Greeks Get First Look At Their Future: Long Bank Lines And Punishing Taxes

Although the details of Greece’s third bailout program have yet to be finalized, Monday marked the beginning of a new dawn for Greeks. Last week, PM Alexis Tsipras forced a set of draconian "reforms" through parliament and sacked political rivals, effectively legislating away the country’s sovereignty while condemning the Greek people to a fate of even tougher austerity and ensuring that despite rhetoric out of Athens, "normality" will not return to Greece for a very long time. 

Greek banks reopened and as expected there were long lines. On the bright side, the queues were described as "orderly." From AP

In downtown Athens, people lined up in an orderly fashion as the banks unlocked their doors at 8 a.m., taking a number and reading the paper as they waited for their turn at the till.

 

Many restrictions on transactions, including cash withdrawals, remained, however.

 

The Greek government kept the daily cash withdrawal limit at 60 euros ($65) but added a weekly limit of 420 euros ($455) that will be available beginning Sunday. This means depositors who don't make it to the bank on Monday to withdraw cash could pull out 120 euros ($130) on Tuesday instead, and so on, so Greeks don't have to feel they need to visit an ATM every day.

 

Bank customers will still not be able to cash checks, only deposit them into their accounts, and they will not be able to get cash abroad with their credit or cash cards, only make purchases. There are also restrictions on opening new accounts or activating dormant ones.

 

 

 

 

Meanwhile, the VAT hike - one of the most contentious "red lines" from Greece’s negotiations with creditors - kicked in. The tax rose to 23% from 13% on everything from salt to firewood. Restaurants and taxi fares are also affected. Just call it an EMU member fee.

Additionally, Greece gave the go ahead for Europe to pay itself back for previous loans to Athens. Over the weekend, the country received an EFSM bridge loan for €7 billion - €6.8 billion was used on Monday to repay creditors, including the ECB. As noted on Sunday, "now that a new circular funding scheme has been devised that will allow Greece to make a €3.5 billion (€4.2 billion with interest) payment to Mario Draghi on Monday, the ELA liquidity drip can continue."

Or, as some pointed out, Greece gets to keep a transaction fee of about €300 million for facilitating a €6.8 billion payment from the Creditors to the Creditors.

As for the possibility that Greece could see its debt written down as part of a push by Brussels to appease the IMF (and by extension, the US Treasury), Angela Merkel looks to have driven the final nail in that coffin on Sunday. Here’s Bloomberg:

"A classic haircut -- writing down 30 or 40 percent of the debt -- this cannot happen in a currency union," Merkel says in interview with German broadcaster ARD. "You can have it outside a currency union, but you can’t have it in a currency union."

 

“Part of the wish for Greece to remain in the euro area is that such a haircut is not possible,” Merkel says

 

Merkel says euro leaders will discuss extension of Greek debt maturities and easing interest rates “when the first successful assessment of the program being negotiated now is completed.”

 

“Exactly this question will be discussed then,” Merkel says on debt relief. “Not now, but then.”

In other words, there can be "re-profiling" (as suggested by the EU Commission), but there will be no writedown, and indeed Christine Lagarde seemed resigned to the impossibility of a haircut last week. 

So that’s it - a rather depressing and anticlimactic end to the Syriza "revolution" and, by extension, to "hope" in Greece. More austerity is now the law and Athens is once again completely beholden to the German purse string. 

But hey, at least there are no tanks in the streets.