MercoPress. South Atlantic News Agency

“A better relation with creditors is crucial”

Argentina has a great chance to begin a path of solid growth, but a strong reduction in the country's debt is needed, “a three quarters cut” is essential, and a better relationship with creditors, according to Martin Wolf one of the “Financial Times” main columnist, former senior economist in the World Bank and Economics graduate from Oxford.

Interviewed by the Argentine press Mr. Wolf said that the Argentine government 75% cut offer to sovereign holders is adequate from an economic point of view, but Argentina must prove there's no alternative and for this, the support of the most industrialized countries is crucial.

"It would be desirable, fantastic if Argentina could achieve the support of the most powerful countries, United States, Japan, Britain, Germany, France and even Italy given the number of small creditors involved", underlined Mr. Wolf.

However "there's great resentment given the hard attitude of Argentina, but the support of these countries would make the difference in the restructuring proposal".

Trying to impose a program that is not accepted by the other side "is not a brilliant idea since at some point Argentina will want to return to the money markets, and here is where a good relation with the G-7 would be so much more productive".

"The Kirchner administration must convince these governments that it will stick to whatever restructuring agreement is reached, that it will implement a solid fiscal policy and that it will clarify its official policy for investments in public utilities in Argentina", said Mr. Wolf.

The Financial Times columnist added that he anticipated in 2000 that Argentina was inevitably heading for a default damaging its international credibility, but now that "the default is a fact restructuring must be sufficiently strong as to ensure that a well managed Argentina will not have to restructure again in the short term".

"With the overweight of the debt aside, an extremely competitive exchange rate and some of the current "fantastic" fiscal policies and if some of the reforms in place can keep advancing, Argentina has an extraordinary period of long term growth, but I repeat the point is improving relations with creditors".

Finally Mr. Wolf regrets that the IMF can't play a more active role because given its neutrality it could establish a working framework, "something like a broker instead of jumping into the discussion as an interested party".