As Greece struggles to strike a deal with its EU partners that will allow itself to overcome a debt crisis, it has been hit by a flurry of allegations that it deliberately struck deals that allowed it to spend beyond its means without the need for full disclosure.
Investment firms including Goldman Sachs arranged currency swaps for Greece over the last decade that allowed Athens to artificially reduce its national debt while pushing payments well into the future.
Critics claim that the transactions were not transparent, although the main deal that has been uncovered dates back to 2002 and was well-known to Eurostat, the EU statistical agency. The Goldman currency swap, worth $10bn of debt, is thought to have helped reduce Greece’s debt to gross domestic product from 105.3 per cent to 103.7 per cent. Sources close to Goldman said the transaction was “appropriate and entirely within European rules.”
At least three investment banks – and possibly many more – are said to have worked on similar deals.
European Commission economy spokesman Amadeu Altafaj Tardio told a news conference in Brussels yesterday that Eurostat is seeking answers to the allegations, but Papaconstantinou defended his country’s actions.
“These kinds of more exotic financial instruments were, at the time, completely Eurostat legal,” he said. “Greece was not the only country using them. They have since been made illegal and Greece has not used them since,” he added.
The EU changed its rules on such transactions in March 2008.
Eurostat gave Greece until the end of the month to provide more information on the swaps. Standard & Poor’s and Fitch Ratings are also questioning Greece over its use of the swaps.
Doubts over the reliability of the country’s statistical data have contributed to the recent investor flight from the country’s bonds and demands for higher yields.
A poll published in Germany at the weekend showed a majority of Germans want the debt-ridden state to be thrown out of the eurozone, if necessary, and more than two-thirds oppose handing Athens billions of euros in credit.
“Goldman Sachs broke the spirit of the Maastricht Treaty,” Michael Meister, financial affairs spokesman for German’s Christian Democrats told Bloomberg yesterday.