Write off Argentina debt

The vertiginous descent of the Argentinean economy continues. Since it became the largest nation ever to go bankrupt there have been riots, hunger strikes and deaths. Provincial administrations, whose reckless spending did much to bust the economy, have resorted to printing their own money and have told the International Monetary Fund (IMF) to "go to hell". Citizens, furious that the central government had closed banks to stop reserves draining away, went to court to get to their money out. The ensuing chaos saw President Eduardo Duhalde lose a finance minister -- four have gone in five months. What was once Latin America's third-largest economy has a currency, the peso, which has lost two thirds of its value in weeks. Never has so much been lost so quickly.

While the world watches, it offers sympathy not cash. The realpolitik of international bailouts should also be considered here. Argentina is of little strategic or economic importance to the U.S., therefore there will be no cash injection like that afforded to Mexico during its crisis. The IMF argument that with no government, there can be no route map out of misery and therefore no loan to tide the economy over is only two-thirds correct. President Duhalde has to form a new cabinet quickly and reach a national consensus for a rescue plan. The fund at this point should step in and offer a loan to reverse the fall that is taking place in real incomes, employment and investment.

Argentina's plight should also be Wall Street's call to action. Bankers were as reckless in lending money as Argentina was in borrowing vast sums. Financiers did so because they knew that, in the event of a bankruptcy, an IMF loan would mean that they would get their money back. This needs to stop. The simplest solution is for the fund to demand that private investors write off the debt owed to them from bankrupt countries. It is what happens with poor nations. It should be done for Argentina too.

-- The Guardian, London