Greece

II - Changes to the Budgetary Process

Budgetary process   
II.1
Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in Greece.

According to article 72 of the Constitution, the Budget and the Annual Report of the State and Parliament is voted in the Parliament Plenary Session. The details of the budgetary process were until recently defined by statute 2362/1995,[1] which was extendedly amended in August 2010, some months following the conclusion of the first loan agreement to Greece, by statute 3871/2010.[2] The amended statute was focused on budgetary stability and discipline,[3] was much more detailed concerning the content of the budget and the calculation methods of the various capitals,[4] and was characterized by the attribution of extended competences to the Minister of Finance, who became responsible for the economic management of General Government.

The Budget of Central Government and the connected budgets of General Government[5] (hereafter Budget) comprise many documents. First of all, the Annual Budget of Central Government defines the revenues, the expenses and the sources of income for Central Government for each economic year. The Medium Term Framework of Budgetary Strategy defines the budgetary objectives and goals for General Government for the year it refers to and the three following years, it defines the main general policies concerning the annual budget, and it announces the main sources of risks for the financial situation of General Government. The Annual Social Budget defines the revenues, expenses, deficit/surplus of the unified system of social security and for each one of the main funds of social security and the main hospitals. The unified annual budgets of Local Authorities define the budget of each unified domain of local administration. Finally, the unified annual budgets of the remaining sectors of General Government, define the unified budgets of the sectors of General Government which are not covered by the previous documents.[6]

The Medium Term Framework of Budgetary Strategy is drawn up by the General Accounting Office of the State, under the guidance and surveillance of the Minister of Finance. It is submitted for approval to the Ministerial Council before the 15th of April. After its approval, the Minister of Finance submits it to Parliament for voting before the 15th of May. During September, if substantial changes have occurred, the Minister of Finance can submit to Parliament an up-to-date Medium Term Framework of Budgetary Strategy, which is voted by Parliament within 10 days from its submission.[7] The various annual budgets must be in conformity with the Medium Term Framework of Budgetary Strategy.[8]

The Annual Budget of Central Government is drawn up by the General Accounting Office of the State, under guidance and surveillance by the Minister of Finance. For its redaction, the method of “top-down budgeting” is employed, which entails the determination of binding maximum limits of expenses per Central Government sector, inside of which the various capitals are allocated.[9] A draft of the Annual Budget is submitted by the Minister of Finance to the competent parliamentary committee on the first Monday of October, before the beginning of the economic year that it concerns.[10] According to the Standing Orders of Parliament,[11] the Permanent Committee of Financial Affairs deliberates on the draft and the proceedings are communicated to the Minister of Finance.[12] The Minister, after taking into consideration the remarks of the Committee, introduces to Parliament the final draft bill of the Annual Budget, at least 40 days before the beginning of the economic year that it concerns.[13] The bill is voted during the normal annual parliamentary session, after a second examination by the permanent committee of Financial Affairs.[14] After its approval by Parliament, the Annual Budget is binding. However, the Minister of Finance can submit a proposal for the amendment of the credits of the Annual Budget of Central Government, with a complementary budget; he/she is obliged to do so in certain cases. The Minister of Finance can approve expenses exceeding the amounts of the credits provided for in the Annual Budget, in order to fulfill obligations of the State according to loan agreements, international conventions, and obligations to the European Union.[15]

The execution of the Annual Budget of Central Government is assured by the General Accounting Office of the State, which manages public property and must cooperate in every general act entailing expenses.[16] Moreover, the execution of the Annual Budget is monitored by the Committee of Review and General Balance of the State and of the Monitoring of the Execution of the Budget of Central Government. This Committee is informed by the Minister of Finance every three months on the execution of the Annual Budget and on the management of public finances. Further, the Minister of Finance submits a monthly report on the revenues and expenditure of the Budget.[17] For the collecting of the necessary information, a special Office has been created by the new statute, the Office of the Budget of Central Government to the Parliament, which compiles and submits trimestral and annual reports on public finances.[18] Until the end of July, the General Accounting Office of the State compiles the Review of the execution of the Annual Budget of Central Government and the Balance-sheet, which represents the clear image of the financial status of Central Government, as well as other financial reports. These documents are based on information given by the competent authorities. They are submitted to the Court of Audit, which must scrutinize their correctness within two months. Then, the Minister of Finance introduces them, together with the decision by the Court of Audit and his/her own comments, to Parliament (the same committee is competent) for approval, before the end of November and, in any case, before the introduction of the new Annual Budget.[19]

