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Hellenic Exchanges took a dive in the wake of the Greek debt crisis, which has also led to Finland coming under scrutiny for possible corruption.
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Finland’s debt management tactics resemble Greek counterparts but are deemed acceptable by analysts.
Besides the securitisation scheme which transferred debt, Finland also counted private pension funds as public, thus making government finances look even better. Finland was increasing its reportable assets and decreasing its reportable debt.
Although controversial, some economists are forgiving of Finland’s methodology. Tarmo Valkonen, head of the public finance and economy policy division at the Research Institute of the Finnish Economy ETLA, points out that the pension system is mandated by law and even private funds could be considered as part of the “public” system. He does not think it was overly manipulative.
Finland also uses currency swaps. Greece has been accused of using such swaps to delay or hide debt levels. Mika Tasa at the State Treasury explains that Finnish use of these instruments are simply to hedge against unfavourable exchange rate moves in debt issued in other currencies. “We just use plain cross-currency swaps,” he says. “If we issue debt in dollars, for instance, we convert it into euros at the time of issue.”
Allegations against Greece:
• Complex cross-currency swaps were used to hide extent of debt.
These used fictional exchange rates so Greece received a higher
sum than the actual market value. Lump sums due to swap cancellations
were added as revenue, while the loan from investment
banks due to fictional exchange rates was not booked as debt.
• Capital injections into public corporations were not counted
as expenses.
• Overestimation of social security surplus.
• Some military spending was not counted as expenses because
authorities claimed it was “confidential.”
• Tax revenue was overstated.
• EU grants to non-governmental organisations were treated
as government revenue.
• Much of the expenses in public hospitals were not counted as
expenses. |
At the end of January Finland had about 3.1 billion euros in loans denominated in other currencies, out of a total debt of around 63 billion euros. This full 3.1 billion euros is covered by currency swaps.
Several years ago the official EU statistics agency Eurostat raised questions about some of Finland’s reporting, including the securitisation scheme. Since that time Finland has ceased securitisation, buying back the last outstanding Fennica loan in 2007. As Eurostat has tightened their rules, Finland has followed suit and cleaned up its accounting accordingly.
In the most recent visit to examine Finland’s statistical methodology Eurostat praised the country. Tasa cannot think of any issues Eurostat currently has with the State Treasury. For his part, Valkonen believes that Finland has stayed away from any deceptive practices in recent years. “I have had no observations of that type of behaviour,” he says, speaking of the alleged Greek practices. “We rely on the Finnish authorities.”
DAVID J. CORD - HT
LEHTIKUVA - REUTERS - Yiorgos Karahalis
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