Greek Banks Reopen
Published: July 21, 2015
Greek Banks Reopen, The reopening of banks and repayment of debts returned Greece to a semblance of normality on Monday but the ruling Syriza party admitted it faced considerable political challenges in pushing through reforms.
After a drama-filled month that saw the country come close to being ejected from the eurozone, the government, led by the prime minister, Alexis Tsipras, appealed for unity as it faced another make-or-break vote in Athens on Wednesday.
As customers queued outside banks – after lenders opened their doors for the first time in three weeks – officials warned that the left-led coalition could fall if dissidents failed to endorse reforms set by international creditors as the price of further aid.
“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,” said state minister Nikos Pappas, one of Tsipras’s closest aides.
Addressing reporters, the foreign minister Nikos Kotzias said he believed fresh elections were “inevitable” in September or October because the government could not continue depending on the political opposition for support.
The first package of reforms voted through by the Greek parliament last week was passed with the backing of three opposition parties, which have argued that Greece must be kept in the eurozone at any cost.
But government officials have said elections could be held as early as 13 September amid fears that such an arrangement cannot last in the long term.
Amid mounting talk of early elections, Nikos Filis, the ruling Syriza party’s chief parliamentary representative, highlighted the dangers that lay ahead, saying the government would collapse if rebels rejected the measures.
“When a government does not have [the support of] 120 MPs, legally there is no issue but politically there is,” he said.
Last week, Syriza saw its support being whittled down from 149 to 123 MPs as lawmakers broke ranks over the controversial terms of an aid package worth as much as â‚¬86bn (£60bn) to keep the insolvent country afloat.
The reforms included changes to the Greek pension system and VAT regime. The loss of support has meant that Tsipras now has a two-pronged battle on his hands: to meet the exacting terms of creditors while convincing increasingly hostile members of his own party to back them.
By Wednesday, the Greek parliament must, as requested by creditors, pass a law to overhaul its civil justice system, with the aim of speeding up processes and reducing costs. The government must also transpose the EU’s bank recovery and resolution directive into law. This law was part of Europe’s response to the 2008 banking crisis and should have been put into national law months ago.
Meanwhile, Greek officials began paying back international lenders on Monday shortly after an emergency bridging loan worth â‚¬7.2bn arrived in the Greek government’s bank account.
The EU agreed the loan on Friday to enable Athens to meet urgent debt repayments and clear arrears, both necessary hurdles if the Greek government is to secure a three-year bailout from the European Central Bank, International Monetary Fund and European commission.
The money was transferred to Athens around noon on Monday and was immediately used to repay Greece’s international creditors. The Greek government began making a â‚¬4.2bn payment to the ECB, officials told Reuters – a â‚¬3.5bn loan plus â‚¬700m interest.
Failure to make this payment could have forced Greece out of the eurozone, as the ECB would have had to pull its support for Greek banks because it cannot back an insolvent country.
The Greek government also owes â‚¬500,000 to the central bank of Greece and must clear this debt so it is not indebted to the “eurosystem” – the central banks of the eurozone.
The IMF confirmed it had received about â‚¬2bn from Greece, representing two missed payments. Greece became the first developed economy to default on an IMF loan when it missed a payment nearly three weeks ago, putting it in the company of Somalia, Sudan and Zimbabwe.
After 20 days, Greece is now out of that group, as a spokesman confirmed it was no longer in arrears. “The fund stands ready to continue assisting Greece in its efforts to return to financial stability and growth,” he added.
Queues formed outside bank branches as banks reopened, although capital controls remain in place. Greeks are now able to withdraw up to â‚¬420 a week in one go, rather than being limited to â‚¬60 a day. But restrictions on sending money abroad and other controls have not been lifted. The Athens stock market is closed until further notice.
“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 banking association.
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