Argentina, whose government defaulted on $100 billion in debt in late 2001, is astonished that Italy in particular remains angry at the South American state for running out on its tab and getting away with it. After all, the two nations have close historic ties.
Astonished indeed. After all, isn't Argentina a nation in substantial part descended from Italian immigrants? And isn't Argentina's left—leaning government full of Peronist fascists (the real kind) who derive their ideas about governance from Mussolini's Italy? In the mind of Argentina's government, wouldn't it seem reasonable that Italy would, you know, be nostalgic for that? It looks like Italy isn't.
As we reported here, when Argentina defaulted on its debt, many investors left holding the empty bag were individual Italians who bought Argentina's bonds for their pensions. They did it because they believed in the good faith of Argentina's government. Back in those days, family ties may have been a consideration. With about a quarter of Argentina's population descended from Italian immigrants, to some it was an overriding reason to invest in the country that, on the surface, didn't seem so third—world.
All of that went out the window when Argentina defaulted on its debt in late 2001. But even that was not so intolerable to Argentina's blood—kin Italian pensioners, given the financial trouble Argentina was in. They could take that. What outraged Italy was Argentina's unfamily—like behavior afterward: instead of trying to pay back every penny of the debt whatever it took — as families do — they laid one and only one settlement offer on the table with the suddenly non—family Italians, take it or leave it.
Italians were forced to take about 30 cents on the dollar, an unheard—of lowball deal. (Even though it was obvious Argentina could have paid more.) Most sovereign defaults in the past have been settled for 67 cents on the dollar and those are figures from dirt—poor countries like Ecuador, not rich, already developed states like Argentina. Thirty cents, take it or leave it, left the Italian pensioners not feeling so much like family anymore, and to add insult to the injury, the IMF and the international community actually accepted the offer, forcing the Italians to eat the losses.
Now, Argentina is holding up its Italy—as—family card again to persuade the Italian government to let bygones about billions be bygones.
Can you imagine what the Italians think?
It shows that the Argentines don't get it at all. It might be summed up this way: Argentina's government thinks ethnic ties are relevant when they want investment and respectability, but not when it's time to pay the bill. And that family ties are not only irrelevant when the bill is due, but have no effect afterward, either. "The central problem resides with the executive branch of the Italian government and, more specifically, with the Bank of Italy," said one Argentine official, imagining that these institutions are behind Italy's new cold eye to Argentina.
He completely misreads this country called Italy. Italian pensioners are a powerful political voting bloc in Italy's well—developed democracy and their anger is directly behind Italy's government's lonely, but correct, hard stance at these third—world deadbeats. Not having an authentic democracy, Argentina is clueless about why it has problems with Italy now. What they need to understand is that family ties have everything to do with it.
Italy's Silvio Berlusconi has proven himself a staunch a brave ally with us in the War on Terror. He deserves our applause and support in his war on deadbeats.