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Banks reopen, taxes hiked as Greece seeks to reboot economy

Banks reopen, taxes hiked as Greece seeks to reboot economy

4 min. 20.07.2015 From our online archive
Greek banks reopened Monday after a three-week shutdown imposed to stop a run on ATMs from crashing the financial system.

(AFP) Greek banks reopened Monday after a three-week shutdown imposed to stop a run on ATMs from crashing the financial system, but citizens woke up to widespread price hikes as part of a cash-for-reform deal with the country's creditors.

Bank branches were doing steady trade after a shutdown estimated to have cost the crisis-hit Greek economy 3.0 billion euros since June 29.

Greeks still face capital control measures, including a ban on most transfers to foreign banks, but a daily cash withdrawal limit of 60 euros has been relaxed.

The European Union meanwhile confirmed that it had paid out a 7.16 billion euro emergency loan to Greece so that Athens can meet debts of 4.2 billion euros due to the European Central Bank on Monday as well as outstanding sums owed to the International Monetary Fund.

"Now basically Greece has to carry out the transactions for that to happen, and we are confident this will happen during the course of today," European Commission spokeswoman Mina Andreeva told a daily briefing.

The government agreed to tough reforms last week -- including tax hikes, an overhaul of the ailing pension system and privatisations it had previously opposed -- in exchange for a three-year bailout of up to 86 billion euros that it is hoped will stop it from crashing out of the eurozone.

An EU source said technical negotiations for the bailout began on Sunday with a teleconference between Greek authorities and the "troika" of Greece's creditors -- the European Commission, ECB and IMF -- who could send representatives to Athens by the end of the week.

Taxes went up Monday on everything from sugar and cocoa to condoms, taxis and funerals, from 13 percent to 23 percent, although the tax on medicines, books and newspapers eased from 6.5 percent to 6.0 percent.

Tryphon Alexiadis, taking up his new role as finance vice-minister in charge of tax, vowed that "not a single euro from the tax rise will escape state coffers", adding that "a wave of inspections will be launched" to prevent tax evasion in a country where the problem is notoriously rife.

Greeks urged to bring cash back

Louka Katseli, the head of Greece's bank association, said some 40 billion euros have been withdrawn from Greek banks since December by customers anxious over the safety of their deposits, seriously damaging the banks' ability to function normally.

She urged people to bring their savings back to the banks to support the crisis-hit financial system. 

"If we take out the money from our safes and our houses -- where, in any case, it isn't safe -- and we deposit it in the banks, we will reinforce liquidity," she told the Mega TV channel.

But it was not exactly business as usual in bank branches on Monday, and customers expressed frustration over the continuing restrictions on financial services.

"I came today to collect my pension but unfortunately I could only get a small percentage of it," said pensioner Spyros Papasotiriou as he left his bank in the northern Athens suburb of Neo Psychiko. "It's a big hassle."

Greeks are now able to withdraw a maximum of 300 euros at once until Friday, when a new weekly limit of 420 euros takes effect.

They can also use their credit cards for foreign purchases again, and certain exceptions to the capital controls have been introduced to help citizens who are studying or undergoing medical treatment abroad.

But most people remain unable to take out large sums, transfer money to other countries or open new bank accounts.

'Crash test'

The tough bailout agreement -- accepted by a radical-left party that came to power in January promising to end austerity -- came after more than 60 percent of Greeks rejected further cuts in a July 5 referendum called by Prime Minister Alexis Tsipras himself.

The premier's critics accuse him of succumbing to blackmail by Greece's creditors, who had threatened to expel the country from the eurozone.

The austerity package caused a mutiny among lawmakers of Tsipras's ruling Syriza party, forcing him to carry out a limited reshuffle on Friday.

Most analysts and even government officials say early elections are inevitable, and are likely to be held in September.

The embattled prime minister faces a fresh challenge on Wednesday when parliament must approve a second wave of reforms tied to Greece's economic rescue.

Pro-government newspaper Avgi on Sunday said the vote would be a "crash test" that could even result in Tsipras's resignation.

"If there are new losses, in whatever form, (Tsipras) will hand back his mandate," the daily said.

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