Global Ethics Corner: Greece, Goldman, and Financial Transparency?

Mar 12, 2010

This short video on ethics asks: Is Goldman Sachs responsible for the current financial crisis in Greece? Or should Greek politicians who knew of Goldman's practices be blamed for the state of their economy?

The Greek government is deeply in debt, due to decades of excess public spending. Greek politicians were unwilling to reduce services or raise taxes.

Today Greece's annual budget deficit is about 13 percent, and the national debt is over $400 billion. So, they had to borrow and continually roll over the borrowing. To reduce costs, they needed to refinance at the best possible interest rate.

Along with European banks, Goldman Sachs helped by arranging artificial cross-currency swaps. The result dramatically understated Greece's liabilities by 1.6 percent of GDP. Hence, Greek finances appeared healthier than the reality, and interest rates were much lower.

Goldman followed a basic principle, the client comes first. They creatively advised, and their techniques were approved by European statistical authorities. This shell game was intentional, legal, and semi-covert.

When the details became clear, the consequences were severe. Interest rates skyrocketed, Greece announced austerity measures, and public employees went on strike. Weak economies in Europe were pressured, speculation about the stability of the euro peaked, and stock markets reacted negatively

The lack of courage and self-serving of Greek politicians is clear, but is Goldman culpable? One of their Business Principles is, "We expect our people to maintain high ethical standards in everything they do…."

What would you do? Would you serve the client's short-term request, force attention to larger issues, or refuse to hide liabilities?

By William Vocke

Some details are from "Time for Goldman to Come Clean," The New York Times, March 1, 2010, p. B2

See also Goldman Sachs Business Principles.

You may also like

President Macron at the World Economic Forum's Davos Agenda, January 2021. <br>CREDIT: <a href="https://www.flickr.com/photos/worldeconomicforum/50877135273">World Economic Forum/Pascal Bitz</a> <a href="https://creativecommons.org/licenses/by-nc-sa/2.0/">(CC)</a>

MAR 30, 2021 Article

ESG Offers Capacity, Capital, and Consensus for Global Challenges

In this article, Carnegie New Leader Ravipal Bains outlines an environmental, social, and governance (ESG) led reorientation of the global financial system. The core idea ...

Terms and Conditions. CREDIT: <a href=https://www.behance.net/gallery/52947849/Stahlscom-terms-and-conditions-user-flow>Dave Goodman (CC)</a>.

JAN 31, 2020 Article

Sharing is Caring: Governing the Internet

This essay written by Sasa Jovanovic is the second prize winner of the undergraduate category in the 2019 student essay contest. What are the benefits of ...

Likes. CREDIT: <a href=https://pixabay.com/illustrations/facebook-icon-like-thumb-1084449/>Pixabay (CC)</a>.

JAN 31, 2020 Article

Internet Regulation: The Responsibility of the People

This essay written by Justin Oh is the second prize winner of the high school category in the 2019 student essay contest. What have data and ...