Banks to reopen, taxes hiked as Greece prepares to reboot economy

People line up at an ATM outside a National bank branch, in central Athens, on June 29, 2015. Anxious Greeks lined up at ATMs as they gradually began dispensing cash again on the first day of capital controls imposed in a dramatic twist in Greece’s five-year financial saga. Banks will reopen Monday Greeks may withdraw up to 420 euros weekly. AP

ATHENS, Greece – Greece prepared Sunday to restart its struggling economy with a revamped government, a bank reboot and a new round of tax hikes agreed after months of fraught confrontation with its creditors.

Banks are set to reopen Monday after a three-week shutdown estimated to have cost the economy some 3.0 billion euros ($3.3 billion) in market shortages and export disruption.

Crisis-hit Greeks will also have to endure widespread price hikes with a broad batch of goods and services — from sugar and cocoa to condoms, taxis and funerals — now taxed at 23 percent, up from 13 percent.

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

420 euros per week

Greeks will from Monday be able to withdraw up to 420 euros at once per week, sparing people the ordeal of queuing daily at ATMs in the summer heat, which thousands did for three weeks for just 60 euros per day.

But capital controls remain largely in place, including a block on money transfers to foreign banks and a ban on the opening of new accounts.

Greece last week had to agree to a tough fiscal package to earn a three-year bailout from its international creditors and avoid crashing out of the Eurozone.

For the first time in months, technical teams representing the creditors — the European Union, the European Central Bank and the International Monetary Fund — are expected in Athens next week to assess the state of the economy.

The austerity package caused a mutiny among lawmakers 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.

Tsipras — who barely has time to eat or sleep, according to his mother — faces a fresh challenge in parliament on Wednesday to approve a second wave of reforms tied to its economic rescue.

‘Crash test’

Pro-government newspaper Avgi on Sunday said the vote would be a “crash test” that could even result in the prime minister’s resignation.

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

Tsipras’ coalition holds 162 seats in parliament, but in last Wednesday’s vote, only 123 government MPs backed the bailout — just over the minimum 120 required to sustain a minority government.

Nearly a quarter of Syriza’s lawmakers — 39 out of 149 — failed to support the reforms bill, which passed thanks to solid support from opposition parties.

The leftist government has agreed to raise taxes, overhaul its ailing pension system and commit to privatizations it had previously opposed, in exchange for a bailout of up to 86 billion euros over the next three years.

The draconian agreement — accepted by a party that came to power in January promising to end austerity — came after over 61 percent of Greeks on July 5 rejected further cuts in a referendum called by Tsipras himself.

The premier’s critics accuse him of kowtowing to blackmail by Greece’s creditors, who had threatened to expel the country from the euro.

“The commission is prepared for everything… We have a Grexit scenario, prepared in detail,” European Commission head Jean-Claude Juncker had warned on July 8.

The Kathimerini newspaper on Sunday said the “Grexit” plan, which also entailed Greece’s expulsion from the Schengen Treaty, had been secretly prepared in less than a month by a 15-member European Commission team.

French Finance Minister Michel Sapin on Sunday insisted that the “real humiliation would have been for Greece to have been kicked out of the euro.”

“There was a real confidence problem… now this confidence is being restored,” Sapin told the To Vima weekly.

The Greek crisis exposed a rift between the Eurozone’s top powers, Germany and France, on how far to apply austerity to meet fiscal goals.

Chancellor Angela Merkel on Sunday reiterated Berlin’s tough stance ruling out debt forgiveness for Greece, but added that her government was open to more flexibilities in Athens’ repayment schedule.

Merkel told public broadcaster ARD that “there can’t be a classic haircut — forgiving 30 or 40 percent of debt — in a monetary union”.

But she noted that Greece had received other forms of debt relief in recent years including a “voluntary writedown for private creditors, extended maturities and lower interest rates”.

“We can discuss possibilities along those lines again,” she said.

French President Francois Hollande on Sunday called for the euro’s governance to be “strengthened”, calling for “the addition of a specific budget and a parliament to ensure democratic control”.

Commentators say the lack of centralized governance over national fiscal policies — a jealously-guarded area of sovereignty for member governments — is a major flaw in the single European currency.

Greece is also scheduled Monday to repay 4.2 billion euros to the ECB.

For this purpose, the EU on Friday approved a short-term loan of 7.16 billion euros, which will also enable Athens to repay debts to the IMF outstanding since June.