Step Aside Greece: How Gustavo Piga Exposed Europe's Enron In 2001 - Focusing On Italy's Libor MINUS 16.77% Swap; Was "Counterpart N" A Threat To Piga's Life?

It is not often that one finds smoking gun reports which refute all claims, such as those by EuroStat and Angela Merkel, in which the offended parties plead ignorance of the fiscal inferno raging around them, kindled by lies, deceit, and blatant mutually-endorsed fraud, and instead, now facing themselves in the spotlight of public fury, put the blame solely on related party participants, such as, in a recent case, Greece and Goldman Sachs. Yet a 2001 report prepared by Gustavo Piga, in collaboration with the Council on Foreign Relations and the International Securities Market Association, not only fits that particular smoking gun description, but the report itself was damning enough of another country, a country which used precisely the same off-market swap arrangement to end up with an interest expense of LIBOR minus 16.77% (in essence the counteparty was paying Italy 16.77% of notional each year as a function of the swap mechanics), in that long ago year of 1995. The country - Italy (for confidentiality reasons referred to in the report as Country M), was at the time panned as the Enron of the European Union due to precisely this kind of off-balance sheet arrangement by the Counsel of Foreign Relations. The counterparty bank: unknown (at least in theory, since the swap was highly confidential, and was referred to as Counterpart N), but considering the critical similarities in the structuring of the swap contract to that used by Greece in 2001, and that ISMA cancelled Piga's press conference discussing his findings out of fear for the academic's life, we can easily venture some guesses as to which banks value their recurring counterparty arrangements more than human life.

And only an idiot (here's looking at you, EuroStat) would miss this striking revelation in the ISMA report made almost 10 years ago, envisioning not only Italy but Greece, which joined the euro on January 1, 2001: "Piga has unearthed some rather striking documentary evidence: an actual swap contract, indicating that one EMU entrant (who, owing to an agreement with the source of the documentation, will remain anonymous) used swaps to mislead other EU governments and institutions as to the size of its budget deficit, so as to falsely suggest compliance with the Maastricht Treaty." Once all is said and done, and both the euro and the eurozone are forgotten history, it will be amusing to observe just how prevalent lies and deceit were in the Eurozone, where apparently it was a daily and thoroughly accepted occurrence to lie, both to others and to oneself, about the real state of financial affairs. Oh, and the "US-zone" which is doing precisely the same complete cover up of its true economic state, is certainly not too far behind.

Disclosures made in this report forced the Council on Foreign Relations to make an explicit comparison between Italy and the greatest corporate fraud of the early 2000's: Enron.

The parallel with the Enron transactions is uncanny. Like Enron, Italy took on debt but chose to represent it as a hedge for a yen bond it had issued in May 1995, which matured in September 1998. As with Enron, the hedge explanation was clearly misleading. If it had been a hedge, the exchange rate used would simply have been the market rate at the time the swap transaction was entered into. Off-market rate swaps were clearly selected for the purpose of producing interest revenue in 1997, with euro entry as the goal.

The Treasury does not deny this. It justifies it, however, using an explanation that is in part irrelevant and that in part implicates it clearly.

The irrelevant part of the explanation is that the Treasury was concerned that a yen appreciation could increase Italy's debt, thus jeopardising the country's hopes of entering the eurozone. So the swaps were structured to protect against its debt rising over the course of 1997. But Italy's debt was 110 per cent of gross domestic product in 1997, well beyond the 60 per cent Maastricht barrier. The European Union never intended to enforce the debt limitation, only the annual deficit limitation. Italy's deficit was forecast to be within striking distance of the 3 per cent barrier and the swaps legally affected only the deficit. The debt argument is a red herring.

The damning part of the explanation is the admission that Italy was taking a cash advance in 1997 against an expected foreign exchange profit in 1998. Under accounting rules, this is simply impermissible. Borrowers cannot use loans to anticipate capital gains on a bond.

