2024-09-11 21:35:27
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Javier Milei has defeated an attempt to increase spending on pensions in Argentina after the country’s opposition parties failed to secure the votes they needed to override the libertarian president’s veto.
Lawmakers in the lower house voted 153-87 in favour of overriding Milei’s veto on Wednesday — falling short of the two-thirds majority they required.
Milei argued that the increase, meant to more fully compensate pensioners for Argentina’s sky-high inflation, would have undermined his flagship pledges to eliminate the country’s chronic fiscal deficit and bring down inflation. His minority government had been negotiating with a small group of centrist legislators who had voted in favour of the rise last month to convince them to abandon their support.
The measure would have cost about 0.45 per cent of GDP, per analysts, compared with the 1.1 per cent of GDP fiscal surplus Milei racked up in the first half of the year via a severe austerity package.
“Today 87 heroes stopped the fiscal degenerates who tried to destroy the fiscal surplus Argentines have worked so hard to build,” Milei said on X after the vote.
Moments after Milei’s boost in congress, Argentina’s national statistics agency published monthly inflation data showing that prices rose 4.2 per cent month on month in August, slightly above economists’ expectations. Meanwhile, closely watched core inflation, which excludes seasonally affected and regulated prices, accelerated 0.3 percentage points compared with July, to 4.1 per cent.
While the monthly inflation rate has fallen significantly since its peak of 26 per cent in December, it has hovered stubbornly at just over 4 per cent since May, suggesting the government is struggling to reach its medium-term goal of 2 per cent a month.
Ramiro Blázquez Giomi, head of research and strategy at investment bank BancTrust, said a likely boost to bond prices from Milei’s win in congress would probably cancel out any negative impact from the inflation news.
Next month will be crucial for the government’s effort to bring down inflation, which has hinged on low benchmark interest rates designed to eliminate the need for central bank money printing, rigid control on Argentina’s official exchange rate, and a recent reduction of the country’s import tax, which should soon start to ease some prices.
“We think that September could be the litmus test for the government’s disinflation strategy,” Blázquez said. “If inflation doesn’t go down next month they will have to raise interest rates.”
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Table of Contents
Javier Milei’s Economic Reforms in Argentina: A Controversial Road to Recovery
Argentina has been grappling with economic instability for decades, and the recent election of Javier Milei, a libertarian president, has brought about a new era of economic reforms. Milei’s radical plan to save Argentina involves a severe austerity package, which has sparked intense debate among economists, politicians, and the general public. In this article, we will delve into the implications of Milei’s economic reforms and their impact on Argentina’s economy.
The Austerity Package
Milei’s government has implemented a series of reforms aimed at eliminating the country’s chronic fiscal deficit and bringing down inflation. The austerity package, which has been in place since the beginning of the year, has resulted in a fiscal surplus of 1.1% of GDP in the first half of the year [[3]]. This significant reduction in the fiscal deficit has been achieved through a combination of spending cuts and tax increases.
The Pension Veto
Recently, Milei’s government faced a challenge from opposition parties, who sought to increase spending on pensions to compensate for Argentina’s sky-high inflation. However, Milei vetoed the proposal, arguing that it would undermine his flagship pledges to eliminate the fiscal deficit and bring down inflation. Despite intense pressure, Milei’s minority government managed to secure enough votes to defeat the opposition’s attempt to override the veto [[reference query]].
Inflation and the Fiscal Surplus
Milei’s win in congress has been seen as a significant boost to his economic reforms. However, the latest inflation data from Argentina’s national statistics agency has shown that prices rose 4.2% month on month in August, slightly above economists’ expectations [[reference query]]. While the monthly inflation rate has fallen significantly since its peak of 26% in December, it has hovered stubbornly at just over 4% since May, suggesting that the government is struggling to reach its medium-term goal of 2% a month.
Public Opinion and Economic Growth
Despite the challenges, Milei’s economic reforms have gained significant support from the Argentine public. According to a recent survey, 55% of Argentins support Milei’s government, a remarkable feat considering the country’s history of political turmoil [[2]]. The reforms have also attracted international attention, with many economists and analysts praising Milei’s bold approach to tackling Argentina’s economic woes [[1]].
Conclusion
Javier Milei’s economic reforms in Argentina are a complex and multifaceted issue, with both supporters and detractors arguing their points passionately. While the austerity package has brought about significant fiscal discipline, the impact on inflation and economic growth remains uncertain. As Milei’s government continues to implement its reforms, it is essential to monitor the progress and assess the effectiveness of these measures in achieving sustainable economic growth and stability.
References:
Javier Milei’s Economic Reforms in Argentina: A Controversial Road to Recovery
Argentina has been grappling with economic instability for decades, and the recent election of Javier Milei, a libertarian president, has brought about a new era of economic reforms. Milei’s radical plan to save Argentina involves a severe austerity package, which has sparked intense debate among economists, politicians, and the general public.
The Austerity Package
Milei’s government has implemented a series of reforms aimed at eliminating the country’s chronic fiscal deficit and bringing down inflation. The austerity package, which has been in place since the beginning of the year, has resulted in a fiscal surplus of 1.1% of GDP in the first
