Lessons from Argentina

04/07/2010

 

Ricardo López Murphy: “Spain’s situation is similar to the Argentinean one in 2000 and 2001, and we haven’t managed to return to normality there: the ordinary situation is deprivation and urgency”

“In the long run we have to adopt the Chilean model of public debt which has a structural surplus of 1% corrected by the cycle. This way, debt disappears in the long run. Chile is an example to follow. It doesn’t have public debt and is a net creditor of the world. My suggestion is not allowing debt”

“If in Spain they haven’t realised the seriousness of having more than 10% deficit, then you have a serious problem”

“The tax burden in Spain is tremendously high, and this way you burst any possibility of private investment. Taxes cannot continue to be raised. Spain is beginning to look like Argentina in the widespread fiscal fraud”

“Reforming the pension system in Spain is necessary, so that the markets know that it’s not going to burst in the long run. That generates confidence today and avoids overloading adjustment in the short run. In my opinion, the retirement age could be increased to 69 in 25 years’ time”

“Reforming health goes attached to reforming the pensions. Copayments must be introduced to limit expenditure, which has rocketed because the cost is not assumed by the doctor nor the patient, but by the State”

“We must understand the nature of the problem and avoid the chaotic adjustment, because adjusting preventively is less costly for the country than letting markets adjust you, because they’ll adjust you chaotically”