ΑΞΙΟΛΟΓΗΣΗ ΤΗΣ ΕΥΡΩΠΑΪΚΗΣ ΕΠΙΤΡΟΠΗΣ ΑΥΓΟΥΣΤΟΣ 2010

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ISBN: 978-92-79-16545-0
doi: 10.2765/69759

© European Union, 2010
Reproduction is authorised provided the source is acknowledged.

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The Economic Adjustment Programme
for Greece

First review – summer 2010

2

CONTENTS

3

Executive summary

7

1.

Introduction

9

2.

Macroeconomic developments

11

3.

Financial markets and financial sector developments

15

4.

Programme compliance and policy discussions

21

4.1

Fiscal policy

21

4.2

Structural fiscal reforms

27

4.3

Financial sector policy

35

4.4

Other structural reforms

39

4.4.1 Labour market

41

4.4.2 Business environment

43

4.4.3 Energy

46

4.4.4 Transport

49

4.4.5 Absorption of structural funds

51

4.4.6 Public enterprises and privatisation

53

5.

Programme financing and treasury management

55

Annex 1

High-frequency indicators

57

Annex 2

Assessment of compliance with required action for the first review 60

Annex 3

Provision of data requirements

71

Annex 4

Updated macroeconomic forecast

74

Annex 5

Quantitative performance criteria

75

Annex 6

Financing gap projections

76

Annex 7

Statement by the European Commission, the ECB and IMF on
the First review Mission to Greece

77

Annex 8

Updated programme documents

79

Letter of intent

79

Memorandum of Economic and Financial Policies

81

Memorandum of Understanding on Specific Economic
Policy Conditionality

89

Technical Memorandum of Understanding

112

LIST OF BOXES

1. The economic adjustment programme for Greece

9

2. The effect of indirect taxation on inflation

13

3. Debt restructuring – Are market fears founded?

16

4. CEBS Stress Tests of Greek banks

20

5. From cash accounts to ESA95 accounts

24

6. The tax reform

32

7. The pension reform law

34

4

8. The Hellenic Financial Stability Fund

36

9. Potential growth

40

10. Opening up the electricity sector

48

11. Restructuring Greece's railway sector

51

12. State-owned enterprises and privatisation

53

13. Euro area stability support to Greece: main features

55

LIST OF TABLES

3.1 Banking sector soundness indicators

18
4.1 Summary of compliance with policy conditionality for the first review 21
4.2 Quantitative performance criteria and outcomes (EUR billion)

26

4.3 State budget execution (January to June 2010, cash data)

27

4.4 Payment claims

52

LIST OF GRAPHS

2. 1 Main macroeconomic indicators

11

2. 2 Correlation of output gap and inflation in Greece and the euro
area (1998-2010)

12

3. 1 Market sentiment indicators

15

3. 2 Loan and deposit developments in Greece

15

3. 3 Bank interest rates on new deposits and loans vis-à-vis euro area
residents

18
4. 1 Budgetary consolidation under the programme (EUR million) 22
4. 2 State budget cash balance (as of end June 2010)

27

4. 3 Developments of general government primary cash balance and
spending compared to the end June performance criterion 28
4. 4 Public employment – Structure (June 2010) and changes (June 2009
to June 2010)

30

4. 5 Long-term change in age related expenditures at unchanged policy,
prior to reform (2007 -2060)

32

4. 6 Long-term scenarios for government debt with and without pension
reform

32

4. 7 Greek banks' borrowings from the ECB

36
4. 8 Strictness of employment protection legislation (OECD indicator) 43
4. 9 World Bank Doing Business 2010 rankings

43
4.10 Barriers to entry in services: composite indicator (1998-2008) 44
4.11 Regulation in professional service indicator (1996-2008)

46

4.12 Composite indicator of product market regulation in the
EU (1998-2008)

46

4.13 Share of the largest electricity generator in the domestic
market (2007)

47

4.14 Road transport – indicator based on the number of (semi-) trailers
indexed to GDP

50

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ACKNOWLEDGEMENTS
This report was prepared in the Directorate-General of Economic and Financial Affairs under the
direction of Servaas Deroose, acting Deputy Director-General.
Contributors:
Servaas Deroose, Uwe Böwer, Giuseppe Carone, Declan Costello, Leila Fernández Stembridge,
Luis García Lombardero, Loukas Kaskarelis, Filip Keereman, Daniel Kosicki, Paul Kutos,
Sven Langedijk, George Moschovis, João Nogueira Martins, Elena Pavlova, Milda Valentinaitė
and Peter Weiss. 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-F-3
BU-1 01-140
B-1049 Brussels
e-mail: joao.nogueiramartins@ec.europa.eu

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