For those who think Ireland should follow Argentina’s default example…

I’ve heard more than one politician suggest that Argentina’s default is the way to go to get Ireland out of its crisis. Well, maybe. And maybe not. I’ve a English friend whose missionary parents were out there when it all cowped, and I recall that they had problems getting enough food to eat, never mind coping with the energy shortages.

Tough medicine, but if it works and helps the country straighten things out maybe it would be worth it?

Well maybe. But then again, maybe that’s not what’s happened. The Economist has recently taken Argentina’s economic figures out of their tables, and they admit, not before time:

Since 2007 Argentina’s government has published inflation figures that almost nobody believes. These show prices as having risen by between 5% and 11% a year. Independent economists, provincial statistical offices and surveys of inflation expectations have all put the rate at more than double the official number (see article). The government has often granted unions pay rises of that order.

What seems to have started as a desire to avoid bad headlines in a country with a history of hyperinflation has led to the debasement of INDEC, once one of Latin America’s best statistical offices. Its premises are now plastered with posters supporting the president, Cristina Fernández de Kirchner.

Independent-minded staff were replaced by self-described “Cristinistas”. In an extraordinary abuse of power by a democratic government, independent economists have been forced to stop publishing their own estimates of inflation by fines and threats of prosecution. Misreported prices have cheated holders of inflation-linked bonds out of billions of dollars.

Hmmm…. Argentina, like Greece, has had relative recent history of military dictatorship. Ireland hasn’t. And Ireland has never quite displayed quite the same tractable attitude towards normal fiscal controls. In any case, massaging the hard economic figures to suit political establishment is hardly evidence of economic ‘bounce-back-ability’.

  • Alanbrooke

    Are you using the right comaprison there Mick ? Ireland’s problem stems from an ill-thought out guarantee for its banks not a systemic fiddling of the national debt. The better example, as has been posted here before, is Iceland, which has put its problems behind it and can return to the bond markets and the path of growth.

  • Mick Fealty

    It is a better comparison without a doubt.

    But the piece was aimed at those who have suggested that the Argentinian case proves you can go bust and bounce back better than ever.

    It seems the figures have been cooked since 2007. In other words, they’ve been had.

  • eamonnmcdonagh

    On a slight tangent; the quality of governance here leaves something to be desired in general. They found a body in the train wreck last night nearly two days after the smash itself and after the mother of the poor sod in question had spent two days looking for him. The cops had only bothered to search the first two wagons.

    Oh and since the disaster CFK, who obliges the terrestrial TV to cover her most tedious pronouncements live, hasn’t appeared in public , hasn’t said a word about it fact. The transport minister – Schiavi – held a press conference where he basically said “Shit happens” and read out a list of rail accidents that occurred in other countries, He also blamed the high number of casualities on people crowding into the front of the train. He didn’t say that the dead had killed themselves on purpose to embarrass the govt. but he stopped short not from it.

    Not a dicky bird out of the other ministers, too scared to say anything given CFK’s silence.

    There have been no resignations and there’s no talk of firing anyone though – naturally – the driver of the train is going to face charges.

    And of course the government controlled media have spent the last two days attacking the coverage of the disaster by the non government controlled media. As ever, CFK’s government is more interested in controlling how events are reported than the stuff that actually happens.

    Which I guess brings this comment back around to the inflation figures being fiddled.

  • lover not a fighter

    This should be a law of Economics.

    If you are daft enough to loan loads-a-money to people/enterprises that will not be able to pay it back

    then

    Don’t be surprised if they don’t pay you back

    or

    Bollocks to the bankers if you prefer.

  • Alanbrooke

    I have no doubt Argentina is in an economic mess the current shenanigans on the Falklands has all the desperation of a failing government which needs a foreign distraction to divert voters away from its domestic shortcomings. The question should be asked is why do argentinians never learn ? They have gone from being one of the world’s richest nations to a failed state but don’t really change their policies.

    It’s not as if default per se is a recipe for poverty. We forget that both Germany and France have defaulted, the idea of either being a sure bet would have been laughed at 100 years ago. It seems to me that the act of default while traumatic isn’t the real benchmark, it’s what you do afterwards that counts. Some countries take the knock and work their way back up vowing never to repeat the mistakes, others just go straight ahead and take up from where they left off pre-default. I would like to think Ireland’s approach would be the former rather than the latter.

  • Drumlins Rock

    I thought Ireland was well on the road to recovery without defaulting? well thats the story we are being told, I’m guessing if the Greek situation is sorted then some type of debt “restructuring” will come Irelands way to free it up a bit more.

    Argentina cannont be compared for many many reason, it is a vast country with amazing as yet untapped potential, it could be at the top table if managed right. On the other hand Iceland is also a bad comparison, its a tiny country with limited resources but lots of flexiability. Ireland is its own case, the FG gov seem to be playing it pretty well so far.

  • Mick Fealty

    Only if you read the wrong press. If you’d been reading Pete’s excellent updates, you would not be labouring under any such delusions.

