Stiglitz, 137 economists from 20 countries back Argentina in debt showdown
A group of 138 economists from 20 countries, including Nobel laureates Joseph Stiglitz and Edmund S. Phelps, urged Argentina's bondholders on Wednesday to take a "constructive approach" to the government's debt restructuring proposal.
The economists argue in the letter that Argentina's top spending priority is to protect its citizens from the health and economic fallout caused by the coronavirus crisis rather than pay back creditors who knew they were taking a big risk by buying high-yielding Argentine paper.
The government is out to revamp about $65 billion in "unsustainable" international bonds mostly dating from Mauricio Macri's 2015-19 tenure, requesting a three-year grace period with a 5.4% cut in capital and a 62% cut in interest.
But some major holders have balked at Argentina's proposal, estimated to be equivalent to a 56% "haircut." Bondholders have until May 22 to respond, after which Argentina will be in default.
This is part of a broad debt restructuring with creditors, including the IMF and Paris Club of country-to-country lenders. IMF Director Kristalina Georgieva declared that the country needs debt relief of between $55 billion and 85 billion.
Argentina currently owes $250 billion in foreign currency-denominated public debt - including $44 billion to the IMF. Over $34 billion is owed this year alone to private and foreign creditors.
The country was already in recession before going on lockdown against the pandemic on March 20, with GDP down 7.9% as of February from two years earlier.
At: https://money.usnews.com/investing/news/articles/2020-05-06/nobelist-stiglitz-economists-from-20-countries-back-argentina-in-debt-showdown
Columbia Professor and Nobel Laureate Joseph Stigliz with Argentine Economy Minister Martín Guzmán during a conference hosted by the Vatican on economic solidarity in February.
"We believe a sustainable agreement benefits both sides," Stiglitz and 137 other economists declared.
"A struggling economy with 45 million people and the creditors themselves. Now is the time for private creditors to act in good faith. A responsible resolution will set a positive precedent, not only for Argentina, but for the international financial system as a whole."
