Minister of Finance’s press conference yesterday January 13 lasted 1 hour and 18 minutes. Despite its generous extension, most of those who saw it -including the journalists who were present- are still wondering what he meant. Prat Gay’s press conference was a masterful application of the famous warning: «When you don’t understand economists it’s because they are lying.»

In short, there weere three major announcements. The remainder consisted in the same desperate attempts by macrism to pin the blame on the “heavy inheritance” every time an unpopular policy is announced. This widely used resource was worn out in a month because all their announced policies have been deeply unpopular and founded in their beliefs rather than the country’s current situation. Let’s analize these first announcements to then refute one by one the “technical” arguments of the supposed to be “heavy inheritance”.

The three announcements

Prat Gay’s first item was to confirm, just as Macri had threatened so many times, that the governmet led by PRO with its troop of functionaries from the foreign private banking sectors is willing to pay the vulture funds as soon as possible and at any cost.

To make a long story short, Prat Gay announced that Macri’s government has come to indebt Argentina with the main international banks again and, even though they don’t say it yet, possibly with the IMF as well. The main difference with other debt taking processes is that this one will not be justified based on the needs of the people but on paying what the vulture funds want.

In his attempt to justify this shameful regression Prat Gay spouted two childish excuses. First, confronting the vulture funds and not paying them had “high costs”. That’s why, even though we would have to take on $ 10 billion in debt to comply with Judge Griesa’s outrageous ruling (a respectable, wise man for the party in power) it would be worse not to pay. Second, that the Paris Club negotiation was wrong, a stupidity that has been constantly repeated by them to point out that the previous government was worse that they are at negotiating.

It is not to be forgotten that it wasn’t only Cristina’s administration to say “no” to the extorsion, but 136 countries supported Argentina’s position against vulture funds at the UN. Macri wants now to trash it all away to fulfill his commitments with the foreign banking sectors.

The second item is that PRO is ready to make a major cut in public spending. They haven’t explained methodology nor which budget allocations yet, although electricity, gas and water bills hikes and massive lay offs throughout the public administration have occurred so far. The excuse once again is the “heavy inheritance”. That’s why bills hikes, higher income for public service private companies, obey the «lag» generated by the previous government. Dismissals are based on a curious theory: If public servants are young, involved in political activities, then they are gnocchi. (In Argentina, a gnocchi is a government official who doesn’t work but still gets paid every month)

What would Clarín or La Nación say if Cristina’s administration checks public servants’ Twitter or Facebook accounts in order to dismiss them if they write posts supporting other party? «Persecution! Nazism! Fascism!» That’s what they would howl. How many young workers should be kicked from Buenos Aires City’s government for supporting PRO?

The fact is that they didn’t evaluate anybody’s work, but kicked people because of how they think. Even worse, because of Macri’s State conception, there are probably too much public servants, thousands, as they think that any rule, regulation or control is an inconvenience to the private sector, then must be removed. Prat Gay said he wants to stop «repressing” the economy with demands to private companies. Sure, they will only “repress” workers, as they already demonstrated with those backs full of holes caused by rubber bullets, La Plata public servants and Cresta Roja employees. Quite a warning.

The last announcement aims to put a limit on wage settlements in 2016. In his salad number, Prat Gay dropped that he estimates inflation will be 20-25%, so wages should not rise more than that. He forgot something: throughout 2015, inflation was coming down month by month, according to private consultants and government statistics. That trend changed when Macri announced in campaign, then implemented as soon as he assumed, the biggest devaluation since the crisis of 2001, about 40%.

As everyone knows, devaluations are transferred to prices, so since Macri’s taking, according to private, officialist consultants, monthly inflation soared to 6% (previously they had estimated 1.5-2%). The official number is not known because for the first time in History and with the excuse of «heavy inheritance», INDEC is not measuring prices nowadays. In short, Macri devaluation resulted in inflation, already +12%. If we add how much prices will grow next year, it is clear that Macri seeks to adjust wages by putting a limit on the joint.

In summary. First they devalue 40%, lower the withholdings, start the openness to imports, raise interest rates, making credit more expensive. The result of these policies is, as has always been, inflation and economic recession. What Prat Gay announced are the remaining points to complete the classic orthodox adjustment package recommended by the IMF for all countries in all circumstances. He announced debt, reduction of public spending and wage cuts. The model applied by Macri inevitably generates wage fall, recession and unemployment. The numbers close with the people outside. And to apply this model, as shown in painful historical experience, they have to limit the workers’ demands with repression.

Some additional comments on the excuses of Minister Prat Gay

1. Inventing an uncontrolled fiscal deficit. Prat Gay said the 2015 deficit is 2.3% of GDP. True, if you apply the methodology and criteria of all countries in the world and recommended by the IMF itself. It turns out that throughout the campaign, macrists and their media stirred the deficit was 7% of GDP. In his press conference, the Minister of Finance made some «creative accounting», inventing budget items, additions and subtractions to reach the 7% which they lied with for months. For that, he violated all the methodological manuals in the world. He added to the expenses the «floating debt» of this year, without subtracting the ammount paid of the «floating debt» of last year. A true methodological show off. Then he subtracted from the incomes, profits that according to the Central Bank Organic Act they send to the Treasury. These are very technical things, but basically lies to build his golden number. Finally, he also added to «inherited» deficit, Macri’s campaign promises: the reduction in whithholdings, in high income tax, and other measures already applied. A mess. All this tongue twister of meaningless numbers have only one goal: to justify the expenditure adjustment that Macri planned to do anyway.
2. The supposed cost of not paying the vulture funds. Throughout the world it is known that the neoliberal governments -as Macri’s- led Argentina in 2001 to the biggest default in History. And that Néstor and Cristina Kirchner solved the problem, indebting the country like never before. The whole debt was paid to the IMF, so it was no longer able to condition the domestic economic policy. And they strongly negotiated with creditors, agreeing with 93%. The legal and financial scandal of Judge Griesa and the American Justice gave the reason to the 1% of creditors, the vulture funds. That judgment «of the century» ended in July 2014. Cristina’s administration simply denounced this scandal rather than kneeling before creditors, as Macri intends.
3. Another fallacy:  The Paris Club was poorly negotiated. The debt negotiated with the Paris Club which was declared in default in 2001, was contracted by successive governments since 1956 and was the subject of numerous renegotiations in 1962, 1965, 1985 (called Round I) 1987 (Round II), 1989 (Round III), 1991 (Round IV) and 1992 (Round V). The agreement came to regularize obligations for more than 20 years, and which services were no longer satisfied from 2001. In the History of the Paris Club, it doesn’t exist the chance of getting a debt reduction in the amount due (including contractual interests, both regular and punitive) except for countries with low GDP per capita (under $ 755) and unsustainable levels of debt. Argentina does not fulfill any of these conditions. In the same way, all negotiations in the History of Paris Club -60 years-, except the one with Argentina, were made within the framework of an agreement with the IMF. It had never been agreed before, a payment within five years, extendable to 7, without an IMF program as part of the agreement. If Argentina would not have reached this favorable settlement payment should have been made in cash. Therefore, experts and opposition press were in charge of saying that reaching an agreement was impossible without the IMF. Furthermore, in the agreement, the financial cost is reduced since the last update rate average stood at around 6.8% while the agreement involves a cost of refinancing between 3% and 4.45% , depending on the dynamics of payments.