1 Budgeting in Greece Presentation at the annual meeting of Senior Budget Officials, Vienna, June 2008 Ian Hawkesworth, Budgeting and Public Expenditures Division, GOV

2 Agenda 1.General overview 2.Budget preparation 3.Parliamentary approval 4.Budget Execution 5.Accounting and Audit

3 1.General overview 2.Budget preparation 3.Parliamentary approval 4.Budget Execution 5.Accounting and Audit

4 General Overview Founding member of OECD Joined EC in th member of the euro zone Per capita GDP at 89% of the euro zone average Services is the dominant contributor to GDP Rapid GDP per capita growth; on average more than 4.0% per year during

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6 General Overview Under the Stability and Growth Pact Excessive Deficit Procedure 2006/2007 Successful in reducing the deficit below 3% of GDP in 2006 Greece is projected to continue keep the deficit below recommended 3% of GDP

7 Source: OECD Economic Outlook, Vol.2007/2, No. 82, December

8 General Overview Future challenge lies in reducing government debt Currently, Greece has one of the highest general government debt ratios among OECD members (over 90% of GDP, Maastricht definition) Correspondingly Greece pays significant interest payments in terms of GDP share

9 Source: OECD Economic Outlook, Vol.2007/2, No. 82, December

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11 General Overview Situation is projected to be exacerbate with growing current account balance deficit. Explanations for the “dip”: –Eurozone entry lowered borrowing costs which then led to consumer spending boom –Surge of public and private investment increased demand for imported goods and services * Because Greece is service-oriented economy, demand for durable goods translates to a current account balance deficit

12 Source: IMF

13 1.General overview 2.Budget preparation 3.Parliamentary approval 4.Budget Execution 5.Accounting and Audit

14 Key Features Weak top-down budgeting Lack of unitary budget process (special accounts, capital budgeting) Detailed input orientation Little performance information One year budgeting perspective Program budget reform in pipeline

15 The preparation process January-FebruaryUpdate of macroeconomic forecast Early springCouncil of Ministers discusses and decides on main fiscal parameters (deficit and debt). Spring (May)MOEF circular is sent to line ministries and regions. The circular contain two parts: 1) main fiscal policy targets and overall fiscal policy parameters (deficit and debt); and 2) a technical part specifying deadlines and information to be included in line ministries’ budget submissions. Spring (June)Investment budget circular Mid-JuneDeadline for line ministries and regions budget submissions October, 1st MondayPreliminary Draft budget submitted to Parliament No later than November 21 Draft budget submitted to Parliament No later than December 31 Budget is voted on in Parliament

16 1.General overview 2.Budget preparation 3.Parliamentary approval 4.Budget Execution 5.Accounting and Audit

17 Institutional features Unicameral legislature with 300 members elected for a four-year term by proportional representation. Presently a centre right majority Traditionally majority governments No independent research capacity

18 Parliamentary process Pre-budget consultation (early October) Tabling Committee on Economic Affairs examination Plenary debate Approval of the budget – block vote (end of December) In-year oversight – weak The definition of “Significant”

19 1.General overview 2.Budget preparation 3.Parliamentary approval 4.Budget Execution 5.Accounting and Audit

20 Key Features Extensive focus on ensuring the legality and propriety of expenditure Very extensive use of ex ante control Execution involves a large amount of actors which confuses responsibility Reallocation very time consuming (6650 in 2007, half < € 5000) which burdens MOEF New framework law places more emphasis on ex post control, reducing the FAOs role, but effect too early to say

21 Ministry of Finance Fiscal Audit Office Tax and Payment Office Supreme Audit Court Body (Ministry, Region, etc) Execution process 3 rd Party * Excludes Salaries and Pensions

22 1.General overview 2.Budget preparation 3.Parliamentary approval 4.Budget Execution 5.Accounting and Audit

23 Accounting On a cash basis, no plans for accruals Responsibility for central government accounting is centralized in GAO’s Directorate of Public Accounts Five different accounting systems for public sector: hospitals, social security funds, municipalities, public law entities, central government Modernization project

24 The Hellenic Court of Audit Inspired by French Cour des Comptes About 650 staff Ex ante and as ex post control take up the same amount of resources Less than 1 pct. of ex ante controls result in changes No performance or value for money audits Some defense and foreign affairs expenditure is excluded from HCA audit Little dialogue with Parliament on basis of HCA’s annual report