HELLENIC REBUBLIC

MINISTRY OF FINANCE

Budget 2011
Draft Law

18 November 2010

Budget 2011
The 2011 budget
Has been drafted within the framework of the most ambitious fiscal
adjustment and structural reform programme ever implemented in the
country
Continues an aggressive fiscal consolidation effort and aims to reduce the
deficit by 5 billion Euro or 2% of GDP in 2011.
Sets off from a more adverse starting point than initially projected due to
the revision of fiscal data by Eurostat
Contributes to the fulfillment of the quantitative and structural targets of
the Economic Policy Programme
The 2011 Budget is the first budget which applies the principle of fiscal
management at the level of general government.

Macroeconomic environment
At the current economic juncture :
Growth potential at the global level and in particular for the Eurozone remains low
The turmoil in international sovereign markets, and in particular for peripheral
economies will most likely continue
In 2011, the recession in Greece will be more shallow than in 2010 (-3% compared to
4,2%) but larger than initially expected (-2,6% )
6
% real GDP

4,6

% nominal GDP

HCPI
4,4

4
3
2

3,3

2,9
2,2
1,3

2,1
1,1

2,7
2,1

1,5

1
0,5

0,7

1
0

-1
-1,1

-2
-3

-1,3

-1,5

-2,4
-3

-4
-4,2

-5
2009

2010

2011

2012

2013

2014

2015

Deficit and debt revision

The revision of fiscal data by Eurostat covers the period 2006-2009.

Between 2006 and 2009 the deficit almost quadrupled, having increased
from 9.85 billion Euro in 2003 to 36.2 billion Euro in 2009.
Debt increased from 97.4% of GDP in 2003 to 126.8% in 2009.
In absolute numbers, debt almost doubled, having increased from 168
billion euros in 2003 to 298 billion euros in 2009.

Starting point: 2009 deficit

The starting point for the implementation of the Economic Policy Programme of Greece, resulting
from the revision of fiscal data by Eurostat, was a deficit of 15.4% of GDP or 36.2 billion Euro.
The deficit is 3.8 billion Euro or 1.8% of GDP higher than was known at the time the Economic Policy
Programme was drafted.

Main components of the deficit revision

(bl Euro)

36.2

Main components of the deficit revision

(% GDP)

15.4%

16

37,0
36,0

0,2

35,0

1,9

1,8

14
13,5

32,0
31,0

15

0,1
0,8

Inclusion of public
corporations to the
general government

0,8

Revision of surpluses of
LG, SSF and LEPL

14,5

34,0
33,0

15,5

Other adjustments

32,3

30,0

13

0,1
GDP reduction
13,6
Initial deficit

12,5
2009

2009

Evolution of deficit
In 2009 the deficit increased by 6% of GDP, by the same amount as the reduction achieved in 2010
via the implementation of the stricter fiscal adjustment programme that has ever been
implemented in Greece.

General Government deficit 2006-2014

40,0

18,0%
36,2

Deficit (% GDP)
35,0

16,0%

Deficit (bn Euro)

15,4%

14,0%

-6%

+6%

30,0

12,0%
25,0

22,4

21,9
10,0%

20,0
15,0

9,4%

9,4%

17,0
7,4%

12,1

6,5%

6,4%
10,0

8,0%

14,9

14,5

11,4

6,0%

5,7%
4,9%

5,0

6,4

4,0%

2,6%

2,0%

0,0

0,0%
2006

2007

2008

2009

2010

2011

2012

2013

2014

Evolution of revenues and expenditures

In the framework of the Economic Policy Programme the medium-term objective will
be achieved through the return of expenditures and revenues in terms of GDP ratios
to sustainable levels.
General Governmnet Expenditure (%GDP)
53,1

55,0

50,2

48,9

50,0

General Governmnet Revenues (% GDP)

49,7

48,5

47,2

46,4
45,0

45,3

44,8
42,2

40,0

39,0

39,8

40,6

39,6

42,0

42,4

42,7

37,8

35,0

30,0

25,0

20,0
2006

2007

2008

2009

2010

2011

2012

2013

2014

Starting point: Debt 2009

General government debt in 2009 reached 298 billion or 126.8% of GDP, which is 10.5%
of GDP (or 24.6 billion) higher compared to the April fiscal data notification.
Main components of the debt revision
(bn Euro)

Main components of debt revision compared to April

(% GDP)

