Greek Ex-Minister: Other Euro Countries Did Swaps Too

Greece's 2001 deal to swap some of its debt using currency derivatives was in line with what other euro-zone countries were doing, Yiannos Papantoniou, the country's finance and economy minister when the deal was made, told CNBC.com Wednesday.

The transaction, intermediated by Goldman Sachs, involved exchanging about 2.8 billion euros ($3.8 billion) worth of bonds denominated in yen and US dollars — that would have generated substantial outflows in 2002 — into euros, maturing in 2019, Papantoniou explained.

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"We took a loan that was to be repaid in 2019," he said in a telephone interview. "It was public. I know that what we've done then was consistent with what was done by many euro zone countries."

A subsequent government extended the deal's maturity to 2037, he added.

in Greece, according to Papantoniou.

Goldman Sachs officials declined to comment as did Morgan Stanley. JP Morgan officials were not immediately available for comment.

Italy, France and Spain were among the euro zone members doing such swaps at the time, he added. Eurostat, the European Union's statistics office, has asked Greece for explanations on these debt swaps by Feb. 19.

"Completely Crazy"

These types of debt swaps are destabilizing financial markets and the European Commission should thoroughly investigate the case, Simon Johnson, Professor of Entrepreneurship at MIT Sloan School of Management, told CNBC.com Tuesday.

The transactions allowed countries to buy the currency at historical rates, which were lower, and record the debt for statistical purposes at the stronger market rate, thus making the debt look smaller. Eurostat banned this way of registering debt in 2008.

These and other transactions, while not illegal, have come under increasing scrutiny. Critics say the moves masked growing debt loads and impending financial problems (Read more here).

Papantoniou said the current fuss around the transactions surprised him. "It's completely crazy," he said, adding that Greece came into the limelight on this "because of the crisis and because of the stereotype that Greece has cheated on its statistics."

Christophoros Sardelis, former chief of Greece's debt management agency, declined to disclose details of the deals, citing an impending parliamentary inquiry. "The whole thing was over-dramatized," Sardelis told CNBC.com by telephone.

But just as foreign exchange markets were getting over the Greek tragedy following the EU's announcement that Greece had 30 days to come up with ways to cut its deficit, this ongoing saga is hurting the euro again.

"I don't think that's particularly good for the euro," Alex Edwards, senior corporate dealer at UK Forex, told CNBC.com. "It's pretty much uncertainty that's the key here."

"The euro is going to struggle to get past $1.40 just because these problems are long-term," he said.