[stop-imf] Opposition to cuts grows in Argentina

[Robert Weissman]

The Globe and Mail
August 30, 2001

Opposition to cuts grows in Argentina

      Key politicians protest austerity measures

      By Brian Winter, Buenos Aires

Opposition to the Argentine government's last?ditch plan to avoid a debt
default swelled yesterday as key politicians and hundreds of union
protesters lashed out at unpopular measures.

Influential provincial governors said they would oppose President Fernando
de la Rua's plan to help defuse a harrowing financial crisis by slashing the
$1.364?billion (U.S.) the provinces receive each month in federal tax
revenues.

Governors from the opposition Peronist Party - who control most of
Argentina's 23 provinces and wield enormous political clout over legislators
- have vowed to fight any effort by Congress to pass a law needed to modify
the tax transfers.

Mr. de la Rua says the cuts are needed to ease investors' fears that a deep
three?year economic funk could leave the government without cash to pay its
$128?billion public debt.

But the unpopular leader's chances of pushing through the reforms appeared
to darken when an ally from his own ruling centre?left Alliance coalition
said he would oppose reduced funding to the provinces, many of which are
besieged by cash shortages of their own.

"If [the cuts] occur, I will defend my province tooth and nail," said
Governor Angel Rozas of the humid, impoverished northern province of Chaco.

Meanwhile two of Argentina's three largest labour unions led a march in
Buenos Aires waving banners reading "No to spending cuts; No to miser" to
protest the government's decision to cut some public salaries and pensions
by 13 per cent.

Members of two separate wings of the General Workers Confederation set off
fireworks and played drums outside the presidential palace as their leaders
warned the government they were sick of wave after wave of spending cuts.

The government says the cuts are necessary to balance its budget, but the
unions are tired of austerity with a third of the nation's 36 million people
in poverty and unemployment near five?year highs.

Some analysts fear that popular opposition ahead of October legislative
elections could force Argentina to backtrack on its "zero deficit" plan to
convince investors it can avoid a default or currency devaluation by vowing
to spend only what it earns in tax revenues.

Mr. de la Rua said he empathized with the protesters but insisted the
spending cuts were necessary to stabilize the economy and bring down
sky?high interest rates.

"I want the Argentine people to know that the president and the government
understand their worries, their pain, the way people feel about this
recession that has gone on for so long," he said.

Argentina's recession has deepened in recent months amid a roller?coaster
financial crisis that led many investors to dump sovereign bonds and stocks
fearing a total economic meltdown.

A thinktank run by leading Argentine economist Miguel Angel Broda yesterday
said it saw the economy shrinking 1.8 per cent in 2001, singling out the
credit crunch as a main factor.

Financial markets have stabilized in the past week after the International
Monetary Fund promised to provide Argentina with $8?billion in fresh
funding.

Reuters News Agency