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

[ATHENS] Greece prepared on 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 on Monday after a three-week shutdown estimated to have cost the economy some 3.0 billion euros (US$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 per cent, up from 13 per cent.

To sweeten the pill, the tax on medicines, books and newspapers falls from 6.5 per cent to 6.0 per cent.

With Greeks now able to withdraw up to 420 euros at once per week, people will be spared the ordeal of queuing daily at ATMs in the summer heat, which thousands did for three weeks for a mere allowance of 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.

Mr 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.

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 privatisations it had previously opposed, in exchange for a bailout of up to 86 billion euros (US$94 billion) over the next three years.