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English to Chinese: Debt Deals Haunt Europe General field: Bus/Financial Detailed field: Finance (general)
Source text - English Debt Deals haunt Europe
Investors Re-Examine Complex Financial Maneuvers Used to Hide Borrowings
Concerns that Greece and other struggling European nations may not be able to repay their debts are focusing investor attention on another big worry: Economies across the Continent have used complex financial transactions—sometimes in secret—to hide the true size of their debts and deficits.
Investors long turned a blind eye to European governments' aggressive bookkeeping, aimed at meeting the euro zone's fiscal ceilings. Countries using the euro currency have a rich history of exotic maneuvers aimed at meeting rules requiring members to cap debt levels at 60% of their gross domestic product and their annual budget deficits to no more than 3%. Despite criticism, European leaders deemed many of these moves acceptable as they sought the long-planned currency union.
To try to meet the targets, which were aimed at building trust in the stability of the euro, governments over the years have sold state assets, bundled expected future payments into securities to hawk and even, in the case of Greece, insisted to the Eurostat statistics authority that large portions of its military spending were "confidential" and thus excluded from deficit calculations. In 2000, Greece reported that it spent €828 million ($1.13 billion) on the military—about a fourth of the €3.17 billion it later said it spent. Greece admitted to underreporting military spending by €8.7 billion between 1997 and 2003.
France arranged a deal with the soon-to-be privatised France Telecom in 1997 under which France Telecom paid the government a lump sum of more than €5 billion ($7.6bn). In return, France agreed to assume pension liabilities for France Telecom workers. The quick cash injection helped bring down France's deficit and permit it to join the euro.
Contagion issues have deeply concerned both policymakers and investors as the Greek debt crunch has unfolded over the past weeks. The cost to insure against a Greek default remains near record highs. Moreover, bond offerings from Spain, Ireland and Portugal in the past two weeks have succeeded primarily because they paid higher-than-usual yields.
Last week, such worries exacerbated market jitters over Europe's debt woes and could complicate Greece's plan this week to sell more debt, bankers and investors say.
Deutsche Bank executed currency swaps on behalf of Portugal between 1998 and 2003, according to spokesman Roland Weichert. Mr Weichert said Deutsche Bank's business with Portugal included "completely normal currency swaps" and other business activity, which he declined to discuss in detail. The currency swaps on behalf of Portugal were within the "framework of sovereign-debt management," Mr Weichert said. The trades weren't intended to hide Portugal's national debt position, he said.
The Portuguese finance ministry declined to comment on whether Portugal has used currency swaps such as those used by Greece, but said Portugal only uses financial instruments that comply with European Union rules.
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