BBC

Saturday, 17 March, 2001, 17:24 GMT Spending cuts spark Argentina crisis

Mr de la Rua says the measures are needed to restore growth Three cabinet ministers have resigned in Argentina in protest against an austerity programme that aims to combat the country's recession.

They include the powerful Interior Minister, Frederico Storani, and other members of the left-wing Frepaso, which is the junior partner in Argentina's ruling coalition.

Mr Storani stepped down shortly before Economy Minister Ricardo Lopez Murphy announced nearly $8bn of spending cuts to be implemented over the next three years.

It is the second cabinet crisis in less than a month for President Fernando de la Rua, whose administration has so far failed to bring about a recovery from the long slump.

Resignations

Two other cabinet ministers and a presidential aide resigned on news of the adoption of the programme, which analysts say will hit the country's working class because of its deep cuts in social spending.

Minutes after Mr Storani stepped down, he was followed by Social Development Minister Marcos Makon, Education Minister Hugo Juri and Ricardo Mitre, general secretary of the presidency.

Mr Storani is known as the key architect behind the ruling coalition that includes the centre-left Radical Civic Union and the Frepaso group.

"We cannot stay in the government a second longer," Anibal Ibarra, the mayor of Buenos Aires and a leader of Frepaso, said.

"There are a number of measures which we don't agree with and which are going to create a great deal of conflict," he added.

The economy minister made no mention of any resignations during his nationally televised news conference held to announce the austerity plan.

"Abandoning convertibility would have been a mistake of unthinkable proportions" Mr Murphy said as he presented the measures.

Recession

Earlier, in an address to the nation, President de la Rua called the proposed measures "exceptional" but argued they were needed to "restore economic growth".

He also urged lawmakers, labour unions and the Argentinian business community to unite by reaching a "historic agreement" aimed at saving the country.

The measures follow a 33-month recession that shows no signs of easing, with unemployment near 15% and the country saddled by a ballooning deficit.

Argentina is an enormous borrower of foreign money - the largest in Latin America.

The country's total foreign debt is $120 billion, close to 50% of the country's GDP.

In October, investors' concerns that the country would have trouble making its dept payments sparked a financial crisis that lasted for months.

-- Rachel Gibson (rgibson@hotmail.com), March 17, 2001