Greek Government Proposes Major Reforms to Strengthen Debt Resolution and Public Sector Pay

The Greek Ministry of National Economy and Finance has unveiled a series of reforms aimed at enhancing the out-of-court debt settlement mechanism, addressing public sector pay disparities and boosting the capital

The proposals, part of a draft bill now open for public consultation, include measures to expand access to debt relief for middle-class households, streamline public sector salary adjustments and extend support for reducing non-performing loans in the banking sector.

A key focus of the draft legislation is the expansion of the out-of-court debt settlement mechanism, which will now cover a broader range of income and asset thresholds.

The change is designed to make more individuals eligible for debt relief, particularly middle-class borrowers struggling with financial obligations.

To qualify, debtors must have non-performing bank debts not exceeding €300,000. The move aims to provide a lifeline to households and businesses burdened by unsustainable debt, while also encouraging creditors to participate in the resolution process.

The draft bill also addresses long-standing issues in public sector pay, particularly the “personal difference” allowance, which has created disparities among employees in the same pay grade.

Under the proposed reforms, the adjustment of this allowance will be permanently regulated starting retroactively from June 1, 2024.

For public servants with a personal difference of less than €300, no offset will be applied against future salary increases. For those with a personal difference exceeding €300, the offset will be limited to 50% of the salary increase or the amount above €300, whichever is lower.

The measure aims to reduce pay inequalities while ensuring that all public employees benefit from future wage hikes.

For example, a public servant receiving a €59 salary increase would retain the full amount if their personal difference is €200. If the personal difference is €400, they would receive half the increase (€29.50), and if it is €310, only €10 would be offset, leaving them with a €49 increase.

The reform is expected to cost approximately €11.6 million in 2025, with an additional €5 million annually in subsequent years.

The draft legislation also includes a six-month extension of the “Hercules” program, which helps banks reduce non-performing loans, and introduces measures to enhance the credibility and attractiveness of the Athens Stock Exchange.

The initiatives are part of the government’s broader strategy to stabilize the financial sector and promote economic growth.

Additionally, the bill outlines six key initiatives to further reduce private debt, including stricter eligibility criteria for debtors and enhanced support for financial restructuring.

The measures aim to provide relief to struggling households and businesses while maintaining fiscal discipline.

The proposed reforms reflect the government’s commitment to addressing long-standing economic challenges, from public sector pay disparities to private debt burdens.

By expanding access to debt relief and ensuring fairer compensation for public employees, the draft bill seeks to promote social equity and economic stability. The public consultation period will allow stakeholders to provide feedback before the legislation is finalized and submitted to Parliament for approval.

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