Daniel Ozarow told teleSUR that the 2001 Argentine debt default shows that a default could set Greece on the path to economic recovery.
Observers of the ongoing debt crisis in Greece have often tried to raise the ghost of Argentina's 2001 debt default as a warning of what could happen in Greece. However, Daniel Ozarow, a U.K.-based expert on the 2001 Argentine debt default, told teleSUR Thursday that the Greek people “do not necessarily need to fear default.”
In an exclusive interview, Ozarow said that based on his analysis of the Argentine economy in the 21st century that a debt default “in the long term ... can actually be a very good thing.”
After months of negotiations with creditors proved fruitless, the Syriza government in Greece opted Tuesday to default on a 1.6 billion euro (US$1.8 billion) payment to the International Monetary Fund.
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As was the case in Greece with Syriza's predecessors, conservative governments in Argentina followed the dictates of the IMF, which loaned money on the condition it implement neoliberal, pro-market reforms. This served only to worsen the crisis, created social unrest, and further pushed the Argentine economy into recession.
After months of protest and the resignation of the president, Argentina defaulted on its debt in December 2001.
“The most incredible thing about post-2001 situation in Argentina was just how resilient the people were, how creative they were, how much solidarity was expressed in society.”
Ozarow, who co-edited the 2014 book “Argentina Since the 2001 Crisis,” admitted that the period shortly after the 2001 default was “a very difficult year for Argentinians,” but that default ultimately set Argentina on the path of economic recovery.
According to Ozarow, after the initial shock, the Argentine economy made a dramatic recovery, due mostly to increased exports to world markets and increased internal demand.
The latter was a result of government-led “wealth redistribution” efforts through policies such as increased spending on social programs and increased wages.
Something Ozarow classified as being “the opposite of Greek austerity measures being imposed by the IMF now.”
One of the biggest disagreements between the left-wing Greek government and its creditors has been the IMF's insistence that the government slash pensions and wages and increase consumption taxes. These are measures steadfastly opposed by the Syriza government, which has argued that these steps would only worsen Greece's economic situation.
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Argentina's default allowed its government to pursue a path distinct from the mandates of the IMF, which Ozarow says were so effective that “Argentina became the fastest growing economy in the West.”
Aside from setting the country on the right track, and despite the initial difficulties, the default also led to some surprising results.
“The most incredible thing about post-2001 situation in Argentina was just how resilient the people were, how creative they were, how much solidarity was expressed in society,” Ozarow told teleSUR.
After the default, Argentines were forced to find creative ways to cope with the fallout of an economy left in ruins. Workers established new political organizations, created bartering systems, and even took bold steps such as occupying and restarting factories abandoned by their former owners. Something that has also happened in Greece, one of Prime Minster Alexis Tsipras' first acts was to visit a recovered factory.
One aspect that sets Greece apart from Argentina in 2001 is, according to Ozarow, “The Greeks have the benefit of a supportive government.”
Although Argentina would elect a progressive government in 2003, Greece already has a left-wing government in power, and for Ozarow that means that “things have the potential to be quite exciting in Greece.”