Tuesday 19 September 2017

EU says Athens must reveal details of ploy to conceal debt

Elisa Martinuzzi

EU REGULATORS ordered Greece to disclose details of currency swaps after an inquiry by the country’s Finance Ministry uncovered a series of agreements with banks that it may have used to conceal mounting government debt.

The swaps were employed to defer interest payments by several years, according to a report commissioned by the ministry in Athens.

The government turned to Goldman Sachs Group Inc. in 2002 to get $1bn (€780m) through a swap, Christoforos Sardelis, head of Greece’s Public Debt Management Agency from 1999 to 2004, said in an interview last week.

A spokesman for German Chancellor Angela Merkel said she would push for new rules that would force euro area states and banks to disclose bond swaps that have an impact on public finances.

The Finance Ministry report said that, while swaps should be strictly limited to those that lead to a permanent reduction in interest spending, “some of these agreements have been made to move interest from the present year to the future, with long-term damage to the Greek state”.

Ratings agencies Standard & Poor’s and Fitch Ratings are also said to be questioning Greece over its use of the swaps. The Goldman Sachs transaction consisted of a cross-currency swap of about $10bn of debt issued by Greece in dollars and yen, former debt manager Mr Sardelis said.

That was swapped into euro using a historical exchange rate – a mechanism that implied a reduction in debt and generated about $1bn of funding for that year.

Eurostat and the rating companies were both aware of the plan, he claimed. “Eurostat was not aware about such transactions,” a European Commission spokesman told reporters in Brussels.

The statistics agency has set an end-of-February deadline for Greece to provide information about the transactions, he said.

Goldman Sachs, who have just become one of the 14 primary dealers in Irish government bonds, made about $300m from the agreement, the New York Times reported. (Bloomberg)

Irish Independent

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