BUENOS AIRES — In a move designed to reassure nervous investors, President Fernando de la Rua reached agreement Monday night with the main opposition governors to back a plan that would cut the budget.
The agreement was announced hours after the stock market continued its plunge. The pact's details are to be announced today.
"We have arrived at an agreement in fundamental concepts to arrive at zero deficit," Cabinet chief and lead negotiator Chrystian Colombo told reporters. Salta Gov. Juan Carlos Romero said the pact will be signed today.
The agreement with a group of opposition governors follows four days of talks between the central government and the provincial leaders. De La Rua reached agreement with governors of his own political alliance Sunday night, but governors from the rival party had balked at the severity of the cuts.
It was unclear Monday night whether the agreement would halt the slide of the Argentine stock market, which fell an additional 1.55% on Monday. The market went into free fall last week, creating waves in emerging markets from the Pacific Rim to Latin America.
An agreement with the governors is considered crucial to reassure the markets and to forge local political support. Two of Argentina's largest unions have rejected the austerity measure as unfair to the lowest-paid groups. The cuts include shaving 13% from all government salaries and pensioners who receive more than $300 in monthly benefits.
Union demonstrations against the cuts are planned for Wednesday in the downtown district and union leaders said they were organizing a nationwide general strike Thursday to continue the protest.
Economists say adoption of the so-called zero deficit spending cuts may well be Argentina's last opportunity to avert economic collapse.
De la Rua and his economy minister, Domingo Cavallo, are portraying the plan as Argentina's last chance to avoid "catastrophic consequences": a default on about $128 billion in debt or a devaluation.
In separate talks to businessmen and economist groups Monday, Cavallo promised that the program "would begin to bear fruit" over the next three months in the form of lower interest rates and the "economic reactivation" that would result from cheaper credit.
"We can't take on another peso of debt," Cavallo told a group of bankers and businessmen convened at Argentina's central bank auditorium.
