Greece, Don’t Follow Argentina: Analyst
Argentina holds no lessons for Greece in how to manage a sovereign default, Robert Shapiro, Co-chair of the American Taskforce on Argentina and Co-founder and Chairman of Sonecon, an economic advisory firm told CNBC.com.
“Argentina has not gotten out of their situation. They have effectively said: ‘the rules don’t apply to us’,” he said.
“The international financial system works on trust and integrity if there wasn’t that, it would break down and this leads to isolation. The Argentine model is a catastrophic way to handle a default. The fact that it’s a G20 country doing this is particularly catastrophic. This brings up the question of whether they should be in the G20 at all,” Shapiro told CNBC.com.
The South American country defaulted in 2001 after suffering a protracted recession where it was unable to meet its debt repayments – the largest default in history. Greece is mirroring some of the events which unfolded there including fracturing social cohesion, rioting in the streets and severe hardship for the public with massive unemployment.
Argentina is still excluded from international capital markets because of its inability to come to an agreement with some of its creditors about repayment of its debts .
Shapiro argues that the decade since has seen Argentina recover economically and that it has been deceptive about its situation delaying full repayment of its debts from that time.
“They have not been transparent about the fiscal situation. They are trying out a new model which is effectively ‘we make the rules up ourselves’. If Argentina were to become the model there would be chaos. It’s the most dangerous model out there,” he added.
Shapiro said the U.S. had decided to take affirmative action against Argentina because it “serially violates international norms”.
“We have been putting legal pressure on them and that hasn’t worked so now we’re saying that if you don’t respect the rules of the international community then we will isolate you on other aspects of the international community.
He said the U.S. would now be voting against all loans to Argentina and that his visit to the UK is to press members of parliament as well as to inform think tanks and other officials of the need to join the U.S. position and stand against Argentina on the international stage.
Referring to the heightened tensions in recent weeks between the UK and Argentina over the Falkland Islands – also known as Las Malvinas – which saw the two countries at war in the early 1980s, Shapiro said the UK in particular should remove any support for the country.
Shapiro added that he did not believe thatGreece’s current economic situation was sustainable with the implications for the banking system across Europe put under pressure.
“The drastic austerity is having a devastating effect. It is slowing the economy and making problems harder. However, the alternative outside the euro would be a brave new world, we just don’t know what would happen,” he said.