MercoPress. South Atlantic News Agency

Eurostat orders Greece to disclose details of currency swaps

European Union regulators ordered Greece to disclose details of currency swaps after an inquiry by the country’s Finance Ministry uncovered a series of agreements with banks that it may have used to conceal mounting debts.

The swaps were employed to defer interest payments by several years, according to a February 1 report commissioned by the Finance Ministry in Athens. The document didn’t identify the securities firms that arranged the contracts.

The government turned to Goldman Sachs Group Inc. in 2002 to get 1 billion USD through a swap, Christoforos Sardelis, head of Greece’s Public Debt Management Agency from 1999 to 2004, said in an interview last week.

“While swaps should be strictly limited to those that lead to a permanent reduction in interest spending, some of these agreements have been made to move interest from the present year to the future, with long-term damage to the Greek state,” the Finance Ministry report said. The 106-page dossier is now being examined by lawmakers.

Eurostat, the EU statistics office, gave Greece until the end of the month to provide more information on the swaps, which do not necessarily break EU rules, European Commission spokesman Amadeu Altafaj told reporters in Brussels.

“Greece used accounting tricks to hide its deficit and this is a huge problem,” Wolfgang Gerke, president of the Bavarian Center of Finance in Munich and honorary professor at the European Business School, said in an interview. “The rating agencies are doing the right thing, but it may be too little too late. The EU slept through this.”

Greek Finance Minister George Papaconstantinou said Monday the country’s use of swaps agreements was “at the time legal.” The contracts are no longer legal, and Greece doesn’t use them, he said during a question-and-answer session at a conference in Brussels today.

Lucas van Praag, a spokesman for New York-based Goldman Sachs, the most profitable securities firm in Wall Street history, didn’t respond to e-mails seeking comment.

“Goldman Sachs broke the spirit of the Maastricht Treaty, though it is not certain it broke the law,” Michael Meister, financial affairs spokesman for German Chancellor Angela Merkel’s Christian Democrats, said today in a telephone interview. “What is certain is that we must never leave this kind of thing lurking in the shadows again.”

Merkel’s party aims to push for new rules that will force Euro-zone nations and banks to disclose bond swaps that have an impact on public finances, Meister said.

EU leaders last week pressed Greece to get its deficit under control and vowed “determined” action to staunch the worst crisis in the Euro 11-year history.

Greece, whose burgeoning budget deficit caused it to fail the criteria for joining the single European currency in 1999, joined the euro in 2001. Member nations had to reduce deficits to less than 3% of GDP and trim national debt to less than 60% of GDP.

Greek Prime Minister George Papandreou more than tripled the 2009 deficit estimate to 12.7% after ousting two-term incumbent Kostas Karamanlis in October. Greek officials last month pledged to provide more reliable statistics after the EU complained of “severe irregularities” in the nation’s economic figures.