Greek banks reopen as citizens brace for new austerity measures

Banks reopened in Greece today as the government spoke optimistically of a return to normalcy, but the political U-turn it took to get there could condemn Greeks to a deeper recession and new elections.

Thanassis Stavrakis/AP
New Alternate Finance Minister Tryfon Alexiadis speaks during the handover ceremony in Athens, Monday. Greek banks finally reopened after three weeks of being closed but new austerity taxes meant that most everything was more expensive – from coffee to taxis to cooking oil.

Orderly lines formed outside banks in Athens Monday morning as Greek banks reopened for the first time in three weeks.

With the government contemplating withdrawing from the euro, faced with about €200 billion in debt, and the prospect of harsh austerity measures attached to any bailout from Europe – Greek banks had been shuttered for weeks to prevent the financial system from collapsing under a flood of withdrawals. 

There are still strict limits on withdrawals in the country. Greeks will be limited to withdrawing €420 a week, essentially the same as the €60 per day they had been restricted to in recent weeks. Wire transfers abroad will not be possible, and neither will cash deposits. Greeks will be able to make check deposits, however, as well as access safety deposit boxes and withdraw money without an ATM card.

“Capital controls and restrictions on withdraws will remain in place,” said Louka Katseli, head of the Greek bank association, in an interview with Reuters. “But we are entering a new stage which we all hope will be one of normality.”

Ms. Katseli told state-run ERT television on Monday that it was too early to say how long the restrictions would last.

“I totally understand people who are anxious,” she told the station, according to The Associated Press. “But acting with fear produces the circumstances that people are afraid of.”

The government is hoping new austerity measures will restore trust between Greece and its European creditors ahead of negotiations for a third bailout. Perhaps the harshest action is a sharp rise in value-added tax – from 13 percent to 23 percent – that is expected to accentuate the country’s recession.

Dmitris Chronis, who has been running a small kebab shop in central Athens for 20 years, told AP that the new taxes could signal the end of his business. His sales have dropped by around 80 percent since banking restrictions were imposed on June 29, he said.

“I can’t put my prices up because I’ll have no customers at all,” he said. “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.”

The plan to enter into new bailout negotiations has split Greece’s ruling party, and could precipitate an election as early as September or November. Prime Minister Alexis Tsipras and his far-left Syriza party came to power in January on a promise to end years of austerity. But Mr. Tsipras' popularity has suffered after he pushed the third bailout through the Greek parliament, despite Greeks voting overwhelmingly against new austerity measures in a national referendum earlier this month.

The Christian Science Monitor reported that the January election felt at the time like a corner being turned. Now, the Greek government appears to have done a full U-turn from their own campaign promises and recent demands from the majority of their constituents.

“On the cusp of January’s election, the streets of Athens felt like a theater of rebellion mixed with hope,” wrote Sara Miller Llana earlier this month. “Six months on, those same revolutionaries, and their supporters, now face what feels like complete surrender by a Syriza-led government to its creditors.”

Tsipras secured approval of the new bailout package despite 39 members of his own party either voting against it or abstaining. And the coming months could see Tsipras turning further away from his own party as he continues negotiations with European creditors.

Cabinet-level dissenters were replaced on Friday, the AP reported, and Tsipras’ allies have tried to justify the government’s recent decisions.

“The government was obliged to make a tactical retreat to save the country,” said new Labor Minister Giorgos Katrougalos today, according to the AP. “This was the result of a soft, post-modern financial coup that was handled by the prime minister in a responsible way.”

State Minister Nikos Papps, one of Tsipras’ closest aides, told the leftist Efimerida Ton Syntakton newspaper: “What worries me is that some people still think there would be no austerity if we were out of the euro. This argument is absolutely false.”

A second vote will be held on Wednesday over a new wave of measures, including justice and banking reforms. Tsipras may only have 123 votes from his own party in the 300-seat parliament, meaning he will likely need opposition support again. According to Reuters, some government officials have suggested that if support drops below 120 votes early snap elections would have to be called while the bailout was still being negotiated. 

The bailout discussions are expected to last around a month. A suite of short- and long-term loans are expected to be authorized in exchange for Greece meeting various economic targets and reforms over the next three years.

The country’s first two bailouts in 2010 totaled more than €240 billion, according to The New York Times.

This report contains material from Reuters and the Associated Press.

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