The Commission is recommending a comprehensive structural reform package aimed at increasing the effectiveness of public administration, stepping up pension and healthcare reform, and maintaining banking and financial sector stability. Greece must submit a first report by mid-March 2010.
"Greece has adopted an ambitious programme to correct its fiscal imbalances and to reform its economy. Yesterday's announcement strengthens the government's commitment to deliver the programme's objectives of more sustainable public finances and a more competitive economy. This is in the interests of the Greek people, who will benefit from better and more durable growth and job opportunities in the future. It is also in the interests of the euro area and of the EU as a whole. The Commission fully supports Greece in this difficult task," said Economic and Monetary Affairs Commissioner Joaquín Almunia, adding: "The Commission will monitor the execution of the budget and of the reforms very closely and regularly and welcomes the Greek government's readiness to adopt further measures as and when necessary ".
On 15 January, the Greek government submitted to the Commission its stability programme for the period 2010-2013 which envisages reducing the budget deficit by 4 percentage points to 8.7 per cent of GDP in 2010 and thereafter to 5.6 per cent in 2011, 2.8 per cent in 2012 and 2 per cent in 2013. The programme contains a package of concrete fiscal consolidation measures for 2010, with an estimated quantification for each of the measures, as well as a timeframe for their adoption and implementation. On the revenue side, it includes the elimination of tax exemptions, the rise of excise duties on tobacco and alcohol and measures to fight tax evasion. Regarding expenditure, the government will cut public servant allowances, freeze recruitment in 2010 and will only recruit 1 for every 5 civil servants retiring thereafter. The government has set up a contingency reserve and frozen all budgetary appropriations per ministry by 10 per cent and already adopted nominal cuts in public consumption and operational expenditure. The programme outlines a number of structural reforms aimed at improving the budgetary framework and the efficiency of public spending, enhancing investment and improving the functioning of labour and product markets. After the submission of the stability programme, the Greek government announced further measures concerning public wage, excises on fuel and pension reform. The Commission is asking Greece to spell out the implementation calendar for these measures within one month. The plans for 2011 and 2012 need to be detailed in the coming months.
Given the state of the public finances in Greece and the persistent external imbalances, resulting from accumulated competitiveness losses, and in order to allow for simultaneous discussion by the Council of fiscal policy and structural reforms, an integrated approach to the enhanced surveillance mechanism is being adopted.
The Commission is recommending to the Council that Greece adopts a comprehensive structural reform package aimed at increasing the effectiveness of public administration, stepping up pension and healthcare reform, improving labour market functioning and the effectiveness of the wage bargaining system, enhancing product market functioning and the business environment, and maintaining banking and financial sector stability . This recommendation is made under Article 121(4) of the Treaty, ‘with a view to ending the inconsistency with the broad economic policy guidelines and the risk of jeopardising the proper functioning of the monetary union’. The recommendations are largely included in the stability programme but require clarification in some cases.
Considering that Greece has failed in its duty to report reliable budgetary statistics, as seen again in October, with a significant revision of data for 2008, the Commission is initiating infringement proceedings, requesting the government to take all necessary steps to ensure that the systemic failures and weaknesses identified in the recent Commission report are corrected. Greece has been asked to cooperate with the Commission and to promptly agree on an action Plan to tackle statistical, institutional and governance deficiencies, including the adoption, by 15 May, of legislation making compulsory the provision of public reports on budgetary execution on a monthly basis, the obligation for social security funds and hospitals to publish accounts and enhanced control mechanisms and effective personal responsibility in the statistics and general accounting offices, as well as receiving the appropriate resident technical assistance for the compilation of reliable statistics.
Greece must submit a first report by mid-March 2010, spelling out the implementation calendar forthe measures to achieve the 2010 budgetary targets, standing also ready to adopt additional measures if needed, and quarterly integrated reports from mid-May 2010 on the implementation of the recommendations, including the reforms.
The Commission's integrated recommendations will be discussed at the February Eurogroup and ECOFIN meetings.
© European Commission
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