The full extent of damage to the European economy and the Euro currency is only now making its presence felt as Greece’s series of bailouts and sustained fiscal impotence has reached its final hour, however this situation may well have been toxic before Greece’s entry into the Eurozone, and indeed the European Union.
Antigone Loudiadis, a city professional who has spent several years as a senior executive at Goldman Sachs Group Inc (NYSE:GS) in London, joined the firm from JP Morgan in 1994, and quickly rose through the ranks, has been named as instrumental in brokering the deal to ensure that Greece joined the European Union and the single European currency, despite its balance sheets and financial condition being outside of the stringent rules set out by the Maastricht Treaty.
One of the obligations of the treaty for the members was to keep “sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP.”
Greece managed to keep within the EU’s strict Maastricht rules for membership which included a limit on inflation and national budget deficit, largely because of the complex financial deals created by Goldman Sachs, which analysts suggest disguised the extent of the country’s outstanding debts. Indeed, the Financial Times delicately called it ‘an optical illusion’ back in February 2010.
Goldman Sachs is said to have made as much as $500million (£322million) from these transactions.
Ms. Loudiadis has now been named as being a central figure in brokering the deals which allowed Greece to display figures which met the criteria to join the European Union.
Her fluency in the Greek language, and strong connections in the country were instrumental in Goldman Sachs being chosen as unofficial financial advisers to the Greek government.
For Greece, membership of the single currency gave it access to billions of easy credit. However, as has become completely apparent, the Athens government was incapable of repaying that money because the economy was far less healthy than lenders realized with these revelations demonstrating that the cornerstone was laid for the current crisis even before Greece joined the single currency.
Now, this has become a matter of public record and Goldman Sachs faces the prospect of potential legal action from the Greek government.
According to the Daily Mail, a source explained “In this instance, however, the rumoured profits were so big, and had come from such a small country when not much was going the bank’s way, that everybody knew about it.” Accordingly, Miss Loudiadis was richly rewarded.
Reports suggest she was paid up to $12million (£7.7million) a year by the time she was named co-head of the investment banking group.
Goldman Sachs later moved her to head insurance firm Rothesay Life, set up in 2007 to buy big firms’ pension funds. Miss Loudiadis is likely to get a multi-million-pound payday when, as is expected, Rothesay floats next year with a potential value of £3billion.
Such deals, it should be stressed, were not uncommon among small countries attempting to enter the eurozone club, but they were stopped by the EU economic statistics agency Eurostat in 2008. Eurostat has said that Greece did not report the Goldman Sachs transactions in 2008, when it and other countries were told to restate their accounts.
Goldman Sachs insists its transactions were in accordance with Eurostat rules. The company said it helped to reduce Greece’s foreign debts by 1.6 per cent, adding that the company had a ‘minimal effect’ on the country’s overall fiscal situation.