Why Did Argentina's Default Work?

[fluffybiscuits]

Why is it so difficult for White Power enthusiasts to read? There is much more to a default succeeding than simply devaluing. You have to look at your primary deficit, your foreign reserves, your bank liquidity, trade/payments surplus/deficit, your PMI, household debt, who holds what debt, confidence that you can run a balanced budget for 10+ years/no market access.

This thread is to see how close peripheral nations are to a viable default by learning from the Argentinian situation. For instance, I'm reading that the good/bad bank resolution scheme was used to great success in Argentina, recovering 97 percent of deposits. An Irish default would probably require a new good bank. I don't think Greece meets a sufficient level of the criterion for a default to be as successful as Argentina. Ireland, however is not far off.

Ah damn you beat me to it!

My guess its a DRM member !

[IrishPride]

And meanwhile with the services for homeless over stretched you support people being chucked on to the streets?

Theres nothing stopping you from helping the homeless. Why dont you help them out?

[fluffybiscuits]

Theres nothing stopping you from helping the homeless. Why dont you help them out?

How do you know I havent ?

[IrishPride]

This thread is to see how close peripheral nations are to a viable default by learning from the Argentinian situation. For instance, I'm reading that the good/bad bank resolution scheme was used to great success in Argentina, recovering 97 percent of deposits. An Irish default would probably require a new good bank. I don't think Greece meets a sufficient level of the criterion for a default to be as successful as Argentina. Ireland, however is not far off.

So you think Irelands economy could "rebound strongly" after a default. Tell me this, which areas of the economy will "rebound strongly"? Construction, retail, hotels & restaurants?

Im pretty sure, the economy would contract by about 30billion or 40% overnight if we were to default, because thats how much money our creditors are giving us right now. That would shut off instantly.

Could the welfare class and public sector handle that? Hahahaha Id love to see the public sector paid with bits of paper instead of euros! They would take the whinging to new and unprecedented levels.

[C. Flower]

All paid up.

http://www.breakingnews.ie/world/arg...pe-561684.html

But much of their recovery was before the current slump.

[Klaus Kastner]

Please, don't take Argentina as an example for anyone! First, few countries are as rich in natural resources as Argentina is so they will always deal from a better position. Secondly, Argentina's foreign debt was about 50% of GDP and the IMF considered this as "excessive" (Greece's foreign debt is heading towards 300% of GDP!). And to suggest that Argentina paid "all its debts in full" is a slap in the face of those where were not paid many billions USD in full.

One thing a country like Greece could learn from Argentina. They had all the problems one can think of: deposit freeze; USD expropriation; stealing from pensions funds when short of cash; people on the streets banging pots because of hunger; etc. etc.

Greece would have had the same in the last 2 years if it hadn't been so lucky as to belong to a currency union which assured that external financing would not stop. Not only for essential imports but, actually, for all imports Greeks felt like buying. And certainly deposit freezes and the likes of it would also have been necessary.

So, on behalf of all Greeks: thank you, Eurozone, that we could be a member during these times!

[Ephilant]

Please, don't take Argentina as an example for anyone! First, few countries are as rich in natural resources as Argentina is so they will always deal from a better position. Secondly, Argentina's foreign debt was about 50% of GDP and the IMF considered this as "excessive" (Greece's foreign debt is heading towards 300% of GDP!). And to suggest that Argentina paid "all its debts in full" is a slap in the face of those where were not paid many billions USD in full.

One thing a country like Greece could learn from Argentina. They had all the problems one can think of: deposit freeze; USD expropriation; stealing from pensions funds when short of cash; people on the streets banging pots because of hunger; etc. etc.

Greece would have had the same in the last 2 years if it hadn't been so lucky as to belong to a currency union which assured that external financing would not stop. Not only for essential imports but, actually, for all imports Greeks felt like buying. And certainly deposit freezes and the likes of it would also have been necessary.

So, on behalf of all Greeks: thank you, Eurozone, that we could be a member during these times!

