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08/12/2016

Greek banks reopen, Merkel urges swift bailout talks

Euro & Finance

Greek banks reopen, Merkel urges swift bailout talks

Angela Merkel at the 7 July eurozone summit. [European Council]

Greeks queued outside banks Monday (20 July) as they reopened three weeks after closing, the first sign of a return to normal after a deal to start talks on a new package of bailout reforms.

However, capital controls will remain and payments and wire transfers abroad will still not be possible. The stock market will also remain closed until further notice.

Queues formed outside bank branches in central Athens, as Greeks waited to take care of business frozen during the three week-long bank holiday.

Limits on cash withdrawals have been made slightly more flexible, with a weekly limit of €420 in place of the daily €60 limit previously.

“That’s not a normal life so we have to negotiate quickly,” Merkel said in extracts from an interview with German public broadcaster ARD.

Merkel said it would be possible to talk about changing the maturities of Greece’s debt, or reducing the interest Athens has to pay after the first successful review of the new bailout package to be negotiated.

Berlin, the biggest contributor to eurozone bailouts, would do all it could to bring talks to a successful conclusion but would “negotiate hard” to ensure Athens stuck to agreements, she said.

“That certainly won’t be easy because there are things that we have discussed with all of the Greek governments since 2010 that have never been done, but that have been done in other countries like Portugal and Ireland,” she said.

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.

“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.

Bankers said there may be minor disruptions after the three-week interruption to services, but 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.

The bank closures were the most visible sign of the crisis that took Greece to the brink of falling out of the euro earlier this month. But Prime Minister Tsipras is eyeing a fresh start and swift talks on the bailout that will keep Greece afloat.

The tough terms of the bailout will see tax hikes, pension cuts, strict curbs on public spending, an overhaul of collective bargaining rules and a transfer of €50 billion of state assets into a special privatisation fund.

In exchange, Greece is hoping to receive loans of up to €86 billion.

The decision to reopen banks was the first action by Greece’s new cabinet after the 40-year-old leftist premier sacked rebels who had opposed the deal he struck with EU leaders last week.

Increases in value added tax agreed under the bailout terms have also taken effect, with VAT on food and public transport jumping to 23% from 13%.

Acceptance of the bailout terms that meant the banks could reopen marked a turnaround for Alexis Tsipras, after months of difficult talks and a referendum that rejected a less stringent deal proposed by the lenders.

He sacked party rebels in a government reshuffle on Friday (17 July) and is seeking a swift start to talks on the bailout accord with European partners and the IMF before elections which Interior Minister Nikos Voutsis said were likely in September or October. 

For the first time in months, technical teams representing the creditors – the European Union, the European Central Bank and the International Monetary Fund – are expected in Athens next week, to assess the state of the economy.

Tsipras, who barely has time to eat or sleep, according to his mother, faces a fresh challenge in parliament on Wednesday (22 July) to approve a second wave of reforms tied to its economic rescue.

‘Crash test’

On Sunday (19 July), pro-government newspaper Avgi said the vote would be a “crash test” that could even result in the prime minister’s resignation.

“If there are new losses, in whatever form, (Tsipras) will hand back his mandate,” the daily said.

Tsipras’ coalition holds 162 seats in parliament, but in last Wednesday’s vote, only 123 government MPs backed the bailout — just over the minimum 120 required to sustain a minority government.

Nearly a quarter of Syriza’s lawmakers — 39 out of 149 — failed to support the reforms bill, which passed thanks to solid support from opposition parties.

The premier’s critics accuse him of kowtowing to blackmail by Greece’s creditors, who had threatened to expel the country from the euro.

“The Commission is prepared for everything… We have a Grexit scenario, prepared in detail,” European Commission head Jean-Claude Juncker had warned on 8 July.

On Sunday, Kathimerini said the “Grexit” plan, which also entailed Greece’s expulsion from the Schengen Treaty, had been secretly prepared in less than a month by a 15-member European Commission team.

A high-level source has said that German Minister of Finance Wolfgang Schäuble was prepared “to give Greece €50 billion” had Yanis Varoufakis, his Greek counterpart at the time, agreed to his country leaving the eurozone.

>>Read: Schäuble was ready to give Greece €50 billion to quit the euro