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President Kirchner fires central bank chief over debt repayments

Argentine President Cristina Kirchner has sacked the head of the country's central bank, Dr Hernan Martin Perez Redrado (pictured), for refusing to use foreign currency reserves to pay off part of the national debt.


AFP - Argentine President Cristina Kirchner signed a decree Thursday ordering the removal from office of the head of the central bank in a bitter showdown over payments on the country's national debt.

"The president of the central bank, Dr Hernan Martin Perez Redrado, has been removed from office for misconduct and having failed in his official duties," the decree stated.

Kirchner took the action after Redrado rejected her demand that he step down, invoking the bank's autonomy from the executive branch under a charter that gives only the Congress power to remove a sitting central bank president.

Kirchner's control over Congress has weakened since mid-term elections last year, apparently prompting her to launch a direct challenge that could end up being decided by the courts.

The decree, signed by Kirchner's entire cabinet at an emergency meeting she convened in her office, said central bank vice president Miguel Pesce will provisionally take over Redrado's functions as of Friday.

The confrontation stems from Redrado's refusal to hand over 6.59 billion dollars from Argentina's foreign currency reserves to pay off part of a 13 billion dollar payment of the national due this year, after the president ordered him to do so.

Kirchner called for the money to guarantee debt payments, part of an effort to end Argentina's isolation from global credit markets in the wake of its 2001 default.

Redrado had sought to investigate all the possible legal consequences of such a decision.

In defying the presidenti's demand on Wednesday that he resign, Redrado said he would remain in his post "to guarantee, as we have done in the last five years, monetary and financial stability."

After the decree was announced, Redrado huddled with lawyers "to study his options," a spokesman told AFP.

While opposition lawmakers and economists have backed Redrado, bankers and unions urged him to step down.

Several constitutional experts defended the central bank's autonomy and criticized the Kirchner's decree dismissing Redrado.

"The decree's constitutional worthiness is questionable," said Gregorio Badeni, adding that Redredo could make a strong case for himself in a court of law.

Felix Lon went further, saying "the Central Bank is being trampled... this is an extremely delicate issue from the institutional standpoint."

"Evidently (Kirchner) is letting herself in for a political trial," Lon added.

Opposition lawmaker Elisa Carrio agreed: "We're dealing with an obvious power conflict" in which Redrado should stand his ground and defend his office in court.

"There's a whole lot of irrationality in all this," she said.

Redrado became president of the central bank in 2004 under the government of Nestor Kirchner, the husband of the current president, and his mandate was due to expire in September this year.

The government has offered his post to Mario Blejer, who led the central bank under the government of Eduardo Duhalde, in 2001-3, during one of the country's worst economic crises.

Although Argentina now has a long-running fiscal surplus, it cannot borrow freely in international capital markets due to lingering investor mistrust and because it still has to settle with bondholders who boycotted a previous debt restructuring in 2005.

A new debt-swap offer that would reimburse 45-75 percent of some 20 billion dollars held by US creditors is about to be presented in New York, but a major debt-holding group has already deemed it "unacceptable."

Argentina faces maturing debt repayments totaling 13 billion dollars in 2010, while the central bank reserves hold more than 48 billion dollars.

Argentina repaid 20 billion dollars in 2009, but the rate of growth in government income has slowed down due to the global economic crisis.

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