Greek debt highlights need for legitimacy guidelines-UN

* Unclear if Greek deals illegitimate under new guidelines

* “Can’t use future generations’ revenues” -UN official

By Jonathan Lynn

GENEVA, Feb 22 (BestGrowthStock) – Reports that Greece used
derivatives contracts with U.S. investment banks to mask the
size of its debt highlight the need for guidelines defining the
legitimacy of sovereign debt, a U.N. official said on Monday.

Yuefen Li, head of the Debt and Development Finance Branch
at the United Nations Conference on Trade and Development
(UNCTAD), said the reports that the previous Greek government
had pledged future revenue streams [ID:nLDE61E1LC] raised
questions of transparency.

Li heads a project to draw up international guidelines on
whether sovereign debt is legitimate. [ID:nLDE61B185]

She told Reuters it was not possible to say whether the
Greek transactions could be declared illegitimate under the
future guidelines without knowing the full details of the deals
and how they were handled under Greek law.

“Whether or not it can be declared illegitimate, you have to
look at the legal aspects — whether the government has gone
through transparency, (whether) you inform your people,
(whether) you go through the legal procedures, whether it’s for
the benefit of the people,” Li said.

But she said pledging future income to meet current needs
raised ethical problems, comparable with irresponsible economic
growth that created long-lasting pollution.

“You cannot use the revenue for future generations to solve
your immediate problems,” she said.

Li said Greece was not the only country to engage in these
kinds of transactions, but declined to name others.

The Greek case raised the question whether governments had
the right to impose debt burdens on future generations that
would have to be repaid when they were no longer in office, she
said.

It also showed that the planned guidelines were relevant to
all states, and not only highly-indebted developing countries.

According to the New York Times, one contract in 2001 —
carried out as Greece was joining the European monetary union —
involved Greece selling forward future lottery receipts and
airport landing fees in exchange for cash to write down debt.

The deal was structured to appear as a currency trade rather
than a loan, allowing Greece to hide it from public view while
meeting deficit limits on joining the single currency, the
newspaper reported. The EU has asked Greece to explain.

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(Editing by Robin Pomeroy)

Greek debt highlights need for legitimacy guidelines-UN