1. (A)  The European Stability Mechanism (“ESM”) was established by the Treaty Establishing the European Stability Mechanism entered into between the euro area Member States (the “ESM Treaty”) for the purpose of mobilising funding and providing stability support for the benefit of ESM members which are experiencing, or are threatened by, severe financial problems, if indispensable to safeguard the financial stability of the euro area as a whole and of its member states.
  2. (B)  ESM may grant financial assistance under financial assistance facility agreements by way of any of loan disbursements under precautionary conditioned credit lines or enhanced conditions credit lines, loans to ESM members under macro-economic adjustment programmes, facilities to (directly and indirectly) finance the recapitalisation of financial institutions in an ESM member state, and facilities for the purchases of bonds in the primary or secondary markets, all subject to strict conditionality appropriate to the financial instrument(s) chosen (each such loan or disbursement under such a financial assistance facility agreement being a “Financial Assistance”).
  3. (C)  The European Commission, in liaison with the ECB, assessed (i) the existence of a risk of financial stability of the euro area as a whole or of its member states, (ii) whether the public debt of the Hellenic Republic (the “Beneficiary Member State”) was sustainable and (iii) the actual or potential financing needs of the Beneficiary Member State, and on the basis of such assessment the ESM Board of Governors decided in principle to grant stability support to the Beneficiary Member State in the form of a financial assistance facility.
  4. (D)  The Memorandum of Understanding has been negotiated and finalised between the European Commission (on behalf of the ESM and with the approval of its Board of Governors) – in liaison with the ECB – with input from the IMF, and the Beneficiary Member State. The financial assistance to be provided to the Beneficiary Member State by the ESM shall be dependent upon compliance by the Beneficiary Member State with the measures set out in the Memorandum of Understanding.
  5. (E)  The ESM Board of Governors approved this Memorandum of Understanding and the European Commission signing the Memorandum of Understanding on behalf of the ESM.
  6. (F)  With the exception of the first disbursement, the release of Financial Assistance by ESM under any financial assistance facility agreement, shall, unless otherwise specified, be conditional upon the ESM Board of Directors deciding, on the basis of reports from the European Commission (in liaison with the ECB) in accordance with Article 13(7) of the ESM Treaty, that the Beneficiary Member State has complied with the conditionality attached to the financial assistance facility agreement, including compliance with the measures set out in this Memorandum of Understanding.

This Memorandum of Understanding may be amended upon mutual agreement of the parties, by the European Commission, acting on behalf of the ESM, in liaison with the ECB, and together with the IMF and the Beneficiary Member State, in the form of an addendum. The addendum will be an integral part of the memorandum and will become effective upon signature.


Done in Athens on 19 August 2015 and in Brussels on 19 August 2015 in five (5) originals, in the English language.


____________________________ Represented by Euclid Tsakalotos, Minister of Finance


________________________________ Represented by Yannis Stournaras, Governor of The Bank of Greece


________________________________ Represented by Valdis Dombrovskis,

Vice-President of the European Commission responsible for the Euro and Social Dialogue


Agreed at staff level – 11 August 2015

Memorandum of Understanding for a three-year ESM programme

1. Outlook and strategy

Greece has requested support from its European partners, to restore sustainable growth, create jobs, reduce inequalities, and address the risks to its own financial stability and to that of the euro area. This Memorandum of Understanding (MoU) has been prepared in response to a request of 8 July 2015 from the Hellenic Republic to the Chairperson of the Board of Governors of the European Stability Mechanism (ESM) for stability support in the form of a loan with an availability period of three years. In accordance with Article 13(3) of the ESM Treaty, it details the conditionality attached to the financial assistance facility covering the period 2015-18. The conditionality will be updated on a quarterly basis, taking into account the progress in reforms achieved over the previous quarter. In each review the specific policy measures and other instruments to achieve these broad objectives outlined here will be fully specified in detail and timeline.

Success requires ownership of the reform agenda programme by the Greek authorities. The Government therefore stands ready to take any measures that may become appropriate for this purpose as circumstances change. The Government commits to consult and agree with the European Commission, the European Central Bank and the International Monetary Fund on all actions relevant for the achievement of the objectives of the Memorandum of Understanding before these are finalized and legally adopted.

The recovery strategy takes into account the need for social justice and fairness, both across and within generations. Fiscal constraints have imposed hard choices, and it is therefore important that the burden of adjustment is borne by all parts of society and taking into account the ability to pay. Priority has been placed on actions to tackle tax evasion, fraud and strategic defaulters, as these impose a burden on the honest citizens and companies who pay their taxes and loans on time. Product market reforms seek to eliminate the rents accruing to vested interest groups: through higher prices, these undermine the disposable income of consumers and harm the competitiveness of companies. Pension reforms have focussed on measures to remove exemptions and end early-retirement. To get people back to work and prevent the entrenching of long-term unemployment, the authorities, working closely with European partners, will initiate measures to boost employment by 50.000 people targeting the long-term unemployed. A fairer society will require that Greece improves the design of its welfare system, so that there is a genuine social safety net which targets scarce resources at those who need it most. The authorities plan to benefit from available technical assistance from international organisations on measures to provide access to health care for all (including the uninsured) and to roll out a basic social safety net in the form of a Guaranteed Minimum Income (GMI).


Implementation of the reform agenda will provide the basis for a sustainable recovery, and the policies are built around four pillars:

  • Restoring fiscal sustainability (section 2): Greece will target a medium-term primary surplus of 3.5% of GDP to be achieved through a combination of upfront parametric fiscal reforms, including to its VAT and pension system, supported by an ambitious programme to strengthen tax compliance and public financial management, and fight tax evasion, while ensuring adequate protection of vulnerable groups.
  • Safeguarding financial stability (section 3): Greece will immediately take steps to tackle Non-Performing Loans (NPLs). A recapitalisation process of banks should be completed before the end of 2015, which will be accompanied by concomitant measures to strengthen the governance of the Hellenic Financial Stability Fund (HFSF) and of banks.
  • Growth, competitiveness and investment (section 4): Greece will design and implement a wide range of reforms in labour markets and product markets (including energy) that not only ensure full compliance with EU requirements, but which also aim at achieving European best practices. There will be an ambitious privatisation programme, and policies which support investment.
  • A modern State and public administration (section 5) shall be a key priority of the programme. Particular attention will be paid to increasing the efficiency of the public sector in the delivery of essential public goods and services. Measures will be taken to enhance the efficiency of the judicial system and to upgrade the fight against corruption. Reforms will strengthen the institutional and operational independence of key institutions such as revenue administration and the statistics institute (ELSTAT).Success will require the sustained implementation of agreed policies over many years. To this end, political commitment is needed, but so is the technical capacity of the Greek administration to deliver. The authorities have committed to make full use of the available technical assistance, which on the European side is coordinated by the new Structural Reform Support Service (SRSS) of the European Commission. Technical assistance is already in place for some key reform commitments, including on tax policy, the reform of the tax administration, the Social Welfare Review, and the modernisation of the judicial system. The authorities are committed to quickly scale up pre-existing technical assistance projects to support reforms such as OECD competition assessment, World Bank investment licensing, health care, revision of the income tax, autonomy of the tax authority, Social Security and tax debt cross-checking and collection and reform of the public administration. There is also scope to develop technical assistance projects in areas such as energy policy, labour market policies including tackling undeclared work and codification of the Greek statute book. The Greek authorities will by end-September 2015 finalise a medium-term technical assistance plan with the European Commission.Greece needs to build upon the agreed recovery strategy and develop a genuine growth strategy which is Greek-owned and Greek-led. This should take into account the reforms included in this MoU, relevant European Union initiatives, the Partnership


Agreement of the implementation of the National Strategic Reference Framework (NSRF) and other best practices. Greece must benefit fully from the substantial means available from the EU budget and the EIB to support investment and reform efforts. For the period 2007-2013, Greece was eligible for EUR 38 billion in grants from EU policies, and should benefit from the currently remaining amounts under this envelope. For the 2014-2020 period, more than EUR 35 billion is available to Greece through EU funds. To maximise absorption, the European Commission’s Investment Plan for Europe will provide an additional source of investment as well as technical help for public and private investors to identify, promote and develop high-quality and feasible projects to fund. The Greek authorities may request technical assistance to further develop the growth strategy, which inter alia could aim at creating a more attractive business environment, improving the education system as well as human capital formation through vocational education and training, developing R&D and innovation. It could also help design sectorial priorities in areas such as tourism, transport and logistics, and agriculture. The authorities aim to finalise the growth strategy by March 2016 in collaboration with social partners, academics and international organisations. The strategy should also address the need for coordination of the ambitious reform agenda, reinforcing the existing Secretariat General for Coordination and involving as appropriate organisations representing the private sector.

2. Delivering sustainable public finances that support growth and jobs

The correction of extreme imbalances in public finances in recent years has required an unprecedented adjustment and sacrifices from Greece and its citizens. Public deficits have fallen considerably compared to the pre-crisis period, although Greece is facing a primary deficit of about 1.5 percent of GDP in 2015, absent additional measures. The consolidation has also relied on a dramatic scaling back of public investment and services, which will need to be progressively normalized and further prioritised in order to sustain the growth potential.

2.1 Fiscal policy

The Greek authorities commit to ensuring sustainable public finances and achieve sizeable and sustainable primary surpluses over the medium-term that will reduce the debt to output ratio steadily. The authorities will accordingly pursue a new fiscal path premised on a primary surplus targets of -1⁄4, 0.5, 13⁄4, and 3.5 percent of GDP in 2015, 2016, 2017 and 2018 and beyond, respectively. The trajectory of the fiscal targets is consistent with expected growth rates of the Greek economy as it recovers from its deepest recorded recession.

The government has recently adopted a reform of VAT and a first phase of the reform of the pension systems; raised the corporate tax rate; extended the implementation of the luxury tax; taken measures to increase the advance corporate income tax in 2015 and require 100 percent advance payments gradually for partnerships etc. and individual business income tax by 2017; and raised the solidarity surcharge.

