EUROZONE-GREECE/BANKS UPDATE Banks reopen in Greece but economy still far from normal - market strategist

Record ID: 146603

  • Title: EUROZONE-GREECE/BANKS UPDATE Banks reopen in Greece but economy still far from normal - market strategist
  • Date: 20th July 2015
  • Summary: ATHENS, GREECE (JULY 20, 2015) (REUTERS) VARIOUS OF PEOPLE QUEUING OUTSIDE BANK VARIOUS OF PEOPLE ENTERING AND EXITING BANK (SOUNDBITE) (Greek) THEODOROS DAFOGIANNIS, 50, CIVIL SERVANT, SAYING: "Is it dignified to have people tortured at banks? Old people - 70, 80 years old - to wait for 50 euros? Is this the dignity of the Greek people in 2015? Is this what the people exp
  • Embargoed: 4th August 2015 13:00
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  • Location: United Kingdom
  • Country: United Kingdom
  • Topics: General
  • Reuters ID: LVAD41OC5CKZV9160HRILA8QFU58
  • Aspect Ratio: 16:9
  • Story Text: Greeks queued up outside bank branches that reopened for the first time in three weeks on Monday (July 20) after they were closed to save the system from collapsing under a flood of withdrawals.
    The country also started the process of paying off billions of euros owed to international creditors in the first signs of a return to normal after a deal to agree a new package of bailout reforms.
    Increases in value added tax agreed under the bailout terms also took effect, with VAT on food and public transport jumping to 23 percent from 13 percent. 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.
    Fifty-year-old civil servant Theodoros Dafogiannis said he felt let down by Tsipras' government.
    "Is it dignified to have people tortured at banks? Old people - 70, 80 years old - to wait for 50 euros? Is this the dignity of the Greek people in 2015? Is this what the people expected from a left government? I am saddened, I am truly saddened by what is taking place today, by a leftist government," Dafogiannis said while waiting for his turn to enter the bank.
    Although the queues were orderly, they were long.
    "The problem is you lose a day's wage just by queuing up with 300 people in front of you," said seventy-five-year-old George Isakidis.
    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 (July 19) was "not a normal life" and warranted swift negotiations on a new bailout, expected to be worth up to 86 billion euros.
    Mike Ingram, a market strategist from BGC Partners in London echoed that sentiment, saying that while banks reopening is a positive sign, Greece's economy is still far from normal.
    "Yes the 60 euro per day limited has gone. The 420 euro limit per week has come in so a little bit of reprofiling how people are able to take cash out but overall, the cupboard is still pretty bare," he 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.
    Bankers said there may be minor disruptions after the extended interruption to services but said they expected services to resume largely as normal.
    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 June 30, 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.
    The third bailout for Greece could take around four weeks to negotiate.
    "Greece certainly needs a swift conclusion to its financing needs. From what I understand, yes, the negotiations are likely to take of the order of four weeks. I very much doubt it will take less than two, and of course if the Greek parliament raises any issues during those negotiations it could take a lot more, " said Mike Ingram.
    Although the Greek parliament approved the bailout package on Thursday (July 16), 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 (July 22) 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.
    Some officials in the government have suggested that if support from lawmakers from within the coalition dropped below 120 votes, early snap elections would have to be called while the bailout was still being negotiated.
    Their argument is that under Greek law, the lowest number of votes a government can have to win a confidence motion is 120 out of 240, the minimum quorum in parliament for a vote to be valid.
    Dropping below 120 would be a symbolic blow but whether it would actually push Tsipras to step down is unclear given that he would have the support of the pro-European opposition parties if a confidence vote were called.
    Acceptance of the bailout terms and reopening of the banks have marked a new stage for Tsipras after months of difficult talks.
    The bailout terms, which are tougher than those rejected in a referendum earlier in July, include tax hikes, pension cuts, strict curbs on public spending, an overhaul of collective bargaining rules and a transfer of 50 billion euros of state assets into a special privatisation fund.
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