Greece no longer in default as it repays creditors

Country pays billions of euros to the IMF and the European Central Bank as it raises taxes.

Greek default Greece
Greeks woke up to widespread tax rises as part of a reform package agreed in exchange for a three-year bailout [Reuters]

Greece’s government has raised taxes and repaid billions of euros to its creditors as its banks reopened just days after the country reached a deal with its European partners.

A source close to the Greek finance ministry told the AFP news agency that the government had completed payments that were due to the European Central Bank and International Monetary Fund on Monday, after the EU granted emergency bridge funding of 7.16bn euros ($7.75bn).

The IMF separately announced that Greece was no longer in default on its loans after remitting about two billion euros ($2.2 billion) to make up for missed repayments, while an ECB spokesperson said: “The ECB confirms it has been repaid.”

Reopening banks offers no relief for Greek businesses

In response to last week’s parliamentary vote backing the austerity measures, the ECB raised the amount of liquidity assistance on offer to Greek banks, paving the way for them to reopen.

The European Union also sent a three-month loan to Athens, enabling the government to repay the ECB and IMF debts.

Non-payment of either loan would have derailed Greece’s latest bailout request.

Counting the Cost – Greek Crisis: What’s next?

Greeks woke up to widespread tax rises as part of the reform package agreed in exchange for a three-year bailout of up to 86 billion euros ($93 billion) aimed at keeping Greece from crashing out of the eurozone.

Value-added tax (VAT) has gone up from 13 percent to 23 percent on a wide range of goods and services, although the tax on medicines, books and newspapers eased from 6.5 percent to 6.0 percent.

Tryphon Alexiadis, the new finance vice minister in charge of tax, vowed that “not a single euro from the tax rise will escape state coffers”, adding that “a wave of inspections will be launched” to prevent tax evasion in a country where the problem is notoriously rife.

Along with the tax hikes, the Greek government is also set to overhaul its ailing pension system as part of the reforms deal, and launch privatisations it had previously opposed.

40bn withdrawn from banks

Louka Katseli, the head of Greece’s bank association, said some 40bn euros had been withdrawn from Greek banks since December by customers anxious over the safety of their deposits, seriously damaging the banks’ ability to function normally.

Katseli urged people to bring their savings back to the banks to support the financial system.

“If we take out the money from our safes and our houses, where, in any case, it isn’t safe, and we deposit it in the banks, we will reinforce liquidity,” she told the Mega TV channel.

Ordinary Greeks suffer as leaders strike EU deal

Greeks are now able to withdraw a maximum of 300 euros at once until Friday, when a new weekly limit of 420 euros takes effect.

They can also use their credit cards for foreign purchases again, and certain exceptions to the capital controls have been introduced to help Greeks who are studying or undergoing medical treatment abroad.

However, most people remain unable to take out large sums, transfer money to other countries or open new bank accounts.

The capital controls are taking a heavy toll on Greek businesses, with 23 percent of firms saying they are seeking to move their headquarters abroad to improve stability and cash-flow, according to a survey released Monday by non-profit group Endeavour Greece.

Source: AFP, AP