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Report draws up challenges faced by Greece

By Gabriele Steinhauser

Associated Press

Published: Thursday, Nov. 17 2011 7:55 a.m. MST

Head of the European Task Force for Greece Horst Reichenbach pauses during a news conference at the European Commission headquarters in Brussels, Thursday, Nov. 17, 2011. Reichenbach has been appointed by European Commission President Jose Manuel Barroso to lead a task force within the Commission to provide technical assistance to Greece.

Yves Logghe, Associated Press

BRUSSELS — Greece is losing out on about €60 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 massive shortfall in tax collection is just one of the findings of the group of international experts that was set up earlier this year, when it became obvious that Greece was overwhelmed by the task of overhauling its sprawling administrative system and reviving economic growth.

The group's first report paints a dire picture of Greece's efforts to raise money to repay its debts. But it also spells out specific areas where experts from other EU countries and international institutions hope to help the Greek administration work more effectively.

"Reform ... is always easier in times of growth, whereas Greece has to succeed in very difficult times," said Horst Reichenbach, the head of the task force.

The report, which the EU said showed "cautious optimism" despite some of its negative findings, comes amid a further intensification of the eurozone's wider debt crisis that was kicked off 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, amid growing doubts over the future of the common currency.

Analysts say that the eurozone's slow and often fumbling attempts to resolve Greece's troubles are one of the main reasons investors have lost confidence in the entire currency union.

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

It seeks to help Athens with some of the practical issues that have contributed to Greece's debt troubles, such as widespread tax evasion, an often inefficient public sector and the difficulty faced by businesses getting loans they need to expand.

But within Greece, the task force is seen by many as yet another example of foreign European powers intervening in domestic policies, after imposing painful austerity measures in return for two massive bailouts.

The EU, meanwhile, has presented the task force as part of a "Marshall Plan" for Greece, helping the country raise money to repay its debts and use some €12 billion in EU funds to create growth and jobs.

The group's report said that of the €60 billion in outstanding taxes, as much as €8 billion would be immediately collectible and could help Athens cut its massive budget deficit.

However, about €30 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, Reichenbach said.

At the same time, experts from the International Monetary Fund and other EU states are helping Athens negotiate a deal with Switzerland to stop Greeks from evading taxes using the country's bank secrecy laws.

"There are very clear figures on how much in deposits has been pulled out of Greek banks. One can imagine that part of those deposits have gone to Switzerland," Reichenbach said.

The task force also seeks to assist Greece in other areas, including how to 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 €5 billion by the end of the year because the unexpectedly sharp economic downturn has made investors cautious about sending money to Greece.

The €50 billion multiyear privatization plan is key to the country's two bailout programs.

Athens now aims to raise €1.3 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.

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