GREECE

According to the 1975 Constitution (revised in 1986, 2001 and 2008), Greece is a parliamentary republic. Legislative power is exercised by a unicameral Parliament composed of 300 members elected by universal suffrage for a four-year term. The head of state is the President of the Republic, elected by the Parliament for a five-year term. The Prime Minister is the head of government, belonging to the leading political party. The President of the Republic formally appoints the Prime Minister, who has more political power.

Greece is a unitary country “organised according to the principle of decentralisation” (article 101 of the constitution). After a long period of centralisation, Greece started a process of decentralisation in 1986, with the establishment of 13 “programmatic” regions. The process continued in 1994 with the establishment of the 54 prefectures as self-governing units with direct elected councils and prefects (Law 2218/1994). The Kallikratis programme (Law 3852/2010) constituted a second wave of decentralisation in 2010, with the merger of the 914 municipalities into 325 and the replacement of the former 13 programmatic regions as self-governments with directly elected councils. In addition, the law established seven deconcentrated authorities (‘Apokentromeni Diikesi’), chaired by a general secretary appointed by the Ministry of Interior. The third wave of decentralisation started in 2018 with the Kleisthenis programme (law 4555/2018), which introduced a new electoral system with local and regional elections, a new system of representation in local and regional councils and a reorganisation of the supervision authorities. The reform rationalised the unclear assignment of responsibilities between the levels of governments with the creation of several Inter-ministerial Committees for the Redefinition of Competencies and Procedures.

In 2020, a draft law on multigovernance was launched to further increase the independence of subnational governments vis-à-vis the state and to extend their responsibilities, resources and staff accordingly. Article 1 of the Law 4674/2020 provides for the creation of a Local and Regional Level Development Planning Commmittee to improve subnational governments’ planning and to monitor policy implementation. Article 7 provides for the introduction of a data registry for subnational governments, including all their financial and administrative operations, with the aim of designing more targeted policies at the local level. These rapid decentralisation and regionalisation processes in Greece represent however certain challenges for regions and municipalities, as they need time to build appropriate institutional, administrative and financial capacities to address their new responsibilities.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
325 municipalities (dimos)		13 regions (peripheria)	338
Average municipal size: 32 969 inhabitants
325		13	338

OVERALL DESCRIPTION: Greece has two levels of subnational government, comprising 325 municipalities (dimos) and 13 regions (peripheria), without a hierarchical link between them. Greece also has one autonomous territorial entity, the Community of Mount Athos Monasteries.

REGIONAL LEVEL: In each new region, the Kallikratis reform created “regional units”, within the boundaries of the former prefectures to play an “intraregional decentralisation role”, still providing services via the former prefectural administrations. Each region has a regional council, composed of several committees (e.g. financial for consultative purposes, economic for economic affaits, budgeting and procurements, executive for the coordination), and a head of the region (perifereiarchis) elected by universal suffrage for a period of five years. Regions can also create regional ‘development companies’ (private-law entities) to promote development projects and, in some cases, non-for-profit companies.

Greece is characterised by strong geographical fragmentation (around 9 840 islands out of which 169 are inhabited). The country has around 15 000 km of coast, mountains covering between 70% and 80% of the country’s area, etc. Regions range from 203 000 inhabitants in the Ionian Islands to 3.74 million in the region of Attica, while the average size was 825 000 inhabitants in 2020. Greece has high regional GDP per capita disparities. In 2020, the level of GDP per capita in the capital region (Attica) was twice as high as in East Macedonia or Epirus.

MUNICIPAL LEVEL: At the municipal level, members of the municipal council and the mayor (dimarchos) are elected by direct universal suffrage for a five-year term. The municipal council is composed of several committees: the financial committee, the quality of life committee and the board of immigrant integration. Currently, municipalities have around 33 000 inhabitants, which is well above the OECD and EU averages (10 250 and 5 960 inhabitants). In 2020, 8% of municipalities had fewer than 2 000 inhabitants (vs 53% before the Kallikratis programme), well below the OECD and EU averages (26% and 28% respetively). Athens, the capital city, is the most populated (around 664 000 inhabitants, but around 3.15 million if the functional area is taken into account).

