The Europeans are enthusiastically holding in their hands "the euro, our currency" that for so long had been no more than a much-wielded slogan. So is it really the moment to take a look at Argentina? More than ever in fact, as the financial crisis that is shaking Buenos Aires has a useful message for us: The choice of a currency can never be reduced to a simple act of political will. One must understand all the implications, often unfortunately invisible. 
	
	
 It is not enough to proclaim, even in the Constitution, that one peso is worth one dollar, for that to be really the case. The Argentines thought they had discovered the philosopher's stone in 1991. The linking to the dollar, as a guarantee of stability, was meant to rid them of the hyperinflation running at 2000 percent a year they had experienced during the 1970s and 80s. The tale today is all the more bitter as it began with such euphoria. 
	
	
 The social contract implemented by Carlos Menem at the start of his 10-year presidency (1989-99) was simple in principle and based on two pillars: Monetary discipline and liberalism. 
	
	
 Introducing the currency board system in 1991 obliged the central bank to guarantee the pesos in circulation with foreign currency reserves, in the same way as issuing bodies used to only issue notes to the equivalent of the gold reserves they held. Hence the official parity between the peso and the dollar until 1 December 2001 when it became necessary to introduce exchange controls with a devastating effect. 
	
	
 The commitment to liberalism, the second strand of the Menem program, lived up to its promises. Privatization earned $40 billion. Its success established the reputation of Buenos Aires on international markets. The real gauge of this confidence was the size of the national debt, that grew and grew. It more than doubled during the 1990s, from $60 billion to $132 or even $150 in 2001, making Argentina the number one market borrower among the emerging economies. 
	
	
 Looking back one can see a general lack of vigilance. Also on the part of the International Monetary Fund whose principal role is to be watchdog before bailing out those who come unstuck. Michael Mussa, chief economist with the IMF until last April, recognizes this: "If we had paid more attention to the growing budgetary deficit and national debt between 1996 and 1998, Argentina would have been in a much better position to absorb the impact of the devaluation of the Brazilian real." 
	
	
 The fall came in 1998, when Brazil, made vulnerable by the Asian crisis, abandoned its fixed parity against the dollar. Economists and market players then noticed that Argentina had been "over-financed." "Credibility evaporated," to quote the expression of one expert who stresses the paradoxes of a system whose bases seemed sound. 
	
	
 First paradox: The Argentine economy is not very open, not even to its neighbors in Latin America. Its exports amount to just 8 percent of its GDP, as do its imports. The result is a trade balance, in marked contrast to a balance of payments deficit burdened by servicing its debt. Other countries live on a currency board system, most notably Hong Kong. But this Chinese territory has an extremely open economy, to the point where its exports exceed its GDP, thereby facilitating the influx of foreign currency. 
	
	
 Second paradox: The self-proclaimed parity between the peso and the dollar never enabled the government and even less private borrowers to obtain credit terms to match those enjoyed by the Americans. The risk premium has always been considerable, rates never falling below 10 percent. This places an unbearable burden on the government in servicing the debt and a revenue to match for the creditors. Argentine pension funds have enjoyed interest rates as high as 35 percent over recent months: No less than 45 percent of the national debt estimated at between $130 and $150 billion is held by the Argentines themselves. 
	
	
 Over recent weeks street demonstrations culminating in the general strike of 13 December have been the most visible aspect of a civil war between creditors and debtors. 
	
	
 Appeals were already made to the creditors during the first phase of the debt rescheduling involving the $55 billion held by Argentine funds and that was completed at the end of November. And they will come under pressure again: The IMF's recent refusal to approve a $1.3 billion loan is designed specifically to help Finance Minister Domingo Cavallo put pressure on private investors, as the latter have clearly understood even if not always the observers. At the same time private debtors who became indebted in a strong currency would find themselves ruined by a peso devaluation. This is why dollarization has generated such support among politicians: From former President Carlos Menem, today leader of the most influential Peronist faction, to new Finance Secretary Miguel Kiguel, a former banker, charged along with Domingo Cavallo with restoring order to public finances. 
	
	
 The final switch to the dollar would stabilize relations between creditors and debtors. But it would also be a very painful way of restoring credibility, "like when one loses one's virginity and the only solution is to enter a convent," as one monetary expert put it. But neither dollarization nor the currency board provides a guarantee of low interest rates, as there will always be an "Argentine risk." Plus there is the problem of external competitiveness that remains unsolved. Unless the peso is devalued before it disappears, that is technically possible but more delicate when it comes to credibility. 
	
	
 That leaves the most economically realistic solution, the one backed by the technical experts: Floating the currency, but it is also the most risky. Are the Argentines now in a position to forge a new social contract?