How Greece has disguised its public accounts since 1997

THE ECO SCAN – Greek leaders disguised their public accounts to enter the euro in 2001. Then they concealed loans, on the advice of the American bank Goldman Sachs, via risky financial operations, which turned into a fiasco for the small state. Back to the fall of Greece.

Everything had started too well. The entered the euro zone on January 1, 2001 with European congratulations for its “admirable and remarkable” efforts in terms of public accounts. The country had indeed seen its public deficit drop from 10% in 1995 to… 1.6% in 1999! Admittedly, the public debt exceeded 100% of GDP, but no matter, the Eurozone (then comprising eleven countries) was in a hurry to expand: such a “leap forward” guaranteed the future decline of this debt towards the famous 60% regulatory. As a good student, Greece then posted exemplary deficits, of less than 2% between 2000 and 2004.

Except that the dice were loaded from the start. In March 2004, the right seized power from the Socialists and deliberately launched an audit of the country’s public accounts. At the end of the summer of 2004, there arose what – the head of the ECB at the time – described as a “huge problem”: in reality, the Greek public deficits – taking into account heavy military and social expenditure who had been “moved” into debt – reached 4.1% in 2000, 3.7% in 2001 and 2002, 4.6% in 2003 and went to 5.3% in 2004! Almost in quick succession, Europe understands that Greece also “cheated” during its period of recruitment in the euro zone: the deficits were actually sinking 6.4% in 1997, 4.1% in 1998 and 3.4% in 1999. Thus, Greece had never respected the European criteria… In truth, “everyone knew that Greece was not economically solid enough to enter the euro, but there, it was official , remembers an economist. But Europe needed Greece in its tight euro clan for geopolitical reasons.

Euro-Greek Tragedy, Act II

Years pass, governments parade and fail to raise taxes better. The state of Greek public finances is deteriorating inexorably. So much so that at the end of 2009, the socialist government of George Papandreou was about to! In December, the rating agencies – – on Greece. And from January 2010, the country fell victim to a Greek debt was sold suddenly and massively, the financial crisis spread to Italy, Spain and Portugal. The attack also targeted the euro, which fell sharply against the dollar. The financial violence against Europe was such that it was necessarily concerted.

In February 2010, the then revealed how the American bank had helped Greece to make up its public accounts since 2001. , to the fall of Greece, which Europe had to take under its tutelage.

the deal with Goldman Sachs which turned into a nightmare

To fully understand what happened, we have to go back to the early 2000s. Greece mandates as an advisory bank to help it reduce the service of its debt. So far, nothing out of the ordinary. At the end of 2001, they agreed: to convert Greece’s foreign debt into euros, . This financial mechanism is not illegal – but it still eluded European supervisors. More pernicious, this “swap”, baptized Aeolus (the god of the wind) was operated on the basis of an artificial exchange rate, which allowed Greece to receive even more new money, which it would reimburse more later… with its future revenue from airport taxes and national lottery revenue. In the end, the operation enabled Greece to remove 2.8 billion euros of debt from its official 2002 accounts. By posting a debt ratio of 103.7% instead of 105.3%, Greece could continue to borrow from the ECB, and the Greeks to live beyond their means. For its advisory service, Goldman Sachs received some . At the same time, Goldman Sachs invested in “floating rate long-term interest rate swaps” or “sovereign CDS”. Translation: the bank buys derivatives based on Greek bonds, which are a kind of insurance against Greece’s bankruptcy – an amazing way to look at your own client’s future.

Bad luck, just after the agreement, the September 11 attacks shook the financial world and the operation turned into a nightmare for Greece, which renegotiated with Goldman Sachs. In 2002, the CDS was transformed into a “euro zone inflation swap”. The result is even worse. In the end, the bank will have collected 5.1 billion euros, almost double the initial loan.

Greece’s Financial Execution

In 2005, “creative accounting” continues. Goldman Sachs sells the deal from 2001 to the National Bank of Greece (or NBG, the first Greek commercial bank). Then, at the beginning of 2009, they together created a company based in the City, called Titlos. This “securitization vehicle” will make it possible to transform the swap into bonds maturing in 2039 (enough to postpone the problem), and thus use it as a pledge for new loans from the ECB. At the end of 2009, when nothing was going well in Greece, which would have enabled Greece to shift the weight of the Greek social debt over time. But this time, Papandreou refuses.

The Greek default is no longer in doubt. Goldman Sachs and its Wall Street cronies know this very well. If they are not responsible for the chaotic management of Greek public finances, they had no qualms. Five years later, Greece has just signed

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