Banks reopen, first repayments start as Greece aims for return to normal

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Greece reopened its banks and started the process of paying off billions of euros owed to international creditors on Monday in the first signs of a return to normal after a deal to agree a new package of bailout reforms.

Customers were queued up outside bank branches open for the first time in three weeks on Monday after they were closed to save the system from collapsing under a flood of withdrawals.

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.

See photos of banks reopening across Greece:

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Banks reopen, first repayments start as Greece aims for return to normal
ATHENS, GREECE - JULY 20: People wait to enter a bank branch as Greek banks reopened on Monday morning after three weeks of closure on July 20, 2015 in Athens, Greece. Many restrictions on transactions will remain and a lot of goods and services will become more expensive as a result of a rise in value added tax (VAT) approved by Parliament last Thursday, which is among the first batch of austerity measures demanded by Greece's creditors. (Photo by Milos Bicanski/Getty Images)
ATHENS, GREECE - JULY 20: People queue to get money from ATMs as Greek banks reopened on Monday morning after three weeks of closure on July 20, 2015 in Athens, Greece. Many restrictions on transactions will remain and a lot of goods and services will become more expensive as a result of a rise in value added tax (VAT) approved by Parliament last Thursday, which is among the first batch of austerity measures demanded by Greece's creditors. (Photo by Milos Bicanski/Getty Images)
ATHENS, GREECE - JULY 20: People wait to enter a bank branch as Greek banks reopened on Monday morning after three weeks of closure on July 20, 2015 in Athens, Greece. Many restrictions on transactions will remain and a lot of goods and services will become more expensive as a result of a rise in value added tax (VAT) approved by Parliament last Thursday, which is among the first batch of austerity measures demanded by Greece's creditors. (Photo by Milos Bicanski/Getty Images)
ATHENS, GREECE - JULY 20: A National Bank official opens the door of a bank branch as people enter after Greek banks reopened on Monday morning after three weeks of closure on July 20, 2015 in Athens, Greece. Many restrictions on transactions will remain and a lot of goods and services will become more expensive as a result of a rise in value added tax (VAT) approved by Parliament last Thursday, which is among the first batch of austerity measures demanded by Greece's creditors. (Photo by Milos Bicanski/Getty Images)
People enter a branch of a national bank in Athens on July 20, 2015. Greek banks reopened after a three-week shutdown imposed to stop mass cash withdrawals crashing the financial system, but citizens woke up to widespread price hikes as part of a cash-for-reform deal with the country's creditors. The shutdown since June 29 is estimated to have cost the economy some 3.0 billion euros ($3.3 billion) in market shortages and export disruption. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
People wait to enter a bank on July 20, 2015 in Athens. Greek banks reopened on July 20 after a shutdown lasting three weeks imposed by the government to avert a crash in the banking system over the country's debt crisis. However, capital controls in force since June 29 remain in place, although a daily cash withdrawal limit of 60 euros ($65.03) has now been relaxed to a weekly restriction of 420 euros. AFP PHOTO / ARIS MESSINIS (Photo credit should read ARIS MESSINIS/AFP/Getty Images)
People enter a bank in central Athens on July 20, 2015. Greek banks reopened on July 20 after a shutdown lasting three weeks imposed by the government to avert a crash in the banking system over the country's debt crisis. However, capital controls in force since June 29 remain in place, although a daily cash withdrawal limit of 60 euros ($65.03) has now been relaxed to a weekly restriction of 420 euros. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
ATHENS, GREECE - JULY 20: People queue to get money from ATMs as Greek banks reopened on Monday morning after three weeks of closure on July 20, 2015 in Athens, Greece. Many restrictions on transactions will remain and a lot of goods and services will become more expensive as a result of a rise in value added tax (VAT) approved by Parliament last Thursday, which is among the first batch of austerity measures demanded by Greece's creditors. (Photo by Milos Bicanski/Getty Images)
The first customers, most of them pensioners, stand in a queue to enter a branch at National Bank of Greece headquarters in Athens, Monday, July 20, 2015. Greek banks reopen on Monday morning, but many restrictions on transactions, including cash withdrawals, will remain. Also, many goods and services will become more expensive as a result of a rise in Value Added Tax approved by Parliament last Thursday, among the first batch of austerity measures demanded by Greece's creditors. (AP Photo/Thanassis Stavrakis)
