Should Ireland Default?

Atrios, pointing to this article on Ireland's precarious financial condition, says "they should just default. Tell the continent to bail out its banks directly if they want." There is actually a very interesting precedent for this, Argentina a decade ago. I wrote about it 2004:

Defying conventional expectations (including my own quite frankly), Argentina has experienced significant economic and employment growth in the last few years while defying the IMF and and the pressures of foreign investors. Larry Rohter of the NYT presents both sides of the argument:

Three years after Argentina declared a record debt default of more than $100 billion, the largest in history, the apocalypse has not arrived. Instead, the economy has grown by 8 percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning and unemployment has eased from record highs - all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.

Argentina's recovery has been undeniable, and it has been achieved at least in part by ignoring and even defying economic and political orthodoxy. Rather than moving to immediately satisfy bondholders, private banks and the I.M.F., as other developing countries have done in less severe crises, the Peronist-led government chose to stimulate internal consumption first and told creditors to get in line with everyone else.

"This is a remarkable historical event, one that challenges 25 years of failed policies," said Mark Weisbrot, an economist at the Center for Economic and Policy Research, a liberal research group in Washington. "While other countries are just limping along, Argentina is experiencing very healthy growth with no sign that it is unsustainable, and they've done it without having to make any concessions to get foreign capital inflows."

In fact, after ignoring the IMF and charting its own course, in 2005, Argentina found itself in a position to actually pay off its creditors and is now firmly ensconced as a G-20 member.

Perhaps Ireland should look at what Argentina did as a guide.

Speaking for me only

< The Friendly Skies? Take 'em, Their Yours | The Laws Of War And Status Determination For Alleged Enemy Combatatns >
  • The Online Magazine with Liberal coverage of crime-related political and injustice news

  • Contribute To TalkLeft

  • Display: Sort:
    another handful of marbles... (5.00 / 1) (#2)
    by Dadler on Fri Nov 19, 2010 at 09:31:55 AM EST
    ...brings another country down. The profound absurdity of our relationship to an inanimate object is truly remarkable. Today, I'm going to plant a dime and see if I can grow anything. Next, I'll try to milk a quarter. For my finale, I will attempt to slaughter and butcher a five dollar bill to make steaks.

    We might as well start using shells.

    So, what you're saying is that (5.00 / 1) (#4)
    by inclusiveheart on Fri Nov 19, 2010 at 09:54:54 AM EST
    Argentina decided to help Argentina first instead of worrying about the global gangsters?

    What a novel idea for the 21st Century.

    A country helps its people first and the multi-nationals and financiers second.  And, apparently, it works out in the end for all of them.  Hmmm.

    It's really not that hard a calculation. (5.00 / 1) (#6)
    by robotalk on Fri Nov 19, 2010 at 10:27:05 AM EST
    You figure out what's causing the debt and whether those debts are actually legitimate.  In the case of derivatives, etc., they appear not to be.

    In the real world, debts that can't be paid are typically negotiated down, not paid at their full value.


    I see one huge difference-- (none / 0) (#1)
    by jeffinalabama on Fri Nov 19, 2010 at 09:21:13 AM EST
    currency control by Argentina versus the Euro in Ireland. Additionally, the articulation between ireland and the rest of the EU might come in to play.

    Argentina had about 300 percent inflation at that time, IIRC, so the cause of the default wasn't the same. the IMF had pushed Argentina and other South American countries to build lots of infrastructure, dams, etc, whether they were needed at that time or not.

    Different situation in my mind. Could be the same cure would work, though. I need more explanation of Ireland's EU connection/obligations, though.

    Correcting my own mistake (none / 0) (#5)
    by jeffinalabama on Fri Nov 19, 2010 at 10:26:42 AM EST
    hyperinflation in the 70s and 80s...1991 Argentine peso pegged 1-1 to dollar... limits on bank withdrawals in 2001-2002...High inflation, but not on the 200 percent or higher scale.

    had some bad dates in there, sorry. There were grocery store riots, and a shortage of cash for the populace before the default. from 2002-2004, almost half of all Argentines lived below the poverty line.

    Currently, only 15 percent of argentina is at the poverty line or lower.

    Argentina's crisis was exacerbated by Mexico and Brazil devaluing their currencies while the peso was tied to the dollar.

    not the only issues that led to default, but I wanted to correct myself. IMF debts and Argentinas international bonds were re-issued at longer rates and at about a quarter of their previous value, a huge savings for the country.


    Atrios is right (none / 0) (#3)
    by Warren Terrer on Fri Nov 19, 2010 at 09:39:49 AM EST
    Ireland should default AND get off the euro. Argentina proves that countries should never listen to the IMF. The IMF isn't in the business of helping countries, it's in the business of helping banks to loot them.

    As soon as I read your headline,,, (none / 0) (#7)
    by masslib on Fri Nov 19, 2010 at 12:02:39 PM EST
    I thought Argentina.  Yes, I think that would be favorable to Ireland.

    If one country defaults then others will (none / 0) (#8)
    by Militarytracy on Fri Nov 19, 2010 at 02:32:22 PM EST
    By the time you are done BTD Goldman Sachs will be broke :)  But the vampire quid will be off my jugular then, and then we can build something real instead of dying slowly for make believe balance sheets and "the new" bookkeeping methods....insolvent is insolvent, broke is broke.

    AIG opened my eyes (none / 0) (#9)
    by BobTinKY on Fri Nov 19, 2010 at 03:27:04 PM EST
    all these bailouts of countries, huge insurers, compaines, Wall St.  are just a way of funneling taxpayer money (from whatever country) to the indebted's creditors.  

    There no help or even intention to help the indebted party, in fact, the conditions that attach (except for Wall Street bailouts) are usually incredibly onerous and lead ot mass human suffering.

    I would love to see Ireland default & tell the IMF and EU to go pound sand.

    Argentina raided the pension system too (none / 0) (#10)
    by diogenes on Fri Nov 19, 2010 at 07:07:53 PM EST
    When your government is run by those of the looting persuasion then first you loot from the bondholders and then you loot from the pensionholders.  Maybe Obama should do the same here:
    October 21, 2008, Reuters (from Google)
    "Argentina's center-left President Cristina Fernandez on Tuesday signed a bill for a government takeover of the $30 billion private pension system in a daring and unexpected move that rocked domestic markets.
    Labor leaders and lawmakers from the ruling Peronist party and some opposition groups applauded the nationalization as a way to guarantee pensions at a time of global market turmoil.
    But the surprise move unnerved investors and sent Argentine stock and bond prices into freefall.
    Critics said the government was looting pension funds ahead of a tough budget year when it has to find billions of dollars to pay and service debt."