Greek Calamity

Greek woes increase as US looks into hidden debt
Andrew Willis

Greek woes continued on Thursday (25 February) as threats of further credit rating downgrades had a negative impact on the country's bond market.

Just 24 hours after a similar statement by Standard & Poor's, rival credit rating agency Moody's said Greece was in danger of seeing its rating cut, causing Greek bond prices to fall and yields to rise.

Rumours that Greece is preparing further austerity measures in a bid to reduce its budget deficit did not appear to allay investors' fears, despite an announcement by EU economy commissioner Olli Rehn that he would fly to Greece next week.

"I'm planning to go to Greece next week to discuss the fiscal and economic situation and the future financial stability of the eurozone," Mr Rehn told a news conference in Brussels. He added that he was looking forward to reading the report from the latest EU monitoring visit.

Commission, European Central Bank and International Monetary Fund officials wrapped up a three-day expedition to Greece on Thursday during which they closely inspected the country's finances.

The officials will have seen the mass protests that spilled over into violent clashes on Wednesday, as Greek citizens displayed their unhappiness with the government's programme of spending cuts, tax increases and plans to raise the retirement age.

Mr Rehn is likely to discuss the need for further austerity measures during his visit to Athens, together with allegations that Greece used financial derivative products, including currency swaps, to hide the true extent of its debt pile over the past decade.

On Thursday, the US Federal Reserve announced it would look into the role played by Wall Street investment bank Goldman Sachs in providing Greece with the currency swaps, which reportedly helped Athens to keep a multi-billion euro loan hidden from EU monitors.

"We are looking into a number of questions relating to Goldman Sachs and other companies and their derivatives arrangements with Greece," said Federal Reserve chairman Ben Bernanke Bernanke before a hearing in Congress.

The EU requested that Greece hand over information regarding the currency swaps to the bloc's statistics agency by last Friday, but the deadline was missed.