  • Alias

    There are hundreds of sovereign defaults on record. In Europe alone, Ireland is one of the few countries that hasn’t defaulted. The UK, for example, has defulated 5 times, Spain 13 times, Greece 5 times, Germany 3 times, France 8 timees, and Portugal 7, etc.

  • Harry Flashman

    Jeez, a leftie government screwing up the economy and then lying about it, whodathunkit eh?

  • Lefties? Well hey the Bush Republicans and Wall Street cowboys really worked magic for the US economy – right?

  • terryhewett

    Is Ireland going to jump ship? see President Michael D Higgins’s remarks on treaty:

    http://www.irishtimes.com/newspaper/frontpage/2012/0225/1224312378180.html

    and “Time for Greece to leave not just euro but EU itself”

    http://www.irishtimes.com/newspaper/opinion/2012/0225/1224312371795.html

    All that to-ing and fro-ing with America, UK and China says they are giving it some thought.

  • Greenflag

    Forget the Argentinians and/or the Greeks the people to listen to are the Icelanders .

    Throwing stones at your politicians and telling the world’s international banksters that their gambling debts will not be paid back and they have lost their money and reducing the principal to those thousands of Icelanders who were worse affected by the crisis has proved for the Icelanders to be successful.

    http://rt.com/programs/keiser-report/episode-253-keiser-report/

    How fares Ireland compared to Iceland in this crisis ? Icelandic ‘anger’ reaps the benefits . Greek ‘anger’ gets a 70% write off of their debt for which they remain ‘ungreekful’ .
    And what does Ireland get for paying ‘death ‘ money to the to the international financial terrorists and banksters ? The same as the USA and UK -nothing .

    And now Libor is seen as being manipulated by the banksters and inside traders who have forgotten nothing . How they do it is at 9 minutes in.

  • Greenflag

    Spare a thought though for the poor old UK in these fraught times.

    http://www.telegraph.co.uk/news/politics/9107485/George-Osborne-UK-has-run-out-of-money.html

  • Comrade Stalin

    The better example, as has been posted here before, is Iceland, which has put its problems behind it and can return to the bond markets and the path of growth.

    That’s a funny way to talk about a country which has import bans in place, record unemployment, high interest rates (and inflation), large loans from the IMF (which have to be repaid) and which is currently suing for membership of the EU.

    I’m wondering exactly what way they’re better off than Ireland.

  • Greenflag

    @lover not a fighter

    This should be a law of Economics.

    If you are daft enough to loan loads-a-money to people/enterprises that will not be able to pay it back

    then

    Don’t be surprised if they don’t pay you back.

    Should be ? Already is or was before comatose deregulation opened the floodgates to chaos .

    Twas Ogden Nash who penned the law iirc

    “One rule which woe betides the banker who fails to heed it, never lend any money to anybody unless they really don’t need it” – Ogden Nash

  • Greenflag

    @Comrade Stalin

    Here’s Joe Stiglitz’s comment

    “Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”
    Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital — 46 billion euros ($64 billion) so far — to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December.
    Ireland’s banks had more than 10 times the assets of Iceland’s lenders, making their collapse more dangerous for the European financial system. Ireland also couldn’t devalue its currency because it is part of the euro zone. Still, countries with larger banking systems can follow Iceland’s example, says Adriaan van der Knaap, a managing director at UBS AG.
    “It wouldn’t upset the financial system,” says Van der Knaap, who has advised Iceland’s bank resolution committees. “Even Irish banks aren’t too big to fail.”

    AND

    By guaranteeing bank liabilities, Ireland faces a potential public debt burden that could swell to twice its GDP, up from 94 percent now. Iceland’s debt ratio is about 85 percent.
    “Our future isn’t as bleak because our public debt isn’t as high,” says Hoskuldur Olafsson, chief executive officer of Arion Banki hf, the new bank formed to take over Kaupthing’s domestic assets.
    Today, Iceland is recovering. The three new banks had combined profit of $309 million in the first nine months of 2010. GDP grew for the first time in two years in the third quarter, by 1.2 percent, inflation is down to 1.8 percent and the cost of insuring government debt has tumbled 80 percent. Stores in Reykjavik were filled with Christmas shoppers in early December, and bank branches were crowded with customers.

    The full article

    http://www.bloomberg.com/news/2011-02-01/iceland-proves-ireland-did-wrong-things-saving-banks-instead-of-taxpayer.html

    ‘I’m wondering exactly what way they’re better off than Ireland.’

    I hope the above link and info has helped to inform.

    Of course this crisis is not over yet not by a long shot . Ireland may get ‘more relief ‘ down the road given the ‘write down ‘ of Greek debt .

    Lets hope ‘lessons ‘ are learned from the debacle .

  • Mack

    Peter Matthews outlined how the central bank could just write off up to €75bn in debt created to bail out the Irish banks (in line with ECB policy for protecting the broader European banking system). This would not even constitute a default.

    Here ->

    http://www.independent.ie/national-news/that-promissory-note-could-literally-be-torn-up-3031903.html

  • wee buns

    As David Mc Williams says in the below video – ‘as the great ecconomist Herbert Stein once observed ‘When something can’t go on, it has to stop.’ ‘

    http://youtu.be/V5z0rQRdsiE