The annual budgets of the rest of the institutions of General Government are compiled and executed under the guidance and surveillance of the competent Minister or head officer, who are responsible for their correct execution.[20] The drawing up of these budgets is coordinated by the Minister of Finance and the time-line is defined by the General Accounting Office of the State for each economic year.[21] Their execution is monitored and reviewed by the General Accounting Office of the State and the Minister of Finance, with the cooperation of the Head of Financial Services, which is a new organ, appointed in every institution of General Government for the monitoring of the management of its finances.[22] The General Accounting Office of the State must cooperate in any general act entailing expenses to the annual budgets.[23]

Statute 4111/2013 established fiscal rules and practices for General Government institutions and services. Most importantly, every institution or service must set monthly and trimestral budgetary objectives according to the Annual Budget voted by Parliament.[24]

A summary of the rest of the annual budgets of General Government are annexed to the Annual Budget of Central Government, when submitted for approval to Parliament. Also, they are accompanied by a declaration by the Minister of Finance for their conformity to the Medium Term Framework of Budgetary Strategy.[25] Moreover, the Minister of Finance also submits to Parliament the various reports of the competent Directors of taxation services and of the General Accounting Office concerning public revenues and expenses, as well as the report of the General Director of Public Property, which concerns the results of the exploitation of public property. Finally, the Minister of Finance informs Parliament on the total amount of the public debt and on any other subject, in order to render public finances transparent and accessible to the public.[26]

Article 98 of the Constitution attributes an important role to the Court of Audit for the monitoring of the management of public finances. According to the first paragraph of this article,

1. The jurisdiction of the Court of Audit pertains mainly to:


a) The audit of the State’s expenditures, and of local government agencies or other public law legal persons subject to its audit by special laws.

b) The presentation to Parliament of the financial report and balance sheet of the State.

c) Advisory opinions concerning statutes on pensions or on the recognition of service for granting of the right to a pension, in accordance with article 73 paragraph 2, and on all other matters specified by law.

d) The audit of the accounts of accountable officials and of the local government agencies and public law legal persons specified in subparagraph (a).

e) The trial of legal remedies on disputes concerning the granting of pensions and the audit of accounts in general.

f) The trial of cases related to liability of civil or military servants of State and local government agency civil servants for any loss, through malicious intent or negligence, incurred upon the State or upon the above agencies and legal persons.

2. The authority of the Court of Audit shall be regulated and exercised as specified by law.

The provisions of article 93 paragraphs 2 and 3 shall not be applicable in the cases specified in (a) through (d) of the preceding paragraph.

3. The judgments of the Court of Audit in the cases specified in paragraph 1 shall not be subject to the control of the Supreme Administrative Court.[27]

The comments by the Court of Audit on the financial management of the State, included in its annual report, are communicated to the various Ministers. The responses to the comments are communicated to the President of the Court of Audit who communicates them together with the report to the President of the Parliament. All these documents are published to the Official Gazette of the Government.[28]

The above characteristics were subsequently incorporated into a new systematic text on budgetary process, which entered into force with law 4270/2014 on 28th of June 2014.[29]

The public debt is managed by a legal entity in public law (Οργανισμος Διαχειρισης Δημοσιου Χρεους, Public Debt Management Agency).[30]

General change           
II.2
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?

