The Second Economic Adjustment Programme for Greece

195 Pages·2012·1.3 MB·English

EUROPEAN

ECONOMY
Occasional Papers 94 | March 2012
The Second Economic Adjustment
Programme for Greece

March 2012
Economic and
Financial Affairs
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KC-AH-12-094-EN-N
ISBN 978-92-79-22849-0
doi: 10.2765/20231

© European Union, 2012
Reproduction is authorised provided the source is acknowledged.
EUROPEAN COMMISSION
DIRECTORATE GENERAL
ECONOMIC AND FINANCIAL AFFAIRS

The Second Economic Adjustment
Programme for Greece
March 2012

OUTLINE OF THE REPORT

Executive summary 1

1. Introduction 5
2. Macroeconomic developments 11
3. Financial markets and financial sector developments 17
4. Programme implementation and policy discussions 21
4.1 Fiscal policy 21
4.2 Fiscal strategy in 2012 and subsequent years 24
4.3 Structural fiscal reforms 31
4.3.1. Privatisation 31
4.3.2. Revenue administration, fight against tax evasion and
tax reform 34
4.3.3. Expenditure control 35
4.3.4. Public administration, public procurement and
social programmes 35
4.3.5. Healthcare and pension reform 36
4.4 Growth-enhancing structural reforms 37
4.4.1. Labour market 37
4.4.2. Regulated professions 41
4.4.3. Energy and transport 41
4.4.4. Business environment and reforms in product and
service markets 42
4.4.5. Absorption of structural funds 43
4.4.6. Judicial reform 43
4.5 Fiscal financing and treasury management 44
4.6 Technical assistance and monitoring 48

Annex 1 Assessment of compliance with the Memorandum of
Understanding on Specific Policy Conditionality 51
Annex 2 Macroeconomic forecast 85
Annex 3 Updated programme documents 91

LIST OF BOXES
1. Statement by the Eurogroup: 21 February 2012 6
2. Economic Adjustment Programme and social equity 8
3. Debt sustainability assessment 27
4. Private Sector Involvement 47

LIST OF TABLES
1. Disbursements under the first financing programme 5
2. Contributions by the euro area Member States to disbursements to
Greece under the first financing programme 6
3. Member States guarantees to the EFSF 8
4. Macroeconomic scenario: main features 16
5. Ratings 18
6. Banking sector soundness indicators 19
i
7. Summary of compliance with policy conditionality 21
8. Fiscal quantitative criteria 22
9. Implementation monitoring: Estimated yield of measures agreed in
June and October 2011 23
10. Developments in public employment 24
11. Main fiscal indicators 2010-14 25
12. Deficit and measures accounting: from the deficit in one year to the
next 26
13. Privatisation plans: transactions, so far 31
14. Planned privatisation receipts 32
15. Privatisation – transactions in the pipeline 33
16. Arrears to suppliers 35
17. Minimum monthly wages 40
18. Interest rates and interest payments charged to Greece by the euro
area Member States 45
19. Planned schedule of disbursement for the new programme 46

LIST OF GRAPHS
1. Real GDP growth 11
2. Business and Consumer Surveys 12
3. Equipment 12
4. Housing investment 12
5. Market shares : Performance of Greek exports of goods and
services relative to the imports of 35 industrial countries 13
6. Exports and non-domestic industrial orders 13
7. Industrial production and capacity utilisation 13
8. HICP inflation developments and projections 14
9. HICP inflation main drivers 14
10. Employment and unemployment rate 15
11. Nominal Unit Labour Cost 15
12. Athens Stock Exchange Indices 17
13. Bank deposits 18
14. Greek banks' borrowing from the Eurosystem via monetary
policy operations 18
15. Credit to private sector 19
16. Non-performing loans 19
17. Loan to deposit ratio by bank 19
18. State primary payments - 2011 22
19. Government primary balance – 2011. Outcomes and quarterly
criteria 22
ii
20. Government revenue, expenditure and gross debt 24
21. Recourse to arbitration to settle negotiations disputes 39
22. Nominal Unit Labour Cost 39
23. Regulation of the airline industry 42
24. Outstanding stock of T-bills 44
29. T-bill auctions since July 2010 44

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ACKNOWLEDGEMENTS

The report was prepared in the Directorate General Economic and Financial Affairs, under the
direction of Matthias Mors, director and mission chief.
Contributors:
Matthias Mors, Zeta Astra, Pedro Cardoso, Giuseppe Carone, Jakob E. Christensen, Fotini
Dionyssopoulou, Riccardo Ercoli, Leila Fernández Stembridge, Luis García Lombardero,
Loukas Kaskarelis, Frank Kohlenberger, Daniel Kosicki, Peter Lohmus, João Nogueira
Martins, Ricardo Selves, Irmantas Simonis, Milda Valentinaitė, Rafał Wielądek and Ana
Xavier, and Markus Zalewski. Christos Zavos was responsible for the layout.
The report was prepared in liaison with the ECB.
Comments on the report would be gratefully received and should be sent, by mail or e-mail to:
João Nogueira Martins,
European Commission,
Unit ECFIN-G-3,
BU 1 01-140,
B-1040 Brussels.
e-mail: [email protected]

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

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