Call them “Chinese whispers” with a Greek flavour, promoted by a bunch of US bankers.

Media reports say that the wide boys of Wall Street (AKA Goldman Sachs) have homed in on financially-crippled Greece as the newest business opportunity.

The reports say GS is now touting a deal whereby China will finance some of this year’s huge funding needs for the financially-stricken Greek Government.

“Greece is wooing China to buy up to €25bn of government bonds, a move that underlines Beijing’s growing financial power, as it struggled to fund soaring public debt,” reported the Financial Times.

That caused Greek bond yields to rise sharply overnight, a move that badly damaged the 11 billion euro issue made earlier in the week. Investors who took up that high yield bond have been handed some nasty, early losses. The higher yields were a sucker play. The suckers in the European markets fell for it and are now losing money.

The line “Beware of Greeks bearing gifts” comes to mind. In fact Greek bond yields hit the highest level since the country joined the euro in April 2001, and the margin (spread) between Greek and the highest-rated German Government bonds hit their highest level ever of around 3.85%. That’s a sign of how much a basket case Greece is and how desperate the Government is that they would allow themselves to be courted by the financially aggressive Goldman Sachs.

The Greek finance ministry said no deal had been reached to sell bonds to China and that it hadn’t commissioned Goldman to sell bonds to China, but it didn’t deny dealing with the bank, described memorably last year in one media report as a “vampire squid”.

The FT reported that:

“Gary Cohn, Goldman Sachs chief operating officer, has made two trips to Athens – last November and this month – to meet George Papandreou, prime minister and senior officials.

“Beijing has not agreed to such a purchase. Meanwhile, Athens has rejected a suggestion that a Chinese bank should acquire a strategic stake in National Bank of Greece the country’s flagship commercial lender, according to officials contacted by the FT.

“But a more modest deal of about €5bn-€10bn ($7bn-$14bn) appeared possible after Mr Cohn’s second trip to Athens, officials said on Tuesday.”

Greece is effectively broke: it needs to raise an estimated 53 billion euros this year from markets in new and rollover debt. It has been fudging its debts for years, as well as the size of its spending and the revenue shortfall. It wasn’t until late last year that a new Government owned up to the lies. It claims it will cut the deficit from 12.7% of GDP to 3% by 2012. No one in Europe believes them.

Greece’s problems are why the euro is weak and why the US dollar’s rebound is continuing. The fear is that if Greece can’t refinance itself and keep going it will either have to be bailed out by the rest of Europe, or leave the eurozone, which could trigger an enormous financial shock. If this happens, then gloom and doom will takeover Europe and the rest of the world. If dealing with Goldman Sachs and using their legendary ability to raise money to avert a collapse in the eurozone is the price to pay, then so be it.