People enter a bank in central Athens on July 20, 2015. Greek banks reopened on July 20 after a shutdown lasting three weeks imposed by the government to avert a crash in the banking system over the country's debt crisis. However, capital controls in force since June 29 remain in place, although a daily cash withdrawal limit of 60 euros ($65.03) has now been relaxed to a weekly restriction of 420 euros. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
ATHENS, GREECE - JULY 20: A National Bank official opens the door of a bank branch as people enter after Greek banks reopened on Monday morning after three weeks of closure on July 20, 2015 in Athens, Greece. Many restrictions on transactions will remain and a lot of goods and services will become more expensive as a result of a rise in value added tax (VAT) approved by Parliament last Thursday, which is among the first batch of austerity measures demanded by Greece's creditors. (Photo by Milos Bicanski/Getty Images)
A policeman guards outside of a bank in central Athens on July 20, 2015. Greek banks reopened after a three-week shutdown imposed to stop mass cash withdrawals crashing the financial system, but citizens woke up to widespread price hikes as part of a cash-for-reform deal with the country's creditors. The shutdown since June 29 is estimated to have cost the economy some 3.0 billion euros ($3.3 billion) in market shortages and export disruption. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
People wait outside a bank in central Athens on July 20, 2015. Greek banks reopened after a three-week shutdown imposed to stop mass cash withdrawals crashing the financial system, but citizens woke up to widespread price hikes as part of a cash-for-reform deal with the country's creditors. The shutdown since June 29 is estimated to have cost the economy some 3.0 billion euros ($3.3 billion) in market shortages and export disruption. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
People wait to enter a bank, prior its opening on July 20, 2015 in Athens. Greek banks reopened on July 20 after a shutdown lasting three weeks imposed by the government to avert a crash in the banking system over the country's debt crisis. However, capital controls in force since June 29 remain in place, although a daily cash withdrawal limit of 60 euros ($65.03) has now been relaxed to a weekly restriction of 420 euros. AFP PHOTO / ARIS MESSINIS (Photo credit should read ARIS MESSINIS/AFP/Getty Images)
Fishmongers man their stalls at Athens' central fish and seafood market on July 20, 2015. Greek banks reopened Monday after a three-week shutdown imposed to stop a run on ATMs from crashing the financial system, but citizens woke up to widespread price hikes as part of a cash-for-reform deal with the country's creditors. Taxes went up on many products and services from sugar and cocoa to condoms, taxis and funerals, from 13 percent to 23 percent. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
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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.

"Things are better than the last few weeks. Thank God we didn't end up with the drachma!" said 62-year-old pensioner Maria Papadopoulou. "I came to pay bills and my taxes today. Last week I couldn't and all of this is very tiring for the older people like me."

Limits on withdrawals will remain, however -- at 420 euros ($455) 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 was "not a normal life" and warranted swift negotiations on a new bailout, expected to be worth up to 86 billion euros.

"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 bank association.

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.

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"I don't expect major problems, our network and the network of our competitors are ready to serve our clients," said a senior official at Piraeus Bank, one of the big four lenders. "There might be lines because many people will want to withdraw money from their deposit boxes," the official said.

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.

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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.

Although the Greek parliament approved the bailout package on Thursday, 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 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.

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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.

"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," State Minister Nikos Pappas, one of Tsipras' closest aides told the leftist Efimerida Ton Syntakton newspaper.

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 privatization fund.

(Additional reporting by Renee Maltezou, Angeliki Koutantou and Lefteris Papadimas; Writing by Ingrid Melander and James Mackenzie; Editing by Jon Boyle, Anna Willard and Sonya Hepinstall)

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