In other words, cooking the public debt books in the EU started not with Greece and Goldman in 2001, but with Italy and Counteparty N in 1995; we are fully confident that many more examples will emerge shortly.

How widespread is this sort of financial chicanery among sovereign borrowers? It is very difficult to know, since these deals are done over the counter with no public paper trail. Gustavo Piga, author of the ISMA/ CFR report, uncovered the Italian transaction quite accidentally. But there are powerful reasons for concern.

First, governments have clear incentives to cook the books. The EU continues to impose fiscal expenditure restrictions on eurozone governments, violation of which can result in censure and fines. The International Monetary Fund imposes fiscal conditionality on its client governments, which naturally have a strong incentive to keep the Fund from closing the money spigot. Derivatives can be used to shuffle cash flows through time in ways that current accounting rules do not prevent.

Second, banks are only too willing to market derivatives tricks to their big client governments, particularly when it puts them at the front of the queue for future bond issues and privatisations.

Third, if the integrity of government financial data is fatally undermined, the damage to stock and bond markets will dwarf the "Enron effect" that has recently pummelled the Dow.

We urge everyone to reread the last sentence as many times as needed, until the truth sinks in.

Before we get into the implications, here are the "revelations" (even though these have been part of the public record for nearly ten years) about Italy, which is now certain to attract everyone's attention as the source of potential near-term eurozone destabilization.

Below we present the critical section from Piga's report, a must read for all those who are still unsure how governments used banks such as Goldman Sachs to create borderline legal, off-balance sheet swaps to hide their debt:

Setting the stage

This sub-section provides a real-world example of how sovereign borrowers can use derivatives to window-dress public accounts as a means of achieving short-term political goals. It is by no means a theoretical example, but a real swap transaction undertaken by one of the sovereign borrowers cited in this book, which now belongs to the European monetary union.

In what follows we will call this sovereign borrower “M”. The author was given a copy of the swap contract by a public officer of M. This officer works in a public institution in charge of approving the accounting of derivative transactions entered into and recorded by sovereign borrower M. The public officer had no understanding of the nature of this contract and honestly believed he was giving the author a copy of a derivative contract that did not present accounting problems. This also indicates how officers in charge of verifying that sovereign borrowers implement proper accounting procedures sometimes lack the technical expertise to fulfill their duties optimally.

The swap transaction, translated into English and reproduced in the Appendix, was undertaken in 1996 by M solely to reduce the level of interest expenditure in years 1997 and 1998 - two critical years for the EMU process - so as to keep the budget deficit-to-GDP ratio within the 3% level required by the Stability and Growth Pact. As this transaction only helped postpone interest expenditure, one of its consequences was to raise unduly the level of interest expenditure in the years after 1998.

Had proper national accounting procedures been in place, this transaction would have been recorded without allowing window-dressing of public accounts in 1997 and 1998 at the expense of public account balances after 1998. We will demonstrate that M undertook such a swap transaction only to window-dress its accounts. To do so, we will first show in sub section 4.2.b that standard derivative contracts to achieve proper debt management goals were disregarded because they would not help in substantially decreasing interest expenditure in the years 1997 and 1998. Sub-section 4.2.c describes the swap transaction entered into by sovereign borrower M, reveals its window dressing nature, and documents its impact on the public accounts of sovereign borrower M.

Standard active debt management with derivatives

In 1995, M issued an international 3-year and 3-month yen-denominated bond maturing in 1998 with a face value of JPY 200 billion and a yearly coupon of 2.3%. This bond was sold at par. The net proceeds for sovereign borrower M were y unis, where the uni is the fictitious name we will give to the currency in M. The exchange rate on the day the bond was issued was 193.44 unis for JPY 1.

