Comparing the Argentine and Greek crises

For those that assume that the situation in Greece and Argentina are comparable I would point out that: Argentina under Kirchner was able to successfully renegotiate terms of its debt position with its debtors but at a huge price.  Private savings were slashed and the middle class was decimated. An unprecedented social crisis was coupled with double digit unemployment rates and declining standards of living, from which the country has not yet fully recovered.  Current buoyant economic growth is driven by rocketing prices of agricultural goods and commodities globally.  The price of default for Argentina has been a rise in inequality and an unequal burden sharing during the worst years of the crisis.

If Greece defaults and exits the euro the outcome for Greece will be a decade of economic contraction, rising unemployment, rising inequality and continuing social and political unrest.  Economic contraction is inevitable since there is no competitive advantage of the Greek economy that could engineer substantive growth.  Greece remains a peripheral economy to the European core.  The Greeks do not have a pliant and cheap labour force like Turkey, a serious innovative drive like north Italy, the trust of business investors like Spain.  Since economic activity strongly depends on economic signals and investment confidence it is reasonable to assume that, post-default, the country will end up at the bottom of the EU economic league tables a few slots below other mismanaged neighbours like Bulgaria.

 

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