The inevitable is finally happening. Although new uncertainties tend to replace old ones — the focus has shifted to Italy’s troubles in the past few weeks — Greece is going through a default.
It’s likely that this process will be guided by the broad outlines of an agreement reached between the European Union and Greece in October, although the details are probably subject to change.
As part of that accord, Greece and its private creditors have been invited to implement a bond exchange with a nominal discount, or haircut, of 50 percent of face value. Even though acceptance of the invitation is portrayed as voluntary, this agreement is, in all but name, a default, and for practical purposes should be consider as such.
Many comparisons have been made between Greece and Argentina, and now that default will be another common feature, we believe there are two distinct — often overlooked or misconstrued — lessons from the Argentine precedent.