That same day, domestic (uni) interest rates for a similar maturity were higher than yen interest rates. By issuing the yen-denominated bond instead of a domestic bond in unis, the debt office would have paid less interest on its yen-denominated liability. However, any appreciation of the yen over the life of the bond, if realized, would have made yen-denominated payments more expensive once converted into unis. At issuance (barring superior knowledge on the part of sovereign borrower M as to future movements in the yen/uni exchange rate), issuing in yen or in unis would have looked equally costly to sovereign borrower M. Nevertheless sovereign borrower M decided to issue this yen-denominated bond rather than a domestic uni-denominated bond over the 3-year and 3-month maturity. It is likely that sovereign borrower M issued the yen-denominated bond primarily to achieve greater diversification of its bond portfolio.

In 1996, almost one year and six months after the issuance of the yen-denominated bond, the yen had instead substantially depreciated against the uni. The yen traded at 134.1 unis per yen. The yen-denominated bond had at that date a remaining life to maturity of approximately one year and nine months. Had the yen continued to trade at such low levels compared to those of 1995, the debt office in M would definitely have gained from having issued in 1995 in yen rather than in unis. However, at the date when the yen was trading at 134.1 unis per yen, the debt office in M was still exposed to exchange rate changes in the remaining one-year-and-nine-month’s life of the yen-denominated bond. Had the yen substantially appreciated in that remaining period, M’s debt office would have lost some or all of the earlier gains obtained through the initial depreciation of the yen.

It is at this point that active debt management through derivatives could have been used effectively to achieve a specific goal. Imagine that in 1996 when the yen-denominated bond had a one-year and nine-month residual life to maturity, the sovereign borrower M had entered into a standard oneyear and nine-month JPY 200 billion notional amount cross-currency swap. Such a theoretical standard cross-currency swap would have matured in 1998, on the same date the yen-denominated bond matured.

At maturity, the theoretical currency swap would have required M to pay an amount of unis equal to JPY 200 billion multiplied by the market exchange rate on the day the swap was transacted, 134.1 unis for one yen. In exchange, always at maturity, M would have received JPY 200 billion from its counterpart.

During the life of this theoretical cross currency swap, sovereign borrower M would have paid a short-term floating rate in unis to its counterpart while receiving a yen-denominated fixed swap rate. In 1996 the one-year and nine month yen swap-market rate was approximately 0.75%. To be perfectly hedged against exchange rate risk, sovereign borrower M would have received a 2.3% yen fixed rate, or a fixed payment 155 basis points higher, rather than the swap-market rate equal to 0.75%. In exchange for these extra fixed payments, M’s counterpart would clearly have asked to receive from M larger amounts on the floating-rate leg of the swap. M would have thus paid to its counterpart the uni’s Libor rate plus 155 basis points on a uni-notional amount of JPY 200 billion multiplied by the market exchange rate between the yen and the uni (134.1 unis per yen). Figure 4.1 illustrates this theoretical transaction.

After this theoretical transaction, by eliminating currency risk and turning a yendenominated liability at a low value of the yen into a uni-denominated liability, sovereign borrower M would have locked-in a capital gain by having issued, in 1995, in yen rather than in unis. What matters for our purposes is to show that this gain would have, by and large, not affected interest expenditure in 1997 and 1998, but only affected it from 1999 onwards. In this case, the theoretical transaction we are describing would have proved useless in reducing the budget deficit in 1997 and 1998. Where would the savings arising from this theoretical swap have appeared in the budget of M? Recall that after the theoretical cross-currency swap illustrated in Figure. 4.1, M’s liability would have become a synthetic uni-Libor liability on a notional amount in unis (JPY 200 billion converted at the market exchange rate of 134.1 unis for JPY 1). The lower the yen exchange rate established in the swap contract, the lower this liability would have been. M would therefore have had, through this theoretical currency swap, a lower net cash outflow at maturity than the one it would have had by issuing a domestic  uni-denominated bond in 1995.