Furthermore, as a prior action the Government will adopt legislation to:

• raise revenues: a) gradually abolish the refund of excise tax on diesel oil for farmers in two equal steps in October 2015 and October 2016; b) increase the tonnage tax. The authorities will take actions to launch the 2015 ENFIA exercise in order to issue


bills in October 2015 with the final instalment due in February 2016. They will also correct issues with the revenue measures recently implemented.

  • target and contain expenditure: a) effective immediately, (i) re-establish full INN prescription; (ii) reduce the price of all off-patent drugs; b) launch the comprehensive social welfare review (see section 2.5.3).
  • The package will include further measures with budgetary impact, such as public administration reforms, reforms addressing shortfalls in tax collection enforcement, and other parametric measures, recalled in other parts of this document.To demonstrate its commitment to credible fiscal policies, the Government will adopt (Key deliverable) in October 2015, a supplementary 2015 budget as needed, the draft 2016 budget and a 2016–19 Medium-Term Fiscal Strategy, supported by a sizable and credible package of parametric measures and structural fiscal reforms, including: a) a second-phase of pension reforms, see section 2.5.1; b) a reform of the income tax code, see section 2.2.2; c) phasing out the preferential tax treatment of farmers in the income tax code, with rates set at 20% in the 2016 exercise and 26% in the 2017 exercise. Meanwhile a strategy for agriculture is being developed; d) a tax on television advertisements; e) the announcement of an international public tender for the acquisition of television licenses and usage related fees of relevant frequencies; f) the extension of Gross Gaming Revenues (GGR) taxation of 30% on VLT games expected to be installed at second half of 2015 and 2016; g) an increase of the tax rate on income for rents for annual incomes below €12,000 to 15% (from 11%) and for annual incomes above €12,000 to 35% (from 33%); h) phasing out special tax treatments of the shipping industry; i) extend the temporary voluntary contribution of the shipping community to 2018; j) reduce permanently the expenditure ceiling for military spending by €100 million in 2015 and by €400 million in 2016 with a targeted set of actions, including a reduction in headcount and procurement; k) better target eligibility to halve heating oil subsidies expenditure in the budget 2016.In addition to the measures above, the authorities commit to legislate in October 2015 credible structural measures yielding at least 3⁄4% of GDP coming into effect in 2017 and 1⁄4% of GDP coming into effect in 2018 to support the achievement of the medium term primary balance target of 3.5% of GDP. The authorities commit to take further structural measures in October 2016, if needed to secure the 2017 and 2018 targets. These would include containing defence expenditure, the planned PIT reform and freezing statutory spending.

    Parametric fiscal measures will be bolstered by a wide range of administrative actions to address shortfalls in tax collection and enforcement: these measures will take some time to bear fruit but could offer significant upside fiscal yield going forward.

    The Greek government will monitor fiscal risks, including court rulings, and will take offsetting measures as needed to meet the fiscal targets. The authorities intend to transfer at least 30 percent of any over-performance to the segregated account earmarked for debt reduction. In addition, another 30 per cent of the over-performance would be used for clearing unpaid government obligations linked to the past.

    2.2 Tax policy reforms

    The Government commits to enact reforms of both direct and indirect taxation to improve efficiency, collectability and boost labour supply.


In July 2015 the Government has already legislated a major reform of VAT aiming at simplifying the VAT structure, broadening the tax base and eliminating and streamlining exemptions, generating around 1% of GDP in annual revenues.

The government commits to further reforms as follows:

  1. As a prior action, the authorities will: a) eliminate the cross-border withholding tax introduced by the instalments act (law 4321/2015) and reverse recent amendments to the Income Tax Code (ITC) introduced in laws (4328/2015 and 4331/2015); b) clarify that the VAT island discounts will be fully eliminated by end-2016 and define the transitional arrangements.
  2. Tax Codes. By September 2015 adopt outstanding reforms on the tax procedures codes: a) introduce a new Criminal Law on Tax Evasion and Fraud to amend the Special Penal Law 2523/1997 and any other relevant legislation, and replace Article 55, paragraphs 1 and 2, of the Tax Procedure Code (TPC), with a view, inter alia, to modernize and broaden the definition of tax fraud and evasion to all taxes; abolish all Code of Book and Records fines, including those levied under law 2523/1997; b) issue a circular on fines to ensure the comprehensive and consistent application of the TPC; c) ensure appropriate single-violation penalties for breach of the accounting code; non-issuance or incorrect issuance of retail receipts will be treated as a single but serious procedural violation for VAT (key deliverable). By February 2016, the authorities will conduct a comprehensive review of remaining tax legislation that is in conflict with the ITC and TPC, integrating these acts where appropriate, and by March 2016 issue all secondary legislation to implement the ITC and TPC.
  3. Income tax. By October 2015, the Government will: a) simplify the personal income tax credit schedule; b) re-design and integrate into the ITC the solidarity surcharge for income as of 2016 to more effectively achieve progressivity in the income tax system; c) identify all business income tax incentives and integrate the tax exemptions into the ITC, eliminating those deemed inefficient or inequitable; d) undertake a review and reform of the KEDE, including revenue administration procedures for enforced sale of assets at public auctions; e) ensure the revenue administration’s adequate access to taxpayers’ premises for conducting timely audits and enforcement purposes; f) review the framework of capital taxation and develop the tax framework for collective investment vehicles and their participants consistently with the ITC and in line with best practices in the EU; g) review the withholding tax on technical services; h) In view of any revision of the zonal property values, adjust the property tax rates if necessary to safeguard the 2016 property tax revenues at least €2.65 billion and adjust the alternative minimum personal income taxation; i) review the operation of the alternative minimum tax (including correcting any backtracking); j) close possibilities for income tax avoidance; k) tighten the definition of farmers. (key deliverable)
  4. VAT. The authorities will by March 2016, a) codify and simplify the VAT legislation, aligning it with the tax procedure code, eliminating outstanding loopholes and shortening the VAT payment period; b) simplify the income tax regime and ensure


consistency of the income base for income tax and social security contributions of small businesses below the VAT registration threshold; c) modernise the corporate tax law in ITC covering mergers and acquisitions and corporate reserve accounts and implement ITC provisions concerning cross-border transactions and transfer pricing. (key deliverable)

v. Property tax. The authorities will by September 2016 align all property assessment values with market prices with effect from January 2017. By that date, cross- checking of all ownership interests against the information on all individual properties in the cadastre. (key deliverable)

2.3. Revenue administration reforms

The ability to collect revenues has been hampered by a long history of complicated legislation, poor administration, political interference and generous amnesties, with chronically weak enforcement. To break from this practice and improve the tax and social security payment culture, the government firmly commits to take strong action to improve collection and to not introduce new instalment or other amnesty or settlement schemes nor extend existing schemes.

As a prior action, the authorities will adopt legislation to: a) on garnishments, eliminate the 25 percent ceiling on wages and pensions and lower all thresholds of €1,500 while ensuring in all cases reasonable living conditions; b) amend the 2014–15 tax and SSC debt instalment schemes to exclude those who fail to pay current obligations, to introduce a requirement for the tax and social security administrations to shorten the duration for those with the capacity to pay earlier, and to introduce market-based interest rates while providing targeted protection for vulnerable debtors (with debts below €5,000); c) amend the basic instalment scheme/TPC to adjust the market-based interest rates and suspend until end-2017 third-party verification and bank guarantee requirements; d) accelerate procurement of software for VAT network analysis and for further automation of the debt collection, embracing inter alia fully automatized garnishment procedures; e) adopt immediately legislation to transfer, by end October 2015 all tax- and customs-related capacities and duties and all tax- and customs- related staff in SDOE and other entities to the revenue administration; all non-assessed audits reports made by SDOE since law 4321/2015 will be considered as detailed fact sheets to the tax administration.

The authorities commit to taking immediate enforcement action regarding debtors who fail to pay their instalments or current obligations on time. The authorities will not introduce new instalment or other amnesty or settlement schemes nor amend existing schemes, such as by extending deadlines.

Furthermore, the authorities, making use of technical assistance, will:

  1. enhance compliance. The government will by October 2015: a) adopt a fully-fledged plan to increase tax compliance; b) develop with the Bank of Greece and the private sector a costed plan for the promotion and facilitation of the use of electronic payments and the reduction in the use of cash with implementation starting by March 2016.; c) publish the list of debtors for tax and social security debt overdue for more than three months.
  2. fight tax evasion. The authorities will by November 2015 produce a comprehensive plan for combating tax evasion based on an effective interagency cooperation which


includes: a) identification of undeclared deposits by checking bank transactions in banking institutions in Greece or abroad; b) introduction of a voluntary disclosure program with appropriate sanctions, incentives and verification procedures, consistent with international best practice, and without any amnesty provisions; c) request from EU member states to provide data on asset ownership and acquisition by Greek citizens, and how the data will be exploited; d) renew the request for technical assistance in tax administration and make full use of the resource in capacity building; e) establish a wealth registry to improve monitoring; f) adopt legislative measures for locating storage tanks (fixed or mobile) to combat fuel smuggling; g) create a database to monitor the balance sheets of parent-subsidiary companies to improve risk analysis criteria for transfer pricing;

  1. prioritise action on collectable taxes. By September 2015, the authorities will sign the Ministerial Decision allowing for the extension of the indirect bank account register to provide 10 years of transaction history. By October 2015, the authorities will reduce – taking account technical assistance – restrictions on conducting audits of tax returns subject to the external tax certificate scheme. By November 2015, the authorities will adopt measures to prioritise tax audits on the basis of risk analysis and not, as is now the case, year of seniority (i.e. year of write-off).
  2. improve collection of tax debt. To improve collection of tax debt the authorities will by October 2015 (key deliverable): a) improve the rules on write-off of uncollectible tax; b) remove tax officers’ personal liabilities for not pursuing old debt, and c) propose, and implement in 2016, a national collection strategy including further automation of debt collection, and by November d) take necessary measures towards the timely collection of fines on vehicles uninsured or not undertaking mandatory technical controls, and of levies for the unlicensed use of frequencies; e) issue legislation to quarantine uncollectable Social security contribution debt; and f) improve the rules on write-off of uncollectible Social security contribution debt, and g) enforce if legally possible upfront payment collection in tax disputes.
  3. improve collection of Social security debt. By September 2015 the authorities will: a) provide KEAO with access to indirect bank account registry and to tax administration data; b) create a single SSC debt database that will encompass all social security funds. The authorities will implement by end-December 2016 a central registry of contributors in coordination with the pension funds consolidation and complete the integration of social security contribution collection with the tax administration by the end of 2017.
  4. strengthen VAT revenues. The authorities will strengthen VAT collection and enforcement inter alia through streamlined procedures and with measures to combat VAT carousel fraud. They will adopt by October 2015 legislation to a) accelerate de- registration procedures and limit VAT re-registration to protect VAT revenue; b) adopt the secondary legislation needed for the significantly strengthening the

reorganization of the V A T enforcement section in order to strengthen V A T enforcement and combat V A T carousel fraud. The authorities will submit an application to the EU VAT Committee and prepare an assessment of the implication of an increase in the VAT threshold to €25,000.


