Greek banks reopen but cash limits remain and taxes soar

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Published: July 20, 2015 9:42:02 PM

Greek banks opened their doors today for the first time in over three weeks, a move the government hopes will help the economy get back to normal following a period dominated by fears over the country's future in the euro.

Greek banks opened their doors today for the first time in over three weeks, a move the government hopes will help the economy get back to normal following a period dominated by fears over the country’s future in the euro.

Strict controls on the amounts individuals can withdraw remain, however, and new austerity taxes demanded by the country’s European creditors came into effect, making most everyday items more expensive from coffee to taxis.

The hefty sales tax rise on many basic goods from 13 per cent to 23 per cent formed part of a package of confidence-building measures the Greek government had to introduce for negotiations on a third bailout to begin. For an economy reeling from weeks of uncertainty and capital controls, the higher taxes are expected to accentuate the recession.

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 Chronis, who said sales have slid by around 80 percent since banking restrictions were imposed 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 higher sales taxes. They have been imposed on many basic goods including some meats, cooking oils, tea and condoms. Popular services have also been hit by the new taxes such as restaurants and cafes, funeral homes, ferries and language schools.

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 Friday. They will include economic targets and reforms deemed necessary in return for an anticipated 85 billion euros (USD 93 billion) over three years.

Though the potential bailout has eased fears of a potential 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.

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