Sunday, June 26, 2011

Krugman on Argentina, Greece and sovereign debt default

Paul Krugman has been pointing out how Greece's situation today is similar to that of Argentina in 2001: targeted by bond speculators, not directly in control of their own currency (Argentina's currency was pegged to the US dollar). And when he looks at the comparison of how Nestor Kirchner's government handled that crisis vs. the Greek parties madly embracing economically suicidal austerity, and says Don't Cry For Argentina 06/23/2011:

Argentina suffered terribly from 1998 through 2001, as it tried to be orthodox and do the right thing. After it defaulted at the end of 2001, it went through a brief severe downturn, but soon began a rapid recovery that continued for a long time. Surely the Argentine example suggests that default is a great idea; the case against Greek default must be that this country is different (which, to be fair, is arguable).

I was really struck by the person who said that Argentina is no longer considered a serious country; shouldn't that be a Serious country? And in Argentina, as elsewhere, being Serious was a disaster.
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