In politics, football and music alike, Argentina can be defined by intensity and reinvention. Economic policy has been no different. President Javier Milei’s chainsaw cure of deregulation and austerity has shocked his country onto a new trajectory.
Whether the experiment ultimately succeeds where a century of half-measures failed is still uncertain. But the outcome will hold lessons well beyond Buenos Aires, not least for how Europe might one day reckon with its own financial excesses.
At Davos in January, Milei set out his creed. Nearly every modern ideology, he argued, is just another shade of state-led collectivism – from socialism to nationalism to Christian democracy. Prosperity, by contrast, comes not from the state but from unleashing individual enterprise.
History bears him out: in 1800, global GDP per capita doubled only once a century; today it doubles roughly every two decades, driven not by governments but by entrepreneurs.
Europe, meanwhile, seems intent on clipping its own wings. Germany has released its debt brake but funds are flowing into subsidies rather than tackling rigid labour laws or restructuring its fragmented industries.
France cannot muster support to raise its pension age and now faces its sixth prime minister in as many years.
Britain’s chancellor, meanwhile, has stumbled on welfare reform, locking her government into an impossible fiscal bind.
These are not isolated events. They reflect Europe’s deeper collectivist reflex to protect the present at the expense of the future.
The German auto industry, long Europe’s industrial pride, lays bare the steep price of complacency. Electric vehicles (EVs) already make up half of the Chinese market. The survivors of a brutal competitive shake-out are now so efficient that quality Chinese EVs land in Germany at roughly a third of the price of domestic equivalents.
Corporates are responding with caution. German industrial conglomerate Thyssenkrupp has shelved a flagship green steel project.
AstraZeneca, Britain’s largest listed company, is weighing a move to the US. Even when money is available, business sees little incentive to deploy it under Europe’s current rules of the game.
Yet the potential is immense. An International Monetary Fund (IMF) study recently found that trade barriers inside Europe are four to 10 times greater than those between Europe and the US and three times greater than between US states.
That is extraordinary self-sabotage, especially when Europe’s internal market is almost twice the size of its external trade. In other words, US tariffs are not Europe’s biggest trade problem. Europe is.
Two paths lie ahead. The first is financial repression, which would hold down borrowing costs and let inflation erode debt. History shows this only works when economies are growing strongly, which Europe is not.
The second is harder but ultimately more fruitful: raising productivity through supply-side reform, deregulation and fiscal discipline.
The periphery has already proven it can work. After a decade of painful adjustment, Spain, Portugal and Greece have emerged among the continent’s most fiscally resilient economies, with Greece now enjoying a stronger credit rating than France.
Argentina is running the same strategy at full throttle. In under two years, Milei’s government has cut ministries from 20 to nine, shrunk the civil service by 11%, axed subsidies, floated the peso and slashed spending by almost 10% of GDP.
The IMF credits these measures with averting a full-blown crisis. Poverty, after an initial spike, is now below pre-reform levels and inflation has dropped to a five-year low.
Europe’s economy is not yet at the cliff edge Argentina faced two years ago but it must summon the will to change course. Milei has shown that radical reinvention is possible when politics demands it.
Populist parties now command 20-30% of the European vote, up from 10–15% only a few years ago. For all the hand-wringing this provokes, their rise may prove necessary. Entrenched collectivism, marked by stimulus, rising entitlements and over-regulation, is unlikely to be dismantled from within.
It may take an outsider, with no alternative but to act, to force through what insiders cannot. Italy’s relative fiscal improvement under Giorgia Meloni suggests the political risk premium attached to European populism is overstated.
Concurrently, other exogenous forces, from Donald Trump’s disruption of the global order to renewed bond-market scrutiny, may finally be spurring Europe’s policymakers to embrace long-overdue reforms.
The Draghi Report, the EU’s review of competition law, and new legislation in the UK embedding growth as a statutory objective for regulators, suggest awareness is rising.
Investors have already rewarded Europe this year as cracks in US exceptionalism appear. But this revival will sputter unless its leaders embrace the Argentinian spirit of individualism.
Chainsaw economics may look extreme, but its essence – stripping away the barriers that smother enterprise – is precisely what Europe needs.
Daniel Avigad is portfolio manager of the Lansdowne European Strategy. The views expressed above should not be taken as investment advice.