  1. reinforce the capacity of the administration. By October 2015, the authorities will secure the full staffing of KEAO, strengthen control capacity in IKA and reinforce the Large Debtors Unit, to improve its capacity on issues of liquidation and tax collection, and – with highly skilled legal advisers, supported by an international independent expert firm – for the assessment of debtor viability. By December 2015 the LDU will segment commercial debtors with large public debt according to viability status.
  2. strengthen the independence of the revenue administration. The authorities will by October 2015 adopt legislation (key deliverable) to establish an autonomous revenue agency, that specifies: a) the agency’s legal form, organization, status, and scope; b) the powers and functions of the CEO and the independent Board of Governors; c) the relationship to the Minister of Finance and other government entities; d) the agency’s human resource flexibility and relationship to the civil service; e) budget autonomy, with own GDFS and a new funding formula to align incentives with revenue collection and guarantee budget predictability and flexibility; f) reporting to the government and parliament. The authorities will by December 2015 (key deliverable) appoint the Board of Governors and adopt priority secondary legislation of the law (key human resource, budget) on the autonomous revenue administration agency, so that it can be fully operational by June 2016.

The authorities will continue to improve operations as measured by key performance indicators. Over the medium term the Authorities will continue with reforms improving tax administration, to be agreed with the institutions and taking into account recommendations of technical assistance reports conducted by the EC/IMF.

2.4 Public Financial Management and Public Procurement

2.4.1 Public financial management

The authorities commit to continue reforms that aim at improving the budget process and expenditure controls, clearing arrears, and strengthening budget reporting and cash management.

The authorities will adopt legislation by October 2015 (key deliverable) to upgrade the Organic Budget Law to: a) introduce a framework for independent agencies; b) phase out ex-ante audits of the Hellenic Court of Auditors and account officers (ypologos); c) give GDFSs exclusive financial service capacity and GAO powers to oversee public sector finances; and d) phase out fiscal audit offices by January 2017. The authorities will adopt secondary legislation to define the transitional arrangements of the OBL reform by end- December 2015, and complete the reform by end-December 2016.

The Greek government is committed to making the Fiscal Council operational before finalizing the MoU. For this to happen, the government adopted a Ministerial Decision to start the open procedure to select the members of the board. Following completing the process for the appointment of the Board Members of the Fiscal Council, the Government will by September 2015 issue the needed secondary legislation to make the Council fully operational (including budgeting and staffing) by November 2015. The Authorities will


complete a review with the help of technical assistance from the EC of the work of the Fiscal Council by December 2016, and adopt legislation as needed (March 2017).

In line with the Fiscal Compact, the Greek Government shall present the main characteristics of their medium-term public finance plans to the European Commission and the ECOFIN Council in spring of each year and will update its Medium Term Fiscal Strategy before end May of each year in line with the programme targets. In addition, as part of a common budgetary timeline, Greece shall submit to the European Commission the draft budget for the following year by 15 October of each year, along with the independent macro- economic forecast on which it is based. The Government will design a new government Budget Classification structure and Chart of Accounts (September 2016) in time for the 2018 budget.

The authorities will present by September 2015 a plan to complete the clearance of arrears, tax refund and pension claims, and immediately start implementation. The authorities will then clear the outstanding stock of spending arrears of 7.5 billion by end-December 2016 after completing a thorough audit by end-January 2016, and clear the backlog of unprocessed tax refund and pension claims by end-December 2016; The Government will ensure that budgeted social security contributions are transferred from social security funds to health funds and hospitals so as to clear the stock of health-related arrears.

The Government will present by November 2015 a medium-term action plan to meet the requirements of the Late Payment Directive, including concrete measures and safeguards to ensure the transfer of IKA liabilities (cash transfers and expenditures) to EOPYY during the relevant period. By January 2016, the authorities will complete an external audit of EOPYY’s accounts payables, and rationalize the payment process in the social security and health system by end-June 2016 (key deliverable). The authorities will continue to improve operations as measured by key performance indicators.

To improve the fragmented cash management system, the Government will include all central government entities in the treasury single account by end-December 2015. Following the implementation of a cash management reform the Authorities will close accordingly general government accounts in commercial banks and consolidate them in the Treasury single account. As a prior action, the ministry of finance will ring-fence the account for the management of EU structural funds instruments and of Greece’s national contributions.

2.4.2 Public procurement

Greece needs to take further action in the area of public procurement to increase efficiency and transparency of the Greek public procurement system, prevent misconduct, and ensure more accountability and control. By September 2015 the authorities will agree with the European Commission, which will assist on implementation, an action plan to spell out the details of the actions below (key deliverable).

• By January 2016, a consolidated, comprehensive and simplified legislative framework (primary and secondary legislation) on public procurement and concessions, including the transposition of the new EU directives on public procurement and concessions (2014/23, 2014/24, 2014/25) will enter into force.


  • By December 2016, the reform of the system of non-judicial/administrative remedies will enter into force. The authorities will present a detailed proposal for this reform to the Commission by October 2015.
  • By February 2017, the authorities will adopt measures to improve the judicial remedies system. In preparation, the authorities will perform by September 2016 in cooperation with the Commission a comprehensive assessment of the effectiveness of the existing judicial remedies system, identifying problems (e.g. lack of effective and rapid remedies, delays, difficulty of obtaining damages, litigation costs).
  • The authorities will continue to implement the action plan on e-procurement as agreed with the Commission.
  • By May 2016, a new central purchasing scheme, established in cooperation with the Commission and the OECD will enter into force, to be applied for the needs of 2017.The authorities will ensure that the SPPA remains the principal institution in the area of public procurement in Greece; the SPPA will cooperate with other Greek institutions and the Commission to prepare by March 2016 a national strategy, identify systemic deficiencies of the national public procurement system, and propose realistic solutions to be implemented by the authorities through an action plan.

2.5 Sustainable social welfare

2.5.1 Pensions

The 2010 and 2012 pension reforms, if fully implemented, would substantially improve the longer-term sustainability of the overall pension system. However the pension system is still fragmented and costly and requires significant annual transfers from the State budget. Hence much more ambitious steps are required to address the underlying structural challenges, as well as the additional strains on the system caused by the economic crisis. Contributions have fallen due to high levels of unemployment at the same time as spending pressures mounted as many people opted to retire early.

To address these challenges, the authorities commit to implement fully the existing reforms and will also proceed with further reforms to strengthen long-term sustainability targeting savings of around 1⁄4% of GDP in 2015 and around 1% of GDP by 2016. The package inter alia aims to create strong disincentives for early retirement through increasing early retirement penalties and by the gradual elimination of the grandfathering of rights to retire before the statutory retirement age.

The authorities have already increased health contributions of pensioners to 6% on their main pensions and applied health contributions of 6% also to supplementary pensions from 1 July 2015; will integrate into ETEA by 1st September 2015 all supplementary pension funds and ensure that all supplementary pension funds will be only financed by own contributions from 1 January 2015; will freeze monthly guaranteed contributory pension limits in nominal terms until 2021; and ensured that people retiring after 30 June 2015 will have access to the basic, guaranteed contributory, and means- tested pensions only at the attainment of the statutory normal retirement age of currently 67 years.

i. As a prior action, the authorities will: a) clarify the rules for eligibility for the minimum guaranteed pensions after 67 years; b) issue all circulars to ensure the


implementation of the 2010 law; c) correct law 4334/2015 to among others correctly apply the freeze on monthly guaranteed benefits (instead of contributions state subsidy) and to extend to the public sector; d) eliminate gradually the grandfathering to statutory retirement age and early retirement pathways, progressively adapting to the limit of statutory retirement age of 67 years at the latest by 2022, or to the age of 62 and 40 years of contributions, applicable for all those retiring (except arduous professions and mothers with children with disability) with immediate application.