24,6

126,0%

300,0
1,1
295,0

128,0%

5,3

0,5%
2,3%

124,0%

290,0

122,0%

285,0

120,0%

Other adjustments and

GDP
7,7%
Off-market swaps

18,2
280,0

118,0%

275,0

116,0%

270,0

114,0%

265,0

273,4

126.8%

Inclusion of debt of public

corporations

116,3%
112,0%

Initial Debt

110,0%

260,0
2009

2009

Evolution of debt
The review of fiscal data with the reclassification of several public enterprises and entities in the
general government sector leads to higher projections of debt figures than forecast before the
revision but a similar time profile provided that the medium-term fiscal targets are met.
Evolution of General Government Debt
(% GDP)

160
150

142,5

140
130

126,8

145,2

148,9

149,7

148,4

133,2

120
110

115

Debt - estimated evolution after the

revision

100
90

97,5

95,3

98,8

Debt - estimated evolution before the

revision

80
70
60
2006

2007

2008

2009

2010

2011

2012

2013

2014

Primary balance
The return to primary surpluses from 2012 onwards will contribute to the reduction
of debt.
Primary balance (% GDP)
8,0
5,7

6,0
4,0

3,1

2,0

0,9

0,0
-2,0

-1,4

-0,8
-1,9

-4,0

-3,3
-4,5

-6,0
-8,0
-10,0

-10,1
-12,0
2006

2007

2008

2009

2010

2011

2012

2013

2014
9

The effect of the revision on 2010 data

The revision of fiscal data for the period 2006-2009 increases the deficit of the general
government for 2010 by about 3.4 billion euros or 1.5% of GDP compared to the
estimates for the deficit included in the pre-Budget of 2011.
Main components of the deficit revision
(bn Euro)

10,0%

Main components of the deficit revision(% GDP)

23

22
22

0,3%
0,7
9,0%

21

20

9,4%

9,5%

2,7

0,1%

Inclusion of 10 SOEs and 3

entities in the G.G.'s
accounts
GDP reduction

8,5%
1,2%

19
Revision of surpluses of
LG,SSF and LEPL

8,0%
18

17

18,5

16

7,5%

Initial Debt

7,8%

7,0%
2010

2010

10

Fiscal adjustment in 2010

In 2010, Greece achieved the largest fiscal adjustment ever achieved in a single year.
The deficit was reduced by 6 percentage points.
The adjustment, after the revision of fiscal data, is larger than the 5.5 percentage
points adjustment which was initially projected.

40,0

Fiscal Adjustment before and after

revision (bn Euro)
36,2

35,0

Fiscal adjustment before and after revision

(% GDP)

2009

2010

2009

18,0%

32,3

30,0

14,2 bn
13,8 bn
Euro

25,0

20,0

Euro
22

18,5

14,0%

13,6%

6%

12,0%

5,5%
9,4%

10,0%
8,0%

15,0

2010

15,4%

16,0%

7,8%

6,0%
10,0
4,0%
5,0

2,0%

0,0

0,0%
Initial Deficit

Deficit after revision

Initial Deficit

Deficit after revision

11

2011 Budget: New facts

The 2011 Budget will be the first budget to be drafted and executed on the
basis of the new fiscal management framework, which among others provides
for:
Detailed description and setting up of accounts for the general
government
Annual expenditure ceilings
The creation of a contingency reserve
Maximum borrowing caps
The obligation to submit a supplementary budget in case of expenditure
overruns above the reserve
Procedures to control commitments
The obligation to report and publish data regularly (monthly, quarterly and
semi-annually) on the budget execution of the general government.
12

Fiscal adjustment in 2011

Fiscal adjustment in 2011 will amount to 2% of GDP (from 9.4% to 7.4%) or about 5
billion euros (from 22 billion Euro to 17 billion Euro).
The initial projection included in the Programme was a reduction by 0,5% of GDP or a
1.5 billion Euro reduction.

25

Fiscal Adjustment before and after

revision (bn Euro)
22,0

2010

10,0%

Fiscal Adjustment before and after

revision (bn Euro)
9,4%

2011

2010

2011

9,0%
8,1%

20

8,0%

18,5
17,0

17,0
1,5 bn
Euro

15

5 bn

Euro

7,6%

2%

7,0%
6,0%

7,4%

0.5%

5,0%
10

4,0%
3,0%

2,0%
1,0%

0,0%
Initial Deficit

Deficit after revision

Initial Deficit

Deficit after revision

13

Fiscal effort in 2011

Economic Policy Programme: in order to achieve a deficit reduction of 1.5 billion Euro (0.5% of GDP)
in 2011, it was required to take measures amounting to 9.150 billion Euro (the difference between
fiscal effort and fiscal adjustment results from autonomous changes in fiscal data by about 9 billion
Euro, such as increase in interest payments, reduction in contributions, increases in social spending,
effect of the recession).
New facts: the size of the required fiscal adjustment is larger and amounts to 5 billion Euro, while the
yield of measures that were included in the Economic Policy Programme has been re-evaluated.
Required fiscal effort in 2011 in order to
achieve the deficit reduction target by about 5
bn euro

