* Branches open but capital controls still in place
* Government starts repaying ECB, IMF loans
* Numbers in parliament tight before new bailout vote Wednesday
* For Eikon page on the issue, click tmsnrt.rs/1LlrwQw
By Lefteris Papadimas and Lefteris Karagiannopoulos
ATHENS, July 20 (Reuters) - Greece reopened its banks and ordered billions of euros owed to international creditors to be repaid on Monday in the first signs of a return to normal after last week’s deal to agree a tough new package of bailout reforms.
Customers queued up as bank branches opened 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 processed 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.
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.
“It is positive that the banks are open, though the effect is psychological for people more than anything else,” said 65-year-old pensioner Nikos Koulopoulos. “Because to be honest nothing much changes given the capital controls are still in place,” he said.
Limits on withdrawals will remain, however — at 420 euros 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.
“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 payment 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 paid 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.
Acceptance of the bailout terms and reopening of the banks have marked a new stage for Tsipras after months of difficult talks and he is now eyeing a fresh start and swift talks on the bailout aimed at keeping Greece afloat with up to 86 billion euros of new loans.
However he faces difficulties with hardline factions in his leftwing Syriza party, which came to power in January pledging to reject bailout-driven austerity.
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.
Some officials in the government have suggested that if support from lawmakers from within the coalition dropped below 120 votes, early elections would have to be called while the bailout was still being negotiated.
That is because 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 heavy symbolic blow but whether it would actually force 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.
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 privatisation fund. (Additional reporting by Renee Maltezou, Angeliki Koutantou; Writing by Ingrid Melander and James Mackenzie; Editing by Jon Boyle, Anna Willard, Sonya Hepinstall and Giles Elgood)