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OPINION AND ANALYSIS | 29-05-2021 11:20

Germany is the capital of Paris

Argentina is an old story for the Paris Club – indeed the oldest story of them all since its very first agreement back in 1956 was with the military regime which had just toppled Peronism.

German Chancellor Angela Merkel, the presidential conversation partner last Wednesday, is always going to remind a lot of people of a lot of things because she has seemingly been around forever. For so much time that some think it even longer than it is, such as Senate Majority Leader José Mayans, who last February placed Formosa Peronist Governor Gildo Insfrán on the same level as Merkel on the grounds that “both are in their fifth term.” Wrong on both counts – Merkel is nearing the end of her fourth and last term while Insfrán is almost halfway through his seventh with apparently no end in sight. Quantitatively Insfrán is thus being seriously underestimated – qualitatively it could be a different story. Comparisons are odious indeed.

In point of fact, Merkel is equalling the late Helmut Kohl’s record of 16 years as chancellor. Another detail perhaps better underlines her uniqueness – the turn of the millennium neatly bisects her Christian Democratic Union party because throughout the last century from its foundation in mid-1945 it was always headed by various Catholic males (with the brief exception of Ludwig Erhard), while all this century it has been led by that one Protestant woman.

Anyway my main personal memory of Merkel in an Argentine context goes back to the very first day of the eight years of the Cristina Fernández de Kirchner presidency in 2007, when the latter’s inaugural speech proclaimed Germany to be her model in the world and her template for governance. Her “Cristina, Cobos y vos” campaign that year (complete with a rainbow tour of Germany a month before the voting, bankrolled by the likes of Siemens and Volkswagen) had been anchored on her future presidency completing the institutional fine-tuning, after her husband Néstor had nobly done the economic dirty work (which had in fact been largely performed beforehand by Eduardo Duhalde’s economy ministers, Roberto Lavagna and, even more, Jorge Remes Lenicov). With a married name of Kirchner and a mother surnamed Wilhelm, all that Teutonic identification seemed to fit.   

There can be little doubt that this identification was inspired by Merkel as much as by Germany as such. Still relatively new to the game with less than 30 months in office, Merkel extended virtual state visit status to CFK that September even though she was then only a presidential candidate while through to 2011 (when Dilma Rousseff reached the Brazilian presidency) Merkel was the only other female G20 leader in the world, thus making for potential gender bonding at summits – more of a factor for CFK than for Merkel, it would seem.

Anyway all that past ties in with the present for various reasons, including President Alberto Fernández as a common denominator – Merkel’s Zoom interlocutor last Wednesday, the then-Cabinet chief was also the main architect of that 2007 campaign, especially its institutional overtones aimed at luring Radical allies with considerable success.

But the most important overlap is the common objective of the German connection in both decades – the bid to roll over Paris Club debt while bypassing the International Monetary Fund (IMF). In the former case this slightly predates the Cristina Kirchner presidency. In the very first days of 2006 Néstor Kirchner had severed all links with the IMF by paying all the US$9.8 billion owed them out of Central Bank reserves (the global commodity price boom then prevailing allowed him margin for that stunt). A triumphant assertion of economic sovereignty that summer but the new freedom came anything but free – the Frente para la Victoria government quickly ran into the snag of having to negotiate the ongoing Paris Club debt without an underlying agreement with the IMF, thus breaking the rules.

Argentina is an old story for the Paris Club – indeed the oldest story of them all since its very first agreement back in 1956 was with the military regime which had just toppled Peronism. The name Paris Club might make the outsider think that Emmauel Macron’s Finance Minister Bruno Le Maire calls the shots among the 22 member countries, but in fact Germany is far and away Argentina’s leading creditor here, being owed 37 percent of the US$2.4-billion quota due next Monday, followed by Japan (22 percent) – no other country’s percentage enters into double digits. The situation was much the same back in 2006-2007, which transformed servicing Paris Club debt behind the IMF’s back a central theme of Cristina’s 2007 campaign visit to Germany. But nothing doing – Berlin was no more inclined to cut Argentina any slack than it was a few years later with its European Union partners known as the PIGS (Portugal, Italy, Greece and Spain).

Buoyed by that year’s bicentennial jamboree, Cristina tried again on her next visit to Germany in 2010 (just three weeks before her husband’s death) but no joy. It was to be third time lucky – or perhaps unlucky. In 2014 then-Economy Minister (and today Buenos Aires Province Governor) Axel Kicillof was sent to negotiate with strict instructions to achieve both objectives of settling with the Paris Club and bypassing the IMF, whatever the cost. As he did indeed – shunning the IMF carried the price tag of punitive interest rates almost as high as the original debt of US$4.95 billion when the standard interest payments would have been around US$1.1 billion.

The latest chapter in this saga was last Wednesday’s 40-minute exchange between President Fernández and Chancellor Merkel. We do not know exactly what was said – according to Argentine sources, Merkel pledged to continue supporting Argentina in its quest for a sustainable agreement with the IMF and according to Berlin’s Foreign Ministry, the agenda revolved around the coronavirus pandemic and the EU-Mercosur agreement. What we do know is that only a weekend lies between now and that Paris Club quota of US$2.4 billion falling due on Monday (although there is a grace period of two months, which nevertheless does not suffice to postpone an agreement until after the midterms).

The outcome remains highly uncertain – a default does not really suit either side but if the government continues to push up its fiscal deficit and taxation at the same time against the backdrop of Kirchnerite pressures to ban using even the money coming from the IMF to repay the Fund or the Paris Club, then we could end up with default by default.

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Michael Soltys

Michael Soltys

Michael Soltys, who first entered the Buenos Aires Herald in 1983, held various editorial posts at the newspaper from 1990 and was the lead writer of the publication’s editorials from 1987 until 2017.

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