June 1, 2011
I remember it so distinctly. Mum allowed me to stay up to watch it even though it was a school night and it meant going to bed after midnight.
The reception was appalling on our tiny “PYE” television in the corner of the kitchen. But Scotland were playing Holland in the 1978 World Cup and as Dad’s parents were Scottish, this link was enough to give me legitimate bragging rights in national school. But everyone loved Scotland back then; we adopted them. They had Dalgleish, Jordan, Hartford, Gemmill, Souness, Buchan, and Robertson. They were quick and skilful and, of course, we watched them every week playing for Liverpool, Man U, Leeds and Notts Forest.
The game, played in the freezing cold of the Argentinean winter, was extraordinary with Scotland winning 3-2 but still failing to qualify, and then Holland’s contentious loss to Argentina in the final. What amazed me in 1978 wasn’t so much the brilliant game and Archie Gemmill’s outstanding goal, but the wonderfully alien atmosphere as reams and reams of paper were thrown from the stands to greet the players.
Last night, I found myself in the same stadium in Mendoza. It is still called Las Malvinas Stadium. I went to see the local team Godoy Cruz play Gimnasia of Buenos Aires in the Argentinean first division. A win meant the home side would still be in the running for the title. The atmosphere was electric. The fans didn’t stop singing once, flares lit up the sky, huge samba drums boomed throughout the game, flags were waved and the noise was deafening. The game ended 2-2, but still the fans sang.
On the way home, we chatted about the economic situation in Argentina. The local people — many with Irish roots — felt very sympathetic to our plight. The news from Ireland, Greece and Portugal is constantly in the papers here. As many thousands of Argentineans are still Italian citizens and can vote in Italian elections, political events in the periphery of Europe are watched very closely.
Because of everything Argentina has been through economically, they have an acute sense of what it means to be faced with huge debts, a future of deflation, a government that favours foreign banks over local citizens. Argentineans know the only way out of the crisis is some dramatic action.
Argentina has experienced 10 straight years of solid economic growth since it defaulted and abandoned its currency link with the US dollar. Every person I met said that this was the right thing to do. But interestingly they admit that they did not support the default and devaluation policy before it happened. Like many tens of thousands of Irish people, they could see that they couldn’t pay all the debts and that they couldn’t be competitive with a currency that pegs one to one with the dollar, but they were afraid to act. They were scared of the unknown. The entire establishment told them that if Argentina defaulted the country would never grow again.
In the event, Argentina defaulted and 70pc of their debts were wiped out. The currency fell dramatically. My friends, all of whom are local small business people in Mendoza, said the first two months were traumatic as no one knew what to do. But then the economy started to recover. Having had three years of recession from 1998 to 2002, the default happened in December 2002. By April, the economy started to grow and it has not stopped since.
Looking back, they all agreed, although they never wanted it to happen, that the default and the devaluation was the best thing for Argentina. The economy grew again and the people responded with a burst of entrepreneurial activity. They went back to basics. Exports took off and from having a perennial trade deficit, importing all sorts of finery with other people’s money, Argentina began running a trade surplus. Agriculture and wine became competitive again and all the people I spoke to also said that there was a profound sense of national sovereignty when you stood up to foreign loan sharks which, in Argentina’s case, was the IMF.
Argentina is clearly supportive of the dramatic course of action its government took in 2002, even though no one wanted to do it because everyone was scared of the future.
However, at a personal level, what about the millions of Argentineans who had dollar mortgages? Initially everyone with a mortgage panicked as the currency fell. They saw their mortgage repayments still in dollars but their pay in the new devalued peso. But then the government just cancelled all dollar mortgages and turned them into peso mortgages. So who paid? The foreign banks . The foreign banks who had made a fortune in Argentina lending in the boom, (sound familiar?) lost out.
And as for the local banks, didn’t they get hammered? Well, yes they did, said all my friends (and one is a banker) — “but they deserved it”. The government just issued them with government bonds, IOUs to replace their dollars and they began lending pesos again. The football fans last night over a few beers said that it was all surprisingly straightforward, even though they worried that the world would end.
In classic fans’ talk they compared economic problems to the problems of a team. If the team is losing and you know where the problem is either you fix it, change tactics and players or you continue to lose. Simple.
However, showing a keen knowledge of the realities of life inside a currency union as they had been for 10 years with the US, the local fans here told me that you can’t do any of this without your own currency. Unless you can print money, backed by local government debt to reflate an economy suffering deflation and inject liquidity into an economy which has none, you are screwed. So they agreed that Ireland, Greece and Portugal have a choice: What are you going to do?
Argentineans have a much better understanding of economics and financial dilemmas than most citizens. The fans last night concluded that either we go for a massive default, together with the Greeks, Portuguese and others and stay in the euro or we leave the euro and default less spectacularly. They suggested that the price we should try to extract for staying in the euro would be a more significant default, because they understand the point is to improve your balance sheet so that you can start again. There is no point “half defaulting”, they laughed; “it’s like being half pregnant”, quipped one fan.
As we left the Malvinas Stadium, I wasn’t sure about taking advice from Argentinean football fans but the knowledge of our plight, the empathy and the sharpness of their analysis, was more impressive than much I have heard from so-called “experts” in Ireland. These people have lived through economic chaos which they never believed could happen to them and we are living through economic chaos which we never believed could happen to us.
That’s why it’s interesting to listen to them.
After all, the stuff you learn from experience can never be taught.