By Indalecio Alvarez
BUENOS AIRES, Aug 5, 2012 (AFP) -- With Spain teetering on the brink of an unprecedented banking crisis it would do well to learn the lessons of Argentina's 2001 meltdown.
As the Latin American powerhouse plunged into one of the largest debt defaults in history, $100 billion, it froze people's bank deposits and forbade withdrawals in a process known as the "corralito."
Like Argentina, Spain is facing a severe recession, high unemployment, capital flight, restrictions on monetary policy, distrust of the financial system, and changing strategies for responding to the crisis.
"If we do not want to become like Argentina, with a 'corralito' and 20-40 percent inflation, we must take steps to clean up our public accounts," top Madrid official Esperanza Aguirre said recently, advocating drastic reductions in public spending.
Spain has already slashed 27.3 billion euros ($33.5 billion) from its 2012 budget and is pursuing additional austerity measures -- worth 65 billion euros ($80 billion) -- through the end of 2014.
The measures, which include cuts for public workers and the unemployed, have sparked massive demonstrations from protesters who call themselves the "Indignados," a term that roughly translates as "the outraged."
In their shoes
"Personally, I wouldn't want to be Spain today," Argentina's former economy minister Roberto Lavagna told AFP with a smile.
Lavanga served from 2002 to 2005 and helped lead Argentina's spectacular recovery -- eventually ushering in huge growth averaging eight percent annually.
He said Spain, by virtue of its budget-cutting austerity measures, was committing "the same errors that provoked the 'corralito' in Argentina," adding that current policies would only serve to deepen the recession.
What the European country needs instead, he said, are "stimulus measures, capable of combining economic and social recovery, and to streamline public accounts."
Another former Argentine economy minister, Ricardo Lopez Murphy, disagreed, saying austerity measures were the only way to avoid having to freeze assets.
Although Lopez Murphy's own austerity plan for Argentina was rejected in March 2001 -- he ended up being fired just days into the job as his measures sparked angry protests -- he insisted it could have worked.
"We could have made adjustments and avoided the heart of the problem: the panic and the flight of capital," he said in an interview.
'Don't give up'
A far-left member of Argentina's opposition, Senator Eugenio "Nito" Artaza, said he sympathized with the "Indignados" in Spain.
"We were the 'Indignados' of 2001," Artaza said.
A decade ago, the senator worked to defend Argentines whose US dollar accounts had been blocked and reconverted to pesos at a loss of more than 50 percent of their initial value.
Artaza urged the Spanish protesters not to give up, saying "we must defend our rights through peaceful resistance."
The senator also said it was a mistake for the Spanish government to be taking on banks' debts, as Argentina also did over a decade ago.
The economy minister at the time, Domingo Cavallo, ordered all Argentine bank deposits frozen on December 1, 2001 -- some $70 billion -- in an attempt to prevent the banks collapsing.
Argentina then issued notes worth about $19.6 billion to those whose accounts had been frozen. The last installment, of $2.2 billion, was repaid on Friday.
"We are at last repaying the 'corralito," the economy ministry posted on its official website on Wednesday, adding that "without debt, we are more free."