2012 to bring core banks’ CAR to 8 percent.
  - The largest public bank ATE was resolved in July 2012 through a P&A transaction by Piraeus Bank with upfront costs for the HFSF of €7.2 billion.

### Program Policies and Adjustments
- Understandings were reached with the new government on a fully recalibrated program to deal with stronger macroeconomic headwinds and observed implementation capacity.
- Key modifications
  - The fiscal adjustment path was lengthened by two years to 2016 to allow more time to reach the primary balance target.
  - Privatization targets were adjusted downward to reflect weak market conditions and the need to prepare assets.
- Authorities’ actions and reforms
  - Authorities specified adjustment measures necessary to close the fiscal gap through 2014.
  - Measures taken to liberalize product markets and to lower nonwage costs to help stem rising unemployment and falling real wages.
  - Bank recapitalization process advanced; oversight and governance to be strengthened.
  - Fiscal institutional reforms for tax administration and public financial management have been put back on track, though behind schedule.
  - Key measures were adopted as prior actions for the first and second reviews.

### Debt Sustainability, Financing, and Euro-area Partner Measures
- Debt relief and financing framework
  - The updated DSA showed further debt relief was needed for sustainability.
  - Euro-area partners agreed, as a first step, to lower the interest rate on the Greek Loan Facility, lengthen maturities on all of their lending, and transfer profits earned by the ECB on Greek debt back to Greece.
  - Partners agreed to bring forward program financing to support a buyback of recently-restructured Greek government bonds (completed in December 2012).
  - These measures are projected to bring debt to 128 percent of GDP by 2020.
  - Partners committed to take further actions, once Greece advances with fiscal adjustment, to bring debt down to 124 percent of GDP by 2020 and substantially below 110 percent of GDP in 2022.
  - Partners agreed to provide roughly €26 billion in additional financing for the period 2012–16 to help cover projected financing gaps.
  - With the relief, a gap of €5½–9½ billion remains during 2015–16; partners reiterated commitment to support Greece as necessary during and beyond the program, provided Greece implements the program.
- Timely delivery of partners’ undertakings on debt relief and financing is crucial for program success.

### Discussions and Mission
- Discussions for the first and second reviews under the Extended Arrangement were held during July 3–11, July 24–August 5, September 5–20, and October 1–16.
- The 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.
- The staff team comprised P. Thomsen (head), M. Flanagan, W. McGrew, H. Floerkemeier, G. Gottlieb, N. Hobdari, W. Maliszewski, and M. Shamloo (EUR); G. Palomba, and I. Petrova (FAD); S. Lanau (SPR); G. Mitchell Casselle, L. Cortavarria, N. Jassaud, and N. Saker (MCM); and G. Esposito and Y. Liu (LEG). B. Traa, S. Eble, G. Gatopoulos, and M. Athanasopoulou (IMF resident representative office) assisted the mission.

*Executive Summary — _cr1320 - EXECUTIVE SUMMARY_*

### 7.      The structural transformation of Greece’s economy continues to proceed at a slow

### _cr1320 - 7.      The structural transformation of Greece’s economy continues to proceed at a slow

### Structural transformation and reform progress
- Pace of structural transformation remains slow (outside of the labor market), increasing adjustment costs.
- Early post-Extended Arrangement measures included:
  - Legislation simplifying fast-track investment licensing and reducing red tape for exporters.
  - Steps to improve efficiency of court proceedings and implement licensing laws.
- World Bank Doing Business Indicator: Greece moved 11 positions higher than last year on ease of starting a business, protecting investors, and facilitating external trade, but remains well behind EU best practice.
- Extended election period effectively paused liberalization of product and service markets (e.g., regulated professions).
- Judicial reform, especially reducing court case backlogs, remained well behind schedule.

### Privatization
- Full-year 2012 privatization target set at €3.2 billion was not met; privatization activity halted by election uncertainty, financial stability concerns, and absence of HRADF Board.
- HRADF recent actions (as part of 78 priority actions):
  - Advanced asset preparation: state aid clearance, unblocking sale of “golden shares” (mostly in utility companies).
  - Launched tender processes for gas company DEPA and betting firm OPAP.
  - Identified a portfolio of 3,000 commercially viable real estate assets.
  - Specified 40 real estate assets slated for near-term privatization.
  - Cleared up regulatory provisions.
- Political resistance remains strong; parliament passed amendment allowing Parliamentary Economic Committee to provide recommendations before privatization transactions.

### Institutional reforms and public administration
- Tax administration reform stalled:
  - Little progress over last 10 months on fragmentation, understaffing, inadequate operating procedures, and weak internal controls.
  - Leadership vacuum: no Secretary General for the last 10 months.
  - Tax administration fell well short of performance targets in large taxpayer and high wealth individual audits and debt collection; End-December 2012 targets set at program approval will almost certainly be missed.
- Public financial management reform slowed:
  - Commitment registers established in around 70 percent of general government entities; major holdouts include health social security fund EOPYY (established in January, started reporting only in October).
  - Slow posting of qualified staff reduced effectiveness of commitment controls in controlling spending and arrears.

### Overall program assessment and remaining gaps
- Greece has made significant fiscal adjustment progress, but:
  - Some 6 percent of GDP additional primary adjustment is still needed to reach the program target.
- External adjustment and competitiveness:
  - Only about half of the estimated 20–30 percent pre-program real effective exchange rate overvaluation has been eliminated.
- Financial sector:
  - Averted a major crisis and banks are closing in on full recapitalization, but major restructuring is still required to assure financial stability.

### Strategy and political economy
- Program strategy: help Greece address external adjustment and debt overhang within the euro area.
- Euro exit alternative: would correct exchange rate overvaluation quickly and reduce debt via default and comprehensive restructuring but likely cause severe economic disruption.
- Authorities determined to stay in the euro area; European partners concerned about international spillovers.
- Simulations (referenced) suggest Greek exit would still have significant impact on euro area GDP (see Box 2).
- Staff assessment: adjustment within the euro area is preferable for Greece and Europe.

### Revisions in agreed policies and financing arrangements
- Agreed policy changes to reach objectives within the euro area:
  - Mac outlook adjusted for deeper recession, tight financing conditions, and worse external outlook.
  - Increased emphasis on macro-structural reforms to boost external rebalancing and reduce output cost of fiscal adjustment.
  - Privatization targets revised down, with adjusted timeline due to poor market conditions, revised bottom-up estimates, and strong resistance from vested interests.
  - Fiscal adjustment extended by two years to cushion impact and protect social cohesion.
- European partners agreed to a financing package to address debt sustainability:
  - Brought forward program financing to support a debt buyback from the private sector.
  - Increased concessionality of their lending, including significant extension of debt maturities.
  - Committed to do more in the future to help bring debt substantially below 110 percent of GDP by 2022, provided Greece further advances in fiscal adjustment.
- Staff assesses the support package sufficient to make the macro-policy framework attainable and the debt trajectory sustainable, though margins remain very limited and further conditional relief is crucial.

### Macroeconomic framework, projections, and scenarios
- Initial review discussions found a significantly deteriorated macro outlook with mid-150 percent of GDP range in 2020 for debt under medium-term projections.
- Package of agreed debt relief measures expected to mitigate macro impacts but not fully offset recent developments.
- Macroeconomic framework assumptions:
  - Over the next 12 months Greece must make a decisive break with political instability and improve program implementation, while Europe meets commitments to support Greece.
  - Projected dynamics: continued near-term weakness followed by restoration of confidence.
- Near-term GDP projections and implications:
  - GDP projected to decline by 6 percent in 2012 (compared to a decline of 4¾ percent under the program).
  - GDP projected to decline by a further 4¼ percent in 2013 (compared to stabilization under the program).
  - Fiscal multipliers increased to around one (with references noting potential multipliers rising as high as 1.75 in some episodes).
  - Extension of fiscal adjustment path expected to cushion effects; without the extension projected output could be at least 1½ percent lower in 2013.
- Medium-term output and potential:
  - Recovery projected to start later; medium-term potential output path expected to be lower.
  - Cumulative output growth between 2012 and 2020 is now projected to be 5 percent less than projected at program approval.
  - Growth projections beyond 2020 kept close to original program projections (reflecting a shrinking population and receding productivity gains from structural reforms).
- External adjustment:
  - Expected to proceed at a faster pace; cost and price competitiveness gains should exceed previous expectations.
  - The current account expected to achieve balance on an accrual basis by 2015.
  - Agreed debt relief expected to benefit the current account by about 2 percent of GDP per year on a cash basis.
- Banking sector:
  - Credit and deposits expected to resume growth in 2014 in line with economic recovery.
  - Private credit growth projections revised down somewhat; banks need to hold more treasury bills to help finance the government.
  - Reduction in reliance on central bank financing will occur more slowly given tighter liquidity conditions.

### Risks to the outlook
- Significant risks persist:
  - High vulnerability to confidence shocks due to implementation risks and political fragilities.
  - Tight financial conditions and heavier reliance on Treasury bills could crowd out private sector loans more than anticipated.
  - Sluggish growth in trading partner countries and tighter liquidity conditions could increase the size of fiscal multipliers.
- Positive risks:
  - Rapid reduction in labor costs may facilitate adjustment through prices rather than quantities.
  - Completion of upcoming reviews on schedule could trigger an earlier and stronger revival of confidence.

### Structural reform priorities and agreed actions
- Authorities and EC/ECB/IMF staff agreed that renewing structural reform momentum is urgent to support recovery and growth.
- Agreed steps to liberalize product and service markets (MEFP ¶8):
  - Regulated professions:
    - Over 500 regulated professions in Greece account for about one-third of employment and are subject to tighter restrictions than OECD average.
    - Sector-by-sector approach to eliminate specific restrictions (entry, minimum prices, mandatory use of services).
    - Targeted professions include real estate brokers, private schools, primary care services, lawyers, custom brokers, stevedores, accountants.
    - De jure excessive restrictions eliminated for most professions; de facto change expected to take more time.
    - Target retained to complete liberalization of regulated professions by end-2012, covering remaining 20 percent of professions.
    - Follow-on work planned in Q1 to liberalize transportation services (airport, seaport, intercity bus, domestic ferry).
  - Product markets:
    - Focus on opening retail sector to greater competition (smaller stores account for most grocery sales in Greece vs. EU average of 20 percent of sales; Greece lags EU-15 average productivity by 30–40 percent).
    - Identified changes in fuel market and transportation services to increase competition and reduce high airport charges relative to regional competitors.
    - Future screening of construction materials, food processing, and tourism sectors for restrictions.
- Business environment reforms (MEFP ¶9):
  - Renew work on licensing reforms and build up trade facilitation reforms.
  - Full implementation of licensing framework for manufacturing and projects with environmental impact rescheduled for Q1 2013.
  - Trade facilitation reforms, including single integrated information system and one stop shop for export facilitation, targeted for 2013–15.
  - Judicial reform measures postponed again; focus remains on reducing case backlog, streamlining Code of Civil Procedure, and publishing court data.
  - Authorities reset deadlines for backlog reduction to align with capacity; progress limited due to judicial independence challenges and lack of political commitment.
- Next 12-month priorities:
  - Eliminate barriers to competition via in-depth assessment of 13 key sectors (including agriculture and energy).
  - Objective to reduce by one quarter the cost of red tape (estimated by the OECD to be about 7 percent of GDP a year).
  - Use OECD toolkit to identify competition barriers and less restrictive measures.
  - Eliminate nuisance taxes that have proliferated, including financing entities outside general government, due to their disproportionate burden on small firms and negative impact on GDP growth.

*Source: _cr1320 - 7.      The structural transformation of Greece’s economy continues to proceed at a slow (PDF chapter content provided).*

### 21.      The authorities have taken some further steps to further reform the labor market

### _cr1320 - 21.      The authorities have taken some further steps to further reform the labor market

### Labor market reforms
- Phased approach adopted instead of deep upfront actions envisaged under the program (MEFP ¶10).
- Minimum wage system:
  - A timetable has been established for a new minimum wage system; one issue requires revisiting in a year.
  - Prior action: power to set minimum wages shifted to the government, meeting a program commitment.
  - Authorities have not yet fully moved to a single minimum wage; maturity allowances were grandfathered for existing employees and this decision will be reviewed in early 2014, informed by labor market developments and administrative feasibility.
- Tax wedge and nonwage costs:
  - Plans to reduce the tax wedge were rephased to 2013–15 as authorities had not fully evaluated options to finance rate reductions (e.g., adjustments to broaden the tax base).
  - Focus shifted to reducing nonwage costs, including severance pay and administrative burdens, to achieve upfront reductions in unit labor costs and mitigate pressures for nominal wage declines.
  - Severance pay reform agreed: notification period reduced from 6 to 4 months and maximum severance reduced from 24 to 12 months, allowing for some grandfathering; reform leaves severance still generous compared to EU average given less generous unemployment benefits in Greece.
  - Administrative burdens: elimination of various pre-approvals by the labor inspectorate (e.g., for work schedules and overtime) to reduce unnecessary controls and informal labor arrangements.

### Privatization
- Government committed to restart the stalled privatization process (MEFP ¶12); seen as crucial for growth and a break from previous public sector–led growth model.
- Asset specification and real estate:
  - List of companies and concessions unchanged; value estimates updated based on pre-tenders and profitability analysis.
  - Identified pool of 3,150 properties with an estimated market value of €10 billion to provide a basis for sales over the next 2–3 years; authorities will transfer 1,000 fully identified assets to the HRADF in 2013.
  - Beyond the 3,150 pool, identified some 10,000 additional real estate assets with an estimated value of €8 billion for later privatizations.
- Steps to move process forward (Table 13, MEFP ¶14–15):
  - Ownership of assets being transferred to the HRADF; assets ready for sale are held by the HRADF in off-balance sheet accounts to maximize restructuring flexibility; loss-making enterprises or assets requiring cash injections remain with the government.
  - Legal impediments being removed across several categories; through November the authorities largely addressed golden shares/restrictions and company statutory deviations from private law and made progress on state aid clearance.
  - Tenders accelerated: HRADF brought three projects to tender over the last 12 months; objective to have 21 objects tendered by June 2013 (compared to seven since HRADF setup); with adherence, sales proceeds could begin to accrue in earnest during H2 2013.
- HRADF governance and transparency:
  - Political resistance led to review of HRADF independence, transparency and accountability (MEFP ¶16); recent amendment mandating HRADF to take account of Parliament’s Economic Committee recommendations risks new barriers and delays.
  - Agreed contingent steps in event of delays (measured by objects privatized and proceeds realized) to strengthen HRADF, including eliminating the ex-ante parliamentary review and changing the Board.
  - Steps to enhance transparency/accountability: publish plans and HRADF financial accounts.
- Revised privatization proceeds projections (MEFP ¶17):
  - Cumulative proceeds now set at €6 billion by 2014, €10 billion by 2016, and €23.5 billion through 2020 (including the €1.6 billion realized to date).
  - These projections are about half of what was projected at the time of the approval of the Extended Arrangement.
  - Backloaded receipts reflect time to sell bank equity acquired during recap (about half the expected proceeds) and time to prepare real estate assets for sale.

### Financial sector policies
- Focus areas: recapitalization and resolution process refinements, operational restructuring of banks, governance strengthening at banks and the HFSF, and supervisory framework adaptation (MEFP ¶18).
- Recapitalization framework refinements (MEFP ¶19):
  - Deadline for recapitalization of core banks extended from end-September 2012 to end-April 2013 to stagger rights issuance and avoid saturating the market.
  - Conditions for continued private management of core banks tightened: objective retained to keep core banks run by private shareholders, subject to their injection of 10 percent of the new equity capital (counting any increase from acquisitions); enhanced due diligence of related party lending required.
  - Noncore banks framework finalized: noncore banks are not anticipated to be recapitalized alongside private shareholders; they must be fully capitalized with private resources or merge with sound institutions on the basis of a viable business plan before end-April 2013; interim enhanced supervision.
- Recapitalization and resolution timeline and measures (MEFP ¶20–21):
  - Resolution timeline extended to end-June 2013 to allow acquisitions via purchase and assumption transactions and due diligence after core bank recapitalization.
  - Approach to manage assets left in bad banks to minimize resolution costs; options include enhanced liquidator powers or pooling bad assets; foreign expert assistance to be sought.
  - BoG to set strategy for cooperative banks (13 institutions holding deposits of about €2.6 billion): options include integration into viable banks or merging into a core cooperative unit to be recapitalized with a viable business plan.
- Specific bank actions:
  - Authorities will resolve Hellenic Postbank no later than end-January 2013; Postbank’s good bank to be acquired via an open-bid process.
  - Authorities will allow the NBG-Eurobank merger to proceed; if completed, the new NBG would control around 40 percent of system deposits; expected EC DG-Competition anti-trust review.
- Post-recapitalization safeguards and governance (MEFP ¶23–25):
  - Banks receiving state aid must produce business plans confirming medium-term viability; HFSF and monitoring trustees will check adherence and report semi-annually to the EC/ECB.
  - NPL resolution and debt workouts to be enhanced: banks to place nonperforming assets in a dedicated unit with separate management to facilitate debt workouts; asset management companies not ruled out but pose funding and instrument challenges.
  - Legal framework to restructure viable debtors to be revised; rephased from Q2 2012 to Q1 2013 for further international expert assistance.
  - Safeguards:
    - HFSF-hired auditors to review related party lending for legal limits, monitoring, and special terms; findings communicated to the BoG.
    - Placement of monitoring trustees (international accounting firms) in banks with terms to include overseas partners; trustees to verify governance, commercial criteria in key decisions, oversee restructuring plan implementation, and report to HFSF and EC/ECB.
    - Enhanced HFSF transparency: EC and ECB observers to have increased access to information ahead of Board discussions and liaise with monitoring trustees; HFSF to publish semi-annual operational details.
    - BoG to strengthen supervision: revise supervisory model to increase monitoring of key bank ratios, intensify onsite inspections, and require standardized asset quality disclosure; authorities to undertake a new Basel Core Principles (BCPs) assessment in 2014 (last assessment October 2006).
- Capital envelope and stress testing:
  - Envelope of about €50 billion found adequate with sufficient buffers to deal with stress scenarios and potential needs in banks’ foreign subsidiaries.
  - Revision of CT1 targets from 10 to 9 percent to align with European Banking Authority recommendations on capital buffers; capital injections by owners also offset higher needs.
  - BoG analysis indicates banks could sustain a peak NPL level of 40 percent assuming a coverage ratio of 50 percent; memorandum: core banks hold tax credits for about €3.2 billion associated with PSI losses not yet incorporated into program capital estimates.
  - Additional top-down verification of capital needs to be conducted by end-December 2013; stress test to assess capitalization through 2014 under updated macro assumptions and performance through June 2013.
- Estimated Structure of the Banking Sector, 2013Q1 (selected figures preserved as presented):
  - NBG/Eurobank 1/5: Deposits (billions of euros) 8.64; Deposit share (percent) 40.2; Asset share (risk-weighted, percent) 41.4.
  - Alpha 2/3: Deposits 2/3.24; Deposit share 22.3; Asset share 27.4.
  - Piraeus 3/3.21; Deposit share 22.1; Asset share 21.2.
  - Postbank 4/1.09; Deposit share 7.5; Asset share 3.1.
  - Other: Deposits 11.5; Deposit share 7.9; Asset share 6.8.
  - Notes: 1/ Assuming the planned merger is completed by end-2013Q1. 2/ Includes assets and deposits of recent acquisition of Emporiki. 3/ Includes assets and deposits of recent acquisitions of ATE and Geniki. 4/ TT Postal bank will be resolved.

### Fiscal policy
- Review focused on recalibrating the fiscal adjustment timeline and fully defining the adjustment strategy.
- Government acknowledged need to adjust quickly to address Greek solvency concerns while ensuring the pace of adjustment reflects macro considerations.
- Discussions emphasized ensuring a credible, efficient and well-targeted package of measures that would protect the most vulnerable and distribute the adjustment burden equitably to enhance political sustainability.

*Source: IMF country report content provided in the input.*

### 35.      The authorities and their European partners agreed to extend the timeline for fiscal

### _cr1320 - 35.      The authorities and their European partners agreed to extend the timeline for fiscal

### Timeline and recalibration of fiscal adjustment
- The new path reaches the targeted primary surplus of 4½ percent of GDP two years later, in 2016.
- In 2013 the targeted adjustment in the primary balance drops from 3 percent to 1½ percent of GDP (4½ to 3 percent of GDP, when measured by the structural primary balance).
- Had the original program targets been maintained, Greece would have had to implement 11½ percent of GDP in measures in 2013–14.
- With the extended timeline the total needed measures are reduced to 7¾–8¾ percent of GDP (€13½ billion through 2014, and a further €2–4 billion in 2015–16, depending on the strength of the cyclical recovery).
- Some 2¼ percent of GDP of the new measures is required to offset expected declines in the yields from past measures.

### Adjustment strategy and fiscal package
- The authorities’ adjustment strategy focuses on reducing expenditures (MEFP ¶30), refocusing away from reliance on tax rate increases during 2010–12.
- Identified measures amount to 5 percent of GDP in 2013 and an additional 2¼ percent of GDP in 2014.
- The authorities specified about 80 measures cutting across every category of spending and taxation; the package was approved as a prior action for the review.
- Some three-quarters of the package were implemented upfront as prior actions and are parametric reforms (wage, pension, and social benefit measures).
- The package has a greater share of savings from wages and social spending in the total spending cuts (around 80 percent vs. 60 percent) and a greater contribution of direct taxes to total revenue increase (54 percent vs. 46 percent) compared to other countries with large adjustments.

### Spending, revenues, and social protection implications
- Total primary spending is expected to fall to 41 percent of GDP by 2014.
- Revenues are expected to remain around 43 percent of GDP (compared to projected euro area averages of 45 and 46 percent, respectively).
- Cuts in special wage regimes, elimination of various bonuses, and planned cuts in public employment will bring the ratio of wages to GDP closer to the European average of about 10½ percent.
- Pension measures will reduce pension spending from 17 percent to about 14 percent of GDP in 2013 (euro area average of 12 percent).
- Tax reform is expected to keep direct tax revenues close to 10 percent of GDP (still 2 percentage points behind the euro area average).
- Measures designed to protect the most vulnerable:
  - Pensions below €1000 per month exempted; cuts increase to 20 percent for pensions exceeding €3000 per month.
  - Effective tax free income raised to €10,000 from €5,000 through an overall tax credit.
  - Expanded unemployment insurance benefits (pilot basis) and discussions to leverage structural funds for job training programs.
- PIT reform reduces tax brackets from 8 to 3; many capital income types taxed at a moderate flat rate of 20 percent.
- Memorandum item in package table:
  - Tax administration gains 2013–14: 0.34
  - Tax administration gains 2015–16: 1.30

### Package composition (2013–16) — fiscal measures (Percent of GDP)
- Expenditure Measures 2013–14: 5.10; 2015–16: 0.04
- Compensation of employees 2013–14: 0.79; 2015–16: 0.01
- Social security transfers 2013–14: 3.23; 2015–16: 0.04
- Subsidies 2013–14: 0.09; 2015–16: 0.01
- Intermediate consumption 2013–14: 0.75; 2015–16: -0.01
- Gross fixed capital formation 2013–14: 0.24; 2015–16: 0.00
- Revenues Measures 2013–14: 2.06; 2015–16: 0.02
- Direct taxes 2013–14: 0.90; 2015–16: 0.01
- Indirect taxes and sales 2013–14: 0.61; 2015–16: 0.00
- Social security contributions 2013–14: 0.38; 2015–16: 0.00
- Total 2013–14: 7.15; 2015–16: 0.06

### Remaining gaps, staffing, and contingency
- The strategy for fiscal adjustment in 2015–16 has not yet been fully identified (MEFP ¶32); an estimated gap of up to €4 billion remains.
- Authorities intend to focus on retaining expiring measures, base broadening, and efficiency savings from long-term structural reforms; largest gains from extending expiring revenue measures (i.e., solidarity surcharge on PIT).
- Authorities committed to transfer 27,000 staff to a new mobility scheme; 2,000 staff were transferred as a prior action (short of the 15,000 they should have transferred to the labor reserve by end-2012).
- Targets for dismissals to be set at the time of the next review once staffing plans are known.
- Contingency arrangements (MEFP ¶33):
  - Binding sectoral expenditure ceilings, new correction mechanisms for state enterprises and local governments.
  - Within-year appropriations as ex-ante buffers released only if targets are met.
  - In case of sustainable over-performance, 30 percent of the excess devoted to debt reduction; up to 70 percent of any permanent windfall revenue may be used on programs targeting the most vulnerable or to support the recovery.

### Fiscal institutional reforms and revenue administration
- Management and independence of revenue administration to be reinforced; by early 2014 the administration will be transformed into a semi autonomous agency (MEFP ¶35).
- Fourth program review—in Q3 2013—will focus on revenue administration and removal of underperforming staff.
- Key operational steps (MEFP ¶35–36):
  - Immediate transfer of 150 staff from local tax offices to address shortage of auditors for large taxpayers, high-wealth individuals and debt collection; further hiring and internal transfers during H1 2013.
  - Transferred staff to be subject to audits of their wealth.
  - Replaced the Code of Books and Records (CBR) with the Tax Recording of Transactions and Reconciliations Code; some provisions effective by end-2013.
  - Action plan for social security collection (meets a program structural benchmark) envisages: (i) strengthening the recovery of arrears; (ii) enforcing filing; (iii) new framework for settlement and penalty arrangements; and (iv) full integration of collection activities into the tax administration beginning with consolidation into the largest social security fund.
  - Contribution debt accumulation was 3½ percent of GDP at end 2011.
  - Anti-corruption measures: new code of conduct by end 2012; framework to report misconduct, protect whistle blowers, centralize disciplinary decisions; Internal Affairs Directorate to commence annual audits of assets of managers and tax auditors.
  - By mid-2013 income tax law to be further simplified and a new Tax Procedure Code implemented to tighten installment schemes, introduce modern audit and debt collection methods, adopt more efficient enforcement, and reform penalty and interest regime.
  - Measures to utilize third party information (bank accounts, utility bills, insurance contributions) to support presumptive taxation for the self-employed.

### Public financial management, expenditure controls, and arrears
- Authorities will set quarterly fiscal targets for line ministries, state enterprises, and local governments, and establish mechanisms for sanctions (MEFP ¶34–35).
- Expenditure control reforms (MEFP ¶38):
  - Establish General Directorates of Financial Services (GDFS) in line ministries to consolidate control of expenditure commitments; should be in place by end-2012 with new targets set for 2013 (TMU, Table 2).
  - Extend use of commitment registers; national health service integrated into e-portal reporting as a prior action; aim to integrate almost 720 small general government entities into reporting and commitment registers (structural benchmark targets for mid-2013 adjusted accordingly).
- Arrears clearance strategy updated (MEFP ¶39):
  - Funds for arrears cleared after verification and compliance with basic financial management reforms and consistent data from commitment registers.
  - Line ministries will not be required to have run no arrears to access funds to clear outstanding stocks.
  - Timeline for arrears clearance revised to run through end-2013 to account for larger stock of arrears (€9.4 billion as of end-October 2012).
  - An audit to be completed by end-2013 to assess clearance program success.

### Debt sustainability, financing, and debt relief measures
- Without actions to reduce debt, Greece’s debt would peak close to 200 percent of GDP and only slowly decline to 150–160 percent of GDP in 2020, rendering debt unsustainable.
- General government debt components (Billions of euros, 2012):
  - General government: 307.2
  - State: 312.2
  - Tbills: 18.4
  - Official sector: 183.6
  - IMF: 22.3
  - European Commission: 161.3
  - Exchanged bonds: 29.9
  - Non-exchanged bonds: 56.3
  - Loans: 18.0
  - Other: 6.0
  - Subsectors 1/: -5.0
  - 1/ Subsector debt is net of intra-government holdings.
- Debt relief necessity and magnitude:
  - Necessary magnitude of measures estimated to equal about 24 percent of GDP (to achieve target of a 120 percent debt-to-GDP ratio by 2020).
  - European official sector involvement considered inevitable.
- Agreed debt relief and maturity measures:
  - Interest rate reduction on existing GLF loans.
  - Fiscal transfers by member states (of ECB profits related to Greek bond holdings).
  - Voluntary buyback of bonds from the private sector completed on December 18, 2012.
  - A 15-year extension of maturities on official loans.
  - Together, these measures are projected to deliver some 16 percent of GDP in debt reduction by 2020.

*International Monetary Fund staff summary of the specified document content.*

### 51.      Since this was not enough to restore debt sustainability, Greece’s European partners

### _cr1320 - 51.      Since this was not enough to restore debt sustainability, Greece’s European partners

### European assurances and conditional debt relief
- European partners provided supplementary assurances of additional conditional debt relief via Eurogroup statements on November 29 and December 13, and separate interactions with the Managing Director.
- Commitments made:
  - (i) provide 1.4 percent of GDP in debt relief in early 2014 (provided the primary balance target for 2013 is met);
  - (ii) take measures in 2015 to ensure that debt drops to 124 percent of GDP by 2020 and substantially below 110 percent of GDP by 2022 (provided Greece’s primary balance swings to a surplus as programmed in 2014).
- Staff assessment: some combination of haircuts on outstanding GLF loans, close to zero interest rates on GLF loans and lower rates on EFSF loans, or long-term transfers will be necessary to fulfill the full commitment.

### Debt sustainability and projection outcomes
- Under the new financing package and provided program implementation, debt would be sustainable in the medium term, albeit still with risks.
- Public debt:
  - Debt would decline to 124 percent of GDP in 2020, somewhat higher than the targeted 120 percent of GDP.
  - Debt dynamics before 2020 are less favorable, with debt peaking in 2014 about 10 percent of GDP higher than previously.
  - European commitment to further contingent debt relief points to eventual recovery of the program debt trajectory in 2022 (original program foresaw debt of 107 percent of GDP in 2022).
  - Risks remain significant: stress tests single out risks from delays in reforms, more adverse macro dynamics, and non-implementation (leading to euro exit).
- External debt:
  - Net external debt projected to fall from 109 percent of GDP at end-2012 to 59 percent by 2020 according to baseline projections.
  - Improvement largely due to improved current account path and the debt buy-back.
  - Macroeconomic shocks and policy slippages could produce considerably more adverse debt dynamics.

### Debt service, maturity extension, and debt NPV perspectives
- Maturity extension effects:
  - Interest payments in 2013–20 reduced by almost 3 percent of GDP per year in cash terms (falling below the euro area average).
  - Principal repayments on debt falling due from 2020 to 2030 reduced by an average of about 4½ percent of GDP per year.
- Headline debt:
  - Headline debt peaks at about 180 percent of GDP in 2013 and overstates the debt burden given the sharp decline in debt service.
- Debt NPV:
  - NPV of end-2012 debt evaluated at Greece’s long-run projected nominal growth rate (around 4 percent) would be 148 percent of GDP.
  - This NPV is lower than at the time of EFF program approval (when it stood about 3 percentage points higher).
  - Using a higher discount rate (in line with the range of borrowing rates within the euro area) would produce even lower debt NPVs.

### Additional financing, financing needs, and re-phasing
- Estimated additional balance of payments financing needs over 2012–16: €32 billion.
- Debt buyback added about €9.8 billion to needs during 2012–16 (with €10.8 billion upfront).
- Other debt-related measures reduced financing needs by about €10 billion over the same period.
- Agreed new financing: roughly €26 billion, leaving a gap of €5.5–9.5 billion (depending on how transitory movements in deposits are accounted for), falling entirely in 2015–16.
- Specific measures agreed:
  - Deferral and capitalization of EFSF interest payments for one decade, providing an estimated €11.5 billion in financing through 2016.
  - ECB preliminary agreement to rollover maturing Greek bonds held by national central banks (ANFA), generating about €5.6 billion in further financing through 2016; if not confirmed by March, euro member states agreed to provide equivalent relief via other means.
  - Greece agreed to delay the programmed €9 billion net redemption of Treasury bills now held by banks; banks will need balance sheet adjustments (likely involving higher ELA and higher access to ECB instruments).
- Disbursement sequencing and amounts (E.U. Disbursements, 2012–14, Billions of euros):
  - 1st disbursement, 2012Q4: 49.1
    - Of which Dec., 2012: 34.3
    - Jan.–Mar., 2013: 14.8
  - 2nd disbursement, 2013Q1: 4.2
  - 3rd disbursement, 2013Q2: 3.2
  - 4th disbursement, 2013Q3: 0.7
  - 5th disbursement, 2013Q4: 2.4
  - 6th disbursement, 2014Q1: 6.3
  - 7th disbursement, 2014Q2: 4.8
  - 8th disbursement, 2014Q3: 0.0
  - 9th disbursement, 2014Q4: 0.0
- Disbursement design:
  - Amounts brought forward to fill 2013 financing gaps.
  - Disbursements tranched within quarters, linked to financing needs and completion of objective milestones (as defined in the program).
  - Following the €34.3 billion disbursed in December 2012, a further €14.8 billion to be disbursed in early January, early February, and early March 2013 as Greece meets milestones (including tax reform passage and establishment of public sector staff reduction targets).
  - Funds in January–March include amounts for bank recapitalization delayed to finance the debt buyback.
  - Importance of frontloading disbursements to January to minimize bank restructuring delays and prevent tighter-than-programmed liquidity.

### IMF financing re-phasing
- IMF resources re-phased at Greece’s request:
  - Purchases related to the first and second reviews, and a re-phasing of the undrawn third purchase, with remaining outstanding access to be spread equally over all remaining reviews.
  - Each of the remaining purchases would equal SDR 1,506.7 million under the proposed re-phasing.

### Program monitoring, prior actions, and structural benchmarks
- Ten prior actions implemented to set the stage for Board consideration of the reviews, covering three core areas:
  - Recovering competitiveness and protecting real incomes:
    - Prior actions include: (i) liberalization measures in retail, fuel, transportation services, and regulated professions; (ii) measures to reduce severance and other nonwage costs; (iii) reforms to eliminate legal obstacles to privatization.
    - Staff views these three actions as macro critical.
  - Preserving financial stability:
    - Prior actions include: (i) steps to finalize bank recapitalization program; (ii) measures to strengthen governance of the financial system.
  - Restoring fiscal sustainability:
    - Prior actions include: (i) adoption of revenue and expenditure measures to achieve fiscal consolidation during 2012–14; (ii) steps to improve revenue administration; (iii) improvement of commitment controls and arrears reporting.
    - Staff views the collective package as macro critical.
- Proposed quantitative target revisions:
  - Fiscal quarterly performance criteria (QPCs): floor on modified general government primary cash balance, ceiling on state budget primary spending, and ceiling on stock of domestic government arrears for end-December 2012 proposed to be adjusted to reflect understandings; authorities requesting waivers of applicability for present reviews.
  - Indicative targets: end-2012 indicative target on domestic government arrears proposed to be adjusted; new indicative targets on domestic arrears and privatization proceeds proposed for 2013; end-September 2013 floor on privatization proceeds proposed to be a QPC.
  - Definitions revised:
    - (i) cash payments from loss-making banks excluded from central government primary revenue (TMU ¶5);
    - (ii) verified tax refunds not paid added to program definition of domestic arrears (TMU ¶10);
    - (iii) ceilings set on stock of arrears consistent with programmed arrears clearance schedule, and arrears already subject to a QPC excluded from primary balance QPC definition (TMU ¶6 and ¶4).
  - Note: risk of misreporting arrears remains given weak Greek institutions.
- New structural benchmarks (MEFP Table 4):
  - To restore competitiveness:
    - Strategy to reduce social security contribution rates adopted by end-November 2013 (reset benchmark from the Extended Arrangement).
    - Eliminate various small fees and taxes (“nuisance taxes”) in context of 2014 budget (in September 2013).
  - To preserve financial stability:
    - By end-January 2013, Hellenic Postbank will be resolved.
    - By end-April 2013, all four core banks required to meet capital adequacy requirements.
    - By end-June 2013, all noncore banks undercapitalized or insolvent will be resolved.
    - By end-July 2013, all banks should submit restructuring plans for validation to DG-Competition.
    - By end-2013, Bank of Greece will complete a follow-up stress test for all banks.
  - To secure fiscal sustainability:
    - By end-February 2013, law to establish a semi-autonomous tax agency will be adopted.
    - By end-February 2013, authorities will complete staffing plans and specify targets for mandatory exits from the public sector.
    - By end-June 2013, a new Tax Procedure Code will be adopted and income tax law further simplified.
    - By end-2013, Ministry of Finance will complete an audit of accounts payable to ensure compliance with arrears clearance targets and modalities.
- Program reviews:
  - Third and fourth reviews proposed on or after February 28 and May 31, 2013, respectively.
  - Fifth review will focus on overall progress with tax administration reforms in addition to other conditions.
  - Sixth review will include focus on overall progress with privatization in addition to other conditions.

