beyondbrics

The EU and IMF’s massive €110bn EU bailout for Greece will fail. This is the stark view of Argentine President Cristina Fernández, whose country had the dubious distinction of crashing into the world’s biggest debt default in 2001, on nearly $100bn.

Speaking at an event on Monday night to refinance debt for Argentina’s provinces, which are mired debt, Fernández said the Greek rescue plan repeated “the same recipes that they applied to us and that provoked (what happened in) 2001″.

Argentina, as an IMF member, voted for the rescue package, but “critically”, Ms Fernández said, adding the enforced austerity will have “terrible consequences” on the real economy. “They are repeating prescriptions whereby what they are trying to do is rescue the financial system. We believe these policies are condemned to failure and that is why we don’t apply them in our country,” she said.

She defended the economic model championed by her husband, Néstor Kirchner, in his 2003-07 government, which she has continued in her administration from 2007 onwards. “Since 2003, we have been applying a totally different model that has permitted a very strong and very sustained reduction in the nation’s debt,” she said.

What she didn’t mention was how those same government policies have led to out-of-control public spending, unbridled inflation and widely mistrusted official statistics. Nor did she refer to her governmennt’s controversial grab of private pension funds, or her moves to use central bank funds to pay off debt, which triggered an unprecedented political crisis. The government has used some reserves to pay creditors, including the Andean Development Corporation in March, and many here see the use of reserves as opening the door to the central bank financing an increasing share of government spending in the run-up to presidential elections next year.

Nor did she refer to her government’s controversial grab of private pension funds, or her  to pay off debt which many here see as opening the door to the central bank financing an increasing share of spending in the run-up to presidential elections next year.

Ironically, Argentina is seeking to issue new debt now, as part of a debt swap designed to mop up nearly $20bn still unpaid since the 2001 default. The Greek rescue plan cheered markets, boosting Argentine bonds and giving a fillip to the swap prospects. But the uncertain outlook may well force Argentina to postpone the plans to raise $1bn in new money, which was to have to be launched in tandem to the swap.