Argentina scraps key economic law

ARGENTINA - Argentine senators have ditched a controversial law that has been putting off international lenders. The IMF has made abolition of Argentina's so-called economic subversion law a condition for lending to the cash-strapped nation to restart.
ARGENTINA - Argentine senators have ditched a controversial law that has been putting off international lenders.

The International Monetary Fund (IMF) has made abolition of Argentina's so-called economic subversion law a condition for lending to the cash-strapped nation to restart.

The country urgently needs new money - as much as $9bn is sought - after its economy's four-year tailspin resulted in a default on $141bn of existing loans in December.

The 1974 law, which gives judges wide powers to investigate banking practices, led to fears that financiers could be made scapegoats for the country's financial crisis.

The senate's decision to repeal the law will be final. The lower house has no power to veto it.

The vote came amid stiff opposition from many senators belonging to the opposition Radical party, as well as some of the ruling Peronist party who were worried it would anger the general public.

Balancing act

Analysts say Argentina is unlikely to pull itself out of its four-year recession unless it secures more IMF loans to shore up its cash-starved banking sector.

Argentina's President Eduardo Duhalde has said that the country's only way to recover is to live up to international agreements and continue to seek help from international money lenders.

The financial crisis has resulted in widespread social unrest, including December's fatal riots, because of rising poverty and unemployment.

The protests have been intensifying again in recent weeks, directed mainly at banking regulations restricting the withdrawal of savings.

Argentina's president and the recently installed economy minister, Roberto Lavagna, face the challenge of finding a balance between satisfying both the IMF and the Argentine people.

Indeed, Mr Duhalde was forced on Thursday to deny market rumours that Mr Lavagna was on the way out.

Angry reaction

President Duhalde's handling of the economic crisis prompted a day of violent protests and strikes on Thursday.

Protestors blocked roads and burned US flags while many state workers were on strike.

The anti-US feeling reflects widespread criticism of Argentina's efforts to bow to the wishes of the IMF.

The IMF has stressed that three targets must be met before it releases more money: changes to the bankruptcy law, changes to the economic subversion law and the implementation of spending cuts by the provinces.

Resentment

Lawmakers have agreed to legal changes aimed at protecting creditors and businesses, which have already suffered heavily from Argentina's debt default and currency devaluation.

But many Argentines are critical of the IMF for demanding protection for foreign creditors while the domestic poverty situation worsens.

The economic subversion law, introduced by Argentina's military government in the 1970s, was originally intended to choke off funding for left-wing opposition groups.

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