Newspaper article The Christian Science Monitor

A Morality Tale in Argentina's Debt Epiphany

Newspaper article The Christian Science Monitor

A Morality Tale in Argentina's Debt Epiphany

Article excerpt

One of the world's longest sagas over a debt default may soon be coming to end. Argentina is nearing a final deal with foreign creditors - almost 15 years after it first defaulted on nearly $100 billion that it owed. A successful conclusion to the extended legal battle could offer a morality tale for a world awash in red ink.

What is the tale? It is that Argentines decided last year to elect a new president, Mauricio Macri, who, like a returned prodigal son, has quickly begun to shed many of the country's profligate habits and plans to abide by the obligations of global financial rules.

"We have to be a predictable and trustworthy country," he said. "Argentina wants to have a good relationship with the whole world."

Largely cut off from world capital markets and foreign investments, Argentina's economy has stagnated. Mr. Macri's election was a turning point for the resource-rich South American nation, whose wealth per capita was once on par with Canada's. While Argentina's 43 million people have practical economic reasons to make good on the nation's sovereign debts, the legal drama has also helped. Many of the creditors were able to convince a United States federal judge, Thomas Griesa, to impose tough restrictions on Argentina's assets around the world.

It also helped that Judge Griesa labeled Argentina's actions as "immoral." In fact, Argentina's snub of its creditors pushed the International Monetary Fund, which helps rescue countries in financial trouble, to stiffen its rules. "No More Argentinas" become a mantra at the IMF.

The issue of morality is often woven into today's international struggles over debt collection or debt leniency. Since the 2008 financial crisis, the European Union has pushed Greece to curb its overspending and its lapsed tax collection before receiving loan bailouts. Greece is not alone in the EU. Many European banks remain saddled with nonperforming loans, which may total more than $1 trillion. And the official debts of Italy and Portugal are still at dangerous levels. …

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