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View Diary: Goldman Sachs tears apart another European government (100 comments)

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  •  Goldman certainly contributed to Greece's problems (2+ / 0-)
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    mrkvica, Ljanney

    Prior to Greece joining the euro, Goldman worked with the Greek government of the time to devise financial instruments to help disguise the Greek national debt. The debt was, in fact, too large to meet the requirements for joining the euro.  When the economic crisis hit, these instruments contributed greatly to Greece's debt problems.  In characteristic fashion, Goldman also created instruments that allowed investors to bet against the Greek government instruments.

    I'm truly sorry Man's dominion Has broken Nature's social union--Robert Burns

    by Eric Blair on Tue Feb 04, 2014 at 10:02:17 AM PST

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    •  This story is a canard (0+ / 0-)

      Carefully erected. It's designed to allow the German and French banks that loaned to Greece the ability to say, "We didn't know, the Greek people should pay."

      It was a Eurozone problem from the start.

      http://www.risk.net/...

      Greece was well under the debt line.

      Read here: http://www.ekathimerini.com/...

       

        1. Greece should never have joined the euro -- it used false statistics.

          People often make the mistake of lumping these two issues together when there is clear distinction between the two. There is a valid economic argument that Greece, and several other countries, should not have joined the euro when they did. In Greece’s cases, it had achieved only a superficial convergence based on public debt and deficit figures but the negative underlying economic factors should have meant that the Greek organ was rejected in this currency transplant. The structural problems that Greece never addressed, such as its decrepit public administration and weak production base, meant that it was at a disadvantage from the start and would have had to undergo a remarkable transformation -- one which was never attempted by the country’s timid politicians -- to achieve a sound footing within the eurozone.

          Instead, Greece ended up producing only one euro of its own wealth for every three that it imported over the last decade. However, this issue is totally removed from that of forged statistics. It has become a throwaway line for commentators and journalists to write that Greece fibbed its way into the euro. This misconception is largely driven by the decision of the New Democracy government that came to power in March 2004 to conduct an audit of public finances that led to Greece’s budget deficit figure being revised upward, above the 3 percent of gross domestic product limit for euro-area members. However, the deficit increase was largely down to the conservative administration changing the way military expenditure was recorded. Rather than record the spending when the procurements were delivered, it attributed them to the date when the orders were made. This exposed a weakness in the way that the eurozone treated statistics. By failing to agree on a uniform system for all, it allowed statistics to be open to political manipulation in several member states, not just Greece. It is an issue that the European Commission has only addressed over the last few months. As Dimitris Kontogiannis revealed in Kathimerini English Edition recently, the EU now uses the delivery method to record procurements, which means Greece’s deficit when it joined the European Monetary Union in 1999 met the 3 percent target.

          According to the Commission’s database, several other countries’ deficits, including France and Spain, were over 3 percent. Some will argue that this is irrelevant now and in a sense it is. But the regular rehashing of this myth has contributed to the impression among commentators, as well as average Europeans, that Greece has to answer for an original sin even though this offense was never committed. Establishing the truth has to be the first step to rebuilding trust.

      The Goldman Sachs deal was well known to Eurostat, and everyone was doing it. Why? It was a currency conversion trade, back when the euro was par with the dollar. When the EU was told about such deals, the FMs insisted that such deals were legal and should continue in the same fashion. It wasn't secret at all, as the article in Risk shows.

      I think I know why these myths are perpetuated. It's so that the banks who lent to Greece can claim "We didn't know!!" when they did. It serves as a distraction.

      There are two kinds of people in this world. The kind who divide the world into two kinds of people, and the kind who don't.

      by upstate NY on Sun Feb 09, 2014 at 07:22:13 AM PST

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