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Goldman Issues Press Release On Greek Swaps, Pours More Gas On PR Fire

Tyler Durden's picture


Full press release from Goldman Sachs giving the company's perspective on the recent topic du jour about its arrangement of numerous Greek currency swaps. One wonders why pour more gas on the pr nightmare fire, if indeed everything was according to the books. One also wonders just how many of the "European member states with foreign debt outstanding" that performed comparable transactions will be presented as a shocker to Eurostat, which at last check was only 7 years behind the curve.

Greece, like most countries in
Europe, uses the international debt markets to meet its financing
needs, in addition to borrowing in the domestic market. As a result,
many countries have significant amounts of debt denominated in foreign
currencies. Greece actively accessed both the Japanese Yen and US
Dollar markets, amongst others.

Following Greece’s decision to join the European Monetary Union and
adopt the Euro (which, under the criteria set by the European Union,
included a debt-to-GDP ratio of less than 60%), reducing the size of
foreign denominated liabilities became a priority for Greece, as it did
for most European sovereign states.

According to the EU accounting framework, unhedged foreign currency
denominated debt was required to be translated into Euro using the
year-end exchange rate. The strengthening of the dollar or yen against
the Euro in 1999 and 2000, created an unfavorable increase in Greece’s
reported Euro debt levels.

Currency Hedges
Greece entered into a series of hedging agreements designed to
transform foreign debt into Euro, a common practice undertaken by many
European member states with foreign debt outstanding. By the end of
2000, Goldman Sachs had a portfolio of swaps hedging USD and JPY debt
issued by Greece.

In December 2000 and in June 2001, Greece entered into new cross
currency swaps and restructured its cross currency swap portfolio with
Goldman Sachs at a historical implied foreign exchange rate. These
transactions reduced Greece’s foreign denominated debt in Euro terms by
€2.367bn and, in turn, decreased Greece's debt as a percentage of GDP
by just 1.6%, from 105.3% to 103.7%.

The Greek government has stated (and we agree) that these
transactions were consistent with the Eurostat principles governing
their use and application at the time.

Interest Rate Hedges
The December and June 2001
cross currency swaps generated a reduction in the value of the swap
portfolio for Goldman Sachs. To offset this, Greece and Goldman Sachs
entered into a long-dated interest rate swap. The new interest rate
swap was on the back of a newly issued Greek bond, where Goldman Sachs
paid the bond coupon for the life of the trade and received the cash
flows based on variable interest rates.

Effect of Currency and Interest Rate Hedges
transactions reduced the country’s debt by a total of €2.367bn,
although they had a minimal effect on the country’s overall fiscal
situation. In 2001, Greece's GDP was ~$131bn, and its debt was 103.7%
of GDP. By 2008, Greece's GDP was ~$357bn and its debt was more than
99% of that. Greece’s deficit in 2001 was -4.5%; without the swaps, it
would have been -4.64%.


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Mon, 02/22/2010 - 13:45 | Link to Comment Missing_Link
Missing_Link's picture

Deuteronomy 4:24 For the LORD thy God is a consuming fire, even a jealous God.
25 When thou shalt beget children, and children's children, and ye shall have remained long in the land,

and shall corrupt yourselves, and make a graven image, or the likeness of any thing,

and shall do evil in the sight of the LORD thy God, to provoke him to anger:
26 I call heaven and earth to witness against you this day,

that ye shall soon utterly perish from off the land whereunto ye go over Jordan to possess it;

ye shall not prolong your days upon it, but shall utterly be destroyed.


I presume this is the "God" and the "work" they're referring to.

Mon, 02/22/2010 - 12:17 | Link to Comment deadhead
deadhead's picture


I have upgraded Goldman Sachs from "Goldman Sachs is a clear and present danger to the United States of America" to "Goldman Sachs is a clear and present danger to the entire world".




