Argentina's economy minister quits

Domingo Cavallo: Happy to be back

By James Reynolds in Buenos Aires

Argentine Economy Minister Ricardo Lopez Murphy has resigned just three days after he announced a series of economic austerity measures.

Mr Lopez Murphy had only been in the job two weeks, and his resignation is the latest step in an intensifying political crisis for President Fernando de la Rua.

De la Rua abandoned the controversial austerity plan

President de la Rua confirmed that his former opponent, Domingo Cavallo, was to get his old job back and join the administration as economy minister.

The president also confirmed that Mr Lopez Murphy's austerity programme - $8bn of public spending cuts over three years - would now be abandoned.

In its place, he said, Mr Cavallo would present his own austerity package. The new plan is not expected to affect education spending, the target of severe cuts in Mr Lopez Murphy's measures.

Asked by reporters if he was still in control, Mr de la Rua replied: "The president is at the head of the government."

It is thought that Mr Cavallo will be sworn in later on Tuesday along with the rest of the cabinet.

It's been reported that a number of ministers who resigned last week in protest at Mr Lopez Murphy's austerity package may now rejoin the government.