From: Walter Lippmann <[EMAIL PROTECTED]> Still not enough austerity to satisfy the free market. (read to the last paragraph) ___________________________ Published Tuesday, July 31, 2001 in the Miami Herald Angst grows in Argentina The market rallied, then fell on news of Senate-approved budget cuts. By JANE BUSSEY [EMAIL PROTECTED] BUENOS AIRES -- Dashing local hopes of immediate financial relief, international markets offered a cold shoulder Monday to the news that the Argentine Senate had approved a drastic economic austerity program that is intended to protect the country from defaulting on its debts. Stock and bond prices rallied and then fell on the news that the Senate had approved a package of budget cuts and prices hikes intended to lower the federal budget deficit to zero. The measure puts the government on a cash basis; it can pay salaries and expenses only with the revenue it takes in from fees and taxes. Salaries will be cut by about 13 percent and gasoline prices will rise about 40 cents to nearly $5 a gallon. The new budget plan was a measure that financial task masters at the International Monetary Fund in Washington and on Wall Street had insisted was necessary to recover credibility, but analysts here agree it is not enough to completely ward off the threat of default. Argentina is short at least $8 billion to service its debt, estimated at $130 billion for the federal government and almost $200 billion if all loans to provinces and private companies are included. This is the seventh round of austerity measures and the third big effort in 12 months to patch together a financial rescue package. The latest tensions centered on the refusal last week by both opposition senators and members of President Fernando de la R�a's own party to hold a special session and approve the zero-deficit plan, a condition for any more aid or loans. Shortly before dawn Buenos Aires time, exhausted senators from De la R�a's alliance acquiesced to dire warnings of imminent chaos and financial upheaval and voted for the package. De la R�a's political operators twisted the arms of senators from the opposition Justicialist Party, which holds the majority and traces its roots to former President Juan Domingo Per�n. ``Credit crises are solved when confidence is restored,'' said Chrystian Colombo, head of De la R�a's cabinet. ``Confidence has deteriorated because we have had three years of recession.'' The final 26 to 18 vote was hardly a ringing endorsement for De la R�a. Senator Leopoldo Moreau from De la R�a's own Uni�n C�vica Radical berated Economics Minister Domingo Cavallo for his handling of the economy in the early 1990s. Cavallo, who won a mere 10 percent of the vote in the 1999 presidential elections that voted De la R�a into office, was brought back in March by the president to run the economy. ``Cavallo is the one mainly responsible for the overwhelming budget deficit,'' said Moreau, who warned that the markets would ``be back'' to demand more sacrifices in Argentina. But Colombo told a news conference with foreign journalists that to talk of weakness in a government that gained congressional approval of an austerity law and taken other tough measures ``was not very objective.'' ``Have we failed to comply with any of our commitments?'' Colombo asked. Colombo also tried to dismiss talk that the government would postpone Oct. 14 legislative elections, which are expected to spell a big defeat for candidates in de la R�a's alliance. ``There is no reason to postpone the elections,'' he said. ``Problems with democracy are cured by more elections, not less.'' Economists here fault the current and previous governments for increasing public spending by 80 percent in the past 10 years, while economic growth has been only 45 percent. The Senate approval alleviated the pressing political problem facing de la R�a: he could not even drum up support for his latest austerity plan in his own alliance. Now that the package is law, it cannot be overturned by a federal judge. But de la R�a has only bought time on one out of many fronts his beleaguered government faces, political and economic analysts said. ``The market goes day by day,'' said one financial analyst in Buenos Aires, who did not want his name used. ``Tomorrow there will be social tensions.'' Groups of unemployed and labor activists are scheduled to block highways today, although they have pledged not to disrupt access to the capital, where the country's economic activity is concentrated. _________________________________________________ KOMINFORM P.O. Box 66 00841 Helsinki Phone +358-40-7177941 Fax +358-9-7591081 http://www.kominf.pp.fi General class struggle news: [EMAIL PROTECTED] subscribe mails to: [EMAIL PROTECTED] Geopolitical news: [EMAIL PROTECTED] subscribe: [EMAIL PROTECTED] __________________________________________________
