During the six month stand-off between Athens and Brussels, which we documented in Greece on the Edge?, while European intransigence was driving Greece ever closer to default on its massive debt – a step which would inevitably entail exiting the euro – various commentators began asking whether Greece might have anything to learn, one way or the other, from the case of Argentina,* where the currency collapsed in December 2001, the banks put up shutters, the country got through five presidents in twelve days, and ended up (when the IMF withdrew its support) in a spectacular default.
There are big differences between the two countries, of course, but there are also strong similarities in the economic dilemma facing them. Neither country was in a position to apply its own monetary policy because, in Argentina the peso had been pegged to the dollar in 1991, and in Greece, as a member of the eurozone since 2001, the currency is outside their control. In both countries, economic recession was met by austerity policies that inevitably turned recession into depression: unemployment soared, especially among the youth, poverty grew, GDP plummeted, and as it did so, the country’s debt grew proportionately and became increasingly unpayable. Countries defaulting on their sovereign debt is nothing new – it’s been going on, for one reason of another, for the last five hundred years – but Argentina and now Greece are paradigmatic modern instances of a world where the financialisation of the global economy gives moral hazard a whole new dimension.
Documentary filmmaking always benefits from serendipity. It is only logical, therefore, that for the next chapter of Money Puzzles, we should take advantage of an invitation for Michael to screen a previous film of his at a seminar in Córdoba, allowing a week in Buenos Aires investigating the Argentine case.
The fact is that there are no internationally accepted provisions for what happens if a country goes bust, unlike ordinary bankruptcy, which falls under the jurisdiction of each individual state. Greece must now attempt to get its debt restructured by its unforgiving creditors. Argentina, meanwhile, presents a cautionary tale. The initial effect of the default was further economic decline, to which the popular classes responded with strikes, factory take-overs, and the introduction of improvised local currencies. In due course, rising international prices benefitted the country’s large agricultural export industry, and recovery followed quite quickly. The country made deals with most of its creditors to restructure its debt, convincing them to take losses of up to 70%. But not all, and a US court last year ruled in favour of a couple of vulture funds which had bought up old Argentine bonds on the cheap and were now claiming repayment in full – at a 1600% return on its investment.
Not for the first time, the USA now finds itself on a collision course with the international community. Following an initiative by the negotiating bloc of the ‘developing countries’ at the UN, the Group of 77, the General Assembly last year adopted a resolution to draw up a proper multilateral legal framework on sovereign debt restructuring. For the time being, however, what happens when a sovereign debtor can’t pay remains very uncertain.
We shall tell the Argentina story with the aid of activist videos made in 2002 by the movement known as cine piquetero, and a number of key interviewees which are now being lined up by our collaborator in Buenos Aires, Guillermo De Carli.
* For example, Joseph Stiglitz and Martin Guzman, ‘Argentina Shows Greece There May Be Life After Default’