Sleepless nights for economy minister Roberto Lavagna?

If an agreement is not reached within 24 hours, Argentina will be forced into a damaging $2.9bn (�1.8bn) default on its debt.

The government in Buenos Aires received some important backing on Monday from the US - by far the most influential member of the IMF - which called for flexibility.

"The US believes the conditions for reaching an agreement with the IMF are favorable and that Argentina enjoys terrific political support from the US and the G8 in general," said US Assistant Secretary of State Roger Noriega.

The loan in negotiation is a three-year pact that will allow Argentina to just pay the interest on the $13bn of debts it owes the IMF, allowing it put more money into its social programme.

But there are two key sticking points: the IMF says big banks must be compensated for last year's collapse and that utility firms must be allowed to raise prices.

Both these measures are highly unpopular domestically and perceived to be helping out big business at the expense of the poor.

With the negotiations continuing, Argentina's financial markets fretted, as the MerVal idex ticked up 0.55% in volatile trading and the peso fell slightly.

Old enemies

An agreement to limit the country's budget surplus - another controversial condition - has already been hammered out.

Nestor Kirchner has openly criticised the IMF

Economists say that a fresh default will seriously undermine Argentina's attempts to drag itself out of a financial crisis by acting as a further deterrent to foreign money.

The country's economic collapse at the end of 2001 led to a currency devaluation, the closure of banks, widespread poverty and rioting.

On the other hand, a default would also be a blow for the IMF, Argentina's main creditor.

Relations between the IMF and Argentina have been rocky for some years, with both parties blaming the other for past mistakes.

Extended stay

At the weekend, President Nestor Krichner fuelled the tension by saying: "During the last 10 years some IMF staff gave very bad advice to Argentina."

He also suggested that he was opposed to compensating the banks for their losses at the expense of the ordinary people.

"If we talk about compensating Argentina, [let's compensate] 50% of the country in poverty," he said in a speech laced with anti-IMF rhetoric.

As the deadline approaches, analysts said the mood was shifting from optimistic to cautious.