ACT OF TREASON
The Argentine government’s determination to avoid a technical default on its foreign debt has become immoral, politically unsustainable and economically insane.
After four years of recession and rigid adherence to a fixed exchange rate, or currency board, it is clear that Argentina simply cannot export enough to pay its debt. The country’s total public debt, internal and external, is about Dollars155bn, more than five times its annual exports. This is far higher than the ratio that the International Monetary Fund normally regards as sustainable – especially at the current interest rates. The 30 per cent spread between Argentine debt and US Treasury bonds reflects the ...view middle of the document...
Every day, many more people join the 14m already living in poverty on less than Dollars 4 a day.
Now the IMF and the Argentine government are seeking to inflict further pain on ordinary Argentines. The Fund is seeking a balanced budget for 2002. That may mean spending cuts of Dollars 7bn, combined with tax increases of Dollars 4bn. In US terms, such measures would be the equivalent of a Dollars 400bn-a-year tax increase/spending cuts package: perhaps Dollars 2,500 a year for every family. The result will be many more lost jobs, unpaid pensions, cuts in social services and in education – all so that the government can postpone the inevitable a little longer and service its foreign debts for a few more months.
This is economic and political lunacy. Certainly, Argentina has some structural fiscal weaknesses. Yet the problem is not the budget deficit but the recession, which is causing that deficit.
By the end of next year, the economy is forecast to have contracted by 10 per cent since 1988. Unemployment is nearing 20 per cent. In the past week, tax revenues were down more than 25 per cent, year on year. Each further round of budget cuts has worsened the recession, increased social tension and further reduced confidence. This one will be no different.
Neither the IMF nor anybody else would advise any developed country to adopt such masochistic and self-destructive policies. No one is suggesting that because recession has...