Banks reopen, taxes hiked in Greece

  • 20/07/2015

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

The shutdown since June 29 is estimated to have cost the economy some 3 billion euros (NZ$4.95 billion) in market shortages and export disruption.

Capital controls including a block on key transfers to foreign banks and a ban on the opening of new accounts remain in force on Monday, although Greeks can now withdraw a bigger amount at once per week, rather than the 60 euro daily limit that had forced them to queue daily for the last three weeks.

A weekly withdrawal limit of 300 euros would be imposed initially until Friday, with the restriction to be raised to 420 euros from Saturday.

The government is meanwhile expected to make a 4.2-billion euro payment Monday to the European Central Bank (ECB), made possible by the granting of a short-term "bridge" loan of 7.16 billion euros by the European Union on Friday.

The loan will also enable Athens to repay debts to the International Monetary Fund (IMF) outstanding since June.

Greece's radical-left government last week agreed to tough reforms, including tax hikes, an overhaul of the ailing pension system and privatisations it had previously opposed, in exchange for a bailout of up to 86 billion euros over the next three years and avoid crashing out of the eurozone.

Crisis-hit Greeks will now be taxed at 23 percent, up from 13 percent, on everything from sugar and cocoa to condoms, taxis and funerals.

To sweeten the pill, the tax on medicines, books and newspapers eases from 6.5 percent to 6.0 percent.

Louka Katseli, the head of Greece's bank association, on Monday urged clients to bring their savings back to the banks to support the country's 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.

Some 40 billion euros have been withdrawn from Greek banks since December, she noted, seriously damaging their ability to function normally.

For the first time in months, technical teams representing the creditors - the European Union, the ECB and the IMF - are expected in Athens in the coming week to assess the state of the economy.

The austerity package caused a mutiny among MPs of the ruling radical Syriza party, forcing Prime Minister Alexis Tsipras to carry out a limited reshuffle on Friday.

Even so, most analysts and even government officials say early elections are now inevitable, and are likely to be held in September.