Nora Mazzini
Argentina should adopt the euro, not the dollar, in order to tackle hyperinflation, Nobel economist Paul Krugman said.
The South American nation does almost twice as much trade with the EU as it does with the US, he pointed out.
Red-hot inflation and a plunging peso have fueled chatter that Argentina should ditch the peso.
Forget the dollar, it’s the euro that Argentina should be adopting, Nobel economist Paul Krugman said.
His comments come as the country battles with three-digit inflation levels and a plunging peso.
“Argentina does almost twice as much trade with the European Union as it does with the US. If anything, they should adopt the euro,” Krugman said in a Thursday post on X.
As of June 2023, the European Union accounted for 10.1% of Argentina’s exports and 14.6% of its imports, per Argentina’s Ministry of Foreign Affairs, International Trade and Worship.
There’s been much commentary of late suggesting Argentina should ditch the peso and adopt the US dollar as its official tender in order to tackle its nightmarish inflation problem.
Economist Steve Hanke and the South American nation’s presidential candidate Javier Milei are among voices that have argued in favour of dollarization. However, any move to adopt the buck would walk back Argentina’s recent efforts cut its reliance on the US currency.
Annual inflation in Argentina came in at 113.4% in July, according to government data. The soaring prices pressures come on the back of a weakening Argentine peso, which tumbled 20% against the dollar on Monday alone. The currency crisis has largely been triggered by a shortage of the US dollar – and it’s forced the nation’s commercial banks to set up deposit accounts in the Chinese yuan.
The shortage was caused by an ongoing drought that struck the country’s agricultural exports, lowering the central bank’s dollar reserves to their lowest level since 2016.