### Exceptional access criteria, justification, and risks
- Program satisfies substantive criteria for exceptional access but with little to no margin.
- Developments raised issues about debt sustainability and implementation capacity; additional efforts by authorities and European partners allow criteria to be satisfied, albeit narrowly.
- Criterion 1: exceptional balance of payments pressures justify Fund financing beyond normal limits due to prolonged unfavorable financial conditions and elevated sovereign spreads.
- Criterion 2: rigorous analysis indicates medium-term debt sustainability but significant uncertainties remain; baseline sustainable but downside risks high (debt peak near 180 percent of GDP). Exceptional access justified by high risk of international systemic spillovers if program review did not proceed.
- Criterion 3: prospects for regaining market access conditional on successful program implementation and adequate European support; cautious market access assumptions based on small issuances at short maturities and high spreads. Euro area members extended maturities of GLF and EFSF loans to reduce debt service and rollover requirements.
- Criterion 4: policy program provides reasonably strong prospect of success given demonstrated program ownership, strong prior actions, program revisions reducing administrative capacity challenges, and continued technical assistance; implementation risks remain.

*Italic: Source: _cr1320 - 51.      Since this was not enough to restore debt sustainability, Greece’s European partners*

### 63.      Risks to the program are still on the downside. Greece is attempting to achieve an

### Risks to the program are still on the downside

### Key downside risks
- Political failure: diminishing support for reforms amid another year of deep recession; opinion polls show dwindling support for coalition parties and growing support for Syriza and other anti-program parties. This could lead to implementation delays, a political crisis, debt default and/or euro exit.
- Delayed recovery of confidence: political instability and risk of disorderly default/euro exit may further weaken confidence and investment, causing growth to undershoot projections, fiscal adjustment to struggle, and possibly a self-reinforcing high-debt low-growth trap.
- Transmission mechanism risks:
  - Fiscal multipliers could be higher than projected, especially if the external environment is weaker or if bank deleveraging proceeds more rapidly than expected (for example, due to crowding out as treasury bills are retained on banks’ balance sheets).
  - Gains from structural reforms are uncertain: wage adjustment may take longer to translate into price adjustment given strong vested interests; stronger competitiveness may take longer to translate into higher net exports.

### Policy responses and potential additional financing needs
- Program risk mitigation measures:
  - Upfront policy implementation to put difficult actions behind the government.
  - Tighter fiscal rules to help prevent future deviations.
  - Protection for the most vulnerable to contain political stresses.
  - Reinforcement of structural reform efforts to lay a basis for stronger growth.
- If macro risks materialize (confidence and transmission mechanism), additional debt relief and financing from Greece’s European partners would be needed.
- Alternative scenario in the DSA indicates needs to return Greece to the program debt trajectory:
  - Fiscal transfers of about 3 percent of Greek GDP per year (€6 billion) between 2013 and 2020 (which could be delivered through a variety of channels, including lower interest rates on GLF and EFSF loans).
  - Alternatively, an upfront haircut of about 25 percent on EFSF loans, GLF loans, and ECB SMP bond holdings.

### Capacity to repay and safeguards
- Under the revised program baseline:
  - Total debt service to the Fund will peak at about 5 percent of GDP in 2015, compared to 4½ percent under the EFF-supported program.
  - Peak access projections remain broadly unchanged from the program request (2,501 percent of quota).
  - Capacity to repay the Fund critically depends on euro area member states’ commitment to provide support to Greece during the program and beyond; and on Greece’s ability to implement the program in full.
- If the program goes irretrievably off-track and euro area member states void their commitment, Greece would likely not have the capacity to repay the Fund.
  - The Fund’s de facto preferred creditor status provides some protection, but the Fund’s capacity to absorb losses would be limited because credit outstanding to Greece would surpass 200 percent of projected Fund precautionary balances in 2013, and low SDR interest rates limit burden sharing capacity.
- Safeguards assessment of the Bank of Greece:
  - Some key safeguards functions remain under development.
  - Emergency lending operations are subject to adequate regulatory and control frameworks but an internal compliance review by the BoG is warranted.
  - Given significant ELA exposure, the BoG should analyze legal aspects arising in cases of recapitalization or state indemnification of losses.
  - Greece has put legal arrangements in place to channel targeted primary surpluses (plus 30 percent of primary surpluses in excess of targets) and privatization revenues into a segregated account usable only for debt service to all creditors; this does not pose safeguards issues for the Fund.

### Staff appraisal: progress, shortcomings, and priorities
- Mixed picture with stark contrasts:
  - Fiscal adjustment has been extraordinary; labor market reforms have produced significant wage adjustment.
  - Adjustment has relied too heavily on cuts in discretionary spending and increased taxation of wage earners, while tax evasion by the rich and self-employed remains widespread and cuts to bloated state sectors have been limited.
  - Lower wages have not resulted in lower prices because of failure to liberalize closed professions and dismantle barriers to competition; rebalancing has largely happened through recessionary channels rather than productivity-boosting reforms.
  - Mounting sense of social unfairness is undermining support for the program.
- Government alignment with staff objectives:
  - Main objectives and plans generally aligned with staff, and some important upfront changes have been delivered; political resolve is still needed in the most difficult areas.
- Fiscal priorities and tests:
  - Essential to achieve efficiency savings via significant mandatory redundancies and to radically overhaul tax administration to avoid further wage and pension cuts.
  - Tackling tax evasion is a litmus test for domestic and European support.
- Labor and product market reforms:
  - Progress made; staff accepts delaying agreed reforms of the minimum wage regime but still considers such reforms essential.
  - Cut in severance pay is an important step to reduce nonwage costs.
  - More reforms needed to reach a critical mass for sustained productivity gains, lower prices, and protection of real incomes; most difficult reforms will challenge constituencies aligned with the governing party.
- Privatization:
  - Results to date extremely disappointing; government’s intention to accelerate privatization is welcomed but evidence is limited and market conditions are unfavorable.
  - Concerns about political interference in the privatization agency and preference for insiders.
  - If mid-year review shows persistent problems, government should consider radical governance changes, including replacement of current managers by foreign experts.
- Financial sector stabilization:
  - Good progress; recapitalization framework finalized.
  - Almost complete removal of direct sovereign exposure from banks’ balance sheets has reduced risks.
  - With the state set to take major stakes in key banks, the Government must refrain from interfering in day-to-day management; HFSF should protect public interests.
  - EC and ECB should use powers to exert effective oversight alongside Greek supervisors.
- Debt relief and outlook:
  - European partners’ upfront measures are an important first step but likely insufficient to keep debt close to the targeted trajectory.
  - Assurances to take additional measures in 2014 and 2015—provided Greece adheres to primary deficit targets—aim to reduce debt to 124 percent of GDP by 2020 and substantially below 110 percent by 2022.
  - Upfront measures to achieve the original target of 120 percent by 2020 would have been preferable; specification of exact modalities for future relief is lacking.
  - The assurances reflect an explicit acknowledgement that Greece’s debt burden is unsustainable without long-term transfers.
- Repayment-period extensions and refinancing:
  - Extension of repayment periods on GLF and EFSF loans, combined with buyback of privately held bonds, sharply reduce what would otherwise have been a surge in refinancing needs starting in 2022 and lower long-run debt dynamics.
- Short-term financing constraints:
  - Program is fully financed on a 12-month forward-looking basis; proposal to roll-over maturing bonds held by Eurosystem Central Banks could provide sufficient financing assurances through end-2013.
  - Greece’s European partners would have to commit to new funding by that point at the latest.
  - Financing constraints mean the government is no longer planning to reduce its T-bill exposure by €9 billion in 2013 as assumed in the program; without ECB accommodation, liquidity conditions will be notably tighter.
  - If this poses a significant risk to the macro framework, staff would expect euro area member states to provide additional financing in 2013 to allow Greece to reduce its T-bill exposures as originally programmed, or for the ECB to raise its limit on repo-eligible T-bills.
- Contingent approach to debt relief:
  - The gradual and contingent approach will need revisiting if high debt burden continues to weigh on investment.
  - Baseline assumption that GDP will start to recover in 2014 depends on a gradual recovery in confidence and investment while fiscal consolidation still exerts a drag.
  - If investors’ confidence remains subdued because of the debt burden despite strong program implementation, a more frontloaded approach to debt relief would need consideration.
  - Macro and debt outlook should be assessed carefully at each future review.
- Overall judgment:
  - Program is moving in the right direction but challenges remain enormous.
  - Even with generous debt relief, Greece will not restore robust growth while remaining in the euro area without deep structural reforms.
  - Based on government commitments and European partners’ commitment to provide deep relief to achieve debt sustainability, staff can support completion of the first and second reviews and the authorities’ request for modification and waivers of applicability of the end-December 2012 PCs, modification of the PCs and re-phasing of purchases under the arrangement.

### Selected numerical highlights and thresholds cited
- Alternative DSA scenario fiscal transfer need: about 3 percent of Greek GDP per year (€6 billion) between 2013 and 2020.
- Alternative DSA scenario haircut: about 25 percent on EFSF loans, GLF loans, and ECB SMP bond holdings.
- Total debt service to the Fund peak: about 5 percent of GDP in 2015 (compared to 4½ percent under the EFF-supported program).
- Peak access projection: 2,501 percent of quota.
- Targeted debt reductions by European partners (conditional):
  - Reduce debt to 124 percent of GDP by 2020.
  - Reduce debt substantially below 110 percent by 2022.
  - Original target cited: 120 percent by 2020.
- Government no longer planning to reduce T-bill exposure by €9 billion in 2013 as assumed in the program.

*Source: IMF staff report excerpt on Greece (program risks, capacity to repay, safeguards, and staff appraisal).*

### 1. Direct taxes20.84.18.614.320.618.718.819.3

### _cr1320 - 1. Direct taxes20.84.18.614.320.618.718.819.3

### Direct taxes
- Total: 20.8 4.1 8.6 14.3 20.6 18.7 18.8 19.3
- Income taxes: 13.0 2.2 4.8 8.4 11.7 11.9 12.3 13.3
  - PIT: 9.8 1.9 3.7 6.2 8.7 8.8 9.0 9.6
  - CIT: 1.6 0.0 0.5 1.1 1.6 1.7 1.8 2.2
  - Other: 1.5 0.3 0.6 1.1 1.4 1.4 1.5 1.5
- Property taxes: 2.8 0.2 0.9 1.9 3.2 2.9 2.9 2.9
- Tax arrears collection: 2.1 1.0 1.7 2.2 3.2 1.5 1.5 1.7
- Other direct taxes: 2.9 0.7 1.1 1.8 2.5 2.5 2.1 1.4

### Indirect taxes
- Total: 26.2 6.3 11.9 17.9 25.0 24.6 25.2 26.4
- Transaction taxes: 15.7 3.8 7.3 10.9 14.6 14.5 14.8 15.6
  - VAT: 15.1 3.7 7.0 10.5 14.0 13.8 14.1 14.9
  - Other (transaction): 0.7 0.1 0.3 0.4 0.6 0.7 0.7 0.7
- Consumption taxes: 9.7 2.4 4.3 6.5 9.6 9.4 9.6 10.0
- Tax arrears collections (indirect): 0.5 0.1 0.2 0.3 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

### Transfers EU
- Transfers EU: 0.2 0.0 0.1 0.1 0.2 0.3 0.3 0.3

*Source: _cr1320 - 1. Direct taxes20.84.18.614.320.618.718.819.3*

### 4. Nontax revenue2.40.41.01.52.02.22.42.5

### 4. Nontax revenue2.40.41.01.52.02.22.42.5

### Fiscal aggregates, revenues, and expenditures
- Nontax revenue: 2.40.41.01.52.02.22.42.5
- One-off revenue: 1.70.20.50.81.10.90.91.0
- Revenue from concession and rights: 0.00.00.00.00.10.20.00.0
- Tax refunds: 3.70.0.61.42.02.72.93.03.1
- Investment budget: 4.81.01.53.05.14.83.31.8
  - A. EU flows: 4.61.01.42.84.94.63.11.6
  - B. Own revenues: 0.20.00.10.10.20.20.20.2
- Gap filling measures: 0.00.00.0-0.1-0.11.72.83.9
- Total expenditure: 67.713.630.246.364.461.360.162.5
  - Ordinary spending: 59.712.827.642.557.756.156.058.4
  - Ordinary primary spending: 48.011.123.234.548.646.445.646.0
    - A. Remuneration and pensions: 20.44.69.814.920.720.420.420.3
    - B. Insurance and healthcare: 15.73.57.410.815.713.913.113.3
    - C. Operating and other expenditure: 6.91.43.04.76.76.46.36.4
    - D. Earmarked revenue: 4.01.22.33.14.34.44.64.8
    - E. Reserve: 0.40.30.60.91.21.21.21.3
    - F. EFSF commitment fee: 0.60.00.00.00.00.00.00.0
  - Interest: 11.71.74.48.09.19.710.312.4
  - Transfers to hospitals for the settlement of past debt: 0.40.10.10.10.40.40.40.4
  - Investment: 6.71.23.34.87.07.07.07.0
  - Spending on military procurement: 0.70.00.30.61.10.80.90.9
  - Guarantees on entities outside the general government: 0.20.00.10.10.50.30.20.2
  - Clearance of arrears: 0.00.00.00.00.00.00.00.0
- Gap filling measures (expenditure side): 0.0-0.6-1.1-1.7-2.3-3.3-4.3-4.4
- Balance: -15.3-2.1-7.9-10.8-13.1-10.9-9.5-10.6
- Primary balance: -3.6-0.4-3.5-2.8-4.0-1.20.81.8
- Primary spending: 56.812.926.034.455.852.150.250.6
- Modified general government cash balance: -15.60.8-3.9-7.0-8.9-6.5-5.3-5.1
- Modified general government primary cash balance: -3.82.50.51.00.23.25.17.3
- Floor on the modified general government primary cash balance: -3.81.50.51.00.23.25.17.3
- Ceiling on primary spending: 56.814.926.038.855.852.150.250.6

### Local governments, social security, and extra-budgetary balances
- II. Balance local governments: 0.50.20.30.50.61.21.41.9
- III. Balance social security funds: -0.42.93.83.53.83.43.24.0
- IV. Balance of extra-budgetary funds (ETERPS): 0.60.10.20.20.30.30.30.3
- VIII. Balance of reclassified public enterprises: -0.8-0.1-0.3-0.4-0.5-0.5-0.6-0.6
- X. Modified general government cash balance (reiterated): -15.60.8-3.9-7.0-8.9-6.5-5.3-5.1
- Modified general government primary cash balance (reiterated): -3.82.50.51.00.23.25.17.3

*Sources: Ministry of Finance; and IMF staff projections.*

### Monetary survey and aggregated MFI balance sheet highlights (selected levels and changes)
- Total assets of MFIs (selected sequence): 434.6536.1579.2654.6629.0660.0649.6646.1600.3611.6606.9589.0
- Cash (held by credit institutions): 2.72.72.52.12.12.22.22.42.22.42.22.1
- Claims (Loans) on non MFIs (selected): 213.7234.6222.7289.0281.1279.7279.5275.9269.4260.8252.7251.1
  - Domestic: 205.6222.0209.7282.5274.9273.2272.8269.5263.1254.6247.0245.4
  - General government: 21.821.620.326.321.121.221.222.319.315.715.515.4
- Securities holdings: 83.695.9116.0101.2101.3113.294.293.073.686.194.490.8
- Total liabilities (matching assets): 434.6536.1579.2654.6629.0660.0649.6646.1600.3611.6606.9589.0
  - Deposits and repos of non MFIs (selected): 249.7281.7280.1282.5279.5251.9251.5237.5226.8211.2214.8220.4
    - Domestic: 206.1237.4246.7225.1221.9199.7195.6187.7179.6163.5167.5173.6
    - Other countries: 43.644.333.457.457.652.255.849.847.347.747.346.8
- Broad money (levels): 219.9251.4261.1232.9223.2212.8207.7199.2190.1178.3181.7183.1
- Credit to the private sector (levels): 215.1249.3249.3257.5255.0253.1252.6248.1244.7239.8231.4230.0
- Broad money (percent change sequence): 13.812.44.1-11.2-9.8-10.2-12.0-14.6-15.1-17.9-13.2-8.1
- Domestic private sector deposits (percent change sequence): 14.313.34.9-12.4-12.3-12.0-14.1-17.0-17.4-20.0-15.5-10.2

*Sources: Bank of Greece; and IMF staff estimates and projections.*

### Financial soundness indicators (selected)
- Regulatory capital to risk-weighted assets (selected): 9.611.911.711.211.412.312.310.610.17.05.7
- Regulatory tier I capital to risk-weighted assets (selected): 8.110.910.610.110.111.211.19.69.25.94.8
- Nonperforming loans to total gross loans (selected): 5.17.88.29.010.010.511.512.814.716.018.7
- Bank provisions to nonperforming loans: 49.442.0.........46.2.........62.957.1
- Return on assets (after taxes) (selected): 0.2-0.1-0.6-0.6-0.5-0.6-0.3-1.7-2.1
- Liquid assets to total assets (selected): 38.745.245.939.636.535.234.535.233.232.327.3
- Household debt to GDP (selected): 50.352.1.........60.0.........61.363.8
- Residential real estate loans to total loans (selected): 20.720.3.........21.1.........22.824.2

*Source: Bank of Greece.*

### Structural reforms: implementation status and selected measures
- Labor market reforms
  - Facilitating firm-level collective bargaining, adjusting minimum wages, eliminating unilateral recourse to arbitration: MEFP deadline Feb-12 — Status: Completed.
    - By end-September, at least 880 firm level agreements concluded (covering about 133,600 employees), wage cuts of 10-40 percent; about 110,000 individual wage contracts signed Feb–Jun 2012, providing for wage cuts averaging about 23 percent.
  - Review of minimum wage framework: Jul-12 — Status: Delayed. Envisaged overhaul adopted as prior action for the 1st review of EFF.
  - Reducing non-wage labor costs: Feb-12 and Sep-12 — Status: In progress. Steps to reduce social security contribution by rates 1.1 percent adopted in September 2012; additional steps rephased due to fiscal space constraints.
- Sectoral deregulation and product markets
  - Liberalization of regulated professions: Feb-12 and Sep-12 — Status: Completed with delay. Excessive restrictions removed as prior actions for 1st review of EFF.
  - Product market liberalization: Apr-12 — Status: Delayed. Measures in retail, fuel and transportation introduced as prior actions for 1st review of EFF.
- Business environment and judicial reforms
  - Fast-track investment procedures: Mar-12 — Status: Completed.
  - Simplification of export procedures: Mar-12 and Dec-12 — Status: In progress.
  - Speeding up case processing: Mar-12 — Status: In progress; new law adopted in March.
  - Simplification of business and environmental licensing: Mar-12 and Dec-12 — Status: In progress.
  - Reducing the case backlog in courts: Jul-12 — Status: Delayed. Slow progress on tax case backlogs; no progress on non-tax case backlogs; reforms rephased.
  - Improving performance and accountability of courts: Sep-12 — Status: Delayed. Secondary legislation adopted Oct-2012; implementation of other steps delayed.
  - Reforming the Code of Civil Procedure: Dec-12 — Status: In progress. Timetable rephased to Q1 2013.

- Public financial management and revenue administration (selected status items)
  - Commitment registers extended to investment budget; proportion of spending units reporting increased to 70 percent in April 2012.
  - Accounting officers appointed in GG entities (June 2011) and line ministries (February 2012); legislation adopted March 2011 to create General Directorates of Financial services.
  - IT system collected 2 months of data for 450 of 517 general government units in May 2012; project needs rephasing to meet GAO needs.
  - Tax administration: legislation to make exhaustion of administrative dispute phase compulsory for large tax cases; recruitment of auditors stalled (258 auditors and 74 directors hired before June 2012); Internal Affairs Directorate established with heads appointed April–May 2012.

*Source: IMF staff.*

### Medium-term macro framework (2012–20) — key projections (percent of GDP unless indicated)
- Real GDP: 2012 -6.0; 2013 -4.2; 2014 0.6; 2015 2.9; 2016 3.7; 2017 3.5; 2018 3.3; 2019 3.0; 2020 2.6
- Output gap (percent of pot. output): -7.3-10.2-9.0-6.3-3.5-1.1-0.6-0.3 0.0
- Unemployment rate (percent) (Labor Force Survey basis): 24.4 26.6 25.1 23.3 20.4 17.8 15.5 13.3 11.3
- Consumer prices (HICP), end of period: 1.3-0.6 0.0 0.8 1.1 1.2 1.5 1.7 1.9
- Private credit growth (percent change): -7.2-3.1 4.7 4.3 4.0 3.9 3.9 3.9 3.6
- Liabilities to the Bank of Greece (billions of Euro): 122.5 121.3 118.7 108.0 94.0 93.7 93.0 93.2 92.7
- Current account (percent of GDP): -4.2 -1.2 -0.3 0.4 0.7 0.9 1.1 1.5 1.8
- Total revenues (general government): 43.6 42.9 42.8 41.8 41.3 41.3 41.3 41.3 41.3
- Total expenditures: 50.3 47.4 46.2 43.9 41.9 41.9 42.1 42.1 42.1
- Primary balance: -1.5 0.0 1.5 3.0 4.5 4.5 4.3 4.3 4.3
- Gross debt: 157.5 178.5 174.5 170.0 162.7 153.4 144.0 133.9 124.0

*Sources: National Statistical Service; Ministry of Economy and Finance; Bank of Greece; and IMF staff projections.*

### Balance of payments and external sector (selected)
- Current account balance (percent of GDP) — 2011 to 2017 sequence (percent of GDP): -22.5-20.6-8.1-2.3-0.5 0.8 1.4 1.8 (levels in billions: -10.1-9.9-4.2-1.2-0.3 0.4 0.7 0.9)
- Balance of goods and services (percent of GDP): -15.0-12.6-4.8-0.5 2.4 4.8 6.5 8.2
  - Goods balance (percent of GDP): -28.3-27.2-20.3-17.5-15.9-15.1-14.9-14.9
    - Exports of goods (percent of GDP): 17.1 20.2 21.7 22.2 22.7 23.3 24.0 24.9
    - Imports of goods (percent of GDP): 45.4 47.5 41.9 39.7 38.5 38.4 38.9 39.8
  - Services balance (percent of GDP): 13.2 14.6 15.5 17.0 18.3 19.9 21.4 23.0
    - Exports of services (credit): 28.5 28.6 27.7 28.4 29.5 31.2 33.1 35.1
    - Imports of services (debit): 15.2 14.0 12.3 11.5 11.2 11.3 11.6 12.0
- Income balance (percent of GDP): -7.7-8.6-3.8-5.0-5.9-6.6-7.3-8.0
- Capital and financial account balance (percent of GDP): -8.6-21.0-101.8-37.0-17.2-18.8-10.3-7.3
  - Program financing (levels, billions): 31.5 41.5 109.9 39.2 17.6 10.9 6.4 5.4
- Gross external debt (billions of euro): 213.1 225.4 234.5 261.3 259.2 245.4 229.1 213.4
  - Public sector gross external debt: 111.7 123.3 131.7 154.6 154.9 151.7 146.3 139.7
  - Private sector gross external debt: 101.4 102.1 102.8 106.7 104.3 93.6 82.8 73.8

*Sources: Bank of Greece; and IMF staff estimates.*

### Uses and sources of funds for MFIs (excl. BoG) — selected levels (billions of euros)
- Assets (selected total series): 321.0391.3464.5491.9515.3476.9433.7447.0453.5465.7481.3
- Claims on non-MFIs (selected): 227.5264.8301.1309.3357.8339.2315.6330.5338.6348.6360.2
  - General government: 35.731.531.641.863.059.126.926.426.427.428.7
  - Private sector: 170.7202.4221.3211.7256.9247.6230.6223.4233.9244.0253.7
- Deposits of non-MFIs (selected): 211.1248.5280.2278.8280.2232.3215.6208.8215.6232.3253.4
  - Private sector deposits: 177.2201.0231.6242.4213.9178.7160.4157.5165.3179.2195.8
- Eurosystem liquidity support (selected levels and memo)
  - Eurosystem liquidity support levels (selected): 4.98.840.649.797.876.9122.5121.3118.7108.094.0
  - Eurosystem liquidity support (percent of total assets, memorandum): 1.52.28.710.119.016.128.227.126.223.219.5

*Sources: Bank of Greece; and IMF staff estimates and projections.*

### Selected forthcoming structural reform milestones (2012–14)
- Labor market
  - Refocusing the Labor Inspectorate: Dec-12 — complete independent assessment; objective: fight undeclared work and reduce administrative costs.
  - Reducing tax wedge on labor: Sep-13 and Nov-13 — actuarial studies by Sep-13; plan to reduce employer share of contributions by 5 ppt by Nov-13 (phased 2014–16).
- Product and service markets
  - Liberalization of regulated professions: Q4-12 and Mar-13 — eliminate excessive entry restrictions; study of 20 largest professions by Jul-2013.
  - Product market liberalization: Nov-12, Feb-13, Jun-13 — liberalize transportation services; action plan for construction, food processing, tourism by end-June 2013.
- Business environment and judicial reform
  - Trade facilitation: Nov-12 — publish national trade facilitation strategy; increase customs working shifts (Athens airport and Piraeus port to 24/7 by end-Mar-2013).
  - Simplification of licensing: Mar-13 — streamline company establishment procedures and complete legal framework for licensing laws.
  - Reduction of case backlog in courts: Dec-12 and Jan-13 — publish quarterly reports on tax case backlog reduction from end-2012; adopt action plan for non-tax backlog by end-Jan-2013.
  - Reforming the Code of Civil Procedure: Mar-13 — prepare paper with main proposals for amendments.

*Source: IMF staff.*

*Italic: Sources: Ministry of Finance; IMF staff projections; Bank of Greece; National Statistical Service; Ministry of Economy and Finance; and IMF staff estimates and projections.*

### 1. Appointment of advisors

### 1. Appointment of advisors

### Asset transfer and preparation: overview and timelines
- Transfer of asset to the Fund: Land Plot in Nicosia; Athens Airport; South Kaval Natural Gas Storage; Hellenic Motoroways; Hellenic Petroleum; HELPE.
- Preparation of assets — key steps and indicative durations:
  - Define national strategy: Digital Dividend; Small Ports and Marinas; Tolling Policy on Egnatia Odos Motorway. Timeline: 2–4 months.
  - State aid clearance/procurement issues clearance: examples include LARCO; HDS; TRAINOSE.
  - Extension/Amendment of licenses/concessions periods. Timeline: 3 months.
  - Restructuring laws: examples include Hellenic Post; PPC. Timeline: 2 months.
  - Set up of regulatory agencies: ODIE. Timeline: 2 months.
  - Land use and licensing permits: Asteras Vouliagmenis; Voras Cluster; SEF; Ag. Ioannis Sithonias; Ermioni; Prasonisi; Plaka Estate Buildings; Tatoi Estate Buildings: Rhodes Estate Buildings; OLP; OLTH; 10 Large Regional Ports; Regional Airports; EYDAP; EYATH.
  - Independent Valuation. Timeline: 1 month.
- Tender phase: assets listed include Hellinikon; Afantou; Cassiopi; XENIAs; Camping Agios Sithonias; Kaimaktsalan; Buildings Abroad; Sampariza Ermioni; XEY; Thermal Springs; State Lotteries License; 4 Airplanes; OPAP; DEPA/DEFSA. Timeline: 6–8 months.
- Clearances:
  - Court of Audit Opinion: IBC. Timeline: 2–3 months.
  - Council of Experts Opinion. Timeline: ≤ 2 months.
- Other: ELVO noted under Appointment of advisors. A 3 months entry appears earlier in the asset list.

### Cash receipt
- Cash receipt stage listed; specific amounts not provided in supplied content.

*Sources: HRADF; and IMF staff.*

### General Government Operations, 2012–16 (selected figures)
- Table 14 key figures (2013 Prog.; 2014 Proj.; 2015 Proj.; 2016 Proj. where provided):
  - Revenue: 86.0; 85.0; 79.1; 79.2; 79.8; 82.7 (note: table columns list multiple years; preserve numbers as shown).
  - Taxes on production, and imports: 25.5; 25.1; 23.9; 23.7; 24.3; 25.8.
  - Taxes on income and property: 19.3; 19.8; 17.5; 18.3; 18.7; 19.2.
  - Social contributions: 25.5; 24.1; 23.2; 23.2; 23.7; 24.8.
  - Capital: 5.7; 5.0; 4.8; 4.3; 3.2; 2.7.
  - Primary expenditure: 88.0; 87.9; 79.1; 76.4; 76.8; 77.6.
  - Wages: 24.1; 23.9; 22.0; 21.1; 20.8; 20.8.
  - Social benefits: 43.0; 45.1; 39.2; 38.7; 39.3; 40.1.
  - Primary balance: -2.0; -2.9; 0.0; 2.8; 5.7; 9.0.
  - Interest payments 1/: 12.8; 10.1; 8.4; 9.0; 9.9; 10.2.
  - Overall balance: -14.8; -13.0; -8.4; -6.2; -4.1; -1.2.
  - Gross debt (Maastricht): 332.4; 307.2; 329.3; 322.8; 324.6; 325.8.
- Additional percent-of-GDP presentation (selected):
  - Revenue: 42.2; 43.6; 42.9; 42.8; 41.8; 41.3.
  - Primary expenditure: 43.2; 45.1; 42.9; 41.3; 40.2; 38.7.
  - Primary balance: -1.0; -1.5; 0.0; 1.5; 3.0; 4.5.
  - Interest payments 1/: 6.3; 5.2; 4.5; 4.9; 5.2; 5.1.
  - Overall balance: -7.3; -6.7; -4.5; -3.4; -2.2; -0.6.
  - Gross debt (Maastricht): 163.2; 157.5; 178.5; 174.5; 170.0; 162.7.
  - Nominal GDP (billions of euros): 203.7; 195.0; 184.5; 184.9; 191.0; 200.2.
- Footnote: 1/ Reflects all debt relief measures that have accrual effects.

### Authorities' Measures to Meet the 2013–14 Targets (Table 15)
- Total net impact (Percent of GDP):
  - 2013: 5.0
  - 2014: 2.1
  - 2013–14: 7.2
- Expenditure measures: 4.0 (2013); 1.2 (2014); 5.2 (2013–14).
  - I Public administration restructuring: 0.2; 0.2; 0.4.
    - Permanent cuts in PIB (excl. sub-national governments): 0.1; 0.1; 0.2.
    - 25% reduction in discretionary non-wage spending: 0.1; 0.0; 0.2.
  - II Public sector wage bill: 0.6; 0.1; 0.7.
    - Rationalization of special wage regimes: 0.1; 0.0; 0.1.
    - Cuts in public sector seasonal bonus: 0.2; 0.0; 0.2.
    - Introduction of mobility scheme: 0.0; 0.0; 0.1.
    - Suspension of performance and fiscal bonus: 0.2; 0.0; 0.2.
  - III Pensions: 2.6; 0.2; 2.8.
    - Increase in retirement age by two years: 0.3; 0.1; 0.5.
    - Rationalization of lump-sum pensions of the public sector 2013 and 2014: 0.1; 0.0; 0.1.
    - Reduction in supplementary and main pensions (between 1000–1500 by 5%, 1500–2000 by 10%, 2000–3000 by 15%, 3000–4000 by 20%, >4000 by 25%): 0.6; 0.0; 0.6.
    - Elimination of seasonal bonuses of supplementary and main pensions, excl. OGA: 0.9; 0.0; 0.9.
    - Elimination of seasonal bonuses of main pensions, OGA: 0.4; 0.0; 0.4.
    - Cuts in pensions due to rationalization of special wage regimes: 0.1; 0.0; 0.1.
    - Cuts in pensions of armed forces due to new wage bill: 0.0; 0.1; 0.1.
  - V Health: 0.2; 0.3; 0.6.
    - Reduction in pharmaceutical expenditure of social security funds: 0.2; 0.2; 0.4.
    - Increase in co-payments: 0.0; 0.1; 0.1.
  - VI Defense: 0.2; 0.1; 0.2.
  - VIII SoEs rationalization: 0.1; 0.1; 0.2.
  - IX Local governments: 0.0; 0.1; 0.1.
- Revenue Measures: 1.0; 0.9; 1.9.
  - I Income tax reform: 0.2; 0.8; 1.0.
    - Restructuring of PIT and CIT rates and new tax regime for self-employed: 0.1; 0.4; 0.6.
    - Reductions in individuals' income tax credits: 0.0; 0.1; 0.1.
    - Reductions in family allowances: 0.1; 0.1; 0.2.
    - Increase in tax on deposit interest from 10% to 15%: 0.0; 0.1; 0.1.
  - II Reduction of VAT refunds to farmers: 0.1; 0.0; 0.1.
  - III Excises: 0.2; 0.0; 0.2.
  - IV Taxation by tonnage of Greek owned merchant fleet: 0.0; 0.0; 0.1.
  - V Equalization of social security contributions ceiling: 0.3; 0.0; 0.3.
  - VI Taxes on lottery games and winners gains: 0.2; 0.0; 0.2.
- Total: 5.0 (2013); 2.1 (2014); 7.2 (2013–14).
- Source: IMF staff estimates.

### Income Tax Reform (Table 16) — Pre-Reform vs Post-Reform (selected entries)
- Personal income tax:
  - Number of tax rates: Pre-Reform 8; Post-Reform 3.
  - Tax credit: € 2,100.
  - Standard deduction: € 5,000...
  - Other deductions listed include: Mortgage interest; Rental payment; Tuition fees; Insurance premia; Renewable energy; Premium amount forfeit; Child care expenses; Medical costs; Donations; Sponsorships; Alimony.
  - Child tax allowance.
  - Farmers: 13%.
  - Sailors, crew: Pre-Reform 3%; Post-Reform 10%.
  - Sailors, officers: Pre-Reform 6%; Post-Reform 15%.
- Corporate income tax:
  - Self-employed: Under PIT.
  - Number of tax rates: Pre-Reform 8; Post-Reform 2.
  - Standard deduction: € 5,000...
  - Incorporated enterprises: Corporate taxable income: 20% (Pre-Reform); 26% (Post-Reform).
  - Distributed profits: 25% (Pre-Reform); 10% (Post-Reform).
- Capital income tax:
  - Rental income: Under PIT 10% up to €12,000; 33% above €12,000.
  - Interest income on deposits: 10% (Pre-Reform); 15% (Post-Reform).
- Source: IMF staff estimates.