  1. The authorities will by October 2015 (key deliverable) legislate further reforms to take effect from 1 January 2016: a) specific design and parametric improvements to establish a closer link between contributions and benefits; b) broaden and modernize the contribution and pension base for all self-employed, including by switching from notional to actual income, subject to minimum required contribution rules; c) revise and rationalize all different systems of basic, guaranteed contributory and means tested pension components, taking into account the incentives to work and contribute; d) the main elements of a comprehensive consolidation of social security funds, including the remaining harmonization of contribution and benefit payment procedures across all funds; e) phase out within three years state financed exemptions and harmonise contributions rules for all pension funds with the structure of contributions of the main social security fund for employees (IKA) ; f) the abolition from 31 October 2015 of all nuisance charges financing pensions to be offset by reducing benefits or increasing contributions in specific funds; g) gradually harmonize pension benefit rules of the agricultural fund (OGA) with the rest of the pension system in a pro rata manner; h) that early retirements will incur a penalty, for those affected by the extension of the retirement age period, equivalent to 10 percent on top of the current annual penalty of 6 percent; i) better targeting social pensions by increasing OGA uninsured pension; j) the gradual phasing out of the solidarity grant (EKAS) for all pensioners by end-December 2019, starting with the top 20% of beneficiaries in March 2016; k) restore the sustainability factor of the 2012 reform or find mutually agreeable alternative measures in the pension system; i) the Greek government will identify and legislate by October 2015 equivalent measures to fully compensate the impact of the implementation of the Court ruling on the pension measures of 2012; and repeal the amendments to the pension system introduced in Laws 4325/2015 and 4331/2015 in agreement with the institutions.
  2. The Government will by December 2015 (key deliverable) integrate all social security funds under a single entity, abolish all existing governance and management arrangements, establish a new board and management team utilizing IKA infrastructure and organization, implement a central registry of contributors and establish common services, as well as adopting a program to create a common pool of funds that will be fully operational by end-December 2016. The authorities will move towards the integration of social security contribution filing, payment and collection into the tax administration by the end of 2017.

The institutions are prepared to take into account other parametric structural measures within the pension system of equivalent effect to replace some of the measures mentioned above, taking into account their impact on growth, and provided that such measures are


presented to the institutions during the design phase and are sufficiently concrete and quantifiable, and in the absence of this the default option is what is specified above.

2.5.2 Health care

The authorities have committed to continue reforming the health care sector, controlling public expenditure, managing prices of pharmaceuticals, improve hospital management, increase centralized procurement of hospital supplies, manage demand for pharmaceuticals and health care through evidence-based e-prescription protocols, commission private sector health care providers in a cost effective manner, modernize IT systems, developing a new electronic referral system for primary and secondary care that allows to formulate care pathways for patients.

The authorities as prior action committed to reinstate previous key elements of reforms to the health system. In particular, they will a) amend Law 4332/2015 repealing part of Law 4052/2012 (reorganisation and restructuring of the health sector under the MoU) on the appointment of hospital CEOs; b) repeal MD FEK 1117/2015, in order to re-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 (re-establish prior MoU commitment); c) re-establish full INN prescription, including by repealing circular 26225/08.04.2015, with the exceptions as set out in art 6.4 to 6.6 of the MD FEK 3057/2012; d) reduce the price of all off-patent drugs to 50 percent and all generics to 32.5 percent of the patent price, by repealing the grandfathering clause for medicines already in the market in 2012; e) establish claw backs for 2015 for diagnostics and private clinics and delink the 2014 claw back for private clinics from the 2013 one.

By September 2015 extend the 2015 claw back ceilings for diagnostics, private clinics and pharmaceuticals to the next three years, and, by October 2015, the authorities will (a) apply and collect outstanding claws backs until H1-2015 for pharmaceuticals, diagnostics and private clinics; (b) publish a price bulletin to reduce pharmaceutical prices and publish it every six months; and c) review and limit the prices of diagnostic tests to bring structural spending in line with claw back targets (key deliverables). They will execute the claw backs every six months. By October 2015, the authorities will decide whether to re-establish a means-tested 5 Euro fee for hospital visits or to adopt equivalent measures in fiscal and demand management terms;

By December 2015, the authorities will take further structural measures (key deliverable) as needed to ensure that spending for 2016 is in line with the claw back ceilings, including developing new protocols for the most expensive pharmaceutical active substances and diagnostics procedures. Authorities will further reduce generic prices including by making greater use of price-volume agreements where necessary. Over the next three years, they will develop additional prescription guidelines giving priority to those with the greatest cost and therapeutic implications. Ambitious but feasible timelines will need to be set by the Authorities.

By December 2015 (and by December 2016, respectively), the authorities will take concrete steps to increase the proportion of centralized procurement to 60 percent (and to 80 percent), the share of outpatient generic medicines by volume to 40 (and to 60 percent), inpatient generic medicines to 50 (and to 60 percent) and the share of procurement by hospitals of pharmaceutical products by active substance to 2/3 (and to 3⁄4) of the total, in


line with agreed targets. Generic penetration should be supported by further actions to improve the incentive structure of pharmacists, including on profit structure, by August 2016.

The authorities will introduce new drugs into the positive list on the basis of criteria set in MD 2912/B/30.10.2012 and related regulation, subject to prescription guidelines, and with prices set at the level of the lowest three in the EU or lower if the authorities can negotiate a rebate. By December 2017 the authorities will set-up an HTA centre that will inform the inclusion of medicines in the positive list.

To improve financial management of hospitals, the authorities will by December 2015 (key deliverable) deliver a plan to adopt DRG or other international standard activity-based costing methodology in hospitals within the next three years; by December 2017 they will implement the new DRG or alternative activity-based costing system; by June 2016 they will deliver a plan to conduct annual independent financial audits of hospital accounts, with implementation to begin in 2017, and for all hospitals to be covered by 2018. To this end, they will make use of the available Technical Assistance support.

To assess the performance of health care providers, both public and private, EOPYY will continue to collect and publish relevant data on a monthly/quarterly basis. By June 2016, the authorities will develop an assessment of public sector capacity by region and by specialty and will use this to review the need for commissioning private providers per region; and they will develop a new electronic record for patients. By August 2016 they will develop a new system of electronic referrals to secondary care based on e-prescription and the electronic record and allowing the monitoring of waiting times. By June 2017, the authorities will develop a plan to pre-approve referrals to private sector providers based on the electronic patient record, the system of electronic referrals and the mapping of public sector capacity. Over the next three years, the authorities will develop therapeutic protocols for the patient care pathways (primary and secondary care) for the pathways that have the greatest therapeutic and cost implications, to be implemented through the e-prescription system.

The authorities will closely monitor and fully implement universal coverage of health care and inform citizens of their rights in that regard and they will proceed with the roll out of the new Primary Health Care system and the issuing of an MD as envisaged in Law 4238 by December 2015. To this end, they will make use of the available Technical Assistance support.

2.5.3 Social safety nets

The economic crisis has had an unprecedented impact on social welfare. The most pressing priority for the government is to provide immediate support to the most vulnerable to help alleviate the impact of the renewed downturn. Already, a package of measures on food, housing and access to health care has been adopted and is being implemented. In order to get people back to work, the authorities, working closely with European partners, have taken measures to boost employment by providing short-term work opportunities to 50.000 people targeting the long-term unemployed.

The Government will adopt by March 2016 a further series of guaranteed employment support schemes covering 150,000 persons, including the long term unemployed (29+), young people (16-29), and disadvantaged groups (including inter alia GMI beneficiaries) with individualised active labour market measures for participants, using local partnerships,


involving the private and social economy sectors and ensuring efficient and effective use of the resources available.

A fairer society will require that Greece improves the design of its welfare system, so that there is a genuine social safety net which targets scarce resources at those in most need. The authorities plan to benefit from available technical assistance for the social welfare review and for the GMI implementation from international organisations.






The government commits as a prior action to agree the terms of reference and launch a comprehensive Social Welfare Review, including both cash and in-kind benefits, tax benefits, social security and other social benefits, across the general government, with the assistance of the World Bank, with first operational results to be completed by December 2015, targeted to generate savings of 1⁄2 percent of GDP annually which will serve as the basis for the redesign of a targeted welfare system, including the fiscally-neutral gradual national roll-out of the GMI. The overall design of the GMI will also be agreed with the institutions.

The Authorities by September 2015 will set out their detailed preparations for a gradual nationwide roll-out of a Guaranteed Minimum Income (GMI) scheme from 1 April 2016, including for the set up of a benefits registry and a strategy to ensure the inclusion of vulnerable groups and to avoid fraud. Close linkages with municipalities and employment services will be established.

By January 2016, the authorities will propose and legislate reforms to welfare benefits and decide on the benefit rates of the initial GMI rollout in agreement with the institutions. The design of the GMI will be closely based upon the parameters of the pilot schemes after the evaluation of the World Bank, with potential additional targeting of priority needs in the short-term in order to meet budgetary constraints.

By September 2016, the authorities will establish an institutional benefits framework to manage, monitor and control the GMI and other benefits. An evaluation of the performance of the GMI scheme will take place, with the objective of a full national rollout (key deliverable) by the end 2016.

Safeguarding financial stability

All necessary policy actions will be taken to safeguard financial stability and strengthen the viability of the banking system. No unilateral fiscal or other policy actions will be taken by the authorities, which would undermine the liquidity, solvency or future viability of the banks. All measures, legislative or otherwise, taken during the programme period, which may have an impact on banks’ operations, solvency, liquidity, asset quality etc. should be taken in close consultation with the EC/ECB/IMF and where relevant the ESM .

By end-August 2015, the authorities will finalise a comprehensive strategy for the financial system which has deteriorated markedly since end-2014. The main focus of the strategy will be on restoring financial stability and improving bank viability by: (i) normalising liquidity and payment conditions and strengthening bank capital; (ii) enhancing governance; and (iii)


addressing NPLs. This strategy, which will build on the strategy document from 2013, while taking into account the changed context and conditions of the financial system, will include plans regarding the foreign subsidiaries of the Greek banks according to their restructuring plans approved by the European Commission, and will aim to attract international strategic investment to the banks and return them to private ownership in the medium term.

Restoring liquidity and capital in the banking system

The authorities are committed to preserving sufficient liquidity in the banking system in compliance with Eurosystem rules and to achieving a sustainable bank funding model for the medium term. In this context, banks will be required to submit quarterly funding plans to the Bank of Greece (BoG) so as to ensure continuous monitoring and assessment of liquidity needs. The authorities will monitor and manage the process for the easing of capital controls taking liquidity conditions in the banking system into account while aiming to minimise the macroeconomic impact of the controls.

