Pay cuts blocked in cash-strapped Argentina

BUENOS AIRES, Argentina (CNN) -- A labor judge dealt a setback to the Argentinian government Friday when he ruled that a decree cutting the salaries of government workers cannot go into effect.

Embattled President Fernando de la Rua had issued a decree cutting salaries by 13 percent, part of a package of reforms aimed at getting the Argentinian government out of deficit spending.

Labor Judge Roberto Pompa issued the order protecting government employee incomes and pensions, said a court attorney.

Argentina has $128 billion in international debt, and de la Rua is proposing a "zero deficit" plan where the government spends only what it takes in.

The Argentinian Senate, which is dominated by opposition parties, has been going slow on the package, and securities markets have gone into a downward tumble on worries the nation will be forced into default.

The judge's order was not unexpected. Political observers say presidential decrees are often subject to challenge in the Argentinian courts.

Reuters reported that fears over Argentina's debt intensified after Moody's Investors Service, citing "a significant increase in Argentina's default risk," downgraded the country's credit ratings on Thursday to Caa1 from B3, putting it on the same level as Pakistan and Ukraine.