MercoPress. South Atlantic News Agency

A sigh of relief

Argentine and regional markets reacted favorably after the Argentine Senate approved an austerity package aimed at balancing the budget, stimulating the economy and bringing some relief to foreign investors who fear the country might default on its 130 billion debt.

The approval came early Monday after nine long hours of debate and behind the scene discussions between president De la Rúa's administration envoys and opposition Peronist Senators who hold 36 of the 72 seats in the higher House.

Peronist Senators agreed to a minimum quorum for the debate to proceed forcing the ruling coalition and some independent members to carry the burden of the unpopular measures that include a controversial across the board public sector salary and pension cuts of 13% plus some additional taxes.

With three years recession, deflation, 18% unemployment and a ruling coalition in shambles, Argentina faces one of the worst crisis in its history. For weeks foreign markets and the local stock exchange have reflected fears about long term solvency and the "country risk" factor reached a record high of 1700 points.

"The austerity package is very poor, mediocre, and lowering pensions and salaries will only deepen the recession and unemployment", said Peronist Senator Hector Macaya. Senator José María García Arecha admitted that 2 of the 21 ruling coalition members did not vote the bill but, "it's up to them and their conscience, we need to put an end to this situation". In the end Peronists did not support the bill but had enough members in the Senate to guarantee a quorum and give the government the majority.

Mr. De la Rúa followed the discussions from the official presidential residence in Olivos while three of his closest aides, Cabinet Chief, Home Secretary and Secretary of the Presidency, were responsible for the discussions with the Peronist opposition.

This is the seventh austerity plan since Mr. De la Rúa took office in December 1999 after ten years of Peronist Carlos Menem. Mercosur presidents congratulated Argentine Congressmen and confirmed their full support to the De la Rúa administration and its "zero deficit budget" target.