Statute 3871/2010[31] introduced important changes to the budgetary process, a few months after the conclusion of the first loan agreement for Greece. The goal of the statute was “the creation of contemporary budgetary rules and principles for the management of public finances” and “the reestablishment of the credibility of the budget of our country”. The statute aimed at the modernization of the budgetary management with rules, principles, and models according to what exists in other developed countries; the modernization of the budgetary monitoring according to the internationally valid monitoring models; the establishment of the responsibility of all the organs which participate to the management of public finances; the amelioration of the effectiveness and the creation of confidence to the economic management of the country; the harmonization of the budgetary process with the respective process of the Member States of the EU; the consolidation of transparency; the strengthening of the role of Parliament in the monitoring of the budgetary policy of the government and its execution by the ministries; the strengthening of the role of the Minister of Finance with responsibility and surveillance of the budgetary management of General Government.[32]

The statute established many rules and deontological principles (principle of the prudent budgetary management, of responsibility, of impartiality and justice, of sincerity, and of transparency) concerning the content of the Budget. Moreover, it extended the competences of the Minister of Finance to General Government and the competences of the General Accounting Office of the State, as well as of the various competent Ministers. What is more, it appointed a Head of Financial Service in each institution of General Government. Further, it introduced the instrument of the Medium Term Framework of Budgetary Strategy, which comprises the goals of the government for the whole General Government for the three years following its redaction. The statute also introduced the top-down method for the compilation of the Annual Budget of Central Government and it changed the time-line of the compilation of the Budget. Concerning statistics and accounting, the Statute put in place a double-entry accounting system.[33] It defined in detail the content of the Budget and the various documents constituting it. Moreover, it introduced the complementary budgets, thus regulating the exceeding of the credits provided for in the Budget. The expenses from the Central Government Budget and the Local Authorities Budget, as well as the other annual budgets, are submitted to scrutiny by the Court of Audit, which also exercises a preventive scrutiny in certain cases. Also, a special office in Parliament was created for the better supervision and monitoring of the execution of the Budget and of the Medium Term Budgetary Frameworks. Finally, the statute established certain rules for the enforcement of budgetary stability.

The application of the statute met obstacles in the beginning. For example, the first scientific committee of the special budget office in Parliament was dismissed after having concluded that the debt was not sustainable.[34]

Further, statute 4111/2013 established fiscal rules and practices for General Government institutions and services. Most importantly, every institution or service must set budgetary objectives according to the Annual Budget voted by Parliament.[35]

Finally, statute 4270/2014 incorporated these changes in a systematic code of budgetary process and added further changes aiming at the harmonization of domestic law to the precepts of the “six-pack”.[36] Namely, it instituted an Independent Fiscal Council; it established the Medium term budgetary objective procedure and an adjustment path procedure, as well as a corrective mechanism in case of important deviation from these objectives; it harmonized the Greek budgetary time-line with the European semester and it established the legal framework for the fiscal surveillance of General Government sub-sectors. Further, the statute clearly defines the institutional framework of the budgetary process and the competences of the various authorities (articles 18 f.). It states the general principles governing the management of General Government finances (principle of reasonable financial management, of responsibility and reason giving, of transparency and of sincerity –article 33). The statute also enounces some principles concerning pluriannual fiscal planning (article 34): it should give priority to the repayment of the debt and to the consolidation of fiscal and economic stability, it should be unitary and concern all General Government sectors, it should be based on medium term forecasts, it should be transparent and subject to scrutiny by independent authorities.[37]

Institutional change        
II.3
What institutional changes are brought about by the changes in the budgetary process, e.g. relating to competences of parliament, government, the judiciary and independent advisory bodies?

