Banks reopen, taxes hiked as Greece seeks to reboot economy

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

The bank shutdown since June 29 is estimated to have cost Greece's crisis-hit economy 3.0 billion euros (S$4.46 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, although a daily cash withdrawal limit of 60 euros has been relaxed.

Louka Katseli, the head of Greece's bank association, said Greeks would now be able to withdraw a maximum of 300 euros at once until Friday, when a new weekly limit of 420 euros comes in force.

The government is meanwhile expected to make a 4.2 billion euro payment Monday to the European Central Bank (ECB), made possible by a short-term "bridge" loan of 7.16 billion euros granted by the European Union on July 17.

The loan will also allow the debt-crippled Greek government to make payments 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 three-year bailout of up to 86 billion euros that it is hoped will stop it crashing out of the eurozone.

Taxes went up in Greece on a wide range of goods and services on Monday - everything from sugar and cocoa to condoms, taxis and funerals - from 13 percent to 23 per cent.

On the other hand, the tax on medicines, books and newspapers eased from 6.5 per cent to 6.0 per cent.

Ms Katseli said some 40 billion euros have been withdrawn from Greek banks since December by customers anxious over the safety of their deposits, seriously damaging the banks' ability to function normally.

She urged Greeks to bring their savings back to the banks to support the 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.

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 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.

AFP

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