ATHENS (Reuters) - Greece must prioritize paying out arrears it has racked up with suppliers to get funds flowing again to cash-strapped businesses, the head of the EU taskforce that is helping rebuild the country's economy said on Tuesday.
"The first step (in improving access to financing) is to pay the arrears that have accumulated," Horst Reichenbach told a conference in Athens.
Greece's sovereign debt crisis has created a virtual credit crunch for businesses, as banks cut off from wholesale funding markets struggle to lend while its near-bankrupt government holds off on long overdue payments to avoid running out of cash.
The EU taskforce, working to help Greece reform its bloated public sector and cut red tape, said the lack of financing risked undermining any progress achieved through reforms.
"It would be very difficult to really improve the situation of the Greek economy even with these reforms if the very difficult situation of access to finance is not tackled," Reichenbach said.
Greece owes over 6 billion euros to suppliers in industries ranging from pharmaceuticals to construction, local officials estimate, exacerbating the woes of a crippled economy.
Facing huge public pressure, new prime minister Antonis Samaras wants more time to meet fiscal targets and dilute the austerity measures that have helped condemn Greece to a fifth year of recession.
But the European Central Bank told Greece on Monday not to waste time trying to renegotiate its international bailout.
Charles Dallara, managing director of the Institute of International Finance (IIF), said the government needed to cut red tape for businesses, press ahead with privatizations and curb its own role in the economy.
"The Greeks have crossed a bridge and cannot return," Dallara told Czech daily Hospodarske Noviny, adding he was convinced the future of Greece was within the single currency bloc.
Dallara was the chief negotiator for the body representing private sector holders of Greek bonds.
Reichenbach said Greece also ought to tackle the issue of mounting value-added-tax contributions for businesses that export, he said.
The recapitalization of banks and EU structural funds were helping, but the lack of access to finance remained "critical", he said.
Reporting by Deepa Babington and George Georgiopoulos in Athens and Jana Mlcochova in Prague; Editing by John Stonestreet