******************** POSTING RULES & NOTES ********************
#1 YOU MUST clip all extraneous text when replying to a message.
#2 This mail-list, like most, is publicly & permanently archived.
#3 Subscribe and post under an alias if #2 is a concern.
*****************************************************************
<http://roarmag.org/2015/05/why-does-greece-not-simply-default>
Aided by good external conditions, Argentina’s recovery began after 6
months.
---
https://www.stratfor.com/geopolitical-diary/greece-and-argentina-similar-not-same
It is no surprise that Argentina's story appeals to many Greeks,
especially the ruling Syriza party. The Argentine default is a reminder
that debt is essentially a contract, and contracts can be broken if they
become too costly for one of the parties. More important, the Argentine
case highlights the fact that there is life after a default. Between
2003 and 2007, the Argentine economy grew by an annual average of
roughly 8 percent, while unemployment plummeted from around 20 percent
to about 8 percent. Life was certainly not easy for Argentina — the
country became isolated from financial markets, and inflation quickly
became a problem again. But Argentina's default and devaluation
temporarily defused an extremely complex social, political and economic
situation.
As striking as it is, the comparison between Greece and Argentina has
concrete limits. To begin with, Argentina had a currency peg, but it
never abandoned its national currency like Greece did when it adopted
the euro. Many Argentines held bank deposits in dollars and staged
massive protests, some of which turned violent, when the country
converted accounts to pesos using an official exchange rate, but for
most Argentines, life stayed relatively normal. They still received
their salaries in pesos and purchased goods using the currency. In
Greece's case, leaving the euro would require a return to the drachma, a
logistical and political nightmare for Athens. Leaving the euro would
also lead to extended capital controls and a problematic conversion of
savings into drachmas, a move that would trigger high levels of social
unrest.
A second major distinction is that Argentina was able to benefit from a
positive external environment. The Argentine devaluation coincided with
an international commodity boom. China and other emerging markets were
growing fast and demand for Argentina's agricultural and mineral
products was strong. The global economic climate has since changed. Now
Greece would be returning to the drachma at a time when many of its
economic partners, including European consumers and Russian tourists,
are in crisis despite low oil prices and the European Central Bank's
quantitative easing program freeing up a large amount of cash in
European markets.
Argentina also found a key ally in Hugo Chavez's Venezuela — the
Bolivarian leader became one of Buenos Aires' main benefactors. Exact
numbers are difficult to establish, but between 2003 and 2008, Venezuela
is believed to have bought some $5.6 billion in Argentine debt, a
notable figure at a time when there were not many investors interested
in purchasing Argentina's bonds. This raises an interesting question for
Greece: In a post-default scenario, would Athens be able to find its own
Chavez? In recent days, Athens has made an effort to show Europe that it
has strong ties with Russia, but while Moscow is certainly interested in
keeping close ties with Athens — if only to exacerbate the European
Union's political fragmentation — it's not a given that Russia could
become the sponsor Greece would need.
Russia is interesting for another reason, too: In the early 2000s,
Argentina was self-sufficient in terms of energy. Greece is not. One of
the few advantages Greece receives from having a strong currency is the
ability to pay for energy in euros. A return to the drachma would make
energy imports more expensive, making a potential alignment with Russia
even more crucial for Greece. This need is probably the main reason
behind Athens' flirtations with Moscow.
Finally, a crucial factor in a potential post-euro scenario is whether
Greece turns to protectionism. After Argentina defaulted and devalued
its currency, it introduced high import tariffs to protect national
industries and placed heavy tax rates on agricultural exports to take
advantage of the growing demand for commodities. Both measures generated
massive revenue for Buenos Aires and allowed the government to fund a
long list of social programs and subsidies.
_________________________________________________________
Full posting guidelines at: http://www.marxmail.org/sub.htm
Set your options at:
http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