Greece wouldn't be in half the problems it's in if it had stayed out of the Eurozone in the first place.
As a banker, surely you are aware of the current ATE situation? One of the stats released the other day: 80% of lease agreements done through ATE are in arrears or have simply not been paid, once. I wonder how many of these agreements are for expensive cars bought as a status symbol instead of out of need. Without the Eurozone "benefit" of cheap money the state could never afford in the first place, a lot of these nouveaux riche debts simply wouldn't exist.
We would still have all the problems with corruption etc, no doubt. But we would not be cutting peoples livelyhood to shreds to pay for debt that should never have been..

[Klaus Kastner]

I do not disagree with your perspective but I believe you are overstating the importance of the Euro as a cause for the debt explosion. I would argue that much of that would still have taken place because all banks were throwing money at borrowers like there was no tomorrow. Hungary with its own currency received CHF-financing so that CHF-loans could be made to Hungarian homebuilders/-owners!

Yes, if you are not given cheap money, you can't waste it. Yes, Greece wasted a lot of that money on consumption, etc. while the debt remained in place. But don't forget that the gigantic influx of money, recycled by an overly generous state, did have a trickle-down effect the results of which can be seen today.

My first visit to Greece was in 1977. I was simply baffled that there could be such a poor country in Europe (once you got a bit off the beaten path) as Greece was then. If I only compare how my wife's village looks today with how it looked then!

Until the crisis erupted, I would return from my visits to Greece and tell the people at home that we were doing something wrong. The Greeks seemed to do so much better.

Bottom line: not all of the cheap loans were wasted and that part which was not wasted can be seen all over over the country in terms of real assets which won't go away regardless how bad it gets. And, I should add, real assets which would not exist today if there hadn't been the Euro (and the plentiful Euro-loans).

[Sam Lord]

All the periphery is in trouble ... not just Greece. There is one common denominator.

The Euro is overpriced for the periphery and underpriced for the core. The periphery will never trade it's way out of it's problems.

Interest rates are set to suit the core irrespective of how unsuited they may be to the periphery. Etc.

Eurozone financing for countries in trouble does not solve any problem. These are loans that have to be repaid with interest.

[Ephilant]

Bottom line: not all of the cheap loans were wasted and that part which was not wasted can be seen all over over the country in terms of real assets which won't go away regardless how bad it gets. And, I should add, real assets which would not exist today if there hadn't been the Euro (and the plentiful Euro-loans).

These assets are totally useless to Greece because they are being sold off as we speak. And the buyers are in many cases the same people who threw the "cheap" money at the Greek government in the first place. It was "cheap" for them, we are finding out the hard way there is nothing cheap about it.
And yes, reckless borrowing is being mentioned time and time again as the reason for all of this, and we should shut up and carry the consequenses of our actions. But of course, what nobody mentions is that there cannot be reckless borrowing without reckless lending. And we are paying for the consequences of that to, while those who committed that crime pay absolutely zilch for the consequences of their actions. And not only that, they vehemently deny any wrong doing in the first place???

[C. Flower]

All the periphery is in trouble ... not just Greece. There is one common denominator.

The Euro is overpriced for the periphery and underpriced for the core. The periphery will never trade it's way out of it's problems.

Interest rates are set to suit the core irrespective of how unsuited they may be to the periphery. Etc.

Eurozone financing for countries in trouble does not solve any problem. These are loans that have to be repaid with interest.

None of this is a problem for the wealthy, unless there is default, as they can move their spare money around. Rich Greeks have their money at the core, as much as rich Germans.

Privatisations and asset sales are of course nothing to do with solving problems for peripheral countries.

Reliance on the private sector for broadband was a disaster for Ireland.
It could have been done faster, better and cheaper as a state enterprise.

[Klaus Kastner]

You seem to have misunderstood what I meant by real assets. I did not mean state-owned companies. I meant everything you see in the landscape by way of infrastructure; everything you see in the villages/cities by way of residential real estate; everything you see in beach areas and mountain spots by way of second homes for summer and winter; etc. etc. In short, private wealth increased phenomenally overall, albeit not evenly and certainly not all in Greece.