### Revenue Collection Process — Issues and Next Steps (Table 17)
- Stage 1: Organization and Management
  - Issues: Fragmented tax administration; Lacking leadership of the GSTC; General Secretariat for Public Revenues lacks autonomy and power; Too many local offices.
  - Next steps (selected): Appoint a General Secretary for Public Revenues (December 2012); Publish full list of tax offices to be closed (December 2012) and close 150 (March 2013); Adopt law establishing a new semi-autonomous tax agency (February 2013); New semi-autonomous tax agency fully operational (March 2014).
  - Anti-corruption: Issues include lacking integrity and anti-corruption framework; frequent cases of corruption.
  - Next steps (selected): Issue ministerial decision on appointment/end of tenure, quarterly performance targets, reporting and assessment procedures (December 2012); Adopt a code of conduct for the tax administration and system to facilitate transparency (December 2012); Publish an anti-corruption plan for the tax administration (March 2013).
- Stage 1 Assessment: Tax authorities provide services and support to voluntary taxpayer compliance.
  - Issues: 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.
  - Next steps: Expand sources of third party information used in assessments (February 2013); Revise tax and AML laws to enable central authority to be informed of FIU cases and transmit large confirmed debt cases to FIU (February 2013); Adopt a new tax procedures code (June 2013).
- Stage 2 Controls: Tax authorities perform controls and enforce timely filing and payment.
  - Issues: Data gathering ad hoc; no central control for monitoring and enforcing compliance.
  - Next steps: Monitor performance (monthly reports December 2012 and 2013); Require all ministries with fiscal relationships to utilize taxpayer identification number (June 2013); Introduce central agency to consolidate identification numbers (June 2014).
  - Authorities identify cases to audit: Issue — absence of risk-based selection; Next steps: Legislate removal of requirement that all tax declarations for previous 10 years must be audited while retaining right to audit earlier years (February 2013); Ensure indirect audit methods can be applied to cases prior to 2009.
  - Audits performed: Issues — audit workforce insufficient; limited use of indirect methods; low collection of assessed taxes (collection of current year's tax assessed is only 9 percent).
  - Next steps: Head of tax administration to set performance targets and introduce twice-yearly assessments (December 2012); Hire 200 external auditors (March 2013); increase staff devoted to audit by 2,000 by June 2013.
- Stage 3 Enforcement: Collection of tax assessments under appeal and tax arrears.
  - Issues: Poor collection enforcement: collection of fines and penalties around 1 percent.
  - Next steps: Establish specialist debt management units in larger local tax offices and allocate at least 10 percent of local staff to debt management units (December 2012); Launch a website to publicize monthly information on tax debt assessed and recovered, including summary statistics on key performance indicators (December 2012).

*Source: IMF staff.*

### Spending Process — Issues and Actions (Table 18)
- Stage 1 Budgeting: Develop medium term budget framework and annual budgets within medium term expenditure ceilings.
  - Issues: Budgets prepared mainly bottom-up with no hard budget constraints; disjointed budget preparation; fragmented responsibility for social security.
  - Next steps (selected): Issue circular regulating calendar, deadlines, and roles in formulating the 2014–17 MTFS (February 2013); Introduce 3-year expenditure ceilings per subsectors (January 2013); Modify organic budget law to introduce: (i) 3-year binding expenditure ceilings; (ii) provisions to freeze ex-ante 10 percent of discretionary appropriations; and (iii) a revenue rule requiring that 30 percent of windfall revenue be allocated to debt repayment (August 2013).
- Stage 2 Spending Controls: Ensure expenditure commitments do not exceed appropriations and arrears are avoided.
  - Issues: Line ministries do not check or control expenditure commitments; no central control on incurred commitments by decentralized agencies; execution focused on verifying payments.
  - Next steps (selected): Ensure commitment registers operate in 90 percent of general government entities (December 2012); Establish a well-structured and functional GDFS responsible for managing and supervising all financial functions in line ministries (December 2012); Identify areas for real-time monitoring of operational expenditure (March 2013); Set conditions for SOEs to receive new transfers or loans contingent on restoring financial soundness (June 2013).
- Stage 3 Reporting: Collect and analyze information on payments, pending bills and arrears.
  - Issues: Limited real-time monitoring of arrears and pending bills; collection of payment information at non-central government level difficult.
  - Next steps (selected): Expand scope of data captured by the General Accounting Office’s e-portal to include whole expenditure cycle (March 2013); Social Budget Monitoring Committee to introduce comprehensive budget monitoring framework including EOPYY and hospital budgets (December 2012); Start process to clear past arrears subject to validation and compliance with PFM reforms (during 2013).
  - Monitoring and reporting fiscal developments for general government and SOEs: Issues — focus on state budget; no timely in-year monitoring for general government.
  - Next steps: Establish system for monthly financial reporting by SOEs currently outside the general government (June 2013); Verify and validate quality of detailed fiscal data from pilot project before expanding (March 2013); Release status reports on implementation of fiscal measures, hiring, fiscal impact of new legislation, and statement of fiscal risks (March 2013).

*Source: IMF staff.*

### 4. External AuditingParliamentary oversight and general auditing.• Lack of independent oversight of the budget proces

### 4. External AuditingParliamentary oversight and general auditing.• Lack of independent oversight of the budget proces

### Parliamentary oversight and external audit 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:
  - 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).
  - 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 (December 2013).

### General Government Financing Requirements (selected figures, 2010–2016)
- Gross borrowing need:
  - 2010: 60.8
  - 2011: 59.2
  - 2012: 127.1
  - 2013: 56.7
  - 2014: 33.3
  - 2015: 33.3
  - 2016: 23.9
- Overall balance (accrual):
  - 2010: 23.9
  - 2011: 20.0
  - 2012: 13.0
  - 2013: 8.4
  - 2014: 6.2
  - 2015: 4.1
  - 2016: 1.2
- Amortization:
  - 2010: 28.5
  - 2011: 37.3
  - 2012: 24.4
  - 2013: 27.4
  - 2014: 35.4
  - 2015: 25.8
  - 2016: 17.4
- Gross financing sources:
  - 2010: 60.8
  - 2011: 59.2
  - 2012: 127.1
  - 2013: 17.5
  - 2014: 15.6
  - 2015: 15.3
  - 2016: 15.0
- Privatization receipts:
  - 2010: 0.0
  - 2011: 1.0
  - 2012: 0.1
  - 2013: 2.5
  - 2014: 1.9
  - 2015: 2.0
  - 2016: 2.0
- Market access (short-term):
  - 2010: 9.2
  - 2011: 11.8
  - 2012: 16.8
  - 2013: 12.3
  - 2014: 11.3
  - 2015: 11.3
  - 2016: 11.3
- Official financing already disbursed:
  - 2010: 31.4
  - 2011: 41.9
  - 2012: 109.9
  - 2013: 0.0
  - 2014: 0.0
  - 2015: 0.0
  - 2016: 0.0
- Financing gap (including not yet disbursed):
  - 2010: 0.0
  - 2011: 0.0
  - 2012: 0.0
  - 2013: 39.3
  - 2014: 17.7
  - 2015: 18.0
  - 2016: 8.9
- Memorandum items:
  - Total Maastricht debt:
    - 2010: 329.0
    - 2011: 355.8
    - 2012: 307.2
    - 2013: 329.3
    - 2014: 322.8
    - 2015: 324.6
    - 2016: 325.8
  - Total Maastricht debt (percent of GDP):
    - 2010: 145.0
    - 2011: 170.6
    - 2012: 157.5
    - 2013: 178.5
    - 2014: 174.5
    - 2015: 170.0
    - 2016: 162.7

### External Financing Requirements and Sources (selected figures, 2011–2017)
- Gross financing requirements:
  - 2011: 216.2
  - 2012: 239.0
  - 2013: 202.8
  - 2014: 185.8
  - 2015: 187.5
  - 2016: 181.9
  - 2017: 159.5
- Current account deficit:
  - 2011: 22.5
  - 2012: 20.6
  - 2013: 8.1
  - 2014: 2.3
  - 2015: 0.5
  - 2016: -0.8
  - 2017: -1.4
- Medium and long-term debt amortization:
  - 2011: 22.7
  - 2012: 35.5
  - 2013: 13.1
  - 2014: 13.3
  - 2015: 19.0
  - 2016: 17.2
  - 2017: 8.3
- Short-term debt amortization:
  - 2011: 171.1
  - 2012: 182.9
  - 2013: 181.5
  - 2014: 170.3
  - 2015: 168.1
  - 2016: 165.4
  - 2017: 152.6
- Source of financing (total):
  - 2011: 184.7
  - 2012: 197.4
  - 2013: 92.9
  - 2014: 146.6
  - 2015: 169.9
  - 2016: 163.9
  - 2017: 150.6
- Program financing:
  - 2011: 31.5
  - 2012: 41.5
  - 2013: 109.9
  - 2014: 39.2
  - 2015: 17.6
  - 2016: 10.9
  - 2017: 6.4

### Schedule of Proposed Purchases under the Extended Arrangement (2012–16) — selected schedule items
- Board approval of EA:
  - Availability Date: March 15, 2012
  - Total Disbursements (Millions of SDRs): 1,399.1
  - Percent of quota: 127.0
  - Billions of euros1/: 1.6
- Second Review:
  - Availability Date: August 31, 2012
  - Total Disbursements (Millions of SDRs): 2,798.2
  - Percent of quota: 254.0
  - Billions of euros1/: 3.3
- Third Review:
  - Availability Date: February 28, 2013
  - Total Disbursements (Millions of SDRs): 1,506.8
  - Percent of quota: 136.8
  - Billions of euros1/: 1.8
- Repeated review disbursements (Fourth through Fifteenth Reviews) each showing:
  - Total Disbursements (Millions of SDRs): 1,506.8 (except Fifteenth Review: 1,506.4)
  - Percent of quota: 136.8
  - Billions of euros1/: 1.8
- Total (2012–2016):
  - 23,785.3 (Millions of SDRs)
  - 2,158.8 (Billions of euros) 1/
  - 28.0 (Percent of quota)
- Note: 1/ Exchange rate of January 5, 2012.

### Indicators of Fund Credit, 2012–26 (selected projections)
- Prospective drawings (4-year EFF):
  - 2012: 1,599 (Millions of SDRs)
  - 2013: 6,396
  - 2014: 6,396
  - 2015: 6,396
  - 2016: 1,599
- Percent of quota (corresponding):
  - 2012: 145
  - 2013: 581
  - 2014: 581
  - 2015: 581
  - 2016: 145
- Amortization (selected years):
  - 2013: 1,472
  - 2014: 6,278
  - 2015: 7,299
  - 2016: 2,610
- Interest and service charge:
  - 2012: 511
  - 2013: 751
  - 2014: 987
  - 2015: 953
  - 2016: 911
- Total debt service:
  - 2012: 511
  - 2013: 2,223
  - 2014: 7,265
  - 2015: 8,252
  - 2016: 3,521
- Outstanding stock (Millions of SDRs):
  - 2012: 20,340
  - 2013: 25,264
  - 2014: 25,383
  - 2015: 24,479
  - 2016: 23,469
- Outstanding stock (Percent of quota):
  - 2012: 1,846
  - 2013: 2,293
  - 2014: 2,304
  - 2015: 2,222
  - 2016: 2,130
- Memorandum items:
  - Exports of goods and services (billions of euros): 2012: 51; 2016: 60
  - GDP (billions of euros): 2012: 185; 2016: 210
  - Euro/SDR rate (period average) 1/: 1.177 (Data for 2012 as of January 5, 2012)

### Projections and macro-financial outlook (high-level synthesis from figures and tables)
- Real GDP growth: IMF staff projections show a deeper recession relative to the EFF request, with downward revisions through 2016.
- Domestic demand: Sharp downward revision in real private consumption growth and gross fixed capital formation growth.
- External position: Projected faster improvement in the current account balance, aided by price adjustment and PSI-related changes reflected in tables and figures.
- Labor market: Employment projections have worsened; unemployment is projected to remain elevated.
- Financial sector: Deposit contraction, increased reliance on central bank liquidity (Eurosystem and ELA), tightened credit standards, elevated interest rates, and higher nonperforming loans.
- Sovereign risk indicators: Elevated 10-year bond spreads and CDS; euro-exit probability has declined but remains significant.

*Source: IMF staff.*

### Box 1. Increasing Revenue Collection: Progress and Bottlenecks

### Box 1. Increasing Revenue Collection: Progress and Bottlenecks

### Scale of revenue losses
- The shadow economy is estimated at 25 percent of GDP.
- Tax evasion is particularly common among the self-employed—doctors, lawyers, engineers, accountants.
- Empirical estimates suggest that the actual income of these taxpayers is between 1¼–2½ times their reported income (Artavanis et al, 2012), resulting in some 6 percent of GDP in unreported income and potential income tax losses of about 1–1¾ percent of GDP in 2012.
- VAT fraud is widespread, with 450,000 fictitious invoices detected since 2009.
- Tax debt reached €53 billion at end-September 2012.

### Reform strategy and management
- Initial reform focus: design a strategy and a management approach centered on five key areas:
  - (i) large taxpayers;
  - (ii) high-wealth individuals;
  - (iii) tax arrears;
  - (iv) filing enforcement;
  - (v) implementation of the government’s new anti-evasion initiatives.
- Institutional arrangements: five task forces and a steering committee established as a core project management arrangement, recognizing limited implementation capacity of the tax administration.
- Second-stage measures enacted and introduced:
  - A bill in late-2010 to remove tax collection impediments, sanction tax fraud, establish a basis for addressing corruption and poor performance among staff, and streamline the judicial appeals process.
  - IT-based risk analysis, an automated filing enforcement system, and centralized monitoring of high–risk taxpayers.

### Implementation bottlenecks (third stage)
- Resources have not been redeployed:
  - Task force plans were not translated into actions by local tax offices.
  - Despite annual uncollected net tax revenue at 86 percent of collections in Greece, against an OECD average of 12 percent, the administration does not devote sufficient staff to debt collection.
- New approaches have not been adopted:
  - Managers—at headquarters and local offices—have not adopted new audit approaches nor taken action on cases selected through risk analysis.
  - Scarce resources have instead been devoted to low level verifications.
  - The tax administration continues to focus on raising assessments—including fines with little chance of collection—but not on securing payments.
- Harmful practices have remained in place:
  - Authorities have continued with generous amnesty-like installment arrangements, paid little attention to their design, increased the workload in monitoring the schemes and frequently failed to do so past the first installment.
- New tools have not been adequately deployed:
  - Efforts to better use Greece’s anti-money laundering framework have generated large numbers of suspicious transaction reports to the Financial Intelligence Unit, but this easily actionable information has received no priority in the tax administration.
  - In the judicial system, requirements for upfront payments to access an appeal have not been enforced.

### Organizational constraints undermining implementation
- Accountability has been lacking:
  - Anti-corruption efforts have been minimal, and efforts to remove underperforming staff have met stiff resistance.
  - Too little has been done to rein in powerful local offices.
  - Legal frameworks that devolve all decision-making to local office heads have not been amended, and plans to reduce the network of local tax offices have been rephased twice.
  - This has left the performance of core functions exposed to significant discretionary power by the heads of local tax offices.
- New recruitment has been inadequate:
  - The authorities’ commitment to recruit 1,000 audit staff by end-April 2012 was not met—only 140 auditors were hired.
  - The plans for assessment and recruitment of 2,000 tax auditors over 2012 also collapsed.
  - Existing employees have actively resisted new recruitment.

*Source: Box 1. Increasing Revenue Collection: Progress and Bottlenecks.*

### APPENDIX I. DEBT SUSTAINABILITY ANALYSIS

### APPENDIX I. DEBT SUSTAINABILITY ANALYSIS

### A. Key Inputs for the DSA
- Macro and policy framework updates relative to March 2012 program:
  - A lower output path due to political uncertainty, implementation risks, euro exit fears, and a worsened external environment; national accounts revisions removed almost [5] percent from nominal GDP.
  - Weaker external conditions: external demand by Greece’s trading partners is expected to be 1¾ percentage points lower in 2013 and ¾ percentage points lower in 2014 versus the program, then gradually converging to the previous forecast.
  - Real effective exchange rate overvaluation expected to disappear sooner (2014 vs. 2015).
  - Slower fiscal adjustment: primary surplus of 4½ percent of GDP now reached in 2016; long-term primary surplus assumption remains 4 percent of GDP.
  - Lower privatization proceeds for 2012–20 revised from €45 billion to €22 billion; annual proceeds expected in the 1–1½ percent of GDP range.
  - Other adjustments:
    - €8 billion in arrears assumed cleared in 2012–13 (€2 billion higher than at program outset).
    - Government deposit accumulation targeted at €1.5 billion by 2014 (versus €5 billion under EFF), returning to program path thereafter.
    - Stock of T-bills maintained at €15 billion (versus €6 billion foreseen in EFF).
    - Estimated cost of financial system support reduced from €50 billion to €49.4 billion.

- Program financing framework updates reflecting Eurogroup decisions (November 27, 2012):
  - Measures to help Greece reach debt-to-GDP of 124 percent in 2020 and substantially below 110 percent by 2022; DSA models measures to achieve 124 percent in 2020.
  - Revised official financing terms assumed:
    - Reduced interest margin on Greek Loan Facility from 150 bps to 50 bps over Euribor.
    - Cancellation of 10 bps administrative fee on EFSF loans.
    - Receipt of profits on the ECB’s SMP portfolio (projected flow of approximately €9.3 billion through 2020).
    - Deferral (and capitalization) of interest payments on EFSF and future ESM loans until 2022.
    - Eurogroup committed to adopt an additional 4 percent of GDP in debt reduction measures after 2014, conditional on Greece achieving a primary surplus (modeled as a constant fiscal transfer after the program period).
  - Upfront debt reduction via voluntary buy-back completed December 18, 2012: €31.8 billion of bonds retired at the cost of €10.8 billion; financed via EFSF support within existing arrangement.

- Market access and modeling assumptions extended to 2030:
  - Small amounts of market borrowing assumed to begin in 2018, full reliance on market after 2020.
  - Borrowing terms linked to debt level: at roughly 115 percent of GDP, assumed spread of 450–600 bps depending on maturity, with spreads rising by 10 bps for every 1 percentage point increase in debt.

### B. Public Sector DSA
- Baseline public debt trajectory:
  - Debt projected to decline to 124 percent of GDP in 2020 and to 113 percent by 2022.
  - Near-term peak projected near 180 percent of GDP (up from 167 percent projected in original program).
  - Steady reductions commence in 2014; debt ratio projected to drop below 100 percent of GDP in 2026 (one year later than original program).
  - If Europe implements measures to reduce Greece’s debt substantially below 110 percent by 2022, deviations relative to the program would be corrected (under the program debt was projected to fall to 107 percent of GDP by 2022).

- Impact of debt relief measures on debt service:
  - Interest rate reductions and deferrals reduce interest payments by up to 3 percent of GDP per year.
  - Maturity extensions on EFSF and GLF debt sharply reduce maturing official debt starting in early 2020s, mitigating refinancing risk.

- Stress-test sensitivities and outcomes:
  - Policies:
    - If primary balance is stuck at a surplus of 1½ percent of GDP (level reached in 2014), debt would flatten out above 125 percent of GDP over the medium term; a lower primary would put debt on an increasing trajectory.
    - Privatization shortfalls (only half of €21 billion projected by 2020) would raise debt by about 5 percentage points of GDP but preserve a downward trajectory.
  - Macro parameters:
    - Fixing primary path, nominal growth permanently lower by 1 percent per annum would increase debt-to-GDP to 136 percent by 2020.
    - Nominal growth permanently higher by 1 percent per annum would allow debt to fall to 105 percent of GDP by 2020.
  - Financing assumptions:
    - If the spread on EFSF borrowing were 100 bps higher, debt-to-GDP would reach 130 percent by 2020.
    - Maturity extensions reduce sensitivity to market-rate shocks: even a 400 bps shock to Greek spreads over 2021–30 has a relatively modest impact on debt levels.

- Alternative scenarios:
  - Combined-shock / program-delay scenario:
    - Assumes delayed recovery in confidence and investment, slower structural reforms, fiscal adjustment two years later to endpoint target, and privatization €10 billion below target.
    - Debt would peak at 180 percent of GDP and fall to around 147 percent of GDP by 2020 (23 percentage points higher than baseline); thereafter downward but at significantly higher levels, increasing risk that small shocks could produce unsustainable dynamics.
  - Euro exit scenario:
    - Euro exit accompanied by sharp depreciation and deep contraction would reduce Greek GDP in euro terms and could cause debt ratios to double to clearly unsustainable levels.
    - Government likely to absorb significant bank liabilities; fiscalization of Eurosystem liabilities would add further to post-exit debt burden.

- Selected figures from Table AI.1 (Baseline public sector debt, percent of GDP):
  - Public sector debt: 2007: 107.3; 2008: 112.5; 2009: 129.3; 2010: 147.9; 2011: 170.6; 2012: 157.5; 2013: 178.5; 2014: 174.5; 2015: 170.0; 2016: 162.7; 2020: 124.0; 2025: 101.2; 2030: 83.6.
  - Change in public sector debt: 2012: -13.1; 2013: 20.9; 2014: -3.9; 2015: -4.5; 2016: -7.2; 2020: -9.9; 2025: -3.5; 2030: -3.5.
  - Primary deficit (percent of GDP): 2007: 2.0; 2008: 4.8; 2009: 10.4; 2010: 4.8; 2011: 2.3; 2012: 1.5; 2013: 0.0; 2014: -1.5; 2015: -3.0; 2016: -4.5; 2020: -4.3; 2025: -4.0; 2030: -4.0.
  - Revenue and grants (percent of GDP): 2012: 43.6; 2013: 42.9; 2014: 42.8; 2015: 41.8; 2016: 41.3; 2020: 41.3; 2025: 41.3; 2030: 41.3.
  - Average nominal interest rate on public debt (percent): 2007: 4.8; 2008: 5.0; 2009: 4.5; 2010: 4.4; 2011: 4.5; 2012: 2.8; 2013: 2.7; 2014: 2.7; 2015: 3.1; 2016: 3.1; 2020: 3.2; 2025: 3.7; 2030: 4.1.
  - Real GDP growth (percent): 2007: 3.5; 2008: -0.2; 2009: -3.1; 2010: -4.9; 2011: -7.1; 2012: -6.0; 2013: -4.2; 2014: 0.6; 2015: 2.9; 2016: 3.7; 2020: 2.6; 2025: 1.9; 2030: 1.8.
  - Gross financing need (percent of GDP): 2007: 6.8; 2008: 9.9; 2009: 15.6; 2010: 19.5; 2011: 27.3; 2012: 18.0; 2013: 21.7; 2014: 22.7; 2015: 16.1; 2016: 9.6; 2020: 8.7; 2025: 4.1; 2030: 6.2.
  - Gross financing need (billions of U.S. dollars): 2007: 20.8; 2008: 34.0; 2009: 50.2; 2010: 57.6; 2011: 79.3; 2012: 44.4; 2013: 49.6; 2014: 51.9; 2015: 37.8; 2016: 23.6; 2020: 25.5; 2025: 14.7; 2030: 26.6.

- Selected figures from Table AI.2 (Alternative scenario public sector debt, percent of GDP):
  - Public sector debt: 2012: 157.5; 2013: 184.3; 2014: 183.6; 2015: 185.5; 2016: 182.3; 2020: 147.2; 2025: 125.0; 2030: 107.9.
  - Change in public sector debt: 2013: 26.8; 2014: -0.7; 2015: 2.0; 2016: -3.2; 2020: -9.5; 2025: -3.4; 2030: -3.4.
  - Gross financing need (percent of GDP): 2012: 18.0; 2013: 22.4; 2014: 24.0; 2015: 17.5; 2016: 10.9; 2020: 10.2; 2025: 5.5; 2030: 8.4.
  - Gross financing need (billions of U.S. dollars): 2012: 44.4; 2013: 49.6; 2014: 52.1; 2015: 38.3; 2016: 24.6; 2020: 27.3; 2025: 17.9; 2030: 33.2.
  - Real GDP growth (percent) in alternative scenario: 2013: -5.0; 2014: -0.4; 2015: 1.4; 2016: 2.3; 2020: 2.5; 2025: 1.9; 2030: 1.8.
  - Average nominal interest rate on public debt (percent) in alternative scenario: 2013: 2.7; 2014: 2.7; 2015: 3.1; 2016: 3.1; 2020: 3.2; 2025: 3.8; 2030: 4.1.

### C. External Sector DSA
- The appendix concludes that the revised program can place Greek public and external debt on a sustainable trajectory under baseline assumptions but significant risks remain:
  - Debt declines may be interrupted or reversed by shocks.
  - Maturity extension and lower interest rates from official creditors have improved robustness to shocks.
- (Text ends at section header "C. External Sector DSA" in the provided content; no further external sector quantitative projections or tables are included in the supplied excerpt.)

*Source: APPENDIX I. DEBT SUSTAINABILITY ANALYSIS*

### 9.      External debt would fall significantly by 2020 according to baseline projections. Gross

### 9.      External debt would fall significantly by 2020 according to baseline projections

### Baseline projections and headline outcomes
- Gross debt, currently at 235 percent of GDP, would peak at around 260 percent of GDP in 2013 and then drop to 170 percent in 2020.
- Net debt would fall from 110 percent of GDP in 2012 to 60 percent in 2020.
- The net-debt path is better than in the original EFF-supported program despite higher Target 2 liabilities and lower privatization receipts, because the current account has adjusted faster than expected.
- The current account will surpass the debt-stabilizing level of -4.6 percent of GDP already in 2012.
- FDI inflows related to privatization, although lower than in the original program request, remain an important non-debt-creating source of financing.

### Factors driving the projected improvement
- Faster-than-expected current account adjustment as competitiveness is restored.
- Continued reliance on official loans at relatively low interest rates.
- Agreed reduction in the GLF interest rate and EFSF fees.
- Return of SMP profits contributing to a sharp improvement in the current account.
- Non-debt-creating financing from privatization (FDI inflows), even if smaller than originally anticipated.

### Macroeconomic shock scenarios and sensitivity analysis
- Larger current account deficits
  - Slow competitiveness improvements or a terms-of-trade shock would worsen baseline current account projections by around 1.5 percent of GDP.
  - Under this shock the debt ratio would remain on a downward path but would be 11 percentage points higher than in the baseline by 2020.
- Interest rate shock
  - A 100bps shock to Bund rates would worsen the income account and result in a 2020 debt ratio 8 percentage points above the baseline.
  - Effects are dampened by Greece’s almost exclusive reliance on official financing, but changes in the risk-free rate impact the cost of official financing.
- Slippages in privatization
  - A negative shock reducing non-debt-creating flows by €10 billion would raise the 2020 debt ratio by around 4 percentage points relative to baseline.
  - Impact is modest because baseline privatization-related inflows are small relative to the overall financial account balance.
- Combined adverse scenario
  - A scenario combining lagged program implementation, weak competitiveness, and higher interest rates would have a substantially larger impact.
  - Under the combined shock the net debt ratio would reach 87 percent of GDP in 2020, 23 percent of GDP higher than in the baseline.

### Selected quantitative indicators from the external DSA (key figures preserved exactly as in source)
- Debt-stabilizing non-interest current account: -4.6
- Baseline: external net debt (percent of GDP) — selected years:
  - 2012: 109.2 (table) and described as 110 percent of GDP in text
  - 2013: 113.6
  - 2014: 110.7
  - 2015: 103.7
  - 2016: 94.6
  - 2017: 85.0
  - 2018: 75.6
  - 2019: 66.7
  - 2020: 59.3
- Change in external debt (percent of GDP) — selected entries:
  - 2012: -30.0
  - 2013: 4.4
  - 2014: -2.9
  - 2015: -7.0
  - 2016: -9.1
  - 2017: -9.6
  - 2018: -9.3
  - 2019: -9.0
  - 2020: -7.4
- Identified external debt-creating flows (percent of GDP) — 2012: 12.8; 2013: 3.9; 2014: -4.1; 2015: -8.7; 2016: -10.7; 2017: -9.8; 2018: -9.9; 2019: -9.9; 2020: -9.8
- Current account deficit, excluding interest payments (percent of GDP) — 2012: 0.1; 2013: -3.6; 2014: -5.3; 2015: -6.5; 2016: -7.2; 2017: -7.9; 2018: -7.9; 2019: -8.0; 2020: -7.9
- Gross external financing need (billions of euros) — 2012: 202.8; 2013: 185.8; 2014: 187.5; 2015: 181.9; 2016: 159.5; 2017: 148.7; 2018: 139.3; 2019: 131.7; 2020: 121.7
- Gross external financing need (percent of GDP) — 2012: 104.0; 2013: 100.7; 2014: 101.4; 2015: 95.2; 2016: 79.7; 2017: 70.9; 2018: 63.5; 2019: 57.3; 2020: 50.7
- Key macro assumptions (selected):
  - Real GDP growth (percent): 2012: -6.0; 2013: -4.2; 2014: 0.6; 2015: 2.9; 2016: 3.7; 2017: 3.5; 2018: 3.3; 2019: 3.0; 2020: 2.6
  - GDP deflator (change in percent): 2012: -0.5; 2013: -1.2; 2014: -0.4; 2015: 0.3; 2016: 1.1; 2017: 1.2; 2018: 1.3; 2019: 1.7; 2020: 1.8
  - Nominal external interest rate (percent): 2012: 1.9; 2013: 1.9; 2014: 2.2; 2015: 2.5; 2016: 2.8; 2017: 3.1; 2018: 3.1; 2019: 3.1; 2020: 3.0
  - Current account balance (percent of GDP) — projections: 2012: -4.2; 2013: -1.2; 2014: -0.3; 2015: 0.4; 2016: 0.7; 2017: 0.9; 2018: 1.1; 2019: 1.5; 2020: 1.8
- Scenario impacts summarized in figure labels (preserved):
  - Non-interest C/A shock: Current account balance lower by 1.5 percent of GDP due to delayed program implementation and terms-of-trade shock.
  - Bund rate shock: Impact of 100bps shock to Bund rates on Greece's official interest rates and income balance.
  - FDI shock: Decline in FDI due to reduced privatization receipts.

### Policy implications and program linkages (as described in the source)
- Restoring competitiveness and completing structural reforms is central to achieving the rapid current account adjustment underlying the debt path improvement.
- Reliance on official financing at concessional rates, and policy actions by euro-area partners (reduced interest rates and fees, extended maturities, financing a voluntary debt buyback), are key to restoring a sustainable debt trajectory.
- Privatization receipts matter as non-debt-creating financing, but the baseline projections already reflect lower privatization than earlier program requests.
- The sensitivity analysis underscores the importance of avoiding delays in program implementation, sustaining competitiveness reforms, and limiting increases in sovereign borrowing costs.

*Source: IMF staff report section: "External debt would fall significantly by 2020 according to baseline projections."*

### APPENDIX III. MEMORANDUM OF ECONOMIC AND

### APPENDIX III. MEMORANDUM OF ECONOMIC AND FINANCIAL POLICIES

### Strategy and Outlook
- Greece faces three crucial challenges:
  - Restoring growth: fifth year of recession; unprecedented unemployment levels, particularly among youth. Shift growth engine from consumption to exports and investment in the tradables sector.
  - Securing fiscal sustainability: further efforts required to restore fiscal sustainability and spread adjustment burden fairly; achieving a sustainable level of debt within the euro area is vital.
  - Securing the financial system: deep recession and recent public debt restructuring have weakened banks’ capital; recapitalization needed to strengthen depositor confidence and restart lending.
- Short-term outlook:
  - Recession deeper than envisaged under the program; slow progress in structural reforms has not sufficiently addressed price rigidities.
  - External deficit projected to shrink faster than expected; competitiveness gains (unit labor costs) expected to come at a faster pace.
- Policy adaptations to stabilize the economy:
  - Frontloaded structural reforms to reduce prices and encourage employment; accelerate privatization to facilitate private investment; reduce non-wage labor costs.
  - Renewed near-term push to correct poor business environment: implement licensing reforms; simplify export procedures; simplify administrative burden of tax system.
  - Fiscal timing: programmed more time for fiscal adjustment—an extra two years to reach fiscal targets—expected to reduce pace of fiscal consolidation from 3 to 1½ percent of GDP per year to limit negative growth impacts in 2013–14.
  - Demand support initiatives: increased absorption of EU structural funds to sustain public investment; new EIB loans to banks to support SME lending; program resources to clear government arrears gradually; measures to help banks work out debts with truly distressed borrowers.
  - Social safety net enhancements: leverage EU structural funds to strengthen job training initiatives; increase internal resources for unemployment insurance.
- European partner support:
  - Additional financing package with lower interest rates, deferred interest and longer maturities on loans, and higher fiscal transfers (commitment to pass on to Greece an amount equivalent to the income on the SMP portfolio of the National Central Banks as from budget year 2013).
  - Agreement to finance a voluntary debt buyback from the private sector, completed on December 18, 2012.
- Macroeconomic projections and timing:
  - Expect stabilization and recovery start in next 12–18 months.
  - Output: contract by over 6 percent in 2012, and about 4¼ percent in 2013, before quarter-over-quarter recovery toward end-2013 or early-2014.
  - Inflation: moderate in 2012; mild deflation in 2013.
  - Current account: broadly in balance by 2014.
  - Medium term: competitiveness gap to close; current account surplus around 2017.
  - Public debt expectations: fall to 124 percent of GDP by 2020, and to substantially below 110 percent of GDP by 2022.
  - Banking system reliance on the Eurosystem expected to gradually decline.
- Implementation emphasis: strong and timely program implementation critical to support return of confidence.

