
Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt - chaostheory
http://www.spiegel.de/international/europe/0,1518,676634,00.html
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yummyfajitas
Here is what happened in more detail.

Greece borrowed a bunch of dollars and yen. They need to make interest
payments on the money they borrowed, but this exposes them to foreign exchange
risk: if the dollar or yen goes up, all of a sudden the interest payments cost
considerably more euros.

Meanwhile, somewhere in America/Japan, there were people who borrowed Euros
and were exposed to the opposite foreign exchange risk: if the yen goes down,
their interest payments go up.

Enter a cross-currency swap: the japanese guy and the greek guy swap interest
payments. Goldman's role is to mediate this trade and absorb some counterparty
risk (if the japanese guy goes bankrupt, Goldman is still on the hook).

So far so good. But apparently what Greece did was to structure the swap so as
to push some of their payments into the future. I.e., use the swaps as a loan.

Now, these would be on the balance sheet for any corporation - swap payments
are treated as any other payment. Apparently EU government accounting rules
are different, and only track interest payments (not the swap payments).

Also, it's worth noting that this hid debt of about 1 billion euro. Greece
owes 270 billion euro. Among other things, Greece has also used their hospital
system and military to hide debt.

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rbanffy
I swear I read this as "Geek Debt Crisis:..."

I'll get some coffee.

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proemeth
This looks like an accounting stunt. In most countries, banks have to value
their assets using fair (market) value. States' financial arms should do the
same.

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fierarul
Which Greek bank was involved ?

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mfukar
None. It's the Greek government (and governments, generally) that perform
those swaps/loans.

