The global snatch of people’s money is just now gathering pace, here below is how Argentina proposes to solve its problem by snatching people’s pensions. SW
BUENOS AIRES — Hemmed in by the global financial squeeze and commodities slump, Argentina’s leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation’s private pension system.
The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade.
The move came as wealthy nations unveiled fresh steps to fight the credit crunch. The U.S. