GREECE HAS TWO DAYS TO EXPLAIN TRICKS TO HIDE DEBT

 Greece has only days to explain its use of complex financial deals that it used to mask debt and just a month to prove that its drastic budget cuts go far enough to reassure markets and EU governments. Olli Rehn said Tuesday that he wanted the Greek government to supply answers by Friday on how it used currency swaps and how that affected debt and deficit figures.

          EU finance ministers on Tuesday also gave Greece a deadline of March 16 to show that it can make big spending cuts to bring its deficit down from the EU's highest, 12.7 percent of economic output, to 8.7 percent this year. Greece says it isn't asking for financial help and won't need any _but it is facing a credibility crisis as a Feb. 1 report commissioned by the Greek finance ministry warns of «significant debt revisions» for 2009 statistics due to swaps, debt to suppliers and state-guaranteed loans that may default.

          The report said some swaps are now «being done in order to transfer interest from the current year to the future, with long-term loss to the Greek state.» Rehn said «it is clear that a profound investigation must be done on this matter,» promising that he would check to see if all rules were respected. «If it turns out that there is such kind of securitization of swaps that are not in line with the rules of the time, then of course we would need to take action,» he said.

          The EU can take Greece to court, under threat of daily fines, to change its statistics methods. It is already threatening legal action for Greece's failure to report accurate public finance figures last year. Papaconstantinou said Monday that such swaps were legal when Greece used them and that it is not using them now and will stick to EU statistics rules on new financing deals. Papaconstantinou also said Greece was not alone among EU nations in using such deals.

BANKS UP TO NEFARIOUS TRICKS

          Rehn said he was not aware of similar problems with other countries but that «this has still to be verified.» Rehn also took a shot at the investment banks that advised Greece to mask debt. Reports in The New York Times and Germany's Der Spiegel said that Greece used U.S. financial institution Goldman Sachs to engage in the swaps. «I think the banks themselves should also ask, not least after the financial crisis, if this has been in line with the code of ethics,» he said.

          Traders' fears that Greece might not make debt repayments increased Tuesday, with the spread of the Greek government bond widening to 3.35 percentage points against the benchmark German bond. The spread was below 3.00 points last week on hope of a detailed euro-zone bailout plan.