By June 2015, Greece has government debt over 180 percent of its GDP. Part of the borrowing by Greek government was through currency swaps.

Explain why the following swap resulted in a net borrowing by Greece. “Greece enters a 10-year currency swap with Goldman Sachs, receiving fixed rate, 4%, on euro annually and paying fixed rate, 1% on yen annually. The principal amount is ¥248b or €1b. At the time of swap, the market exchange rate is ¥124/€.

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Answer Greece has government debt over 180 of its GDP Though it receives a fixed rate at 4 on eur... View the full answer