President Fernando de la Rua and his economy minister unveiled bold measures to cut government spending and impose fiscal responsibility, in a bid to meet foreign debt obligations, provoking the ire of labour unions.
Declaring that 'the current situation is impossible to maintain,' de la Rua vowed in a nationally broadcast speech late last night that Argentina would 'spend only what it earns.'
He declared war on tax evasion and said he had appointed judges to investigate those suspected of withholding more than $1m. Big tax cheats, he added, will be considered 'criminals of the worst kind.'
'We must meet the challenge of the hour. I am calling once again for unity of all Argentinians. Mutual understanding, support, patriotism are the basis for moving forward,' said de la Rua, who appeared with his entire cabinet, top aides and legislators.
Economy Minister Domingo Cavallo announced salary and pension cuts for government employees. Cabinet chief Chrystian Colombo said monthly salaries and pensions for public officials earning more than $200 would be cut between 8% and 10%.
Cavallo said the cuts were temporary and would not affect social programmes or the private sector. He said the measures were designed to achieve 'zero deficit' growth in the second half at a national level, and called on
provincial governments to work toward the same goal.
Argentina's three main labour unions, however, promptly rejected the measures, which some union officials called 'brutal and recessionary' and incapable by themselves to revive the economy.
Cavallo said that despite predictions of a $1.5bn national deficit in the next six months, Argentina would not seek further loans because interest rates were too high.
The statement came the day after Buenos Aires was forced to offer more than 14% interest - significantly higher than in the past - when it sold $850m in bonds.
Analysts warned Wednesday that Argentina was in danger of defaulting on debt payments as its stock markets plunged again and its deepening financial woes showed signs of infecting other emerging markets in the region.
