ECB President Jean-Claude Trichet wrote, “The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy.”
The European Central Bank refused to disclose internal documents showing how Greece used derivatives to hide its government debt because of the “acute” risk of roiling markets, President Jean-Claude Trichet said.
The ECB turned down a request and an appeal by Bloomberg News to release two briefing documents officials drafted for the central bank’s six-member Executive Board in Frankfurt this year. The notes outline how Greece used the swaps to hide its borrowings, according to a March 3 note attached to the papers and obtained by Bloomberg News.
“The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy,” Trichet wrote in an Oct. 21 letter in which he rejected the appeal. Disclosure “bears, in the current very vulnerable market environment, the substantial and acute risk of adding to volatility and instability.”
The ECB is withholding the information six months after the European Union and International Monetary Fund led a 110 billion-euro bailout ($154 billion) for Greece. The government didn’t originally disclose the swaps, which were designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001. Eurostat, the EU’s statistics agency, is still trying to work out how Greece hid the deficit.
The Greek swaps fueled a financial crisis that threatened the breakup of the region’s currency. The government now says the swaps, some of which were arranged by Goldman Sachs Group Inc., may have caused “long-term damage” for taxpayers.
“There’s only one solution to resolving the current uncertainty: full disclosure,” said Gustavo Piga, author of “Derivatives and Public Debt Management,” and a professor at Tor Vergata University in Rome. “The ECB, the European Commission and Eurostat need to show that they are aware of all the transactions and that they have no issue in disclosing them. The market has been left to think the worst.”
Continue reading - Bloomberg - ECB Rejects Request for Greek Swap Files, Citing `Acute' Risks
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