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European CommissionThe Economic Adjustment Programme for Greece. Fourth ReviewA period of deepening and fine-tuning of health care reforms has now started, with important challengesahead. The financial situation of EOPYY (National Organisation for the Provision of Health Services) remainsdifficult, though significant positive developments can be observed. Despite some progress, addressingremaining delays in the transfer of contribution revenues to EOPYY from Social security funds, and the currentlack of control, guidelines and proper referrals for the use of diagnostics, private clinics and hospitals remainimportant challenges. Regarding the pharmaceutical sector, the implementation of established policies continues,with new policies on pricing, targets for generic medicaments and spending caps and an effective prescriptionbudget for each doctor. However, EOPYY and EOF (National Organisation for Medicines) capacity must bereinforced to ensure that pricing and reimbursement is timely and effective in delivering a cost-effective use ofpharmaceuticals and securing the necessary savings. Important steps have been taken in the hospital sector toimprove the monitoring of financial and activity data and to ensure that financial execution is in line with thebudget. Nevertheless, more could be done regarding ESY (National Health System) facilities and hospitalspending in a number of areas. Finally, a considerable concern remains that a large, but still undetermined,number of people do not have adequate access to healthcare services and goods, although access to healthcentres and emergency care is available to all.Since 2010 substantial progress has been achieved in the reform of the pension system, but importantchallenges remain. While major steps have been taken to stabilise the system and make it sustainable, there is aclear need for further rationalisation of the social security system. The main pension system remains highlyfragmented, relying on increasing financing from state transfer, while pension rules differ greatly across differentcategories of population. The 2012 reform of supplementary pensions has still to be implemented in full, whilethe reform of lump-sum pensions also needs to be completed. The authorities have committed to enhance thepension system to ensure its viability and support labour supply and to this end will prepare a draftcomprehensive proposal on the main elements of SSF consolidation and harmonise contribution and benefitpayment procedures by June 2014, to be subsequently complemented by an actuarial study of the whole pensionsystem, supporting specific design and parametric improvements. These changes will be legislated to take effectfrom 1 January 2015.As concerns education and research, clear efforts to rationalise the Greek education system have beenundertaken, but further measures are needed to improve its quality. In primary and secondary education,the system has been significantly rationalised. In Higher Education, the authorities have completed a first waveof consolidation of HEIs and departments under the Athina project to increase efficiency and eliminateduplications. However, substantial additional measures are required to increase the quality of education. Theinitiatives included in the Education Action Plan need to be fully implemented, and the authorities should takethe necessary additional steps to implement effectively the new policy of evaluation of schools and ofeducational staff. Further steps to increase financial and organisational autonomy of primary and secondaryschools should also be considered. In Higher Education, the provisions of laws 4009/2011 and 4076/2012 needto be fully implemented and a comprehensive impact assessment of the Athina project is now urgent as a basisfor possible additional rationalisation steps. Closer linkages between R&D and businesses are needed to boostthe productivity and competitiveness of the economy. A comprehensive national research and innovationstrategy for smart specialisation need to be developed.Efforts to fight corruption are being stepped up but the challenge is substantial. According to recent reportsby Transparency International and the European Commission, the perception of corruption in Greece is thehighest among the EU Member States. The adjustment programme is tackling this reality, and there has alreadybeen some progress, with the adoption of an anticorruption strategy and the appointment of a nationalcoordinator. The Government has adopted the crucial framework law for anticorruption and is expected to adopta code of conduct for members of Government in April, and by June revised legislation on funding of politicalparties and legislation on declaration and monitoring of assets which will put Greece at the forefront on thisaspect.With regard to the financial sector, the authorities remain committed to taking all necessary actions toensure that banks are healthy and adequately capitalised and are in a position to support the economicrecovery. The review took note of the stress test results and attendant capital needs estimates by the Bank of4
