MercoPress. South Atlantic News Agency

Support from World Bank.

World Bank vicepresident David De Ferranti reiterated this weekend in Buenos Aires the bank's support to Argentina's austerity package which targets zero deficit, and added that “the De la Rúa administration is moving in the right direction”.

"Argentina is capable of honouring its commitments", said Mr. De Ferrenti adding that the World Bank will continue to boost the special financial support fund agreed last December, which amounts to 40 billion US dollars. "The zero deficit target will recover and ensure solvency", indicated Mr. De Ferrenti who stressed that "we trust the current administration's commitment to make the package work". The World Bank official made his remarks during a press conference after meeting president De la Rúa and Economy Minister Domingo Cavallo. The zero deficit tax enforcement measures and spending cuts could mean reducing civil servants salaries and pensions up to 13% in the coming months.

Bankers appeal for action

Hernán Somerville, president of the Chilean Banks Association renewed its appeal to government and Central Bank officials to "follow closely the evolution of the Argentine crisis", insisting that is was vital to take "all necessary measures" to avoid the US dollar from shooting up in local markets. "We went through something similar in the '98 crisis, it's vital we support local companies that are exposed to an increasing dollar situation. Central banks all over the world react to these situations and we have sufficient reserves to contain uncertainty", said Mr. Somerville. Last Friday the US dollar reached an all time record of 668 Chilean pesos, and was privately trading close to 672 pesos. This means the Chilean peso so far this year has depreciated 6,54%, almost the twelve months target. "We can't remain indifferent, strong action is needed because the weakening of the peso was not expected", indicated the president of the Banks Association. Mr. Somerville is concerned the current peso-dollar situation could trigger inflation and also warned that resources are being invested in US dollars and not in boosting domestic demand to help the economy recover, "Chile's main problem". All fuel prices increased this Monday in Chile as a consequence of the strong dollar demand.

Menem blasts Cavallo

"Argentina is being destroyed", said former president Carlos Menem to a local radio, talking with journalists for the first time since he was jailed. "We're isolating oursel