Goldman banker hits at Athens swaps
By Megan Murphy in London and Joshua Chaffin in Brussels
Published: February 22 2010 19:09 | Last updated: February 22 2010 19:09
A senior Goldman Sachs banker has conceded that complex currency swaps used to reduce Greece’s budget deficit “could have and should have” been more transparent, as the investment bank moved to head off mounting criticism of the deals.
Goldman is under fire from European regulators and politicians for structuring a series of transactions that helped Greece to trim its national debt figures in 2001, just after Greece was admitted to Europe’s monetary union.
Gerald Corrigan, a former president of the Federal Reserve Bank of New York who joined Goldman in 1994, told a UK parliamentary committee that, “with the benefit of hindsight . . . the standards of transparency could have been and probably should have been higher”.
Mr Corrigan is the first Goldman banker to speak publicly about the swaps as questions over the bank’s role in Greece’s current financial woes continue to swirl.
Goldman posted a short explanation of the transactions on its website, stating that the swaps complied with European Union accounting principles in effect at the time and had had a “minimal” impact on Greece’s overall fiscal situation.
“In December 2000 and in June 2001, Greece entered into new cross-currency swaps and restructured its cross-currency swap portfolio with Goldman Sachs at a historical implied foreign exchange rate,” the statement says. “These transactions reduced Greece’s foreign-denominated debt in euro terms by €2.367bn and, in turn, decreased Greece’s debt as a percentage of [gross domestic product] by just 1.6 per cent, from 105.3 per cent to 103.7 per cent.”
In his testimony, Mr Corrigan emphasised that countries had sought to control their budget deficits for “centuries”, and that Goldman was only one of several banks that had helped governments to “manage” their debt burdens over the past decade.
European Commission authorities have requested information from Greece about the transactions.
It emerged on Monday that Athens had missed a Friday deadline to have supplied the information to Eurostat, the Commission’s statistics agency.
Athens attributed the delay in part to disruptions caused by a four-day strike at the finance ministry.
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