Argentine president warns Greece against austerity measures

Argentine President Cristina Fernandez de Kirchner (foto) warned Greece Thursday against austerity measures that might trigger social problems like those that Argentina faced early in the last decade.
“The recipes that are being imposed on Greece are identical to those that were applied here in 2001,” Fernandez de Kirchner stressed.
Greece’s parliament on Thursday passed an austerity bill that will allow the country to receive a joint European Union-Intenational Monetary Fund emergency loan. As the country was swamped in often violent demonstrations, the government said the measures are the only chance to avoid bankruptcy.
But Fernandez de Kirchner was not convinced, as she underlined the similarities between Greece’s complex situation and the severe social, political and economic crisis that shook Argentina before the country actually defaulted on its foreign debt.
“Savage austerity measures are going to be resisted,” she warned. “They are going to end badly.”
Argentina suffered from a severe recession beginning in 1998, and it needed to keep borrowing. It had both trade and budget deficits at the time, and it needed to honour interest on its outstanding debt. Global lending institutions like the IMF and the World Bank imposed conditions on Buenos Aires, basically in the form of a demand for cuts in government spending.
These conditions soon proved to be too much. Government spending was by then the pillar of a crumbling economy, and, with a fixed exchange rate in place at the time, Buenos Aires – like Greece with the euro in place – could not print more money.
The Argentine government at the time implemented unpopular austerity measures, including cuts in the salaries of pensioners and public servants. Eventually, it even froze deposits held in private bank accounts. There were riots on the streets, and for weeks there was a series of revolving-door presidencies.
“In a very troubled world in which paradigms have collapsed, where we see a world that is very well-developed but which thinks up the same solutions that delivered the same results, I think it takes a los of intelligence,” Fernandez de Kirchner said Thursday.