Argentine lawmakers defeat Duhalde

Staff of a foreign bank protest at losing their jobs

Argentine lawmakers have rejected President Eduardo Duhalde's appeal for legal changes demanded by the International Monetary Fund (IMF).

The Argentine Congress held a special session on Thursday after the president threatened to resign unless the lower house repealed the law on economic subversion.

The IMF wants the law overturned before it will approve any new loans.

"The president told lawmakers he was fed up," said presidential spokesman Eduardo Amadeo. "He wasn't going any further without their support."

Defeat

But the lower House threw out the president's appeal to ditch the clauses on financial crimes which the IMF considers create a risk of prosecution for foreign banks.

Either everyone supports me here or there is no solution for this

Eduardo Duhalde

The president has not yet responded to the defeat.

"The changes that were approved came from the (opposition) Radical Party," said a pro-government legislator.

Government supporters in the legislature have reportedly said they do not yet know what the legal implications of the new clauses that were approved are likely to be.

Mr Duhalde also faces problems within his own Peronist party, particularly from powerful provincial governors who are reluctant to implement budget cuts.

Tough talk

According to La Nacion newspaper, Mr Duhalde told Radical Party leaders by telephone ahead of the vote: "Either everyone supports me here or there is no solution for this...there was a pact and, if you do not all comply with it, I cannot continue."

The paper's view is that Mr Duhalde is now engaged in extreme brinkmanship.

Argentina has been plunged into financial crisis since it defaulted on $141bn of foreign debt and devalued its currency.

Social unrest is on the rise again

Rising inflation and a freeze on the withdrawal of savings from banks have led to months of street protests - and a widespread strike on Thursday.

Earlier this month, Congress approved a controversial bankruptcy law which the IMF had demanded.

But the IMF also wants an end to the economic subversion law, passed in 1974 to block funding to leftist guerrillas, because it fears the law gives prosecutors too much power to act against banks on vague charges.

President Duhalde has said that Argentina's only chance of recovery is to live up to international agreements and continue seeking help from international money lenders.

Balancing act

Argentina's president and the recently-installed economy minister, Roberto Lavagna, have the task of finding a balance between satisfying both the IMF and the Argentine people.

It is unlikely that Argentina will be able to pull itself out of its economic disasters without fresh IMF funds, analysts say.

But the unpopular moves demanded by the IMF may end in yet another government being ousted, they say.