Athens is included in the metropolitan region of Attica. Together with the metropolitan area of Thessaloniki, they have a regional status with some additional metropolitan functions transferred to address supra-local concerns. In municipalities with more than 10 000 inhabitants, local social groups are represented by a deliberation committee.

HORIZONTAL COOPERATION: Article 245 of law 3463/2006 states that voluntary horizontal cooperation between municipalities is achieved by the establishment of municipal associations in the form of legal entities governed by public law. Inter-municipal structures with single or multiple tasks do exist but many of them are inactive. The Kallikratis reform also provides for a form of obligatory inter-municipal cooperation known as "administrative support" in order to help smaller municipalities carry out some responsibilities transferred to them under the Kallikratis programme (e.g. town planning, technical and welfare benefits services).

STATE TERRITORIAL ADMINISTRATION: Since 2010, the central government has seven deconcentrated administrations at the territorial level. Led by a General Secretary appointed by the Ministry of the Interior, they are mainly responsible for coordination of state territorial administration, multi-level coordination, administrative supervision of subnational governments, management of public assets, administrative issues, environmental affairs, and representation of the central government.

According to article 102 of the constitution, there is a “presumption of competence” in favour of subnational governments for the administration of local affairs. The implementation of these principles was done by successive laws including the 2006 Code for Municipalities and Communities and the decentralisation programmes. Since 2010, the Kallikratis programme defined eight specific areas of responsibilities for municipalities, of which local development, child protection, elderly care, social assistance to the unemployed/poor and preventative healthcare. Regions are mainly responsible for regional planning and development, including the management of EU operational programmes.

Many competences of subnational governments are shared with the central government (e.g. education, health and transport), resulting in overlaps, especially with state deconcentrated administration. There is some asymmetry of responsibilities: subnational governments located in the three insular regions (South Aegean, North Aegean and Ioniou) have a wider set of competences (e.g. local development, health and welfare, tourism and intra-regional transport plans). The metropolitan areas of Attiki and Thessaloniki have also additional responsibilities (e.g. environmental protection, urban planning).

The 2018 Kleisthenis programme aimed at taking stock of the transfers of responsibilities that have been completed with the Kallikratis programme and to better assess current and planned transfers. Several committees have been set up, including a permanent committee within the Ministry of the Interior, to evaluate every new bill that involves a transfer of responsibilities. Article 1 of the Law 4674/2020 also aims to improve the existing institutional framework and to harmonise planning management across levels of government through the creation of a Local and Regional Level Development Planning Commmittee.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Regional administration	Municipal administration; Building permits and urban planning applications; Issuing professional licenses; Administrative civil services
2. Public order and safety	Civil protection and emergency services	Civil protection and emergency services; Some local policing powers
3. Economic affairs / transports	Planning/Programming and regional development; agriculture/livestock and fisheries; Employment; Trade; Tourism; Roads, transport and communications; Special transport services; Support to local enterprises; Energy and industry; Tourism	Local economic development; Tourism; Employment; Rural development, livestock and fisheries; Local roads; Local public transport (including small ports)
4. Environment protection	Natural resources; Environment protection	Parks and green areas; Nature preservation; Waste management; Sewerage; Street cleaning
5. Housing and community amenities	Public works; Urbanism; Environment	Urban and land use planning; Gas distribution; Drinking water; Public lighting
6. Health		Health prevention (medical centres)
7. Culture & Recreation	Culture; Sports	Pre-primary education; Primary and secondary education (shared), mainly for school construction, maintenance and equipment (via school committees)
8. Education	Education	Pre-school; Primary and secondary education; Vocational training
9. Social Welfare		Social protection and solidarity mainly child protection; Elderly care; Social assistance to the unemployed/poor/disabled; Support services for families; Integration of foreigners; Housing benefits

Scope of fiscal data: 325 municipalities, 13 regions, 522 Legal entities public law, 155 Legal entities private law.

