To truly understand the Argentina Crisis you mustfirst know what has happened with their government within the past two years. Argentina has been in a terrible recession for the past four years. IN December 1999 newly elected president Fernando De La Rua vowed to restore the economy. Then the budget was not looking so good. Economy minister, Jose Luis Machina predicted the budget to over shoot the 5.2 billion dollar target by 10%.
In March Machina said forget this and quit, to be replaced by Ricardo Lopez Murphy. Murphy steps right in presenting a tough 4.45 billion dollar two year austerity program with deep cuts in education. Distraught by these policies six government officials quit in protest and force Murphy to resign.In March 2001 Domingo Cavallo a former economy minister is appointed to try to restructure the economy. In the past two years Argentines have seen way too many faces slide through offices. This caused people to start to lose trust and hope in their government.
Soon after Cavallo's appointment the stock market crashes and three rating agencies slash Argentina's credit ratings. In July 2001 Murphy's austerity bills are passed. Slashing state salaries and pensions by 13% and forcing an end to budget deficits. Argentines trust in their government is now completely lost. In November of that year people withdrew almost 1.3billlion dollars from their bank accounts. This worried Cavallo, so he ordered a restriction on the amount of money the pubic is allowed to withdraw from their bank accounts.
This was also done to help out the banks. The pension funds that were taken are now being transformed into treasury bonds or government backed loans to pay service debts. Argentina now is in total crisis. Unemployment has risen to 18.3% and all unions are calling a strike. In December 2001 another official quits, Finance secretary Daniel Ma.