Goldman Sachs may have helped Greece use a loophole to hide some of its debt from the European Union. But who is really at fault for the country's financial crisis?

According to Der Spiegel and the The New York Times, Goldman acted as the middle man in a currency swap -- where debt in one currency is exchanged for an equal amount in another. This swap was different, though. Goldman used a fabricated exchange rate so Greece would get extra money upfront, but pay the difference later, basically making the swap a loan.

Felix Salmon, referring to a 2003 article in the trade publication Risk by Nick Dunbar, sums it up well:

Goldman is sending Greece a steady stream of payments over the course of the deal, and then being repaid with a big balloon payment at the end. Essentially, Goldman is continually lending Greece money, and getting no interest payments in return, until maturity a long way out.

Salmon convincingly argues why Goldman isn't at fault, but he could have gone even further and defended Greece as well. There are three questions essential to figuring out whether anyone beyond the regulators is to blame: (1) what was the law when Greece engaged in the currency swaps? (2) did Greece violate the letter of the law? and (3) did Greece violate the spirit of the law?

Eurostat spokesman Johan Wullt told Bloomberg that "Eurostat was not until recently aware of this alleged currency swap transaction made by Greece," but the question is should they have been notified? The Risk provides an answer, though it is a complicated one: Regulators wanted to count currency swaps as financial transactions worth their current market value. But countries lobbied against that so they could use such transactions to adjust their deficits. Ultimately, the member states won out.

The bottom line is this: Thanks to some successful lobbying, Eurostat specifically let countries use currency swaps to adjust their deficits. Dunbar cites the relevant portion of ESA95 -- the European System of National and Regional Accounts, drafted in 1995 -- showing that the law specifically excluded swaps from being counted towards a country's deficit. So, it seems, Greece did nothing illegal. Greek Finance Minister George Papaconstantinou made that argument yesterday, according to Bloomberg, saying that the swaps were "at the time legal."

If Greece didn't violate the letter of the law, did they at least violate its spirit? The spirit of the law was, broadly, to outline what constitutes debt and how that should be reported. If Dunbar's 2003 reporting was accurate, then the law explicitly allowed for such swaps. If the EU ok'd currency swaps (and Greek Finance Minister George Papaconstantinou is telling the truth that his country only engaged in their use while they were allowed), then it becomes very difficult to argue that Greece even violated the spirit of the law.

Of course, forthcoming investigations may reveal some or all of these facts to be false, but as long as the law allowed for the swaps and Greece used swaps while they were legal, the only ones to blame are the regulators.