A buffer of up to €25bn is envisaged under the Programme to address potential bank recapitalisation needs of viable banks and resolution costs of non-viable banks, in full compliance with EU competition and state aid rules. Following a forward-looking assessment of the four core banks’ capital needs by the ECB and the submission of capital plans by the banks, any remaining identified capital shortfalls will be addressed fully by end-2015 at the latest. The Bank of Greece will assess the capital needs of other banks where it was not recently done. The recapitalisation framework will be developed with a view to preserving private management of recapitalised banks and to facilitating private strategic investments. The law relating to government guarantees on deferred tax assets (DTAs) will be amended to minimise programme funding and limit the link between the banks and the state.

Resolution of Non-Performing Loans (NPLs)

While short-term actions to address the problem of high and rising NPL ratios will be specified below in this document, additional measures and actions may be needed in the future so as to resolve the NPLs of the banking sector. By end August 2015, the Bank of Greece will issue all necessary provisions to implement the Code of Conduct, after improvements in agreement with the institutions.

As a prior action, the authorities will: a) develop a credible strategy for addressing the issue of non-performing loans that aims to minimize implementation time and the use of capital resources, and draws on the expertise of external consultant(s) for both strategy development and implementation; b) adopt the following short-term reforms: (i) amendments to the corporate insolvency law to cover all commercial debtors, bring the law in line with international best practice including changes to promote effective rehabilitation of viable debtors and a more efficient liquidation process for non-viable debtors and reducing the discharge period to 3 years for entrepreneurs in line with the 2014 EC Recommendation; (ii) amendments to the household insolvency law to introduce a time-bound stay on enforcement in line with cross country experience; establish a stricter screening process to deter strategic defaulters from filing under the law, include public creditor claims in the scope of the law providing eligible debtors with a fresh start, tighten the eligibility criteria for protection of the primary residence, and introduce measures to address the large backlog of cases (e.g. increasing the number of judges and judicial staff, prioritization of high value


cases, and short-form procedures for debtors with no assets and no income), (iii) adopt legislation to establish a regulated profession of insolvency administrators, not restricted to any specific profession and in line with good cross-country experience; (iv) adopt provisions to re-activate of the Government Council of Private Debt, establishing of a Special Secretariat to support it.

By end-October 2015, (key deliverable), drawing on the expertise of an external consultant, the Bank of Greece will deliver a report on the segmentation of NPLs on banks’ balance sheets and an assessment of banks’ capacity to deal with each NPL segment. The Hellenic Financial Stability Fund (HFSF) in cooperation with the Bank of Greece will provide an analysis to identify non-regulatory constraints and impediments (e.g. administrative, economic, legal etc.) to the development of a dynamic NPL market. By the same date, a working group, drawing on independent expertise and cross-country experience, will examine and recommend specific actions to accelerate NPL resolution, including by removing any unnecessary legal or other impediments to NPL servicing and disposal while protecting vulnerable households consistent with the Code of Conduct established by the Bank of Greece. The authorities will establish by law a Debt Information network and Debt Information Centre, providing legal and economic debt advising.

By end-November 2015 (key deliverable), the Government will strengthen the institutional framework to facilitate NPL resolution, including (i) improving the judicial framework for corporate and household insolvency matters by adopting appropriate legal instruments to establish specialized chambers both for household and corporate insolvency cases and appointing and training an adequate number of additional judges (based on targeted caseload) and judicial staff for both corporate and household insolvency cases; (ii) establishing of a Credit and Wealth Bureau as an Independent Authority that will identify lenders payment capabilities for the facilitation of banking institutions, (iii) amending the out- of-court workout law so as to encourage debtors to participate while ensuring fairness among private and public creditors; (iv) fully operationalising the specialist chambers for corporate insolvency within courts. The Government will establish a permanent social safety net, including support measures for the most vulnerable debtors and differentiating between strategic defaulters and good-faith debtors. The HFSF in consultation with BoG will identify mechanisms and processes to accelerate NPL resolution. The HFSF will nominate an executive board member and an internal team dedicated to the new objective of facilitating banks’ NPL resolution. The Bank of Greece will engage a single special liquidator to ensure individual liquidators are delivering effectively against operational targets. Performance based remuneration scheme will be introduced for all special liquidators in consultation with the HFSF in order to maximise recovery.

By December 2015 (key deliverable) the authorities will (i) introduce coordination mechanisms to deal with debtors with large public and private debts firstly by segmenting commercial debtors with large public debts according to viability status and secondly by adopting legislation to facilitate fast-track liquidation of unviable entities by end-March 2016 and completion of the clean-up process by end-December 2016; (ii) adopt the necessary legal instruments setting out the applicable framework and rules for the insolvency administrator profession (including the manner of professional organization, qualification requirements, procedures enabling effective accreditation, powers and responsibilities, manner of appointment and dismissal, supervision and monitoring, sanction and liability provisions, and the fee structure) .


By end-February 2016 (key deliverable), upon receiving banks’ proposals, the Bank of Greece will agree with banks on operational targets for NPL resolution including for example loan restructuring, and the creation of joint ventures. Banks will report quarterly from June 2016 to the BoG against key performance indicators (KPIs). The HFSF will also apply NPL resolution performance criteria to banks’ management against operational targets agreed between banks and the Bank of Greece. The HFSF will present and implement an NPL resolution action plan to enhance coordination among banks and accelerate the restructurings of the large corporates, and if needed jointly tackle entire economic sectors.

By end-March 2016, the Bank of Greece will revise the Code of Conduct for debt restructuring guidelines to deal with groups of borrowers (e.g.: SMEs) on the basis of clear criteria to segment retail portfolios and introduce in coordination with the HFSF fast-track mechanisms including standardized assessment templates, restructuring contracts, and workout solutions.

By end-June 2016, the authorities commit to assess the effectiveness of the insolvency legal and institutional framework and introduce any necessary amendments.

Governance of the HFSF

The independence of the HFSF will be fully respected and its governance structure reinforced, with a view to preventing any political interference in its management or activities.

By mid-October 2015 (key deliverable), the HFSF law will be amended so as to (i) bring the law in line with the BRRD transposition and the new recapitalization framework to be developed (ii) to reinforce the HFSF’s governance arrangements in line with the Euro Summit statement especially by changing the selection and appointment process and in particular, (a) a new procedure for the selection and appointment of members in the Executive Board and General Council will be designed by end September 2015 which will imply a greater role for the Institutions than in the past; (b) a Selection Panel will be set up, composed of six independent expert members, of which three appointed by the EU institutions – including the chairman with a casting vote in the event of a tie – , and three appointed by the authorities (two by the Ministry of Finance and one by the Bank of Greece). The Ministry of Finance, the Bank of Greece, the European Commission, the ECB and the ESM will each have an observer to the Selection Panel. The Selection Panel will be assisted by an international recruitment consultant selected by the Panel; (c) the Minister of Finance will nominate from the candidates shortlisted by the Panel; (d) the Panel will also define the remunerations and other conditions of employment including evaluation and dismissal process. The Law will also ensure that (i) that remuneration and other conditions of employment are competitive so to attract high-quality international candidates for HFSF management positions; (ii) to include powers, criteria and procedures for the HFSF to review and change – if needed – the boards and committees of banks under its control; (iii) to increase transparency and accountability of the HFSF through annual publication of strategies and semi-annual reporting of performance against key objectives; and (iv) include, among the HFSF objectives, the facilitation of banks’ NPL management.


By end-March 2016, to increase HFSF transparency and accountability, the HFSF will publish an operational strategy annually and, starting from June 2016, report on performance against this strategy semi-annually.

Governance of banks

The Government will not intervene in the management, decision-making and commercial operations of banks, which will continue to operate strictly in accordance with market principles. The board members and senior management of the banks will be appointed without any interference by the Government. These appointments will be made in line with EU legislation and best international practices, taking into account the specific rules in the HFSF law as regards the rights of the private shareholders who participated in the banks’ capital increases under the existing framework. The HFSF ensures through the amended Relationship Framework Agreements (RFAs) hat as of the financial year of 2016 the external auditors’ contracts with the banks can be to a maximum of five consecutive years.

By end-February 2016 (key deliverable), the HFSF with the help of independent international consultant will introduce a program to review the boards of the banks in which the RFAs apply. This review will be in line with prudent international practices by applying criteria that go beyond supervisory fit and proper requirements. By end-June 2016, following the review by the HFSF of the board members along the process described above, members may be replaced in a manner that ensures banks’ boards include at least three independent international experts with adequate knowledge and long-term experience in relevant banking and with no affiliation over the previous ten years with Greek financial institutions. These experts will also chair all board committees.

By October 2015, the need for any measures, in addition to those indicated above, will be explored to ensure that bank governance is sufficiently strengthened to be fully independent and in line with international best practice.

4. Structural policies to enhance competitiveness and growth 4.1 Labour market and human capital

In recent years, major changes have been made to Greek labour market institutions and wage bargaining systems to make the labour market more flexible The Greek authorities are committed to achieve EU best practice across labour market institutions and to foster constructive dialogue amongst social partners. The approach not only needs to balance flexibility and fairness for employees and employers, but also needs to consider the very high level of unemployment and the need to pursue sustainable and inclusive growth and social justice. The government has committed as a prior action to reverse the legislation of the after-effect of agreements legislated in art 72 of 4331/2015 of 2 July 2015.

Review of labour market institutions. The Government will launch by October 2015 a consultation process led by a group of independent experts to review a number of existing labour market frameworks, including collective dismissal, industrial action and collective bargaining, taking into account best practices internationally and in Europe. Further input to the consultation process described above will be provided by international organisations,

including the ILO. The organization, terms of reference and timelines shall be agreed with 21

the institutions. Following the conclusion of the review process, the authorities will bring the collective dismissal and industrial action frameworks and collective bargaining in line with best practice in the EU. No changes to the current collective bargaining framework will be made before the review has been completed. Changes to labour market policies should not involve a return to past policy settings which are not compatible with the goals of promoting sustainable and inclusive growth.

Undeclared work. By December 2015, the authorities will adopt an integrated action plan (key deliverable) to fight undeclared and under-declared work in order to strengthen the competitiveness of legal companies and protect workers as well as raise tax and social security revenues. This will include improved governance of the labour inspectorate and specify technical assistance. As a first step, the authorities will link the tax, ERGANI and social security fund reporting framework to detect undeclared work.

