Under the 2001 deal brokered by Goldman, Greece swapped dollar- and yen-denominated debt for euros at below-market exchange rates. The result was that Athens got paid €1 billion ($1.35 billion) upfront on the swap in exchange for an obligation to buy the swaps back later. In 2005, this obligation was in turn securitized as part of a 20-year debt issue, further pushing off the day of reckoning.
Wednesday, March 3, 2010
Greece's swaps prompt blame game in Europe
Greece's use of currency swaps to help its budget look good for entry into the eurozone was disclosed several years ago, but politicians on both sides of the Atlantic are now criticizing the deals. A case can be made for prohibiting these transactions if their sole purpose is to cloud or enhance the immediate fiscal position of a government. Requiring governments to account in full for long-term obligations would take away the benefit of such swaps, according to The Wall Street Journal.
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