SNA 2008

Availability of fiscal data: High

Quality/reliability of fiscal data: High

GENERAL INTRODUCTION: According to Article 102 of the Constitution, subnational governments have administrative and financial autonomy. The Constitution specifies that the central government should provide funds to subnational governments so they can exercise their responsibilities, in particular when new tasks are transferred to them. The Constitution also provides for the adoption of specific laws concerning the allocation of taxes collected by the state as well as the determination and collection of local revenues directly from local authorities. However, fiscal decentralisation in Greece is not as developed as political and administrative decentralisation due to austerity plans and the recent COVID-19 pandemic. A new draft law in 2020 plans for the allocation of additional financial resources and staff for subnational governments in line with their competences.

Subnational government expenditure by economic classification
	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	1 111	3.9%	6.6%	100.0%
Inc. current expenditure	816	2.9%	5.6%	73.5%
Compensation of employees	445	1.6%	11.6%	40.1%
Intermediate consumption	328	1.2%	21.6%	29.5%
Social expenditure	25	0.1%	0.4%	2.3%
Subsidies and current transfers	8	0.0%	0.5%	0.7%
Financial charges	7	0.0%	0.9%	0.7%
Others	3	0.0%	19.2%	0.2%
Incl. capital expenditure	295	1.0%	12.0%	26.6%
Capital transfers	8	0.0%	0.5%	0.7%
Direct investment (or GFCF)	287	1.0%	31.2%	25.9%

EXPENDITURE: Greece remains among the most centralised countries in the OECD in terms of subnational government spending in 2020. Spending ratios are at the lowest level in the OECD and well below the OECD average for unitary countries (12.7% of GDP and 27.5% of public expenditure). Overall, subnational government spending did not increase as a share of GDP and public spending compared to 1995. The share of subnational government staff spending in total public staff spending is particularly low (11.6% against 41.4% on the average in OECD unitary countries in 2020), despite the transfers of staff from the central government following the Kallikratis reform. This reflects that most of the important public services are subject to direct control by the central government. In addition, regional expenditure is subject by the state Treasury and the national Court of Audit to special restrictions, notably on public contracting. The low share of subnational government staff spending also stems from the fiscal consolidation package and need to comply with the Memorandums of Understandings that were implemented between the central and subnational governments after the 2008 financial crisis. This led to several budget cuts, including the downsizing of the subnational government public sector through staff reduction, limitations in hiring new and qualified staff and pay cuts.

DIRECT INVESTMENT: subnational government involvement in public investment is limited and much smaller than the OECD averages for unitary countries (1.9% of GDP and 48.9% of public investment). The low level of public investment at the subnational level partially reflects the aftermath of the financial crisis and the subsequent fiscal consolidation measures, where public investment is often used as an adjustment variable. However, investing remains an important function of subnational governments, which accounted for 22.0% of their total expenditure in 2020, above the OECD average for unitary countries (14.8%). Around three quarters of local investment is allocated to economic affairs and transportation (e.g. road networks, urbanisation projects and land acquisition), followed by environmental protection (sewage systems, green areas) (10.2% of subnational government investment in 2020), housing and community amenities (street lighting, water supply networks) (6.1%) and general public services (administrative infrastructure, buildings and equipment) (2.8%). EU funds represent the largest part of public investment at the regional level.

To spur investment, the government is reforming its public administration and legal system. A new Labour Law Code and Code of Labour Regulatory Provisions is being prepared and compliance controls are reinforced. At the municipal level, Greece introduced a 2020-2023 development programme for local investment projects, funded by the European Investment Bank. This programme aims to upgrade water and environmental infrastructure, solid waste management, civil protection (e.g. against earthquakes) and public healthcare. Municipalities can also finance some investment projects through public-private partnerships (PPPs), although it remains a rarely tapped resource at the local level.

