U.S. financial institution Goldman Sachs reportedly helped Greece hide its true debt burden with a complex currency swap back in 2002.
European Union rules prohibit member nations from running budget deficits of more than 3 percent of gross domestic product and carrying government debt of more than 60 percent.
While grabbing recent headlines for breaking the rules, Greece has apparently been doing so for a while now thanks in part to Goldman Sachs, who in 2002 helped the country in a refinancing deal using what the Der Spiegel newspaper recently reported were “fictional exchange rates.”
In other words, the bank helped the Greeks turn an otherwise routine swap into a $1 billion credit.
“The Maastricht rules can be circumvented quite legally through swaps,” says a German derivatives dealer, referring to EU rules that can result in fines for running deficits or government debt that break the rules.
Nevertheless, a groundswell of optimism has been taking place in European markets recently that the EU will find a way to help the ailing Greek economy.
“If, and it remains a reasonable ‘if’ this happens tomorrow, the commitment will have to be strong enough to placate markets while retaining a pretense that this is not tantamount to a bailout,” Daragh Maher, an analyst at Calyon Crédit Agricole, tells the Associated Press.
“In the end, the E.U. either directly or through a promise of conditional support may well end up being Greece’s savior.”
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