Banks reopen, first repayments start as Greece aims for return to normal

Reuters: Greece reopened its banks and started the process of paying off billions of Euros owed to international creditors on Monday 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% from 13%. 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 on Monday 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 30 June, 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.

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 on Wednesday 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.