Shadow of CROOK LKY seen in Greek +Italian National Debt Frauds EXPOSED!

LKY the bastard on JP Morgan board, which had just been exposed for helping Italian Govt to cover up huge national debt. This scandal is exposed in Greek Debt Fraud Scandal involving Goldman Sachs.

http://hk.news.yahoo.com/article/100210/4/gjoc.html


高盛涉助希臘隱瞞財赤
(明報)2010年2月11日 星期四 05:10

【明報專訊】希臘 債務危機其中一個火頭是它被揭隱瞞財赤規模。希臘去年10月承認揑造數據，估計2009年財赤將相當於GDP的12.7%，為此前公布數字的兩倍多。德國 《明鏡周刊》報道，希臘數年前已在高盛等投資銀行幫助下做數，掩飾其財赤嚴重程度。

藉貨幣掉期秘密增信貸

不少歐洲政府以美元 及日圓 發債來吸引外資，但由於日常開支要用歐元，因此它們會透過貨幣掉期交易（Cross Currency Swap），用美元或日圓換取歐元，在交易合約期滿時兌回原本貨幣。《明鏡》報道，高盛與希臘在2002年簽署貨幣掉期協議，並以「虛構」匯率進行買賣，令希臘變相獲取更多歐元信貸，而有關款項並沒列入希臘債務表內。

《明鏡》稱，希臘當年每100億美元掉期交易中，便秘密多獲10億美元信貸。但它要支付高盛豐厚佣金。而當這批10年至15年期債券到期贖回時，它卻可能要承擔巨大財務負擔，令赤字惡化。換言之，希臘或可借有關交易紓解即時政治壓力，但卻把財赤與債務問題向後推，埋下計時炸彈。

意大利 曾被指用類似手法瞞財赤

高盛發言人向CNBC強調，跟希臘締結的是正當交易，與1990年代末意大利跟摩根大通 的交易相似。但意大利當年相關交易亦引起極大爭議。意大利1995年發行2000億日圓債券，翌年與銀行作日圓、里拉匯率掉期，但交易匯率變相令里拉貶值 44％。有關交易令意大利1997年財赤得以減少，有評論認為意大利藉這類交易掩飾財赤，以取得加入歐元區資格，意大利辯稱它只是為了對冲日圓升值風險。

希臘2001年加入歐元區，按歐盟 規定，成員國預算赤字不能超過GDP 3%，政府總負債不能超過六成。希臘最初公布其2002年財赤等於GDP 1.2%，但歐盟2004年檢查過後將有關數字修改為3.7%，後來更進一步修訂為5.2%。

明鏡周刊/CNBC

http://www.nakedcapitalism.com/2010/02/goldman-helped-greece-disguise-deficit.html

naked capitalism
Tuesday, February 9, 2010
Goldman Helped Greece Disguise Deficit

Readers may know that one point of contention in the worries about Greece’s deficits is that it had hidden the fact that it violated Maastricht rule that fine eurozone countries whose fiscal deficits exceed 3% of GDP.

How was this subterfuge achieved? While the Greek government engaged in some bogus accounting on its own, it also got some help from Goldman. Der Spiegel explains how:

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country’s already bloated deficit.

Greeks aren’t very welcome in the Rue Alphones Weicker in Luxembourg. It’s home to Eurostat, the European Union’s statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data “cannot be confirmed” or has been requested but “not received.”

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn’t exceed 60 percent.
The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. “Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future,” one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece’s debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn’t show up in the Greek debt statistics. Eurostat’s reporting rules don’t comprehensively record transactions involving financial derivatives. “The Maastricht rules can be circumvented quite legally through swaps,” says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today’s records, it stands at 5.2 percent.

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

Yves here. This is why I am dubious of customized OTC derivatives (as opposed to plain vanilla products, like most interest rate and currency swaps). Their main uses are regulatory arbitrage, per above (generally with very rich fees attached) or to shift risk onto chumps.
More on this topic (What's this?)
Roubini on Greece's Impending Default Crisis (Shocked Investor, 2/4/10)
Will Greece Default on its Debt, and Take the Eurozone Down with It? (Money Morning, 1/20/10)
As Greece’s Woes Demonstrate, the Fuse Has Been Lit on

http://www.spiegel.de/international/europe/0,1518,676634,00.html

Greek Debt Crisis
How Goldman Sachs Helped Greece to Mask its True Debt

By Beat Balzli
Greek Finance Minister George Papaconstantinou speaking at a conference in January.
Zoom
dpa

Greek Finance Minister George Papaconstantinou speaking at a conference in January.