Vocational training. Furthermore, consistent with the 2016 budget and to deliver the modernisation and expansion of vocational education and training (VET), and on the basis of the reform adopted in 2013 (Law 4186/2013), the Government will by December 2015 (key deliverable): (i) legislate a modern quality framework for VET/Apprenticeships, (ii) set up a system to identify skills needs and a process for upgrading programs and accreditation, (iii) launch pilots of partnerships with regional authorities and employers in 2015-16 and (iv) provide an integrated implementation plan from the Ministry of Labour, the Ministry of Education, and OAED to provide the required number of apprenticeships for all vocational education (EPAS and IEK) students by 2016 and at least 33% of all technical secondary education (EPAL) students by 2016-2017; (v) ensure a closer involvement of employers and a greater use of private financing. Regional public-private partnerships will be run during the academic year 2015-16.

Capacity building. Over the medium term, the capacity of the Ministry of Labour will be strengthened in terms of policy formulation, implementation and monitoring in order to increase the its ability to deliver welfare reforms, active labour market policies, and achieve the front-loading of the Structural Funds. This will include improving the public employment services through the completion of the re-engineering of OAED. Existing labour laws will be streamlined and rationalised through the codification into a Labour law Code by end 2016 (key deliverable).

Technical assistance. For the effective implementation of the reform agenda, including labour market reform, VET and capacity building of the Ministry of Labour, the authorities will use technical assistance, benefiting inter alia from expertise of international organisations such as the OECD and the ILO.

Education. The authorities will ensure further modernization of the education sector in line with the best EU practices, and this will feed the planned wider Growth Strategy. The authorities with the OECD and independent experts will by April 2016 prepare an update of the OECD’s 2011 assessment of the Greek education system. This review will cover all levels of education, including linkages between research and education and the collaboration between universities, research institutions and businesses to enhance innovation and entrepreneurship (see also section 4.2). Inter alia, the review will assess the implementation of the ‘new school’ reform, the scope for further rationalisation (of classes, schools and universities), functioning and the governance of higher education


institutions, the efficiency and autonomy of public educational units, and the evaluation and transparency at all levels. The review shall propose recommendations in line with best practices in OECD countries.

Based on the recommendations of the review, the authorities will prepare an updated Education Action Plan and present proposals for actions no later than May 2016 to be adopted by July 2016, and where possible measures should enter into force in time for 2016/2017 academic year. In particular, the authorities commit to align the number of teaching hours per staff member, and the ratios of students per class and pupils per teacher to the best practices of OECD countries to be achieved at the latest by June 2018. The evaluation of teachers and school units will be consistent with the general evaluation system of public administration. The authorities will ensure a fair treatment of all the education providers, including privately owned institutions by setting minimum standards.

4.2 Product markets and business environment

More open markets are essential to create economic opportunities and improve social fairness, by curtailing rent-seeking and monopolistic behaviour, which has translated into higher prices and lower living standards. In line with their growth strategy, the authorities will intensify their efforts to bring key initiatives and reform proposals to fruition as well as enrich the agenda with further ambitious reforms that will support the country’s return to sustainable growth, attract investments and create jobs.

The authorities will legislate as prior actions to:

  1. implement all pending recommendations of the OECD competition toolkit I, exceptOTC pharmaceutical products, Sunday trade, building material and one provision on foodstuff; and a significant number of the OECD toolkit II recommendations on beverages and petroleum products;
  2. open the restricted professions of notaries, actuaries, and bailiffs and liberalize the market for tourist rentals;
  3. eliminate non-reciprocal nuisance charges and align the reciprocal nuisance charges to the services provided;
  4. reduce red tape, including on horizontal licensing requirements of investments and on low-risk activities as recommended by the World Bank, and administrative burden of companies based on the OECD recommendations, and establish a committee for the inter-ministerial preparation of legislation.

On competition, the authorities will by October 2015 implement the remaining recommendations of the OECD toolkit I on foodstuff and of the OECD toolkit II on beverages and petroleum products and launch a new OECD competition assessment in wholesale trade, construction, e-commerce, media and rest of manufacturing. By June 2016, the Government will adopt legislation to address all identified issues in such assessment (key deliverable). By December 2015, the authorities will legislate the OECD competition toolkit I recommendation on OTC pharmaceutical products with effectiveness as of June 2016 (key deliverable). By June 2016, the authorities will fully adopt the pending OECD toolkit 1 recommendation on building material. The authorities will liberalise Sunday trade following the forthcoming State Council ruling. The authorities commit to continue with regular competition assessments in additional sectors over the next three years. By October 2015, the authorities will adopt legislation to make the liberalisation of tourist rentals fully effective.


The advocacy unit of the Hellenic Competition Commission will be strengthened by twelve additional posts and a review will be conducted with the support of the European Commission and international expertise to ensure that the competition law is in line with EU best practice.

On investment licensing, by September 2015, the Government will adopt a roadmap for the investment licensing reform, including prioritization. The authorities will adopt secondary legislation according to this prioritization by June 2016 (key deliverable), and proceed with other reforms in line with the roadmap.

On administrative burden, by November 2015, the Government will adopt the pending OECD recommendations on environment and fuel trader licenses. In addition, by June 2016, the authorities will further reduce administrative burden, including through one-stop shops for business (key deliverable). By June 2016, the Government will fully implement the law on better regulation.

On competition, investment licensing and administrative burden the Government will by October 2015 launch an ex-post impact assessment of selected reforms and their implementation and identify by June 2016 the remaining measures needed for their full implementation (key deliverable).

On regulated professions, in order to remove unjustified and disproportionate restrictions, the Government will submit by October 2015 the Presidential Decree on reserved activities of civil engineers and related professions (key deliverable), and will adopt the recommendations of an external advisor by December 2015 (key deliverable) and the recommendations of the inter-ministerial committee, based on other recent reports, by February 2016.

On trade facilitation, the Government will streamline pre-customs procedures by December 2015. In addition, with the participation of public and private stakeholders, the authorities will update the trade facilitation action plan for the national single window and adopt an export promotion action plan by December 2015 and proceed subsequently with their implementation. The Government will make institutional changes for post-clearance audits and restructure the risk analysis department in line with WCO recommendations by March 2016, and complete the customs reorganisation by September 2016 (key deliverable). On anti-smuggling, the authorities will establish three mobile enforcement teams by September 2015, adopt a comprehensive strategy to tackle fuel and cigarette smuggling based on an effective interagency cooperation by December 2015, and fully install the inflow-outflow system in the tax and customs warehouses tanks by June 2016, and will fully equip with scanners the three main international ports by December 2016, (key deliverable), ensuring that each of these ports has at least one scanner by March 2016.

On land use, by September 2015, the Government will reconvene the inter-ministerial spatial planning committee, with participation of the independent experts. Based on its advice and in agreement with the institutions, the Government will propose in October 2015 a time- bound roadmap for selected improvements of the spatial planning law, including on parts of the land use categories, and for the full adoption of secondary legislation by June 2016 in order to ensure that the legislation effectively facilitates investment, and streamlines and shortens planning processes while allowing for the necessary safeguards. If there is no agreement on the necessary changes, the 2014 spatial planning law will be fully


implemented (key deliverable). The authorities will adopt the Presidential Decree on forestry definitions by December 2015 and fully implement the forestry law by July 2016. In addition, the authorities will by February 2016 adopt the legal framework for nationwide cadastral offices on the basis of the business plan, the experience of the two pilot offices and recent technical assistance advice and ensure adequate financial independence and administrative capacity of the cadastral agency (key deliverable).

On the link between education and research and development, the Greek authorities are committed to launch a comprehensive consultation process following the review of linkages between education and R&D (see under Section 4.1 ‘Education’) with a view to implement recommended best practices. The organization and the timeline for the consultation shall be drawn up by October 2015.

On agriculture, the authorities will adopt a competitiveness strategy by December 2015. This will include: a) the improvements in the EU funds absorption; b) measures aiming at improving the marketing of agricultural products, including the immediate reform of market permits to improve consumer access to farm products, the establishment of a Greek foods initiative for exports; to promote and manage export distribution networks, and c) structural reforms introducing a new framework for agricultural co-operatives, encouraging structural reforms that favour young and active farmers , greater aggregation of agricultural exploitation, and a programme to improve resource efficiency in energy use, water management and good agricultural practices financed through EU funds.

On structural funds, the authorities will by October 2015 implement in full Law 4314/2014 on European Structural and Investment Funds, adopt all delegated acts indispensable for the activation of the available funds and put in place all ex-ante conditionality.

On technical assistance, the authorities intend to launch immediately a request for support in three critical areas: a competition assessment in wholesale trade, construction, e-commerce, media and rest of manufacturing with support of the OECD; the investment licensing reform with support of the World Bank; and a new round of administrative burden reduction. As a next step, with support of technical assistance, the authorities intend to assess the implementation of the reforms in the areas of competition, administrative burden and investment licensing. Furthermore, in order to ensure an effective reform implementation, the authorities will use technical assistance in other areas as needed, including through Commission services, Member State experts, international organisations, and independent consultants. This includes regulated professions, trade facilitation, export promotion, land use, education and R&D, tourism infrastructure, agriculture and structural funds.

4.3. Regulated Network Industries (Energy, Transport, Water)


The Greek energy markets need wide-ranging reforms to bring them in line with EU legislation and policies, make them more modern and competitive, reduce monopolistic rents and inefficiencies, promote innovation, favour a wider adoption of renewables and gas, and ensure the transfer of benefits of all these changes to consumers.


As prior actions, the authorities will adopt the reform of the gas market and its specific roadmap, leading inter alia to full eligibility to switch supplier for all customers by 2018, and notify the reformed capacity payments system (including a temporary and a permanent mechanism) and NOME products to the European Commission.

