Greece Cannot Do What Argentina Did

by Nicolás Creus[1] and Esteban Actis[2]

The triumph of the left-wing Syriza party in Greece has sent shockwaves through international politics and the global economy. The coalition government led by Alexis Tsipras announced that its main economic goal is to restructure Greece’s considerable external debt, which stands at 175 percent of gross domestic product, as a necessary condition to return to  economic growth.The triumph of the left-wing Syriza party in Greece has sent shockwaves through international politics and the global economy. The coalition government led by Alexis Tsipras announced that its main economic goal is to restructure Greece’s considerable external debt, which stands at 175 percent of gross domestic product, as a necessary condition to return to  economic growth.

Tsipras and other Syriza members have highlighted Argentina as a viable model for undertaking the difficult task of negotiating with creditors. Argentina at the end of the 20th Century experienced an economic crisis of similar magnitude. Gross Domestic Product fell sharply for four consecutive years; the country was mired in high debt; unemployment stood at 25 percent, while 40 percent of Argentinians fell below the poverty line. This culminated in December 2001 with the largest default ever recorded.

After tough negotiations, Buenos Aires was able to ease the burden of Argentina’s external commitments – the country emerged from years of economic recession. Argentina’s debt restructuring was an exceptional case. Not only was Buenos Aires able to avoid the involvement of the International Monetary Fund, but creditors agreed to include a strong haircut in nominal terms (about 75 percent), a reduction in the rate of recognized interest, and a considerable extension in the maturities of new bonds. The exchange was completed in June 2005 and was considered a success, with 76 percent of creditors who held defaulted bonds accepting a nominal haircut.

How did a peripheral, developing state such as Argentina lock in this kind of debt relief while negotiating from a position of weakness? The role of the United States – not only a global power, but also a guarantor of regional stability – was a crucial factor. Washington’s support favored Argentine interests and helped shore up Buenos Aires’ bargaining stance.

Evolutions in Washington’s international financial policy helped determine the United States’ functional and at times openly favorable attitude toward Argentina. Washington at the time was implementing a new approach for resolving sovereign debt crises. Further, the United States wanted to head off any contagion to the global economy.

The U.S. government sought to end the costly bailout policies that had characterized the resolution of debt crises during the nineties. The debacle in Argentina provided a test case for a new approach, especially since U.S. nationals were not too highly exposed. In this regard, Washington’s interest was for a resolution of the Argentine default that would avoid the extension of any financial assistance.

In tune with Washington’s new approach, a sheltered and recovering Argentina held back from the search for new money. Thus Buenos Aires broke the unity of the main stakeholders in the financial system while strengthening its demands for a strong haircut on private creditors, understanding that with no rescue or financial assistance forthcoming, the latter would have to share in the costs of restructuring.

This was reinforced by the imminent danger of a contagion that would threaten regional stability. The main fear was that Brazil’s vulnerable economy would suffer, thus jeopardizing the success of the new approach for solving sovereign debt crises. Accordingly, the United States, pursuing its own strategic interests, endorsed and supported the Argentine government’s bold restructuring proposal, haircut and all.

The Greek case is very different. There is no overlapping interest between the debtor country – Greece – and Germany, the main power responsible for ensuring order and financial stability in the European system. Athens initially proposed a haircut as an important condition. Berlin flatly rejected this possibility.

The German reluctance to support Greece’s proposals responds to a number of factors that create a clear contrast with Argentina’s experience. First, European banking sectors in general, and German banking in particular, have high credit exposure to Greece. Second, evidence shows a low risk of contagion to the European periphery, which removes the incentive to accept debtor conditions. Finally, Germany fears that countries such as Spain, Italy, and Portugal could emulate Greece. These are countries imposing considerable fiscal austerity measures to counteract their high indebtedness, and this dynamic hampers the possibility of a more flexible policy toward Greece. From the German view, any replication of the Greek approach not only threatens the financial stability of the European Union – it also legitimizes a new political vision for Europe’s future.

The Greek government has far less room to maneuver than did a Washington-backed Argentina. Athens is unlikely to push an aggressive haircut on its creditors, lessening the prospects of a debt restructuring process with South American characteristics. The lack of support from Germany, and that country’s conflicting interests with Greece, demonstrate the limitations imposed by context. There is a clear gap between reality and Athens’ desires.

[1] Assistant Professor of Argentina International Politics at the National University of Rosario, Argentina. Fellow of the National Council of Scientific and Technical Research.

[2] Assistant Professor of Latin American International Politics at the National University of Rosario, Argentina. Fellow of the National Council of Scientific and Technical Research.

(Texto publicado no jornal no site Real Clear World, em 11/02/2015. Reprodução autorizada pelos autores).

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3 comentários sobre “Greece Cannot Do What Argentina Did

  1. Alemanha e Grécia discutem agora a necessidade de um acordo sobre o programa de reformas para garantir que Atenas volte a crescer economicamente e supere uma gama de problemas como elevados índices de desemprego, sobretudo da população mais jovem. As reformas e políticas severas previamente aplicadas na Grécia pelos governos antecessores e por credores internacionais não encontraram muitos êxitos, mas pelo contrário, tiveram consequências catastróficas para a economia grega. Atualmente, a relação entre os dois países passa por um momento complicado devido aos desacordos sobre as reformas a serem aplicadas na Grécia em troca de novos empréstimos. O primeiro-ministro grego, Alexis Tsipras, porém, garantiu que o país respeitará os acordos de tratados europeus, mas “com determinadas prioridades”, e ressaltou a intenção de governar em favor da coesão social e de “ultrapassar os estereótipos”. O governo da Grécia ainda não prosseguiu com a execução da lista de reformas concretas que prometeu ao Eurogrupo, após o acordo firmado em 20 de fevereiro deste ano que resultou na extensão dos prazos dos empréstimos financeiros concedidos ao país até final de maio, mas confirmou a intenção de promover reformas estruturais no sistema tributário para torna-lo mais justo e combater a evasão fiscal.

  2. Desde 2009, a Grécia vem enfrentando uma profunda recessão. O país sempre
    teve dificuldades em manter uma política fiscal mais responsável e não aproveitou os
    anos de crescimento na zona do euro para reverter esse quadro.
    Quanto a Argentina, a década referente a sua reforma e estabilização repercutiu em um trágico desfecho, uma vez que o Plano da Convertibilidade deixava a economia de tal país em um rígido quadro de política monetária e taxa de câmbio, limitando, assim, as opções disponíveis para responder aos choques.
    Tem-se, assim, como principais pontos de convergência entre tais crises de ambos países a
    irresponsabilidade na política fiscal, a rigidez cambial, a competitividade deteriorada, a alta
    dívida pública e déficit público. Cujas consequências resultaram na evasão das reservas e depósitos bancários, no aumento do desemprego e da inflação, na queda de mesma magnitude do PIB de ambos os países, em programas rígidos que propunham uma reforma fiscal, cujos objetivos
    não foram alcançados e em reformas que não solucionavam os problemas existentes.

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