I have a tough time following your line of reasoning.



You start out arguing that, as in Argentina, budget cuts have led to an untenable situation in Greece, but then you go on to say that Greece’s “soaring deficits … were symptoms of serious pathologies”. That seems contradictory – you argue in favour and against the elimination of budget deficits at the same time.



Then you suggest that, as in the case of Argentina, Greece’s debt is unsustainable. In Argentina, cash interest payments on government debt stood at 5.4% of GDP before the devaluation and at 10.4% of GDP post devaluation – so it was clear they had to default. In the case of Greece, cash interest payments on government debt currently stand at less than 2% of GDP – in fact at less than 1% of GDP if the reimbursement of interest payments to the ECB are taking into account. Furthermore, most of Greece’s debt has very long maturities, and these low interest rates have been locked in for the decades to come. There are only two countries in Europe that pay less on their government debt than Greece: Luxembourg and Estonia. This makes it really difficult for me to make sense of your case for a sovereign default of Greece.



Finally, portraying Argentina as a model for anything (except for music, food, literature and cinema) strikes me as silly. The country is in a total mess, in good part due to the blatant disregard for property rights and the rule of law. This is in part due to the way the 2001 default was handled, and the excessive haircut that was imposed on creditors. Should Greece really follow Argentina’s path? Wouldn’t Uruguay be a better model? Or Brazil? Or even Bolivia?



Greece is already running a primary surplus (which Argentina never achieved before the devaluation) and the country is at the verge of economic recovery. The new government has a funding gap of around € 25 billion and European partners stand ready to provide this funding if Greece agrees on a macroeconomic adjustment that addresses exactly the issues you raised, namely “a dysfunctional public sector, an uncompetitive private sector, and an elite that abdicated its responsibilities and, rather than facing the challenges of the day, used the state as a means to supply jobs to political loyalists.” If this needs to be done anyhow to overcome Greece’s “fundamental problems”, why not accept it as a condition for concessional financing at low rates and long tenors that can be used to pay down non-concessional funding (from IMF and ECB) at high rates and short tenors?



There are certainly cases were government defaults are necessary, but applying this insight blindly to Greece, without any regard for the numbers, appears to be very bad policy advice.