Sunday 25 September 2016

Greece bids to shore up economy as banks reopen and taxes rise

Published 20/07/2015 | 05:52

People line up outside a National Bank branch in Athens, Greece July 20, 2015. Greek banks opened their branches across the country on Monday after a three-week shutdown, officials said, while German Chancellor Angela Merkel called for swift aid talks so Athens could also lift withdrawal limits. REUTERS/Alkis Konstantinidis TPX IMAGES OF THE DAY
People line up outside a National Bank branch in Athens, Greece July 20, 2015. Greek banks opened their branches across the country on Monday after a three-week shutdown, officials said, while German Chancellor Angela Merkel called for swift aid talks so Athens could also lift withdrawal limits. REUTERS/Alkis Konstantinidis TPX IMAGES OF THE DAY
People wait to enter a National Bank branch in Athens, Greece July 20, 2015. Greeks queued outside banks on Monday as they reopened three weeks after closing to stop the system collapsing under a flood of withdrawals, the first cautious sign of a return to normal after a deal to start talks on a new package of bailout reforms. REUTERS/Ronen Zvulun TPX IMAGES OF THE DAY TPX IMAGES OF THE DAY
A man withdraws money at an Alpha Bank branch ATM in central Athens, Greece, July 19, 2015. The Greek government ordered banks to open on Monday, three weeks after they were shut down to prevent the system collapsing under a flood of withdrawals, as Prime Minister Alexis Tsipras looked to the start of new bailout talks next week. REUTERS/Yiannis Kourtoglou
The first customers, most of them pensioners, stand in a queue to enter a bank branch in Athens as Greek banks reopen, although many restrictions on transactions, including cash withdrawals, will remain. (AP)
A man cleans the pavement in front a closed Attica Bank branch in Athens, Greece, July 19, 2015.The Greek government ordered banks to open on Monday, three weeks after they were shut down to prevent the system collapsing under a flood of withdrawals, as Prime Minister Alexis Tsipras looked to the start of new bailout talks next week.The graffiti reads, " A 'No' of the classes" and "No to the debt" REUTERS/Yiannis Kourtoglou
A street performer plays with a ball at the Constitution (Syntagma) square near the Parliament building in Athens, Greece July 18, 2015. The Greek government ordered banks to open on Monday, three weeks after they were shut down to prevent the system collapsing under a flood of withdrawals, as Prime Minister Alexis Tsipras looked to the start of new bailout talks next week. REUTERS/Ronen Zvulun
A street performer (R) acting as a statue stands at the Constitution (Syntagma) square near the Parliament building in Athens, Greece July 18, 2015. The Greek government ordered banks to open on Monday, three weeks after they were shut down to prevent the system collapsing under a flood of withdrawals, as Prime Minister Alexis Tsipras looked to the start of new bailout talks next week. REUTERS/Ronen Zvulun
'Syriza undertook to tackle such endemic corruption and reform the system of public administration in Greece, but so far has been remarkably slow to do so'
Greek Prime Minister Alexis Tsipras looks on during a swearing in ceremony of members of his government at the Presidential Palace in Athens, Greece. New ministers in Tsipras' government were sworn in on Saturday after a reshuffle expelled dissidents from his cabinet and began a new phase of negotiations for a third bailout package (REUTERS/Alkis Konstantinidis)
Sinn Fein Leader Gerry Adams TD (Photo: Gareth Chaney Collins)
People flee from one of the fires that broke out around Athens yesterday
German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble talk during a meeting of the Bundestag yesterday
Riot police run as they disperse protesters during clashes in Athens, Greece July 15, 2015.
Smoke from a fire over the eastern suburbs of Athens. (AP)
A firefighting helicopter drops water at a raging wildfire at the Kareas suburb, east of Athens, Greece July 17, 2015. Dozens of Athens residents fled their homes on Friday as wildfires fanned by strong winds and high temperatures burned through woodland around the Greek capital, sending clouds of smoke billowing over the city. REUTERS/Alkis Konstantinidis
Smoke rises as a wildfire rages at the Kareas suburb, east of Athens, Greece July 17, 2015. Dozens of Athens residents fled their homes on Friday as wildfires fanned by strong winds and high temperatures burned through woodland around the Greek capital, sending clouds of smoke billowing over the city. REUTERS/Alkis Konstantinidis
A firefighting helicopter drops water at a raging wildfire at the Kareas suburb, east of Athens, Greece July 17, 2015. Dozens of Athens residents fled their homes on Friday as wildfires fanned by strong winds and high temperatures burned through woodland around the Greek capital, sending clouds of smoke billowing over the city. REUTERS/Alkis Konstantinidis
A firefighting helicopter drops water on a raging wildfire at the Kareas suburb, east of Athens, Greece July 17, 2015. Dozens of Athens residents fled their homes on Friday as wildfires fanned by strong winds and high temperatures burned through woodland around the Greek capital, sending clouds of smoke billowing over the city. REUTERS/Alkis Konstantinidis TPX IMAGES OF THE DAY
Flames burn on the mountain of Ymittos on the outskirts of Athens (AP)
A demonstrator protests against the third bailout for Greece outside Germany's parliament, the Bundestag, in Berlin, Germany, July 17, 2015. German parliament meets to decide whether to allow Berlin to start negotiations on a third bailout for Greece. REUTERS/Axel Schmidt
Prime Minister Alexis Tsipras rubs his eyes as the Greek parliament debates the new legislation into the early hours of the morning
European Union Commission President Jean-Claude Juncker
Taoiseach Enda Kenny on RTÉ Radio 1’s Sean O’Rourke show yesterday in which he discussed Greece, the Banking Inquiry and the 2016 Budget
President of the European Commission Jean-Claude Juncker
Greece's Prime Minister Alexis Tsipras, right, speaks with Finance Minister Euclid Tsakalotos during a parliament meeting in Athens (AP)
Masked anti-establishment youths and anti-austerity protesters are seen through a cloud of tear gas during clashes in Athens, Greece July 15, 2015. Greek anti-establishment protesters threw dozens of petrol bombs at police in front of parliament on Wednesday ahead of a key vote on a bailout deal, in some of the most serious violence in over two years. Police responded with tear gas, sending hundreds of people fleeing in central Syntagma Square. REUTERS/Yannis Behrakis
Greek Prime Minister Alexis Tsipras reacts during a parliamentary session in Athens, Greece July 16, 2015. The Greek parliament passed a sweeping package of austerity measures demanded by European partners as the price for opening talks on a multi-billion euro bailout package needed to keep the near-bankrupt country in the euro zone. REUTERS/Alkis Konstantinidis TPX IMAGES OF THE DAY
Riot police run as they disperse protesters during clashes in Athens, Greece July 15, 2015. Greek anti-establishment protesters threw dozens of petrol bombs at police in front of parliament on Wednesday ahead of a key vote on a bailout deal, in some of the most serious violence in over two years. Police responded with tear gas, sending hundreds of people fleeing in central Syntagma Square. REUTERS/Yannis Behrakis TPX IMAGES OF THE DAY
Greek Prime Minister Alexis Tsipras looks on during a swearing in ceremony of members of his government at the Presidential Palace in Athens, Greece July 18, 2015. New ministers in Greek Prime Minister Tsipras' government were sworn in on Saturday after a reshuffle expelled dissidents from his cabinet and began a new phase of negotiations for a third bailout package. REUTERS/Alkis Konstantinidis
Greek banks have reopened but customers still face draconian cash restrictions