By September 2015, the authorities will implement a scheme for the temporary and permanent capacity payment system; modify electricity market rules to avoid that any plant is forced to operate below their variable cost, and to regulate according to the final decision of the Council of State on the netting of the arrears between PPC and the market operator; begin implementation of the gas market reform according to the agreed timeline, whilst prioritising distribution tariffs; implement interruptible contracts as approved by the European Commission; revise PPC tariffs based on costs, including replacement of the 20% discount for energy-intensive users with tariffs based on marginal generation costs, taking into account consumption characteristics of customers that affect costs (key deliverable).

In September 2015, the authorities will discuss with the European Commission the design of the NOME system of auctions, with the objective of lowering by 25% the retail and wholesale market shares of PPC, and to bring them below 50% by 2020, while having reserve prices that capture generation costs and being fully compliant with EU rules. In case it is not possible to reach an agreement on NOME by the end of October 2015, the authorities will agree with the institutions structural measures to be immediately adopted leading to the same results mentioned above in terms of market shares and timelines (key deliverable). In any case, by 2020 no undertaking will be able to produce or import, directly or indirectly, more than 50% of total electricity produced and imported in Greece (legislation to be adopted as prior action).

By October 2015, the authorities will: a) take irreversible steps (including announcement of date for submission of binding offers) to privatize the electricity transmission company, ADMIE, unless an alternative scheme is provided, with equivalent results in terms of competition and prospects for investment, in line with the best European practices and agreed with the institutions to provide full ownership unbundling from PPC (key deliverable). To this end, the authorities have sent the first proposal to the institutions in August 2015; b) review energy taxation; c) strengthen the electricity regulator’s financial and operational independence; d) transpose Directive 27/2012 on energy efficiency adopting the legislation already submitted to Parliament.

By December 2015, the authorities will approve a new framework for the support of renewable energies, while preserving financial sustainability, and for improving energy efficiency, making best use of EU funds, international official financing and private funding, Moreover, they will introduce a new plan for the upgrade of the electricity grids in order to improve performance, enhance interoperability and reduce costs for consumers. The authorities will start the implementation of the roadmap for the implementation of the EU target model for the electricity market, to be completed by December 2017 (key deliverable); in this context, the balancing market will be completed by June 2017 (key deliverable).

The authorities will make use of technical assistance for designing the new framework on renewable energies and energy efficiency. Other important areas where assistance will be


used, both for legislation and for regulation, are the implementation of the gas market reform and the transition to the EU target model for the electricity market.

Water utilities

A stable regulatory regime is key for allowing much needed investment in the water networks and to protect consumers in terms of pricing policies. The Government will, with EU technical assistance, launch by December 2015 the actions needed to implement fully the regulatory framework for water utilities based on the methodology completed by the Special Secretariat of Water in 2014 taking into account the current legal framework; it will also aim to enhance and strengthen further the water regulator in order to enable it to take needed independent regulatory decisions (June 2016, key deliverable).

Transport and logistics

On transport and logistics, the authorities will by June 2016 adopt a general transport and logistics master plan for Greece covering all transport modes (road, railways, maritime, air and multi-modal) and a time-bound action plan for the logistics strategy, as well as implementing legislation of the logistics law (key deliverable). On maritime transport, by October 2015, the Government will align the manning requirements for domestic services with the one for international lines, while respecting best-practice safe manning principles, and adopt the legislative changes.

The Port regulator will become fully operational by June 2016. The Government will adopt the Presidential Decree setting out the operational structures of the regulator by October 2015 (key deliverable). The Government will seek technical assistance to define the tasks of the port regulator, the role of the port authorities, and to prepare its internal regulations and needed laws to be adopted by March 2016 in order to ensure its full functionality.

In support of this reform agenda on network industries, the authorities intend to use technical assistance as needed, including on the strengthening of regulators and on logistics.

4.4 Privatisation

Privatisation can help to make the economy more efficient and to reduce public debt. While the privatisation process has come to a standstill since the beginning of the year, the Government has now committed to proceed with an ambitious privatisation program and to explore all possibilities to reduce the financing envelope, through an alternative fiscal path or higher privatisation proceeds.

To preserve the on-going privatisation process and maintain investor interest in key tenders, the Hellenic Republic commits to proceed with the on-going privatisation programme. The Board of Directors of the HRADF has already approved its Asset Development Plan (ADP) which includes for privatisation assets under HRDAF as of 31/12/2014.

The implementation of this programme aims to generate annual proceeds (excluding bank shares) for 2015, 2016 and 2017 of EUR 1.4bn, EUR 3.7bn and EUR 1.3bn, respectively.


As prior action, and to re-launch the privatisation programme the Government will adopt these measures:

  1. The authorities will endorse the Asset Development plan approved by HRADF on 30/7/2015. The ADP is attached to this Memorandum as annex and constitutes an integral part of this agreement. The ADP will be updated on a semi-annual basis and approved by HRADF; and the Cabinet or KYSOIP will endorse the plan;
  2. The Government and HRADF will announce binding bid dates for Piraeus and Thessaloniki ports of no later than end-October 2015, and for TRAINOSE ROSCO, with no material changes in the terms of the tenders;
  3. The authorities will take irreversible steps for the sale of the regional airports at the current terms with the winning bidder already selected;
  4. The authorities will conclude around 20 selected pending actions identified by HRADF.

The Government commits to facilitate the privatization process and complete all needed Government actions to allow tenders to be successfully executed. In this respect it will complete all actions needed as agreed on a quarterly basis between HRADF, the institutions and the Government. The List of Government Pending Actions has been approved by the Board of Directors of the Hellenic Republic Asset Development Fund and is attached to this Memorandum as an Annex and constitutes an integral part of this agreement.

In line with the statement of the Euro Summit of 12 July 2015, a new independent fund (the “Fund”) will be established and have in its possession valuable Greek assets. The overarching objective of the Fund is to manage valuable Greek assets; and to protect, create and ultimately maximize their value which it will monetize through privatisations and other means.

The Fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions. The Fund is expected to fulfil its objective by adhering to international best practices in terms of governance, oversight and transparency of reporting standards, and compliance.

By October 2015 the authorities shall appoint an independent Task Force to identify options and prepare recommendations on the operational goals, structure and governance of the Fund to be created. The Task Force would report by December 2015, and the government, in agreement with the institutions, will take steps to implement the recommendations by March 2016 (key deliverable). The mandate and composition of the Task Force would be drawn up by the authorities, in agreement with the European Institutions and in consultation with the Eurogroup. The authorities may request technical assistance on this matter. The mandate of the Task Force will include:

  1. Identifying the possible assets which could be part of a new Fund and the best options for their monetization: particular attention would be paid to extracting value from the real estate assets of the Hellenic Republic including those already held by ETAD.
  2. Identifying appropriate governance arrangements of the new Fund, including whether there should be specific sub-entities for different types of assets within the Fund drawing upon, where relevant, the experiences of entities such as Hellenic Republic Asset Development Fund (HRADF) and ETAD; whether such existing


5. 5.1.






entities would be reformed and maintained separate to the Fund, terminated upon conclusion of their mandate, or absorbed into the new Fund.
Putting forward a proposal for the transition to the new Fund to ensure continuity from the previous arrangements, including the possible transfer of assets within the Asset Development Plan.

According to the Euro Summit Statement the monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of the recapitalization of banks and other assets and 50% of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50% will be used for investments. The Task Force will identify options and make recommendations on how this will be operationalized. Options for a legislative framework that would be adopted to ensure transparent procedures and adequate asset sale pricing, according to OECD principles and standards on the management of State Owned Enterprises (SOEs) and best international practices. Particular attention will be paid to maximising the value generation of the Fund’s assets and to avoid circumstances of asset sales below their fair value.

Based on international best practises, assess possible strategies to be designed and executed to monetise the assets through privatisation and other means; and examine options for the professional management of the assets.
Examine statistical classification of the new entity in terms of general government classification and in particular the implications for the issuance of debt or guarantees to ensure that these would not burden gross Greek debt or create contingent liabilities for Greek taxpayers.

A modern State and Public Administration Public administration

The authorities intend to modernise and significantly strengthen the Greek administration, and to put in place a programme, in close collaboration with the European Commission, for capacity-building and de-politicizing the Greek administration.

To this extent, building on the letter sent on July 20th by the authorities to the European Commission, a comprehensive three-year strategy for reform will be defined by December 2015 (key deliverable) in agreement with the European Commission, and making the best use of all available technical assistance. The main elements of this strategy will be the reorganisation of administrative structures; rationalisation of administrative processes; optimisation of human resources; strengthening transparency and accountability; e- government; and a communication strategy. Key deliverables will be stronger coordination of policies, better recruitment processes for managers, HR planning to timely assess and fulfil the hiring needs; a fiscally-neutral reform of the wage grid, a modern performance assessment system; strengthening of policy units in key sectors; a substantial upgrade of the role of local government at both tiers with a view to reinforcing local autonomy and rationalising the administrative structures of local authorities; rationalisation of SOEs and locally-owned enterprises; and modernization of recruitment procedures; improved mobility in the public sector to promote better use of resources.


As prior actions, the authorities will align non-wage benefits such as per diems, travel allowances and perks, with best practices in the EU, effective 1 January 2016. By September 2015, the authorities will adopt through legislation the restructuring plan for ‘OASA – Transport for Athens’ agreed with the institutions (key deliverable).

By October 2015, the authorities will reform the unified wage grid, effective 1 January 2016, setting the key parameters in a fiscally neutral manner and consistent with the agreed wage bill targets and with comprehensive application across the public sector, including decompressing the wage distribution across the wage spectrum in connection with the skill, performance, responsibility and position of staff (key deliverable); and align leave arrangements with best practices in the EU. By 2018 the current “klados” system will be reformed to have a better articulation of job descriptions that will be reflected in the wage grid. The authorities will adopt legislation by November 2015 to issue all secondary legislation to implement the wage grid reform and by June 2016 to rationalise the specialised wage grids with effect in 2017.

