GREECE HAS missed a deadline to provide EU investigators with full information about currency hedges it made with Goldman Sachs, deals under scrutiny because they may have improperly flattered the country’s public finances.
As Goldman Sachs said the transactions were consistent with the “principles” set out by the EU’s statistical division Eurostat, the European Commission said Greece failed to provide all relevant data before the expiry of a deadline last Friday.
The development comes amid pressure on Athens to prove that it can within 28 days prove its austerity plan is working.
With Prime Minister George Papandreou under the threat of having fresh austerity measures imposed on it by other EU states, IMF and EU officials arrived in Athens yesterday to examine the country’s finances.
“Athens told us that the reason for the delay was partly to do with the four-day strike which affected the ministry of finance,” said a spokesman for EU economics commissioner Olli Rehn.
Mr Rehn has said suggestions that Greece used deals with Wall Street banks to disguise its finances would raise serious ethical issues if true.
In its first comment, however, Goldman adopted the Greek government’s position that the contracts were legal at the time and had a “minimal effect” on its fiscal position.
However, in unscripted comments before a UK parliamentary committee, senior Goldman banker Gerald Corrigan, a former president of the Federal Reserve Bank of New York who joined Goldman in 1994, said “with the benefit of hindsight” the regulatory standards governing those deals should have been higher.
The deals cut Greece’s euro-denominated debt by €2.37 billion in late 2000 and early 2001, reducing the country’s debt as a percentage of GDP to 103.7 per cent from 105.3 per cent.
“The Greek government has stated (and we agree) that these transactions were consistent with the Eurostat principles governing their use and application at the time,” Goldman said.
“Greece’s GDP was $131 billion, and its debt was 103.7 per cent of GDP. By 2008, Greece’s GDP was $357 billion and its debt was more than 99 per cent of that. Greece’s deficit in 2001 was minus 4.5 per cent; without the swaps, it would have been minus 4.64 per cent.”
Goldman said Greece, like most European countries, uses international debt markets to meet its financing needs, in addition to borrowing in the domestic market.
“As a result, many countries have significant amounts of debt denominated in foreign currencies. Greece actively accessed both the Japanese yen and US dollar markets, amongst others,” it said.
Goldman said reducing the size of foreign-denominated liabilities became a priority for Greece after the country’s decision to join the euro. – (Additional reporting Financial Times Limited)
