There have been a lot of people talking about Argentina as if it were the model for other governments in sovereign difficulty to follow. Yes, Argentina’s decision to default was realistically the right call given the crushing debt load. And that is the path the euro zone periphery is on. But, beyond this, I fail to see where Argentina is the model.

In fact Argentina has just nationalised YPF, the Argentine subsidiary of Spanish oil giant Repsol. This is expropriation plain and simple. The Spanish press is all over this.

• Kirchner anuncia la nacionalización del cien por cien de YPF – Confidencial
• Kirchner ordena la expropiación de YPF a Repsol – Expansion

It will have negative repercussions. The EU is threatening Argentina but has yet to decide what the consequences will be (link in Spanish). Spain will almost certainly pull its ambassador. They are also discussing what the appropriate response will be. The nationalist/socialist turn in Argentina has been years in the making. President Kirchner raided the pension kitty, replaced central bankers, fudged the inflation statistics, put up import restrictions, started a diplomatic row with the UK over the Falklands, and has now made the most aggressive move in her reign in expropriating oil assets.

My prediction: the next to go is freedom of the press. Kirchner has already warned daily newspapers Clarin and La Nacion. I am sure there will be much more to come on this. My sense is that any move toward economic nationalism and unilateral action in the EU will be part of a whole campaign of nationalism that will pervade all parts of the political economy. The euro zone needs to handle the periphery carefully because Argentina is showing us what happens when national socialism becomes the governing raison d’etre.

Also see “Argentina’s latest looming crisis” from November for a balanced view of prospects for the Argentine economy.

This post originally appeared at Credit Writedowns and is posted with permission.