(National Strike called for Wednesday)

Saturday March 17 4:00 PM ET
Argentine Minister Seeks Support Amid Crisis

By Carlos DeJuana

BUENOS AIRES, Argentina (Reuters) - Argentina's economy minister drummed up crucial support for his new $4.45 billion austerity plan on Saturday as a political and economic crisis threatened to blow the ruling coalition apart.

In a straight-talking speech at the Buenos Aires Stock Exchange, recently appointed Economy Minister Ricardo Lopez Murphy implored business leaders to rally behind his program to rebuild confidence in Argentina's long-stagnant economy.

``The cost of the alternative, paralysis, is a crisis of incredible dimensions,'' Lopez Murphy said.

The plan is President Fernando de la Rua's third attempt to rein in chronically high government spending in his 15 months in office and includes a mix of more spending cuts, tax reforms and a reduction in federal funds for the country's provinces.

But just two weeks after a Cabinet shuffle following the resignation of the former economy minister, six senior officials in the center-left Alliance coalition quit or said they would soon after Lopez Murphy presented his plan to the South American nation on a stormy Friday night.

Most rejected some $900 million in education spending cuts that are part of the two-year $4.45 billion austerity plan.

The mass resignations, most of them from the left-leaning Frepaso wing of the already fragile Alliance, appeared to put the coalition's existence at risk and undercut the crucial support the new measures need to be implemented.

Although most of the measures will be pushed through by decree, their backing by Congress is key.

De La Rua Meets With Advisors

De la Rua met with close advisors on Saturday at his Olivos presidential residence to asses the situation.

The resignations included the interior and education ministers, both from De la Rua's centrist Radical Party, as well as the Frepaso's social action minister, chief of staff, deputy interior
minister and deputy cabinet chief positions.

It was the resignation of Frepaso leader Carlos Alvarez from the vice presidency in October which first detonated a financial crisis that was only quashed with a $40 billion aid package in
December led by the International Monetary Fund.

The new spending cuts are aimed at meeting the $6.5 billion budget deficit target the government has promised the IMF. In Santiago, Chile, the IMF's director for the Western Hemisphere Department Claudio Loser said the package merited domestic and international support.

Frepaso leaders meanwhile said the Alliance remained intact. Between the Frepaso and the Radicals, the Alliance has the biggest presence in the Lower House. The Senate is controlled by
the opposition Peronist Party.

Analysts speculated De la Rua may now have to reach out to the Peronists or former Economy Minister Domingo Cavallo, who runs his own pro-market political party.

Meanwhile, a wing of the General Workers' Confederation union alliance, describing the new plans as ``perverse,'' called a national strike for Wednesday. And Buenos Aires province Gov. Carlos Ruckauf, an influential Peronist leader, said De la Rua had to ``rectify the course he had taken'' over the weekend.

The political turbulence is bad news for De la Rua, who was betting the savings would rebuild investor and consumer confidence in Latin America's third-largest economy and lay the foundations for growth following 32 months of stagnation.

``I think (Lopez Murphy) has the strong support of the business community,'' said Eduardo Escassany, head of the Argentine Banking Association. ``It now depends on the political support and how financial markets interpret the measures.''

Lopez Murphy's moves should save $1.962 billion in 2001 and $2.485 billion in 2002, and enact deep administrative reforms that should save the indebted government $3.5 billion in 2003.

``We have a spending problem,'' said Enrique Crotto, head of the Argentine Rural Society. ``It's this or the abyss.''

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