U.S. financial firm Goldman Sachs Group Inc (NYSE: GS) has more than doubled its exposure to short-term Italian government debt over the first quarter of this year, said the Wall Street Journal on Thursday, as Goldman continues to reduce its stake in other troubled European nations.

In a securities filing, the New York-based company revealed that it was holding close to $8.22 billion of Italian debt - as of March 31 - compared to just $3.05 billion at the end of 2011.

In the meantime, the company also chose to reduce its share of Greek and Irish government debt by $126 million and $478 million respectively, while cutting more than $6 billion of its exposure to Italian bank from $6.72 billion (as of December 31) to just $623 million.

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Most significantly however, was Goldman's decision to short on Spanish government debt. The firm's "market exposure" to Spanish government bonds shifted to a negative $446 million in March from a positive $151 million in December, according to Bloomberg.

Speaking on Bloomberg Television's "Surveillance Midday", Bloomberg reporter Christine Harper said that Goldman Sachs was positioning itself for what they believed would be a decline in the value of Spanish government bonds as well as a rally in Italian sovereign debt during the first quarter of this year.

The company will now be looking for safe growth opportunities in Europe as some their rivals retreat, said Liz Rappaport and Liz Moyer at the Wall Street Journal.

Yet if Europe's financial crisis deepens, Goldman could suffer as much as $2.4 billion in losses on their Italian-based financial instruments after suffering $244 million on Greek debt it held as of March.

The firm has apparently landed some large European corporate clients who are now relying on Goldman to help them sell debt securities in the U.S.

According to a WSJ source, the recent increase in short-term Italian government debt may now be a sign that Goldman officials believe a profit could be achieved by building an inventory of such debt to sell to clients.

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A version of this article was published by the EconomyWatch.com on May 11, 2012.