Report paints dire picture of Greek finances

AP News
Posted: Nov 17, 2011 8:08 AM
Report paints dire picture of Greek finances

Greece is losing out on about euro60 billion ($81 billion) in uncollected taxes, with half of that caught up in lengthy legal disputes that prevent the debt-ridden country from getting its hands on desperately needed funding, a European Union task force said Thursday.

The task force was set up earlier this year when it became obvious that Greece needed a lot of support to implement reforms promised in return for a massive international bailout and get its economy growing again.

The group's first report, presented by task force head Horst Reichenbach, paints a dire picture of Greece's efforts to raise money to repay its debts. But it also spells out specific areas where other EU states and international institutions can help the Greek administration work more efficiently and effectively.

The report, which the EU said showed "cautious optimism" for Greece despite some of its negative findings, comes amid a further intensification of the eurozone's wider debt crisis, which was kicked of by Greece's troubles two years ago.

Investors on Thursday continued to dump bonds from much larger countries in the eurozone, including Italy, Spain and France _ underlining that the debt turmoil risks spinning out of control, threatening the future of the common currency.

Analysts say that the eurozone's slow and often fumbling efforts at resolving Greece's troubles is one of the main reasons investors have lost confidence in the entire currency union.

The EU task force is one of the latest attempts at giving some hands-on support for the country, which has been in a deep recession for three years.

The group's report said that of the euro60 billion in outstanding taxes, as much as euro8 billion would be immediately collectible and could help Athens cut its massive budget deficit.

However, about euro30 billion of the outstanding taxes are caught up in lengthy legal disputes that can take seven to 12 years to resolve.

"Even though the actual prospects for collection are very low," the report said, "the very size of these tax arrears casts a doubt over the efficacy of the overall tax administration."

Strengthening the tax dispute resolution mechanism will be one of the priorities for the task force, which will deploy experts from other EU member states, the EU and the IMF to help Greece get its economy growing again.

The task force also seeks to assist Greece in other areas, including sending experts that can help the country value _ and eventually monetize _ its big holdings of companies and real estate.

The report said that Athens won't be able to privatize public assets worth euro5 billion by the end of the year because the unexpectedly sharp economic downturn has made investors cautious about sending money to Greece.

The euro50 billion multiyear privatization plan is key to the country's two bailout programs.

Athens now aims to raise euro1.3 billion by selling off publicly owned companies and real estate between October and the end of the year, the report said. It did not give a figure for how much was privatized before October.