Evidently Greece made an effort to hide its indebtedness in 2002 by buying contracts that “swapped” its interest payments on 11 billion dollars worth of debt.
Here is the story from Bloomberg:
Greece turned to Goldman Sachs Group Inc. in 2002, just after adopting the euro, to get $1 billion in funding through a swap on $10 billion of debt, Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time, said in an interview last week. Eurostat, the EU’s statistics office, was aware of the plan, he said. Risk Magazine also reported on the swap in July 2003.
In essence, Greece in 2002 was hiding 10 billion dollars worth of debt. This type of behavior was standard in Greece. Hiding debts didn’t seem like much of a problem.
However, the people of Germany have a different attitude.
“Greece falsified deficit statistics, and that can’t be legal,” said Wolfgang Gerke, president of the Bavarian Center of Finance in Munich and honorary professor at the European School of Business. “Greece needs to be kicked out of the EU because otherwise there will be new copycats, and that could lead to the next catastrophe on financial markets.”
A NEW VIEW OF THINGS
European politicians this week criticized New York-based Goldman Sachs for arranging the Greek swap and are pressing for more disclosure. Chancellor Angela Merkel’s Christian Democrats aim to push for new rules that will force euro-region nations and banks to disclose bond swaps that have an impact on public finances, financial affairs spokesman Michael Meister said yesterday.
“Goldman Sachs broke the spirit of the Maastricht Treaty, though it is not certain it broke the law,” Meister said in an interview yesterday. “What is certain is that we must never leave this kind of thing lurking in the shadows again.”
A NEW STORY
What will the EU do if another PIG reveals that he ate out of the wrong bin? Will that PIG be thrown out? And, if so, what will happen to to the Euro?