ECONOMY

Why Greece won’t follow Argentina

The source of Greece’s and Argentina’s economic problems are common but Athens has the tools to avoid following in the footsteps of Buenos Aires to bankruptcy, according to a report published yesterday. After Greece revised its budget deficit figures to more than 13 percent of output last year and sought the help of the International Monetary Fund for a joint rescue plan, a number of experts compared the fate of the two countries, with some predicting that Greece will default on its debts like Argentina did in 2002. EFG Eurobank said in a report that Greece’s membership in the single-currency club does not face credibility issues like Argentina did when it pegged the peso to the dollar, and that its banking system is much stronger. «Greece did not take the unilateral step of attaching its currency to a foreign one. It participates in a monetary union,» the report said. «The Greek banking system is much stronger and not at risk from the existence of two currencies at the same time.» The Mediterranean nation’s exit from the euro is essentially impossible due to legal reasons, the reports explains, highlighting that such a development cannot be forced by markets and that it would be at a «massive cost» for the economy. Another factor seen as being positive for Greece is that neither the value of its foreign currency reserves nor its currency are under attack from speculators. The International Monetary Fund’s role in the Greek rescue plan – along with the European Union and European Central Bank – is seen as a better option for Athens after the Washington-based organization faced heavy criticism for contributing to Argentina’s problems with its policies. «Argentina’s experience has changed the way the IMF operates,» the report said. «Its policies now… take into account the weaknesses and peculiarities of each country while boosting medium-term growth prospects.»