MercoPress. South Atlantic News Agency

Argentina: Political support for “zero-deficit”

After days of intense and marathonic bargaining the Argentine government finally managed political support for its zero deficit financial program that should ease international credit conditions and put the country's economy back in track.

The "Independence commitment" as it was officially denominated, convened opposition Peronist governors and President De la Rúa's cabinet to Casa Rosada (Government House), to sign the deal that contemplates cutting salaries, pensions and suppliers bills 13% across the board, from now to the end of the year or until the situation improves.

Peronists governors that dominate the most important provinces in Argentina, were reluctant to give the first step in support of the harsh measures unless the different factions of the ruling coalition openly supported the program masterminded by the controversial Economy Minister Domingo Cavallo.

The signing of the agreement means a more fluid debate in Congress, where Peronist support in the Senate and Deputies is vital. However congressional passage can't be considered automatic since the junior partner of the ruling coalition, Frepaso, and President De la Rúa's rival faction in the Radical Party, that responds to former president Raúl Alfonsín, are not completely convinced about the cuts and are pressing for a greater contribution from "foreign investors".

But even with these question marks ahead, the impact of the deal for the first time in days helped boost a depressed Buenos Aires stock exchange and reduced the country risk-factor which had reached a record breaking 1,626 points.

Powerful Buenos Aires province governor Carlos Ruckauf anticipated cuts in the payroll and others savings that should add to a billion US dollars. Other Peronist governors pointed out that signing the deal did not mean an immediate adherence, and much of it "still has to be decided by Congress". Trade unions announced a 24 hours general strike for this week to protest the salaries and pensions cuts. De la Rúa's administration suggested that if Congress approves the package, the 13% pension cuts will begin at 500 US dollars and not 300 US dollars as currently contemplated.

Argentina, one of the world's leading emerging markets, after almost three years of recession has a foreign debt, (148 billion US dollars), equivalent to almost half its Gross Domestic Product, and honoring payments absorbs almost 40% of its federal 50 billion US dollars budget.