Argentina pursues international help

Spain has declared its support for Argentina

Argentina has called for other governments to help it resolve its financial crisis, just days after interim President Adolfo Rodriguez Saa vowed to suspend payments on the country's $132bn debt and promised to introduce a new currency.

Argentina's economic woes

Public foreign debts of $132bn

Unemployment at 18%

Economy in recession for four years

Savers only allowed to withdraw $250 a month in cash

2,000 people drop below poverty line each day

Pensions to 1.4m retirees delayed

"We are going to seek support from governments," foreign minister Jose Maria Vernet said.

"Once we have the support of the governments we will sit down to start rescheduling the debt."

"Negotiations will not begin directly with the creditors."

Separately, IMF's managing director, Horst Koehler, wrote a letter of support to Mr Rodriguez Saa.

"I wish to assure you, Mr President, that the International Monetary Fund remains ready to work closely with your government to develop a sustainable solution to Argentina's economic problems," Mr Koehler wrote.

Key meeting

Mr Vernet's comments followed a meeting between Mr Rodriguez Saa and the visiting Spanish foreign minister, Josep Pique.

Spain has vowed to back Argentina throughout this crisis, both politically and economically.

"All the Argentinean people must know that Spain is by their side, as in the past the Spanish are aware of having received the support of Argentina," Mr Pique said on leaving Madrid.

But the country must put in place "serious, rigorous, foreseeable policies that respect the rules of the game" to restore the confidence of the international financial system, Mr Pique insisted.

He warned against pursuing "short-term policies for problems that have to be resolved over the medium and long-term".

Spain's reaction to Mr Rodriguez Saa's programme is considered crucial, given that the country is the second-biggest investor in Argentina, after the US.

New currency

Mr Pique's comments followed revelations that Argentina's new currency, the argentino, could be in circulation by the middle of January.

The new currency is central to Mr Rodriguez Saa's economic plan, aimed at lifting the country's economy out of a four-year recession.

The argentino would float alongside the existing peso, and the US dollar to which the peso is pegged.

Argentina's interim government aims to present Congress by the end of the week with a bill seeking to create the currency, presidential legal and technical secretary Luis Luquinos said.

Party split

Mr Rodriguez Saa backed the creation of the argentino following concerns that the mounting debt burden, and flagging economy, had left the country in a severe debt and currency crisis.

An alternative plan of devaluing the peso was rebuffed over its potential for prompting bankruptcy among holders of debt denominated in US dollars.

The adoption of the dollar wholesale was rejected over fears it left Argentina with too little control over its own economy.

The argentino scheme has attracted significant support from Argentines keen to tackle the debt crisis without undermining confidence among international investors needed to boost economic revival.

Devaluation

But critics have included members of Mr Rodriguez Saa's own Peronist party, with former president Carlos Menem preferring dollarisation.

Many financial analysts have said that the introduction of the argentino will anyway amount to devaluation.

Mr Rodriguez Saa has proposed supporting the argentino by backing it with state property, including the presidential palace.

"Argentina is going to back this currency with all its assets, buildings, state land and national state property - Congress, Casa, embassies," Mr Rodriguez Saa said at a meeting with unions.

On the streets of Argentina's towns and cities, large queues formed outside the banks as people were keen to withdraw their cash and invest it in tangible assets.

They did this just in case the argentino's introduction would mark the return for Argentina to hyperinflation, and thereby becoming quickly worthless.