Subnational government expenditure by functional classification
	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure by economic function	1 037	3.4%	-	100.0%
1. General public services	262	0.9%	4.0%	25.3%
2. Defence	0	0.0%	0.0%	0.0%
3. Security and public order	4	0.0%	0.6%	0.4%
4. Economic affairs/transports	267	0.9%	21.7%	25.7%
5. Environmental protection	202	0.7%	47.9%	19.5%
6. Housing and community amenities	58	0.2%	90.1%	5.6%
7. Health	0	0.0%	0.0%	0.0%
8. Recreation, culture and religion	150	0.5%	59.3%	14.4%
9. Education	66	0.2%	5.4%	6.3%
10. Social protection	29	0.1%	0.5%	2.8%

General public services and economic affairs and transport represented around half of subnational spending in 2019. Environmental protection (19.5%) and recreation, culture and religion (14.4%) also form an important share of subnational government expenditure. In contrast to OECD average where education and health are predominant components of subnational expenditure, these two items represent a small share of subnational government expenditure in Greece. As a share of general government expenditure, recreation, culture and religion and housing and community amenities accounted for around 60% and 90% in 2019, which reflects that subnational government are key stakeholders in those specific policy areas.

Subnational government revenue by category
	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	1 123	4.0%	8.0%	100.0%
Tax revenue	279	1.0%	3.8%	24.8%
Grants and subsidies	719	2.5%	-	64.1%
Tariffs and fees	115	0.4%	-	10.3%
Income from assets	9	0.0%	-	0.8%
Other revenues	0	0.0%	-	0.0%

OVERALL DESCRIPTION: subnational governments rely heavily on central government transfers, which accounted for 64.1% of subnational government revenue in 2020, well above the OECD average for unitary countries (53.3% in 2020). Consequently, the share of tax revenue is small and below the OECD average for unitary countries in 2020 (35.4%). This revenue mix is particularly true for regions as their revenue relies almost exclusively on grants, while municipalities have a higher degree of discretion over their revenue. Overall, subnational government revenue decreased significantly since the 2008 crisis, in particular from cuts in grants.

TAX REVENUE: Tax revenues account for a small share of GDP and public tax revenue (1.0% and 3.8% respectively in 2020), well below the OECD average for unitary countries (respectively 4.5% of GDP and 18.7% of public tax revenue). Regional tax revenues are negligible, while municipalities levy one own-source tax, which is the property tax. Overall, tax revenue represented 24.8% of municipal revenue in 2020.

In 2020, the property tax accounted for 94.3% of municipal tax revenue, 23.4% of subnational government revenue and 0.9% of GDP (close to the OECD average of 1.0% in 2020). A new property tax (Unified Property Tax, ENFIA) was established in 2014 to replace two previous property taxes: the real estate based wealth tax (FAP) and the property tax that is collected through the Electric company utility bill. The new tax applies to individuals and legal entities owners of land and buildings. It comprises a main tax and a supplementary tax. The main tax, which is for buildings, plots, fields and so on, is calculated on the basis of “objective values” based on several criteria, such as the location, etc. The supplementary tax (so called sumptuary tax) is imposed on very expensive property. Greece readjusted the taxable value for the real estate property tax and increased the threshold of the supplementary tax. As part of its 2020 National Reform Programme, the state authorised the suspension of payment of tax for property owners who received less rents during the pandemic and the postponement of the recalculation of property values.

Other small taxes include street cleaning and lighting tax, beer tax, advertisement tax and the tourist accommodation tax, the latter being particularly important in several coastal areas. However, the margin of manoeuvre of municipalities over taxes is restricted. For instance, the property tax takes into account the location and age of the building, which are both defined at the central level.

