Argentina’s President Milei presented the 2025 budget, vowed austerity and set the stage

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BUENOS AIRES, Argentina (AP) – Argentina’s Libertarian President Javier Milei presented his 2025 budget to Congress late Sunday, outlining policy priorities that reflect key promises to close the country’s chronic fiscal deficit and signaling a new confrontation with lawmakers.

In an unprecedented move, Milei personally presented the budget to Congress instead of his economy minister, citing Argentina’s history of macroeconomic mismanagement and vowing to veto anything that compromises the strict fiscal policy slog.

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The president’s budget proposal follows a week of political wrangling in the legislature – where Milei controls less than 15% of the seats – over spending increases that the administration warned would undermine the IMF-backed “zero deficit” budget. Opposition parties have pushed for legislation to raise salaries and pensions by inflation to help hard-pressed Argentines cope with brutal austerity.

“The cornerstone of this budget is the first truth of macroeconomics, a fact that has been ignored for years in Argentina: zero deficit,” Milei told lawmakers, facing several empty seats because of the largely Peronist opposition. bloc, Union por la Patria, Mlayu address. “Managing means cleaning up the balance sheet, turning off the debt bomb we inherited.”

Milei’s supporters interrupted the speech – packed with the usual libertarian talking points – with whoops and cheers.

It will fall to the opposition-dominated Congress, which controls the government’s purse strings, to approve the final budget. Milei’s political isolation created problems, prompting weeks of negotiations with political rivals who forced concessions.

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But Milei vows that nothing will stop her from continuing.

“The budget is a declaration of principle,” said Argentine economist Agustin Almada. “Even if there is no compromise from the opposition, Milei will continue to pursue this fiscal contraction.”

If the stroke of the veto pen fails to stop powerful lawmakers from spending, Milei has promised to find other ways to cut the country.

“We will only discuss the increase in spending when it comes to what will be cut to compensate,” Milei said.

During Milei’s last nine months in office, dramatic cuts to public spending – which he says are necessary to restore market confidence in a country damaged by one of the world’s highest annual inflation rates – have increased the fiscal surplus (0.4% of gross domestic product ). ), something that has not been seen in almost two decades.

Austerity has also caused deep economic pain in Argentina, with nearly 60% of Argentines now living in poverty, up from 44% in December, according to Catholic University. Milei has balanced the budget by reducing financial transfers to the provinces, eliminating energy and transport subsidies and keeping wages and pensions stable despite inflation.

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The battle for pensions came to a head last week, when Milei and her allies defeated a bill that would have boosted social security spending in Argentina, undermining the administration’s fiscal discipline. The bill swept both houses of Congress last month, but opposition parties ultimately failed to gain the two-thirds majority needed to override a presidential veto after government lobbying undermined support for the measure.

On the news of the rejection of the bill on Thursday, angry pensioners – who have lost about half of their purchasing power due to inflation _ poured into the streets of the city of Buenos Aires, where they faced riot police who sprayed tear gas and cannons water.

Milei warns that fiscal shock therapy will not be easy. But his government is betting that the worst is over. Although Argentina’s annual inflation hovers around 237%, Milei has retained popular support by working to maintain a cap on monthly inflation, which has dropped to 4% since its peak of 26% last December when he took office.

In an optimistic statement on Sunday’s budget, the Finance Minister said that Milei’s proposal would result in an annual inflation rate of just 18% by the end of 2025 and a 5% economic growth rate. Argentina’s economy contracted by more than 3% in the first half of 2024.

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But much of Milei’s future depends on Congress. The government’s pension law victory last week proved short-lived, as lawmakers in the lower house also passed a bill to increase fees at public universities.

Milei has promised to veto the bill.

Congress dealt another blow to Milei last week when it rejected a plan to raise intelligence service spending by more than $100 million. Despite all the belt-tightening, Milei has pledged to increase defense spending from 0.5% of GDP to 2.1%, upsetting some lawmakers as health and education cuts hit the public.

Although Milei has repeatedly compromised to get the legislation through Congress, he took a strident tone in his speech on Sunday, describing lawmakers as “miserable rats who are against the country.”

Some analysts warn that Milei’s training in political messaging is causing problems.

“The image of a half-empty chamber of deputies during the president’s speech is an indication that it will not be easy for the government to pass this budget,” said Marcelo J. Garcia, Director for the Americas in New York-based geopolitics. risk consultancy Horizon Engage. “Again, Milei seems to prioritize confrontation over compromise.”

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