As the crisis continues in Greece and social unrest is growing, comparisons with the situation in Argentina in 2001 they begin to become more frequent. In Argentina, following the declaration of default, was the freezing of bank deposits the turning point for the generation of mass protests. People took to the streets in protest against an economic situation which plunged millions into poverty. The government declared a state of siege and President fled by helicopter from the Casa Rosado.

The turmoil thatArgentinaexperienced a decade ago now seems in full swing in the European periphery. Apart from the fact that the governments ofIreland,Portugal,Greece,ItalyandSpainwere made to the side and installed new faces, the economic volatility that erodes the stability ofEuropehas engaged in political activity quicksand and democracy itself depends by a thread. In this there is enough similarity toArgentina.

But in the Greek case there are also differences with the Latin American country. While one of the similarities between Greeceand Argentinagives it the character of its economic deregulation and financial and trade liberalization, the difference lies in the dependence on capital flows in each of these countries. As it is a monetary policy implementation, the processes of economic deregulation and financial liberalization promoted by central banks established as a central objective of inflation control. This objective does not measure the cost of the decline in local productive capacity, responsible for the decline in the employment of the least competitive.

Just asArgentinafixed its peso to the dollar,Greeceadopted the euro and established a regime of fixed exchange rate overvalued against the single currency, highly dependent on external capital flows to stimulate domestic demand. In both cases, monetary imbalances were (and fiscal deficits) the detonators of the crisis given the high volume of external funding. But while Argentina’s debt was 40% held by local banks, which facilitated the negotiations, more than 90% of Greek debt is concentrated in German and French banks, which have no intention of facilitating negotiation.

In Argentina, the crisis hit product of the Asian meltdown of 1998, which hit Latin American countries with a sharp contraction of financial flows. In the Greek case, after the crisis hit the sub-prime bubble burst in the U.S.and its tail in European banking. In both cases, countries followed the dictation of IMF for a financial crisis; reducing costs, and declining wages. Also in both cases were imposed draconian austerity measures to ensure the continuity of the money and protect the interests of the financial sector, the main ally of governments.

Governments depend on the financial sector and the financial sector depends on governments this symbiosis where it articulates all monetary stability. Part of the myth of liberal democracy is given by the supposed independence of the U.S. Federal Reserve, which is but a private institution belonging to the oligopoly of banks, like the ECB.

Why these banks will be the last to collapse after the collapse in full development of this system. After the outbreak of the economic and social crisis unprecedented lived inArgentinain 2001, the country devalued its currency by 40% (left in the dollar = peso) and declared the failure to pay almost 70% of public debt. The subsequent boom in natural resources allowedArgentinato enjoy a cycle of economic growth unparalleled. Argentinais recognized by some as “the breadbasket of the world” and the growing demand fromChinaandIndiahas encouraged the growth of food production. But that does not exist forGreece, and the restoration of a path of growth inGreeceis more complex since it requires a strong commitment from the countries of the region to reduce currency mismatches. So it’s Argentina Episode with a Caption of Greece going Bust.

Advertisements