GRANTS AND SUBSIDIES: Central government transfers represent the primary source of subnational government revenue (64.1% of subnational government revenue), especially for the regions (95% of their revenue). The most important grants are the Central Autonomous Funds (CAF), which are granted annually to municipalities and regions. CAF are derived from different taxes. For the municipalities, CAFs receive 19.5% of the income tax on individuals and legal persons; 12% of the Value Added Tax (VAT); and 11.3% of the Unified property tax (ENFIA). For the regions, CAFs receive 4.2% of the PIT and CIT and 4% of the VAT. CAF grants are first assigned to major spending areas and then distributed to individual local governments on the basis of different criteria, such as population size, road network and level of operational costs. CAF grants are divided into the “Regular Grant” (RG) for operating expenditure and the “Public Investment Specific Programme Grant” (PISPG) which finances specific capital expenditure projects.

Other transfers to subnational governments include earmarked and categorical grants allocated based on data sent by the municipalities or regions regarding their specific expenses. Overall, 70% of grants covered operating expenditure and 20% were capital grants in 2020.

OTHER REVENUE: Tariffs and fees represented 10.3% of subnational government revenue in 2020, which is close to the OECD average of 9.1% in 2020. subnational governments can charge fees for waste management, public lighting, water and sewage services provided by local public companies, use of public space for professional activity, operation of cemeteries, etc. Revenues from physical and financial assets account for a very small percentage of subnational government revenue (0.8% in 2020), below the OECD average (1.1%).

Subnational government fiscal rules and debt
	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt	360	1.3%	0.5%	100.0%	-
Financial debt	194	0.7%	0.3%	53.9%	100.0%
Currency and deposits	0	-	-	0.0%	0.0%
Bonds / debt securities	0	-	-	0.0%	0.0%
Loans	194	-	-	53.9%	100.0%
Insurance pensions	0	-	-	0.0%	-
Other accounts payable	166	-	-	46.1%	-

FISCAL RULES: subnational governments have to prepare balanced budgets in accordance with the principles of public finance management and budgeting laid out by law2362/1995 on Public Accounting. In 2012, in order to strengthen tax and budget management, an internal stability pact for local government, based on a balanced budget constraint, was implemented. The Law No. 4111/2013 set up an Observatory for the Financial Autonomy of Local Government, reinforced in 2014 and 2018, to monitor the management and implementation of subnational budgets and to reduce fiscal performance disparities among local governments. Budget implementation review is performed on a monthly basis, while operations of the ‘Consolidated Action Framework’ are done through monthly or quarterly targets. If results negatively vary for more than 10% for a specific period of time, the Observatory can further intervene to provide instructions to local governments, and subnational governments can be subject to a mandatory consolidation package.

DEBT: Borrowing is authorised to finance investment projects (“golden rule”) and to refinance existing debt under better conditions. The law 4111/2013 introduced additional fiscal rules limiting debt: interest payments for a given year cannot exceed 20% of ordinary annual revenues and total debt must remain under 60% of total annual revenues. It also requires that subnational governments receive the approval of the Minister of Finance to access any kind of loans. A debt-brake was introduced for the few municipalities facing over-indebtedness problems, which have to join a “Special Economic Recovery Program”.

Local debt is not a driver of public debt in Greece as reflected by its low level as a share of GDP and of total public debt (1.3% and 0.5% respectively in 2020), especially compared to the OECD average for unitary countries (14.5% of GDP and 10.5% of public debt). In 2020, subnational debt was made up of financial debt (53.9%) and other accounts payable (46.1%). Financial debt is exclusively composed of loans. No bonds are issued by subnational governments.

TERRITORIAL MANAGEMENT OF THE CRISIS: The COVID-19 crisis has been largely managed centrally in Greece. Most regional measures were taken by ministerial decree at the central level, through the Ministry of Civil Protection and Crisis Management, after consultation of the concerned regional and municipal authorities. Subnational governments had mostly an implementation role during the pandemic, although local variation was possible with stricter lockdown measures taken by ministerial decree in the most affected areas. Vertical coordination was limited due to the high degree of centralisation to deal with the pandemic.

