Eurobank: The long list of reforms and milestones in the Recovery Fund

The latest issue of Eurobank Research’s “7 Days Economy” focuses on the long list of reforms and investments included in the National Plan for Recovery and Sustainability “Greece 2.0”, but also on the milestones that must be achieved by the end of the year.

“After a decade of adjustment, recession and stagnation and a two-year unprecedented crisis due to the coronavirus pandemic, the National Plan for Recovery and Resilience ‘Greece 2.0’ responds to Greece’s urgent need for a strong recovery and convergence of domestic per capita income To achieve this, a number of ambitious reforms and investments must be made to help the Greek economy become more sustainable, resilient and better prepared for its challenges and opportunities. green and digital transition “, notes Eurobank Research in its analysis.

As he points out, the plan includes 106 investments and 68 reforms structured in the following 4 pillars:
1st green transition,
2nd digital transition,
3rd employment, skills and social cohesion and
4th private investment and transformation of the economy.

Greece expects total resources of € 30.5 billion for the period 2021-2026, of which € 18.1 billion in grants and € 12.4 billion in loans.

A condition for achieving the full absorption of the aforementioned funds by 2026 is that Greece will complete in time all the relevant milestones and targets that have been set. The European Commission, on August 9, 2021, disbursed to Greece in the form of pre-financing the amount of € 3.96 billion (corresponding to 13% of total grants and loans), as a kick-off for the implementation of the required critical investment and reforms meters.

The first tranche of the € 3.6 billion Recovery Fund, of which € 1.72 billion is in grants and € 1.84 billion in loans, was disbursed on 8 April 2022, following a positive assessment by the European Commission on 28 February, as the country successfully completed the fifteen (15) milestones associated with the first payment request. These milestones were linked to reforms and investment in energy efficiency, electricity mobility, waste management, the labor market, taxation, the business environment, healthcare, public transport, and its accounting and other auditing systems. Greece for the implementation of the recovery and resilience mechanism.

A total of 65 milestones for two other installments of € 5.3 billion.

However, Greece will have to fulfill an additional sixty five (65) milestones by the end of 2022, so that it can claim 2 more installments totaling € 5.3 billion.

More specifically, the second tranche of € 1.72 billion relates only to grants and is linked to twenty-five (25) milestones, which should be completed by the end of the 2nd quarter of 2022. Some of these milestones have started to be implemented and / or tend to be completed before the deadline, such as the reform to simplify the licensing of RES, the digital transformation of SMEs through a voucher system, the strategic plan for vocational education, training and lifelong learning, the setting of standards for the interconnection of electronic cash registers and POS with AADE, the provision of tax and financial incentives for the creation of economies of scale through partnerships and corporate transformations of SMEs, the economic transformation of the agricultural sector and the creation of new industrial parks.

THE third tranche of € 3.6 billionof which € 1.72 billion relates to grants and € 1.84 billion in loans, is linked to the achievement of an additional forty (40) milestones by the end of the 4th quarter of 2022, which makes the approval of its disbursement even more demanding.

The reforms that must be completed by the end of the year can be summarized in the following areas: energy upgrade of the country’s building stock (ie second and third cycle of savings) and preparation of urban plans implementing the urban reform, establishment of installation and operation infrastructure implementation of new regulation of the electric market for the obligation to provide public service from buses, new fiber optic network in buildings and residences, new waste management legislation for the implementation of sustainable landfill and recycling (separate collection of biological waste, water, glass and plastic by the end of 2022) and reform of water policy for the sustainable use of resources, digitization of archives and related services, provision of “customer-centric” public administration services, through simplification and improvement of processes, of improvements systems and compliance with European strategies and policies, initiatives related to the integration of new technologies in the digital transition and the modernization of public administration, improving the resilience, accessibility and sustainability of healthcare, new healthcare framework combating money laundering and corruption, improving the efficiency of the justice system, legislation to reform employment in the cultural sector, and agricultural infrastructure and cognitive agricultural environment for the production process and the management of natural resources).

It is a fact that Greece has made significant progress in implementing the plan, as well as the broader reform agenda. This is confirmed by the positive assessment of the European Commission in the context of the 14th Enhanced Surveillance Report, which was published earlier this week.

As the Commission concludes, the Greek authorities have taken all necessary steps to fulfill their specific commitments in the areas of public financial management, real estate taxation, invalidity benefits, environmental inspections and justice, and have agreed to for the extension of the mandate of the Hellenic Financial Stability Fund.

In addition, the country has completed broader structural reforms, including the reform of public procurement and the establishment of a Statistical Justice Department in the Ministry of Justice.

As a result, the Commission gave the green light for Greece to exit the enhanced surveillance regime on 20 August 2022. However, there are also outstanding commitments, in particular as regards the the codification of labor legislation and the achievement of the agreed objectives for the settlement of overdue debts, which must be completed by October 2022.

In conclusion, Greece, despite its commitment to the implementation of reforms, has in front of it a long list of milestones / commitments which it must successfully complete in a relatively short period of time. These are structural reforms that are expected to increase productivity, by improving the business environment and the digitization of the state and the economy, to strengthen competition in product markets and to increase the share of the active population in the labor force.

The full implementation of the Recovery and Sustainability Plan, ie the use of all funding and the full implementation of structural reforms, is very important, as it can significantly contribute to the growth of real GDP in Greece in the coming years (by 6.9% in relative to the baseline scenario based on BoG estimates or 7.3% based on SOE estimates).

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