Argentina president in crisis talks

Economic proposals were met by protests

Argentine President Eduardo Duhalde is holding crisis meetings to put together a new cabinet after the resignation of the economy minister and other officials.

Jorge Remes Lenicov - Argentina's fifth economy minister in as many months - stepped down after Congress refused to consider emergency legislation to prevent the banking system from collapsing.

The president understood that social peace was in jeopardy and decided to undertake a general review of his strategy

Anibal Fernandez, presidential aide

His proposals to convert people's savings into government bonds in order to prevent banks from running out of money triggered widespread protests across the country.

Banks remain closed and there are growing fears of a return to the violent unrest which shook the country in December and forced the then President Fernando de la Rua to step down.

After meetings with congressional, provincial and union leaders, Mr Duhalde is expected to announce a major government reshuffle as well as new emergency plans, reports from Argentina say.

'Mafia bonds'

"The president understood that social peace was in jeopardy and decided to undertake a general review of his strategy," Anibal Fernandez, a presidential aide, said on television.

The government is hoping its new economic programme will give it a better platform to negotiate with the International Monetary Fund.

Remes Lenicov failed to secure IMF aid

Lending was cut off in December when Argentina defaulted on its debt repayments, and Mr Remes Lenicov failed to secure new loans during meetings with the IMF last weekend.

He also failed to win political backing for his plans to end the run on the country's banks.

Congress refused to consider the package, which would have allowed Argentine banks to convert about 60% of deposits into government bonds - in effect forcing people to lend money to a government they do not trust to pay up.

Protesters who gathered outside the upper house of Argentina's parliament responded by dubbing the proposed securities "Mafia bonds".

The crowd cheered upon learning that the Senate had refused to debate the bill, and cheered again when they heard that Mr Remes had resigned.

More protests are expected on Wednesday, when legislators convene to debate the economic crisis.

President 'weakened'

Banks have been ordered to remain shut until Friday, when Congress is due to have completed its debate of the proposed legal changes.

President Duhalde is to announce a new cabinet

The bank closures were ordered to prevent panic withdrawals by account holders who, rightly, feared that high-level talks to restart aid payments to Argentina would fail.

President Duhalde has warned that the run on banks could lead to the collapse of the country's banking system.

The move to close the banks partially succeeded, in that the withdrawals were indeed stopped.

But the public mood turned sour when Mr Duhalde promised the International Monetary Fund that he would push ahead with economic and legal reforms and a serious belt-tightening exercise.

Analysts say the latest turmoil has left President Duhalde in a weakened position, dependent on securing the support of the country's powerful provincial governors.