meditraitor wrote: » I was only pointing out the fact that Goldman Sach are not some shining light banking organisation.
beeftotheheels wrote: » So a transaction which Greece entered into in 2009 (eight years after they joined the euro) allowed them to keep some debt off their balance sheet. As Goldman's were the counter-party to this transaction we can accuse them of exporting accounting fraud to Greece??? Alright so.
you wrote: reputable Wall Street bank
meditraitor wrote: » Dont be so naive, Goldman Sachs had a very significant part to play in the greek crisis.......http://www.spiegel.de/international/europe/0,1518,676634,00.html
beeftotheheels wrote: » Huh??? Where on earth did that come from? Goldman Sachs are a reputable Wall Street bank who produce their accounts under US GAAP. There have been suggestions of manipulation thrown at many of the finance houses due in no small part to the complexity of the accounting standards dealing with financial transactions. Greece, as a sovereign state produces cash accounts which are black and white unlike the grey area of trying to comply with accounting standards and they misstated them.
Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit. For reasons of data protection and privacy, your IP address will only be stored if you are a registered user of Facebook and you are currently logged in to the service. For more detailed information, please click on the "i" symbol. Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received." Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent. The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent. Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products. Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date. Fictional Exchange Rates Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations. But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks. This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer. In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent. At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005. The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment.
later10 wrote: » Well interestingly the Euro is up right now and rising, suggesting that this Greek story may be losing its momentum for the time being. Presumably down to these comments by Noyer of the ECB todayhttp://www.bloomberg.com/news/2011-05-24/ecb-s-noyer-rejects-greek-restructuring-as-horror-transcript.html Funny to think that such gloomy warnings could leave the forex crowd swooning after the euro, but they are a macabre lot. Apparently some ECB executive board members are due to give a press conference later today (Tuesday), which should bolster the euro further and act to dampen fears for the moment. That is, unless some German politician opens their mouth in the next 24 hours, and sends everything back into a tailspin.
This I have to disagree with (which adds to my fear at the moment). Some treaty articles permit derogation, some do not. Freedom of establishment does, free movement of capital does not (or rather does not in an intra-community context, it does in a third country context). So we don't really know where EU law stands on this.
Today’s declines are “partly down to concern that policy makers will be unable to come up with any concrete solution to the debt crisis,” said John Davies, a fixed-income strategist at WestLB AG in London. “There’s a growing realization that a pain-free solution for Greece may not be there.” Today’s manufacturing and services data “suggest that we might be seeing a sharper slowing in growth than people were expecting,” he said.
Scofflaw wrote: » As far as the question of 'burning' Greece goes, there is no specified exit mechanism from the euro, and there is a commitment on the part of all EU member states to join the euro. The member states not in the euro have temporary 'derogations' from joining the euro, a situation regularised in the Treaties. What strikes me as eminently possible here is for Greece to be given a derogation on the use of the euro. There is no specified procedure for obtaining such a derogation, there are simply two legally recognised possible situations for member states in respect of the euro - with derogation, without derogation. Nothing forbids Greece from obtaining such a derogation except its Treaty commitment to adopting the euro in the first place - but a member state can obtain a derogation from any aspect of the single market if required (with the proviso that "they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market"), so there is an implicit acceptance within the Treaties that backsliding can occur, even in respect of something as fundamental as the single market - and, even more to the point, the Treaties clearly accept that using the euro isn't a defining characteristic of membership. cordially, Scofflaw
What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise? I believe Tora Bora is countering the argument made by one of pro EU posters that the EU has neither the time or resources to examine the accounts of countries applying for membership of Euro or anything else. According to that ever so cordial poster, the EU is a small bureaucracy that has to take countries on trust. But yet we can point out they have had time to tie themselves in knots making decision on vegetables, fruit and don't forget chocolate. And I am not even going to go on about their extremily daft fishing quota laws.
What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise?
Sand wrote: » whose going to recapitalise the ECB? Germany? Doubt it.
Sand wrote: » I wonder if the ECB is scared too - afterall, the problem about making hysterical, unthinkable threats is that you might have to back them up to maintain credibility. And whose going to recapitalise the ECB? Germany? Doubt it.
I don't know why I am finding the discussions today so unnerving, but it is feeling a bit like August 2007 all over again. Up until yesterday I kept hoping that we would survive this but something changed today, I think it is possibly the involvement of the equities markets and the Fed, it could be the position of the Greek opposition, it could be Moody's position on default. We knew the risk of contagion, we knew the ECB's position on burden sharing, we knew that the Greeks were struggling to meet the terms of their bailout. But this is all seeming more real today, that Trichet could destroy the ECB over burden sharing to try and prevent the fallout, that Greece will default one way or another and the question then is just how bad the fallout is and what can be done to manage it.
