1/6
Perhaps we shouldn't be surprised. I didn't look at the full details of the restructuring, but from what I saw it seemed to me that all it really did was to postpone principle repayments for a few years. If Argentina simply had a temporary problem...
ft.com/content/fd786d…
2/6
of matching up cashflows, this might make sense, but if Argentina's external debt was more than it's exports could support (and clearly it was, as @Brad_Setser has argued), it didn't help at all.
Anyone who studies the history of sovereign debt restructuring knows how...
3/6
this will probably turn out: For many years both sides will pretend that Argentina has a liquidity problem, not a solvency problem, during which time the economy will struggle as the debt gets regularly extended, until finally, once debt prices are low enough, Argentina...
4/6
and its creditors will recognize reality and negotiate a substantial debt forgiveness, only after which will the economy start to grow again.
The problem is that the debt isn't just incidental to the economy: it is one of the reasons why the economy will continue to...
5/6
struggle. The excessive debt burden encourages flight capital, discourages private sector investment, undermines social stability, makes workers and labor unions more militant, dramatically shortens the time horizons of policymakers, depresses export incentives, and so on.
6/6
This is why as long as the debt burden remains, Argentina will not be able grow out of the debt no matter how regularly it restructures principle payments.
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