Greece prepares to reopen banks, apply tax hikes

Greece prepared today to restart its struggling economy with a revamped government, a bank reboot and a new round of tax hikes agreed after months of fraught confrontation with its creditors.

Banks are set to reopen tomorrow after a three-week shutdown estimated to have cost the economy some 3.0 billion euros (USD 3.3 billion) in market shortages and export disruption.

Crisis-hit Greeks will also have to endure widespread price hikes with a broad batch of goods and services -- from sugar and cocoa to condoms and funerals -- now taxed at 23 per cent, up from 13 per cent.

The measures are part of a tough fiscal package Greece had to agree to last week to earn a three-year bailout from its international creditors and avoid crashing out of the eurozone.

The austerity package caused a mutiny among lawmakers of the ruling radical Syriza party, forcing Prime Minister Alexis Tsipras to carry out a limited reshuffle on Friday.

Even so, most analysts and even government officials say early elections are now inevitable, and are likely to be held in September.

Tsipras -- who barely has time to eat or sleep, according to his mother -- faces a fresh challenge in parliament on Wednesday to approve a second wave of reforms tied to its economic rescue.

The leftist government has agreed to raise taxes, overhaul its ailing pension system and commit to privatisations it had previously opposed, in exchange for a bailout of up to 86 billion euros (USD 94 billion) over the next three years.

The draconian agreement -- accepted by a party that came to power in January promising to end austerity -- came after over 61 per cent of Greeks on July 5 rejected further cuts in a referendum called by Tsipras himself.

His critics accuse the prime minister of kowtowing to blackmail by Greece's creditors, who had threatened to expel the country from the euro.

"The commission is prepared for everything... We have a Grexit scenario, prepared in detail," European Commission head Jean-Claude Juncker had warned on July 8.

The Kathimerini newspaper today said the "Grexit" plan, which also entailed Greece's expulsion from the Schengen Treaty, had been secretly prepared in less than a month by a 15-member European Commission team.