In Argentina market prices fell sharply because of worries that the government's plans to cut spending will not get political support. The government needs to cut spending because it has a large foreign debt. The fear that Latin America's third largest economy may not be able to repay this debt has also caused concern in markets around the world. Lourdes Heredia reports from Buenos Aires.
Argentina's finance minister, Domingo Cavallo, tried to calm down the country by promising that there was no possibility of debt default or currency devaluation. He said that the financial turmoil will pass as soon as the markets realise that Argentina was taking all necessary measures to stop the crisis.
Late on Wednesday, the government announced a plan to cut government spending and eliminate tax evasion. While economists welcomed those measures, the markets dropped heavily, as investors were sceptical that Mr Cavallo could muster enough political support to implement the budget cuts.
WORDS
debt default - if a country defaults on a debt, then it is not able to repay money that it owes.
turmoil - confusion, disorder, uncertainty
tax evasion - the illegal non-payment of taxes
sceptical - a person who is sceptical about something does not believe it is true or possible
muster.. support - if you muster support, you gather as much help around you as possible so you can do something which is very difficult.
Big public spending cuts are extremely unpopular in Argentina. Even politicians from within the ruling coalition have said they oppose them. A well-known senator, Leopoldo Moreau, has said Mr Cavallo is blind, deaf and mute for not listening to the people. Argentina has been in recession for the last three years. After a long day of negotiations, the government announced that a majority of the lower house would support its plans.
Now, Mr Cavallo is hoping to get more support. Despite Argentina's attempts to calm the storm, fears that Latin America's third largest economy could default sent the world's emerging market reeling for the second day in a row. Many economists have said Argentina has no other option but to implement tough measures to put its economy back on track.
WORDS
the ruling coalition - a government which is made up of two or more political parties who have decided to work together.
mute - a person who is mute is not able to speak
to calm the storm - to make a situation more stable and less uncertain.
sent..reeling - if something is sent reeling then it becomes unstable and is in a state of confusion or chaos
back on track - if something is put back on track then changes are made so that it works well again.
