Argentina's De la Rua asks governors for support

De la Rua met with provincial governors in an effort to reach a consensus on economic reforms

BUENOS AIRES, Argentina (Reuters) -- Argentina's President Fernando de la Rua met with provincial governors Sunday to seek support for a package of economic reforms he hopes will revive the country's sluggish economy and open the door to new multilateral credits.

De la Rua, who met with governors from both his center-left Alliance and the opposition Peronist Party, unveiled a slew of measures Friday that seek to progressively do away with the state pension scheme, and reform the retirement and taxation systems, including privatization of some tax collection.

The president also plans to freeze primary federal spending for five years and is asking the governors to do the same in hopes the signs of fiscal austerity will restore waning market confidence in Argentina.

The support of the governors is crucial since they have a heavy influence in the Peronist-controlled Senate.

"This is a key day for us because we need a serious agreement with the governors so that we can give growth a real push," Labor Minister Patricia Bullrich told reporters on her way to the Olivos presidential residence.

Investors have been worried about the country's ability to pay next year's debt obligations after the two years of economic stagnation and recession and have battered stocks and bonds and pushed interest rates to seven-year highs.

"If we don't get a political consensus to quickly pass these measures Argentina will enter into a worse economic situation," Economy Minister Jose Luis Machinea told newspaper Clarin.

The International Monetary Fund has said it supports the measures and is expected to announce an aid package that will allow Argentina to draw on an existing $7.2 billion standby lending facility and add another loan that could amount to billions of additional dollars.

Machinea told Clarin the Inter-American Development Bank, World Bank and foreign governments would also take part in the aid package, although he did not specify the full amount or when it would be officially announced. Local banks and private pensions are also expected to chip in.

"This is reassurance that Argentina has its financing assured. This should clear up any doubts in the market. We are guaranteeing that we can pay our foreign debt," he said.

But De la Rua will have to work to win backing for the reforms from provincial governors, many of whom have already criticized the government for channeling too little money to the poorer regions of this nation of 36 million people.

So far, Carlos Ruckauf, governor of Buenos Aires province and a leading Peronist, has criticized the measures for not doing enough to fix social problems.

But he added: "The president is at the edge of the abyss and we're not going to push him off."

De la Rua won the support of Alliance congressmen Saturday but smaller opposition parties were less enthusiastic in their support, with some preferring to wait for details of the measures before voicing their approval and others promising to only back certain measures.

The Alliance is the biggest force in the lower house Chamber of Deputies but it lacks an outright majority, meaning it is sometimes crucial to win the support of some opposition parties. The Senate is controlled by the Peronists.

Government officials have said they would prefer to pass the measures through Congress put have not ruled out enacting them by decree.

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