Wednesday

20th Mar 2019

Brussels threatens to widen net on currency swaps

  • The EU's new economy commissioner Olli Rehn said banks could also be investigated (Photo: 1suisse)

The European Commission has said it will widen its investigation into complex currency transactions, used to hide the true extent of national debt levels, if evidence suggests they were deployed in more than one member state.

The EU's statistics office, Eurostat, launched an investigation into Greece over the weekend, following recent reports that Wall Street investment banks provided Athens with swaps and other financial instruments throughout the last decade.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Speaking after a meeting of EU finance ministers in Brussels on Tuesday (16 February), EU economy commissioner Olli Rehn said Greece has until 19 February to justify their legitimacy, adding that the net could be widened to other capitals.

"In case there is reason to expect that these kind of techniques have been used by other member states, not only Greece, then we will request information from other member states," said Mr Rehn.

The Finnish politician said Eurostat had no evidence of other capitals using the swaps, but the statistics agency was also unaware of Athens' activities until very recently.

Media reports over the weekend said Europe's other chronic big spender, Italy, has also used the off-balance sheet items in the past to hide its debt pile.

Greek finance minister George Papaconstantinou told journalists on Monday: "Greece was not the only country using them. They have since been made illegal and Greece has not used them since."

Spanish economy minister and current chair of the bloc's finance meetings, Elena Salgado, said Spain had not been approached by investment banks concerning the products. "If such a proposal had been made it would not have been accepted, but there has not been any proposal along those lines," she said.

Mr Rehn also extended a warning to the firms themselves. "If confirmed that some investment banks have been involved in these kind of exercises, we have to see whether the rules have been respected," he said.

Investment bank Goldman Sachs is alleged to have arranged so-called cross-currency swaps for Greece at the start of 2002, under 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.

The procedure is widely practised by governments looking for different currencies, but questions have been asked about the validity of the exchange rates used in the Greek case.

The reports suggest Goldman Sachs used fictional rates to enable Athens to receive a far higher sum than the actual euro market value of its dollar / yen denominated debt, with the additional credit gained in this way going undetected by Brussels.

US bank plans

As well as formally adopting commission excessive deficit recommendations on a number of EU countries, and approving the Greek government's deficit cutting programme, EU finance ministers also listened to presentations from the bloc's various economic commissioners regarding plans for the next five years.

Internal market commissioner Michel Barnier said the EU was currently studying recent US proposals to reform its banking sector, but indicated the EU was not intending to merely adopt them whole scale.

"You can't just transpose or copy the ideas or reforms proposed by [US President] Obama to the European continent," said Mr Barnier who is heading to Washington and New York in the coming days to discuss the plans with American officials.

"In Europe we have more problems related to the interconnection of the banks, rather than the specific nature of the activities or the scale of individual banks," he said.

The US plans, named after their chief architect and former Federal Reserve Chairman Paul Volcker, aim to limit the size and risk-taking of banks operating in America.

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Vestager says 'no' to Siemens-Alstom mega-merger

The EU blocked the merger of the makers of Germany's ICE and France's TGV trains, citing concerns of reduced competition and extra costs for consumers and taxpayers. The two countries now want to change the rules.

News in Brief

  1. EPP proposes suspension for Orban's Fidesz
  2. May asks for Brexit extension until 30 June
  3. Juncker: Brexit decision unlikely this week
  4. North Macedonia EU-membership talks set for June
  5. EU ups benefits rights for mobile workers
  6. Chinese leader visits Italy, France as Rome joins 'Silk Road'
  7. EU agrees to sanction political parties breaching data rules
  8. EPP votes Wednesday on future of Orban's party

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Latest News

  1. May tosses Brexit spanner into EU machinery
  2. Centre-right EPP faces showdown with Orban
  3. A compromise proposal for the Article 50 extension
  4. US glyphosate verdict gives ammunition to EU activists
  5. Have a good reason for Brexit extension, Barnier tells UK
  6. EU countries push for new rule of law surveillance
  7. EU rolls out €525m for military projects, but bars illegal tech
  8. May to seek Brexit extension amid UK 'constitutional crisis'

Stakeholders' Highlights

  1. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  2. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  3. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  4. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  5. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  6. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  7. Nordic Council of MinistersSeminar on disability and user involvement
  8. Nordic Council of MinistersInternational appetite for Nordic food policies
  9. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  10. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  11. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  12. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit

Join EUobserver

Support quality EU news

Join us