There has been a dangerous complacency in the world of international finance since the Asian financial crisis of 1997. Although that contagion spread through emerging markets with breathtaking speed, once the crisis was weathered, talk of real global financial reform was first muted and then seemed to stop altogether. That is odd, not only because of the severity of "bahtulism" but because other crises since then should have convinced governments around the world that the international financial system needs help. In recent weeks it has been Argentina's turn in the spotlight. The possibility of default or devaluation is a sobering one, and could hit all the region's economies hard. The Argentine crisis should spur the international community to resume its efforts at reform.

This crisis has been some time in the making. Latin America's third-largest economy has been in a recession for three years, unemployment stands at 16.4 percent and a quarter of the population lives below the poverty line. Government debt has steadily expanded to $130 billion, about 50 percent of gross domestic product. At the same time, tax revenues have fallen; government income fell 8.7 percent in June (year to year), more than double the predicted amount. Finally, striking workers and an increasingly feisty opposition worried investors that the government's "zero-deficit budget" was a near impossibility. Those worries resulted in demands for higher bond yields. The fear that Argentina would not be able to repay the $8.4 billion it owed this year caused savers to worry that their money was at risk and they took flight with their capital. Total bank deposits fell by $6.1 billion last month — a drop of 7.2 percent — guaranteeing that the financial system, which savers see as weakened, will only become weaker.

Argentina faces a crisis of confidence. A $40 billion aid package agreed to last year failed to do the trick, and the slide this year has only intensified the concern. Last month, the government announced that it had passed a balanced budget bill and secured refinancing of the $1.32 billion in short-term debt due this year. Those two developments should have taken the pressure off the economy, but investors were not convinced. Even after those deals were announced, one respected index put the risk of an Argentine default at a level that was topped only during the 1995 Mexican "tequila crisis." Nowadays, only Nigerian debt is riskier to hold.