Goldman Sachs’ actions at the turn of this century may not have lead directly to Greece’s ongoing financial demolition but they certainly played a role. Most importantly, through the execution of hideously complex currency swap agreements the U.S. investment bank allowed the Greek government to conceal the bleak reality of the country’s finances for nine long years. And as Lucas Van Praag, head of communications for Goldman Sachs, said in 2010, it was all done with the implicit knowledge and consent of EU institutions:
The swaps we executed for the Greek government in 2001 were not designed to help Greece join the euro. The suggestion they were is simply not true. The truth is that Greece was already part of the eurozone when it entered into the swaps. Greece actually executed the swaps transaction to reduce its debt to GDP ratio because all Member States were required by the Maastricht to show improvement in their public finances. The swaps were one of many techniques that European governments used to meet the terms of the treaty. The swaps we executed for Greece were done in accordance with Eurostate rules.
As Greece and the eurozone prepare for the worst, Goldman Sachs’ role in its downfall has been largely forgotten, as is the much ignored fact that ECB President Mario Draghi was Vice Chairman and Managing Director at Goldman Sachs International between 2002 and 2005.
How much did Draghi know about the Greek swaps? What role did he play in helping Greece conceal its borrowings? How many millions did he help Goldman earn by betting against Greek debt? These are questions that may never be answered, thanks to the fact that in 2010 the ECB rejected a freedom of information request by Bloomberg to release documents showing how Greece may have used derivatives to hide its borrowings. The ECB’s reasoning for such uncharacteristic secrecy is that “disclosure could still inflame the crisis threatening the future of the single currency”. It obviously had nothing to do with protecting the current ECB president’s neck or the already much tarnished reputation of the investment bank he formerly served.
The following 2012 VPRO documentary offers an unmissable trip down memory lane. It reminds us at this critical juncture that it’s impossible to truly understand the European financial crisis without first taking into consideration the central role of the major banks, in particular Goldman Sachs. As former Goldman executive Nomi Prins says, “because of the relationship between Goldman and the ECB, and the relationship between Goldman and the U.S. Federal Reserve, you have this whole circle of people that can continue to avoid analyzing what the real problems were and how the risk of the banking system itself was (and still is) hurting Europe.”
[The film includes English subtitles but they may need activating in “settings”]