: (August 4, 2001 09:40 a.m. EDT ) - The International Monetary
: Fund is moving quickly to try to keep economic troubles in
: Argentina, Brazil and Turkey from worsening, a situation it
: fears would trigger a repeat of the 1997-98 Asian financial
: crisis. [snip]
: A $1.6 billion austerity program approved by Argentina's
: Senate failed this week to calm investor anxiety.

Wednesday August 8 9:30 PM ET

Argentine State Workers Strike to Decry Austerity

By Simon Gardner

BUENOS AIRES, Argentina (Reuters) - Argentine state workers staged a strike on Wednesday, taking to the streets to decry an unpopular austerity drive that slashes salaries as the government implements massive spending cuts.

The strike came amid news of official efforts to seek additional cash from the International Monetary Fund in an effort to head off a debt default.

Argentina's largest state worker labor group, the Argentine workers' confederation (CTA), vowed its strike would paralyze the public sector, bringing schools, hospitals and state-run offices of Latin America's No. 3 economy to a grinding halt.

While television broadcasts showed footage of marches and labor groups said hospital services were running at skeleton staff levels, the government had no immediate comment and the impact of the strike nationwide was unclear.

Meanwhile, groups of unemployed continued a second wave of roadblock protests from Argentina's northern border with Bolivia to Patagonia as thousands of unemployed decried the public spending cuts that also hit some pensioners.

``We are all in the same situation,'' said Marta Maffei, head of the Argentine Confederation of Education Workers (CTERA), which is grouped within the CTA. ``The people are all affected by these cutbacks and by exclusion, misery and poverty. Nobody escapes.''

Civil servants, jobless and university professors marched to the presidential palace in downtown Buenos Aires to voice outrage at the cutbacks in this land with unemployment estimated at 16.4 percent and a third of the population living in poverty.

The cash-strapped government's drive to end deficit spending and slash state salaries and some pensions by up to 13 percent has drawn fierce criticism from Argentine unions who say the poor will suffer the most under the austerity measures.

Argentine markets, which have punished local stocks and bonds in recent weeks amid default fears, are now looking for proof the government will stick to the austerity measures and not buckle in the face of mounting social protest with legislative elections looming in October.

International investors still remain skeptical of Argentina's prospects of clambering out of crisis.

Emerging debt market players see a 45 percent chance of a debt default or forced debt restructuring by the end of the year, according to a Reuters poll of 30 emerging market debt strategists, fund managers and economists based in the U.S. and Argentina. The respondents also saw a 44 percent chance of default in the first half of 2002, a 38 percent chance in the second half of next year and a 35 percent chance the local peso would be devalued.

According to official data in Argentina, however, debt swaps, disbursements from a $40 billion IMF-led aid package sealed in December and other new initiatives will ensure the government can cover its debt payments for the rest of the year.

NEW AID IN WORKS?

Investors are watching for signs of additional financial help to ensure Argentina can continue servicing its $128 billion public debt, fend off any attacks by speculators and try to restore public confidence to stop Argentines from withdrawing their savings.

The IMF has said it will recommend speeding up an agreed $1.2 billion loan disbursement for Argentina, but markets are hoping the government will secure a multibillion dollar financial
cushion.

Local media cited Argentine Treasury Secretary Jorge Baldrich as saying that the government was negotiating between $6 billion and $9 billion in aid with the IMF.

A high-ranking official within the Economy Ministry confirmed that Secretary Baldrich had made the statement.

But Economy Minister Domingo Cavallo has been more tight-lipped on the possibility of new IMF funds.

``(The IMF) has heard us argue that we deserve more help and need more help to fully reestablish confidence, not to finance any provincial or national deficit,'' Cavallo said late Tuesday, unveiling plans to enable Argentines to pay tax dues by buying bonds.

Argentine bonds were firmer on Wednesday, bouncing after recent losses amid market optimism for new aid amid Cavallo's comments, with the benchmark 2008 global bond up nearly 6 percent in early afternoon trade.

Argentina's leading MerVal share index was nearly 4 percent firmer in afternoon trading.

The closely-watched country risk premium the government must pay to entice investors away from safe-haven U.S. Treasuries narrowed 97 basis points to 1,487 basis points -- but that still makes Argentina a riskier bet than fellow emerging markets Brazil, Russia and Ecuador.

International reserves and bank deposits have fallen in recent weeks amid fears of a debt default after a three-year slump. Bank deposits fell 7 percent in July while total international reserves have fallen around 43 percent from the highs of $35.609 billion registered on July 19 last year.

(Additional reporting by Genevieve Wilkinson in New York)

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