Government - New Argentinian government announces tough austerity program
As announced during the election campaign, the new Argentinian government of ultra-liberal President Javier Milei has announced a tough austerity program. The federal government will no longer put public construction projects out to tender and will cancel contracts that have already been awarded but not yet started, said Economics Minister Luis Caputo.
Transfer payments to the provinces will be reduced to a minimum and subsidies for energy and local public transport will be cut. Caputo also announced a strong devaluation of the national currency, the peso.
"In Argentina, we spend more than we earn. Financing this deficit leads to problems. If you finance it through the printing press, the peso loses value," said the new Minister of Economy. "We have come to tackle the root of the problem. We have to cure the addiction to the budget deficit."
Many plans postponed or watered down
Milei was defended as Argentina's new president on Sunday. He had won the election with radical demands for an economic and political turnaround. He announced that he would introduce the US dollar as legal tender, abolish the central bank and many ministries and drastically cut social spending. He has since softened his tone considerably and postponed or toned down many of his original plans.
Argentina is in the midst of a severe economic crisis. The inflation rate is over 140 percent and around 40 percent of people in the once rich country live below the poverty line. South America's second-largest economy is suffering from a bloated state apparatus, low industrial productivity and a large shadow economy that deprives the state of many tax revenues. The national currency, the peso, continues to lose value against the US dollar and the mountain of debt is constantly growing.
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Source: www.stern.de