### Structural Reforms
- Overall commitment:
  - Comprehensive liberalization of product and service markets to remove unnecessary restrictions and barriers to entry; ambitious business environment reforms; implement and extend labor market reforms to facilitate employment creation.
- Priority liberalization measures (prior action for the review; Annexes I.1–I.2):
  - Retail market: repealed unnecessary restrictions (sanitary, labor, transport); allow wider class of goods to be sold; reduce retailers’ operating costs to lower prices and increase choice.
  - Fuel market: legal changes to allow small fuel retailers to import without large storage facilities; permit independent retailers to buy directly from refineries and transport own fuel; equalized taxes on diesel and heating oil; introduce control mechanisms against smuggling and fraud.
  - Transportation services: removed restrictions on rental of pickup trucks and vans, chauffeur services; allowed shuttle services by hotels and tour agencies using small vehicles (less than 12 seats) and tour packages for small vans and off-terrain vehicles.
  - Regulated professions (Annex I.2): addressed inconsistencies with law 3919/2011; tackled a new group of 8 professions and activities (including custom brokers, stevedores in ports, tourist agencies, private education establishments); government committed not to extend new reserved activities to specific professions.
- Specified next steps and deadlines:
  - Liberalize all regulated professions by end-2012 per law 3919/2011 (structural benchmark).
  - By May 2013: complete a study of the 20 largest professions examining degree of liberalization, including new entrants and price changes.
  - Complete new round of liberalization of transportation services by end-February 2013 (processes launched in October 2012); address restrictions affecting airports, seaports, domestic ferry services (labor arrangements and routing), and inter-urban travel.
  - By end-June 2013: prepare an action plan to promote competition and facilitate price flexibility in construction materials, food processing, and tourism sectors (using OECD toolkit and Hellenic Competition Commission support).
- Business environment improvements:
  - Licensing and regulation priorities:
    - By end-December 2012: simplify procedures for establishing companies (model company statutes, streamline background checks, reduce minimum capital requirements).
    - Publish during Q4 2012 a national trade facilitation strategy with time-bound steps; increase working shifts (Athens airport and Piraeus port to shift to 24/7 by end-March 2013).
    - By Q1 2013: complete legal framework for licensing laws implementation; certify bodies to issue establishment and operating licenses and set procedures and criteria.
  - Judicial reform:
    - Develop by end-January 2013 an action plan with specific measures to reduce the non-tax case backlog.
    - Publish quarterly reports on backlog reduction starting end-December 2012; update work plan to reduce tax case backlog with priority on cases exceeding €1 million.
    - Prepare a paper outlining main proposals for amendments to the Code of Civil Procedure by end-March 2013.
  - Next steps with OECD assistance:
    - Screen legislation in agriculture, energy, fisheries, pharmaceutical sectors, and public procurement to reduce administrative burden; propose necessary legal amendments by end-September 2013.
    - By end-September 2013: produce comprehensive list of nuisance taxes and levies and approve plan to incorporate them into the central government budget and eliminate the majority in a budget neutral way in the 2014 budget (structural benchmark).
- Labor market measures:
  - Maintain February 2012 labor reforms; apply uniformly across sectors.
  - Minimum wage reform (prior action for the review; Annex II):
    - Establish timetable and mechanism adopted by parliament following government proposal (after consultation); system effective by end-March 2013.
    - At effectiveness, statutory minimum wage and maturity allowances set equal to levels agreed at program approval in March 2012 and frozen; no other allowances.
    - Collective agreements may set higher wages/allowances but binding only for signatories.
    - By Q1 2014: government to assess mechanism’s sufficiency for unemployment and competitiveness and administrative simplicity.
  - Reduce nonwage labor costs:
    - Tax wedge reform (new program structural benchmark): by November 30, 2013 adopt legislation reforming social security contributions to (i) broaden the base; (ii) simplify contribution schedule; (iii) shift funding away from nuisance taxes and onto contributions; and (iv) reduce contribution rates by an average of 5 percentage points (from the rates prevailing on September 30, 2012). Reforms phased in on January 1 in 2014, 2015, and 2016; revenue neutral and preserve actuarial balance. Intermediate step: by end-September 2013 complete actuarial studies and propose an action plan.
    - Other non-wage labor costs (prior action for the review): adopted legislation to increase efficiency within 40 hour weekly limit; reduce administrative burden related to reporting and preapproval for work arrangements; lower dismissal costs with grandfathering for existing workers subject to a cap (Annex II).
  - Strengthen safety net and active labor policies: enhance unemployment benefits; improve training and job-matching programs focused on young and long-term unemployed; better leverage structural funds.
  - Independent assessment of the labor inspectorate: complete by end-2012 to focus on detecting undeclared work and specify action plan.
- Reform management and monitoring:
  - Fully staff the directorate of planning, management, and monitoring of reforms at the Office of the Prime Minister.
  - Publish quarterly monitoring indicators for each reform initiative on the government’s website.

### Privatization
- Priority to restart and invigorate privatization program to improve efficiency, reduce prices, catalyze private investment, cover budget financing needs, reduce public debt, and improve market sentiment.
- Asset specification and valuation:
  - Identified state enterprises and concessions in gaming, utilities, and infrastructure; will include bank assets in government possession or to be acquired during recapitalization. These assets have an estimated value of €26 billion.
  - Screened 81,000 real estate properties with an estimated value of €20–28 billion.
  - Updated privatization plan presented to parliament in the context of the 2012–16 MTFS.
- Steps to restart sales (prior action for the review; Annex III details):
  - Transfer of assets: Privatization Fund (HRADF) given full and direct ownership of non-real estate assets in Annex III; full and direct ownership of real estate assets Kassiopi and Afantou, the 28 government buildings to be sold and leased back, and Astir Vouliagmenis. All line ministries and relevant entities to provide property registry to the General Secretariat for Public Property.
  - Legal framework: removed restrictions to private ownership and control of firms; initiated process to obtain zoning and land planning permits (ESCHADA) for Afantou and Kassiopi. Upon privatization, amend statutory provisions (including labor relations) to align with private sector law.
  - Advisors: appointed necessary advisors to prepare assets in the privatization plan for 2012–13.
  - Tender process: government stakes in OPAP, the state lottery, and IBC have been put up for tender.

*IMF staff summary based on APPENDIX III. MEMORANDUM OF ECONOMIC AND FINANCIAL POLICIES (content unit _cr1320).*

### 15. We expect significant further progress in the period ahead: We will establish regulatory

### _cr1320 - 15. We expect significant further progress in the period ahead: We will establish regulatory

### Privatization program: planned actions and constraints
- Regulatory frameworks to be established for:
  - water companies (December 2012)
  - airports (January 2013)
  - the State Lottery
  - ports (April 2013)
- Asset sales and transfers:
  - Egnatia Motorways will be put to tender by March 2013.
  - Fully identify and describe 40 new real estate assets that comprise the privatization projects for real estate lots 2 and 3; these 40 real estate assets will be transferred to the HRADF by March 2013.
  - Fully identify and describe all remaining assets in the pool of 3150 assets preselected and pre-valued by the HRADF.
  - Transfer full and direct ownership of all commercially viable assets amongst these to the HRADF by end-2013, targeting 250 transfers per quarter beginning in Q1 2013.
  - No transfer or withholding of any real estate assets to entities other than the HRADF (including municipalities and the recently established pension fund SPV, or other dedicated legal entities) without prior consultation and agreement with the HRADF and the EC/ECB/IMF, or until such time as the assets necessary to supply the privatization plan have been secured.
- Transparency and governance measures:
  - HRADF to publish: (i) a semi-annual update of the Asset Development Plan including a Portfolio Overview, descriptions of assets, timeline of planned tenders and targeted total receipts for the current and next year; and (ii) quarterly reports on steps to facilitate privatizations, and financial accounts (profit and loss statement, cash flow statement, and balance sheet), no later than 60 days after the conclusion of every calendar quarter.
- Revised privatization proceeds timetable and targets:
  - Expected to take more time (beyond 2020) to realize the full amount of proceeds of €50 billion.
  - Cumulative expected proceeds (from June 2011):
    - at least €5.9 billion through 2014
    - €10.5 billion through 2016
    - €25.6 billion through 2020
  - Policy: refrain from selling assets in exchange for government bonds.
  - Monitoring: quarterly indicative revenue targets and a performance criterion for end-September 2013.
  - A special focus on privatization will occur in the sixth review under the program.

### Financial sector objectives and strategy
- Overarching objective: ensure a viable and well-capitalized banking sector to underpin Greece’s medium-term recovery.
- Strategy comprises four pillars:
  - (i) recapitalization of viable banks
  - (ii) orderly resolution of nonviable banks
  - (iii) restructuring of banks
  - (iv) strengthening governance, supervision and regulation

### Bank recapitalization framework and process
- Strategic assessment:
  - Bank of Greece (BoG) completed a strategic assessment in March 2012 with international consultancy support.
  - Identified four core banks accounting for about 75 percent of banking sector assets.
- Capital metrics and targets:
  - By end 2012, align capital metrics to minimum core tier I ratio of 9 percent of risk-weighted assets (EBA recommendation on capital buffers).
  - Banks must meet Pillar II requirement to maintain a 7 percent core tier 1 capital ratio under a three-year adverse stress scenario.
  - BoG informed all banks of their individual capital needs and requested finalization of the capital raising process by end April 2013.
  - Capital needs account for the impact of PSI, valuation losses on new Greek government bonds, and stress test results using a three-year horizon (including BlackRock credit loss projections and banks’ future pre-provisioning results).
  - BoG to publish a detailed report on individual banks’ capital needs, the recapitalization process, and methodology by end December 2012.
- Three-step capitalization process:
  - First: HFSF will provide bridge capital to bring core banks up to 9 percent CT1 under Pillar 1 before end-2012; HFSF will issue a commitment letter to subscribe to 100 percent of remaining capital needs.
  - Second: by end January 2013, HFSF will subscribe to 100 percent of any convertible instruments banks decide to issue.
  - Third: by end April 2013, core banks will complete rights issues; any shares not subscribed by the private sector will be acquired by HFSF subscription to common equity; all four core banks will meet Bank of Greece capital requirements (structural benchmark).
- Private sector participation:
  - Current or new shareholders will control core banks if deemed fit and proper and have subscribed no less than 10 percent of capital to be raised by common shares.
  - If 10 percent private sector participation threshold reached, participating private investors will receive warrants to acquire remaining shares from HFSF within five years.
- Subsidiary recapitalizations and acquisitions:
  - Subsidiaries recapitalized by parent banks.
  - Agreements reached on acquisition of Emporiki and Geniki by Alpha Bank and Piraeus Bank, respectively; approvals expected after due diligence; acquisitions will not require additional public funds.
- Noncore undercapitalized banks:
  - Must be fully capitalized by end-April 2013.
  - May merge with other banks if they demonstrate credible business plans and meet recapitalization needs by April 2013.

### Resolution of undercapitalized banks and asset management
- Timeline and measures:
  - Complete resolution of undercapitalized banks by June 2013 and establish framework to manage assets of banks under liquidation.
- State-owned banks:
  - ATE bank resolved in July 2012 via a Purchase and Assumption (P&A) with Piraeus Bank; final resolution cost to be defined by external audit of transferred assets and liabilities.
  - Piraeus Bank presented EC with a restructuring plan for the integrated bank.
  - Hellenic Postal Bank: initiated orderly resolution aiming for P&A transaction completed no later than end-January 2013 (structural benchmark).
  - Nea Proton restructuring to be completed by mid-May 2013 in an open bid process under HFSF sponsorship.
- Other undercapitalized noncore banks:
  - If shareholders/new investors cannot support by end-April 2013, resolution via P&A with well-capitalized banks or, as second best, establishment of a bridge bank no later than end June 2013 (structural benchmark).
  - BoG has placed all undercapitalized non-core banks under enhanced supervision.
- Asset management best practices:
  - By end-February 2013 BoG will publish an assessment report prepared by an international expert on policies and procedures for effective bank asset management and recovery; report will identify areas for further strengthening to maximize loan collection and reduce bank resolution costs.

### Cooperative banks assessment
- By end-February 2013 the BoG will complete its assessment of cooperative banks and issue a final report.
- Based on that report, by end-May 2013 a comprehensive strategy will be set out to implement recommendations.

### Estimates of recapitalization resources and fiscal treatment
- Estimated funds required to fully recapitalize the Greek banking system: €50 billion (fully accounted for in updated program financing estimates).
- Fiscal policy stance:
  - No fiscal policy actions to increase this burden; in particular, no dividends will accrue or be paid to the government on preference shares until banks are profitable.
  - A one-time €550 million fee to be received from banks in 2012 in return for bridge capital will be earmarked to the HFSF and placed in the HFSF intermediate account.

### Post-recapitalization restructuring and safeguards
- Restructuring plans and timelines:
  - Banks receiving state aid must provide clear and realistic business plans.
  - Operational restructuring: updated restructuring plans to be submitted for EC validation by end-June 2013; banks acquiring institutions through HFSF-sponsored P&A will have until end-July 2013 (structural benchmark).
  - HFSF to monitor adherence and report semi-annually to the EC/ECB on progress.
- NPL resolution and funding:
  - HFSF will request banks assess by June 2013 whether frameworks/policies to deal with troubled assets are effective; invite international work-out specialists.
  - Banks to set out intentions to broaden funding base and reduce reliance on emergency liquidity over time; BoG will stand ready to continue disbursing emergency liquidity following Eurosystem rules if needed.
- Insolvency framework and borrower workouts:
  - By end-January 2013, review insolvency framework for households and SMEs and the framework for out-of-court negotiations with banks; prepare assessment identifying areas for improvement.
  - By end-February 2013, revise framework to facilitate workouts with over-indebted household borrowers (with technical support of international experts) to preserve bank solvency, credit discipline, avoid fiscal protections for private borrowers, and minimize moral hazard; refrain from initiatives undermining payment culture in Greece.
- Follow-up stress testing:
  - BoG to conduct a new stress test by end-December 2013, based on end-June 2013 data, using methodology determined with EC/ECB/IMF staff (proposal to shift existing structural benchmark to this date).

### Governance, reporting, and supervisory safeguards
- HFSF due diligence and BoG actions:
  - HFSF to complete due diligence of core banks (prior action); focus includes governance, loans to related parties, asset quality, and risk concentration; findings communicated to BoG.
  - BoG to address findings promptly, including removal of board members/managers and/or suspension of private shareholders.
  - By end-March 2013 banks to submit plans to BoG to address identified operational governance weaknesses with timetables for full implementation by end-December 2013.
- Monitoring trustees:
  - Monitoring trustees will be appointed in all banks under restructuring to submit quarterly reports on governance and operations, and ad-hoc reports as needed.
  - Trustees work under EC direction, within terms of reference agreed with EC/ECB/IMF staff, liaise with EC/ECB observers at HFSF, and share reports with HFSF.
  - Trustees will verify governance and use of commercial-basis criteria in key policy decisions; permanent access to Board meeting minutes and observer status at executive and critical committees.
  - Trustees shall be respected international auditing or consulting firms including overseas partners/managers, endorsed by the EC for competence, independence, and absence of conflicts of interest.
  - Terms of reference to be agreed with EC/ECB/IMF staff and communicated to banks with instructions for trustees to begin work no later than mid-January 2013 (prior action).
- HFSF reporting and observers’ access:
  - Starting at end-January 2013, HFSF will initiate semi-annual public reporting on main activities.
  - HFSF by-laws amended (prior action) to require HFSF Board, including observers, be informed of all decisions of core banks impacting HFSF rights as shareholder/investor; information to be provided at least one day in advance of any HFSF Board meeting discussing the bank’s decisions.
- Arms-length governance and relationship frameworks:
  - By end-March 2013, HFSF will publish relationship frameworks with each bank based on best international practices to define responsibilities of bank managers and board members and role of HFSF as shareholder.
  - Draft for discussion to be developed with EC, ECB, and IMF staff by end-January 2013.

### Supervision enhancements and disclosure
- Updating the supervisory model:
  - BoG to complete review of supervisory approach by end-June 2013 with technical support from a banking supervision expert.
  - Key enhancements:
    - refocus off-site analytical capacity to assess core banks’ business models and monitor implementation of business plans;
    - update onsite supervisory procedures and prudential regulation based on ongoing review findings;
    - action plan to monitor credit risk concentration, including enhanced monitoring of large business groups (including those related to bank owners) by end-July 2013.
- Standardizing asset quality disclosure:
  - BoG and Hellenic Capital Markets Commission to issue guidelines to align banks’ disclosure practices with international best practices on provisioning and reporting of restructured loans.
  - By end-August 2013, with assistance of a leading consulting firm, benchmark practices against top European institutions; reflect in banks’ end-2013 financial statements.
- Basel Core Principles assessment:
  - Request IMF to undertake a stand-alone BCP assessment by end-2014.
  - BoG to prepare a self-assessment of compliance with BCP by end-June 2014 with support of independent experts.
- Clarifying competencies:
  - Develop and publish a memorandum of understanding governing relationship of HFSF as shareholder and BoG’s role regarding oversight of banks that received state aid.

### Fiscal policy and consolidation path
- Medium-term fiscal target:
  - Committed to achieve a general government primary surplus of 4½ percent of GDP in the medium term and implement the EU fiscal compact thereafter.
- Revised fiscal adjustment path to soften recession impact:
  - Revised targets for general government primary balance:
    - deficit of 1½ percent of GDP in 2012
    - evenly-paced improvement thereafter by 1½ percent of GDP each year to 2016
  - Nominal overall balance expectations:
    - deficit of €13.8 billion in 2012
    - deficit of €8.9 billion in 2013
    - endpoint deficit of €1.3 billion in 2016
  - Contingent adjustment:
    - Pace of fiscal adjustment would be sped up to the extent privatization targets are missed and less financing is available (by half of the privatization shortfall, up to €1 billion in additional adjustment per year).

*Italic: IMF staff report content provided in the source PDF.*

### 28. The new adjustment path, and different macroeconomic background, has implications

### 28. The new adjustment path, and different macroeconomic background, has implications

### Needed measures and phasing
- Needed measures during 2013–14: €13½ billion
  - €3 billion to replace previously agreed measures where yields are declining
  - €10½ billion in net new measures
- Possible additional measures for 2015–16, depending on cyclical rebound and government efficiency: €2–4 billion
- Without extension of the fiscal adjustment period, estimated measures needed for 2013–14: €20 billion (including €13 billion in 2013)

### Core adjustment strategy and targeted structural problems
- Primary objectives:
  - Improve revenue collections to ensure fair sharing of the adjustment burden; aim for revenue gains of 1½ percent of GDP, full effects materializing gradually through 2016.
  - Improve government efficiency by further reducing operating expenditures and eliminating waste (notably in the health sector) and addressing inefficiencies in extra-budgetary funds, local governments, and state enterprises.
  - Reduce spending items that grew disproportionately prior to the crisis (notably pensions), while protecting the most vulnerable and refocusing social transfers to increase effectiveness in alleviating poverty.
  - Establish a more efficient tax system by broadening the base, closing loopholes, and adjusting allowances to raise revenue and improve equity; support tax collection by preventing under-reporting.

### Adjustment package through 2014 — focus on permanent spending reductions
- 2013 measures required: €9.2 billion
- Reduction of wage bill, pensions and social transfers in package: €6 billion
- Prior actions for the review: passage of the 2013 budget and updated MTFS; adoption of a package of fiscal measures drawn from areas below.

- Public sector wage bill: target reduction of €1.5 billion (net of taxes and social contributions) from 2012 to 2014
  - Public sector employee compensation measures:
    - Adjusted the wage grid for special regimes, effective August 1, 2012
    - Reduced labor costs for elected positions; eliminated seasonal bonuses; suspended performance bonuses
    - Legislation to align parliamentary staff wage grid with state employees
  - Public administration reform: reduce public sector workforce by 150,000 by 2015 relative to end-2010 level
    - Rigorous assessment:
      - Ministry of Administrative Reform to complete functional review for government ministries by January 2013
      - Individual staff performance assessments by end-2013
      - Extend reform to extra-budgetary funds and regional/local administrations in 2013
    - Mobility and exits:
      - Transfer affected employees to mobility scheme or dismiss; one year of reduced pay for mobility scheme participants
      - Target to place 27,000 in mobility scheme by end-2013
      - Complete staffing plans for line ministries by end-February 2013; set quarterly targets for mandatory exits through end-2014 (proposed structural benchmark)
    - Hiring controls and plans:
      - Limit intake into public service academies by 30 percent
      - Remove job guarantees for private sector teachers; add sunset clause to eligible graduate lists
      - If personnel reduction targets are unmet, increase targeted redundancies

- Pension reform: measures effective January 1, 2013, yielding €5.2 billion during 2013–14
  - (i) introduce actuarially-fair rules for lump-sum pensions
  - (ii) introduce a progressive reduction in monthly pension incomes above €1000
  - (iii) eliminate seasonal bonuses for supplementary and main pensions
  - (iv) reduce pension increases due to automatic wage promotion for those indexed to wages of special regimes
  - Increase statutory retirement age to 67 and postpone retirement eligibility by two years in all other cases including early retirement
  - Finalize national registry of pensions and sanction funds that do not deliver required information

- Better targeting of social spending: expected net savings of 0.6 percent of GDP
  - Health spending measures to reduce public pharmaceutical spending towards 1 percent of GDP:
    - Activate claw-back mechanism for outpatient pharmaceutical spending
    - For 2013: (i) revise co-payments; (ii) restrict non-generic drugs in positive list and expand OTC products; (iii) further reduce price of off-patent and generic drugs; (iv) reduce average profit margins of pharmacists to 15 percent; (v) reduce hospitals’ operational spending and merge underutilized facilities; (vi) increase contributions by farmers for their healthcare; (vii) revise benefit package offered by EOPYY
  - Other social benefit programs: introduce an income-tested system to reduce spending by 0.2 percent of GDP
    - Replace various untargeted family benefits with one means-tested family benefit program
    - Reduce special and seasonal unemployment benefits for certain professions and geographic areas
    - Increase age eligibility and income-testing of social solidarity supplements

- Improvements in efficiency: expected savings close to €0.7 billion within central government
  - Reductions in grants to political parties; rationalization of social security funds’ operating expenditures; cuts in lower priority investments; rationalization of tertiary education system
  - Cuts planned outside general government: local governments €0.2 billion; extra-budgetary funds €0.3 billion; state enterprises €0.3 billion
  - Measures to contain contingent risks in energy sector, including raising a solidarity contribution on renewable energy providers and incentives for cost control (e.g., deposit for existing contracts yet to be connected; annual fee on production licenses)

- Revenue-increasing reforms: net revenue targets
  - Direct taxes: net total yield of €1.9 billion from reforms to personal, capital, and corporate income taxation (to be enacted by end-December 2012; program structural benchmark, with delay)
    - Broaden income tax base by abolishing selected deductions, allowances, exemptions
    - Shift taxation of self-employed, farmers, and proprietorships to corporate tax regime; increase fixed charge on companies and self-employed
    - Simplify PIT to three statutory rates; introduce a standard tax credit
    - Rationalize capital income tax to a single flat rate (except two rates for rental income; lower rate for deposit interest)
  - Indirect taxes: measures designed to yield €0.9 billion
    - Reduction in diesel excise subsidy for farmers; reduction in tax refunds to farmers; increase excise for liquid petroleum gas; equalize excise on heating oil with diesel fuel
    - Restructure cigarette taxation in line with EU best practices; introduce tax on gross gaming receipts
    - Consultation with EC/ECB/IMF on any proposed changes in tax rates or bases

### Social protection measures
- Increase support for unemployed by €55 million by 2014 through two new pilot programs:
  - Income-tested benefit scheme targeting long-term unemployed, providing income payable for a year
  - Minimum income guarantee scheme targeting families in areas with difficult socioeconomic profiles
- Expand job-training and job matching programs and leverage EU structural funds where possible

### Strategy to achieve primary surplus targets and medium-term plans
- Strategy to fully achieve 4½ percent of GDP primary surplus target by 2016:
  - Expect revenues to revive with economic recovery and gains from stronger revenue administration
  - Continue efficiency improvements and implement additional spending reforms to eliminate waste (including increasing revenues of state-owned enterprises, contracting out local government services, restructuring public administration, and eliminating ineligible pension and social benefits recipients through data cross-checks)
  - If fiscal gap remains, options include: broaden tax base by further reducing exemptions/deductions; extend expiring measures; targeted cuts in current expenditure; refocus investment program
  - Concrete plans for 2015 to be specified no later than end-August 2013; detailed fiscal program for 2014–15 to be consistent with a primary surplus of 3 percent by 2015

### Flexibility, contingency rules, and use of windfalls
- Government committed to deliver fiscal targets but will adjust if performance or cyclical conditions change
- After final decision on direct tax reforms, review fiscal outlook for 2014 and agree with EC/ECB/IMF on measures to close any residual 2014 gap in context of second program review
- If tax administration or other fiscal reforms underdeliver, impose expenditure cuts focused on categories where arrears would not arise
- In case of sustained over-performance, adjust budgetary ceilings to help low-income earners and support recovery; use at least 30 percent of any windfall to make intermediate deficit targets more ambitious and accelerate debt reduction

### Fiscal institutional reforms and tax administration overhaul
- Objective: markedly reduce tax evasion and build an independent revenue administration with modern operations; selected key reforms are prior action for the review (see Annex VI for upfront reforms)
- Key commitments and measures:
  - Appoint a new Secretary General of the tax administration; passed legislation defining role and qualifications; interim legislation enables Minister of Finance to delegate decision-making powers to the Secretary General
    - Powers include operational decision-making, directing local offices, HR management, replacing underperforming senior managers, managing tax administration budget, and managing confidential information
  - Establishment of independence: legislation to create semi-autonomous tax agency to be adopted by parliament by end-February 2013 (structural benchmark); agency to become fully operational in March 2014
    - Law to specify autonomy, legal powers of head, governance, relationship with other agencies (including FIU), information receipt/use framework (including controls against sharing confidential operational information with the Minister of Finance), accountability, and initial staffing
  - Establishment of key functional units:
    - Transfer 100 experienced auditors to the large taxpayer unit
    - Establish one permanent functional unit (at most two locations) for high-wealth individuals, permanently transferring 50 experienced auditors to it
    - Strengthen collection by establishing specialist debt management units in larger local tax offices and allocate at least 10 percent of local staff to debt management by end-2012
  - Consolidation of operations:
    - Close and merge 150 small local tax offices by end-March 2013; about 120 functioning offices will remain by end-June 2013
    - Publish full list of offices to be closed by end-December
    - Centralize audit, filing enforcement, and debt management for small and medium taxpayers in largest tax offices on a regional basis
    - Remaining office network to be customer service centers with no audit/enforcement functions
  - Simplify record keeping, procedures, and tax legislation:
    - Repealed Code of Books and Records; adopted simpler accounting/record keeping rules
    - By end-May 2013 adopt a new Tax Procedures Code and simplify income tax legislation (structural benchmark)
    - New code to collect procedural provisions from income, VAT, excise laws; incorporate procedural reforms for tax filing, audit and penalties, enforcement, debt collection; introduce streamlined administrative dispute resolution process; adjust income tax law aspects (e.g., thin capitalization, EBITDA provisions) to reduce erosion of corporate tax base
  - Upgrade personnel:
    - Increase auditors by 2,000 by June 2013: hire 200 externally by end-March 2013 and admit staff with audit experience and other qualified staff following interviews
    - Selective asset audits for candidates; Secretary General to set performance targets and introduce twice-yearly performance assessments
    - Temporary annual contracts for auditors allowing termination upon failure to achieve targets
    - Ministerial decision in January 2013 to establish appointment/end of tenure procedures for heads of departments, quarterly performance targets, and reporting/assessment procedures
  - Anti-corruption framework:
    - Legislation to overhaul personnel management, including rotation of managers in critical offices
    - By January 2013 adopt a code of conduct for the tax administration (conflicts of interest, declaration of interests), system for transparency and reporting of misconduct, whistle-blower protection, and centralize disciplinary decisions in internal affairs unit
    - By end-March 2013 define measures for continuous monitoring of code implementation
    - Government to publish an anti-corruption plan for entire public administration during Q1 2013, covering specific actions for tax administration
  - Improvements in operating procedures:
    - Legislate by February 2013 removal of requirement that all tax declarations for previous 10 years must be audited (retain right to audit earlier years and discretion to audit any amount of declarations from earlier years)
    - Remove barriers to modern audit methods, including use of indirect evidence based on presumptive instruments; expand sources of third party information used in assessments
    - Revise tax and AML laws by February 2013 to: (i) enable central revenue authority to be informed of all cases sent by the FIU to local tax offices and Corps for the Prosecution of Financial Crime; (ii) provide that relevant information on large cases of failure to pay confirmed debt shall be transmitted to the FIU
  - Fiscal identification number and data consolidation:
    - By June 2013 require all ministries with fiscal relationships to utilize taxpayers’ identification numbers for financial transactions
    - By June 2014 introduce a central agency to consolidate and link all different identification numbers across government agencies
  - Accountability and public reporting:
    - Launch an easily accessible website by Q1 2013 to publicize monthly information on tax debt assessed and recovered and summary statistics on key performance indicators, including tax evasion cases sent to the FIU and to prosecution by the tax administration

*Source: IMF staff summary of the program chapter titled “The new adjustment path, and different macroeconomic background, has implications.”*

### 36. Parallel to our work with the revenue administration we will work to improve the

### _cr1320 - 36. Parallel to our work with the revenue administration we will work to improve the

### Social security collections reform
- Finalized a reform plan to modernize collections with focus on:
  - boosting revenue and recovery;
  - overhauling business processes, performance standards, and inter-agency relationships;
  - improving reporting of information needed for validating payments and administering benefits.
- Plan defines phases to consolidate collections and integrate them into the tax administration in the long term once its organization and governance have been strengthened.
- A working group between the Ministry of Labor and the Ministry of Finance has been established to advance the reform.
- Immediate action: by Q1 2013 review penalties and sanctions to ensure they sufficiently deter evasion and fraud.

### Tax arrears, amnesties, and installment schemes
- The government will not introduce any new amnesties or incentive schemes to collect tax arrears or social contributions or extend existing schemes.
- The PIT installment scheme introduced in 2012 will remain a one-off arrangement and will not be extended.
- The deadline for the existing social security amnesty will not be extended.
- Debt installment arrangements will be rationalized by:
  - tightening eligibility criteria to reflect ability to pay;
  - targeting only taxpayers under temporary financial stress, with a good compliance history and reasonable prospects of business viability.

### Tighter control over general government spending
- Strategy focuses on improved budgeting, stricter controls on expenditure commitments, and better fiscal reporting and monitoring.
- Budgeting actions and timing:
  - Issue a circular by end-February 2013 regulating the calendar, deadlines, and roles in formulating the next MTFS (2014–17) and the 2014 budget.
  - Modify the organic budget law by August 2013 to introduce:
    - (i) three year binding expenditure ceilings on a permanent basis as part of the rolling MTFS; and
    - (ii) a provision freezing ex-ante 10 percent of discretionary appropriations per budget line (to be released in the second half of the year conditional upon meeting the fiscal targets).
  - Operationalize the parliamentary budget office to ensure independent oversight of the budget process.
- Fiscal framework actions:
  - Introduce and make operational a domestic stability pact for local governments.
  - Establish a system to agree with state-owned enterprises on monthly budget targets and sanctions for non-observance; necessary legislation to be adopted by end-2012.

### Commitment-based spending controls and reporting milestones
- Commitment registers:
  - Prior action: EOPYY must report from its commitment register through the e-portal for at least two consecutive months (retroactive reports included).
  - By end-2012, ensure commitment registers are in operation in 90 percent of general government entities, with all commitments recorded at the moment they are made and all columns complete and reconciled.
  - By March 2013, expand the scope of data captured by the General Accounting Office’s e-portal to include the whole expenditure cycle.
  - The Ministry of Finance will continue monitoring via targeted inspections.
- General Directorates of Financial Services (GDFS):
  - A joint circular has been issued to implement GDFS in all line ministries to unify financial services under the accounting officer.
  - By end-2012 a Ministerial Decision will specify the financial authority and powers of accounting officers.
  - By end-2012 all line ministries will have established a well-structured and functional GDFS responsible for MTFS and budget proposals, consolidation of supervised entities’ budgets, and monitoring/reporting budget execution.
- Fiscal reporting improvements:
  - A new Social Budget Monitoring Committee has begun monthly monitoring of the social budget against fixed quarterly targets.
  - By January 2013 the committee will introduce a comprehensive budget monitoring framework, including improved reporting and control systems of EOPYY and hospital budgets.
  - By end-March 2013 verify and validate the quality of detailed fiscal data collected from a recent pilot project before expanding it to all significant general government entities.

### Clearing domestic arrears
- Government will clear domestic arrears as quickly as feasible to improve liquidity.
- Conditions for disbursing funds for arrears clearance:
  - For expenditure arrears:
    - (i) verification of arrears claims by an audit unit external to the relevant government unit;
    - (ii) establishment by the unit of a fully functioning commitment register;
    - (iii) reporting of at least three months of consistent data on commitments, payments, and arrears.
  - For tax refunds: verification of claims by the audit unit of the Ministry of Finance (the Directorate of Revenue Policy).
- Subvented agencies meeting conditions can clear arrears even if parent agency does not meet conditions.
- Ensure arrears do not delay execution of the pharmaceutical spending clawback.
- Once all verified arrears are cleared, commence a targeted audit of general government entities’ accounts payable to verify whether arrears remain and identify non-compliance; completion of the audit is a structural benchmark for end-December 2013.

### Monitoring off-balance sheet activities and SOEs
- Establish by June 2013 a system for monthly financial reporting by state-owned enterprises currently outside the general government.
- Set conditions under which SOEs’ right to receive new general government transfers or loans will be contingent on adoption of structural measures to restore financial soundness, including spending cuts and fee increases in consultation with supervising ministry and the MoF.

### Monitoring implementation via quantified indicators and structural benchmarks
- Two new structural benchmarks proposed for end-June 2013 and end-December 2013 covering achievement of revenue administration indicators, including audit targets.
- Two new structural benchmarks proposed for end-June 2013 and end-December 2013 covering achievement of public financial management indicators, including implementation of spending controls across line entities.
- The attached Technical Memorandum of Understanding provides details on the quantity targets.
- The fifth review of the program will focus on overall progress with revenue administration reforms.
- Specific timing and milestones repeated elsewhere in the document include:
  - Q1 2013: review penalties and sanctions for social security collections.
  - End-February 2013: circular for MTFS and 2014 budget formulation process.
  - August 2013: modify organic budget law to introduce three year binding expenditure ceilings and the 10 percent ex-ante freeze provision.
  - End-2012: adopt legislation for fiscal framework measures for SOEs and local governments; commitment registers and GDFS milestones.
  - By March 2013: expand General Accounting Office’s e-portal data scope.
  - June 2013: monthly SOE reporting system in place.
  - End-December 2013: completion of targeted audit of accounts payable (structural benchmark).

### Selected quantitative targets and deadlines cited in the unit
- By Q1 2013: review penalties and sanctions for social security contribution evasion and fraud.
- By end-February 2013: issue circular regulating MTFS (2014–17) and 2014 budget preparation.
- By August 2013: modify the organic budget law to introduce (i) three year binding expenditure ceilings and (ii) freeze ex-ante 10 percent of discretionary appropriations per budget line.
- By end-2012: commitment registers in operation in 90 percent of general government entities.
- By March 2013: expand e-portal to include the whole expenditure cycle.
- By January 2013: Social Budget Monitoring Committee to introduce comprehensive budget monitoring framework.
- By end-March 2013: verify and validate pilot detailed fiscal data before expansion.
- By June 2013: establish monthly financial reporting system for SOEs outside general government.
- Structural benchmark completion: end-December 2013 (targeted audit of accounts payable).

*Source: Excerpt from IMF staff report content unit _cr1320.*

### Annex I.1: Product Market Actions

### Annex I.1: Product Market Actions

### Fuel market
- Allow independent gas stations to own and operate tanker trucks above eight tons, and use any tanker size to pick up (imported) fuels, provided that safety standards for the transportation of fuel are respected.
- Allow gas stations to hire a public use tanker for fuel transportation without needing to qualify for their own private use tankers.
- Issue technical specification and set the timetable for the implementation of the input-output measurement system in all fuel stations—with a deadline for Athens and Thessaloniki region of March 2013, other large cities by September 2013, and the rest of the country by March 2014.
- Issue the implementing MD on GPS systems in fuel trucks, to be effective end-2012.

### Retail market
- Allow sale in supermarkets of pre-packaged food products, including meat, seafood, cheese and charcuterie.
- Allow sale in grocery stores of non-food products, including infant milk, tobacco, newspapers, and magazines.
- Allow mixed shops to sell goods other than food, subject to hygiene and food safety standards.
- Eliminate all restrictions on minimum space requirements for sale of food products.
- Allow a delink of the working hours of all employees in establishments (as defined in Law 1037/1971 and related implementing legislation) from opening hours of the establishment.
- Adjust the law to clarify that shift breaks are allowed in all retail establishments (including those with continuous working schedule).

### Transportation
- Remove restrictions on rental of pickup trucks and vans and chauffeur services.
- Allow shuttle services by hotels and tour agencies using small vehicles (less than 12 seats) and tour packages for small vans and off-terrain vehicles.