Greece set a series of landmarks today it hopes will shore up its battered economy following months of crisis that threatened its place in the euro.

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Banks reopened after more than three weeks, and the cash-strapped country got enough money from European creditors to pay around 2 billion euro (£1.4 billion) it owed to the International Monetary Fund.

But for most recession-weary Greeks, today was all about the price of goods in the shops as new tax rises demanded by creditors on everything from coffee to taxis took effect. And though the banks may have opened, strict limits on cash withdrawals remained.

For an economy reeling from the recent uncertainty over the country's euro future, the continuing controls on capital and the tax rises are not going down too well.

Dimitris Chronis, who has been running a small kebab shop in central Athens for 20 years, says the new taxes could push his business over the edge especially when combined with higher business taxes and meat prices.

"I can't put up my prices because I'll have no customers at all," said Mr Chronis, who said sales have slid by around 80% 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 increase in sales taxes from 13% to 23%. They have been imposed on many basic goods, from cooking oils to condoms, through to popular services such as eating out at restaurants and ferries to the Greek islands.

The tax rises formed part of a package of confidence-building measures the Greek government had to introduce for negotiations on a third bailout to begin.

In response to the latest austerity measures being passed by the Greek Parliament, the European Central Bank raised the amount of liquidity assistance on offer to Greek banks. The European Union also sent a three-month loan to Athens to pay a 4.2 billion euro (£2.9 billion) debt due to the ECB today and clear its arrears with the IMF.

"I can confirm that Greece today repaid the totality of its arrears," IMF spokesman Gerry Rice said. "Greece is therefore no longer in arrears to the IMF."

Mr Rice said the IMF "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 on the measures that Greece's European creditors are demanding without significant debt relief for Athens.

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. Other austerity measures included cuts to pensions.

The green light to the opening of discussions, which are expected to last around a month, was given on Friday. They will include economic targets and reforms deemed necessary in return for an anticipated 85 billion euro (£59 billion) over three years.

Though the potential bailout has eased fears of a Greek exit from the euro, capital controls of some sort are expected to remain in place for months if not years.

The controls were introduced because negotiations with creditors had reached an impasse, fuelling fears of a Greek exit from the euro and a bank run.

Today, the first easing saw banks reopen their doors for limited services. There were no reports of any problems.

Though the daily cash withdrawal limit stayed at 60 euro (£41), the government has given individuals a new weekly limit of 420 euro (£292) from this coming Sunday so they do not need to trudge to the ATM every day.

Since the Greek parliament passed the austerity measures demanded, creditors have relieved the pressure on Greece, though the country's acute difficulties were evident in the fact that the Athens Stock Exchange remained closed with no indication of when it will reopen.

Further relief for Greece may come if politicians back another set of creditor-demanded measures on Wednesday.

Paying off the IMF and ECB will give Greece some breathing space but the country will need bailout funds to meet upcoming debts. Some of the bailout money will also go to restoring the financial health of the banks, which would help speed up the removal of the controls.

Press Association

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