Should Greece follow in Argentina’s footsteps?
Steve Chiotakis: So to that debt crisis that really won’t go away, in Europe, economists and politicians are still haggling over a planned restricted default in Greece. But some skeptics believe Greece should follow the example of Argentina a decade ago and embrace the default there.
Ian Mount reports from Buenos Aires.
Ian Mount: Riots hit the streets of Argentina in late 2001, as the country defaulted on some $100 billion worth of international loans. Confidence plummeted, and one in four people were unemployed. Yet many here say if Greece should default, so be it.
Woman: Nurses, police, doctors, teachers should not pay for the mess that their politicians and the banking system has got them into.
Argentina used the money it would have spent repaying loans to build schools, highways and hospitals. In the decade since, poverty and unemployment rates have fallen by more than half. But while defaulting played a big part in Argentina’s recovery, the fact that it had control over its own national currency was important, too.
Alan Cibils is chair of the political economy department at the National University of General Sarmiento in Buenos Aires.
Alan Cibils: It made imports more expensive so it became more profitable to produce stuff here than to import it. The other thing is it made exports more competitive abroad, and so Argentina’s exports also took off.
Greece can’t devalue while it’s locked into the Euro. Its options are limited.
Miguel Kiguel was Argentina’s national finance undersecretary in the late 1990s.
Miguel Kiguel: The way they’re trying to restore competitiveness is by reducing domestic costs, which in many cases means nominal reductions in wages, pensions. And experience shows that it’s very, very difficult to get improvements in competitiveness through deflation.
Kiguel says that Greece should try to stay in the Euro if it can, perhaps by issuing a parallel currency so it could control its money while the economy heals.
That may seem drastic. But the Greeks may now have to be consider options they once believed unthinkable.
In Buenos Aires, I’m Ian Mount for Marketplace.
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