Greek banks reopen but cash limits remain; taxes soar

Greek government agreed with the Eurozone to secure the bailout.

Greek government agreed with the Eurozone to secure the bailout.

Greek banks opened their doors on Monday for the first time in over three weeks, a move that the government hopes will help the economy get back to normal following a period dominated by fears over the country’s future in the euro.

Still, strict controls on the amounts individuals can withdraw remain and new austerity taxes demanded by the country’s European creditors mean that most everyday items are more expensive from coffee to taxis to cooking oil.

In downtown Athens, people queued up in an orderly fashion as the banks unlocked their doors at 8 a.m., but restrictions on most transactions remained.

Though the daily cash withdrawal limit stayed at 60 euros ($65), the government has given individuals a new weekly limit of 420 euros ($455) from this coming Sunday so they don’t need to trudge to the ATM every day.

Ready cash is something Greeks will need as new taxes also came into effect on a wide array of goods and services on Monday.

Sales taxes have risen from 13 per cent to 23 per cent on many basic goods including some meats, cooking oils, coffee, tea, cocoa, vinegar, salt, flowers, firewood, fertilizer, insecticides, sanitary towels and condoms.

Popular services were also hit by the new taxes- restaurants and cafes, funeral homes, taxis, ferries, cram schools and language schools.

The new taxes are part of a package of confidence—building measures that the Greek government had to introduce in order for negotiations on a third bailout to begin.

Since the Greek parliament passed the measures, creditors have sought to relieve the pressure on Greece. The European Central Bank has raised the amount of liquidity assistance on offer to Greek banks while Greece’s partners in the 19—country eurozone agreed to give Athens a short—term loan so it wouldn’t default on a 4.2 billion—euro debt due to the ECB on Monday.

Mina Andreeva, a spokeswoman at the European Commission, confirmed on Monday that the 7.16 billion—euro three—month loan has been sent to Athens so it can repay the ECB and also to clear arrears with the International Monetary Fund.

Andreeva said she was confident Greece will make the payments “in the course of today.”

Paying off the IMF and ECB will give Greece some breathing room but the country will need to secure the bailout, which is expected to be worth around 85 billion euros, to meet upcoming debts.

After months of negotiations with creditors, Greek Prime Minister Alexis Tsipras agreed last week to accept a series of demands such as pension cuts and sales tax hikes, in order for the bailout discussions to begin.

“The government was obliged to make a tactical retreat to save the country,” new Labor Minister Giorgos Katrougalos said on Monday. “This was the result of a soft, post—modern financial coup that was handled by the prime minister in a responsible way.”

Getting the Greek economy back to normal will take time though especially as credit the lifeblood of a modern economy remains restricted.

Louka Katseli, head of the Greek Banking Association, said on Monday it was too early to say how long the cash controls would last.

“I totally understand people who are anxious,” she told state—run ERT television. “But acting with fear produces the circumstances that people are afraid of.”

Katseli noted that since 2008, 124 billion euros worth of deposits has been withdrawn from Greek banks and that 40 billion of that money has been removed in the last few months.

“If that had not been removed, the Greek banks would not have had a liquidity problem,” she said.

The Greek government introduced the capital controls because negotiations with creditors had reached an impasse, fueling speculation that the country was going to default on its debts and exit the euro.

It has cleared most of the hurdles demanded of it, but still faces another vote in parliament this Wednesday to impose more austerity measures.

Amid the pressure, Prime Minister Alexis Tsipras is struggling to contain a growing revolt in his Syriza party that threatened to topple the government last week in the first round of austerity voting. Cabinet—level dissenters were replaced in a reshuffle Friday, but even their replacements have angrily denounced the new austerity measures.

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Printable version | Sep 25, 2022 10:56:36 am |