Argentina is expected to announce later on Wednesday a plan to deal with its debt and boost the economy.

The country is the most highly indebted emerging market economy, owing about $130bn (�91bn) to investors.

Fears remain that the government could default on its debt, triggering a crisis of the world's financial markets.

President Fernando de la Rua, however, has insisted that this will not happen.

Key meetings

The president on Wednesday held meetings with provincial governors to hammer out spending cuts needed to balance state books and secure a key debt bail-out.

But governors have so far declined to comment on the sessions.

The deal would see Argentina 'guarantee' debt payments by linking them to tax revenues.

This debt swap or restructuring would provide a breathing space for the country, which has to repay $2bn in November alone.

A better guarantee should boost the price of Argentina's bonds in the debt markets, providing some consolation for investors who feel that this "restructuring" is a default in all but name.

However investor scepticism remains, as some argue that ultimately if they are worse off, then Argentina has defaulted on its debt.

"Looks like default, smells like default, must be default," Walter Molano, a senior analyst for BCP Securities wrote in a daily research note.

Martin Redrado, chief economist of Fundacon Capital, is more optimistic.

"Argentina doesn't need to default in my view," he told the BBC's World Business Report.

"It is not in a situation like Russia in 1998 or Ecuador in 1999... you have excess reserves, excess reserve requirements, you are not in a terminal situation."

Guarantees

Another option would see the Argentina pay lower interest rates on its debt - saving it millions of dollars a year - but for a longer period of time.

In return, investors may get better guarantees, for example a guarantee from an international agency, such as the International Monetary Fund (IMF).

However, US Treasury Secretary Paul O Neill has said in a Wall Street Journal article that he is not inclined to support more IMF aid for Argentina.

The IMF agreed an extra $8bn for Argentina in August.

Lifeline

Argentina's hope is that investors will put aside their financial dictionaries and agree to a deal that will keep the country's economy afloat.

The three-year deep recession has created massive social unrest in the country, where many people have seen their wages and pensions cut.

This unrest has become increasingly political, with people questioning the effectiveness of both President de la Rua and economy minister Domingo Cavallo.

Acting as President Carlos Menem's finance chief in the 1990s, Mr Cavallo pegged the peso to the dollar, successfully neutralising the country's hyperinflation.

But Mr Cavallo's star has lost its luster, as recession has seen thousands of small businesses close and unemployment rise to 16%.

Stock nerves

Argentine stocks have lost half their value since the beginning of the year.

Markets remain tense ahead of the government's announcement, originally expected at the weekend.

The delay sent share prices lower earlier in the week.

The lack of an announcement is widely attributed to continued wrangles between central government and local governors over cutbacks.

Argentina is Latin America's third biggest economy, so fears that a default would send markets tumbling are real.

Fundacion Capital's Martin Redrado said: "No matter what happens with Argentina we are entering into a recession in the United States and in Europe, not to speak about Japan... it provides one additional cause for difficulties in the world, in world trade and in world financial markets."