We spent last spring in Greece and would get calls from Austria inquiring how bad the situation really was and whether we were affected by it.

Well, I don't mean to offend anyone who is suffering but the image which has been broadcast to the world that all of Greece would be in a situation similar to that of Argentina's around 2000, well, that's an image. Admittedly, our apartment is in one of the nicer suburbs of Thessaloniki (Kalamaria) but, nevertheless, if I didn't know there was a crisis, I would never see it there. Streets of down-town Thessaloniki are still clogged with gas-guzzling SUVs at record gas prices; the cafés are full; the shops are not but there are still shops with incredibly high-priced products (a pair of women's sandals for 514 Euro!) and people are buying that stuff; the clubs along the seaside are packed and the parking places remind one of Monte Carlo vehicles; Gran Masoutis, a very expensive supermarket, is full of shoppers; so is IKEA, not to mention the Cosmos Mediterrenean; on weekends, the highway to Chalkidiki is bumper-to-bumper; it seems like everyone we know (and we don't know the very rich) is spending the summer in the second home in Chalkidiki; and so forth.

I can't put a figure on it, of course, but I would imagine that at least the upper quartile of society is still leading an incredibly good life! A life which many people in the socalled Core would also love to enjoy but can't.

My point is that it was not so much foreigners who took advantage of Greeks but, instead, it was (and still is) one segment of Greek society which has taken the rest of society for a brutal ride. A true rip-off! And to correct that, by the way, is not something anyone else can do for Greeks. Only Greeks themselves can correct that.

http://klauskastner.blogspot.co.at/2...ing-class.html

[C. Flower]

You seem to have misunderstood what I meant by real assets. I did not mean state-owned companies. I meant everything you see in the landscape by way of infrastructure; everything you see in the villages/cities by way of residential real estate; everything you see in beach areas and mountain spots by way of second homes for summer and winter; etc. etc. In short, private wealth increased phenomenally overall, albeit not evenly and certainly not all in Greece.

We spent last spring in Greece and would get calls from Austria inquiring how bad the situation really was and whether we were affected by it.

Well, I don't mean to offend anyone who is suffering but the image which has been broadcast to the world that all of Greece would be in a situation similar to that of Argentina's around 2000, well, that's an image. Admittedly, our apartment is in one of the nicer suburbs of Thessaloniki (Kalamaria) but, nevertheless, if I didn't know there was a crisis, I would never see it there. Streets of down-town Thessaloniki are still clogged with gas-guzzling SUVs at record gas prices; the cafés are full; the shops are not but there are still shops with incredibly high-priced products (a pair of women's sandals for 514 Euro!) and people are buying that stuff; the clubs along the seaside are packed and the parking places remind one of Monte Carlo vehicles; Gran Masoutis, a very expensive supermarket, is full of shoppers; so is IKEA, not to mention the Cosmos Mediterrenean; on weekends, the highway to Chalkidiki is bumper-to-bumper; it seems like everyone we know (and we don't know the very rich) is spending the summer in the second home in Chalkidiki; and so forth.

I can't put a figure on it, of course, but I would imagine that at least the upper quartile of society is still leading an incredibly good life! A life which many people in the socalled Core would also love to enjoy but can't.

My point is that it was not so much foreigners who took advantage of Greeks but, instead, it was (and still is) one segment of Greek society which has taken the rest of society for a brutal ride. A true rip-off! And to correct that, by the way, is not something anyone else can do for Greeks. Only Greeks themselves can correct that.

http://klauskastner.blogspot.co.at/2...ing-class.html

It is the same in Ireland. A sizeable portion of the population is better off than ever.

The divide is horizontal, not vertical, across European society.

[Sam Lord]

None of this is a problem for the wealthy, unless there is default, as they can move their spare money around.

I wasn't suggesting that it was a problem for the wealthy. I was responding to a view being articulated that Greece should be thankful it is part of the Eurozone.

