Commission: Promoting reforms and continuing high growth in 2022 – ‘Yes’ to second minimum wage increase

By Tasos Dasopoulos

Continuation of the effort for reforms, reduction of arrears of pensions and high growth of 4.9% in 2022, the European Commission certifies in its report for the 13th evaluation, where it accepts the second increase of the minimum wage in 2022 as a measure against accuracy.

In its general conclusion, the Commission emphasizes that Greece continued its efforts to implement its commitments despite the difficult times. In particular, it refers to the progress it is making in increasing the efficiency of the public operation, in the new capitalization subsidiary, in the simplification of the licensing of companies and in the privatizations. It also emphasizes the promotion of the digitization of public services and the rapid implementation of the Recovery and Sustainability program.

The only possible delay is in the settlement of non-performing loans (NPLs). Specifically, the Commission accepts that the percentage of NPLs has decreased from 30.1% at the end of 2020 to 15% at the end of September 2021, but emphasizes that the write-off from the balance sheets of banks is due to the operation of the “Hercules” program since Loans are still – as it is emphasized – still in the economy and affect the lending policy of the domestic financial system.

In particular, it is stressed that the hearings for the approximately 30,000 cases of the Katselis law have accelerated, but even greater speed is needed to achieve the goal of full settlement of the cases by the end of 2023.

In the same line are the electronic auctions which started again in 2021 but with a result that is still less than expected.

However, it is stressed that the new law on debt settlement and the provision of a second chance (ie the new Bankruptcy Code) is now operational, while the institutional framework for the new body for real estate management is being promoted for a vote in February. In addition, the Commission notes delays in the changes that should be made in primary health care and justice, but which are mainly attributed to the delay in the functioning of the public sector brought about by the pandemic.

With regard to arrears, the Commission is also seeing progress as the amount decreased by € 316 million compared to the previous assessment. As it is emphasized, the granting of arrears of pensions has accelerated significantly, with the result that the balance of 176 million euros of the previous evaluation has been reduced to 93 million euros and now it is possible that their full liquidation by mid-2022.

Regarding the growth prospects, the Commission adopts the winter forecasts, noting that in 2021 Greece recovered quickly with growth of 8.5%, mainly due to private consumption and the very good tourist season. The prospect is that the strong growth will continue this year at a rate of 4.9%, mainly due to the greater recovery of tourism but also the implementation of investments and reforms of the Recovery Fund.

The Commission predicts that the primary deficit will reach 7.6% of GDP in 2021 to fall to 1.2% of GDP at the end of 2022.

Finally, it reveals that revenues last year exceeded 1.2% of GDP, which corresponds to an amount of over 2.1 billion euros, due to the better course of business and corporate taxes. For 2022 he mentions the reform of ENFIA which will have a net budget cost of 0.1% of GDP, ie about 180 million euros.

Support measures

With regard to the support measures, the Commission notes that most of them were completed at the end of 2021, with the exception of the measure of suspension of employment contracts which the Government was forced to extend in early 2022 due to the Omicron mutation, adding costs that exceeds 0.15% of GDP, while for the whole year support measures have been planned amounting to 1.7% of GDP (approximately 3.1 billion euros).

With regard to electricity and gas subsidy measures, the Commission notes that the coverage comes from public revenues from polluting auctions that are not included in the budget. It is stressed, however, that the progress of subsidies should be closely monitored, on a monthly basis, so that the surplus from pollutant revenues does not turn into a deficit and Greece is forced to subsidize energy products with budget money.

Minimum wage

The report also states without comment the Government’s intention to institute a second increase in the minimum wage after the conservative increase of 2% at the beginning of the year. As it is emphasized, the first and the second increase comes after the two-year freeze of the minimum wage due to a pandemic and will be given for the first time in May. The increase will be dependent on labor productivity and the level of unemployment and will have minimal effect on the public wage. As emphasized elsewhere, Greece has gained many points in competitiveness since 2018.

Public funding

With regard to the revision of the debt sustainability report, the Commission confirms that despite the increase in debt due to the pandemic, financing needs remain below 15% of GDP in the long run. According to the central scenario, the debt will be reduced from 203% in 2021 to 55% of GDP in 2050.