November 22, 2011

Aldo Ferrer: Speculative Attacks & Sovereign Debt, a voice of experience

I translated part of an Interview with the Octogenarian Dr. Aldo Ferrer (mini bio. below), November 2011 at the University of Buenos Aires an interviewer for the Argentine Times ("El Tiempo") asked Ambassador Ferrer whether he ever might have expected to see Europe in the state that it is in today? His reply demonstrates Ferrer's experience in the defense of his nation against the international speculative bond markets...

Ferrer's response was very revealing:

Europe has been much worse. It has been the scene of two World Wars; both from the result of an unraveling of the now resolved Franco-German conflicts. Since the treaty of Rome the Europeans have moved forward a great deal in the area of integration, giving up fundamental social tools in the political sphere, giving up their sovereignty. To the extraordinary extent that is the important element of national currency. This changes the rules of the game causing enormous competitive strains withing the European space such as, for example, between Germany and Greece. Such asymmetries, combine with the consequences of the hegemony of financial activities, have lead to an excessive debt situation in many nations. This process brought the European nations, as happened in most industrialised nations when the crisis hit, the obligation of stepping up to rescue the speculators. This caused a huge increase in the fiscal deficit of the member states.

Now the markets feel uncomfortable. The nation states are trying to regain market confidence by the means of policy adjustment (austerity measures). This impedes their process of resolving of the sovereign debt problems as it leaves them at the mercy of speculative attacks. In confronting this situation, community policy has been to appease the markets, instead of putting them back in their box, controlling them, as they should, putting finance back in the service of production and not speculation.

[1] Mini biography: Aldo Ferrer is a distinguished Argentine economist. Former Argentine Minister for Economics, Dr. Ferrer is director of the Program for Economic Regional Integration in the University of Buenos Aires. He is currently Argentine Ambassador to France and one of the chief negotiators on sovereign debt with the Paris Club of Global Financiers. The Author is completing Dr. Ferrer's Masters Program on regional integration in the Department of Economics of the University of Buenos Aires.

Photo courtesy of Brazilian State news agency:
http://www.agenciabrasil.gov.br/

Posted by Tony Phillips at 01:14 PM | Comments (2)