Argentine President Cristina Fernandez on Thursday fired the country’s central bank president, who had rejected her calls to step down for refusing to use Argentina’s foreign currency reserves to pay debt.
Fernandez issued a presidential decree removing Martin Redrado from office, citing misconduct and dereliction of duties. He was replaced by Central Bank Vice President Miguel Pesce, a government ally, who will serve as interim president.
The conflict has highlighted uncertainty in Argentina as Latin America’s No. 3 economy tries to win back investor confidence and return to global markets with a bond issue eight years after a massive debt default.
It also threatens to open a protracted legal battle led by an emboldened opposition that has backed Redrado and is looking to challenge Fernandez after she lost control of Congress in mid-term elections last year.
Redrado will step down to respect the decree and planned to present a court injunction against his firing either yesterday or today, a central bank official said.
The former central bank head did not comment publicly about his ouster as constitutional experts questioned the legality of Fernandez’s decision.
His firing came after Argentine stock, bond and currency markets closed, but the spread on Argentine bonds over comparable US Treasuries widened 25 basis points to a near three-week high of 681, the JP Morgan Emerging Market Bond Index showed.
The deadlock between the government and Redrado has heightened political tensions and cast a shadow over the government’s attempts to reshape its image among investors.
The Argentine leader on Wednesday asked Redrado to resign after he failed to act on her order to use US$6.6 billion in foreign currency reserves to meet debt payments next year.
Argentine Economy Minister Amado Boudou, in comments to Radio 10, said the government would hold talks with Mario Blejer, who headed the central bank in 2002 and is a former IMF official, about taking over permanently as the bank’s chief.
Under the central bank’s charter, the executive branch can dismiss a member of the bank’s board but must have a recommendation from a special congressional committee.
The presidential decree, however, stated that Congress is in recess and its recommendation is nonbinding.
Some Argentine legal analysts said the dispute may be headed for more legal wrangling.
Constitutional lawyer Gregorio Badeni questioned the legality of Redrado’s dismissal.
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