Such lower cash outflow due to a lower reimbursement of principal would not have affected the interest expenditure of sovereign borrower M in the years when the crosscurrency swap would have been outstanding (i.e., 1996 to 1998). Instead, it would have decreased the public sector borrowing requirement of M in 1998, when the bond and the swap would have expired. Such a lower public sector borrowing requirement in 1998 would have implied a lower public debt in M in 1998, compared to the level of public debt that M would have had to roll over had it instead issued in unis in 1995. In turn, this lower public debt would have implied lower interest expenditure and lower deficits only from 1999 onwards.

Enter "Counterpart N" or, allegedly, Goldman Sachs

Using derivatives to window-dress public accounts

Had sovereign borrower M wanted to eliminate currency risk due to the issuance of a yen-denominated bond it could have made use of the standard cross-currency swap illustrated in Figure 4.1. By doing so, it would have also locked-in a substantial capital gain due to the yen depreciation that had occurred since the issuance of the yen-denominated bond.

However, such a transaction would have had an impact on M’s interest expenditure only after 1998. We showed in the previous sub-section that such a standard cross-currency swap would have allowed the sovereign borrower to decrease the value of public debt in 1998 and, therefore, to accrue savings in interest expenditure only after 1998.

However, countries like M aiming at entering into the euro area during the period considered were not concerned with the reduction of debt. Rather, they were pressed to limit interest expenditure, especially for 1997, so as to contain the value of the budget deficit. Perhaps political pressure was formidable on debt managers in M, which would have been hard to resist. Whatever the reason, M’s debt office did not enter into a standard cross-currency swap as described in the previous section. Instead, it implemented, through a complicated cross-currency swap, a scheme that transferred the gains described in the previous sub-section to the fiscal years 1997 and 1998. By so doing, M’s debt office lowered interest expenditure in those two years and raised interest expenditure in the years after 1998. It did so by taking advantage of a lack of expertise on the part of officials in charge of monitoring the accounting of such operations.

The cross-currency swap which sovereign borrower M transacted with counterpart “N” (a large market maker in the derivative market) was entered into in 1996 for one year and nine months and matured in 1998. This swap matured on the same day when the yen-denominated bond issued in 1995 expired. In this real swap transaction, counterpart N paid in 1997 and in 1998 a 2.3% yearly fixed interest on a JPY 200 billion notional to M, the sovereign borrower. Also in 1998, when the swap matured, N paid an amount of JPY 200 billion to its counterpart M. Notice that in this way, starting from the day the swap was negotiated, the debt manager in M was perfectly hedged on its original yen-denominated bond liability, just as the debt manager would have been with a standard cross-currency swap transaction (see Figure 4.1).

However the similarities with the previously described standard cross-currency swap contract end here. Indeed, the exchange rate used in the contract (on which the notional amount in unis of M’s paying leg of the swap was set) was not the exchange rate prevailing in the market the day the swap was transacted, 134.1 unis per yen. Rather, the exchange rate used was 193.44 unis per yen, a much higher level than the market level. This implied that at maturity sovereign borrower M paid to counterpart N a much larger amount, 38.668 trillion unis (200 times 193.44 billion), than what it would have paid in a regular cross-currency swap entered into at the market exchange rate.

Finally, the currency swap contract required sovereign borrower M to pay, semiannually starting in 1997, on a uni-notional amount of JPY 200 billion times the 193.44 agreed exchange rate, the uni’s Libor rate minus 1,677 basis points (16.77%). The transaction is synthesized in Figure 4.2 (below).

Sovereign borrowers like M could borrow, at the time when the transaction took place, at levels around Libor with no spread added. It is, therefore, very puzzling that in this case it borrowed at Libor minus 1,677 basis points, which implies a negative interest rate. Sovereign borrower M was therefore going to receive interest payments on both legs of the swap until maturity. Why did it enter into such a strange transaction?

