Budgeting in
Greece
Presentation at the annual meeting of
Senior Budget Officials, Vienna, June 2008
Ian Hawkesworth, Budgeting and
Public Expenditures Division,
GOV
1
Agenda
1.
2.
3.
4.
5.
General overview
Budget preparation
Parliamentary approval
Budget Execution
Accounting and Audit
2
1.
2.
3.
4.
5.
General overview
Budget preparation
Parliamentary approval
Budget Execution
Accounting and Audit
3
General Overview
•
•
•
•
•
•
Founding member of OECD
Joined EC in 1981
12th 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 2002-2007
4
Growth in Real GDP
(as percentage change from previous year)
6
5
4
3
2
1
0
2002
2003
2004
Euro area
2005
2006
Total OECD
2007
Greece
2008
5
Source: OECD Economic Outlook, Vol.2007/2, No. 82, December
2009
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
6
Greek General balance
(as percentage of GDP)
0
-1
-2
-3
-4
-5
-6
-7
-8
2004
2005
Euro area
2006
2007
Total OECD
2008
Greece
2009
7
Source: OECD Economic Outlook, Vol.2007/2, No. 82, December
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
8
General Government Gross Public Debt
(Maastricht definition; as percentage of nominal GDP)
120
100
80
60
40
20
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Euro area
Greece
9
Source: OECD Economic Outlook, Vol.2007/2, No. 82, December
General Government
net debt interest payments
(as percentage of nominal GDP)
14
12
10
8
6
4
2
0
Euro area
Total OECD
Greece
Euro
OECD10
Greece
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
11
Current Account Balance
(as percentage of GDP)
2
0
-2
-4
-6
-8
-10
-12
-14
-16
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Euro area
Source: IMF
European Union
Greece
12
1.
2.
3.
4.
5.
General overview
Budget preparation
Parliamentary approval
Budget Execution
Accounting and Audit
13
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
14
The preparation process
January-February
Update of macroeconomic forecast
Early spring
Council 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.
Investment budget circular
Spring (June)
Mid-June
October, 1st Monday
No
later
November 21
No
later
December 31
Deadline for line ministries and regions budget
submissions
Preliminary Draft budget submitted to Parliament
than Draft budget submitted to Parliament
than Budget is voted on in Parliament
15
1.
2.
3.
4.
5.
General overview
Budget preparation
Parliamentary approval
Budget Execution
Accounting and Audit
16
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
17
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
18
• The definition of “Significant”
1. General overview
2. Budget preparation
3. Parliamentary approval
4. Budget Execution
5. Accounting and Audit
19
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
20
Execution process
Ministry of Finance
Body
(Ministry,
Region, etc)
Fiscal
Audit
Office
3rd Party
Supreme
Audit
Court
* Excludes Salaries and Pensions
Tax and
Payment
Office
21
1.
2.
3.
4.
5.
General overview
Budget preparation
Parliamentary approval
Budget Execution
Accounting and Audit
22
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
23
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
24