Argentina’s leader wins support to slash deficit


Burdened by a debt crisis that has rattled emerging markets, Argentine President Fernando De la Rua has clinched critical support from 14 opposition governors for a plan to slash the bloated deficit.

Protests started even as the breakthrough agreement emerged, to be sealed with a signing ceremony Tuesday. Hundreds of unemployed men blocked a highway outside Buenos Aires on Monday. More protests were expected this week, and powerful labor unions announced a national strike on Thursday.

The 14 Peronist Party governors agreed late Monday with the government for the plan to drastically cut public spending. But in a concession, the document allows each province to decide its own method to balance its books.

“We agree on the need to arrive at a zero deficit,” said the president’s Cabinet chief, Chrystian Colombo.

Eleven governors of the president’s fractious two-party ruling coalition, the Alliance, had already given tepid support to the plan. But backing by all parties was seen as essential to put forth unpopular cuts to the 36 million populace already smarting from a long economic downturn.

Investors also see the cross-party support as Argentina’s best chance of regaining international confidence that it can repay nearly dlrs 130 billion in government debt.

“We share the idea” but think every province can reach a zero deficit in its own manner, said Gov. Juan Carlos Romero of the northern province of Salta.

De la Rua was joined last week by Economy Minister Domingo Cavallo in announcing sweeping spending cuts that include a 13 percent reduction of state worker salaries. The austerity plan, the seventh since De la Rua took office in December 1999, also takes aim at reducing government pensions and calls for aggressively combatting tax evasion.

Angered by calls for more popular sacrifice, three of Argentina’s largest unions called for a large-scale strike on Thursday, saying the plan was tantamount to “looting of the pockets of public workers.”

Argentina’s 3-year-old downturn has propelled the jobless rate above 15 percent, the highest in years, business closings are frequent, consumer spending in a funk, and there are no signs of a recovery.

At a routine treasury bill auction last week, Argentina found itself unable to borrow money at anything less than double-digit interest rates, effectively shut out of international credit markets.

Concerns that Argentina would have difficulty meeting its debt obligations sent the country’s stock market tumbling 12 percent.

“We need to reach a zero deficit immediately because no one is going to lend us money,” Cavallo insisted Monday.