By entering into a cross-currency swap at a higher yen exchange rate (193.44 unis per yen) than the one it could have fixed on the same day (the market exchange rate of 134.1 unis per yen) sovereign borrower M did in fact romise to pay to counterpart N at maturity a much larger amount of unis than it would have done had the swap been transacted at the market exchange rate. Actually, sovereign borrower M paid at maturity approximately 200 multiplied by (193.44-134.1) unis more that it would have paid under a standard cross currency swap.

Sovereign borrower M, in exchange for these extra cash outflows, received from N a series of extra cash inflows during the life of the swap. These cash inflows would not have been part of a standard cross-currency swap transaction. Indeed, counterpart N, instead of receiving uni-Libor rate plus 155 basis points from sovereign borrower M on the floating leg of the swap (as it would have in a standard transaction, see Figure 4.1), received a uni-Libor rate minus 1,688 basis points. This implies that counterpart N paid to sovereign borrower M, in four regular installments every six months starting from 1997 and until the maturity of the swap in 1998, approximately 1,843 basis points per annum more than what it would have had in a standard cross-currency swap transaction.

De facto, the sovereign borrower received four loans from counterpart N, every six months from 1997 to 1998. These loans were paid back at maturity in 1998 by disbursing a greater amount than would have been disbursed had the currency swap been constructed in a standard way.

It is a clever transaction that is initially difficult to comprehend and which hides a simple principle: advancing future cash flows to the present. The transaction in Figure 4.2 had nothing to do with hedging the currency risk in the cash flows related to the underlying yen-denominated liability. Nor did it have anything to do with locking-in with certainty the capital gain that derived from the yen depreciation. These goals could have easily been achieved with a standard cross-currency swap, such as the one shown in Figure 4.1. Rather, the type of transaction that sovereign borrower M entered into allowed the debt management office to receive in advance cash flows that were supposed to be received only in the distant future. The accounting for these cash flows was then implemented as if these represented reductions in interest payments. This accounting choice hid the true nature of the cash inflows, the one of a liability that should impact on the public debt rather than on the budget deficit.

As for the regulatory chaos endorsing or preventing such schemes, here is what Piga had to say about that:

In country A, the author was told: “Maastricht has no exact rule on this, and we would like a rule on it. In A, politicians do not know about these rules, but for us it is scary; if they knew about it they would press for these deals.” In country B, the author was told: “I would love the guidelines to prohibit up-front payments so as to remove any temptation.” In country C, the author was told: “We have a self-imposed, ethical unwritten rule not to use up-front payments. However, we would not like to bring it to the attention of politicians by asking to insert it into the guidelines: That would give them an incentive to put political pressures on us.” When the author asked a debt manager in country C whether politicians would notice such a change in the rules, she said: “Oh yes, they are very careful about these things.” Asked why the politicians would not exert pressure now, if they are so careful, the debt manager did not give an answer. It should be pointed out that not all of these debt managers were in state treasuries. ‘Independent’ agencies are also under pressure from politicians, albeit to a lesser extent. It is worth noting that these political pressures might be particularly intense also on the issue of when to terminate a contract, as positive value transactions would help the budget in a given year in almost all countries.

As to Goldman's culpability, aside from fears of retaliation against all those who report the truth, it seems the "Counterpart N" liability is limited. Goldman did not do anything that was not endorsed and allowed explicitly by host domiciles that benefited explicitly from masking their interest rates as they were entering the EMU. Yet the issue does not end there: when one grasps the extent and severity of such swap transactions, one realizes the massive opportunity for conflict of interest, of mutual blackmail, of the desire for secrecy, and of counterparty risk, which is why Goldman is and has always been the preferred party of interest - just how many other such deals is Goldman on the hook for? Were Hank Paulson to have allowed Goldman to implode, it is likely that most if not all European governments, which one guesses currently have numerous other comparable secret arrangements with "Counterpart N", would have all suffered massive and irreparable losses on existing swap arrangements. This is merely yet another way in which the Federal Reserve-Goldman Sachs complex bailed out the world, however this time using the threat of the unravelling of completely confidential swap arrangements, which were known to at most several high level bureaucrats, and of course Lloyd Blankfein (and Hank Paulson, and Jon Corzine prior).