Statute 3871/2010[38] of 2010 (see also question II.2) brought about important institutional changes in the budgetary process. These changes were subsequently incorporated into statute 4270/2014, which instituted a wholly new budgetary process.[39]

First of all, it has importantly increased the competences and powers of the Minister of Finance, who now has the power and competence to exercise the general management of public finances of Central Government, as well as the coordination and surveillance of the General Government finances. Among his/her particular competences are the submission of the Medium Term Framework of Budgetary Strategy and its eventual up-to-date versions to Parliament; the submission of a draft of the Annual Budget of Central Government, the Annual Report and the Balance of the State to Parliament; the surveillance of the redaction and execution of the annual budgets and of the budgetary reports of the institutions of General Government; the submission of a report concerning the budgetary developments of General Government to Parliament and its publication on the internet; the conclusion of loan agreements as a representative of the Greek State; the surveillance and monitoring of programmes which are financed by the EU or other international organizations.  The Minister of Finance also determines the models, the regulations and the procedures that govern the economic management of the public sector. Together with the co-competent Minister or head officer, he/she is responsible for the correctness and accuracy of the information and the elements included in all the documents of the Budget and in the various reports. Moreover, ministerial decrees by the Minister of Finance define the procedure and the time-line of the redaction of all the Annual Budgets, except from the unified annual budgets of Local Administration. They also define in detail the competent State organs and the procedure for credits, the major categories of expenses in the Budget of Central Government, the categorization of the revenues and expenses for the domains of General Government and any other detail for the redaction of the Budget.

The General Accounting Office of the State has also been attributed extended competences. Among them are the following: the General Accounting Office draws up the Medium Term Framework of Budgetary Strategy and its eventual amendments; communicates through circulars to all institutions of General Government the time-line for the redaction of the Budget of the next economic year; compiles the draft of the Annual Budget of Central Government, and proposals for complementary budgets; compiles the Annual Report and Balance-sheet of the State, as well as the rest of the financial reports of Central Administration; manages public property and monitors the execution of the Budget; obligatorily approves the enactment of general acts causing expenses to the expense of the Budget; compiles reports for the execution of the annual budgets of the institutions and services of General Government; exercises review to the financial management of the local authorities and of the legal persons depending on them; monitors the financial management of various legal persons which are financed by the Budget; monitors the management of programs which are financed by the EU or other international organizations; collects the information for the exercise of its competences; enacts directives and circulars concerning the budgetary process and the public financial management.

According to the new budgetary process, the competent Ministers and head officers of the remaining General Government institutions are attributed the following budgetary competences and responsibilities: they manage and execute the budget of their institution according to the legal statute; they compile and present a draft of their annual budget, according to the maximum limits of defined in the Medium Term Budgetary Framework; they execute the annual budget; they supervise and direct the organs under their surveillance for the compilation of the budget in conformity with the Medium Term Budgetary Framework and their correct execution; they manage public property and resources; they work out reports for the execution of the budget of their institution and the institutions under their surveillance; they work out and submit information on the financial situation of these institutions.

Moreover, a new official has been appointed to the financial service of each Minister and each institution of General Government, the Head of Financial Service. He/she is responsible for guaranteeing a prudent budgetary management of the institution where he/she is appointed and of the institutions financed by it. He/she also supervises the procedures concerning the budget and the accounting information, according to the directives of the General Accounting Office of the State. Law 4270/2014 separated the function of Authorizing Officer from that of the Head of Financial Service and made them incompatible. It also attributed more competences to the Head of Financial Service. Both the Authorizing Officer and the Head of the Financial Service of each institution must sign decisions concerning the assuming of obligations by General Government sectors.

Further, since 2010 (Kallikratis plan, concerning the Local Authorities)[40] the budget of the Local Authorities is monitored ex ante by the Court of Audit. The statute of 2010 introduced the ex post review of the execution of the budget of these authorities (for the first and second degree), as well as of their enterprises and organizations.

For the better information of the Parliament, the Office of Budget to the Parliament has been created, which assists the various competent committees in their work, especially through the collection of the necessary information.

Statute 4055/2012 charged the Court of Audit with the scrutiny of the new fiscal governance introduced by the 2010 statute.[41]

Finally, statute 4270/2014 instituted an independent Fiscal Council, thus incorporating Directive 2011/85/EU into the domestic order. Among the Council’s competences are the evaluation of public macroeconomic forecasts and the monitoring of the State’s observance of fiscal rules.[42]

Change of time-line 
II.4
How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?

