Milei promises austerity in his budget for 2025 and proposes a duel in the Argentine Congress

Argentina’s libertarian president, Javier Milei, presented his 2025 budget to Congress on Sunday night, reflecting his signature pledge to end the country’s chronic fiscal deficit and setting up a new phase of confrontation with lawmakers.

In an unprecedented move, Milei personally presented the spending plan instead of delegating it to his economy minister, in a speech in which he lashed out at Argentina’s history of poor macroeconomic management and vowed to veto any measure that compromises his tough austerity strategy.

The proposal follows a week of political wrangling in the chamber, where Milei controls less than 15 percent of seats, over spending increases that the government says would derail the “zero deficit” budget backed by the International Monetary Fund. Opposition parties have sought to pass laws to raise wages and pensions in line with inflation to help hard-hit Argentines cope with brutal austerity.

“The cornerstone of this budget is the first truth of macroeconomics, a truth that has been neglected in Argentina for many years: zero deficit,” Milei told parliamentarians, in front of a handful of empty seats since most members of the opposition Peronist bloc, Unión por la Patria, were absent from his speech.

“Managing means cleaning up the Central Bank’s balance sheet and deactivating the debt bomb we inherited,” he said.

Milei’s supporters interrupted his speech – peppered with his usual libertarian slogans – with cheers.

Now the opposition-dominated Congress, which controls government funding, will have to approve the final budget. Milei’s political isolation complicates the situation, and weeks of negotiations are expected with political rivals who insist on concessions.

However, Milei promised that nothing will stop him from moving forward with his austerity plan.

“The budget is a declaration of principles,” said Argentine economist Agustín Almada. “Even if there is no agreement with the opposition, Milei will continue to seek fiscal contraction.”

If vetoes fail to stop influential lawmakers from reining in spending, Milei vowed to find other ways to shrink the state.

“The only context in which we will agree to discuss an increase in an expense is when the request comes with an express explanation of which item needs to be reduced to cover it,” he said.

In Milei’s nine months in office, drastic cuts in public spending — which he describes as necessary to restore market confidence in a country plagued by one of the highest annual inflation rates in the world — have produced a fiscal surplus of 0.4 percent of gross domestic product, something unheard of in nearly two decades.

Austerity has also caused deep economic hardship in Argentina. Nearly 60 percent of Argentines now live in poverty, up from 44 percent in December, according to the Catholic University. Milei has largely balanced the budget by cutting spending to provinces, removing energy and transportation subsidies and freezing wages and pensions despite inflation.

The fight over pensions reached a milestone last week when Milei and his allies defeated a bill that would have increased social security spending in Argentina and compromised the government’s fiscal discipline. The law was quickly approved in both houses of Congress last month, but opposition parties ultimately failed to secure the two-thirds majority needed to override the president’s veto after government pressure reduced support for the plan.

After hearing that the measure had been rejected on Thursday, angry pensioners – who have lost around half their purchasing power due to inflation – took to the streets of downtown Buenos Aires, where they clashed with riot police who used tear gas and water cannons.

Milei warned that his fiscal shock therapy would not be easy. But his government is betting that the worst is over. Although Argentine inflation is around 237%, Milei has maintained popular support by containing monthly inflation, which has fallen to 4% compared with the peak of 26% last December, when he took office.

In an upbeat budget statement, the Finance Ministry said Sunday it expected Milei’s proposal to keep annual inflation at just 18% by the end of 2025 and produce economic growth of 5%. Argentina’s economy shrank more than 3% in the first half of 2024.

But much of Milei’s future depends on Congress. The government’s victory with the pension law last week proved short-lived, as lower house lawmakers also approved a proposal to increase spending on public universities.

Milei has promised to veto the bill.

Congress dealt another blow to the president last week by rejecting his plan to increase spending on intelligence services by more than $100 million. Despite all the cuts, Milei has pledged to increase defense spending from 0.5 percent of GDP to 2.1 percent, dismaying some lawmakers as cuts to health and education hit the population.

Although Milei has made repeated concessions to get his legislation through the chamber, Sunday’s speech was strident in tone, describing lawmakers as “the miserable rats who bet against the country.”

Some analysts warned that Milei’s political message presented a complicated situation.

“The image of the half-empty chamber of deputies during the president’s speech is an indication that approving this budget will not be easy for the government,” said Marcelo J. García, director for the Americas at the geopolitical risk consultancy Horizon Engage, based in New York. “Once again, Milei seems to prioritize confrontation over negotiation.”

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