Argentine President Eduardo Duhalde is urging the Congress to quickly approve government-sponsored legislation aimed at preventing a collapse of the banking system. The legislative package was submitted Monday -- the first day of an indefinite bank holiday that has shut down Argentine banks and foreign exchange operations.
President Duhalde says he has spoken to congressional leaders, and urged them to pass the legislation as soon as possible. The measure called "Plan Bonex" would convert bank deposits into long-term bonds. Restrictions on withdrawing these deposits have been in place since last December to prevent a collapse of the banking system. An indefinite bank holiday began on Monday to stop the outflow of cash and to give the Congress time to act on Plan Bonex.
Speaking to reporters Monday, Mr. Duhalde said Congress needs to act quickly on the legislation because the banks cannot remain closed indefinitely. He warned there is not enough money now in the banking system to meet the demands of depositors. "We know the situation very well. The situation is that there are many more people who want to withdraw their money than there is cash," he said. The Argentine leader went on to say Argentina's banking system has some $60 billion, but this money has been lent out at terms of three to four years.
Mr. Duhalde took office January first in the midst of a financial crisis that had forced the resignations of two Presidents in December. Shortly after taking office, Mr. Duhalde devalued the country's currency, which had been pegged one-to-one to the U.S. dollar, and entered into negotiations with the International Monetary Fund. However, negotiations have stalled as the IMF continues to call for further austerity measures by the Duhalde government.
Monday's bank holiday created additional hardships for beleaguered Argentines. There were protests in Buenos Aires' financial district, as angry depositors banged on bank doors and windows demanding their money. The freeze on bank withdrawals declared last December sparked the demonstrations that brought about the downfall of two Presidents in less than two weeks.