Page last updated at 11:19 GMT, Wednesday, 31 March 2010 12:19 UK

Court backs Argentina government's debt plan

Argentina President Cristina Fernandez
President Fernandez has promised to clear Argentina's debts

Court rulings in Argentina have cleared the way for controversial government plans to use central bank reserves for servicing the country's debt.

The rulings overturn opposition efforts to stop President Cristina Fernandez de Kirchner from using $6.6bn (£4bn).

Argentina has $15bn of international debt that matures this year, and a hole in its budget of between $2bn and $7bn.

In January, central bank chief Martin Redrado resigned after a bitter public row with the president on the issue.

President Fernandez says Argentina will benefit from her proposed move and that it will bolster the country's standing in international markets.

But opposition politicians accuse the government of planning a spending spree in the run-up to presidential elections next year.

Lengthy battle

The court decisions were the latest twist in a political battle that began in December last year, when the president issued a decree to transfer some of the central bank's reserves into a government fund.

Mr Redrado refused to co-operate, so Ms Fernandez fired him in another decree. He was subsequently reinstated on the orders of a judge, but resigned anyway at the end of January.

The plan to seize control of the reserves appeared to have failed until earlier this month, when the president issued two fresh decrees ordering the transfer of funds - one for $4.4bn and another for $2.2bn.

These decrees were approved on Tuesday in two separate rulings by an Argentine appeals court, which overturned injunctions obtained by the opposition.

Analysts see the president's efforts to use the central bank funds as a sign of the government's commitment to repay its creditors by all means necessary.

However, some economists fear it could help to stoke Argentina's high inflation rate, which they say has been understated in the government's widely mistrusted official figures and could reach 20% in real terms this year.



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