Buenos Aires---With Greece in danger of tumbling into the economic abyss it faces the haunting memory of Argentina in 2001, when the South American country defaulted on nearly $100 billion and was plunged into a crisis it is still battling back from.
Like Greece, Argentina had been living beyond its means for years, dating back at least to the country's 1976 to 1983 dictatorship, when the junta jacked up military spending.
The debt continued to spiral in the 1990s as Argentina borrowed to fund a novel inflation-fighting program in which the government pegged the value of the peso to the dollar, holding $1 in reserve for every peso in circulation.
The so-called "convertibility" plan successfully reined in the hyperinflation that had dogged Argentina for 40 years.
But it left the country's books badly overstretched by 1999, when the shockwaves of the world financial crisis plunged Argentina into recession.
To respond to the demands of the International Monetary Fund, the Argentine government enacted austerity measures and tax hikes.
But that provoked a series of general strikes.
As warnings of an imminent crisis spiralled, Argentines withdrew $22 billion from their banks in less than three months.
In December 2001, in a bid to stop the run on banks, economy minister Domingo Cavallo, architect of the convertibility plan, ordered nearly $70 billion in bank deposits frozen.
For a 90-day period, people were barred from withdrawing more than 250 pesos (then worth $250) a day.
That sparked riots and a government crackdown that left 33 people dead.
Looters trashed supermarkets and tens of thousands of Argentines vented their wrath by banging pots and pans in the street -- the so-called "cacerolazo" protests.
On December 19, 2001, President Fernando de la Rua decreed a state of siege. A day later, as thousands of angry protesters massed outside the presidential palace, he resigned and left aboard a helicopter.
On December 23, interim president Adolfo Rodriguez Saa announced a moratorium on payments of Argentina's nearly $100 billion debt.
But the crisis soon turned the presidency into a revolving door, churning through five politicians in just two weeks.
By the time the carnage ended, the economy had shrunk by one-fifth, inflation had soared and the peso had been devalued by 70 percent.
AFP