The author did not expect to be told the whole truth, but hoped to acquire some understanding of the decision-making process in these cases. Two things were learned. First, market makers consult with their legal office, since ignorance of the reason for the sovereign’s request is not legally excusable. Second, while explaining the transaction to the sovereign, the market maker makes sure that all possible risks are presented to the government before signing the deal, so that the government cannot blame the market maker. Interestingly, a market maker told the author that the strategy outlined here is something the industry learned after Merrill Lynch and the Belgian government were engulfed in a conflict that turned out unfavorably for Merrill Lynch. Governments are large and powerful actors, and every precaution has to be taken by market makers to avoid a legal challenge: “My advice to a firm,” one market maker told the author, “is never present a positioning strategy as a hedged strategy. Define which asset you want to hedge against and, if it is a positioning strategy, always show the downside.” The same market maker said: “As for the ethics within our firm, we do look at it very seriously. We do try to see the client’s intention as well. If we do see a window-dressing intention, we discuss it at the highest level, with the chairman. I remember one case when we said no.” Why does this window-dressing per se constitute a reason to halt derivative operations? Governments and market makers (especially the large ones that dominate the derivative market) have a special kind of relationship that is ongoing and often wideranging, including privatizations, syndicated loans, securitizations, asset and liability management, risk management advice and software provision. If a market maker has provided a government with window-dressing advice, window-dressing operations or other inappropriate transactions, it links itself in a tight embrace with the sovereign. Both know something about the counterpart that might hurt them if this activity were to be made public. While it is obvious that it is in their mutual interest not to go on record about such activities, there is also the possibility that one of the two parties might be able to exert undue pressure on the other in future transactions. A market maker might obtain a privatization mandate that it would otherwise not have deserved, possibly damaging the taxpayer or the consumer. A government official might obtain additional advantages, either personal or for the office itself. Keep in mind that such a possibility was not deemed as being so farfetched as to prevent its consideration in the IMF and World Bank guidelines: “Staff involved in debt management should be subject to code-of-conduct and conflict-of-interest guidelines regarding the management of their personal financial affairs. This will help to allay concerns that staff’s personal financial interests may undermine sound debt management practices.”

More generally, concern might arise in counterpart risk management with those counterparts that have a ‘special relationship’ with debt managers for the wrong reasons. We have seen that credit-line ceilings often do not automatically lead to the reduction of exposure to the required level even under normal conditions. How easy would it be to reduce the exposure of a counterpart that has knowledge of a possible improper handling of contracts for accounting purposes by the sovereign borrower? Demonstrating their extreme candor, Danish authorities have underlined the risks of one-to-one relationships in their comprehensive 1998 annual report in a passage on credit-risk management that is worth quoting: “Since the [Danish] central government began to use swaps in debt management in 1983 it has not suffered any loss owing to counterparty default. Certain counterparties used by the central government have faced very serious economic problems, however. A few have ceased to exist or could only continue with the support of public funds or after being acquired by a competitor,” [emphasis added]. In other circumstances it might be tempting to establish a connection between public support for a failing counterpart and its special relationship with the government.

Nearly 8 years before the world was about to end following Lehman's bankruptcy, Piga classified precisely the moral hazard associated with Goldman's too big to fail status, courtesy of the Enron-style accounting treatment that made Goldman an inexorable link at the heart of the viability of the Euro and the European Union. Was Goldman kept alive just to make sure the eurozone did not collapse? We sincerely hope Congressmen and Senators ask Mr. Blankfein this question at the next possible opportunity. And if not that, perhaps it should finally be made public just how many such deals Goldman has underwritten over the past 20 years, what the full masking impact to domestic economies has been as a result, and how many of these deals are currently still outstanding?