According to the statute 3871/2010, the time-line of the budgetary cycle is divided in calendrical stages accordingly:

1) January-March (1st Stage): the General Governmental Strategy is defined and the Medium Term Framework of Budgetary Strategy is compiled.

2) April-May (2nd Stage): The Medium Term Framework of Budgetary Strategy is approved by the Ministerial Council and is approved by the Parliament.

3) June-July (3rd Stage): The budgetary process for Central Government begins, together with the preparation of the budget of the rest of the institutions of General Government.

4) August-October (4th Stage): Negotiations between the Ministry of Finance and the Ministries concerning their budget and timely preparation of the Social Budget.

5) November-December (5th Stage): Submission and voting of the Central Government Budget by Parliament with a parallel publication of the budget of the remaining institutions of General Government (Social Security Funds, Hospitals, Local Authorities).[43]

Before this statute, no budgetary time-line was legally defined.

Statute 4270/2014 incorporated this time-line into the new budgetary process that it instituted and further harmonized domestic law to the “European semester”.[44] Thus, it provided that the Fiscal Council (an independent administrative authority instituted for the first time by the same statute) will publish twice per year, in conformity with the “European Semester” time-line, a report in which it will elaborate its conclusions concerning the macroeconomic and fiscal forecasts, the fiscal objectives and the fiscal results.[45]

Miscellaneous
II.5
What other information is relevant with regard to Greece and changes to the budgetary process?

It is important to note that, independently from the legally determined budgetary process, since the first loan agreement on May 2010, a de facto process is taking place, under the directives and surveillance of an international formation, the so-called “troika”. The “troika” is composed by one representative of each one of the country’s creditors, that is, the IMF, the ECB, and the European Commission, representing the Eurozone MS. Any important evolution concerning the planning of the budgetary strategy, the execution of the Budget and the Medium Term Budgetary Framework, and the management of public property and finances, is negotiated with and approved by this sui generis institution, which functions as an independent technocratic council. The report by the “troika” constitutes the basis of the Eurogroup decision for the disbursement of the tranches of the financial assistance to Greece.[46] Even though the Government formed after the 2015 elections refused to negotiate with the “troika”, negotiations are still taking place with the “institutions” (ECB, IMF and Commission) in order to conclude an agreement as to financial assistance to Greece.

Moreover, according to article 4 of statute 4063/2012,[47] the reimbursement of the public debt has priority to any other expenses. Thus, the revenues of the Budget from the EFSF and other determined revenues are deposed into a special account which is created exclusively to this objective.

[1] ΦΕΚ Α’ 247/27.11.1995, concerning the accounting of public finances, the monitoring of the expenses of the State, and other provisions.

[2] ΦΕΚ Α’ 141/17.8.2010, budgetary management and responsibility.

[3] The new articles 1, 1A and 5 Law 2362/1995 define a large number of general principles which govern the budgetary process.

[4] See the Interim Progress Report on the implementation of Council Directive 2011/85/EU on requirements for budgetary frameworks of the Member States http://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp128_en.pdf.

[5] According to article 1B, General Government comprises the Central Government, first and second degree Local Administration  and the Social Security Organizations of. The Central Government comprises the Central Administration (Presidency, Ministries, Decentralized and Independent Authorities), the legal persons of public law and the legal persons of private law that are monitored and financed by the Central Administration.

[6] Article 6 Law 2362/1995.

[7] Article 6Γ Law 2362/1995.

[8] Article 6Δ Law 2362/1995.

[9] Article 6E Law 2362/1995.

[10] Article 8 par. 1 of the statute. According to article 4, the economic year begins on the 1st of January and finishes on the 31st of December of the same year. It includes the administrative act and the events that are relative to the management of the public accounts and the movement of the public property of the State.

[11] http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/kanonismos-Thematiko-syntagma%202010.pdf.

[12] Article 121 of the Standing Orders of Parliament.

