Greek Banks Reopen As New Austerity Taxes Come Into Effect

Greek banks opened on Monday for the first time in more than three weeks.

However, capital controls remain in place and there are still restrictions on the amounts individuals can withdraw

Higher taxes demanded by the country’s European creditors have also came into effect, making most everyday items more expensive.

The economic outlook for the recession-battered country was far from back to normal

The Independent reports:

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 bail-out 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,” 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.”

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 bail-out 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 a month, was given on Friday. They will include economic targets and reforms deemed necessary in return for an anticipated €85bn over three years.

Though the potential bailout has eased fears of a potential “Grexit”, capital controls are expected to remain in place for months, if not years.

The first easing saw banks reopen their doors for limited services. In Athens, people queued up in an orderly fashion. Though the daily cash withdrawal limit stayed at €60, the government has given individuals a new weekly limit of €420 from this Sunday. Since the Greek parliament passed the austerity measures demanded, creditors have relieved the pressure on Greece.