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received."

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent.

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment.

http://ftalphaville.ft.com/blog/2010/02/09/145201/goldmans-trojan-greek-currency-swap/

Goldman’s Trojan currency swap
Posted by Tracy Alloway on Feb 09 15:25.

A curious game of Maastricht criteria hide-and-seek

The Spiegel is reporting that Goldman Sachs helped Greece cover up part of its whopping deficit. The deal was reportedly done via a currency swap, using artificially high exchange rates.

Here’s the relevant bit of the report:

Greece’s debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

The loan-cum-currency swap would not have shown up in Greece’s debt statistics, which means it was effectively a way of bypassing the eurozone’s Maastricht criteria, which prescribe certain debt-to-GDP metrics for countries wishing to join the single currency zone.

Even with the currency swap, we should note, Greece’s finances have never quite been Maastricht-compliant. Only once in the past 20 years, for instance, has Greece found itself in keeping with the EU edict that fiscal deficits should not exceed 3 per cent of GDP (in 2006).

In any case, Greece’s previous fiscal shortcomings are now well known. The issue is that, as the Spiegel notes, at some point the country will have to pay up for its swap transactions, and that will impact its (current) deficit. The bonds reportedly mature sometime between 2012-2017.

Interestingly, this is not the first time such a currency swap has been used in this way.

The last instance was another porcine-acronym eurozone peripheral country: Italy.

From a 2001 Euromoney article:

In May 1995, Italy issued a Y200 billion ($1.6 billion) bond. The exchange rate at that time was Y19.30 to the lira. By December 1996, the yen had depreciated to Y13.40 against the lira. With 12 European countries desperately trying to meet the five criteria for joining the single currency, Italy wanted to hedge its foreign exchange gains, so it entered into a currency swap with a foreign bank.

But the swap had some peculiar features. The rate on the swap was Y19.30 to the lira, the exchange rate at the time of the bond issue. This was unusual – the vast majority of currency swaps are done at the existing currency rate, as Eurostat, the European Union’s statistics office, admits. The exchange rate was far worse than Italy could have obtained. It was losing a lot of money in the long term.

Also unusual was the interest rate on the swap – Libor minus 1,677 basis points. Such an interest rate was almost unheard of in the currency swap market. It meant the bank counterparty was paying Italy cash advances through quarterly payments.

You can see how the swap might be more of a loan than a currency hedge for Italy’s Euro-yen bonds. The country effectively would have received four cash advances because of the negative interest rate from the unnamed bank counterparty.

Italy, we should note, always insisted the swap was just a way to lock-in foreign currency gains. Furthermore, they say, the thing would only have reduced the country’s debt by 0.02 per cent — not enough to make a difference for Italy’s eurozone-ambitions.

But there was the suggestion the swap was just one part of a series:

… these deals are usually part of a series and it is probable this was the case with the swap … If there were 10 of them, the cash from the deals would be enough to reduce the country’s debt by 0.2%, which was close to the amount Italy needed to reduce its deficit to GDP ratio in 1997.

Greece’s currency swap reportedly took place around 2002 — a year after the country joined the eurozone. In that respect it’s perhaps even more of a mystery than Italy’s.

Why did the country feel the need to fudge its deficit in 2002 specifically?

And why did Goldman Sachs reportedly want to help it do so?

The Spiegel report has a clue, at least on the Goldman point:

Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

Ouzo all around then.

Well, at least for Goldman, if not the Greek banks.

Related links:
The ever increasing parallels between AIG and Greece – ZeroHedge
How do you say vicious circle in Greek? – FT Alphaville

If you searched internet and read about these UBS is also involved in these dirty businesses.

This means GIC aka LKY's Government Investment Corp has a dirty hand in it.