P.R.: Position of the Minister of Finance Mr. Christos Staikouras in the discussion with Mr. Mario Nava, Director General for Structural Reform Support of the European Commission in the context of the 7th Delphi Economic Forum
I am particularly pleased to be sharing this panel with Mr. Mario Nava, Director General for Structural Reform Support of the European Commission. I highly appreciate this opportunity to speak about Greece’s highly ambitious reform agenda, focusing on the Ministry of Finance’s particular role in implementing economic and fiscal policy reforms. Indeed, significant reforms in critical economic and social areas have been a crucial part of the Government’s agenda, from the beginning.
Our strategy has been aiming at an appropriate economic policy mix that will adequately combine fiscal stability through reduction in the tax burden, and the promotion of structural reforms to address long-standing deficiencies of the Greek economy, to expand its productive base, and to strengthen the extroversion of firms. Specifically speaking, the Ministry of Finance has an ambitious and comprehensive reform agenda, which is being implemented through targeted policies and actions. A reform agenda that serves 5 pillars of strategic priorities. Starting with the 1st reform pillar, this is about expanding the tax base. This is being achieved through reforms aiming at increasing electronic transactions and introducing electronic invoicing and book-keeping, while effectively combating smuggling. This pillar includes 5 reform projects which will:
§ Ease the administrative burden for businesses and improve tax compliance through the introduction of tax incentives.
§ Develop a framework to facilitate the connection of cash registers with Point-of Sale (POS) terminals and its IT systems.
§ Provide the Independent Authority for Public Revenue with a structured and systematic compliance risk management approach that improves its tax control effectiveness and efficiency.
§ Modernize the Customs’ tracking systems, audit processes, and equipment in order to increase the effectiveness of cargo audits.
§ And, simplify and update the tax and customs codes and secondary legislation, according to EU best practices. The 2nd pillar of reforms is focused on enhancing the financial system’s stability and boosting liquidity in the real economy. In the last 2.5 years we have strengthened financial stability and accelerated the reduction of NPLs, through the implementation of the “Hercules” asset protection scheme. We have also carried out the major reform of the new insolvency framework that will be instrumental in addressing the problem of private debt, and that will further contribute to our strategy towards the fast reduction of NPLs. Also, I would like to highlight that - in 2020 - our National Private Debt Resolution Strategy was released, supported by the European Commission’s Structural Reform Support Program. Currently, part of this ambitious strategy is being materialized through 2 projects included in our National Recovery and Resilience Plan: First, the implementation of a New Public Credit Bureau, providing credit scoring of existing and potential debtors, based on both private and public debts. And second, the establishment of a Central Credit Registry, hosted by the Bank of Greece, which will be recording - on a granular basis - the payment history of each individual loan. Both these actions aim at preventing future private debt build-up and empowering the NPL market, by tackling information asymmetries, which facilitate credit decision-making and increase transparency of the payment history and the level of collateral provided. DG Reform’s TSI program is also supporting two significant reform projects on this area: The first regards the strengthening of the insolvency and restructuring framework, mainly through supporting the out-of-court workout and setting up an early warning system. And the second is based on promoting the adoption of a National Strategy for Financial Literacy, as a way to empower the population towards making effective financial decisions, as well as using traditional and innovative financial services safely. Our 3rd reform pillar focuses on upgrading the corporate governance and capital markets framework. In 2020, we introduced a new corporate governance framework, which reformed the two decades old legislation. This new omnibus law has provided solid grounds for encouraging long-term shareholder engagement, increasing transparency and accountability in corporate governance and enhancing trust between companies and investors, by reducing the principal-agent problem. The same law also included a new framework facilitating the establishment of flexible forms of Alternative Investment Agencies, in order - among other things - to boost investments in start-ups. Additionally, for the Development of Greece’s Capital Markets more recent reforms are being promoted through 2 parallel streams:
The first focuses on enhanced capital market supervision and trustworthiness, a reform being implemented through “Greece 2.0”, which aims at modernizing the Hellenic Capital Commission’s supervisory capacity.
The second is an ambitious project, supported by DG Reform, which aspires to provide Greece with a comprehensive Capital Market Development Strategy, based on international best practices, but also adjusted to Greece’s particular needs and circumstances.
The 4th pillar of reforms aims at improving fiscal governance, including measures to ensure long-term sustainability of public finances and compliance with state aid rules.
During the last 2.5 years, the Ministry of Finance has placed particular emphasis on successfully implementing spending reviews and the gradual set-up of performance budgeting, through the pilot implementation of key performance indicators.
We also continue in carrying out our plan to clear general government arrears, while we have completed major steps in automating the process related to cash calls on state guarantees.
DG Reform has significantly been supporting our efforts in this pillar of reforms.
Since 2020, the General Accounting Office received technical support through 2 TSI projects regarding the implementation of the new chart of accounts:
§ The enhancement of cash management functions, as well as
§ the implementation of the accrual accounting reform in all general government entities. Additionally, compliance of the planned state support measures with state aid law is priority for the Ministry of Finance, especially within the framework of the unprecedented pandemic crisis. In order to ensure this aspect, we are advancing the modernization of our state aid legislation and control framework, as well as the establishment of a Central State Aid IT System. Furthermore, we are modernizing our State Owned Enterprises’ institutional framework, which will allow their effective operation and management, a reform also included in our National Recovery and Resilience Plan.
Last but not least, our 5th pillar of reforms aims to incorporate the climate dimension in fiscal governance and promote the green transition of the Greek economy.
Our government has placed particular emphasis at aligning our policies with our ambitious national and European climate goals.
Our national Recovery and Resilience Plan dedicated more than 37% of the available budget for the implementation of green projects, including significant reforms, such as the super-deduction of SME expenses on green economy, energy, and digital transition.
Additionally, 3 major green reforms, also benefiting from TSI support, are underway:
§ The first is the introduction and gradual implementation of a green state budgeting framework.
The 2021 Greek state budget was the first to explicitly include a reference to the climate aspect.
§ Secondly, the design and implementation of a comprehensive national Sustainable Financing Strategy to support Greece’s green economic transition.
§ And third, the design and implementation of a modern environmental taxation framework, in order to achieve the ambitious national and EU climate goals, while equally supporting socio-economic cohesion.
I take this opportunity to thank Mario Nava for the excellent cooperation with the Greek Government and the Ministry of Finance in particular.
As I have already laid out, a significant part of our ambitious and dynamic reform agenda has been benefiting from DG Reform’s Technical Support Instrument.
All 5 pillars of reforms have been instrumental in successfully advancing our prudent, insightful and growth-friendly overall economic policy.
But even more so, they stem from our vision to form a new economic paradigm for Greece, under the principles of resilience, fairness and sustainability.