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Banks accused of helping Greece to hide budget woes

German Chancellor Angela Merkel has slammed investment banks which may have assisted a number of Greek governments to disguise mounting budgetary problems.

Dr Merkel said that it would be a "scandal" if the banks had helped Greece bypass European debt restrictions as has been suggested in reports.

Her comments came as the euro currency lost ground against the dollar, leaving it almost 5pc down on the year.

"It's a scandal if it turned out to be true that banks that already pushed us to the edge of the abyss were also party to falsifying Greek statistics," Dr Merkel said during a speech.

An investigation will look at whether Goldman Sachs, Wall Street's most profitable securities firm, helped Greece hide its deficit as it struggled to comply with European Union limits.

Eurostat, the EU's statistics office, has ordered Greece to hand over information by the end of this week.

This investigation could be extended to other EU countries to see what other methods might have been used to reduce headline debt figures.

Greece's public debt is forecast to reach 120pc of GDP this year and the EU has warned that it will need to take more stringent measures ahead of the assessment on March 16.

George Papandreou, the Greek prime minister, has said a special parliamentary commission would be set up to investigate possible mishandling of the public finances under the previous government between 2004 and 2009.

"The principle is that we have to shine light everywhere it's needed," said Mr Papandreou.

EU regulators this week 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 debts.

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

Analysts have said that the investment bank Goldman Sachs could potentially face legal action if lenders to the Greek government were misled about the state of the country's finances.

The New York-based bank helped Greece raise $1bn (€0.73m) off-balance-sheet funding in 2002 through the swap, which EU regulators said they knew nothing about until recent days.