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Thursday, 2 August, 2001, 09:14 GMT 10:14 UK
'Give us a chance' says Argentina
Unemployed Argentineans protest
Argentina's crisis has hit the poor hardest
Desperate to stave off an economic and financial crisis, Argentine Economy Minister Domingo Cavallo has appealed to the world to "give us a chance".

The Argentine stock market fell by more than 4% on Wednesday, and bonds sagged to their lowest point since President Fernando de la Rua took office in December 1999, as investors became increasingly convinced that Argentina would default on its debt.

Meanwhile, Argentine state employees protested against a severe austerity package - passed on Monday - which aims to cut their pay.

Speaking at a news conference, Mr Cavallo admitted that July had been "a very difficult month", but appealed for understanding both from Argentines and the international community.

Argentine economy minister Domingo Cavallo
Cavallo: Appealing for calm
"Let's bring down the forces that generate instability," Mr Cavallo said, without specifying what those forces were.

Mr Cavallo pointed out that Argentina had garnered support in the last few days from a raft of foreign leaders, including US President George W Bush, Brazil's President Fernando Henrique Cardoso, and Tony Blair, who this week became the first British prime minister ever to visit Argentina.

Things fall apart

Despite the passage of the austerity plan, Argentina's crisis has intensified this week.

On Wednesday, the treasury announced that tax receipts in July fell by 8.7% year-on-year, as taxpayers hoarded their money in anticipation of harder times ahead.

And thousands of Argentines demonstrated against the austerity plan on Tuesday, blocking roads all over the country.

A demonstrator in Argentina
The austerity plan has sparked protests
On Wednesday, the Argentine Association of State Workers (ATE) announced an indefinite strike.

Federico Sturzenegger, secretary of economic policy, said that salary cuts might have to be as deep as 20% to meet the government's target of abolishing the budget deficit.

In a sign of the increasing tightness of the financial system, the state of Buenos Aires introduced a new form of artificial currency, the patacon, in order to pay some of its bills.

And according to Argentine newspaper Clarin, some $11bn in foreign investment-fund money has already been bet on a default or devaluation from Argentina.

Contagion worries

Argentina's crisis is far reaching.

After a three-year recession and a series of domestic and international rescue packages, recent months have seen increasing speculation that the government might have to devalue the peso - currently pegged against the US dollar.

The resulting collapse in Argentine financial markets has raised fears of global "contagion" across developing economies, similar to the fall-out from the Russian economic crisis of 1998-99.

Economic policymakers have been keen to argue that the danger of contagion is less now than it was in 1998.

Speaking on Thursday in Sydney, World Bank President James Wolfensohn said that he did not expect worries over Argentina to spread to Asia.

"I do not predict a crisis, but if one was to occur Asia is distinctly much better off," Mr Wolfensohn said.

But markets have still been nervous.

Some developing world currencies dropped against the US dollar on Thursday morning.

And the Spanish stock market, the exchange most exposed to the Latin American economy, opened 0.5% lower.

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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