*Source: Annex I.1: Product Market Actions (excerpt).*

### Annex V. Fiscal Measures (continued)

### _cr1320 - Annex V. Fiscal Measures (continued)

### Health sector measures and EOPYY reforms
- Issue a circular to ensure implementation of the ministerial decision requiring that pharmacies substitute prescribed medicines by the lowest-priced product of the same active substance in the reference category by pharmacies (compulsory "generic substitution").
- Adopt legislation with immediate effect to improve the current financial situation of EOPYY:
  - Restrict the benefit package by delisting selected services, establishing utilization caps, and reducing reimbursement prices to save €180 million in 2013.
  - Increase cost–sharing for private care services to at least 30 percent.
  - Negotiate price-volume discount agreements with private health care providers, to generate savings of at least €70 million in 2013.
  - Revise the fees for and number of diagnostic and physiotherapy services contracted by EOPYY to private providers with the aim of reducing related costs by at least €80 million in 2013.
  - Introduce a reference price system for reimbursement of medical devices.
- Introduce legislation to increase the contributions paid by OGA members to €25 per month.
- Implement higher copayments for in–patient hospital care and for each prescription and realize savings of €115 million in 2014.

### 2013–2014 budget ceilings and spending cuts
- Set an expenditure ceiling on “operational and other” spending of line ministries (excluding defense, health, and education) to reduce it by €203 million in 2013 and an additional €112 million in 2014 relative to the 2013 baseline of €3.989 billion.
- Reduce subsidies to extrabudgetary funds outside the general government and domestic ferry boats by €32 million in 2013 and additional €66 million in 2014, relative to the 2013 baseline of €393 million.
- Set a ceiling to reduce operational costs at higher educational institutions, athletic (federations, sports centers) and cultural (theaters, museums, festivals) institutions to achieve savings of €86 million in 2013 and €37 million in 2014.
- Reduce investment spending by €150 million in 2013 and an additional €150 million in 2014.
- Set a ceiling on state transfers to SOEs, to save €250 million in 2013 and additional €123 million in 2014.
- Set a ceiling on transfers to STASY to generate savings of €22 million and €5 million in 2013 and 2014, respectively.
- Reduce the transfer of Central Autonomous Funds from the State to local governments by €10 million in 2013 and additional €50 million in 2014 compared to the baseline of €2,563 million in 2013 and €2,669 million in 2014.
- Reduce transfers from the SATA (account for collective decision for local governments) by €40 million in 2013 and additional €110 million in 2014 compared to the baseline of €330 million in 2013 and €330 million in 2014.
- Adopt legislation to amend the spending ceiling of the Green Fund to 2.5 percent of the stock of deposits it holds at the end of the previous year.

### General government and contingent liabilities (energy sector)
- Pass legislation to address contingent fiscal liabilities in the energy sector:
  - Introduce a special solidarity surcharge on producer turnover yielding €250 million a year (effective July 1, 2012, as discussed with the industry).
  - Conclude the Power Purchase Agreement for a photo voltaic station at the price in force at the time that station is put into operation, yielding an average of €150 million a year.
  - Adjust the RES Special Levy every six months, beginning on 1 January 2013, to eliminate the RES Account debt by December 2014.

### Revenue reforms and tax measures
- Adopt legislation to:
  - Reduce the diesel excise duty subsidy provided to farmers by €130 million from a baseline subsidy of €163 million (the rate is reduced from 95 percent to 80 percent of the tax amount).
  - Increase the fee for law suits so as to raise an additional €50 million per year.
  - Reform tobacco excise taxation by raising the per unit tax to €80 per 1,000 pieces and reducing the ad valorem tax to 20 percent, while minimum tax is raised to €115 per 1,000 pieces. Rolled tobacco tax will be set at €153/kg.
  - Mandate signing an MOU between the government and owners of the merchant fleet to ensure payment of tonnage tax aimed at raising €80 million in 2013 and €140 million each year in 2014–16 per year.
  - Equalize the social security earnings ceiling for contributions by raising the ceiling for employees first employed before 1993 to that of employees first employed after 1993, which is €5,543 per month.
  - Increase the excise tax on LPG from €200/t to €330/t.
  - Impose a 30 percent tax on OPAP’s gross gaming revenue for each existing game and a 10 percent withholding tax on player’s winnings from the same games—sufficient to raise at least €222 million, and €88 million above the baseline, respectively, per year starting in 2013.
  - Reduce the VAT refund for farmers to 6 percent of turnover.
- Submit with the tax reform bill a luxury goods tax effective 2014 with an annual yield of €110 million.

### Tax administration actions (Annex VI)
- Independence of the tax administration:
  - Adopt legislation to define the role and qualifications of the Secretary General. This should be a person with senior management experience, expertise in tax matters, and an impeccable reputation (including a strong tax compliance history).
  - Adopt interim legislation to enable the delegation of powers from the Minister of Finance to the new Secretary General.
- Support of core functions:
  - Increase the audit capacity of the large taxpayer unit by transferring 100 auditor staff to it.
  - Establish a unit responsible for high–wealth individuals and transfer 50 auditor staff to it.
- Anti–corruption strategy:
  - Adopt legislation to implement a simpler set of accounting and record keeping rules and repeal the Code of Books and Records.
  - Adopt legislation to overhaul personnel management (covering procedures for rotation of managers in critical tax offices).

### Program financing schedule (selected figures)
- Board approval of EA (March 15, 2012): Total disbursements 1,399.1 Millions of SDRs; Percent of quota 127.0; Billions of euros 1.6.
- Second Review (August 31, 2012): Total disbursements 2,798.2 Millions of SDRs; Percent of quota 254.0; Billions of euros 3.3.
- Third Review (February 28, 2013): Total disbursements 1,506.8 Millions of SDRs; Percent of quota 136.8; Billions of euros 1.8.
- Fourth Review (May 31, 2013) through Fourteenth Review (November 30, 2015): each listed as Total disbursements 1,506.8 Millions of SDRs; Percent of quota 136.8; Billions of euros 1.8.
- Fifteenth Review (February 29, 2016): Total disbursements 1,506.4 Millions of SDRs; Percent of quota 136.8; Billions of euros 1.8.
- Total program purchases/disbursements: 23,785.3 Millions of SDRs; 2,158.8 Percent of quota; Billions of euros 28.0.
- Source note: Exchange rate of January 5, 2012.

*Source: _cr1320 - Annex V. Fiscal Measures (continued), IMF PDF.*

### 4.      Definition: The modified general government primary cash balance (MGGPCB) is defined

### 4. Definition: The modified general government primary cash balance (MGGPCB) is defined

### Definition and core formula
- The modified general government primary cash balance (MGGPCB) is defined as the modified general government cash balance (MGGCB) minus interest payments by the state budget.
- The MGGCB is defined as the sum of:
  - the cash balances of the ordinary state budget,
  - the cash balance of the public investment budget,
  - the change in net financial assets of local government,
  - the change in net financial assets of social security,
  - the change in net financial assets of the Green Fund,
  - the change in net financial assets of reclassified public enterprises (RPEs) minus guarantees called to entities within the general government,
  - and the spending by the HRADF.
- Privatization receipts, as defined in the document and the proceeds from the sale of land and buildings, will be excluded from cash receipts.
- Net lending operations by the state budget will be recorded as cash expenditures.

### Cash balance of the ordinary state budget
- Measured from above the line, based on:
  - (i) gross ordinary budget revenues (recurrent revenue plus 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, and in line with the corresponding line items established in the ordinary state budget.
- Ordinary budget expenditures will exclude amortization payments, but include:
  - salaries and pensions;
  - grants to social security funds, medical care and social protection;
  - operational and other expenditure;
  - returned resources;
  - payments in exchange of claims of insurance fund for the personnel working in the Public Electricity Company;
  - the reserve, interest payments;
  - transfers for the settlement of past debt;
  - payments for military equipment procurement on a cash basis;
  - NATO expenses;
  - capital transfers to social security funds or other entities by bonds;
  - and called guarantees where the state or central government assumes payments on behalf of entities outside of the general government.

### Cash balance of the public investment budget
- Measured from above the line, based on investment budget revenues minus investment budget expenditures of the investment state budget as published monthly on the official website of the General Accounting Office of the Ministry of Finance, and in line with the corresponding line items established in the investment state budget.

### Change in net financial assets — general definitions
- Defined on a transactions basis as the change in the total of financial assets minus financial liabilities, adjusted for valuation changes by the Bank of Greece.
- Deposits are measured at face value excluding accrued interest, consistent with monetary survey data recording.
- Loans from domestic credit institutions are measured at face value, consistent with monetary survey data recording.

### Change in net financial assets of local governments
- Transactions basis measure of total financial assets minus financial liabilities, adjusted for valuation changes by the Bank of Greece.
- Financial assets include deposits of local governments in the Bank of Greece and deposits 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).

### Change in net financial assets of social security funds
- Transactions basis measure of total financial assets minus financial liabilities, adjusted for valuation changes by the Bank of Greece.
- Financial assets include:
  - Deposits of social security funds in the Bank of Greece and deposits in 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, including short and long-term securities issued domestically, long-term securities issued abroad operated from Bank of Greece accounts, and indirect holdings through the IKA mutual fund (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 the social security funds, measured consistently with monetary survey data.

### Change in net financial assets of the Green Fund
- Transactions basis measure of total financial assets minus financial liabilities, adjusted for valuation changes by the Bank of Greece.
- Financial assets include:
  - Deposits of the Green Fund in the Bank of Greece and in domestic credit institutions (measured at face value excluding accrued interest).
  - Holdings of shares held by the Green Fund 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 the Green Fund, measured consistently with monetary survey data, or other lending from the Bank of Greece.

### Change in net financial assets of reclassified public enterprises (RPEs)
- Transactions basis measure of total financial assets minus financial liabilities of RPEs, adjusted for valuation, minus the amount of guarantees called from entities consolidated within the general government.
- RPEs include: 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, and OSE.
- Financial assets include:
  - Deposits of RPEs in the Bank of Greece and deposits in credit institutions (domestic and foreign) (measured at face value excluding accrued interest).
  - Holdings of shares held by RPEs 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, measured consistently with monetary survey data.
  - Short and long term loans from the foreign banking system, as well as loans from the EIB or other official lenders, as measured by the difference between new loans granted to these entities (as approved by the GAO in line with the Fiscal Responsibility Act) and amortization of these loans through called guarantees of the government or amortization of these loans made by actual payments by the companies themselves, upon monitoring and information provided by the General Accounting Office (D25).

### Expenditures of the HRADF
- Defined from below the line as the change in deposits of the HRADF net of deposit changes due to borrowing for securitization purposes that are remitted to the central government as privatization receipts.
- Changes in net deposits of the HRADF and borrowing are to be measured from the monetary survey data for borrowing and deposits held in commercial banks.
- For deposits held at the central bank, net deposits are measured directly from the Bank of Greece.
- Remittance of privatization proceeds to the state will be measured from the inflows into the Treasury Single Account.

### Other provisions for the purposes of the program
- 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. However, for the entire program period where applicable, sales of gaming licenses, telecom licenses, sales of aircrafts, and extension of the airport concession that were established in the context of the May 2010 SBA program or the 2011 budget (Second Review) discussions will be recorded as cash revenue receipts and taken into account for the MGGPCB criterion, irrespective of whether the realized proceeds accrue to the privatization agency or not.
- The primary expenditure of the central government excludes payments related to bank support. Transactions that may be excluded from the balance include:
  - loans to financial institutions and investments in equity of financial institutions (requited recapitalization);
  - unrequited recapitalization;
  - purchases of troubled assets;
  - and operations related to the FSF.
- Any financial operation by central government to support banks, including the issuance of guarantees or provision of liquidity, will be immediately reported to IMF, European Commission, and ECB staff.
- The primary revenue of the central government will exclude 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 for MGGPCB
- Data on cash balances of the ordinary and state budgets will be provided to the European Commission, ECB and IMF by the General Accounting Office in the Ministry of Finance within three weeks after the end of each month. Data will include detailed information on revenue and expenditure items, in line with monthly reports published on the official website of the Ministry of Finance. Data will also include data on capital transfers to social security funds or other entities in bonds and called guarantees.
- Data on net financial assets of local authorities and social security funds, extra-budgetary funds including the Green Fund, AKAGE, and reclassified public enterprises will be provided to the IMF, European Commission and ECB by the GAO in cooperation with the Statistics Department of the Bank of Greece within four weeks after the end of each month.

### B. Ceiling of State Budget Primary Spending (Performance Criterion)
- Definition:
  - State budget primary spending = state budget spending (ordinary state budget plus 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 (unlike the MGGPCB definition which excludes this spending item).
  - Primary expenditure of the central government that is monitored for the Performance Criterion excludes any cash payments related to bank restructuring, when carried out under the program’s banking sector restructuring strategy. Costs that may be excluded include loans to financial institutions and investments in equity of listed and non-listed financial institutions (requited recapitalization); unrequited recapitalization; and purchase of troubled assets.
  - 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.

### C. Ceiling on the Stock of Domestic Arrears (narrow definition) (Performance Criterion)
- Definition:
  - Domestic arrears (narrow definition) are defined as:
    - (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:
    - (i) the arrears which are being 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); and 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:
  - 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 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 also 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).

### D. 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 which are being 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); and 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 IMF, European Commission, and ECB staff. Reports will include accounts payable overdue by 0–30, 31–60, and 61–90 days for the central government based on the commitment registers. Tax refund arrears data will be based on information from the General Secretariat for Information Systems and General Secretariat for Tax and Customs.

### E. Ceiling on the Overall Stock of Central Government Debt (Performance Criterion)
- Definition:
  - The overall stock of central government debt refers to ESA95 central government debt, which includes the state debt, debts of extra budgetary funds and public enterprises that are consolidated into the central government, and other ESA 95 adjustments. Holdings of intra-government debt will be netted out.
  - For program purposes it is defined as total outstanding gross debt liabilities, including liabilities in the form of securities and loans, excluding accounts payable.
  - Debt will be measured at nominal value. The 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 will exclude debt arising from payments for bank restructuring, when carried out under the program’s banking sector restructuring strategy (this does not cover the debt related to the Financial Stability Fund). This includes loans to financial institutions and investments in equity of financial institutions (requited recapitalization); unrequited recapitalization; and purchase of troubled assets.
  - Any financial operation by the central government to support banks, including the issuance of guarantees or provision of liquidity, with the exception of Hellenic Republic intermediation in repos between foreign and domestic financial institutions, will be immediately reported to IMF, European Commission and ECB staff.
- Adjuster:
  - 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-September 2012 ESA95 central government debt of €307.9 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.

### F. Ceiling on New Central Government Guarantees (Performance Criterion)
- Definition:
  - The ceiling on the new central government guarantees shall include new guarantees granted by the state, as well as new guarantees granted by any other entity that is classified under ESA95 under central government, but exclude guarantees to entities whose debt is covered under the ceiling on the stock of central government debt as defined in paragraph 15.
  - The ceiling shall exclude:
    - (i) guarantees to support banks;
    - (ii) guarantees related to EIB financed loans;
    - (iii) guarantees granted by ETEAN (up to an 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, but for those for which the 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 the maturity, amount of guarantees, and beneficiaries of the loan) will not be treated as new guarantees.

*Source: _cr1320 - 4. Definition: The modified general government primary cash balance (MGGPCB) is defined*

### 16.      Supporting material. All new central government guarantees will be reported in detail,

### _cr1320 - 16.      Supporting material. All new central government guarantees will be reported in detail,

### Reporting of new central government guarantees
- All new central government guarantees will be reported in detail, identifying amounts and beneficiaries.
- The General Accounting Office will provide the data on a monthly basis within three weeks after the end of each month.
- Non-state entities classified under the central government shall report the new guarantees they extended to the General Accounting Office on a monthly basis within three weeks after the end of each month.

### G. Non-Accumulation of External Debt Payment Arrears by the General Government (Continuous Performance Criterion)
- 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.

### H. Floor on Privatization Proceeds (Indicative Target and Performance Criterion)
- Definition:
  - Privatization proceeds are defined as the cash receipts from asset sales carried out by the privatization agency (HRADF), cash receipts from direct government sales, and cash receipts from the eventual sale of any bank participations through the HFSF, the HRADF, or from the government directly.
  - Included receipts: 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 will be valued in euro and reported on a gross basis, excluding any associated capital expenditure or other restructuring costs as well as the operating costs of the HRADF including the fees of advisors related to the specific privatization.
  - Proceeds will be measured as the inflows of cash received by the HRADF as deposited in the Special Privatization Account at the Bank of Greece within 10 days after the settlement of the transaction.
- Supporting material:
  - Quarterly information on the cash receipts from asset sales, quarterly balances of the privatization account, inflows to the account (by project), and outflows to the state budget, will be made available by the Minister of Finance, in collaboration with the HRADF, no later than 60 days after the end of each quarter.
- Other:
  - The privatization agency will provide GAO analytical data on the gross receipts and expenditures of the above mentioned sources, on a monthly basis–by the end of the 20th of every next month.

### I. ESA “Program” Deficit and Overall Monitoring and Reporting Requirements
- ESA program deficit:
  - For the program, the ESA deficit (EDP B.9) will exclude the sale of non-financial assets such as land, buildings, and other concessions or licenses, unless these have been agreed in the context of the May 2010 SBA program (including subsequent reviews).
  - The ESA deficit will also exclude all transfers related to the Eurogroup decisions of February 21, 2012 and November 26, 2012 in regard to income of euro zone national central banks, including the BoG, stemming from their investment portfolio holdings of Greek government bonds (schedule B 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.

### Monitoring of Structural Benchmarks
- Benchmark on progress in revenue administration, 2012–13:
  - Progress in revenue administration in 2012 and 2013 will be defined as reaching or exceeding the targets set in Table 1.
  - Definition:
    - A completed audit is an audit reported as formally finalized in the ELENXIS audit case management system, including signed off by the audit supervisor, and the taxpayer has settled or appealed the assessment, or the audit report states that no underpayment has occurred.
    - Risk-based audits for large taxpayers are audits selected on a risk basis using the ELENXIS audit management system.
    - The number of cases submitted to the state prosecutor relates to those submitted for financial crimes on grounds of suspicion of deliberate tax evasion.
    - 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, including examination of all 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. These audits will be conducted annually by the Internal Affairs Directorate of the MoF.
- Supporting material for revenue administration:
  - Monthly information on 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, and audits of asset declarations from auditors and managers of local tax offices will be made available by the Minister of Finance no later than two weeks after the end of each month.
  - Monthly submissions will include, for each local tax office and special unit: 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, specified for temporary and full scope audits.
- Benchmark on progress in public financial management, 2012:
  - Progress in implementing public financial management reforms in 2012 will be defined as reaching or exceeding the targets set in Table 2.
  - Definition:
    - For the 2012 target, reporting institutional units include any unit under the general government as defined in paragraph 32 of the March 2012 TMU.
    - For subsequent targets, reporting institutional units 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 for public financial management:
  - Monthly summary information from the e-portal, surveys, and other sources on performance against the 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 will be made available by the Ministry of Finance by December 31, 2012, updated with the entities reporting either on the e-portal or through surveys, including their share of overall annual spending in 2011 and the amount, provided no later than four weeks after the end of each month.

### Selected targets and indicators (from Table AIV.1 and Table AIV.2)
- Table AIV.1 (Structural Benchmarks in Revenue Administration, 2012–13) — selected entries:
  - Debt collection:
    - Collection of tax debts as of the end of the previous year: 2,000; 775; 1,900
    - Collection of new debts in the current year (percent of new debt in the year): 20.0%; 14.0%; 24.5%
  - Tax audits and collection of large taxpayers:
    - Number of risk-based full scope audits in the year: 300; 330; 750
    - Number of risk based temporary audits in the year: 325; 350; 750
    - Collection full scope audits in the year (percent of assessed tax and penalties): 50%; 65%; 75%
    - Collection temporary audits in the year (percent of assessed tax and penalties): 50%; 45%; 55%
    - Number of cases submitted to the state prosecutor: 8; 18
  - Audits and collection of high wealth individuals:
    - Number of completed risk-based audits in the year: 1,300; 1,200; 2,600
    - Collection of assessed audits in the year (percent of assessed tax and penalties): 50%; 40%; 65%
    - Number of cases submitted to the state prosecutor: 50; 110
  - Audits and collection for VAT non filers:
    - VAT audits of VAT non-filers: 10,000
    - Collection of assessed tax and penalties: 20%
  - Internal control and human resource integrity:
    - MoF audit of assets of managers of local tax offices 2/: 50; 110
    - MoF audit of assets of auditors 2/: 50; 130
  - Note: 1/ Cumulative audits from January of each year. 2/ The audit is performed by the Internal Affairs Directorate of the MoF.
- Table AIV.2 (Structural Benchmarks in Public Financial Management, 2012–13) — selected entries:
  - Indicator and entity coverage targets and outcomes include values such as:
    - 2012 entity coverage: 90%
    - 2013 entity coverage: 80% 97%
    - 2012 entity coverage1% and 2013 entity coverage10%1% (table entries as reported)
    - 2013 entity coverage: 65% 93%
  - Explanatory notes:
    - 2/ Cumulative target from January 2013, reflecting the expansion of general government entities in the Elstat register as of September 30, 2012.
    - a. Percent of institutional units reporting on the E-portal of GAO total budget allocations (including any revisions), pending outstanding commitments, unpaid commitments, and arrears data 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 is below target.
    - c. Percentage of institutional units 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.
    - 1/ For the purpose of the 2012 target, reporting institutional units include any unit as defined in paragraph 32 of March 2012 TMU. For the 2013 target, reporting institutional units 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.

*Source: Excerpt from the IMF programme documentation (pages covering Supporting material, Performance Criteria, Privatization Proceeds, ESA deficit definitions, and Structural Benchmarks).*

### 2.1 Privatising to boost efficiency in the economy and reduce public debt .............................. 171

### 2.1 Privatising to boost efficiency in the economy and reduce public debt

### Overview
- Privatisation aims to:
  - Reduce public debt and reduce subsidies, other transfers or state guarantees to state-owned enterprises.
  - Increase the efficiency of companies and the competitiveness of the economy.
  - Attract foreign direct investment.
- The Greek authorities committed to proceed swiftly and efficiently with the Privatisation Plan, with the aim of collecting EUR 50 billion, even if the sale of assets goes beyond the duration of the Economic Adjustment Programme.
- The Government is committed to insulate the privatisation process from political pressures.
- The provision of basic public goods and services by privatized industries will be fully safeguarded, in line with national policy goals and in compliance with the EU Treaty and appropriate secondary legislation rules.
- Proceeds from the privatisation of financial and non-financial assets, transactions related to bank recapitalisation, as well as all transfers related to the Eurogroup decision of 21 February 2012 in regard to income of euro zone national central banks, including the Bank of Greece (BoG), 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.

### Prior to disbursement — Strengthening the institutional framework for privatisation
- Present an updated Privatisation Plan to Parliament with the 2012-2016 MTFS.
- Publish a semi-annual update of the Asset Development Plan, which will include a Portfolio Overview with a description of the privatisation assets, a timeline of planned tenders and targeted total receipts for the current and next year.
- Amend the Articles of Association of the HRADF (Article 16.3.) to stipulate that the “due cause” required for substituting members of the Board of Directors is defined in particular by the undue suspension or by the intentional compromising of the objectives of the HRADF with acts or omissions of its Board members.
- Amend Law 3986/2011 to require the publication of quarterly reports of the HRADF on activities and financial accounts, including a detailed profit and loss statement, a cash flow statement, and a balance sheet, within 60 days of the end of each quarter.

### Asset transfers to HRADF
- Transfer to the portfolio of privatisation assets of the HRADF the full and direct ownership (shares or concession rights) of:
  - Egnatia Motorway
  - Regional ports of Elefsina, Lavrio, Igoumenitsa, Alexandropolis, Volos, Kavala, Corfu, Patras, Heraklion, and Rafina
- Sign the contract between HRADF and the Ministry of Finance for the use of the voting rights for ELVO.
- Issue an Inter-Ministerial Decision that secures that the proceeds of the sales of the Digital Dividends are transferred to the HRADF.
- Ensure line ministries and other relevant entities provide the General Secretariat for Public Property with full access to the inventory of all real estate assets owned by the State.

### Eliminating legal and planning obstacles for asset sales
- Amend/repeal statutory provisions of companies that diverge from private company law (PPC, OLP and OLTH port authorities, HELPE, EYATH and EYDAP, ports, etc.), regarding any restrictions on voting rights of private shareholders.
- Launch the process to obtain the zoning and land planning permits (ESCHADA), i.e., submit the environmental and zoning study for Afantou and Kassiopi.

### Appointment of advisors
- Launch tenders for the appointment of advisors for:
  - EAS
  - ELVO
  - South Kavala Natural Gas
  - Trainose
- Ensure appointments are consistent with the existing procurement rules.

### Safeguards and governance
- Government commits to insulate the privatisation process from political pressures through legal and institutional measures (HRADF governance amendments, transparency and reporting requirements).
- The process includes safeguards to preserve provision of basic public goods and services and to comply with EU Treaty and secondary legislation.

*International Monetary Fund — 2.1 Privatising to boost efficiency in the economy and reduce public debt*

### 1. Rapid adoption of necessary primary and secondary legislation and implementation

### 1. Rapid adoption of necessary primary and secondary legislation and implementation

### Privatisation and asset transfers
- Rapid adoption of necessary primary and secondary legislation and implementation decisions, in consistency with the required actions for a swift Privatisation Plan (see Annex 9.1).
- Establishment of a regulatory framework for airports (January 2013), the State Lottery, ports (April 2013) and water companies (December 2012).
- Submission of a pre-notification to the Commission services with respect to the definition of the universal postal services and the compensation of the Universal Service Provider (December 2012).
- Launch for tender of Egnatia Motorways (March 2013).
- Trainose transferred to the HRADF (March 2013) and the tender for its sale launched (June 2013).
- Transfer of forty new real estate assets (identified as "real estate assets lots 2 and 3" in the Privatisation Plan) to the HRADF (March 2013).
- Full identification and description of all the remaining real estate assets in the pool of 3,150 assets that have been preselected and pre-valued by the HRADF (December 2013).
- Transfer of full and direct ownership of 1000 commercially viable real estate assets to the HRADF (by end-2013). The transfer will be done in four phases, based on concrete interim targets of 250 real estate assets per quarter (starting in January 2013).
- Ensuring that there will be 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 to municipalities and the recently established pension fund SPV or other dedicated legal entities, or until such time as the assets necessary to supply the privatisation plan have been secured (Continuous).
- Amendment, upon privatisation, of all statutory provisions (including on labour relations) to fully align them with private sector law (Continuous).
- HRADF obligations:
  - No further political review once an asset has been transferred to the HRADF.
  - Enhance transparency: 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).
- Privatisation receipts targets (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
- Government to prepare a tax reform aiming to simplify the tax system, eliminate exemptions and preferential regimes, broaden bases, and allow a gradual reduction in tax rates as revenue performance improves. Reform relates to the personal income tax and corporate income tax.
- Reform adoption timeline:
  - Adopted in December 2012 to enter into force in 2013.
- By November 2012, Government will announce full schedule of intermediate steps — including legislative actions and technical steps — until the new tax system becomes effective, including public consultation and review by the European Commission, ECB and IMF staff.
- By March 2013, Government makes fully operational a standard procedure for revision of legal values of real estate to better align them with market prices under the responsibility of the Directory of Capital Taxation.

### 2.3 Revenue administration reforms — objectives and broad measures
- Reform institutional framework to ensure more autonomy for the tax administration department for day-to-day operations while leaving policy matters to the Government.
- Reorganisation of tax offices to increase efficiency: create specialised units (large taxpayer unit, high wealth individual unit, large debtor unit), regroup local offices, tackle potential corruption.
- Replace the Code of Books and Records by a more modern and substantially simpler set of rules for tax record keeping; create a new single tax procedure code.
- Abolish compulsory auditing of all tax declarations; concentrate on high yield audits using risk assessment techniques.
- Reinforce tax collection: establish specialized and dedicated staff in larger DOYs; introduce rules to write-off non-collectable debts in line with international best practice.
- Management improvements: appoint a new Secretary General with increased powers; managers and auditors subject to performance targets and regular assessment; Secretary General to have capacity to replace non-performing managers and auditors; regular rotation of managers to become a rule.
- Fight tax evasion and corruption using new tools and strengthened measures.
- Replace current administrative review process with a cost effective compulsory pre-settlement administrative procedure to reduce unnecessary tax litigation.

Prior to disbursement the Government will:
- a. Adopt legislation to define role and qualifications of the Secretary General (senior management experience, expertise in tax matters, impeccable reputation, strong tax compliance history).
- b. Adopt interim legislation delegating decision making powers to the Secretary General (operational decisions, control local offices, manage HR, replace underperforming senior managers, manage budget, manage information confidentiality).
- c. Adopt legislation to deploy experienced tax auditors towards immediate revenue imperatives: transfer 100 auditors, establish one functional unit for high-wealth individuals and high-income self-employed and staff the unit with 50 experienced tax auditors directly accountable to the Secretary General.
- d. Establish procedures for rotation of managers in critical tax offices on a periodic basis.
- e. Replace the Code of Books and Records by significantly simpler legislation in line with international standards.

### 2.3.1 Organization — specific actions and timing
- Appoint a new Secretary General of the tax administration (December 2012).
- Adopt legislation to establish a significantly more autonomous tax administration and specify degree of autonomy, governance framework, accountability, legal powers of the head and initial staffing (by February 2013). New agency to become fully operational in March 2014.
- Continue to centralise and merge local tax offices leaving about 120 functioning offices (June 2013).

### 2.3.2 Fight against tax evasion, money laundering and corruption — measures and timeline
- Revised Code of Books and Records enters into force (1st January 2013).
- Steps up hiring and simplifies reassessment process to achieve target of 2 000 tax auditors fully operational by June 2013.
- Introduces at least twice-yearly performance assessments for tax auditors (December 2012).
- Issue an administrative circular to enhance targeted auditing based on risk assessment techniques (December 2012).
- Abolish the requirement that all tax declarations for the previous 10 years must be audited while retaining right to audit earlier years and discretion to audit any amount of declarations from these earlier years (January 2013).
- Adopt legislation to introduce a modern code of conduct concerning conflicts of interests and declaration of interests and a system for protecting whistle-blowers who report corruption (March 2013).
- Appoint a national coordinator for anti-corruption action (April 2013).
- Enact appropriate legal framework to create a secure direct or indirect central register of bank accounts (January 2013).
- Require that all Ministries which have a fiscal relationship with taxpayers utilize their tax identification number for financial transactions with them (June 2013).
- Introduce a central agency to consolidate and link all different identification numbers now employed across various government agencies (June 2014).

### 2.3.3 Tax and revenue collection — measures and timeline
- Establish specialist debt management units in larger local tax offices and allocate at least 10 percent of local staff to this function (December 2012).
- Complete a review of policy and procedures to write off tax debts, and prepare recommendations to facilitate actively managing tax debt with real prospect of collection and explore ways to deal with the non-collectable part (February 2013).
- Replace payments in cash and cheque in tax offices with bank transfers (December 2012).
- Commit not to adopt new tax amnesties, or extend existing amnesties for the collection of taxes and social contributions during the years covered by the economic adjustment programme (Continuous).
- Integrate the collection of social security contributions into the tax administration (March 2014).

### 2.3.4 Tax dispute
- Put in place a mandatory administrative review procedure (Q2 2013) to design a mandatory administrative appeal procedure allowing a distinct and higher level body within the Ministry of Finance, staffed with specialists in tax dispute matters, to re-examine tax decisions taken by the DOYs or auditors before going to court.

### 2.3.5 Management of the State Revenue Service
- Replace managers who do not meet performance targets (Continuous).
- Launch an easily accessible website to enforce accountability to the public through publication of summary statistics on key performance indicators, the number of tax evasion cases sent to the FIU and to prosecution by the tax administration (December 2012).

### 2.3.6 Tools — Single Tax Procedures Code and IT
- Adopt a new Single Tax Procedures Code (June 2013) to reduce administration and compliance costs and incorporate procedural reforms (tax filing, audit and penalties, enforcement powers, debt collection) and a new streamlined administrative dispute resolution process.
- Put in place a new IT system that interconnects all tax offices (March 2013).
- IT system preparation main steps:
  - 20 more new electronic services and enhancements (December 2012) — mainly taxes withheld at source.
  - 8 remaining new electronic services and enhancements (December 2012) — concern forms filed late with a fine, real-estate tax, and VAT administration.
  - System and user tests, user training, and migration of all tax offices to the centralized database (December 2012).
  - Operational use of the new IT infrastructure by all tax offices (March 2013).

### 2.4 Public financial management reforms — objectives and prior actions
- Develop a solid public financial management framework to control expenditures and achieve fiscal targets.
- Prior to the next disbursement the Government will:
  - adopt the 2013-16 Medium term fiscal strategy;
  - ensure that EOPYY reports for at least two consecutive months (retroactive reports included) from its commitment register through the e-portal.
- Further actions:
  1. Government adopts an administrative calendar for update of the medium-term fiscal strategy (February-2013).
  2. To address extra-budgetary funds and social security sector issues:
     - i. ensure by December-2012 commitment registers are in operation in 90 per cent of general government entities.
     - ii. monitor effectiveness of commitment registers by conducting regular targeted inspections in covered public entities (Continuous).
     - iii. enforce obligation of accounting officers to report commitments by enacting sanctions to entities not submitting needed data, including disciplinary action for accounting officers, and strengthen role of GAO in support and guidance to Accounting Officers (Continuous).
     - iv. ensure by December 2012 that EOPYY monthly budget execution is published on the website with a lag of four weeks after the end of the respective month, providing detailed data on expenditure commitments/purchases (accrual basis) and actual payments (cash basis), current performances against yearly budget allocation and accumulation of accounts payable (and arrears). As soon as significant deviations from yearly targets become evident, remedial action should be taken at the same time.
  3. Conditions for a government unit to meet to allow funds for clearance of 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);
     - and for both expenditure arrears and tax refunds: (iii) verification of claims.
     - Subvented agencies which meet these conditions can clear their arrears even if their parent agency does not meet the conditions.
     - Arrears should not delay the execution of the pharmaceutical spending clawback or any related measure.
     - Government actions:
       - i. Prepare and publish by November 2012 a plan for the clearance of arrears owed to suppliers by public entities and of tax refunds (to be done by GAO in liaison with GSIS and other relevant authorities).
       - ii. Ensure administrative capacity to make clearance of arrears effective including re-allocation of at least 30 employees with relevant competences from other social security funds to EOPYY (November 2012).
  4. Once clearance of all verified arrears is achieved, Government ensures that no new arrears are accumulated (Continuous).
  5. GSIS designs a risk-based assessment procedure for verification of VAT refunds (March 2013).

