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Monday, 30 July, 2001, 18:55 GMT 19:55 UK
Argentina workers angry at austerity bill
Argentine President Fernando De La Rua
President De La Rua wants to cut spending drastically
Unions and opposition groups in Argentina say they are planning further protests against austerity measures that will see the Argentinean people's income slashed.

All salaries and pensions above $500 a month will be cut by 13% in a tough monetary package designed to resolve the country's severe economic crisis.

The cuts are unnecessary, unsustainable and any benefit will only by temporary ... I think we're in for a long recession

Buenos Aires street vendor
The measures were approved by the Senate on Monday, despite protests from workers who have mounted protests on the streets of Buenos Aires and have led a series of strikes, hitting the civil service, hospitals and transport.

The final decision came after nine hours of intense debate by senators seeking to introduce the plans before the start of the working week.

The measures - put forward by President Fernando de la Rua - also include some new taxes and measures to stop tax evasion.

Market relief

But while the news was unpopular with state workers and pensioners, shares on the Buenos Aires stock market rose sharply in early trading, and the value of Argentine Government bonds rose on international markets.

Other countries have also welcomed the measures, including Brazil which has seen its currency lose value by more than 25% because of Argentina's problems.

Trade union protesters
Unions are angry about the cuts
The Argentinean president hopes the measures will help to balance the budget, stimulate economic growth, calm the fears of international investors and avoid default on the country's $128bn (90bn) debt.

Argentina's economic troubles deepened two weeks ago when fears over the country's long term solvency, exacerbated by a three-year recession, caused stocks to plummet.

With unemployment at almost 18%, Argentina is facing what some analysts have described as the worst social crisis in the country's history.

Investors' fears

Investors had been nervously awaiting the bill's passage, which analysts say represents the country's best way of escaping its economic woes.

However, Senator Hector Maya of the opposition Peronist Party said the cuts would have an adverse effect on an already depressed economy.

"Lowering pensions and salaries won't do anything but deepen the recession and generate more unemployment," he told the Senate.

Argentine Economy Minister Domingo Cavallo
Economy Minister Cavallo said Argentina won't default
And some market observers are still worried that a zero-deficit policy will not in itself be enough to reactivate Argentina's economy and the government may actually need a surplus to keep ahead of interest payments on its mammoth debt.

They fear Argentina may have simply delayed the crisis rather than solved the problem definitively.

Public dismay

"We are lost" said Manuel Lopez as he tended his toasted peanut stall in downtown Buenos Aires.

"The (pension and salary) cuts are unnecessary, unsustainable and any benefit will only by temporary ... I think we're in for a long recession," he said.

Many Argentines have found it hard to accept the country's seventh austerity plan since 1999.

Many people blame the crisis in part on massive government corruption during the presidency of Carlos Menem.

Mr Menem is currently under house arrest accused of illegal arms sales to Croatia and Ecuador.

The BBC's Mark Gregory
"The most controversial measure is a 13% cut in salaries and pensions for government staff"
See also:

20 Jul 01 | Business
Argentina softens economic reforms
19 Jul 01 | Business
Argentina's corporate bail-out
17 Jul 01 | Business
Argentine austerity plan backed
12 Jul 01 | Business
Argentina debt sparks foreign fears
20 Jun 01 | Business
Argentine currency fears grow
13 Jul 01 | Business
Argentina minister appeals for calm
20 Jul 01 | Business
General strike paralyses Argentina
06 Jul 01 | Country profiles
Country profile: Argentina
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