Late last night the Greek government approved several austerity measures that include increased taxes and pension cuts.
As a part of the agreement, they will receive a 900 million euro loan to temporarily shore up their economy, while they discuss the possibility of accepting a three-year, 85 billion euro loan. Contrary to previous claims that their banks may be closed for another month, the emergency loan will have banks opened by next week (or so they say anyway).
However, the agreement hasn’t gone over well with left leaning citizens in Greece. While Prime Minister Tsipras claims that this was the only way to prevent a financial collapse, he and his Syriza party were elected on the promise that there would be no more draconian austerity measures. Instead, Tsipras has essentially sold his country out to receive more debt and more austerity, rather than defaulting and starting over.
In response, thousands of citizens took to the streets of Athens to protest the debate last night, many whom started to smash storefronts and burn cars. It was the first major riot to be reported since the Syriza government was elected, and police report that 50 people were arrested. Civil servants have since protested the agreement with a 24 hour strike that disrupted transportation, medical care, and other services across the country. Several government officials have also resigned over the agreement, and the Syriza party may be ousted in the next election. (see how the financial crisis could cause a civil war in Greece).
Other news tells of the Greek people taking it out on their credit cards.
USE it or lose it — that’s the plan for many Greeks, who have been going on a credit card-fuelled spending spree out of fear their savings could be confiscated or devalued.
Wary of the experience in fellow eurozone member Cyprus two years ago, when deposits were seized to recapitalise banks, Greeks are opting to drain their accounts by electronically paying taxes and bills — or buying luxury goods.
“Up to last weekend, people bought a lot of things to protect their money,” confirmed Andreas Triantaphylidis, vice president of the Association of Athens Merchants.
Between June 27, when Prime Minister Alexis Tsipras announced a referendum that made his eurozone creditors boil, and July 10, when speculation peaked that Greece could crash out of the euro, luxury products have been flying off the shelves.
Sales of expensive goods such as watches and jewellery and electronic items like smartphones and computers leapt 30 per cent compared to the same period last year, Triantaphylidis said.
The unexpected wave of spending was sparked by the rationing of cash from ATMs — withdrawals have been limited to 60 euros per day for over two weeks — spurring the much wider use of credit cards and electronic cash transfers than ever before in Greece.
Some 500,000 credit cards were delivered in the past few days, helping push card transactions up 130 per cent, according to the Association of Greek Banks.
“Last week, we had a lot of clients. They wanted to buy all they could, for fear of losing half of their savings,” said Stephanie, a saleswoman in a family-owned jewellery store in the capital’s up-market Kolonaki neighbourhood.
Jewellery made of gold, a traditional safe-haven metal, and luxury watches, some of which cost up to 6,000 euros, were snatched up by “not especially rich” customers aged 30 to 50, the 28-year-old employee said.
“Greeks: I don’t understand them. Me, I’d never spend my money in these times,” Stephanie added.
Since Athens struck a deal with its eurozone partners on Monday, easing fears of a “Grexit” or a “bail-in”, where bank deposits are seized, the Greek customers have been replaced by the usual tourist clientele.
And the rush of “protective spending”, covering high-margin expense items, hasn’t turned around Greece’s economic fortunes. According to the National Confederation of Greek Business, retail sales fell 70 per cent between June 27 and July 10, compared to the same period a year earlier.
Only purchases of fuel and food increased, seen as proof the country is well and truly in crisis.
The government on Tuesday went out of its way to quash speculation and rumours that fuelled public panic, saying the bailout agreement “guaranteed deposits” and averted any need for a bail-in.
It added that parliament had until next week to transpose an EU directive into law, adopted after Cyprus’s 2013 crisis, that guaranteed deposits up to 100,000 euros.
There has been another side-effect of Greeks’ fears about their savings — people are paying their taxes.
Some one billion euros flowed into state coffers between June 27 and July 10 as citizens looked to settle what they owed before any deposit “haircut” — nearly as much as the tax system usually receives in a month.
Read more at News.com.au