ACT OF TREASON

The Argentine government’s determination to avoid a technical default on its foreign debt has become immoral, politically unsustainable and economically insane.
After four years of recession and rigid adherence to a fixed exchange rate, or currency board, it is clear that Argentina simply cannot export enough to pay its debt. The country’s total public debt, internal and external, is about Dollars155bn, more than five times its annual exports. This is far higher than the ratio that the International Monetary Fund normally regards as sustainable – especially at the current interest rates. The 30 per cent spread between Argentine debt and US Treasury bonds reflects the markets’ belief that some form of default is now virtually certain.
So far, default has been staved off by the transfer of wealth from taxpayers – Argentine and international – to bondholders. Last Friday, the government paid Dollars 900m in interest on its foreign debt, in part by using money confiscated from private pension funds and by pressuring domestic banks to roll over Treasury bills.
By the end of the year, the Institute of International Finance calculates, Argentina will have paid Dollars 12bn to foreign creditors, at the same time as domestic capital has been fleeing the country. The money to finance this has come from the IMF, the World Bank and the Group of 10 industrial countries – in other words, taxpayers around the world.
But avoiding a foreign debt default does not mean that Argentina has met its commitments. The price demanded by the IMF and the US Treasury for their support has been that the Argentine government, at the same time that it pays foreign creditors, should default on its domestic promises. Pensions have been cut by 13 per cent. Many state employees have not been paid for months. Bank depositors have had their accounts partially frozen. The most