### 2.5 Safeguards for the delivery of fiscal commitments
- Early implementation of the EU's Fiscal Compact to enhance credibility of the Adjustment Programme.
- Prior to disbursement the Government will adopt a Council of Ministers act (replacing the Council of Ministers act adopted on 29 October 2012) to strengthen Budget execution and enhance sound fiscal management, including additional provisions:
  - i. Memoranda of Cooperation signed by end-December of each year between the Ministry of Finance and other Ministries or between Ministries and managers of supervised entities covering entire General Government; Memoranda aim to enhance monitoring and introduce corrective mechanisms: quarterly budget execution targets, corrective actions in case of deviations and further actions in case of non-compliance.
  - ii. Strengthen balanced budget constraints for Local Governments including corrective and sanctioning mechanisms.
  - iii. Strengthen monitoring system for SOEs, introducing an enforcement mechanism for deviations from specific targets identified for each SOE.
  - iv. Set framework for defining specific targets for coverage of operational commitment registers for LG and SOEs to be established by December of each year.
  - v. Set up a framework for correcting transfers from central government to address deviations from targets within the year and possibly in following years while ensuring arrears are not increasing; improvements to be integrated in relevant legislation including triggering circumstances, criteria for graduation from suspension to outright reduction of transfers, and timing issues.
  - vi. Make explicit that proceeds from the privatisation of government assets are paid directly into the account referred to in section 2.5.6.
  - vii. Set automatic cuts in expenditures to be applied as a rule when targets are missed, while ensuring that arrears are not increasing.
  - viii. Reinforce centralisation of budget planning and implementation including further strengthening of the Ministry of Finance vis-à-vis line ministries, introduction of effective top-down budgeting, veto role of the Minister of Finance, monthly submission to the supervising Director General of Financial Services (DGFS) and the GAO (depending on the size of their budget) of the budget execution programme and actual execution, and the power to take corrective measures at the implementation stage, with bodies failing to comply being brought under direct supervision of the Ministry of Finance.

*Source: _cr1320 - 1. Rapid adoption of necessary primary and secondary legislation and implementation*

### 1. The Council of Ministers act referred to in paragraph a. shall be converted into law by

### _cr1320 - 1. The Council of Ministers act referred to in paragraph a. shall be converted into law by

### Fiscal rules and transposition of the Fiscal Compact
- The Council of Ministers act referred to in paragraph a. shall be converted into law by end-December 2012.
- The Government will adopt the necessary legislation to transpose the Fiscal Compact provisions with a view to introducing a structural budget balance rule with an automatic correction mechanism (August 2013).

### Budget preparation and implementation
- Introduce three-years binding expenditure ceilings per subsectors (at least for the central government and the health sector) for 2013:
  - Ceilings for the first two years would be considered fixed and used as such in the following budget planning exercise, with some flexibility within the ceiling as long as the general target is met.
  - Ceilings for the last year of the three-year period may be updated annually.
  - This measure will be adopted within an update of the MTFS to be done by January 2013.
- Modify the organic budget law by August 2013 to introduce:
  - i. The three-years binding expenditure ceilings on a permanent basis as part of the rolling MTFS.
  - ii. Provisions to freeze ex-ante 10% of discretionary appropriations per budget line as part of the MTFS. The frozen appropriations would be released in the second half of the year conditional upon meeting the fiscal targets. The first application should concern the 2014 budget.
  - iii. A revenue rule for the general government, according to which at least 30% of windfall revenues will be devoted to debt repayment while up to 70% could be used the following year by the Government to support temporary policies aiming to boost growth and social cohesion automatically, conditional to the achievement of the fiscal targets.

### Monitoring and reporting
- Identify other areas of operational expenditure where real time monitoring mechanisms could be introduced or strengthened (March 2013).
- Extend e-prescription to illness benefits provided by EOPYY to strengthen the monitoring among others of Diagnostic Tests, Inpatient Care and Rest Provision. (June 2013).

### Corrective and sanctioning mechanisms
- Ensure a continuous balance between contributions and benefits, by bringing forward by one year the entry in force of the binding mechanism (for auxiliary pensions) already legislated to enter in force as of 2015. (September 2013)
- Strengthen HRADF's governance and independence and implement an automatic correction mechanism, should there be any difficulties in the privatisation process or slippages in the targets, by (quarterly):
  - i. Reviewing the functioning of the recently amended privatisation law, through specific QPCs to be enforced the moment the privatisation plan derails.
  - ii. Taking, in cooperation with EC/ECB/IMF, appropriate steps, including changes in existing legislation and/or in the composition of the Board, to safeguard and strengthen the independence and the functioning of the HRADF, if targets for the sale of assets to be privatised were missed substantially for two consecutive quarters. In all circumstances, the HRADF remains fully accountable to parliament on an ex-post basis for the integrity of every privatisation sale.
  - iii. Increasing automatically the primary surplus target, should there be a shortfall of privatisation proceeds due to the delay in sales of specific assets compared to programme targets for two consecutive quarters:
    - Unless other adjustments are agreed with the 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.

### Transparency, accountability and oversight
- Increase transparency and accountability to the public/parliament by releasing status reports on the implementation of the legislated fiscal measures, publication of hiring numbers, proper fiscal impact assessment of legislation, statement of the main sources of fiscal risks related to changes in key economic assumptions in the forecast, as well as an assessment of the fiscal impact of the main sources of fiscal risk including government guarantees and other contingent liabilities, etc. (March 2013).
- Resume and enhance the operation of the existing Parliamentary Budget Office (June 2013) and take steps to strengthen its reputation, independence and technical competence towards a fully-fledged fiscal council (e.g. provision/endorsement of forecasts for the budget preparation, monitoring of compliance with budgetary targets and fiscal rules, provision of independent assessments of fiscal developments and challenges, etc.), building on best international practices. (December 2013).

### Debt servicing account
- Ensure an effective implementation of the debt servicing account to monitor cash flows, avoid diversion of official financing and secure a 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 the amortization and interest payment costs of all HR’s loans, debt management transactions and derivatives, as well as any parallel cost (fees and other expenses) related to debt servicing and in general to Public Debt Management are paid.
  - The 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 the 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 and actions prior to disbursement
- a. Adopt the legal act harmonising the entrance fees for all casinos in Greece and take all necessary actions toward full and effective recovery of the illegal state aid from all Casinos, including Casino Mont Parnes.
- b. Identify the assets and production units of LARCO assets and rights that belong to the Agios Ioannis/Larymna concession in view of their sale after the current concession of LARCO.
- c. Amend the current requirement in the existing ETEAN law of providing government bonds at market value to banks when guarantees are called: instead the State will provide ETEAN with cash against ETEAN holdings of government bonds to pay banks for the guarantees called.
- Other Actions:
  - 1. The Government identifies the assets and production units of the Hellenic Defence Systems to be privatised. (December 2012)
  - 2. The Government creates a Central State Aid Unit responsible for screening all measures, from across the Government, for their compliance with State aid rules, before they are implemented. (January 2013). The Central State Aid Unit will be the only contact point for the Commission on all State aid matters, including for notifications.
  - 3. All actions attributable to public authorities should be in compliance with the rules on free movement of capital (TFEU, Article 63) (Continuous).

### Making the public administration more efficient and effective
- Prior to disbursement: The Government ensures that at least 2,000 staff will be moved to the mobility scheme.
- Reform objectives: reduce waste, contain public wages, increase efficiency and productivity; evaluate administrative structures and personnel; pursue entity closures with transfers to the mobility scheme or dismissals; extend reforms to extra budgetary funds and regional and local administrations in 2013.

#### Institutional reforms (timelines and actions)
- 1. The assessment of the institutional setting of two pilot ministries (Ministry of Administrative Reforms and Ministry of Environment) is completed (October 2012).
- 2. The assessment of the institutional setting of all ministries is finalised (December 2012), while the assessment of the performance of civil servants is completed (December 2013).
- 3. The first draft of the two pilot staffing plans is finalised (November 2012); the other ministries' staffing plans are completed (February 2013).
- 4. Develop an action plan for the assessment of all public entities, including all Extra-Budgetary Funds and SOEs under Chapter A (December 2012). The pilot assessment of two major public entities is completed by February 2013 and a complete assessment of all public entities is completed by December 2013.
- 5. Based on the different assessments, the Council of Reform approves the transformation scenarios for each ministry (January 2013). A precise roadmap must be published two months after approval.
- 6. The Government monitors progress on inter-ministerial coordination, whereby the Coordinator is appointed (November 2012) and full implementation of the process is ensured (January 2013).
- 7. The Government involves the Commission services with respect to assessment of structures and staffing linked with the implementation of the Cohesion Policy (Continuous).
- 8. Prepares and makes public a fully-fledged anti-corruption plan for the civil service, including special provisions for the tax and customs administration (February 2013).

#### Mobility scheme and human resources management
- Reduce public sector workforce by 150,000 by 2015, relative to the end-2010 level, through assessment, mobility, attrition, reduction of temporary contracts, disciplinary procedures and mandatory redundancies.
- Place 25,000 government employees in the mobility scheme in 2013, with half of them by mid-2013. The mobility scheme allows transferred personnel to remain for up to one year with a reduced rate of pay while they seek new employment and are re-trained.
- By end-February 2013, complete staffing plans for line Ministries to identify redundant positions and set quarterly targets for mandatory exits through end-2014.
- Adopt the law on mobility between ministries in the interest of the services (November 2012).
- Define a human resources strategy reflected in legislation (January 2013) to identify weaknesses and modify recruitment, appointments, trainings, and mobility; provide a basis for evaluating competences of the senior management.
- Assess the mandate, roles and responsibilities of all senior managers (February 2013) leading to legislative amendments and reduced number of advisors with constrained roles (May 2013).

### Avoiding waste and increasing quality through sound public procurement
- Objectives: make the Single Public Procurement Authority (SPPA) fully operational; establish an e-procurement platform and mandate its use gradually; increase share of supplies and services tendered through Central Purchasing Bodies (CPBs); codify and simplify all public procurement legislation.

#### Making the SPPA operational
- By December 2012, issue implementing legislation of Law 4013/2011 providing for:
  - i. the SPPA's financial management rules (Art. 4).
  - ii. the SPPA's structure and remit of its services (Art. 4).
  - iii. the SPPA's Rules of Procedure (Art. 7).
  - iv. the Agora Portal for contract transparency (Art. 11).
  - The above legislation shall enter into force at the latest by December 2012.
- Ensure all necessary staff is transferred to the SPPA in accordance with Presidential Decree 123/2-11-2012 so the SPPA fulfils its mandate (February 2013).
- The SPPA ensures coordination and coherence of CPBs, procurement reform, and the e-procurement framework with the overall public procurement system (Continuous).

#### Increasing efficiency of procurement processes
- Central Purchasing Bodies (CPB):
  - Present a plan for the development of CPBs to the Commission Services by December 2012, identifying contracting authorities and procurement needs; submit a plan to establish CPBs at regional/local level by December 2012.
- Framework contracts:
  - Submit by December 2012 to the Commission services for evaluation two and one framework contracts used in frequently purchased supplies or services at central government and regional level, respectively, and mandate sourcing via those contracts. (April 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 the coordination of the SPPA to simplify and consolidate legislation, rationalise administrative structures and processes, and improve national review procedures.
  - Develop an Action Plan for the reform, in agreement with the European Commission. (January 2013)
  - Present drafts of all legislative and organisational measures implementing the Action Plan to the European Commission in September 2013.

#### E-procurement rollout and targets
- Refine, in consultation with the European Commission, the existing plan for development of the e-procurement platform by December 2012, including measures and deadlines for operation, functionalities (e-notification, e-tendering), mandatory use, training, monitoring, interaction with procurement simplification, and user access (e-signature and e-ID).
- Commitments in development:
  - i. complete the e-procurement infrastructure for supplies and services contracts by December 2012.
  - ii. run supplies and services contracts for the Central Government on a pilot basis through the e-procurement platform throughout the 1st half of 2013.
  - iii. ensure that the e-procurement platform is fully operational and ready for use by the Central Public Administration for supplies and services contracts in July-2013.
- Usage targets:
  - i. The Central Government procures at least 25% of its supplies and services' needs (in terms of contract value) through the e-procurement platform by December 2013.
  - ii. The Central Purchasing Bodies (CPBs) use the e-procurement platform for all their tendering procedures. (June 2014)
  - iii. The whole public sector in Greece uses the e-procurement platform by December 2015.

*International Monetary Fund — Content unit: _cr1320 - 1. The Council of Ministers act referred to in paragraph a. shall be converted into law by*

### 4. Submits to the Commission services the data of the monitoring activities covering year

### 4. Submits to the Commission services the data of the monitoring activities covering year 2013 against the target user levels. (1st half of January 2014)

### 2.8 Completing the pension reform to secure sustainability
- Prior to disbursement:
  - The age of retirement is increased by 2 years, starting from (1 January 2013). The increase is applied to the statutory retirement age and any other retirement age for special groups and to the minimum requirement for getting a pension.
- Other actions — The Government:
  - Finalises the implementation of the reform of the functioning of secondary/supplementary public pension funds and ensures the unification into ETEA of all existing funds, which are considered to be in the domain of public sector according to ESA95 national account definition. (Q4-2012)
  - Ensures that the new single fund ETEA sets up, in a cost effective way, a computerised system of individual pension accounts; starting in Q1 2013 and to be finalised by Q4-2013.
  - Identifies the schemes for which lump sums paid on retirement are out of line with contributions and adjusts the payments. A new, actuarially neutral, formula to calculate lump sum, including a sustainability factor to avoid any future imbalances, is designed in consultation with the European Commission, ECB and IMF staff. (Q4-2012)
  - Will produce a regular quarterly report of the activities of the Health Committee, aimed at monitoring and revising the disability status and ensure that disability pensions correspond to not more than 10 percent of the overall number of pensions. (next report, Q1-2013)

### 2.9 Modernising the health care system — objectives and targets
- Objective: stabilise public health expenditure at, or below 6, percent of GDP, while maintaining universal access and improving quality of care delivery.
- Programme pharmaceutical expenditure targets and outcomes:
  - Achieve savings in the purchasing (accrual basis) of outpatient medicines of about EUR 1 billion in 2012 compared to 2011 and reach spending of about EUR 2.440 billion in 2013 (accrual basis).
  - 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.

### 2.9.1 Governance — concentration of responsibilities and EOPYY
- Prior to disbursement:
  - Finalise the concentration of all health-related decision making procedures and responsibilities (including payroll expenditures) under the Ministry of Health by merging all health insurance funds, without exception, into EOPYY.
- From January 2013:
  - 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).
- Staffing target:
  - EOPYY ensures that the number of doctors is reduced in headcount compared to June 2012 by at least 10% by December 2012 and by a further 10% in 2013.

### 2.9.2 Controlling pharmaceutical spending — overall measures
- Goal: achieve EUR 1 billion reduction in outpatient pharmaceutical spending in 2012 and reach the 1 percent of GDP target in 2014.
- Measures: develop incentives and obligations for producers, wholesalers, pharmacies, doctors and patients to promote the use of generic medicines.

#### 2.9.2.1 Contingency measures
- Prior to disbursement:
  - Adopt legislation which activates contingency measures (including e.g. a cross-the-board cut in prices or entry fee for the positive list), if, for any reason, the claw-back is not able to achieve the target. Such measures produce equivalent amount of savings.
  - Set, through Ministerial decree, the new claw back threshold for 2013, based on the above mentioned targets (Euro 2.44 billion for outpatients).
  - Revise the co-payment structure for medicines to exempt from co-payment only a restricted number of medicines related to specific therapeutic treatments. (Q4-2012)

#### 2.9.2.2 Pricing of medicines
- Prior to disbursement:
  - Repeal the current provision of the law which hampers the collection of the rebate from pharmacies in case of delays in payments on the part of EOPYY.
- Additional measures:
  - Revise downward the price of medicines, based on the three EU countries with the lowest prices; re-price medicines now cheaper than 10 EUR, including implementing a 10% price reduction in the prices of these medicines (quarterly update of price list - next published by December 2012).
  - Apply an automatic claw-back mechanism (every six months) to pharmaceutical producers which guarantees that the outpatient pharmaceutical expenditure (EOPYY budget) does not exceed the above targets (Continuous).
  - Produce an implementation report on the impact of the new profit margins of pharmacies by Q1-2013 and share it with the European Commission, ECB and IMF staff. If it is shown that this new model to calculate profit margins does not achieve the expected result of a reduction of profit margins down to 15%, the regressive margin will be further revised.
  - Ensure that EOPYY negotiates a 5% discount through price-volume agreements on medicines (200 medicines) (Continuous for 2013 and 2014).
  - Extend the application of the 5% rebate on pharmaceutical companies (which exists for hospital-priced medicines) to all products sold in EOPYY pharmacies (legislation adopted by Q4-2012).

#### 2.9.2.3 Prescribing and monitoring
- Prior to disbursement:
  - Update the price list and the positive list of reimbursed medicines by reimbursing only the cost-effective packages for chronic diseases, by moving medicines from the positive to the negative and OTC lists and introducing the reference price system developed by EOF. These lists must be updated at least twice a year.
- Government actions:
  - Extend the current e-prescribing to all doctors, health centres and hospitals; e-prescribing is made compulsory and must include at least 90 percent of all medical acts covered by public funds (medicines, referrals, diagnostics, surgery) in outpatient facilities and providers contracted by EOPYY and the other social security funds. (Q4-2012); the extension to NHS facilities will be finalised by Q2-2013.
  - Implement the system (API) whereby pharmacies electronically register any residual manual prescriptions from doctors into the e-prescription application established by IDIKA. (Q4-2012).
  - Continue publishing prescription guidelines/protocols for physicians, with priority for the most expensive and/or mostly used medicines, and make them compulsory (Continuous).
  - Enforce the application of prescription guidelines through the e-prescription system. (Q2-2013).
  - Further develop monitoring and control of e-prescription by introducing ICD-10 and SPC filters in the e-prescription system (Q2-2013).
  - Produce detailed monthly auditing reports on the use of e-prescription in NHS facilities and by providers contracted by EOPYY. These reports are shared with the European Commission, ECB and IMF staff teams. (Continuous).
  - Continue to provide a regular assessment of the information obtained through the e-prescribing system. (Continuous).
  - Produce detailed quarterly reports on pharmaceutical prescription and expenditure which include information on the volume and value of medicines, on the use of generics and the use of off-patent medicines, and on the rebate received from pharmacies and from pharmaceutical companies. These reports are shared with the European Commission, ECB and IMF staff teams. (Quarterly updates).
  - Provide detailed reporting on individual prescription behaviour to each physician relative to the average of comparable (specialty, patient workload) physicians (both in NHS facilities and contracted by EOPYY and other social security funds until they merge) and signal when they breach prescription guidelines; feedback is provided at least every month and a yearly report is published covering: 1) the volume and value of the doctor's prescription in comparison to their peers and in comparison to prescription guidelines; 2) the doctor's prescription of generic medicines vis-à-vis branded and patent medicines; and 3) the prescription of antibiotics. (Continuous).
  - Enforce sanctions and penalties as a follow-up to the assessment and reporting of misconduct and conflict of interest in prescription behaviour and non-compliance with the EOF prescription guidelines (Continuous).
  - Select a number of the most expensive medicines currently sold in pharmacies, to be sold in hospitals or EOPYY pharmacies. (Q4-2012).
  - Implement a mechanism to reduce off-label prescription (Q4-2012).

#### 2.9.2.4 Increasing use of generic medicines
- Prior to disbursement:
  - Make it compulsory for physicians to prescribe by international non-proprietary name for an active substance, with no reference to any brand name on the prescription form, with brand name prescription allowed only in limited and duly motivated cases. The share of branded name prescriptions can be no more than 15% of the overall prescriptions of each doctor and the doctor needs to provide the relevant justification in each case. A ministerial decree will explicitly define the exceptions to INN prescription. 
  - Mandate the substitution of prescribed medicines by the lowest–priced product of the same active substance in the reference category by pharmacies (compulsory "generic substitution").
- Government targets and measures:
  - Increase the share of generic medicines to reach 35 percent of the overall volume of medicines sold by pharmacies by end-2012 and 60 percent by end-2013, achieved by:
    - setting the maximum price of the generic to 40 percent of the price of the originator patented medicine with same active substance at the time its patent (exclusivity period) expired; further reductions achieved through external reference pricing based on the three EU countries with the lowest prices. (Continuous)
    - automatically reducing the maximum price of originator medicines when their patent (exclusivity period) expires (off-patent branded medicines) to 50 percent of its price at the time of the patent expiry; further reduction by linking off-patent products to the average of the three lowest prices in the EU. (Continuous)
    - creating dynamic competition in the market for generic medicines through price reductions of at least 10 percent of the maximum price of each new generic producer entering the market. (Q4-2012)
    - introducing (EOPYY) additional incentives and mechanisms, including a prescription quota system for physicians, to ensure generic substitution (Q4-2012)
    - deciding about the reimbursement of newly patented medicines on the basis of objective and strict medical and cost-effective criteria and, until internal capacity is in place, by relying on best practice health technology assessment of their cost-effectiveness carried out in other member states, while complying with Council Directive 89/105/EEC. (Continuous)
    - excluding from the list of reimbursed medicines those which are not effective or cost-effective on the basis of objective criteria. (Continuous)
  - Ensure that at least 50 percent of the volume of medicines used by public hospitals is made up of generics with a price below that of similar branded products and off-patent medicines. (Continuous)
  - Make it compulsory for all public hospitals to 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. (Q4-2012)
  - Adopt, with the pharmaceutical companies and physicians, a code of good conduct regarding interactions between pharmaceutical industry, doctors, patients, pharmacies and other stakeholders; code to impose guidelines and restrictions on promotional activities and forbid any direct (monetary and non-monetary) sponsorship of specific physicians (Q4-2012)
  - Speed up administrative and legal procedures, in line with EU legal frameworks for the entry of cheaper generic medicines in the market. (Q4-2012)

### 2.9.3 Reviewing the provision of medical services contracted by EOPYY
- Prior to disbursement: implement measures to improve EOPYY finances and bring budgetary execution closer to a balanced budget in 2012 and 2013, including:
  - restricting the benefit package;
  - increasing cost-sharing for private care;
  - negotiating price-volume agreements and revising case-mix agreements with private providers;
  - revising the fees for and number of diagnostic and physiotherapy services contracted by EOPYY to private providers with the aim of reducing related costs by at least EUR 80 million in 2013;
  - introducing a reference price system for reimbursement of medical devices;
  - progressively increasing the contributions paid by OGA members to the average of those paid by other members of EOPYY.
- Reporting:
  - The government starts publishing a quarterly report on the prescription and expenditure of diagnostic tests. (quarterly updates - next report Q4-2012)

### 2.9.4 National Health System (NHS) service provision

#### 2.9.4.1 Reorganisation and management of the health care sector
- Implement plan for reorganisation and restructuring as set in Law 4052 / March 2012 to reduce inefficiencies, utilise economies of scale and scope, and improve quality of care.
- Hospital operating cost reduction targets:
  - Reduce hospital operating costs by 8 percent in 2012 and an additional 5% in 2013.
- Actions to achieve savings and efficiency:
  - increase mobility of healthcare staff (including doctors) within and across health facilities and health regions;
  - adjust public hospital provision within and between hospitals within the same district and health region;
  - revise the activity of small hospitals towards specialisation (e.g. rehabilitation, cancer treatment or terminal care);
  - revise emergency and on-call;
  - optimise and balance resource allocation of heavy medical equipment (e.g. scanners, radiotherapy facilities) on the basis of need;
  - reduce administrative costs notably by removing deputy managers posts;
  - reduce cost with outsourcing services such as IT services, laboratory services and hospital servicing costs (e.g. cleaning services).
- Additional requirements:
  - Produce an annual report comparing hospitals performance on the basis of the defined set of benchmarking indicators (Continuous).
  - Update a report on human resources for the whole health care sector annually and use it as a human resource planning instrument. (Continuous)

#### 2.9.4.2 Accounting, control, IT and monitoring systems
- The Government ensures that:
  - Internal controllers are assigned to all hospitals and all hospitals adopt commitment registers. (Q4-2012)
  - 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 includes both expenditure commitments/purchases (accrual basis, by December 2012) and actual payments (cash basis), describes performance on the execution of budget and accumulation of arrears, and recommends remedial actions to be taken. (Continuous)
  - Further measures to improve accounting, book-keeping of medical supplies and billing systems, through:
    - introduction of analytical cost accounting systems (Continuous);
    - regular annual publication of balance sheets in all hospitals. (Q2-2013);
    - introduction of the uniform coding system for medical supplies developed by the Health Procurement Commission (EPY) and the National Centre for Medical Technology (EKEVYL) and the use of the observe.net system to monitor the procurement and use of tenders for medical supplies. (Continuous);
    - introduction of inbound hospital logistics and stock management (Q4-2013);
    - timely invoicing of full treatment costs (including staff payroll costs) - i.e. no later than 2 months to other EU countries and private health insurers for the treatment of non-nationals/non-residents. (Q4-2012);
    - enforcing the collection of co-payments and implementing mechanisms that fight corruption and eliminate informal payments in hospitals. (Continuous).

*International Monetary Fund — Extracted from the specified content unit.*

### 4. ELSTAT starts providing expenditure data in line with Eurostat, OECD and WHO

### 4. ELSTAT starts providing expenditure data in line with Eurostat, OECD and WHO

### Health statistics and hospital IT systems
- ELSTAT starts providing expenditure data in line with Eurostat, OECD and WHO databases i.e. in line with the System of Health Accounts (joint questionnaire collection exercise). (Q4-2012)
- The programme of hospital computerisation allows for a measurement of financial and activity data in hospital and health centres. The Minister of Health defines a core set of non-expenditure data (e.g. activity indicators) in line with Eurostat, OECD and WHO health databases, which takes account of the future roll-out of DRG (diagnostic-related groups) schemes in hospitals. (Continuous)
- The government starts to develop a system of patient electronic medical records. (Q1-2013)
- In all NHS hospitals, the Government, with technical assistance from experts across EU, continue piloting a set of DRGs, with a view to developing a modern hospital costing system for contracting (on the basis of prospective block contracts between EOPYY and NHS). DRGs include a detailed item on costs of personnel. (Continuous)
- An analysis will be made of how hospital accounting schemes integrate DRGs at hospital level in view of future activity-based cost reporting and prospective budgets payment for hospitals. (Q4-2012)

### Centralised procurement
- The Government increases substantially the number of expenditure items and therefore the share of expenditure covered by centralised tender procedures through EPY. (Continuous)
- EPY will undertake a major effort to utilise tender procedures for framework contracts for the most expensive medicines used in the outpatient context so as to substantially reduce the price paid by EOPYY. (Q4-2012)
- In compliance with EU procurement rules, the Government conducts the necessary tendering procedures to implement a comprehensive and uniform health care information system (e-health system) including the full and integrated system of hospitals' IT systems. (Continuous)

### Upgrading the education system
- The Government implements the Action Plan for the improvement of the effectiveness and efficiency of the education system and regularly reports on the progress of its implementation including on the results of the external evaluation of high education institutions (December 2012).
- On higher education: the provisions of the laws 4009/2011 and 4076/2012 are fully and promptly implemented including:
  - i. the activation of the Quality Assurance Authority (December 2012);
  - ii. the constitution of the Council of Higher Education Institutions is completed (March 2013), with the respective organisation charters and internal regulations completed (September 2013);
  - iii. the election of the new Rectors (December 2012);
  - iv. the procedure on the consolidation/merging of departments of universities and technological institutes (ATHINA Project) starts to be implemented (March 2013).
- On primary and secondary education, progress on the implementation of the school and teacher evaluation policy including the schools' self-assessment project is reported on a quarterly basis (as of Q1 2013). More flexibility is introduced by end-December 2012 in the adjustment of tuition fees by private schools, as per Opinion 20/VI/2012 of the Hellenic Competition Commission.

### Recapitalisation of the banking sector — overview and capital needs
- The Bank of Greece (BoG) completed a strategic assessment of the banking sector in March 2012. The study identified four core banks accounting for approximately 75 percent of banking sector assets.
- Authorities estimate that the funds required to fully recapitalize the Greek banking system will amount to €50 billion, which is fully accounted for in updated estimates of program financing.
- Prior to the disbursement, the BoG informed all banks of their individual capital needs and requested that they finalize the capital raising process by end-April 2013. The capital needs account for the impact of the valuation losses on new Greek government bonds, and results of a stress test exercise with a 3-year horizon.

Key capital-metric and reporting commitments:
- By Q4-2012, the Government and the Bank of Greece will align capital metrics to the minimum core tier I capital ratio of 9 percent of risk-weighted assets set out in the European Banking Authority (EBA) recommendation on capital buffers.
- Banks will also have to meet the requirements set by the BoG under Pillar II (to maintain a 7 percent core tier 1 capital ratio under a 3 year adverse stress scenario).
- The BoG will publish a detailed report on the individual banks’ capital needs, recapitalization process and the methodology followed by Q4-2012.

### Recapitalization process — steps and timelines
- Legal framework for recapitalisation is to be put into place prior to disbursement.
- The recapitalization process of core banks will involve three broad steps:
  - i. First, the Hellenic Financial Stability Fund (HFSF) will provide sufficient funds in the form of bridge capital to bring the core banks up to the minimum level of 9 percent CT1 under Pillar 1 by end-December 2012. The HFSF will also issue a commitment letter to subscribe to 100 percent of the remaining capital needs.
  - ii. Second, by end-January 2013, the HFSF will subscribe to 100 percent of any convertible instruments that the banks will decide to issue.
  - iii. Third, by end-April 2013, the core banks will complete the rights issue and any shares not subscribed by the private sector will be acquired by the HFSF subscription to the common equity.
- Recapitalization of remaining undercapitalized non-core banks:
  - These institutions must be fully capitalized by end-April 2013; they may merge with other banks if they can demonstrate a credible business plan and meet recapitalization needs by end-April 2013.
- Cooperative banks:
  - By end-February 2013 the BoG will complete its assessment of this sector and issue a final report.
  - By end-May 2013, authorities will set out a comprehensive strategy to implement its recommendations.

Additional fiscal and contribution measures:
- The authorities will take no fiscal policy actions to increase the burden for the programme, and will adjust the structure of outstanding government-owned bank capital instruments (preferred shares) to ensure that they can continue to be counted as bank capital.
- A one-time €550 million fee, to be received from banks in 2012 in return for the provision of bridge capital, will be earmarked to the HFSF and placed in the HFSF intermediate account. (Continuous)

### Framework for restructuring and strengthening of the banking system
- Banks that receive state-aid must provide clear and realistic business plans for their restructuring.
- Operational restructuring:
  - Following recapitalization, all institutions should update their restructuring plans and submit them for validation by the EC. These should be finalized by Q2-2013.
  - Banks acquiring other institutions through P&A transactions sponsored by the HFSF must submit revised plans by end-July 2013.
  - The HFSF will continuously monitor banks’ adherence to their restructuring plans and report to the EC/ECB on progress on a semi-annual basis.
- NPL resolution:
  - The HFSF will request that banks assess whether their established frameworks and policies to deal with troubled assets are effective by June 2013.
  - International work-out specialists should be invited to assist.
- Funding:
  - Banks will set out intentions to broaden their funding base and reduce reliance on emergency liquidity.
  - The BoG will stand ready, following Eurosystem procedures and rules, to continue disbursing emergency liquidity support if needed. (Continuous)

### Resolution of undercapitalized banks
- The authorities will complete the resolution of undercapitalized banks by mid-June 2013 and establish a framework to manage the assets of banks under liquidation.
- State-owned banks:
  - ATE bank was resolved in July through a Purchase and Assumption (P&A) transaction with Piraeus Bank; the final resolution cost will be defined by an external audit.
  - Hellenic Postal Bank: authorities have initiated its orderly resolution aiming to complete via a P&A transaction no later than end-January 2013.
  - Nea Proton’s restructuring to be completed by May 2013 under HFSF sponsorship.
- Other undercapitalized non-core banks:
  - If shareholders or new investors cannot support these institutions by end-April 2013, authorities plan to complete resolution by end-June 2013 via P&A transactions with well capitalized banks, or establish a bridge bank as a second best.
  - BoG has placed all undercapitalized non-core banks under enhanced supervision.
- By end-February 2013 the BoG will publish an assessment report prepared by an international expert regarding policies and procedures required to ensure effective bank asset management and recovery.

### Safeguards to ensure stability and viability of the financial system
- Prior to disbursement:
  - The HFSF will complete the due diligence of core banks and communicate findings of interest to the supervisor (BoG).
  - Authorities agree with the EC/ECB/IMF the terms of reference for the monitoring trustee and have instructed trustees to begin work no later than mid-January 2013.
  - Authorities will amend the HFSF by-laws to require the HFSF Board, including EC and ECB observers, be informed of all decisions of the core banks having an impact on the HFSF's rights; such information is to be provided within one day of receipt.
- Governance and monitoring commitments:
  - By Q1-2013 banks will submit to the BoG plans to address identified operational governance weaknesses with clear timetables for full implementation by Q4-2013.
  - Monitoring trustees will be appointed in all banks under restructuring to submit quarterly reports on governance and operations, and ad-hoc reports as needed.
  - Monitoring trustees will work mainly under the direction of the EC within terms of reference agreed with the EC/ECB/IMF, liaise with EC/ECB observers at the HFSF, have permanent access to board meeting minutes, and be observers at executive committees and other critical committees.
  - Trustees shall be a respected international auditing or consulting firm endorsed by the EC.
- Reporting and transparency:
  - By end-January 2013, the HFSF will initiate semi-annual public reporting on its main activities.
  - By Q1-2013, the HFSF will publish relationship frameworks with each core bank to define responsibilities of bank managers and board members and the role of HFSF as a shareholder; a draft for discussion will be developed with EC, ECB, and IMF staff by end-January 2013.

### Adaptation of banking supervision
- Updating the supervisory model:
  - The BoG will complete a review of its supervisory approach by Q2-2013, with technical support from a banking supervision expert.
  - Enhancements include refocusing off-site analytical capacity, updating onsite supervisory procedures and prudential regulation, and an action plan to monitor credit risk concentration including enhancing monitoring of large business groups by end-July 2013.
- Standardizing asset quality disclosure:
  - The BoG and Hellenic Capital Markets Commission (HCMC) will issue guidelines to align banks' disclosure practices to international best practices.
  - By end-August 2013, with assistance of a leading consulting firm, practices will be benchmarked against top European institutions and reflected in banks’ end-2013 financial statements.
- Basel Core Principles (BCP) assessment:
  - Authorities will request the IMF to undertake a stand-alone assessment by Q4-2014.
  - The BoG will prepare a self-assessment of compliance with the BCP by end-June 2014 with support of independent experts by Q2-2014.
- Clarifying competences and responsibilities:
  - Authorities will develop and publish a memorandum of understanding governing the relationship of the HFSF as a shareholder and the BoG’s role regarding oversight of banks that have received state aid.

### Review of insolvency frameworks
- By Q4-2012, in consultation with EC/ECB/IMF staff, authorities will review the insolvency framework of households and SMEs and the framework for out of court negotiations between banks and troubled borrowers, and prepare an assessment identifying areas for improvement.
- By end-February 2013, authorities will revise, with technical support of international experts, the existing framework to facilitate workouts with over-indebted household borrowers that preserves bank solvency and credit discipline, avoids fiscal support to protect private borrowers, and minimizes moral hazard by targeting borrowers that are in real need.
- Authorities will refrain from supporting initiatives that may undermine the payment culture in Greece.

### Follow up stress testing
- The BoG will conduct a new stress test exercise, based on end-June 2013 data, using a methodology determined in consultation with the EC/ECB/IMF, by Q4-2013.

### Strengthening labour market institutions and promoting employment
- The Government will promote an efficient wage-setting system, reduce non-wage labour costs and create more options for the adaptability of working hours.
- Target: reducing nominal unit labour costs in the economy by 15 per cent over the period 2012-14.
- The Government will fight undeclared work and informality by streamlining administrative burdens and increasing transparency and enforceability of the labour law.
- Enhance policies to help the unemployed returning to paid jobs and develop adequate and affordable social safety nets.
- Labour legislation treating preferentially some sectors or professions will be brought in line with general standards applicable to the rest of the economy.
- Reforms in labour legislation will be implemented in consultation of social partners as a rule, and in respect of EU Directives and Core Labour Standards.

