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Greece starts repaying ECB, IMF loans – Banks reopen, first repayments start

greeksATHENS: Greece reopened its banks and started the process of paying off billions of euros owed to international creditors yesterday in the first signs of a return to normal after a deal to agree a new package of bailout reforms. Customers were queued up outside bank branches open for the first time in three weeks on Monday after they were closed to save the system from collapsing under a flood of withdrawals. Increases in value added tax agreed under the bailout terms also took effect, with VAT on food and public transport jumping to 23 percent from 13 percent. The stock market remained closed until further notice. The bank closures were the most visible sign of the crisis that took Greece to the brink of leaving the euro earlier this month, potentially undermining the foundations of the single European currency.

Their reopening followed Prime Minister Alexis Tsipras’ reluctant acceptance of a tough package of bailout demands from European partners, but a revolt in the ruling Syriza party now threatens the stability of his government and officials say new elections may be held as early as September or October. “Things are better than the last few weeks. Thank God we didn’t end up with the drachma!” said 62-year-old pensioner Maria Papadopoulou. “I came to pay bills and my taxes today. Last week I couldn’t and all of this is very tiring for the older people like me.” Limits on withdrawals will remain, however-at 420 euros per week instead of 60 euros per day previously-and payments and wire transfers abroad will still not be possible, a situation German Chancellor Angela Merkel said on Sunday was “not a normal life” and warranted swift negotiations on a new bailout, expected to be worth up to 86 billion euros. “Capital controls and restrictions on withdrawals will remain in place but we are entering a new stage which we all hope will be one of normality,” said Louka Katseli, head of the Greek bank association.

Greeks will be able to deposit cheques but not cash, pay bills as well as have access to safety deposit boxes and withdraw money without an ATM card. Bankers said there may be minor disruptions after the extended interruption to services but said they expected services to resume largely as normal. “I don’t expect major problems, our network and the network of our competitors are ready to serve our clients,” said a senior official at Piraeus Bank, one of the big four lenders. “There might be lines because many people will want to withdraw money from their deposit boxes,” the official said. Athens initiated procedures to pay 4.2 billion euros in principal and interest to the European Central Bank due yesterday after European authorities agreed last week to provide emergency funding assistance, It is also paying 2.05 billion euros to the International Monetary Fund in arrears since June 30, when Greece became the first advanced economy to default on a loan to the IMF, along with 500 million euros owed to the Bank of Greece.

Vote tomorrow
Tsipras is eyeing a fresh start and swift talks on the bailout aimed at keeping Greece afloat but faces hurdles with factions in his party. Although the Greek parliament approved the bailout package on Thursday, the 40-year-old prime minister was forced to rely on votes from the opposition after 39 rebels from Syriza refused to back the government by voting against or abstaining. A second vote will be held tomorrow on measures including justice and banking reforms and a similar outcome is expected. The voting arithmetic is finely poised, however.

Together with his coalition partners from the right-wing Independent Greeks party Tsipras has 162 seats in the 300-seat parliament. But Thursday’s rebellion cut his support to just 123 votes, meaning he is likely to need opposition votes again. Some officials in the government have suggested that if support from lawmakers from within the coalition dropped below 120 votes, early snap elections would have to be called while the bailout was still being negotiated.

Their argument is that under Greek law, the lowest number of votes a government can have to win a confidence motion is 120 out of 240, the minimum quorum in parliament for a vote to be valid. Dropping below 120 would be a symbolic blow but whether it would actually push Tsipras to step down is unclear given that he would have the support of the pro-European opposition parties if a confidence vote were called. “What worries me is that some people still think that there would be no austerity if we were out of the euro. This argument is absolutely false,” State Minister Nikos Pappas, one of Tsipras’ closest aides told the leftist Efimerida Ton Syntakton newspaper. Acceptance of the bailout terms and reopening of the banks have marked a new stage for Tsipras after months of difficult talks. The bailout terms, which are tougher than those rejected in a referendum earlier in July, include tax hikes, pension cuts, strict curbs on public spending, an overhaul of collective bargaining rules and a transfer of 50 billion euros of state assets into a special privatization fund. — Reuters

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This article was published on 21/07/2015