Goldman Sachs, the giant investment bank, is today at the centre of the row over the Greek government’s finances, amid recriminations over complex financial deals that allowed the eurozone nation to skirt its debt limits.
With European finance ministers meeting in Brussels today and tomorrow to discuss ways to prevent a debt crisis threatening the eurozone as a whole, a spotlight has been shone on techniques used by Greece and other indebted countries to give the appearance of lower budget deficits and debt levels.
The euro membership rules place strict caps on the size of government deficits relative to a national economy, but Goldman Sachs and other banks helped Greece raise cash earlier in the decade in ways that did not appear in the official statistics.
With the current recession causing even official budget deficits to balloon all across the continent, fears of further hidden liabilities have been contributing to the crisis of confidence in Greek debt and pulling down the value of the euro.
Goldman Sachs has been the most important of more than a dozen banks used by the Greek government to manage its national debt using derivatives.
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