[13] Article 8 par. 2 Law 2362/1995.

[14] Article 121 of the Standing Orders of Parliament.

[15] Article 8A Law 2362/1995. The Minister of Finance must submit a report within 60 days for these expenses.

[16] Article 3 par. 8 Law 2362/1995.

[17] Article 31A of the Standing Orders of Parliament.

[18] Article 8B Law 2362/1995. Cf. also http://www.hellenicparliament.gr/Dioikitiki-Organosi/Ypiresies/Grafeio-Proypologismou-tou-Kratous-sti-Vouli/ and http://www.pbo.gr/.

[19] Articles 72 f.

[20] Article 3.

[21] Articles 2 and 3.

[22] Article 3B.

[23] Article 3 par. 8

[24] Cf. Law 4111/2013, ΦΕΚ 18 Α‘/25.01.2013, available at http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=3cde3e1c-d018-4244-af66-c69249f657f6.

[25] Article 8.

[26] Article 8.

[27] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[28] Article 77 of the legal statute.

[29] ΦΕΚ Α’ 143/28-6-2014, principles of fiscal management and supervision, public accounting and other provisions.

[30] http://www.pdma.gr/index.php/en/

[31] ΦΕΚ Α’ 141/17.8.2010, budgetary management and responsibility.

[32] See the informative note accompanying the bill, http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=22cdbbfe-ed73-4fe5-8f49-d6a1c6f88494. See also the explanatory report to the bill, available at http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=22cdbbfe-ed73-4fe5-8f49-d6a1c6f88494.

[33] See also Presidential Decree 15/2011, ΦΕΚ Α’30/2.3.2011.

[34] Cf. the Interim Report by the Budget Office in Parliament, “The New Economic Governance in the Eurozone and Greece [in Greek]”, January 2014, available at http://www.pbo.gr/Home/TabId/1081/ArtMID/5211/ArticleID/1092/THE-NEW-EUROPEAN-ECONOMIC-GOVERNANCE-IN-THE-EURO-ZONE-AND-GREECE-Surveillance-mechanisms-and-solidarity-after-the%E2%80%9CMemorandum%E2%80%9D.aspx.

[35] Cf. Law 4111/2013, ΦΕΚ 18 Α‘/25.01.2013, available at http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=3cde3e1c-d018-4244-af66-c69249f657f6.

[36] ΦΕΚ Α’ 143/28-6-2014, principles of fiscal management and supervision, public accounting and other provisions. See the explanatory report to the statute, available at http://www.hellenicparliament.gr/UserFiles/2f026f42-950c-4efc-b950-340c4fb76a24/a-apred-eis-olo.pdf.

[36] On this, cf. questions VII.1 f.

[37] On this, cf. questions VII.1 f.

[38] ΦΕΚ Α’ 141/17.8.2010, budgetary management and responsibility.

[39] ΦΕΚ Α’ 143/28-6-2014, principles of fiscal management and supervision, public accounting and other provisions.

[40] Statute 3852/2010, ΦΕΚ Α’87/7.6.2010.

[41] See article 80 of the statute 4055/2012, ΦΕΚ Α’ 51/12-3-2012.

[42] ΦΕΚ Α’ 143/28-6-2014, principles of fiscal management and supervision, public accounting and other provisions.

[43] See the informative note accompanying the bill, http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=22cdbbfe-ed73-4fe5-8f49-d6a1c6f88494. See also the explanatory report to the bill, available at http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=22cdbbfe-ed73-4fe5-8f49-d6a1c6f88494.

[44] ΦΕΚ Α’ 143/28-6-2014, principles of fiscal management and supervision, public accounting and other provisions.

[45] Article 2 paragraphs 4 f.

[46] For more information, see the questions relevant to the financial assistance to Greece (X.1 and following).

[47] ΦΕΚ Α’ 71/30.3.2012. With this legal statute the Parliament ratified the TFEU amendment, the Fiscal Compact and the ESM Treaty.