Fiscal efforts and fiscal adjustment

15000
Deficit Reduction

25
13000

20
Measures (bn Euro)

20
14

15

Deficit Reduction (bn Euro)

14

11000
9000

5.000

300
1.900

Other (oneoff, military exp.

etc.)
Interest increase

7000

10

2.200
5

5000
3000

0
2010

2011

1000

4.800

Expenditure for
wages, pensions
and benefits
Impact of recession
on revenues

-1000

14

2011 Budget
2009
Realisation
State Budget
. Revenues (1+2)
1. Net revenues of ordinary budget (a+b+c+d-e)
a. Ordinary revenues
b. Revenues from the abolishment of special accounts
c. Revenues from the bank support scheme
d. Revenues from NATO
e. Tax returns
2. Revenues of Public Investment Programme (PIP) (a+b)
a. Revenues from the EU
b. Other revenues
. Expenditures (1+2)
1. Expenditures of the ordinary budget (a+b+c+d+e+f)
a. Primary expenditure
b. Subsidies to public hospitals for the repayment of old
debts
c. Expenditures for NATO
d. Military expenditures (on a cash basis)
e. Guaranteed called
of which for Public Enterprises
f. Interest payments
2. Public Investment Programme (PIP)
. State budget deficit (-)
% GDP
.a. Primary balance ( 1f)
% GDP

2010
Economic Policy
Estimations
Programme

2011
Projections

50.585
48.545
52.308
1.088
47
55
4.952
2.040
1.858
183
84.215
74.627
57.992

58.434
55.176
58.744
1.200
280
52
5.100
3.258
3.109
149
78.925
69.725
54.611

54.326
51.434
54.853
1.150
485
46
5.100
2.892
2.642
250
77.393
68.893
52.798

59.482
55.560
57.520
1.157
643
40
3.800
3.922
3.722
200
80.339
71.839
52.633

1.498

245

345

450

51
2.175
584
484
12.325
9.588
-33.629
-14,3%
-21.304
-9,1%

52
1.800

46
1.500
944
813
13.260
8.500
-23.067
-9,9%
-9.807
-4,2%

40
1.600
1.196
1.051
15.920
8.500
-20.857
-9,1%
-4.937
-2,2%

Note: The impact of Eurostats revision of fiscal data is not included in the target for the EPP in 2010

13.017
9.200
-20.491
-8,9%
-7.474
-3,2%

15

2011 Budget
a. State budget deficit
b. Balance of LGs, SSFs, Hospitals and other legal entities
Legal entities
LGs
SSFs
Arrears of SSFs
Hospitals
Of which hospital arrears
Public Enterprises
c. Funding of entities with special bonds
d. Adjustments
Military expenditure (difference between payments and deliveries)
Accrued interest
Tax revenue
Adjustment between claims and receipts from EU
Advanced payments by the EU
Privatisation account
Treasury account
Swaps
Transactions in debt
Arrears of military hospitals
Debt repayment to hospitals
Non-audited prepayments

ELEGEP
AKAGE
Other adjustments
Non-audited tax refunds
Revenues from the abolishment of special accounts
e. General Government balance (a+b+c+d)
% GDP
f. Estimated primary balance of the general government (e-1 of table
5.1)
% GDP
GDP

2009
Estimations
-33.629
-2.365
125
-65
408
-479
-611
-1.743
-531
375
-752
-623
550
-312
911
-250
294
400
58
-52

2010
Economic Policy
Programme
-20.491
2.669

-550
-350

Estimations
-23.067
-851
102
20
906
-524
-815
450
-540
2.018
200
-950
320
1.065
100
-239
400

2011
Projections
-20.857
1.491
230
500
700
-239

300
-420
3.053
800
640
50
50
50
120

-30
345
433
-24
-400
798

30
-137
900

450

-370
35
-94
522
229
-160
-11
-36.150
-15,4%

-18.722
-8,1%

-21.900
-9,4%

-16.833
-7,4%

-23.825
-10,1%
235.035

-5.705
-2,5%
231.000

-8.640
-3,7%
231.888

-813
-0,4%
228.408

16

Carry over of 2010 measures in 2011

TOTAL

2650

1,2%

1150

0,5%

Income policy for the general government (cuts in wages and allowances)

500

0,2%

Income policy for pensioners (reduction of 13th and 14th pension)

