Argentina Governors Reject Austerity Plan

In a bruising blow to President Fernando de la Rua, opposition-led Argentine provinces rejected an austerity plan seen as key to securing international support for a record debt swap.

De la Rua, battling to end a three-year recession and avert a default on Argentina’s $132-billion debt load, desperately needed a budget pact ahead of a crucial trip to New York to have any chance of winning help in restructuring the nation’s debt.

But the influential Peronist provincial governors said a government proposed deal to cut their share of tax funding was unacceptable, leaving the embattled De la Rua empty-handed ahead of a Sunday meeting with President Bush.

A deal would show investors his unpopular and divided center-left government has the political mettle to meet its promises to end deficit spending--a condition for International Monetary Fund aid to back a swap of much of the nation’s debt for lower interest rate loans.

U.S. National Security Advisor Condoleezza Rice said Argentina must carry out plans to end deficit spending “to make its situation sustainable.”