From the scant details available, it appears that Greece massaged its public finances with a currency swap from Goldman Sachs. USD and JPY were swapped into EUR at historic exchange rates, resulting in an up-front payment of $1 billion from Goldman to the Greek government – off balance sheet.
The Greek finance minister, George Papaconstantinou, protests that the use of the swaps were legal back in 2002. That is not the issue: setting historic FX rates was viewed as dubious market practice even before the activity was explicitly outlawed by the Bank of England’s grey book in the 1980s.
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