Stiglitz: Austerity will slow down the Argentine economy and impose a high cost on ordinary people
The austerity measures imposed by the Argentine government will slow down the economy and impose a high cost on ordinary people, Nobel Prize in Economics Joseph Stiglitz said in an interview published on Thursday.
In statements to BBC World, Stiglitz considered that the budget cut provisions accepted by Argentine President Mauricio Macri, in practice, limits the country's scope for action and could have considerable social costs.
With a growing devaluation of the peso against the dollar since April, Argentina requested a stand-by loan of $50 billion from the International Monetary Fund (IMF). Some $15 billion have already been disbursed from the bailout, secured on June 8.
The bailout, however, requires up to $10 billion budget cuts - some 8% of the federal total - including an 81% cut in public works.
Critics note that the cuts, besides being unconstitutional, exacerbate the recession (GDP is down 6.7% just as of June) and do little to stem the true cause of the debt crisis: ballooning current account deficits and capital flight - $25 billion each so far this year.
Macri was charged by a federal prosecutor yesterday with abuse of power and malfeasance in signing the June 8 bailout.
"What worries me is that once a crisis is created, as these policies of bad management seem to be in a predictable way, the room for maneuver is very limited," Stiglitz added.
According to Stiglitz, Macri's measures favored the growth of the gap between rich and poor in Argentina, to the detriment of those with fewer resources.
Once the export taxes, which were an important source of income, were cut by decree within days of his taking office in late 2015, the deficit grew, while incentivizing an increase in the cost of food and a reduction in real wages, the expert considered.
Food and medicine prices have nearly tripled since Macri took office, and have risen over 30% in the first 8 months of 2018.
Stiglitz, who believes that Argentina should assess the possibility of restructuring its debt, does not rule out that the crisis could affect other nations in the area.
Neighboring Bolivia and Uruguay have already taken measures to protect their local business community from the fallout.
At: https://www.plenglish.com/index.php?o=rn&id=33348&SEO=austerity-measures-to-affect-argentines-expert-says
Prof. Joseph Stiglitz
