The European Union has asked Greece to explain reports that it engaged in derivatives trades with US investment banks that may have allowed it to mask the size of its debt and deficit from EU authorities.
According to the New York Times, one contract in 2001 - carried out just as Greece was joining Europe's monetary union - involved Greece selling forward future lottery receipts and airport landing fees in exchange for cash to write down debts.
The deal was treated as a currency trade rather than a loan, according to the newspaper, allowing Greece to hide it from public view while meeting EU deficit limits.
Greece's finance minister, George Papaconstantinou, today dismissed suggestions that his country may have played fast and loose with monetary rules, saying the transactions Greece took part in were permissible at the time.
"The kind of derivatives contracts reported by some newspapers were legal at that time," he told reporters in Brussels."
Greece was not the only country to use them...They were made illegal; we have not used them since then." The issue has become a focus of attention as Greece has now acknowledged that it has a budget deficit of nearly 13 per cent of gross domestic product - more than four times EU limits - and a national debt equivalent to 120 per cent of GDP.
The fiscal problems have led to pressure on Greek debt in bond markets and weakened the European single currency.
The European Commission, the EU's executive that is responsible for enforcing EU laws, said it had asked Greece to explain what contracts it had engaged in as Eurostat, the EU's statistics agency, had never been informed.
"I want to state that Eurostat was not aware of such transactions," Commission spokesman Amadeu Altafaj told a regular briefing today.
"But I can tell you that Eurostat has indeed, following these reports, already requested the Greek authorities for an explanation by the end of February."
Asked if the derivatives trades that Greece is alleged to have conducted fell within EU budget rules, Mr Altafaj said: "We need the information on what kind of transactions took place, if they did (take place), and what was the effect on the government accounts of Greece...This is something that we don't have the information (on) yet and we have requested."
A senior Greek finance ministry official said that Greece's current debt financing operations were transparent and complied with Eurostat rules.
But Eurostat, which already has profound concerns about the reliability of Greek macroeconomic data, is likely to take a very hard look at exactly what transactions took place and when.
"This is why we are requesting more capacity for Eurostat to indeed to have more thorough and deeper view on these statistics. Reliable statistics are a key issue in management of public finances," Mr Altafaj said.
What Greece appears to have carried out, at least on one occasion, is a currency swap, which Mr Altafaj said would have to be examined to see if it met EU rules.
In particular, Eurostat will assess if underlying exchange rates and interest rates in any swaps were calculated based on observed market rates, which may be necessary for such deals to be considered legitimate, he said.