Argentine Leader Moves Against Court and Banks
By Alistair Scrutton
BUENOS AIRES, Feb. 4 -- President Eduardo Duhalde moved today to block
the Supreme Court from derailing his freshly announced economic plans while
government defended the embattled Argentine currency by effectively stopping banks from using U.S. dollars.
The government prohibited Argentines from going to court to take advantage
of the Friday court ruling, which overturned a freeze on bank savings that
implemented two months ago to stop a potentially disastrous run on banks. On another front, Congress expedited action to fire Supreme Court members, whose
ruling Duhalde said was tantamount to "blackmail" by judges who are being probed for alleged corruption and cronyism.
Duhalde's government told banks to convert their dollars into devalued
pesos -- the latest move to squash Argentines' use of dollars. The U.S.
currency has been
employed by most savers and debtors over the past decade, when the peso was pegged one-to-one to the dollar. Both savers and banks stand to lose billions of
But Duhalde contends scrapping Argentina's twin exchange-rate system
to fully float the peso is key to turning around a brutal recession. He
must stop Argentines
from a massive buying of dollars -- a safe-haven currency in Latin America -- that would spark the peso's collapse.
Argentines, with no faith in local currencies after decades of devaluations
and inflation, have lined up at banks to buy whatever dollars they can.
That has led the peso
to lose 50 percent of its value in a month on the floating foreign exchange market.
The government announced Sunday that billions of dollars in accounts,
including many people's life savings, would be forcibly converted into
pesos, a move long
feared by middle-class depositors who have increasingly taken to the streets to protest, causing two presidents to resign.
A depositor with $100,000 in the bank will be given pesos worth about
$66,000 on the exchange market. If the money is in a fixed-term account,
the depositor may
not get all of it back until 2005 because of a freeze on some accounts.
To appease angry savers, banks are being told to shoulder more of the
burden. Banks will give depositors 1.4 pesos for each dollar but will receive
one peso per
dollar in loan repayments.
The Supreme Court ruling and weak peso have added to growing troubles
for Duhalde, the fifth president since December, who is battling to end
a slump that has
sparked riots and mob attacks on legislators, and led to the world's biggest sovereign debt default.
But the government moved quickly on the political offensive. The congressional
commission probing the judges said it could force members out within 20
Usually the process can take up to two months.