Bloomberg Sues ECB to Force Disclosure of How Greece's Swaps Hid Deficit
By Elisa Martinuzzi and Alan Katz - Dec 22, 2010 1:01 AM GMT+0100 Wed Dec 22 00:01:00 GMT 2010
Bloomberg News filed a lawsuit against the European Central Bank, seeking to make it disclose documents showing how Greece used derivatives to hide its fiscal deficit and helped trigger the region’s sovereign debt crisis.
The lawsuit asks the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose two internal documents drafted for the central bank’s six-member executive board in Frankfurt this year. The notes show how Greece used swaps to hide its borrowings, according to a March 3 cover page attached to the papers obtained by Bloomberg News.
ECB President
Jean-Claude Trichet withheld the documents after the European Union and International Monetary Fund led a 110 billion-euro bailout ($144 billion) for Greece. The dossier should be disclosed to stop governments from using the derivatives in that way again and show how EU authorities acted on information they had on the swaps, according to the suit, filed by Bloomberg Finance LP, the parent of Bloomberg News.
The EU is dependent “on member states taking an open and transparent approach in relation to their levels of debt,” Bloomberg said in its suit. “If Greece has failed to take such an approach in the past, there is a compelling public interest in relevant information being disclosed.”
An ECB spokeswoman declined to comment on the lawsuit.
The Greek government didn’t originally disclose the swaps, designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001.
‘Undermine Public Confidence’
Eurostat, the EU’s statistic’s agency, said last month the swaps added 5.3 billion euros to the country’s debt, without giving details. Repeated revisions of Greece’s national figures, beginning last year, spurred a surge in borrowing costs that pushed the country to the brink of default and triggered a region-wide debt crisis.
“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, turning down Bloomberg’s request for the documents. Disclosure “bears, in the current very vulnerable market environment, the substantial and acute risk of adding to volatility and instability.”
ECB officials first spotted “a swap operation in unusual terms,” in April 2009, seven months before the Greek crisis erupted, according to the March 3 cover note.
“It is wholly unclear what (if anything) the ECB did at that time to investigate further,” Bloomberg’s suit says.
Greece entered into a “large” number of private, off- market swaps from 2001 through 2007, Luxembourg-based Eurostat said in a report on Nov. 15. The agreements, which led to higher debt, were analyzed “in detail,” Eurostat said. A follow-up report on Greek data including swaps is due in weeks, a spokesman said at the time.
“Disclosure would help prevent these situations repeating themselves,” said
Michael Spence, winner of the Nobel Prize for Economics in 2001 for his research on asymmetric information in markets. “It’s a tough call. Not everything can be disclosed, but markets need to know.”
(Bloomberg)
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Bloomberg intenta causa contro la BCE sui documenti riservati inerenti la "questione derivati".
