Greece, Portugal and Spain: Lessons from Argentina

CHARLEMAGNE summarises the latest developments from Europe:After seven gruelling hours in Luxembourg, which included a video conference with colleagues from G7 countries, the finance ministers of the 17 countries of the euro zone decided to delay until July the disbursement of €12 billion ($17 billion) in loans from the European Union and the IMF.

MARKETS were jolted this morning as rumours spread that Greece had gone to the International Monetary Fund and the European Union to request a debt restructuring. The Greek government has denied that this is so, but restructuring increasingly seems to be a matter of when, not if. Yields on 2-year Greek debt are up 7% and 10-year yields are up over 5%. Both are at crisis highs. There is no question of the Greek government's ability to borrow in private markets any time soon.

The Free Exchange column in this week's print edition is a guest article by Mario Blejer and Guillermo Ortiz, former central-bank governors of Argentina and Mexico respectively. They note that some advocates of Greek exit from the euro cite Argentina's abandonment of its currency board in 2002. The peso devaluation that followed the collapse of the currency board led to a boom in Argentine exports and growth.

Several people have asked me about statements I have made that "Greece is in a hopeless situation until it exits the Eurozone." Actually Greece is in a horrific condition whether or not it exits the Eurozone as the Troika literally destroyed Greece (perhaps purposely to protect French and German banks), by dragging this mess out the way they have. A Primer on the Euro Break-Up To understand why Greece (then Spain and Portugal and perhaps even Italy) must exit the Eurozone, one must first understand the flaws of the European Monetary Union.

THE euro crisis began in Athens some two years ago as the full extent of its dire public finances first became apparent. Now it has turned full circle again. Along with the acute difficulties in constructing a much stronger firefighting fund to protect countries like Italy, especially while Silvio Berlusconi still remains in charge, the agony of Greece is the main reason why today’s summit in Brussels looks set to disappoint those expecting that it would deliver a fully worked-out solution.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.This post is a guest contribution by Asha Bangalore, vice president and economist at The Northern Trust  Company.

By Peter Boone and Simon Johnson The bailout of Greece, while still not fully consummated, has brought an eerie calm in European financial markets.  It is, for sure, a massive bailout by historical standards.  With the planned addition of IMF money, the Greeks will receive 18% of their GDP in one year at preferential interest rates.  This equals 4,000 euros per person, and will be spent in roughly 11 months.