As to the next logical question: how many such deals exist, Piga provides the following table of swaps outstanding shortly before the time of the paper's publication, or ~2000.

Following up on this same question, Euromoney made the following observation back when in 2001:

Italy's public debt was around 110% of GDP in 1997 - way over the 60% outlined by Maastricht. As it was so far over the limit, Italy was unlikely to worry about the negligible effect of a foreign exchange loss. Even a large appreciation of the yen was unlikely to have a significant impact on Italy's chances of joining the eurozone. However, the cash advance from the negative interest rate on the swap would have made some difference on  the budget deficit, which stood at 3.2% in 1997. All the political emphasis in the run-up to joining the single currency was on Italy meeting the deficit criteria and showing a move towards reducing its debt. In the end, it failed to do this - the country's debt grew to 120% of GDP in 1999, without causing Italy too many problems with the EU. But it did manage to reduce its deficit to meet the 3% target, though only just, with three months to spare, and this could have meant the difference between being able to join the eurozone or, like Greece, being forced to wait.

In 1997, when Italy's prime minister, Romano Prodi, was canvassing for Italy to be a founder member of the EMU charter, he pointed to the fall in budget deficit, where Italy was one of the stronger of the tested countries. This strengthened Prodi's hand enormously against Germany, which had doubts about Italy's ability to meet the criteria. Indeed, Germany itself had some difficulty in meeting the 3% deficit target.  Back in 1998, several countries' public debt was over the 60% mark - Austria's was 65% of GDP, Sweden's was 75%, Italy's was 121.9% and Belgium's was 121.3%. Greece, the only country to be refused entry to the eurozone in 1998, had a public debt ratio of 106.4%. The reason it was refused, while Belgium and Italy were allowed to join, was that it had a deficit of 4.2%, while those of Italy and Belgium were under the deficit target.

The stunning revelation: Goldman would come to the rescue again and again, likely extracting many pounds of flesh to wave its magice wand and allow countries to not only enter the EU, but to subsequently mooch billions of dollars off of its various structural funds. Without Goldman's assistance Italy would not have been let into the eurozone. And Goldman did some critical window dressing not just Italy and Greece, but very likely most of Europe! We, for one, can't wait for disclosure of all the heretofore confidential swap agreements underwritten by Goldman.

If Greece and Italy are any indication, it only took a phone call by any of these governments to former Goldman CEOs Jon Corzine (latter part of 90's) and Hank Paulson (Goldman CEO until 2006), to arrange the same kind of non-standard, off-market swaps as has now been evidenced were used by both Greece and Italy. After all, keep in mind, the whole purposes of these "Goldman" swaps is to merely reduce public debt interest payment to align with EU and EMU artificially low fiscal requirements, at the expense of debt notional, which is not as constrictive an economic barrier according to Maastricht and other supervisory requirements. When the truth finally comes out that all of Europe's finances over the past 10 years have been a sham, covered up and facilitated very legally by Goldman Sachs, the Euro was collapse under the weight of the decade of lies that have made it seem that the eurozone is an economically viable construct.

As for Mr. Piga's report, on second thought we may have been too harsh on EuroStat. In 2001, Euromoney reported that:

ISMA was concerned enough to cancel a press conference with Gustavo Piga, the author of the report, because it said his safety was not certain.

It is thus very likely that most if not all may have missed it. After all, it was caught by just a few publications at the time, the CFR, which went so far as to claim Italy is Europe's Enron, being, of course, one of them. Yet inquiring minds would be very curious to uncover whether the danger to Mr. Piga's life came from representatives of Country M or Countepart N. If in the distant 2001 disclosure of facts about shady involvements of countries such as Italy and their counterparties such as Goldman Sachs, raised the specter of a threat on a person's life, we dread to imagine just how much other recent facts have been "silenced" over the past 2 years.

Link for absolutely must read, and completely public for the past 8 years report from Gustavo Piga and ISMA.