*Source: _cr1320 - 4. ELSTAT starts providing expenditure data in line with Eurostat, OECD and WHO*

### 4.1  Reforms in the wage-setting system

### 4.1  Reforms in the wage-setting system

### Wage-setting reform (statutory minimum wage)
- Establish a statutory minimum wage system as the nation-wide legally binding minimum floor for wage setting.
- Negotiations for labour agreements and contracts of any type and level shall take into consideration the binding floor of the statutory minimum wage rate.
- As of the enactment of this reform, the National General Collective Labour Agreement binds only the signatory parties regarding wages, allowances and any other direct remuneration clauses.
- The minimum wage rate shall be legislated by the Government after consultation with social partners, other stakeholders and independent experts, taking into account the economic and labour market situation and prospects.
- The reform will define how the economic and labour market situation and prospects will be factored into the process to ensure objectives of supporting employment and safeguarding labour income are achieved.
- Prior to the disbursement:
  - a. The Government adopts the framework provisions for the reform of the minimum wage framework as described above, with the view of having the necessary changes finalised by Q1-2013 at the latest.
- Implementation specifics:
  - 1. With this reform, the base wage and the maturity allowances currently linked to the National General Collective Labour Agreement will start by being set in a statutory way without exceeding their current level over the Programme period, with no other statutory minimum allowances. The statutory minimum wage system is expected to come by Q1-2013.
  - 2. By Q1-2014, the Government will review the minimum wage system, with a view to possibly improve its simplicity and effectiveness to promote employment and fight unemployment and help the competitiveness of the economy.

### Adaptability of working hours arrangements (Section 4.2)
- Objective: make work schedules more flexible while respecting current limits on the duration of the working week (including the 40-hours working week as a reference) and minimum rests due to health reasons for specific categories of workers.
- Prior to the disbursement, the Government makes it possible to:
  - (i) on a contractual basis, apply the general rules on the number of maximum workdays to sectors not now covered by the general rules;
  - (ii) set the minimum daily rest at 11 hours;
  - (iii) allow in seasonal sectors the consecutive minimum two week leave requirement to be taken anytime during the year.

### Reducing non-wage labour costs (Section 4.3)
- Prior to disbursement:
  - a. The Government reduces the maximum dismissal notification period to 4 months and caps statutory severance pay at 12 months (while preserving the existing link between tenure and severance for tenures with severance below the cap).
    - If the cap has already been surpassed on the date of the reform, the amount accrued will be grandfathered in case of future dismissal any time thereafter, subject to a cap of EUR 2000 per month for the number of months exceeding 12.
    - Occupations for which statutory severance costs are in excess of the rule just described, the compensation for severance will be aligned with the latter.
- With a view to foster employment creation, the Government:
  - 1. adopts legislation by November 2013 reforming the system of social contributions, 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, which will be phased in over 2014, 2015 and 2016. The reform will be revenue neutral and preserve the actuarial balance of the various funds.
  - 2. As intermediate steps, actuarial studies of possible changes in the system of social contributions will be carried out and action plans proposed by September 2013.
  - 3. Carries out actuarial 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 Q2-2013.
  - 4. Based on these studies of first-pillar pension schemes, and together with the reform of the system of social contributions, reduces social contribution for these companies and adjusts benefits in a fiscally-neutral manner by Q4-2013.

### Lowering compliance costs, fighting undeclared work and informality (Section 4.4)
- Streamline reporting requirements on firms' internal work arrangements to reduce administrative burden and reform the Labour Inspectorate.
- Prior to disbursement, the Government:
  - a. eliminates the obligations to:
    - i) ex-ante submit work schedules to the Labour Inspectorate;
    - ii) require pre-approval by the Labour Inspectorate of: overtime work, itinerary books of trucks and buses, the work book of daily employment of construction workers, and split of annual leave.
    - These changes shall not apply in the cases of underage employees and workers. Employers will be obliged to record this information and make it available to the Labour Inspectorate for checks whenever requested.
  - b. undertakes an independent external assessment of the Labour Inspectorate, to be completed by Q4-2012, on:
    - (a) the mandate, activities and structure of the Labour Inspectorate with a view to increase its effectiveness and efficiency in fighting undeclared work while keeping administrative burdens for firms contained; and
    - (b) the enforcement and penalty structure for infringements of labour arrangements (including undeclared work).
- To implement the reform of the Labour Inspectorate:
  - 1. The Government, based also on the external assessment of the Labour Inspectorate, shall present and start implementing a detailed action plan by February 2013, aimed at strengthening the fight against undeclared work and raising the effectiveness of the Labour Inspectorate. The plan should focus on: strengthening the mandate and effectiveness and efficiency of the Labour Inspectorate; amending monetary and legal penalties for infringement of law and regulations; streamlining the reporting by employers and employees; and reinforcing anti-fraud and anti-corruption mechanisms.

### More transparent and enforceable labour law (Section 4.5)
- 1. The Government adopts by Q4-2013 a single Labour Code compiling all existing legislation relevant for labour and industrial relations to ease interpretation, reduce compliance costs and increase enforceability of labour law.
- By Q1-2013 the Government shall prepare a report on the structure of the Labour Code.

### Support to the unemployed (Section 4.6)
- Government focus: prevent unemployment becoming permanent and mitigate hardship by facilitating transitions across occupations and sectors; improving training policy quality; promoting employability of disadvantaged groups; targeting segments with the strongest need of income support.
- Action Plan to be adopted by Q1-2013 to provide continuing support to Active Labour Market Policies, focusing on:
  - i. Supporting job matching and activation of the unemployed by reforming and broadening the role of the Public Employment Service and by introducing short-term public work programmes where feasible and appropriate;
  - ii. Enhancing the effectiveness and adequacy of measures for re-skilling the unemployed, including by promoting the training of the unemployed by firms;
  - iii. Facilitating the combination of reduced working time schedules with training in case of temporary reductions in activity;
  - iv. Enhancing unemployment benefits to help mitigate the short-term impact of unemployment and supporting the long-term unemployed and specific categories of workers without entitlement to unemployment insurance.
- The action plan should provide a description of the programmes currently in force and plans for their rationalisation as well as an indication on sources of financing.

*IMF staff extract from the referenced chapter on labour market and business environment reforms.*

### 2. The Government, assisted by the OECD, starts applying the Competition Assessment

### 2. The Government, assisted by the OECD, starts applying the Competition Assessment Toolkit

### Competition Assessment application
- The Government, assisted by the OECD, starts applying the Competition Assessment Toolkit in sectors such as food processing, retail trade, building materials and tourism to identify unnecessary restraints on market activities and develop alternative, less restrictive measures that still achieve government policy objectives. (December 2012)
- Immediately upon completion of the analysis (June 2013), the Government will prepare the legislative amendments to remove disproportionate regulatory restrictions identified by the Competition Assessment Toolkit, with a view to having them adopted by September 2013.

### Judicial system reform to support economic activity
- Objectives:
  - ensures effective and timely enforcement of contracts, competition rules and judicial decisions;
  - increases efficiency by adopting organisational changes to courts;
  - speeds up the administration of justice by eliminating backlog of court cases and by facilitating out-of-court settlement mechanisms.
- Consultation: In designing and implementing the measures below, the Government consults the EC/IMF/ECB.

#### Review of the Code of Civil Procedure
- The Government commits to review the Code of Civil Procedure in accordance with the roadmap defined in section 9.3 of this Memorandum, which defines intermediate steps towards its completion by March 2014.

#### Judicial statistics
- The Government will compile and publish on its website the information indicated in Section 9.4 of this Memorandum. (Quarterly)
- Establishes an interservice group between the Ministry of Justice, Transparency and Human Rights, the Ministry of Finance and the Hellenic Statistical Authority to cooperate in the compilation and publication of the data in Section 9.4 of this Memorandum and the establishment and updating of a database with case data for each court. This cooperation takes into consideration current and future e-justice applications. (November 2012)

#### Tax case backlog reduction
- Following the submission of the work plan for the reduction of the backlog of tax cases in all administrative tribunals and administrative courts of appeal in January 2012 and its first update in July 2012, which provides for the intermediate target for reducing the backlog by at least 80 per cent by end-December 2012 and for the full clearance of the backlog by end-July 2013, the Government, by end-October 2012 and thereafter once a quarter:
  - i. presents updated and further refined work plans (ensuring that priority is placed on high value tax cases – i.e., exceeding €1 million);
  - ii. takes remedial action in case of anticipated or actual deviations, and
  - iii. publishes reports on progress in backlog reduction.

#### Non-tax case backlog reduction
- The Government presents to the EC/IMF/ECB and publishes the study of the backlog of non-tax cases in courts conducted jointly with an external body of experts. (December 2012)
- By end-January 2013, the Government presents to EC/IMF/ECB, based on the above-mentioned study, an action plan with specific measures for a reduction of such backlog of at least 50 per cent by end-July 2013.

#### Reorganization of the magistrates' court
- The Government adopts a Presidential Decree providing for the rationalisation and reorganisation of the magistrates’ courts and the allocation of appropriate human resources and infrastructure for the new structure of magistrates’ courts resulting from this reform making the most effective use of the existing resources available within the system. (October 2012)
- The Presidential Decree on the reform of the magistrates’ courts is implemented by March 2013.

#### Development of e-justice applications in courts
- By end-December 2012, the Government updates, further refines and operationalises every quarter the e-justice work plan of December 2011 and its first update of July 2012 for the use of e-registration and e-tracking of the status of individual cases in all courts covered by the action plan and for e-filing.
- The updates will contain:
  - an evaluation to be completed by end-March 2013 of the e-filing pilot project at the Athens Court of First Instance;
  - an evaluation to be completed by end-March 2014 of the level of integration of IT systems achieved at that time in all courts of the country;
  - a timetable with proposed deadlines aiming at the extension of e-registration and e-tracking to all courts by end-2015.
- The Government ensures consistency of the e-Justice action plan with the e-government strategy.

#### Promotion of pre-trial conciliation and mediation
- By end-October 2012, the Government develops its strategy on the active promotion of pre-trial conciliation, mediation, and arbitration, with a view to ensuring that a significant amount of citizens and businesses make use of these modes of alternative dispute resolution. In order to implement this strategy, the Government, inter alia, applies to obtain funding under the Operational Programme ‘Administrative Reform’ by end–November 2012.
- By end-September 2013, the Government conducts an assessment of whether the enactment of Law 3898/2010 on mediation in civil and commercial matters has delivered the results which the legislation intended to achieve, and presents data and analysis concerning costs, time and success rates associated with the enforcement of agreements arising from alternative dispute resolution as compared with the enforcement of judicial decisions.
- By end-December 2013, the Government presents a legislative proposal for the effective opening of the mediator’s profession to non-lawyers.

#### Other measures on judicial reform
- Assessment of the Law on fair trial and conciliation (4055/2012): The Government conducts an assessment whether the enactment of Law 4055/12 has delivered the results which the legislation intended to achieve. (December 2012)
- Administrative review of cases: The Government prepares, in accordance with Law 4048/2012 on better regulation, 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. (June 2013)
- Study on the costs of civil litigation: the Government 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)

### Efficient network industries and services — Energy policy
- Goal: bolster competitiveness and efficiency in the electricity and gas market, avert a repetition of the 2012 liquidity crisis and position the energy sector as a potential contributor for prosperity.

#### Unbundling network activities from supply activities
- Legislation is passed providing for the details of the ITO-option for the gas TSO. (end-November 2012)
- DESFA applies for certification to RAE. (December 2012)
- The unbundled gas TSO is certified by the Greek energy regulator. (March 2013 or prior to the clearance of the privatisation of DEPA, whichever date comes earlier)

#### Provisions regarding the privatisation of PPC and DESFA
- The Government submits a plan for the restructuring of PPC with a view to preparing the company for privatisation and to allowing PPC to be competitive with other firms in a liberalised electricity market. The plan shall specify which parts of PPC should be privatised and within which timeframe. The plan shall also include provisions for the divestment of lignite-fired and hydro electricity generation capacity currently managed by PPC and evaluate the possibility of ownership unbundling of ADMIE. (November 2012)
- The Government undertakes that whichever the outcome of the privatisation process the gas industry and electricity industry structure will be fully compliant with Directive 2009/73/EC and 2009/72/EC. (Continuous)

#### Ensuring that electricity prices reflect costs
- The Government takes measures for the gradual phasing out of regulated electricity prices for all but vulnerable customers by June 2013. In this respect:
  - i. it issues a Ministerial Decision to adjust end-user prices for low voltage customers, effective as of January 2013. (December 2012)
  - ii. as necessary, it issues a Ministerial Decision by end-March 2013, effective as of May 2013, to further set low voltage end user prices at cost recovery.
  - iii. it removes regulated tariffs for all but vulnerable consumers. (June 2013)
- The Government assesses best practices with a view to charging royalties for the use of hydro and lignite. (March 2013)
- To evaluate the incumbent electricity company's operating costs the Government submits to the EC/IMF/ECB and publishes a study by a specialist of European standing to compare PPC worker's remuneration with best-practice European electricity companies, by comparable job assignments and productivity per employee. Remuneration and promotion schemes also to be assessed against practices in private Greek companies. (December 2012)

#### Implementing smart metering systems
- The Government issues a Ministerial Decision, based on the advice of RAE, on the large-scale replacement of existing systems with smart metering systems and explores assistance from EU structural funds and/or the EIB to conduct this strategic investment. (end-December 2012)

#### Providing for a financially sustainable development of renewable energy sources
- Short term measures:
  - 1. Ensures that from January 2013 onwards, LAGIE publishes monthly data on the evolution of the RES account with projections throughout 2013. (Monthly)
  - 2. Takes measures to reduce the accumulation of licences issued for renewable energy installations, but not implemented. (December 2012)
  - 3. Adjusts the RES levy every six months (January and July 2013) to eliminate the projected RES account debt by end-December 2013.
- Long-lasting reform:
  - 4. Submits to the Commission services a detailed plan for the reform of the renewable energy support schemes such that they are more compatible with market developments and are subject to budgetary discipline. (December 2012). The reform should look into:
    - i. options applicable to the support scheme, including market elements such as forward looking tariff digression and feed-in-premia, combined with a ceiling on the number of licenses, volume of capacity supported or overall subsidies to be provided per technology/tariff category.
    - ii. current and expected trends in costs for all relevant technologies.
    - iii. a sustainable and transparent framework for the regular adjustment of the RES levy.
  - 5. Caps temporarily new connections of rooftop PV systems. (March 2013)
  - 6. Adopts the reform of the renewable energy support schemes as specified in paragraph 4. (June 2013)

#### Planning the development of the electricity market in the medium to long term
- A detailed plan and roadmap to change the market model is presented to the Commission services, including measures to have effective competition in generation and supply, the development of a power exchange, introducing an intra-day market and implementing market coupling with neighbouring markets. (end-December 2012)
- The study also presents a time bound roadmap and estimation of costs of connecting Crete to mainland Greece. (end-December 2012)

#### Fuel distribution
- Transposition of Directive 2009/119: the Government creates the framework for setting up of a Central Stockholding Entity (CSE). The transposition law will grant economic operators the right of delegation of stockholding obligations to:
  - i. the CSE in Greece or to other economic operators within Greece which have surplus stocks or available stockholding capacity, without quantitative restrictions, and/or
  - ii. the CSEs of other EU Member States up to a percentage of the stockholdings obligations imposed on them, upon the entry into force of the transposition law, and/or
  - iii. economic operators abroad which have surplus stocks or available stockholding capacity up to a percentage of the stockholdings obligations imposed on them, upon the entry into force of the transposition law.
- The percentage of cases (ii) and (iii) is at least 30%. (December 2012)
- To eliminate restrictions on public and private use trucks for fuel distribution: Prior to the disbursement, the Government takes measures to:
  - a. allow independent gas stations to own or rent tanker trucks of any capacity provided that safety standards for the transportation of fuel are respected.
  - b. allow independent gas stations to hire public-used tanker trucks for fuel transportation without needing to qualify for their own private used tankers.
  - c. allow any tanker truck, regardless of its capacity, to enter the refineries and customs installations to transport fuel under their own brand name/trademark, provided that safety standards for the transportation of the fuel are respected.
- To improve monitoring systems, prevent illegal trade and tax evasion in fuel distribution: Prior to the disbursement, the Government:
  - a. issues technical specifications and next steps for the implementation of the input-output measurement system in all fuel stations;
  - b. issues a Ministerial Decision providing for the installation of GPS systems, as provided for in Art. 320 of law 4072/2012.

### Electronic communications — release of the Digital Dividend
- Government (and/or EETT) undertakes to:
  - i. amend the frequency and the broadcasting plans, taking into consideration the state of play of international coordination, allocating and authorising the use of the digital dividend to Electronic Communication Services. (December 2012)
  - ii. adopt necessary secondary legislation for the assignment of licenses for broadcasting and for the establishment of licensing procedures. (March 2013)
  - iii. 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. (December 2012) (*)
  - iv. resolve cross-border coordination issues with neighbouring countries, if any. If difficulties on international coordination make this date unfeasible, the frequency and broadcasting plans might indicate alternative channels for re-location of broadcasters, while continuing negotiations with third countries in view of the final assignment of frequencies to broadcasters and mobile operators. (Continuous)
  - v. 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). (March 2013)
  - vi. launch the tender for the assignment of rights of use for broadcasting transmission. (March 2013)
  - vii. proceed to the tender procedure for the assignment of frequencies of the digital dividend, allocating and authorising the use of the digital dividend (800 MHz band) to Electronic Communications Services in line with EC Decision 2010/267/EU and in respect of the deadlines and procedures of the RSPP. (June 2013) (*)
- (*) The deadlines for steps (iii) and (vii) 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.

### Transport — road and sector opening
- The opening of the road haulage and occasional passenger transport is completed; priorities shift to measures for higher levels of tourism and investment across road, maritime and aviation.
- Prior to disbursement, the Government adopts all necessary measures to:
  - a. Remove restrictions on the rental of pickup trucks, vans and chauffeur services;
  - b. Allow shuttle services by hotels and tour agencies using small vehicles (less than 12 seats) and tour packages for small vans and off-terrain vehicles.
- After having completed the report on the functioning of the regular passenger services, the Government:
  - i. Defines a follow up strategy for the effective opening of the sector in line with state aid rules and EU Legislation on awarding contracts of passenger transport services, while ensuring continuity of service provision and identifying concrete options for public transportation in remote areas (December 2012).
  - ii. Approves the required law (and necessary acts) that ensures equal conditions and access equity to all road passenger service operators (March 2013).

*International Monetary Fund — Greece: Excerpt from Memorandum of Understanding (selected actions and timelines as provided in the source content).*

### 1. The Government:

### 1. The Government

### Ferry industry and maritime labour
- Launches (October 2012) a consultation procedure to review the legal framework of the domestic ferry industry, with a view to strengthening the growth potential of the tourist sector. Particular attention is given, inter alia, to increasing the flexibility of (i) manning requirements of vessels outside the minimum routing obligations and (ii) approving changes in the timetables and vessel size for ferry services.  
- Make a concrete amendment of Law 2932/2011 building on this consultation (February 2013).  
- Launches the social dialogue, following the Maritime Labour Convention (2006) principles, in order for labour arrangements to respond to the current economic context and future developments (October 2012).

### Ports strategy, legal and privatisation actions
- Adopts a five-year port national strategy ensuring connectivity of ports with the overall transport network, specifying concrete projects, deadlines for implementation and a financial plan; strategy coherent with TEN-T priorities and principles, efficient use of Structural and Cohesion Funds and in line with State aid rules (December 2012).  
- Privatisation Fund (HRADF) defines a concrete privatisation strategy mainly through concessions with the objective of making the best use of the ports (February 2013) and launches the appropriate call(s) for tender (June 2013).  
- Revises the legal framework governing port labour relations and the administrative functioning of ports and sends a draft proposal to the Commission services (December 2012). Revision complies with the EU social acquis and provides, among others, for the training and certification of cargo-handling employees, and defines a competitive model for ports and terminal operators. The new legal framework is adopted (March 2013).  
- Examines compatibility with Community legislation and in particular State aid rules and amends as necessary provisions concerning Piraeus Port (OLP) and Thessaloniki Port (OLTH), in particular (December 2012):  
  - i. Law 2688/1999:  
    - a. Chapter A, Article Second, paragraph 2;  
    - b. Chapter A, Article Third, article 5, paragraph 5;  
    - c. Chapter B, Article Seventh, paragraph 2;  
    - d. Chapter B, Article Eighth article 5, paragraph 5.  
  - ii. Law 2937/2001: Article 34.

### Aviation
- Privatisation Fund (HRADF) launches the appropriate process leading to the privatisation of regional airports (March 2012) after submission of the National Airport Policy.  
- Government submits legislation for the restructuring of the Hellenic Civil Aviation Authority (HCAA), strengthening its regulatory role and implementing full separation between Regulation and Management from Operation; ensures improvements in air traffic management delivery through adherence to EU Regulation (EU 691/2010) (December 2012). Public airports that will not be privatised will be formed under a public body with management and operation totally separated from the HCAA. New legislation is adopted (March 2013).

### Railways
- Spins-off ROSCO (Maintenance Unit) and GAIOSE (Real Estate), transfers the leasing of the rolling stock activities from the OSE Group to the State, and provides an updated TRAINOSE Business Plan (November 2012).  
- Amends the law such that the fee of charges for obtaining a license or a safety certificate does not exceed the average European charge. All operators are awarded safety certificates on the basis of published, simple and transparent rules for the duration of five years (December 2012).  
- Transfers rolling stock not used/needed by TRAINOSE to a body that leases it on market conditions, including winners of such tenders (December 2012).  
- Establishes independent award authorities for passenger services by rail that can organize competitive tenders (January 2013). Contracts concluded in 2014 or later will generally be awarded by means of competitive tender.  
- National Safety Authority: establishes the examination of 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 (March 2013).  
- Amends the safety legislation to establish a right of any company on access to train driver facilities and examiners (April 2013).  
- Tariffs in OSE Group and TRAINOSE (June 2013) and OASA Group (October 2013) increase by at least 25 percent.

### Retail sector reforms (prior to next disbursement)
- Eliminates the requirement of minimum space for the sale of food products.  
- Allows mixed shops to sell goods other than food, subject to hygiene and food and safety standards.  
- Allows supermarkets the sale of pre-packaged meat, cheese and fish products.  
- Liberalizes sale in supermarkets of infant milk (i.e., 0-6 months).  
- Allows a delink of the working hours of all employees in establishments (as defined in Law 1037/1971 and related implementing legislation) from opening hours of the establishment.  
- Adjusts the law to clarify that shift breaks are allowed in all retail establishments (including those with continuous working schedule).

- Additional retail measures and timelines:  
  - Applies the same standards for transporting perishable goods to private-use trucks as those applicable to public-use trucks (December 2012).  
  - Carries out a proportionality analysis of the restrictions applied on outdoor / ambulant trade for social policy criteria (December 2012).  
  - Completes the revision of Ministerial Decision A2-3391/2009 on market regulations and submits it to the Commission services, in accordance with the notification procedure provided for in Directive 98/34 (October 2012). The revised Ministerial Decision on market regulations is adopted one month after the reply from the Commission services, following the notification process.  
  - Reviews and amends the Market Policing Code (Law 136 /1946) providing for various forms of public sector intervention in the production, distribution and consumption of goods in line with the simplifying recommendations of the Hellenic Competition Commission's opinion no. 24/VII/2012 (January 2013).

### Regulated professions, professional qualifications and services
- Prior to disbursement, amends specific legislation to lift the restrictions in the professions and economic activities listed in Section 9.2.1 of this Memorandum.  
- For professions and economic activities included in Section 9.2.2, prepares draft provisions amending sector specific legislation as per the opinions of the Hellenic Competition Commission. The legislation is adopted by December 2012.  
- Publishes a report on the implementation of Law 3919/2011 on the Government's website (December 2012), including:  
  - i. the list of all professions/economic activities falling under the scope of that law.  
  - ii. the list of all remaining professions/economic activities that have not been treated beforehand; ensures regulatory framework fully in line with chapter A of law 3919/2011 and opinions (if applicable) of the Hellenic Competition Commission (HCC) by (December 2012).

- Transparency measures for professional bodies (legislation adopted December 2012): mandatory publication on the webpage of each professional association of:  
  - i. the annual accounts of the professional association.  
  - ii. the remuneration of the members of the Governing Board broken down by function.  
  - iii. the amounts of the applicable fees broken down by type and type of service provided by the professional association as well as the rules for their calculation and application.  
  - iv. statistical and aggregate data relating to sanctions imposed, always in accordance with the legislation on personal data protection.  
  - v. statistical and aggregate data relating to claims or complaints submitted by consumers or organisations and the reasons for accepting or rejecting the claim or the complaint, always in accordance with the legislation on personal data protection.  
  - vi. any change in the professional codes of conduct, if available.  
  - vii. the rules regarding incompatibility and any situation characterised by a conflict of interests involving the members of the Governing Boards.

- De-linking minimum fees from taxation and contributions:  
  - Issues a Presidential Decree setting a system of prepaid fixed/contract sums for each procedural act or appearance by a lawyer, which is not linked to a specific ‘reference amount’ (November 2012).  
  - Within the context of the tax reform, identifies ways of de-linking taxation from engineers legal fees and from lawyers legal fees / reference amounts (December 2012). This reform becomes operational upon the entry into force of the tax reform in January 2013.

- Assessing proportionality of reserved activities:  
  - Updates the study of the regulations of the professions submitted to the Commission services in July 2012, to assess the justification and the proportionality of the requirements reserving certain activities to providers with specific professional qualifications (November -2012).  
  - Draft legislation is sent to Parliament amending unjustified or disproportionate requirements reserving certain activities to providers with specific professional qualifications, starting from the main regulated professions (i.e., lawyers, engineers, accountants, sworn-in valuers, energy / building inspectors, etc.) (March 2013).

- Additional legislative actions (prior to disbursement):  
  - Repeal mandatory involvement of a lawyer for transactions on ships with immediate effect and for the drawing up of real estate transactions with an immediate effect for the seller and with an effect from 31-12-2013 for the buyer, with the relevant thresholds immediately raised to €80,000 for the entire country.  
  - Repeal the presence of a lawyer (with immediate effect) for the contracts for the distribution or exchange of real estate property as well as for the gratuitous legal transactions, such as donations.  
  - Repeal the scale of minimum monthly amounts that are due to private sector lawyers remunerated for services rendered with a fixed periodic fee; without prejudice to having fee regulations for trainee lawyers and the minimum wage for private sector workers provided for in law 4046/2012.

- Other actions and timelines:  
  - Draft code revising Legislative Decree 3026/1954 submitted to the Commission services by end-November 2012 and adopted by December 2012; code should, among others, abolish total bans on commercial communications, repeal age limits to take the Bar examinations, ease re-entry into the legal profession and clarify the nature of lawyers' fees provided for in current legislation.  
  - Government takes 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).  
  - 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).

### Recognition of professional qualifications and Services Directive implementation
- Ensures effective implementation of EU rules on the recognition of professional qualifications; including compliance with ECJ rulings (inter alia, related to franchised diplomas).  
- Continues to update the information on the number of pending applications for the recognition of professional qualifications, and sends it to the European Commission (Quarterly).  
- Adopts legislation to i) remove the prohibition to recognise the qualifications derived from franchised degrees to access or exercise an economic activity and to ii) 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 degrees (November 2012).

- Point of Single Contact (PSC) requirements (December 2012):  
  - PSC fully operational in all sectors covered by the Services Directive.  
  - PSC distinguishes between procedures applicable to service providers established in Greece and those applicable to cross-border providers (in particular for the regulated professions).  
  - Adequate connection between the PSC and other relevant authorities (including one-stop shops, professional associations and the recognition of professional qualifications) and submission of on-line applications as regards the recognition of professional qualifications is fully operational.

### Increasing the impact of structural and cohesion funds
- Meets targets for payment claims and major projects in the absorption of EU structural and cohesion funds; compliance measured by certified data (Q4 2012).

- Table 1: Targets for payment claims in the absorption of Structural and Cohesion Funds (programming period 2007-2013) to be submitted through 2013 (EUR million):  
  - 2012: European Regional Development Fund (ERDF) and Cohesion Fund: 2,850  
  - 2013: European Regional Development Fund (ERDF) and Cohesion Fund: 3,000  
  - 2012: European Social Fund (ESF): 880  
  - 2013: European Social Fund (ESF): 890  
  - Target of first half of the year: 1,231 (2012) and 1,284 (2013)  
  - Total annual target: 3,730 (2012) and 3,890 (2013)

- Submissions and funding commitments:  
  - Submits complete applications for all major projects for which a Commission decision under Article 41 of Regulation (EC) No 1083/2006 has to be adopted (Q4 2013).  
  - Ensures that the necessary national contribution remains available in the Public Investment Budget 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 in the framework of the 2007-2013 programming period.  
  - Continues quarterly monitoring of implementation of priority projects; for projects in delay, a method for closer monitoring should be agreed (Q4 2012). Priority projects should be completed by the end of 2015.  
  - Support to SMEs at central and regional level targeted to contribute to development and sustainable employment; guidelines issued for definition of conditions of granting state aid and its monitoring (Q4 2012).  
  - Within the review of public procurement regulations, adopts and immediately implements legislation to shorten deadlines and simplify procedures on contract award (Q1 2013).  
  - Completes and makes public an operational monitoring tool for expropriations (Q1 2013).  
  - Reviews "sleeping" projects, un-activated delegations and sleeping contracts and informs the Commission on those eliminated (Q4 2012); repeats exercises periodically until expiry of programming period.  
  - Adopts measures and starts implementing an anti-fraud strategy in the field of the Structural Funds and the Cohesion Fund (Q2 2013); establishes an efficient inter-service consultation procedure supported by an electronic system and implements an integrated project exploiting existing infrastructure (Q1 2013).

### Monitoring and statistics
- Commits to continue supporting ELSTAT and to honour the "Commitment on Confidence" signed by the Prime Minister of Greece on 29 February 2012, which includes commitments to fully respect international and European standards for statistical data quality, guarantee and defend professional independence of ELSTAT, and secure adequate and stable resources for it.  
- Commits to decouple the budget of ELSTAT from that of the Ministry of Finance and to give ELSTAT budgetary execution autonomy from January 1st 2013 onwards, in accordance with Law 4072/2012, article 323. Authorities commit to complete all actions needed to establish budgetary execution autonomy to ELSTAT in line with Law 4072/2012, article 323.  
  - To achieve this, amends Law 3832/2010 regarding the non-applicability to ELSTAT of the provisions of article 25 of Law 2362/1995 and, more broadly, of any other provision the implementation of which is not consistent with the independence of ELSTAT (November, 2012).

*International Monetary Fund — Greece: _cr1320 - 1. The Government_*

### 2. Prior to disbursement, and to ensure a smooth and effective transition toward the

### _cr1320 - 2. Prior to disbursement, and to ensure a smooth and effective transition toward the

### Commitment on ELSTAT arrears
- The Authorities commit to clear all arrears toward ELSTAT for the financial years 2011 and 2012 prior to disbursement.
- Those arrears will be paid at the expense of ELSTAT's 2012 budget.

### Privatisation plan and intermediate steps (Greece—Hellenic Asset Development Fund: Projects Under Development 2012-14)
- Source: HRADF.
- Project timing and intermediate steps (selected items preserved verbatim):
  - I. State-owned enterprise/share sale
    - 2012 Q1 Public Gas (DEPA): Modification of statutory provision at time of privatisation.
    - Q1 Public Gas (DESFA): State aid clearance (January 2013).
    - Q4 Football Prognostics Organization (OPAP): VLT regulation issuance and notification to EU (December 2012). Law on new tax provisions for state aid clearance (December 2012).
    - 2013 Q1 Horserace Betting Organization (ODIE): Pending state aid clearance, adopt legislation for the granting of the new license and the subsequent liquidation of the company (January 2013).
    - Q1 Hellenic Post (ELTA): Ministerial decisions for (i) the determination of the content of universal service and (ii) the compensation mechanism for USP drafted and prenotified to DGComp.
    - Q1 Hellenic Vehicle Industry (ELVO): Transaction structure to be determined and agreed (February 2013).
    - Q1 Thessaloniki Water (EYATH): Establish regulatory framework (December 2012). Establish pricing policy and amend the license (May 2013).
    - Q1 Mining and Metallurgical Company (LARCO): Law for establishing a new company (January 2013).
    - Q1 Hellenic Defense Systems (EAS): Identify EAS assets for privatisation (December 2012).
    - Q2 Hellenic Petroleum (HELPE): Following divestment of DEPA.
    - Q2 Athens Water (EYDAP): Establish regulatory framework (December 2012). Establish pricing policy and amend license (September 2013). Settlement of receivables from the State (September 2013).
    - Q2 Athens Airport (AIA): Re-approach Hochtief Airports (December 2012).
    - Q2 Railways (Trainose): Remaining problems in Trainose will be resolved (February 2013). Trainose will then be transferred to the HRADF (March 2013).
    - Q3 Public Power Corporation (PPC): MoEnergy issues the Energy Policy Objectives and a restructuring plan is fully identified (December 2012).
    - Casino Mont Parnes: Pending legal action for the recovery of the state aid taken by the Ministry of Tourism (December 2012).
  - II. Concessions
    - Hellenic Motorways: Negotiations for the restart of projects currently in progress; ratification of reset agreement by Parliament (December 2012).
    - 2011 Q4 State Lottery: Binding offers (December 2012). Submission to Court of Auditors (December 2012).
    - 2013 Q1 Egnatia Odos: Launching of tender process dependent on: a) agreement/finalisation with Ministry of Development on key characteristics of the concession and conclusion of business plan, b) decision on tolling policy/toll collection system, c) treatment of Piraeus loan granted to Egnatia Odos SA, and d) reset of the 4 Motorway concession projects.
    - Q1 Small ports and marinas: Resolve issues related to urban zoning (December 2012).
    - Q1 Regional airports: National Airports Policy defined. Establish regulatory framework (January 2013).
    - Q2 Thessaloniki Port (OLTH): State aid clearance (March 2013). Establish regulatory framework (April 2013).
    - Q2 Piraeus Port (OLP): State aid clearance (March 2013). Establish regulatory framework (April 2013).
    - Q2 Large regional ports: State aid clearance (March 2013). Establish regulatory framework (April 2013).
    - Q3 South Kavala Gas Storage: Decision on the best exploitation option (December 2012).
    - Q4 Digital Dividend: Pass law to finalise licensing of TV stations and digital broadcasting (December 2012).
  - III. Real Estate
    - 2011 Q4 Hellinikon 1: Transfer of Hellinikon SA ownership to HRADF (Pending decision: December 2012). Launch Phase B of tender process (December 2012).
    - 2012 Q1 IBC: Get approval from Court of Audit (December 2012) and issue PD for ESCHADA (January 2013).
    - Q1 Cassiopi: Declassification of Naval outpost (December 2012).
    - Q1 Lot 1 (Afantou): All intermediate steps have been fulfilled.
    - Sale/repo 28 buildings: All intermediate steps have been fulfilled.
    - 2013 Q1 Astir Vouliagmenis: Negotiations ongoing with NBG. ESCHADA (Zoning and land permit) to be submitted (January 2013). Process led by NBG.
    - Q1 Real Estate lot 2: 40 properties to be identified (December 2012) and transferred to HRADF (March 2013).
    - Q4 Real Estate lot 3: At least 1,000 real estate properties to be transferred to HRADF (December 2013).
- Timing of Privatisation: Pending court decision.