Drawing on international expert advice coordinated by the European Commission, the authorities will: i) by (October 2015), review and start implementation of legislation for selecting managers (key deliverable). The selection of new managers will be completed by the end of 2016, with Directors General to be selected by December 2015 and Directors by May 2016. The reform will base recruitment of managers on merit and competence, de- linking technical implementation from political decision, and will also modify the statutes of Secretaries General and other top-tier levels in public entities, including SOEs, in order to provide for de-politicization and better institutional memory, while ensuring effectiveness and appropriate delegation of powers; ii) by November 2015, legislate the new framework for assessing performance of all employees, to build a results-oriented culture.

By October 2015, the authorities will establish, within the new MTFS, ceilings for the wage bill and the level of public employment consistent with achieving the fiscal targets and ensuring a declining path of the wage bill relative to GDP during the period 2016-2019 (key deliverable). To this end, the authorities commit to continue the attrition rule in 2016 while the ratio for the years 2017-2019 will be set in the MTFS adopted in October 2015. For following exercises, the attrition rule will be subject to annual revision in the context of the MTFS exercise, for the years following the next (t+2).

By November 2015, the existing Secretariat General for Coordination will be strengthened to ensure effective planning and coordination of governmental work, of legislative initiatives, of monitoring of implementation of reforms, and of arbitrage functions on all policies.

By December 2015, the authorities will introduce a new permanent mobility scheme. The scheme will promote the use of job description and will be linked with an online database that will include all current vacancies. Final decision on employee mobility will be taken by each service concerned. This will rationalize the allocation of resources as well as the staffing across the General Government.

The authorities will continue to identify illegal hires and temporary injunctions, as well as disciplinary cases, and take appropriate enforcement action.


The authorities will engage, with the help of technical assistance, in a programme to improve access to law by the citizen. This includes a long term plan of codification of the main legislations which will be proposed by March 2016 and fully implemented by June 2018. The programme also includes the creation of an electronic portal giving access to legislation, both in the form published in the Gazette (FEK form) and in the consolidated version of the various provisions by December 2016.

5.2 Justice

The authorities have adopted on 22 July 2015 the new Code of Civil Procedure, which will become effective as of 1 January 2016. The authorities will implement the revised Code of Civil Procedure, in accordance with the requirements set out in the transitional provisions of Article 1 (Ninth Article) of Law 4335/2015 and the roadmap for the implementation of the revised Code of Civil Procedure to be finalized by September 2015.

The authorities will rationalise and introduce a selective increase of court fees, as well as increase transparency in this regard (October 2015). The authorities will propose measures to ensure access to justice by vulnerable persons (December 2015).

The authorities will propose measures to reduce the backlog of cases in administrative courts by September 2015 and in civil courts by October 2015; they will agree on an action plan with European institutions including technical assistance on e-justice, mediation and judicial statistics (October 2015).

The authorities will propose by November 2015 and subsequently implement a three years strategic plan for the improvement of the functioning of the justice system. The plan should encompass key actions aimed at enhancing judicial efficiency, speeding up judicial proceedings and addressing shortcomings in the functioning of courts such as, but not limited to, collecting information on the situation of the courts, computerization, developing alternative means for dispute resolution, such as mediation, rationalizing the cost of litigation and improving in court functioning and court management.

5.3 Anti-corruption
The authorities will as a prior action update and publish a revised Strategic Plan against

corruption; and they will implement it according to its timeline.

The authorities will adopt by October 2015 legislation insulating financial crime and corruption investigations from political intervention in individual cases in particular by amending the provisions of article 12 of the law 4320/2015 and by setting up a system to ensure proper coordination, prioritization of investigations and sharing of information between investigation bodies through a Coordinating Body Chaired by Finance and Corruption Prosecutors.

The authorities will amend and implement the legal framework for the declaration of assets (October 2015) and the financing of the political parties on key weaknesses such as the composition of the committee common to both legislation, the anonymous donations, limitation on seizures and transferability of public financing and absence of definition of tax deductibility rates (November 2015); the authorities will conduct an assessment of the


reduction of penalties for financial crimes provided by law 4312/2014, and amend it if needed (November 2015); they will adopt a draft code of conduct for members of Parliament (March 2016).

The Government commits to implementing fully and timely the GRECO recommendations.

The authorities will continue to pursue technical assistance with the European Commission SRSS in the fields of anti-corruption where it was already provided.

5.4 Statistics

The Government will fully honour the Commitment on Confidence in Statistics signed in March 2012 by implementing all envisaged actions, including respecting international statistical standards; guaranteeing, defending and publicly promoting the professional independence of ELSTAT; and supporting ELSTAT in upholding confidence in Greek statistics and defending them against any efforts to undermine their credibility, as well as reporting annually to the Hellenic Parliament and to the European Commission.

Government fully respects the independence of ELSTAT in carrying its tasks and providing high quality statistics. In this regard it respects the financial independence of ELSTAT, and provides all the necessary resources in a timely manner, as approved in the annual budget of ELSTAT, for the agency to complete uninterrupted its tasks.

The Government will ensure that by September 2015 ELSTAT has access to administrative data sources in line with the Art. 17 of Law 4174/2013 amended by 4254/2014 and 4258/2014, and the Memorandum of Understanding signed between ELSTAT, the Ministry of Finance (GSIS), the Secretary General for Public Revenues and IKA signed on 17/04/2014.

The Government as a prior action will launch the process for appointing a President of ELSTAT in line with law 4334/2015 and 3832/2010.

1 – HRDAF – Asset Development Plan – 30 July 2015
2 – HRDAF – Government Pending Actions – 30 July 2015




Memorandum between Greece and the Troika: from democracy to external diktat


  1. Memorandum between Greece and the Troika: from democracy to external diktat

    by Tiago Stichelmans

    The third programme between Greece and its creditors fails to promote local ownership. It is therefore difficult to see how it will succeed where its predecessors have failed.

    On Friday, 14 August, Eurozone finance ministers approved the Memorandum of Understanding (MoU) between Greece and the European Stability Mechanism (ESM). This MoU shapes a three-year long bailout of 86 billion euros for Greece. In exchange for this bailout, Greek authorities have to comply with a set of extraordinarily detailed conditions.

    The Memorandum states that “success requires ownership of the reform agenda programme by the Greek authorities”. The document asks Greece to develop a growth strategy that is “Greek-owned and Greek-led”. This is astonishing considering that the conditions included in the Memorandum are worse than the ones that were rejected by the Greeks in the referendum on 5 July. The remarkably long list of prior actions and key deliverables – prior actions are measures that a government agrees to take before the financing is approved or the review of a programme is completed – included in the Memorandum are also in their vast majority in contradiction with the platform adopted by Syriza in Thessaloniki, creating a rift within the party. For example, Syriza was elected under the promise to abolish the unified property tax (ENFIA) that doesn’t take into consideration the level of income, and replace it with a tax on large property. However, the Memorandum rejects this approach and lists the launch of the 2015 ENFIA exercise as a prior action. We must therefore interpret the ‘ownership’ principle included in the Memorandum as a way for the Troika to force the Greek government to take responsibility and own the measures included in the document.

    A number of conditions included in the Memorandum demonstrate the micro-management of Greece by its creditors. This approach has previously been criticised by the IMF itself in a conditionality review. The IMF Guidelines on Conditionality state that the “conditions should be limited to the minimum necessary to achieve the goals of the Fund-supported program [which are] to solve the member’s balance of payments problems”. The ESM should therefore let the Greek authorities decide how the macroeconomic targets will be pursued, leaving them the necessary policy space and ownership to do this. Imposing a unified property tax or a reform of the VAT on Greek islands is in complete contradiction with the IMF’s guidelines and does not build on the lessons learnt.

    It is difficult to imagine how the Greek government will be able to design and implement an economic strategy of its own given the extraordinarily long list of conditions (prior actions and key deliverables) and most importantly how these conditions will reform vast sectors of the economy. To give just a few examples, the Memorandum asks the Greek authorities to abolish the refund of tax on diesel and oil for farmers (despite the fact that agriculture may be an engine of future growth), to eliminate VAT discount on Greek islands (despite the existence of such discounts for islands in other EU member states, the particularly difficult conditions of the population living there during the winter and the impact that this may have on the main Greek export: tourism) and to transfer valuable assets to an independent fund (in reality controlled by the Troika) that will be in charge of their privatisation (meaning that Greek authorities will lose the capacity to use Greek assets according to their priorities).

    In addition to the conditions put on the Greek authorities in exchange for the bailout, the Memorandum organises relations between Greek authorities and the Troika in such a manner that it is difficult to see how they will own any future reform. The document asks the Greek government to commit to “consult and agree” with the Institutions of the Troika (European Commission, European Central Bank and the International Monetary Fund) on all actions relevant to the objectives of the Memorandum, before their adoption. We should note that in the two previous Memoranda, the Greek government committed to “consult” with the institutions of the Troika rather than “consult and agree”.
    The large number of reforms demanded of the Greek authorities was already a feature of previous programmes. Eurodad’s report on IMF conditionalities, published in 2014, highlighted that the Greek programme at the time had a number of conditions (41) far above average (19.5 conditions per programme).

    For the IMF, the imposition of economic reforms in exchange for financial support is not a new issue. However, the experience of developing countries (where financial aid from the IMF usually takes place) should alert us to the problems posed by the lack of ownership on economic reforms. The lack of effectiveness of economic conditionalities has even been recognised by the World Bank, which states that “compliance has been low for policies for which there was no sense of ownership, for politically difficult reforms, or reforms required to be implemented in sensitive political periods”.

    Overall, by imposing Greek authorities’ ownership on the measures included in the Memorandum, the Troika made sure that Syriza will no longer be able to claim that it represents a political alternative as it will now be part of the system by implementing those measures. It is very questionable that reforms imposed by foreign institutions have any chance of being successfully implemented and bringing much desired economic growth to Greece. Without economic growth, and considering that European creditors have so far rejected debt reduction, it is difficult to see how this third program will reach what previous ones have failed to do: help Greece to get back to debt sustainability.


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