Mon, 02/22/2010 - 12:20 | Link to Comment Anonymous
Mon, 02/22/2010 - 13:46 | Link to Comment Missing_Link
Missing_Link's picture


Mon, 02/22/2010 - 13:50 | Link to Comment Anonymous
Mon, 02/22/2010 - 12:21 | Link to Comment Anonymous
Mon, 02/22/2010 - 13:27 | Link to Comment Anonymous
Mon, 02/22/2010 - 14:15 | Link to Comment WaterWings
WaterWings's picture

The Tea Party movement is a fabrication of big money interests to control popular fervor. There will never be any change as long as the grass roots are intentionally over-fertilized with corporate money - straw-man politics on a massive scale. Joe Stack is being called a "teabagger" - what open bullshit.

See the mythical “Promparty” and “Working Peasant Party” trials in Russia during the purges and consolidation for power. Classic propoganda and psy-op tactics against the People. Same tricks, different century. Heavily monitored wikipedia has little to say. But heroic Solzhenitsyn provided us with insight in his Nobel prize winning expose of the Soviet death machine. 

Here is one of the actors that suppressed the people, and then met an ironic fate:

Mon, 02/22/2010 - 12:25 | Link to Comment A Man without Q...
A Man without Qualities's picture

These transactions did not reduce Greece's foreign debt by €2.367bn, but rather hid this amount (plus GSs juicy p&l) in an off balance sheet instrument.

Mon, 02/22/2010 - 12:27 | Link to Comment Whizbang
Whizbang's picture

Sell them sell them sell them. Sell all the Greek CDS you can. In a month you will be buying these things back at 1% compared to the spread now! If greece goes down, The "entire euro" (germany, france, switzerwhore) go down with them. It will not happen!!!

Mon, 02/22/2010 - 12:28 | Link to Comment Anonymous
Mon, 02/22/2010 - 12:32 | Link to Comment Going Down
Going Down's picture


'Nuf Said


"Our client's interests always come first."




Mon, 02/22/2010 - 12:35 | Link to Comment Anonymous
Mon, 02/22/2010 - 12:47 | Link to Comment Going Down
Going Down's picture




Feb. 22 (Bloomberg) -- The U.S. Supreme Court rejected an appeal by Pacific Investment Management Co., clearing the way for a lawsuit seeking more than $600 million for the company’s alleged manipulation of the price of Treasury futures contracts on the Chicago Board of Trade.


Mon, 02/22/2010 - 14:22 | Link to Comment Anonymous
Mon, 02/22/2010 - 13:06 | Link to Comment Anonymous
Mon, 02/22/2010 - 13:30 | Link to Comment Anonymous
Mon, 02/22/2010 - 13:34 | Link to Comment knukles
knukles's picture

The swaps did not decrease Greece's foreign currency exposure as Goldman claims, but simply moved the exposure from one pocket to the other.


Mon, 02/22/2010 - 13:42 | Link to Comment Ripped Chunk
Ripped Chunk's picture

And the men who saved the world did not want derivatives regulated why again???

Oh right, it would be "disruptive"


Mon, 02/22/2010 - 13:45 | Link to Comment Anonymous
Mon, 02/22/2010 - 17:56 | Link to Comment Greyzone
Greyzone's picture

Why do you pour gasoline on a PR fire? To bring down your enemies, making it more feasible to sell US debt into this increasingly fictional marketplace. I can see TurboTax Timmy and Ben Shalom both agreeing that Goldman's position and knowledge of other countries being involved in similar stunts being an opportunity to hurt the standing of those nations further.

Yes they need to debase the dollar, but they need to sell that US debt first and foremost. If the US can't lead the way down in the debasement race, it sure can bring up a bulldozer from behind and force everyone down that road a bit faster.

Mon, 02/22/2010 - 20:07 | Link to Comment williambanzai7
williambanzai7's picture

Goldman needs are real PR specialist like Jigaboo Jones:

Sat, 04/17/2010 - 10:42 | Link to Comment Tom123456
Tom123456's picture

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