MercoPress. South Atlantic News Agency

Central bank conflict: Argentina’s institutional soundness at stake

President Cristina Kirchner authoritarian style clashes with Congress

Argentina's government filed an appeal this weekend against a court ruling that blocked its plan to use Central Bank reserves to pay debts and ordered the bank president's reinstatement, the Cabinet chief said.

A deepening dispute over President Cristina Fernandez de Kirchner's plan to use 6.5 billion of dollars in foreign currency reserves for debt repayments this year has rattled financial markets and stoked political tensions.

Mrs. Kirchner sacked Central Bank President Martin Redrado by decree on Thursday, but a federal judge ordered he be reinstated a day later. The same judge also issued an injunction blocking the transfer of reserves to state coffers.

“The government, in keeping with the responsibility and respect with which we've handled this issue, has presented its appeals” Cabinet Chief Anibal Fernandez told local television.

The turmoil at the central bank has highlighted political instability in Argentina just as Mrs. Kirchner’s cash-strapped government seeks to charm investors and issue global bonds eight years after a massive default. The sovereign debt swap is expected to be launched later this month.

Mrs. Kirchner has defended the plan to use reserves, and government ministers have accused Redrado of plotting with the opposition to destabilize the government, a charge he denies.

Emboldened by gains in a midterm vote last year, opposition leaders have vowed to try to overturn the presidential decrees that set up the debt repayment fund and ousted Redrado.

They say the episode shows Mrs. Kirchner will go to any length to get her hands on extra state funds in an effort to boost her flagging popularity ratings by hiking social spending in the run-up to the 2011 presidential election.

Legal experts are divided over whether lawmakers or the courts can overturn presidential decrees, but Mrs. Kirchner’s opponents say the decrees are unconstitutional because both measures needed approval from Congress.

Meanwhile Vice-president Julio Cobos, who is leader of the Senate, called on party chiefs to return from summer recess on Monday for a special session on Wednesday of a bicameral commission to look at the use of emergency presidential decrees – called “decrees of necessity and urgency” – such as those used to create the fund and to fire Mr Redrado.

Opposition politicians say there was no “necessity and urgency” in this case since Mrs. Kirchner could have recalled Congress to debate the matter.

Cobos is an opposition politician, who was at first allied with the government, then broke ranks after casting the deciding vote against Mrs. Kirchner’s plan to raise farm export tariffs in July 2008 and is now seen by some as a presidential candidate in 2011 elections.

Néstor Kirchner, Cristina Kirchner’s husband and former president, blasted him at the weekend for leading an anti-government “conspiracy”. Furthermore it is not clear whether opposition lawmakers would heed Cobos’ call to attend Monday’s meeting. Agustín Rossi, a government lawmaker, said Congress could not “summon itself” and only the president could recall legislators from their holidays.

Since mid-term elections last year, the government has significantly lost influence in Congress, however the opposition has been unable to unite or prevent the passing of controversial legislation sponsored by government.

In the midst of the controversy the Judge involved in the case Maria Jose Sarmiento said she was “surprised” by some actions taken by government which could be described as trying “to pressure her”.

“It’s very weird: the government had the Federal Police look for me when everybody knows where I live, where I work. I don’t hide, and furthermore I did not ask for any kind of police custody, having a patrol car in front of my house can be interpreted as some form of pressure”, said Judge Sarmiento who added the government has to wait for the first working day (Monday) to present the appeal.

“Judge Sarmiento refused to receive us at her home and said we had to wait for Monday, when this is a matter of national interest”, complained cabinet chief Fernandez.