The View from Buenos Aires

A visit to Buenos Aires in September provided a good vantage point to look at the euro zone's deepening crisis. Angle readers will recall that Argentina went through a painful adjustment process some ten years ago. This culminated in the peso being forced off its peg to the US dollar in 2002 as well as debt default. Unemployment jumped to 30 per cent, and poverty shot up above 50 per cent of the population. Since then the county has bravely remerged from the debris, although it is still pursued by some of its creditors. The crisis caused deep hardship, but almost certainly less than sticking to the currency peg (and good luck arrived with a decade of rising commodity prices as well). Does the Argentinean experience offer any light at the end of the tunnel for Greece? I am not so sure. Greek public debt is up to three times higher as a share of GDP compared with Argentina ten years ago, and the current account deficit is substantially greater. If Greece offers to repay one-third of its debt, backed with hard collateral (which might be what is on offer to private creditors) then its debt-to-GDP level will still equal that of Argentina in 2002, before it defaulted. Greece today is not Argentina then--the situation is worse.