Horizontal coordination at the central level was high. An ad-hoc Inter-ministerial Committee, chaired by the Vice Minister for Civil Protection and Crisis Management, was created to coordinate the policy response to the crisis. The National Experts Committee, composed of scientific experts, was also established to coordinate the crisis management across the country. In addition, a Covid-19 Observatory was created to collect and analyse data at the local level after the containment measures. Finally, the government implemented a task force to elaborate plans to mitigate the adverse effects of the crisis on local economy, especially regarding the tourism sector.

The early and effective response of Greece to the sanitary crisis prevented the country from an outbreak of the healthcare system, despite a small number of Intensive Care Units and shortages in health capacity (i.e. staff, medical supplies) resulting from the spending cuts implemented after the 2008 financial crisis. The government subsequently invested to increase the capacity of Intensive Care Units, medical equipment and healthcare personnel, as well as to digitalise healthcare and public services.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: Municipalities implemented social programmes in 2020 to support vulnerable population given their compentencies in preventive health and social welfare. Law 4674/2020 established a special preventive medicine programme, as part of the ‘Help at Home’ programme, to support residents of mountainous areas with low accessibility to receive healthcare. This municipal scheme aims to facilitate home medical examinations and the automated delivery of results to doctors in these areas. Municipalities also implemented a 'Reconciliation of family and professional life' program, which aimed to make the employment search easier for parents by offering care services and accommodation to infants, young children and children with disabilities in municipal and private pre-school education facilities.

The central government also supported local governments to meet their urgent needs and address the crisis by providing them with emergency grants and subsidies. Between March and June 2020, municipalities received EUR 11.7 million of state transfers to cover material supplies, employees’ protection and other Covid-19 related expenditure. Between May and November 2020, they received EUR 165 million grants from the central government to support their liquidity and additional EUR 50 million in March 2021. Additionally, local governments benefitted from EUR 116 million to repay overdue debts to third parties in 2020.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The Greek economy was severily hit by the pandemic in 2020, with high disparities among the regions. The crisis particularly affected regions relying on tourism sector, such as the South Aegean, the Ionian Islands, Crete and, to a lesser extent, the North Aegean. Rural and remote areas were also heavily affected by the pandemic.

Subnational revenue increased by 5.4% in 2020 compared to 2019. The rise was underpinned by a strong increase in transfers from the central government (13.0%) to compensate for the decline in subnational governments’ tax revenue (-5.9%) and tariffs and fees in 2020 (-4.0%). On the expenditure side, subnational governments increased their spending by 5.4% in 2020, mostly due to higher direct investment (+15.0%). Current expenditure increased to a lesser extent (+2.3%) to finance the purchase of medical equipment during the pandemic. According to the 2021 budget report, the Ministry of Finance expected a subnational government deficit in 2021. The MTFS 2019-2022 however forecasts an improvement of public fiscal performances with a return to primary surplus by 2023 and gradual debt reduction thanks to the implementation of the Recovery and Resilience Plan.

ECONOMIC AND SOCIAL STIMULUS PLANS: The Greek National Recovery and Resilience Plan, Greece 2.0, which comes short after Greece exited the ‘bailout’ conditions in August 2018, was established with the participation of local governments’ officials. The plan aims to spur competitiveness, green investment and to reform administration towards a less bureaucratic and more digitalised state at all levels of governance. It will be co-financed by the European Recovery and Resilience Facility for a total of EUR 30.5 billion until 2026, of which around EUR 17.8 billion is from grants and EUR 12.7 billion is from loans. 37.5% of the envelope will be allocated to green projects and 23.3% to foster digital transformation.

Since 2020, municipalities benefit from the Antonis Tristis development programme, which aims to fund local investment projects up to EUR 130 million to develop smart cities and improve health measures against the pandemic. Eligible investment projects are managed by the Consignment Deposit and Loans Fund. The projects under this programme focuses on environment, digitalisation, quality of life, civil protection, social cohesion and education, culture and tourism.