Anthony Hilton: What’s the truth about Mario’s Italian job?

A couple of years ago there was universal outrage when it was discovered well after the event that Goldman Sachs had used its bankerly skills to help the Greek government of the time disguise the country’s true financial position so it would qualify for membership of the euro.

This week it looked as if the Italian government of the day got up to similar tricks. An Italian newspaper revealed that its government faces losses of many billions of euros because the extremely low interest rates across Europe have pushed the various swap contracts it had with banks deeply into the red.

However, it looks likely that most of these contracts date back to 1999 or to actions taken then when the Italian government in its turn was struggling to meet the terms which would qualify it for the euro.

Once again the banks appear to have arranged transactions for the government which helped it appear healthy at the time at the expense of looking extremely unhealthy in the future. The problems are not solved by such actions, but rather often made much worse – and more costly –with the passing of time.

It is not that these banks have done anything legally wrong, but it would have been nice to think that someone on the board at the time might have questioned the wisdom and morality of deals which helped governments conceal their true financial positions. Certainly it will be no surprise if there is another surge of public anger as further facts are prized out into the open.

People are also asking what, if any, role in this was taken by the current head of the European Central Bank, Mario Draghi.

He was a pretty senior official in Italy at the time, and it would be fascinating to know if he helped in any way to organise these deals.

It would also be particularly ironic if he did because in his current job, Mr Draghi spends much of his time designing policies which are needed to save Italy from the consequences of its membership of the euro.