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November 21, 2014
Sunday, June 29, 2014

The law is a hard taskmaster

The only thing that is certain about Argentina’s holdout case is that a lot of people will get badly bruised

Cristina may have much of the planet on her side as, like a brave Hitchcock heroine, she does battle with those voracious vultures that are fluttering around her head.

But Judge Thomas Griesa has remained unimpressed by the chorus of high-ranking men and women demanding he go easy on her and her compatriots. Even Axel Kicillof, tieless as always to remind the world he is not just a typically bourgeois economy minister but something of a rebel, seems unable to move him. It would appear that Griesa takes a Roman view of the law: every judge worth his salt can quote plenty of terse Latin aphorisms telling us that the law is tough and should be obeyed even though the world comes crashing down as a result. Warnings from the US government, France, a bevy of British dignitaries, the IMF, the Financial Times and other stalwart defenders of the established order about the terrible things that could happen should Argentina fail yet again to satisfy its creditors have so far been dismissed with contempt, as have the more strident appeals coming from less respectable members of the so-called international community.

Perhaps Griesa thinks that, if all those governments and multilateral institutions really did fear that another Argentine default could have catastrophic consequences, they would get together and hand Cristina whatever cash she needs to tide things over until she leaves office. After all, for them, fifty or sixty billion dollars would be a tiny price to pay in order to save the world economy from yet another financial implosion; not that long ago, Facebook forked out 19 billion to a Ukrainian expatriate for a messaging service. As well as letting Griesa, who must dislike being accused of being willing to wreck the world’s finances for some weird legal reason, off the hook, such an arrangement would suit Cristina no end.

According to the Financial Times columnist Martin Wolf, ordinary hard-working Argentines run the risk of being victims of what he calls “extortion backed by the US judiciary” and certainly do not deserve to languish in a dingy debtors’ prison like the ones in his immediate neighbourhood that were abolished in 1869 when the UK introduced bankruptcy. Along with many others, he feels countries should be treated as humanely as are big business corporations that in the US “walk away from their creditors” with an ease he finds “breath-taking”. No doubt he is right, but in Argentina’s case, leniency could prove dangerous. Given half a chance, its political leaders would spirit away much of the world’s financial resources. What is more, many have contrived to persuade themselves that they are fully entitled to do just that.

Well-meaning foreigners such as Wolf, who admits it is hard for him or anyone else to feel much sympathy for a country that has suffered from chronic mismanagement for a very long time, impoverishing itself in the process, would presumably like to punish Argentine politicians for their misdeeds without harming the general population. Just how that could be done is hard to see: in Argentina, people responsible for piling up excessive debts often get elected and, as Néstor Kirchner and his wife realized, refusing to pay money back is widely considered patriotic.

Candidates for high office feel obliged to talk as though they believe Argentina is a far richer country than the available statistics seem to indicate, and therefore any decent government can afford to spend more. In some puritanical parts of the world, voters with a taste for masochism may respond positively to politicians who go on about the need for belt-tightening, austerity and fiscal restraint, but few Argentines find such virtuous proposals at all appealing. Many, perhaps most, assume that all creditors are by definition blood-sucking loan-sharks and that, before giving in to their insolent demands, the government should settle “the social debt” or, in other words, increase public spending. By now, the folk who hope to succeed Cristina in the Pink House must be aware that the next few years are going to be grim, but for understandable reasons they have yet to spell out what parts of the bloated public sector will have to done away with.

Until barely a week ago, Cristina seemed determined not to give an inch to the hated “vulture funds” or judge Griesa, but then, to the immense relief of businessmen and the, one must hope, bewilderment of her more rambunctious followers who, overlooking Barack Obama’s efforts on the country’s behalf, had already started to wage war against Yankee imperialism, she suddenly went all soft and conciliatory.

The current line appears to be that Argentina would be delighted to pay the holdouts whatever they want but is prevented from doing so by a pedantic New York judge. However, while making a deal with the “vultures”, she must be careful to ensure that the creditors who had their hair cut appreciate that the country is doing so against its will because Griesa left it with no choice. That means that an excessively conciliatory approach by her could prove even more counterproductive than did the bellicose one she had favoured until, last Friday, she decided to try something entirely different and dribble the ball past him by depositing half a billion in a New York bank; he quickly responded by telling the bankers to kick it straight back to Argentina. Just how all this will end is anybody’s guess: the only thing that is certain is that a lot of people will get badly bruised.

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