Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
FOR THE SECOND time in 13 years, Argentina defaulted on its debts this week, after the collapse of 11th hour talks with so-called holdout bondholders in New York.
“We’re not going to sign an agreement that jeopardizes the future of all Argentines,” said Finance Minister Axel Kicillof, after meeting on Wednesday with US hedge fund creditors he had dubbed “vultures.”
The holdouts, who were led by US billionaire Paul Singer’s NML Capital, had spent the years since Argentina’s 2002 debt crisis pushing for full repayment of their bonds, with interest – amounting to roughly $1.5 billion.
The aggressive posture taken by Kicillof, and the spectre of “reputational damage” have conjured memories of our own crisis, and the decisions facing Irish politicians in that period.
So TheJournal.ie has enlisted the help of two experts to answer these questions:
Could we have burned the bondholders too? And what makes Argentina now different from Ireland then?
Default in Our Stars
“The first point to make is that this Argentinian case has to do with sovereign debt,” says Philip Lane, Professor of International Macroeconomics at Trinity College Dublin.
Whereas the debate in Ireland was largely over the debts of Anglo-Irish Bank.
And if the Irish banks had defaulted on their debts, that would have been one thing. The markets could have viewed this as just one or two institutions acting alone.
But once the government guaranteed the banks, it ensured the Irish government itself would be liable for any defaulted debt.
Argentina, by contrast, most definitely owned the debt they defaulted on this week, says Brian Lucey, Professor of Finance in the School of Business at TCD and editor of the book What if Ireland Defaults?
They were forced into defaulting. They wanted to reach a settlement, but they faced a negotiating brick wall, and were pushed towards repaying everything.
A debt-defying leap?
Philip Lane, for one, is doubtful that Argentina’s decision this week should serve as an example for Ireland.
The message from this week is that a default is not a clean break. Argentina defaulted 13 years ago, and they’re still dealing with the consequences now.
What this case reflects is the ability of investors to keep pursuing a defaulting country. Defaulting isn’t as easy as you might think.
“When Argentina defaulted on its debts in 2002, they did it chaotically,” says Brian Lucey. “And there have been long-lasting, ongoing effects from that.”
But we have to be careful not to conflate the two cases. Nobody was ever talking about Ireland defaulting on our national debt.
What was suggested was that we revisit a bank debt that had been covered by the government.
…I’m part of the union
Another major distinction between the Argentinian and Irish cases is that, as Lucey points out, the South Americans are not part of any monetary union.
Not that being a member of the Eurozone should have automatically ruled out some sort of renegotiation of our debt.
The Eurozone is not a suicide pact. If we had, for example, decided we wanted to repay the Anglo debt over the course of 1,000 years, as opposed to 30, it wouldn’t have brought down the Euro.
The ECB [European Central Bank] wouldn’t have kicked us out of the Eurozone for it.
To embed this post, copy the code below on your site
If I were the iranian delegation I wouldn’t give an inch until the talks become all inclusive. How is it that Israel, the greatest threat to regional and world peace, has a carte blanche to develop and maintain a nuclear arsenal and Iran can’t even develop a civilian nuclear programme.
because Israel are big allies with the US
i think he knows that aaron,it was more rhetorical !!
Nothing Controversial about their ‘Nuclear’ ambitions, Pakistan have nukes (I’d be far more concerned here but they are (were) a former ally of Uncle Sam and no threat to Israel) India have Nuclear arms, Israel have nuclear arms so why not Iran?
I don’t see how increasing the amount of countries with nuclear arms can be a good thing whatever their motive.
If they want nuclear power all well and good but do we really want a world where this kind of thing is not carefully controlled and policed?
Over 2,000 nuclear bombs have been detonated to date by countries such such as the US, France, UK etc. Why is it that they are allowed to keep their nuclear weapons?They have shown themselves to be irresponsible. Iran has repeatedly said it will not go after nuclear weapons and it has not detonated a single one.
There are persistent reports of late of Pakistan helping Saudi Arabia to acquire nuclear weapons. There is no mention of this in the corporate media. Let’s also bear in mind that the US actively helped Pakistan acquire nuclear weapons and turned a blind eye to Pakistan to helping North Korea with its nuclear weapons programme. So there are precedents.
There have been many proposals to date which the US gave repeatedly rejected to have all of the Middle East free of weapons of mass destruction but the US has repeatedly stood by Israel.
Let’s have a little objectivity in the reporting.
Well said Horgay. As for increasing the number of nuclear weapons, no one even suggested that. Iran is playing brinkmanship, hoping to get a level playing field, one based on a nuclear free middle esst. Good for them, at least someone in the region is being pragmatic.
As long as the AIPAC is still a strong voice in congress agreement will be very hard to reach.
They know no nuclear nation has ever been invaded by another. Yet the don’t speak about Israeli bombs and the disregard to international treaties and law it consistently shows
It means nothing to me!
Obviously not fans of vltravox.
have your say