cellor Kohl, says Gerd Langguth, a Merkel biographer and riages after divorces.

fter divorces. "Merkel comes across as utterly nomial,

political scientist at the University of Bonn, Adds Roland
Berger: "She's not burdened by history. She's simply prag-
matic. She knows what she wants and thinks what she does
is in the interests of Germany and Europe. She is a European,
yes, but Germany comes first."
Merkel's woman-of-the-people approach is what helped
her win a second four-year term as chancellor in September.
She and her husband, Joachim Sauera quantum chemist at
Berlin's Humboldt University-are both in their second mar-
and the average German can really relate to her" said Carl
Graf von Hohenthal, a management adviser at the Brunswick
Group and former deputy editor-in-chief of Germany's Die
We newspaper, who has known her since 1Q9O. "She dresses
well but doesn't wear overly expensive clothes." Merkel wheels
a shopping cart through her local food store, t raed by her se -
curity detail, at least once a month. She evenbags her own gro-
ceries. "She doesn't smoke, she doesn't drink muchpower
is her thing," said Friedrich Thelen, former parliamentary

GOLDMAN STARS IN
doesn't use such swaps now.
Athens got far more money
than it would have at the pre-
vailing exchange rates for the

THIS GREEK TRAGEDY euro back in 2002. Further, the

currency deal didn't show up in
officiai debt statisticsand did
not affect the debt-to-GDP
The firm's currency and bond deals for Greece have drawn fire limits for countries in the euro

f
By Elisa Martjnuz2t
Goldman Sachs. Wall Street's most
profitable securities firm and a boon to
conspiracy theorists the worid over, has
angered EU regulators over its role as
Greece's enablerhelping the Greek
government mask the severity of its
debt problems early last decade, Gold-
man designed an off-balance-sheet
currency swap deal that delivered a
windfall to the Greeks shortly after they
entered the euro zone.
Now there's evidence Goldman
may have also misled investors
when it managed the sale of $15
billion worth of Greek bonds in
subsequent years, according to a
review of bond prospectuses by
Bloomberg News. No mention was
made of the Greek currency swap
in sales documents for the bond
offerings in at least 6 of the 10
sales the bank arranged for since the
2002 currency transaction.
Failing to disclose the swap may have
allowed Greece, Goldman (a co-lead
manager on many ofthe sales), and
other underwriters to get a better price
for the securities, says Biii Blain, co-
head of fixed income at Matrix Corpo-
rate Capital, a London-based broker
and fund manager. Goldman has earned
about $24 million underwriting the
bonds since 2002.
That year, Goldman helped Greece
Finance Minister
Papaconstantinou
(top) and Goldman
CEO Biankfein
pull off a lucrative cross-currency swap
in which some $10 billion in Greek debt,
issued in dollars and yen to international
investors, was swapped for euro debt
using a "historical" (and very favorable)
exchange rate, says Christoforos Sardel-
is, then head of Greece's Public Debt
Management Agency. (Greece entered
the euro zone at the start of 2001.) The
swaps used by Greece to manage debt
were "at the time legal," Greek Finance
Minister George Papaconstantinou
said on Feb. 15, adding the government
zone. Goldman also extended
a $ 1 billion up-front payment
to Athens as part of the deal.
This complex transac-
tion was until recently news
to EU regulators, who last
week launched an investiga-
tion into the Greek currency
swap. Goldman could face
legal liability "if it could be
established that they were
knowingly hiding nsk, and
therefore knew or had
reason to know that the bond
disclosure documents were
misleading" says Thomas
Hazen, a law professor at the
University of North Carolina
at Chapel Hill. "But that would be a
tough hill to climb, in terms of burden of
proof. There would have to be some sort
of smoking-gun memo." Michael Du-
Vally, a spokesman at Goldman Sachs in
New York, declined to comment.
Legal niceties aside, Goldman's im-
age in Europe may take yet another hit.
'The price of bonds should reflect the
reality of Greece's finances," Blain says.
"If a bank was selling them to inves-
tors on the basis of publicly available
information, and they were aware that
information was incorrect, then investors
have been fooled."
-Wilh Maria Petrakis m Athens, Aaron
Kirchfeld in Frankfurt, Ilias Antoniou in
London, and David Scheer in New York

30 I BLOOMBERG BUSINESSWEEK MARCH 1,2010

Copyright of BusinessWeek is the property of Bloomberg, L.P. and its content may not be copied or emailed to
multiple sites or posted to a listserv without the copyright holder's express written permission. However, users
may print, download, or email articles for individual use.