Executive summaryGreece. According to the assessment of the mission teams, there are some upside risks to the capital needsestimates, in particular, if the authorities and banks do not urgently and efficiently address the high level of nonperformingloans. Swift recapitalisation of banks is needed to strengthen their balance sheets. The ongoinginjection of fresh private capital into the Greek banks is a sign of confidence, and will help to strengthen theprivate management of Greek banks. The recapitalisation framework has been redesigned in light of theimproved banking sector capitalisation and market circumstances. The Bank of Greece should remain vigilant inits oversight of the banking system and proceed forcefully in requiring banks to quickly work out their largestock of impaired assets. The authorities are also committed to significantly strengthening the private sector debtresolution framework, also by implementing the transition scheme put in place in December 2013, andfacilitating the orderly and swift workout of impaired bank assets. The buffers in the Hellenic Financial StabilityFund will be retained to meet potential future adverse contingencies.With solid fiscal performance and the stabilisation of the banking system, it is now crucial to ensure that awide range of ambitious structural reforms is implemented to quickly restore and promote growth andsupport employment. The government committed to implement a package of important structural reformswhich, if fully implemented, will significantly improve the growth potential and flexibility of the Greekeconomy. Equally importantly, product market reforms tend to enhance social fairness as excess prices or rents,which so far benefited a small group of privileged firms or professions, are reduced, increasing the livingstandards of ordinary citizens.An important part of the structural policy package is the reform of product markets. According to theOECD, in 2008 Greece had one of the highest levels of regulation among developed countries. While reformsalready implemented under the programme have allowed significant progress in this area in recent years, Greeceis still among the OECD countries with relatively strict product market regulations. This is also testified by theDoing Business report by the World Bank, where Greece has greatly improved its ranking, but still remains lowcompared to other EU Member States.Indeed, the authorities are taking significant steps to remove restrictions to competition in many areas ofthe economy, and action is on-going to reduce administrative burden. Since July 2013, the authorities have,among others, lowered the property transfers tax, eased licensing procedures for retail outlets, introducedsimplified procedures in pilot customs offices and expanded e-customs functions, and reduced the minimumduration of commercial rental contracts from 12-16 years to 3 years. The Greek government has committed toimplement, starting from April 2014, almost in their entirety the OECD recommendations resulting from an indepthstudy of legislation and practices in the key sectors of tourism, retail trade, food processing andconstruction materials, launched in 2012 as part of the programme. It has also been agreed to continue this workand four additional sectors will be analysed by the OECD or an equivalent organisation to identify furtherregulatory constraints on competition. These are wholesale trade, telecommunications, e-commerce andmanufacturing. Concrete measures are also being taken to liberalise the transport and residential rental markets,to develop the logistics market and also to open up closed professions. By June 2014, the authorities will takefurther steps to simplify licensing and customs procedures, to streamline rules for land use, and intend to adoptlegislation on reduction of administrative burden on business across 13 sectors.In addition, Greece is now moving to a more modern market for energy through a fundamentaltransformation of its energy sector. An ambitious package of reforms has been agreed which have the potentialof completely transforming the Greek energy market and liberalising it ahead of privatisation. Unlocking theGreek gas market, which benefits currently from a unique derogation under the EU directive, removingsignificant distortions in the electricity market and improving competition in the supply segment, are essentialsteps to turn the energy market from a drag into a driver of growth for the Greek economy. These reforms areurgently needed as the high cost of energy is affecting the competitiveness of the economy and the welfare ofhouseholds. To deal with both immediate and long-term challenges in a coherent approach, the government willadopt, starting from April and with a significant set of measures by end June, a package of reforms, designed toaddress in a structural manner the many distortions in the energy markets rather than simply compensating them.The privatisation process of PPC, the electricity incumbent, is a key element of this package and is progressingwell. The sale of ADMIE, the network operator, is now in the Expression of Interest phase, while the legislation5
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Chart 18Graph 13.1. Distance to Fro
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4. DEBT SUSTAINABILITY ANALYSIS AND
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4. Debt sustainability analysis and
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4. Debt sustainability analysis and
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Table 12. List of Milestones to be
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ANNEX 2: MACROECONOMIC FORECASTANNE
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ANNEXTable B1: USE AND SUPPLY OF GO
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ANNEXTable C1: FISCAL ACCOUNTS AND
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ANNEX 3: UPDATED PROGRAMME DOCUMENT
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Memorandum of Understanding on Spec
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OCCASIONAL PAPERSOccasional Papers
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No. 46No. 47No. 48No. 49The Western
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No. 80 2011 Pre-accession Economic
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No. 119No. 120No. 121No. 122Possibl
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No. 1582013 Economic and Fiscal Pro
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