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Saturday, 14 September, 2002, 04:49 GMT 05:49 UK
Argentine savings restrictions quashed
Angry Argentines
People are frustrated by the lack of access to accounts

A court in Argentina has ruled that a series of emergency banking restrictions designed to protect the financial system are unconstitutional.

Last December, the government drastically limited access to savings to stop a run on bank deposits, and then earlier this year it converted all dollar savings to pesos.


In strictly legal terms, the issues are clear - in an attempt to protect the nation's banks from collapse, the government decided to fence off people's savings

Banking analysts say that if the higher courts confirm the ruling, it could be enough to collapse the entire financial system.

But the government has promised to appeal.

The game of brinkmanship between the courts and the government is the way one analyst described the legal battle over the validity of the government's banking restrictions.

But in this game, he said, it is the future of the entire nation's financial sector that is at stake.

Significant loss

In strictly legal terms, the issues are clear - in an attempt to protect the nation's banks from collapse, the government decided to fence off people's savings.

And to make sure the banks had the capacity to honour those savings, the government ruled that all dollar deposits had to be converted to pesos, a conversion that cost billions in the paper value of those savings.

Finally, the government severely limited the public's ability to get at their money by appealing through the courts.

But now, a court has judged all three measures to be unconstitutional.

It is not the first time the government has lost a case like this, but this one is significant because it was brought by the ombudsman on behalf of all savers.

Impeachment

The government will appeal and, until the appeals process is complete, the status quo remains in place.

But this also seems to be more than just a legal battle. The Congress has begun impeachment proceedings against the Supreme Court over allegations of corruption, and some observers believe this latest ruling is the court's attempt to strike back.

To complicate matters even further, it also undermines the government's attempts to sign an aid package with the IMF.

The fund has repeatedly said it is unwilling to lend more money unless the future of the banking system is secure. This latest judgment just made it even shakier.


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19 Dec 01 | Business
13 Sep 02 | Americas
06 Sep 02 | Business
19 Jul 02 | Country profiles
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