New York Times
June 20, 2011
As sovereign default in Greece becomes increasingly likely, a lot of people are turning to Argentina in hopes of learning something from that country’s 2002 default experience and its recovery. To be sure, there are significant parallels between Argentina's financial debacle of the 1990s that led to its default, and Greece’s current financial nightmare. Like Greece, Argentina carried a large amount of debt (almost $100 billion), had tied its currency to another currency (the dollar) and was relying on loans from the International Monetary Fund.
However, some clear differences also make Argentina a bad role model for Greece. First, if anything, the financial situation is much worse in Greece than it was in Argentina. According to the European Commission, this year, Greece's public debt reached a whopping 158 percent of gross domestic product, the biggest in the euro’s history. By contrast, Argentina’s public debt was 62 percent of G.D.P. in 2001.
Second, Tyler Cowen reminded me recently that Greece, unlike Argentina, does not have another printed currency available to ease a break with the euro, as Argentina did when it broke with the dollar. But the peso gave another advantage to Argentina over Greece. While Argentina didn’t have access to bailout money from other countries (than through the I.M.F.,) the country was ultimately able to devalue, which likely contributed to its recovery.
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