[Ephilant]

You seem to have misunderstood what I meant by real assets. I did not mean state-owned companies. I meant everything you see in the landscape by way of infrastructure; everything you see in the villages/cities by way of residential real estate; everything you see in beach areas and mountain spots by way of second homes for summer and winter; etc. etc. In short, private wealth increased phenomenally overall, albeit not evenly and certainly not all in Greece.

We spent last spring in Greece and would get calls from Austria inquiring how bad the situation really was and whether we were affected by it.

Well, I don't mean to offend anyone who is suffering but the image which has been broadcast to the world that all of Greece would be in a situation similar to that of Argentina's around 2000, well, that's an image. Admittedly, our apartment is in one of the nicer suburbs of Thessaloniki (Kalamaria) but, nevertheless, if I didn't know there was a crisis, I would never see it there. Streets of down-town Thessaloniki are still clogged with gas-guzzling SUVs at record gas prices; the cafés are full; the shops are not but there are still shops with incredibly high-priced products (a pair of women's sandals for 514 Euro!) and people are buying that stuff; the clubs along the seaside are packed and the parking places remind one of Monte Carlo vehicles; Gran Masoutis, a very expensive supermarket, is full of shoppers; so is IKEA, not to mention the Cosmos Mediterrenean; on weekends, the highway to Chalkidiki is bumper-to-bumper; it seems like everyone we know (and we don't know the very rich) is spending the summer in the second home in Chalkidiki; and so forth.

I can't put a figure on it, of course, but I would imagine that at least the upper quartile of society is still leading an incredibly good life! A life which many people in the socalled Core would also love to enjoy but can't.

My point is that it was not so much foreigners who took advantage of Greeks but, instead, it was (and still is) one segment of Greek society which has taken the rest of society for a brutal ride. A true rip-off! And to correct that, by the way, is not something anyone else can do for Greeks. Only Greeks themselves can correct that.

http://klauskastner.blogspot.co.at/2...ing-class.html

Indeed, and to repeat, the governor of the Bank of Greece quoted, amongst other niceties, that 80% of lease agreements with ATE bank are not being paid, some of them never got 1 payment. Everybody and their dog in Greece knows that ATE bank was nothing but the slushfund for ND/PASOK and their croneys. The majority of those fuel guzzling SUV's etc would be part of that 80%, no doubt. People in Greece are no different form those in Ireland, Spain etc. Ostrich policy comes in handy when confronted with personal debt etc, but only for a while.

If anybody thinks that Greece is in a bad way, think again. Just like in Ireland, the personal debt bubble has not burst yet, but it's very close to it. And that is a problem that will cause a lot of suffering in the layers of society who now blissfully ignore what is happening to the victims of the first wave.
Amongst those running the food kitchens etc there is a very strong feeling that within the year we will be trying to look after at least twice the amount of people we care for now. And we are brasing ourselves for this, because we know the next influx will come from the people you describe. Those who do not know what it's like to live on and with nothing. Those who have lived their lives in the make belief world of free money, credit cards and flashy SUVs.
And they will once again demand priority, because they cannot image being put on par with the illegal immigrant or unemployed steelworker. There will be trouble.

I have a very good friend estate agent on Crete, one of the most affluent areas in Greece, and she operates in one of the most affluent areas on Crete. She told me last night that she cannot give the houses away. People are trying to sell, and some take whatever price they can get. Some demand cash, anything over 25,000 will do. It is total mayhem. 2 years ago she sold 4 houses to a German investor. Yesterday, the man put the same 4 houses back up for sale, at less than half of what he paid for them. They have never been lived in, never rented out, nothing. That is the reality of the real estate you are talking about. For anybody who is interested, on Crete, at this moment in time you can rent a 5 bedroom, fully furnished house with private swimming pool, long term, for the princely sum of €375 a month. Last year, the same house cost €1450 a month and €600 a week during August (when all the "Athenians" come over for holidays). And there are no takers... Affluence, like beauty, is only skin deep. What lies underneath is frightening, very frightening.