Peronists target Argentine austerity plan

Pressure is increasing on Economy Minister Domingo Cavallo

Argentina's Peronist opposition party is preparing to counter an austerity programme introduced in an effort to shore up the country's ailing economy.

The Peronists took control of both houses of parliament in Congressional elections on the weekend.

The party announced its anti-austerity campaign as President Fernando de la Rua returned from a cultural visit to Spain to face concerns from credit experts that he was engineering a debt default.

The Peronists took control of both houses of parliament in Congressional elections on the weekend.

The Peronists announced their intentions as President Fernando de la Rua returned from a cultural visit to Spain to face concerns from credit rating agencies that he was engineering a debt default.

Credit ratings agencies Standard & Poor's and Moody's said a proposed multi-billion dollar debt swap with local banks and pension funds, major holders of Argentina's $132bn public debt, could be classified as a "default".

After a three-year recession and a series of international rescue packages, fears have mounted that Argentina might default on its debt and devalue the peso, causing turmoil in markets across the region.

Peronist moves

Following their election victories, the Peronists are likely to strip Economy Minister Domingo Cavallo of special powers allowing him to by-pass congress in setting taxes and other measures.

Fernando de la Rua: "I'm going to analyse what is needed"

"It would be suitable for Congress to recover these powers after the election and, in this process, debate Argentina's foreign and local debt," said Humberto Roggero, who heads the Peronists in the lower house.

Argentine papers says the party will not wait until the new Congress is sworn in on 10 December, but will confront the government immediately over the draft 2002 budget, repayment of foreign debt and laws delegating legislative powers to the executive.

The Peronists plan to call a lower house session next week.

Presidential welcome

Mr de la Rua returned to Argentina to be greeted by a red "D for default" headline spread across the front page of the Pagina 12 newspaper.

Mr De La Rua said: "I'm going to analyse ... what is needed to assure more cohesion in the government and measures to take to strengthen the economy."

The rating agency warnings are being seen as a setback to his efforts.

The $16bn debt deal is thought to involve swapping high-yielding government debt for lower-rate securities backed with tax collection guarantees or by international lenders.

The International Monetary Fund and the World Bank said they had not been approached for support.

The gloom over Argentina's economy was further clouded by official data showing that industrial production last month was a seasonally adjusted 8.2% lower than in September 2000.