500

0,2%

Reduction of high pensions

150

0,1%

1500

0,7%

600
250
250
50
50
750
150

0,3%
0,1%
0,1%
0,0%
0,0%
0,3%
0,1%

EXPENDITURES
Carry over of 2010 measures

REVENUES
Carry over of 2010 measures
Carry over of excise taxes (2010)
Increase in excise taxes on fuel
Increase in excise taxes on cigarettes
Increase in excise taxes on alcohol
Excise taxes on luxury goods
Increase in VAT
Incentive to regularise land-use violations

17

2011 measures already included in

the Economic Policy Programme
TOTAL

5550

2,5%

1500

0,7%

Cost savings from Kallikrates

500

0,2%

Reduction in Intermediate consumption

300

0,1%

Savings from the establishment of a Single Payment Authority

100

0,0%

Freeze in pensions
PIB (the cut in expenditures is being replaced by an increase in revenues from
the EU)

100

0,0%

500

0,2%

EXPENDITURES
Measures for 2011 already in the Programme

18

2011 measures already included in

the Economic Policy Programme
REVENUES
Measures for 2011 already in the Programme
Replacement of the move of 30% of goods and services from 11% to 23% VAT
rate with the following measures:
Broaden VAT base by including services that were exempted (in 2010)
Increase in the reduced VAT rate from 11% to 13%
Reduction in VAT (drugs and hotels)
Equalization of excise tax on fuel
Heating allowance
New tax framework for firms
Special levy on profitable firms
Reduction of the tax rate for firms (from24% to 20%)
New income tax framework
Presumptive taxation
Taxation of wages in kind (cars)
Book specification of income
Revenues from the new framework for gaming
Gaming royalties
Gaming licenses
Special tax on unauthorised establishments
Increase in real estate legal values
Green taxes

4050

1,8%

1050
100
800
-250
600
-200
680
1000
-320
900
700
150
50
700
200
500
300
270
150

0,5%
0,0%
0,4%
-0,1%
0,3%
-0,1%
0,3%
0,4%
-0,1%
0,4%
0,3%
0,1%
0,0%
0,3%
0,1%
0,2%
0,1%
0,1%
0,1%
19

New measures 2011

The new expenditure measures included in the 2011 budget focus on public
enterprises, controlling health expenditure, means-testing family benefits, reduction
in military expenditure and in transfers and operating expenses.
TOTAL

6130

2,7%

EXPENDITURES

3850

1,7%

Savings from the health sector

Reduction in SSFs expenditures for drugs : reduction in drug prices and
improvement of procurement procedures

2100

0,9%

1400

0,6%

Hospital health procurement

700

0,3%

Savings from public enterprises

800

0,4%

Means-tested family benefits

150

0,1%

Further reduction in transfers and operating expenses by 5%

200

0,1%

Further reduction in the short-term employment contracts in the public sector

100

0,0%

Reduction in military expenditures (deliveries)

500

0,2%

20

New measures 2011

On the revenue side, new measures focus on fighting tax evasion and increasing revenues as well
as on revenues from the exploitation of public property.
REVENUES

2280

1,0%

Measures against tax and social contributions evasion

1590

0,7%

Measures against fuel smuggling (input-output system)

190

0,1%

Action plan to collect tax arrears

200

0,1%

Speeding up the collection of tax fines

400

0,2%

New framework for tax disputes and trials

300

0,1%

Tax settlement (carry over from 2010)

100

0,0%

Settlement of social security contributions (carry over from 2010)

300

0,1%

Increase in court fees

100

0,0%

690

0,3%

Renewal of telecommunication licenses and sales of frequencies

350

0,2%

Extension of the Athens Airport concession contract

250

0,1%

Revenues from guarantees (fees and commissions of guarantees called)

90

0,0%

Revenues from state assets (included in the deficit)

21

2011 measures - Total

In total measures account for over Euro 14 billion of 6.4% of GDP.

TOTAL

14330

6,4%

REVENUES

7830

3,5%

Carry over of 2010 measures

Measures for 2011 already included in the Economic Policy
Programme

1500

0,7%

4050

1,8%

New measures on the revenue side for 2011

2280

1,0%

EXPENDITURES

6500

2,9%

Carry over of 2010 measures

Measures for 2011 already included in the Economic Policy
Programme

1150

0,5%

1500

0,7%

New measures on the expenditure side for 2011

3850

1,7%

22

Structural reforms
Along with fiscal adjustment and measures to reduce the deficit, major structural
reforms have been implemented aiming at enhancing growth and strengthening
institutions in order to restore confidence in the economy:

New tax system

New fiscal framework
Kallikrates reform of local and regional government
Publish all decisions on the internet
Pension reform
Labour reforms
Stability and supervision of the financial sector
Liberalisation of services
Protection of indebted firms and households
Simplification of licensing for establishing enterprises
Road freight liberalisation
Open up of closed professions
New legal framework for the promotion of large and small investments
23