But I found myself scared when reading the papers earlier, Greece is causing a hell of a lot of instability and even the Fed are starting to get nervous about the knock on effect of the eurozone crisis on the US economy.
beeftotheheels wrote: » There are no provisions for leaving the euro. It is kind of like a marriage without provision for a divorce because at the time of the marriage no one thought it would go wrong. So we don't know what will happen.
beeftotheheels wrote: » What distinguishes Greece is that they lied at the alter. They didn't meet the criteria for joining the euro but told everyone that they did, so a fudge may be easier for Greece than for us or Portugal - an annulment as it were rather than a divorce.
beeftotheheels wrote: » The argument only has merits if you believe that the markets will accept the specifics of Greece rather than seeing it as a precedent for other Eurozone countries.
beeftotheheels wrote: » But I found myself scared when reading the papers earlier, Greece is causing a hell of a lot of instability and even the Fed are starting to get nervous about the knock on effect of the eurozone crisis on the US economy.
beeftotheheels wrote: » The Spaniards didn't help matters with their local elections.
beeftotheheels wrote: » Default is now being talked about in Ireland and elsewhere as a solution rather than a problem and a Greek default is looking more and more likely. So rather than allowing the Greek's default why not force their hand which strengthens the moral hazard arguments, and if it goes catastrophically then others (like us) will continue trying to avoid default at all cost.
Tora Bora wrote: » Well the poor underresourced, beurocrats found time to pass assenine laws and regulations, regarding the legal size and weight of cucumbers. The shape of carrots. The curvature of bananas. FFS!
beeftotheheels wrote: » What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise?
Tora Bora wrote: » Well the poor underresourced, beurocrats found time to pass assenine laws and regulations, regarding the legal size and weight of cucumbers. The shape of carrots. The curvature of bananas. FFS! Laws draconianaly applied in Ireland and other states, and blithely ignored in the Republic of France. But hey, silly regulations are for Paddy, not Sarkozy. Shoulda gone to specsavers, most of those eurocrats.:cool:
Prakari wrote: » The Greeks imported accounting fraud from Goldman Sachs, an expert in this area.
Scofflaw wrote: » If one believes that the EU is some kind of immense bureaucracy with extraordinary fiat powers over the helpless member states and a lot of time on its hands to poke and pry where it's not wanted, that explanation would make sense. However, the EU is in fact a very small bureaucracy (smaller than the HSE, for example) with very limited powers, and whose officials pretty much have their hands full just carrying out the duties they've been tasked with. As such, it doesn't have any way of "independently verifying" the books of a member state - it has to act on the basis that the data it's given are not fraudulent. Finding out whether a national government is cooking the books is really beyond the powers of anybody bar that national government - if the government wants to hide the fact, it can and will do so. So, in the case of Greece, it was only when a new and reforming government was elected to office that the fraud committed by the previous governments came out - and I suspect that had the fraud been sustainable the current Greek government might also have decided just to keep quiet about it. It was up to the member states at the time of the creation of the euro to decide whether they would give the EU the legal power and the necessary resources to independently verify whether the member states were being honest about the convergence criteria, presumably through some kind of hostile audit procedure. Opposition from a single member state would have been sufficient to put an end to any such plan, although there's no particular sign that the member states did anything bar say "well, we're all grown-up First World countries, right? I'm sure we're all telling the truth..." rather than go down the road of putting themselves in a position where they too would be audited. This seems to be a regular theme, by the way - the EU has fantastical powers attributed to it by people, and then has negligence attributed to it because it doesn't use the imaginary powers it doesn't have. The EU isn't Europe's federal government - it's a relatively small bureaucracy with rather strictly circumscribed powers at the service of a framework for joint European action by the member states. cordially, Scofflaw
Tora Bora wrote: » I get confused when I hear the Greeks, cooked the books, and lied their way into the Euro club. Surely, there should have been elegibility rules, which there was. And surely, there should have been some sort of independent verification by the ECB, of the books of all would be members, BEFORE, granting full membership status. Seems like more ineptitude on behalf of the Eurocrats, if you ask me.
jmayo wrote: » Jsut a few questions... Firstly what facilities are in place to force a Eurozone member to exit or to kick them out involuntarily ? Are there any ? Secondly what political reprecussions on the EU project would this have ? Why should Ireland or Portugal support such a move when they could be next ? Would such a move just not make Ireland's and Portugal's position more unstable ? Do not underestimate the affect this would have on European banks (British included) and the affect it would have on other European states like Spain and Italy.
beeftotheheels wrote: » There was an interesting suggestion in the Lex column of the FT today that the ECB could do worse than learn from the American settlers and fight fire with fire by burning Greece to protect the rest of the Eurozone. There is a certain logic to the notion that you can separate Greece from the other peripherals on the basis that the source of their problem is illegality (telling lies in their budgets), and one of the reasons they are not meeting their bailout terms is additional illegality (rampant tax evasion). If the markets would accept this decoupling then by leaving Greece to their own devices we would also have a nice little European example of what a Eurozone default looks like which may be instructive for the Spaniards. Undoubtedly as the largest holder of Greek bonds the default would hurt the ECB and require recapitalization of that institution. It would also hurt many European banks and financials, but not by as much as Ireland or Portugal would. It would be a gamble, but the logic is appealing to me. The markets are jittery, nothing that has been done to date has calmed them, so perhaps it is time for more drastic action from the ECB.
