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| An elderly man leaves a branch of the National Bank of Greece in Athens, Monday, July 20, 2015. Greek banks reopen on Monday morning, but many restrictions on transactions, including cash withdrawals, will remain. Also, many goods and services will become more expensive as a result of a rise in Value Added Tax approved by Parliament last Thursday, among the first batch of austerity measures demanded by Greece's creditors. |
ATHENS, Greece
(AP) -- Greek banks reopened Monday for the first time in three weeks,
but strict limits on cash withdrawals and higher taxes on everything
from coffee to diapers meant the economic outlook for the
recession-battered country was far from back to normal.
There
were hopeful developments: The cash-strapped nation got a short-term
loan from European creditors to pay more than 6 billion euros ($6.5
billion) owed to the International Monetary Fund and the European
Central Bank. Non-payment of either would have derailed Greece's latest
bailout request.
But for most Greeks, already
buffeted by six years of recession, Monday was all about rising prices
as tax hikes demanded by creditors took effect.
Dimitris
Chronis, who has run a small kebab shop in central Athens for 20 years,
said the higher tax rates could push his business over the edge.
"I
can't put up my prices because I'll have no customers at all," lamented
Chronis, who said sales have already slid by around 80 percent since
banking restrictions were imposed on June 29.
"We
used to deliver to offices nearby, but most of them have closed. People
would order a lot and buy food for their colleagues on special
occasions. That era is over."
There are few
parts of the Greek economy left untouched by the steep increase in the
sales tax from 13 to 23 percent. The new rates have been imposed on
basic goods, from cooking oil to condoms, as well as to popular
services, such as taxi rides, eating out at restaurants and ferry
transport to the Greek islands.
The tax hikes
are part of a package of austerity measures that also include pension
cuts and other reforms that the Greek government had to introduce for
negotiations to begin on a crucial third bailout.
In
response to last week's parliamentary vote backing the austerity
measures, the ECB raised the amount of liquidity assistance on offer to
Greek banks, paving the way for them to reopen Monday. But strict
controls on cash flows, including a ban on check-cashing and payments
abroad as well as limits on cash withdrawals, remained in effect.
The
European Union also sent a three-month loan to Athens, enabling the
government to repay a 4.2 billion euro debt to the ECB on Monday and to
clear its arrears of about 2 billion euros with the IMF.
Both institutions confirmed they had been repaid.
IMF
spokesman Gerry Rice said the Fund "stands ready to continue assisting
Greece in its efforts to return to financial stability and growth."
The
IMF is not directly involved in Greece's request for a third bailout as
its previous rescue runs until early next year. But it has expressed
doubts over the austerity measures that Greece's European creditors are
demanding unless they also include significant debt relief.
Greece
has relied on bailout loans totaling 240 billion euros since 2010 after
it was locked out of international money markets. In return for the
cash, successive governments have had to enact harsh austerity measures
to try to get public finances into shape.
Though
the annual deficit has been reduced dramatically, the country's debt
burden has actually risen to around 180 percent of Greece's annual GDP
as the country's economy contracted around 25 percent.
The
higher taxes formed a key plank of last week's bailout agreement
between Greek Prime Minister Alexis Tsipras and European creditors.
Following months of growing distrust, Greece's partners in the
19-country eurozone wanted to see measures enacted before bailout talks
could begin.
The green light to the opening of
discussions, which are expected to last around a month, was given
Friday. They will include economic targets and other reforms deemed
necessary in return for an anticipated 85 billion euros ($93 billion)
over three years.
Though the potential bailout
has eased fears of a Greek exit from the euro, capital controls are
expected to remain in place for months if not years. The controls were
introduced because negotiations with creditors had reached an impasse,
fueling anxiety about a Greek exit from the euro and a bank run.
On
Monday, the first easing saw banks open their doors for limited
services that allowed customers to move money from one account to
another, but barred them from opening new ones. The daily cash
withdrawal limit stayed at 60 euros, or about $65, but new rules
permitting the withdrawal of up to 420 euros a week meant that Greeks
won't have to trudge to the ATM every day.
Since
the Greek parliament passed the austerity measures, creditors have
relieved the pressure on the country, though its acute difficulties were
evident in the fact that the Athens Stock Exchange remains closed until
further notice.
Further relief for Greece may
come if lawmakers back another set of creditor-demanded measures on
Wednesday. A repeat of last week's rebellion by lawmakers in Tsipras'
left-wing Syriza party is unlikely given the non-controversial nature of
the reforms: revamping the civil law code to streamline legal
proceedings and adopting EU regulations on guaranteeing bank deposits
and strengthening banks.
The thornier issues
of scrapping early retirement and hiking taxation on farmers - opposed
by both government and opposition lawmakers alike - are not among the
reforms Greece has to approve this week and will be addressed later,
government officials said.
Cabinet-level
dissenters were replaced Friday, but even their replacements have
denounced the austerity measures demanded by Greece's creditors.
"The
government was obliged to make a tactical retreat to save the country,"
new Labor Minister Giorgos Katrougalos said Monday. "This was the
result of a soft, post-modern financial coup."