### Regulated professions — List no. 1 (restrictions to be repealed prior to the next disbursement)
- 1. Stevedores for land operations and at ports: simplify declaration procedures, repeal fixed fees for loading and unloading services and allow stevedores to be employed under private sector law.
- 2. Sworn-in valuers: Issue new legislation to eliminate the applicable fees, the system of numerus clausus, the nationality requirement, allow legal entities to pursue the profession and open up the areas reserved in exclusivity to this profession.
- 3. Accountants and tax consultants:
  - clarify in circular 26801/DIOE 654 of 13 June 2012 that the professional identity card will be issued automatically within the three months period;
  - clarify that it is SAEP the body responsible for the recognition of professional qualifications;
  - amend Ministerial Decision POL 1166/2011 to abolish the certification procedure provided for thereof, which is applicable to legal entities and natural persons;
  - include in the text of the circular references to the legal text of accountants/ tax advisors that have been abolished by law 3919/2011.
  - In addition, amend sector specific legislation to eliminate inconsistencies with the 2011 law on regulated professions.
- 4. Temporary employment companies (TEC): amend sector specific law to i) reduce the minimum capital of €176.083 (Art.123.1 of law 4052/2012); ii) two eliminate / reduce the amounts of bank guarantees (Art. 126); iii) to lift the requirement of having a minimum number of employees; iii) extend the scope of temporary employment agencies to cover, among others, the provision of consulting and training services.
- 5. Private labour consultancy offices (PLCO): amend sector specific law to i) allow employers of PLCOs –other than its director, to undertake mediation; ii) lift requirements on built in infrastructure and on technical equipment; iii) lift requirement provided for in Art. 104.2 of law 4052/2012, whereby if the registered office of the PEA or its branch has changed, the procedure regarding start of PEA activity /occupation under Art. 101 of the same law shall apply; iv) allow PEAs to do activities other than intermediation in the premises where the PEA operates.
- 6. Real estate brokers: Amend sector specific law to drop the probationary period before an applicant can become a real estate broker (Art. 199 of law 4072/2012).
- 7. Actuaries: review the regulatory framework governing the examination process so as to prevent the Hellenic Actuarial Society (HAS) from determining indirectly the number of successful candidates in the examinations in the interest of the incumbents (cfr. the Hellenic Competition Commission's opinion no. 14/VI/2012).
- 8. Tourist guides: provide that the professional ID card will be issued within the three months period or earlier) and amend sector specific law to open the profession to holders of related university degrees.
- 9. Energy inspectors: amend sector specific law to repeal minimum fees for energy inspection services and to simplify licensing.
- 10. Private providers of primary care services: amend sector specific law to eliminate inconsistencies with Law 3919/2011 law on professions.
- 11. Customs brokers: cfr. section on trade facilitation.
- 12. Kiosks and cantinas in public buildings: remove restrictions for licenses in favour of specific groups.
- 13. Tourist offices: eliminate prior authorization scheme, minimum office space requirements, applicable quasi-fiscal charges and reduce the amount of bank guarantees or require touristy offices to get insurance.
- 14. Teaching at private tuition establishments and foreign language schools and teaching at home: remove the need for prior licence and replace it by a notification of commencement of activity. Remove the need to renew the licence every year.
- 15. Private primary and secondary schools: abolish the nationality requirement to get an establishment licence, amend the requirement for formal qualifications to the founder of a private school; abolish shareholding capital requirements, the ban on more than one establishment, minimum distances, the need to renew licenses annually; remove prohibitions to licensing to relatives of private primary and secondary schools license holders.
- 16. Private tuition establishment and foreign language schools: Amend the requirement for formal qualifications to the founder of a private tuition establishment and foreign language schools and remove prohibitions to licensing to relatives of license holders.
- 17. Vocational training institutes (VTI): Allow the advertising of VTI without the approval of the E.O.P.P.E.P.
- 18. Vocational training centres (VTC): Amend sector specific legislation to base the accreditation of a VTC on the basis of an integrity check of objective statutory requirements; ii) to allow private individuals to establish legal entities; iii) to renew the accreditation in the form of notification under Art. 3 of Law 3919/2011, by uncoupling it from the scoring system.
- 19. Post-secondary education centres: repeal the prohibition that post-secondary education centres cannot be established by shareholders or partners of the legal entity which applied for an establishment and operating licence; to renew operating licences in the form of notification under Art. 3 of Law 3919/2011; allow post-secondary education centres to recruit off-register staff notified to the supervising authority, as in the case of VTC; repeal the need to submit a letter of guarantee for the opening of a post-secondary education centre.
- 20. Accredited study centres: Amend the regulation on renewing licenses, so that licenses renewals are limited to the notifications under Art. 3 of law 3919/2011.
- 21. Press distribution agencies: remove prior authorization scheme and expand the number of economic activities carried out.

### Regulated professions — List no. 2 (adjustments to Hellenic Competition Commission opinions)
- 1. Professions under the Greek Ministry of Citizen Protection: i) sale of revolvers, pistols and target-shooting weapons; ii) preparation of explosives; manufacture, conversion, assembly, finishing and repair of firearms, and charging/recharging of firearm cartridges; iii) charging cartridges for hunting weapons for sale; iv) sale of fireworks and flare launchers; v) manufacture of fireworks and flare launchers; vi) operation of private security firms; vii) work by security staff of private security firms; viii) operation of private investigation offices; ix) work by staff of private investigation office: Cfr. HCC Opinion no. 13/VI/2012.
- 2. Dealers in antiques and more recent artifacts and restorers of fine art and antiquities: Cfr. HCC Opinion no. 18/VI/2012.
- 3. Professions / economic activities under the Greek Ministry of Citizen Protection – harbour guard: i) Organisations certifying divers; ii) Suppliers of recreational diving services; iii) Rental of means of marine recreation; iv) Service boat operations; v) Towing operations; vi) Licensing for outdoor trading (stands or itinerant) on board ships; vi) Operation of casinos on board passenger vessels flying the Greek flag on international voyages; vii) Lifeguards: (i) Operation of public health establishments on anchored or floating craft and (ii) Operation of public health establishments on seafaring vessels: Cfr. HCC Opinion no. 22/VII/2012.
- 4. Professions / economic activities under the Ministry of Health and Social Solidarity, Directorate-General for Welfare: i) Care units for old people; ii) Day care centres for old people; iii) Creative activity centres for children; iv) Creative activity centres for children with disabilities; v) Nurseries and kindergartens; vi) Private childrens’ camps; vii) Child welfare institutes: Cfr. HCC Opinion no. 25/VII/2012.
- 5. Petrol sellers, shotfirers, blasters and natural gas sales. Cfr. HCC Opinion no 26/VII/2012.

### Agreed roadmap — review of the Code of Civil Procedure (Ministry of Justice and EC/IMF/ECB)
- 1. By end-October 2012, the Taskforce prepares a briefing paper for its foreign expert members to enable full participation and development of alternative legal solutions.
- 2. Starting from October 2012, the Taskforce provides monthly updates by the end of each month on progress towards preparation by end-March 2013 of a detailed paper outlining the main proposals for amendments to the Code of Civil Procedure. The detailed paper is presented to the EC/IMF/ECB shortly after its completion.
- 3. By end-March 2013, the Taskforce prepares a detailed paper outlining the main proposals for amendments to the Code of Civil Procedure.
- 4. By end-May 2013, the Government holds a series of workshops to discuss the findings and proposals in the detailed paper; Taskforce presents a revised version to the EC/IMF/ECB and submits the revised paper, after reflecting comments, to the Government.
- 5. By end-June 2013, the Taskforce presents a detailed work plan providing for preparation of the draft law by end-January 2014 and containing specific deadlines and deliverables; the Ministry assesses compliance monthly and takes remedial actions if needed.
- 6. Starting from July 2013, the Taskforce prepares the draft law and provides monthly updates by the end of each month on progress towards preparation by end-January 2014 of the draft law. The Ministry holds at least three EC/IMF/ECB expert meetings in July 2013, October 2013 and January 2014.
- 7. The Government finalises the study on the costs of civil litigation, its recent increase and its effects on workload of civil courts, ensures recommendations are reflected in the draft law and publishes the study. (December-2013)
- 8. The Government carries out a public consultation on the draft law and submits the draft law to the Greek Parliament. (March-2014)

### Statistics to be published by the Ministry of Justice or Ministry of Finance
- (a) By end-October 2012, for each administrative tribunal, court of appeal and the supreme administrative court:
  - (i) the number of judges and administrative staff, with a breakdown for judges working in tax chambers or dealing primarily with tax cases;
  - (ii) the number of all cases;
  - (iii) the number of cases carried over from 2011;
  - (iv) the number of cases filed in the first two quarters of 2012;
  - (v) the number of tax cases, with a breakdown according to case value (up to EUR 150,000, between EUR 150,001 to EUR 300,000 and above EUR 300,000);
  - (v) the number of tax cases carried over from 2011;
  - (vi) the number of tax cases filed in the first two quarters of 2012;
  - (vii) the recovery rate for all tax cases, which for the purposes of the MoU, shall mean the ratio of the amount collected by the creditor in enforcement proceedings – following the issuance of an enforceable title – to the amount adjudicated by the court.
- (b) By end-October 2012, for each civil court, court of appeal and the supreme civil court:
  - (i) the number of judges and administrative staff;
  - (ii) the number of all cases;
  - (iii) the number of cases carried over from 2011;
  - (iv) the number of cases filed in the first two quarters of 2012;
  - (v) the number of dormant cases on 30 June 2012, i.e. cases brought before the civil courts in which the relevant court’s file records that they have been postponed or never received a hearing date and no party activity for receiving a hearing date has taken place for at least 18 months.
- (c) By end-October 2012, at the first instance, court of appeal level and the supreme civil court:
  - (i) the number of all corporate insolvency cases;
  - (ii) the number of corporate insolvency cases carried over from 2011;
  - (iii) the number of corporate insolvency cases filed in the first two quarters of 2012;
  - (iv) the average duration of corporate insolvency cases;
  - (v) a break-down of insolvency cases by sector (e.g., agriculture, construction, manufacturing, and services).
- (d) By end-December 2012, quarterly updates of the information in (a) to (c) above relating to the previous quarter.
- Additional corporate insolvency metrics (preserved verbatim):
  - (iii) the number of corporate insolvency cases filed in the first two quarters of 2012;
  - (iv) the average duration of corporate insolvency cases;
  - (v) the recovery rate for all corporate insolvency cases, which for the purposes of the MoU, shall mean the ratio of the amount collected by all creditors in reorganisation, debt enforcement or liquidation proceedings to the total amount owed by the company;
  - (vi) a break-down of insolvency cases by sector (e.g., agriculture, construction, manufacturing, and services).
- (d) By end-December 2012, quarterly updates of the information in (a) to (c) above relating to the previous quarter.

*https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr1320.pdf*

### 9.5 Non-exhaustive list of regulations on port work for review under the new port

### 9.5 Non-exhaustive list of regulations on port work for review under the new port strategy

### Regulations listed
- Port of Piraeus – law 1559/1950 (Gov. Gazette A 252/1950), law 2688/1999 (Gov. Gazett 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.

---

### 9.6 Additional fiscal measures for 2012 and Medium-Term Fiscal Strategy 2013-16

### Summary framing
- The measures included in the medium-term fiscal strategy (MTFS) through 2016 are listed as discrete measures with quantified fiscal impacts by year (2013 and 2014) and structural policy actions.  
- "If necessary, after consultation with the European Commission, ECB and IMF staff, these measures may be replaced with other measures yielding comparable or higher savings."

### 1. Rationalisations in wage bill
- Target savings: at least EUR 1,110 million in 2013, and additional EUR 259 million in 2014.
- Measures:
  - further reduction by 10 percent of fixed term contracts;
  - the rationalization of the State wage bill (including reduction the wage bill for consultant doctors, and an hiring freeze at the Ministry of Citizen protection and at the Ministry of Education, Religious Affairs, Culture and Sport);
  - progressive cuts in the monthly wages of employees under special wage regimes (judges, diplomats, doctors, professors, armed forces and police, airport personnel, and general secretaries) with effect by August 1, 2012, with the following marginal reduction schedule: 2 percent below EUR 1000; 10 percent for EUR 1000-1500; 20 percent for EUR 1500-2500; 30 percent for EUR 2500-4000; and 35 percent above EUR 4000;
  - elimination of automatic wage promotions for the armed forces by 2014 yielding yearly at least EUR 88 million net of taxes and contributions;
  - elimination of seasonal bonuses of employees at the state and local governments, and at legal entities of public and private law;
  - application of the uniform wage grid for public servants to the parliamentary staff (measure to be completed by December 2012);
  - abolition of exceptions from the public sector wage grid reform introduced in 2011;
  - suspension throughout 2016 of fiscal and performance bonuses for public sector employees;
  - reduction in the local government wage bill;
  - reductions in Members of Parliament compensations and other allowances;
  - reductions in cost for wages related to non-permanent secondary level teachers;
  - reduction in non-permanent teachers in universities and technical colleges;
  - reduction of intakes into professional academies;
  - extension of the 1:5 hiring rule (according to which 1 employees could only be hired against 5 retirees) for the General Government through 2016;
  - placing 2,000 civil service employees into the mobility and exit scheme, by abolishing positions of specialized employees, addressing disciplinary cases (including via outright dismissals) and by abolishing positions associated with closed entities.

### 2. Savings in pensions
- Target savings: at least EUR 4 800 million in 2013, and additional EUR 423 million in 2014.
- Measures:
  - the anticipation of the full effects of the pension reform in 2013;
  - the increase of the general pensionable age from 65 to 67 and of all age limits for particular types of pensions while maintaining the current number of contributions required to qualify for the full pension at 40 years;
  - cuts in new lump-sum benefits for public employees and for all Social Security Funds;
  - the reduction of the overall monthly pension incomes (main and supplementary pensions) per pensioner (between €1000-€1500 by 5 percent; €1500-€2000 by 10 percent; €2000-€3000 by 15 percent and above €3000 by 20 percent);
  - cuts in pensions for special wage regimes equivalent to the cuts to wages in special wage regimes;
  - cuts in pensions of military and police due to elimination of automatic wage promotions;
  - increase in healthcare contributions for farmers;
  - elimination of seasonal bonuses for main and supplementary pensions (exceptions allowed for people with disabilities);
  - means-testing pensions for specific categories of beneficiaries;
  - elimination of special pension benefits of trade unionists and cross-checks to abolish ineligible pension benefits in 2013;
  - reduction of pensions of elected staff.

### 3. Cuts in the state's operational expenditures
- Target savings: at least EUR 239 million in 2013 and additional EUR 285 million in 2014.
- Measures:
  - gradual implementation of e-procurement for all public administration;
  - 25 percent reduction in discretionary non-wage spending;
  - reduction in subsidies to internal ferry boats and in grants to entities outside the general governments;
  - elimination of grants to farmers' trade unions linked to assistance in applying for EU financial aid;
  - tightening spending rule for the Green Fund in 2014 (at 2.5 percent of the stock of deposits).

### 4. Cost reductions and efficiency improvements in education expenditure
- Target savings: at least EUR 86 million in 2013, and additional EUR 37 million in 2014.
- Measures:
  - reduction in funding for entities outside of the General Government budget for education;
  - rationalisation of the network of higher education institutions;
  - reduction in expenses for central and regional education administrations.

### 5. Savings in state-owned enterprises
- Target savings: at least EUR 249 million in 2013 and additional EUR 123 million in 2014.
- Measures:
  - increase in revenue;
  - reduction in transfers from the State budget to entities outside the General Government;
  - operational and personnel expenses reductions (harmonization of the wage grid of all state-owned enterprises in Chapter A with the uniform wage grid for state employees reducing average wages to no more than €1900 per month).
- Institutional change:
  - new institutional framework introduced by 2013 fixing the fiscal target for the overall sector in line with the MTFS, bettering the current monitoring system and introducing an enforcement mechanism in case of deviations from the target.

### 6. Cuts in operational defense-related expenditure
- Target savings: at least EUR 303 million in 2013 and additional EUR 100 million in 2014.
- Measures:
  - reduction in expenditures for military procurement by EUR 340 million in 2013-14;
  - reduction in operational expenditures;
  - closure of military camps;
  - reduction of intakes into military academies.

### 7. Savings in healthcare and pharmaceutical expenditure
- Target savings: at least EUR 455 million in 2013, and additional EUR 620 million in 2014.
- Measures and targets:
  - promote use of generic medicines via incentives and obligations along the medicines supply chain;
  - revise the co-payment structure for medicines to exempt from co-payment only a restricted number of medicines related to specific therapeutic treatments;
  - revision of medicines' price, based on the three EU countries with the lowest prices;
  - application of automatic claw-back mechanism to pharmaceutical producers which guarantees that the outpatient pharmaceutical expenditure does not exceed the targets of EUR 2 440 billion in 2013 and EUR 2000 million in 2014 to be in line with the overall target of 1 percent of GDP by 2014, while maintaining supplies for patients;
  - Increase in co-payments in hospitals and for prescriptions of drugs from 2014 onwards;
  - reductions in hospitals' expenditures and a more effective implementation of the Health Map.

### 8. Savings from rationalisation of social benefits
- Target savings: at least EUR 217 million in 2013 and additional EUR 78 million in 2014.
- Measures:
  - introduction of a length of residence in Greece criterion for the provision of pension benefits for uninsured individuals aiming to achieve savings (net of income taxes and social security contributions) of €13 million in 2013 and additional €13 million in 2014;
  - replacement of existing family benefits with a single targeted benefit which absorbs the tax family allowances;
  - rationalization of the transportation reimbursement scheme for selected categories of patients in order to avoid frauds and misuse of public funds maintaining the service according to actual needs of patients;
  - reduction of unemployment benefits targeted to specific geographical areas;
  - targeting assistance pensions provided by EKAS to persons above 64 years;
  - reduction of benefits to farmers;
  - introduction of two new social programmes capped, respectively, at 35 and 20 million from 2014 onwards: a Minimum Income Guarantee scheme applied in two pilot areas of the country with different socioeconomic profiles, and introducing a benefit equal to €200 per month payable for up to 12 months to long-term unemployed who exhaust the full length of unemployment benefit (12 months), provided they do not qualify for other training schemes and have family taxable income up to €10,000.

### 9. Cuts in state transfers to local governments
- Target savings: at least EUR 50 million in 2013 and additional EUR 160 million in 2014.
- Measures:
  - cuts in transfers from the State for ordinary expenses and investment of local government;
  - strengthen an internal stability pact by 2013 fixing balanced budget targets, putting in place an effective system of monitoring municipalities' expenses, economic disincentives in case of deviations from the targets and excluding any possibility for financing deficits.

### 10. Cuts in expenditure by the public investment budget
- Target savings: EUR 150 million in 2013 and additional EUR 150 million in 2014.
- Scope: domestically-financed public investment, and investment-related grants.

### 11. Increases in revenue
- Target increases: at least EUR 1 689 million in 2013 and additional EUR 1 799 million in 2014.
- Measures:
  - increases in the fee for law suits;
  - an increase of tax on ship owners' activities;
  - reducing VAT refunds for farmers;
  - reduction of diesel excise duty subsidy provided to farmers;
  - equalization of the excise tax on LPG and motor diesel oil by raising the LPG tax;
  - equalization of social security contributions by raising the ceiling for employees first employed before 1993 to that of employees first employed after 1993;
  - a reform of tobacco excise taxation;
  - imposing a 30 percent taxation on OPAP's gross gaming revenue;
  - equalization of taxation of winnings towards 10 percent rate without deductibles;
  - reintroduction of the 2011 one-off taxation of pools, yachts and luxury goods from 2014 onwards.
- Tax reform commitment:
  - By December 2012 a tax reform will be adopted that aims at simplifying the tax system, means-testing family allowances, eliminating selected income tax credits and deductions and preferential regimes, broadening bases and ensuring an increase in revenue by about EUR 1.8 billion.

---

### 9.7 Provision of data

### General transmission details
- During the programme, the following data shall be made available to the European Commission, the ECB and the IMF staff on a regular basis.
- These data should be sent to the following e-mail address: ecfin-greece-data@ec.europa.eu
- This address should also be used for the transmission of other data and reports related to the monitoring of the programme.

### To be provided by the Ministry of Finance (selection of required data and periodicity)
- 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 labour reserve, per entity. (Data compiled by the Ministries of Interior and Finance) — Monthly, 30 days after the end of each month.
- Weekly information on the Government's cash position with indication of sources and uses as well of number of days covered. (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.

### To be provided by the Bank of Greece (selection)
- 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.

### To be provided by the Hellenic Financial Stability Fund
- Detailed report on the balance sheet of the Hellenic Financial Stability Fund with indication and explanation of changes in the accounts. — Monthly.

---

*Prepared by the European Department (In Consultation with Other Departments). Approved by Reza Moghadam and Lorenzo Giorgianni. January 15, 2013.*

### 1.      This supplement provides information that has become available since the staff

### _cr1320 - 1. This supplement provides information that has become available since the staff

### Recent Economic Developments
- Economy remains very weak:
  - Industrial production dipped 3.5 percent year-on-year in October.
  - Unemployment climbed, reaching almost 27 percent (seasonally adjusted).
- Inflation and core inflation:
  - CPI inflation for 2012: 1 percent (average) and 0.3 percent (end-period).
  - Staff projections were 1.2 percent (average) and 1.3 percent (end-period).
  - Core inflation in December 2012: -0.1 percent (average) and -0.9 percent (year-end).
- External sector:
  - October current account outcome was in line with staff projections.
  - Imports down 11.7 percent in January–October, year-on-year.
  - Exports up 0.3 percent (January–October, year-on-year).
- Banking sector deposits:
  - Greek banks saw an inflow of €4.9 billion (3.3 percent) in private deposits in December.
  - Marked the fourth consecutive month of net inflows, with acceleration after European partners’ approval of the review.

### Program Implementation — Quantitative Targets and Prior Actions
- End-December performance criteria and indicative targets:
  - One quarterly performance criterion for end-December (on external arrears) was met.
  - One indicative target missed: privatization revenues target of €3.2 billion for 2012 realized only €6 million.
  - Data on remaining end-December performance criteria and on domestic arrears indicative target were not yet available; authorities requested waivers of applicability.
- Fiscal prior action on shipping taxes:
  - MoU with merchant fleet owners (to secure tonnage tax yielding €80 million in 2013 and €140 million each year in 2014–16) had not been signed.
  - Separate legislation imposing tonnage taxes was passed, expected to yield €75–80 million per year starting in 2013.
  - Authorities expect to sign the MoU after ship owners’ annual meeting on February 8, which would raise a further €60–65 million per year starting in 2014, bringing revenues to the MEFP-envisioned total.
  - With withholding tax on deposits raised to 15 percent in 2013 (a year earlier than envisaged), staff does not foresee a fiscal gap from the delayed MoU.

### Structural Benchmarks and Other MEFP Commitments
- Tax reform:
  - Parliament passed a tax bill broadening the tax base and simplifying the tax system; staff considers the overdue structural benchmark on tax reform (scheduled for end-June 2012) met.
  - A second stage of tax reform is planned for May 2013 focusing on the tax code, income tax simplification, requirements for taxpayers to collect receipts, and residual issues in taxation of income from real estate.
- End-December structural benchmarks likely not met:
  - Revenue administration KPIs: based on end-November outcomes, staff considers it highly unlikely that end-December targets were achieved; appointment on January 10 of a new head of tax administration intended to address leadership vacuum. Authorities committed to set KPIs for Q1 2013 and achieve them before the next review.
  - Public financial management quarterly indicators: as of end-November, only 66 percent of entities were reporting to commitment registers versus target of 90 percent for end-year; unlikely to have been met. Implementation of General Directorates of Financial Services in line ministries is underway to improve expenditure control in 2013. Authorities committed to set KPIs for Q1 2013 and achieve them before the next review.
  - Screening and cleaning legislation on regulated professions: majority addressed via prior action; review of remaining professions underway; draft legislation partly implements the benchmark; full implementation expected not later than end-March.

### Financial Sector Restructuring and Other Structural Actions
- Bank recapitalization and restructuring:
  - HFSF provided bridge capital to raise core tier one ratios of the four core banks to 9 percent using funds disbursed by Greece’s European partners in December.
  - Resolution of Hellenic Postbank via a purchase and assumption (P&A) transaction (end-January structural benchmark) expected to be completed imminently; if P&A not feasible, resolution via a bridge bank may be necessary.
  - Pending merger between National Bank of Greece and Eurobank will reduce core banks to three.
- Other MEFP actions:
  - Completed: increases in end-user prices for low voltage electricity customers (with further increases in May and July), publication of regional tax offices to be closed, publication of trade facilitation strategy.
  - Incomplete: full staffing of directorate of planning, management, and monitoring of reforms at the Office of the Prime Minister; publication of report on reducing non-tax case backlog in courts (hampered by judiciary “work to rule” strike).
  - Several privatization-support actions delayed, but authorities and staff agree this need not affect timing of sales.

### European Support and Disbursements
- Milestones for €2 billion January tranche were completed: passage of the tax bill (January 12) and the increase in electricity prices and the renewable energy levy.
- IMF Executive Board actions and disbursement:
  - Executive Board completed first and second reviews under the four-year EFF arrangement and approved disbursement equivalent to SDR 2.798 billion (about €3.24 billion or US$4.3 billion).
  - Total Fund disbursements under the EFF arrangement to date: SDR 4.197 billion (about €4.86 billion or US$6.46 billion).
  - Executive Board approved waivers of applicability of end-December 2012 performance criteria, modified performance criteria, and rephased disbursements.
- EFF arrangement context:
  - EFF approved on March 15, 2012.
  - Part of joint financing with euro area member states amounting to €172 billion over four years.
  - Exceptional access to IMF resources amounting to about 2,159 percent of Greece’s quota.
- European partners’ debt support:
  - Extended repayment periods and assurances to consider additional conditional measures and assistance to reduce debt to substantially below 110 percent of GDP by 2022.
  - Euro area member states reaffirmed IMF preferred creditor status and committed to provide adequate support, conditional on Greece’s continued cooperation.

### Supplementary Staff Assessment — Progress, Challenges, and Policy Priorities
- Assessment of implementation:
  - Greece has made further progress with reforms but timely program implementation remains a constant challenge requiring intensive and uninterrupted efforts.
  - Completion of all prior actions (with one exception where a substitute measure was found) and completion of the tax reform benchmark and other end-year MEFP commitments evidence commitment to the reform agenda.
  - Slippages in December structural benchmarks underscore challenges ahead, particularly in tax administration.
- Critical priorities and recommendations:
  - Radical overhaul of tax administration is critical to bolster tax collections, fight tax evasion, and shrink the public sector (including targeted redundancies).
  - Forceful structural reforms and broad-based domestic support needed to restore growth, competitiveness, and debt sustainability.
  - Ambitious reductions in barriers to competition and delivery of privatization plans with strengthened governance where necessary.
  - Restructure and strengthen the banking system; make the new monitoring and supervisory framework effective to protect the public interest and prevent state interference in management.
  - Additional financing from euro area member states to allow Greece to redeem treasury bills from banks could support liquidity and credit creation.
  - Continued long-term support from Greece’s European partners contingent on implementation of appropriate adjustment policies.

### Press Release Highlights and Executive Statements
- IMF Managing Director Christine Lagarde emphasized:
  - Program moving in the right direction with strong fiscal adjustment and notable labor-cost competitiveness gains.
  - Need for forceful structural reforms, broad domestic support, and long-term European partner support.
  - Importance of bank restructuring and effective supervisory frameworks.
  - Urgent need to overhaul tax administration.
- Outcomes acknowledged:
  - Greece regained more than 18 percentage points of competitiveness lost in 2001–2009 by end-2012.
  - Current account deficit shrank from about 15.0 percent of GDP in 2008 to an estimated 4.2 percent for 2012.
  - IMF/EU/ECB-supported program aims to restore competitiveness and set stage for new development model based on flexible labor and product markets, efficient public sector, and effective tax administration.

### Statement by Alternate Executive Director for Greece — Political Economy and Way Forward
- Economic and social impact:
  - Cumulative decline of GDP in 2008–2012 expected to exceed 21 percent.
  - Unemployment tripled from 7.6 percent in 2008 to 23.6 percent in Q2 2012 and to 26.0 percent in September 2012.
  - Youth unemployment reached 56.4 percent.
  - Risk of an “unemployment trap” with skills erosion among long-term unemployed.
  - Deteriorating financing conditions for enterprises; accumulation of public sector arrears; negative credit flows hindering exports and investment.
- Government strategy and commitments:
  - Continue structural reforms to liberalize product and services markets, remove barriers to entry, and reduce oligopolistic pricing.
  - Achieve fiscal goals through tax and expenditure measures and a broad overhaul of Revenue Administration and Public Financial Management rules and procedures.
  - Accelerate privatization program stalled during 2012.
  - Welcome extension of fiscal consolidation period to 2016 and additional financing and easing of repayment terms from European partners.
  - Committed to intensify efforts across macroeconomic policy, overcome vested interests, and tackle tax evasion and corruption.

### Fiscal Outcomes and Targets (selected figures)
- General government primary deficit in 2012 estimated at 1.5 percent of GDP.
- General government primary deficit was 2.2 percent of GDP in 2011 and 10.4 percent of GDP in 2009.
- Cumulative adjustment of 8.9 percentage points between 2009 and 2012.

*Italic: IMF staff supplement and associated press material, January 2013.*

### 4.5 percent of GDP by 2016, the estimated 2012 deficit suggests that, already by the end

### _cr1320 - 4.5 percent of GDP by 2016, the estimated 2012 deficit suggests that, already by the end

### Fiscal consolidation progress and measures
- By the end of last year, Greece had already covered 60 percent of the distance toward the 2016 fiscal target, i.e. a cumulative 8.9 percentage points reduction out of 14.9 percentage points of GDP expected by 2016.
- The achievement of the 2016 target is predicated on a series of new front-loaded revenue and expenditure measures amounting to 7 ¼ percent of GDP, of which 5 percent of GDP are part of the 2013 Budget that has already been approved by parliament.
- Core measures target sensitive public spending areas:
  - Further consolidation in pensions, wages, salaries and social benefits.
  - Substantial cuts in wasteful health and education spending.
  - Further consolidation in defense and public administration expenditures.

### Revenue administration and public financial management
- Policy premise: strengthening administrative procedures is essential to ensure implementation and ownership by Greek citizens, which hinges on a sense of justice in burden allocation.
- Revenue Administration — two major initiatives:
  - Establishment of a new Secretary General of Public Revenues with a five–year tenure, overseeing the internal revenue service (tax and customs) with significant autonomy. The Secretary General will have authority to:
    - develop, update and supervise the tax administration’s strategic planning;
    - set goals and assessment criteria;
    - appoint the heads of organizational units; and
    - take measures to combat corruption.
  - Systematic cross-checking of bank deposits outside Greece with corresponding tax returns of the owners to pursue potential major tax evaders. If a major and inexplicable discrepancy is identified between the tax returns and the remittances abroad, the taxpayers will be liable to surcharges and penalties. It is the first time in the history of Greece that a systematic action against tax evasion is taken on such large scale.
- Public Financial Management — continuing improvements to strengthen commitment control and budget execution:
  - Establishment of General Directorates of Financial Services.
  - Extension of commitment registers to the National Health Service to stem the creation of arrears.
  - Introduction of a new rule imposing automatic cuts in entities’ expenditures (other than wages, pensions and social benefits) whenever expenditure targets are missed due to non-cyclical factors.

### Privatization program
- Government priorities to energize the privatization program (which effectively stalled in 2012):
  - Speeding up privatization in the energy sector and the state-owned railways.
  - Promoting long-term concessions for regional airports and ports.
  - Facilitating strategic and private investment, including the development of the former Athens International Airport site.
- Hellenic Republic Asset Development Fund (HRADF) progress:
  - Privatization of six state assets completed and initiation of privatization for the State Lottery, port authorities, infrastructure investments, and real estate assets.
- Expected yields from privatization (below original EFF-supported program targets):
  - €2.6 billion in 2013
  - €2.4 billion in 2014
  - €1.1 billion in 2015
  - about €3.4 billion in 2016
- Governance: government committed to strengthen HRADF governance, with HRADF remaining fully accountable to parliament on an ex-post basis for the integrity of every privatization sale.

### Bank recapitalization and restructuring
- Banking sector benefited greatly from financial assistance under the Fund-supported program after the adverse effects of the PSI on balance sheets.
- Objective: create a leaner, well-capitalized and viable banking sector to encourage repatriation of deposits and reverse adverse financing conditions for enterprises and households.
- Recent restructuring developments:
  - In July the Agricultural Bank, a large state-owned bank, was merged with Piraeus Bank, a private bank.
  - In October the acquisition of Emporiki bank by Alpha Bank, and of Geniki Bank by Piraeus Bank were agreed.
  - The National Bank of Greece has offered a voluntary share swap to Eurobank aiming to create the largest regional bank in South East Europe.
- Institutional framework: Greek government and the Bank of Greece have established a framework to ensure continued restructuring and strengthening of the banking system after the recapitalization process is complete.

### Attracting foreign investment and SME support
- Since March the government has pushed growth-promoting policies and increased the rate of absorption of EU structural funds; in the period up to May 2012 it was above the EU average for the first time.
- Priority projects with cumulative budget through end-2015 are nearly 6 percent of GDP and are on schedule.
- Support for SMEs:
  - Agreements in July and September with the European Investment Bank for operation of a Guarantee Fund to support lending to small and medium enterprises.
  - Deployment of a Risk-Sharing Instrument aimed to support infrastructure projects and investments in the energy sector.

### Liberalization of labor, product and services markets
- Labor market reforms and other market reforms resumed after delays in 2011 and early 2012; government determined to pursue further reforms.
- Strengthening labor market institutions:
  - Following reductions in severance pay, government will promote an efficient wage-setting mechanism, reduce non-wage labor costs (e.g. steps to reduce the administrative burden posed by various regulations of the Labor Inspectorate), and create more options for adaptability of working hours, especially for small- and medium-scale enterprises.
- Promoting an efficient and competitive business environment:
  - New “road map” released in November reduces the administrative burden of (a) creating a company, (b) obtaining licenses for manufacturing activities, and (c) setting-up import and export companies, accompanied by initiatives to improve the functioning of the judicial system.
- Liberalizing energy policy — main pillars:
  - a restructuring of the Public Power Company;
  - reforming the renewable energy support schemes;
  - introducing measures to have effective competition in generation and supply of electricity; and
  - facilitating the import and trade of oil and oil products.
- Reforming transport services — priorities:
  - remove restrictions in limousine and shuttle services;
  - improve the operation and connectivity of ports;
  - restructure the Civil Aviation Authority; and
  - gradually restructure public railways with the aim of eventual privatization.
- Liberalizing “regulated” professions:
  - elimination of mandatory use of services;
  - streamlining of minimum fees; and
  - simplification of recognition of professional qualifications.

### Conclusion and policy outlook
- The crisis has caused severe economic and social dislocations unprecedented in modern Greek history, but presents an opportunity to reorient the economy toward high-productivity, internationally tradable sectors.
- Objectives include modernizing public administration by reducing the size of the public sector while rendering it more efficient and more business- and citizen-friendly.
- Authorities broadly agree with staff analysis, recommendations and appraisal; they have requested Board approval of the completion of the first and second reviews and associated waiver, modification of performance criteria and rephasing of access of the EFF-supported program.
- The government emphasizes the need for completion of all prior actions, introduction of correction mechanisms to safeguard fiscal targets, and enhancement of governance to keep the program on track; authorities acknowledge risks and strain on civil service capacity but are hopeful that 2013 will be the year when sacrifices begin to bear fruit.

*Source: _cr1320 - 4.5 percent of GDP by 2016, the estimated 2012 deficit suggests that, already by the end*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr1320.pdf_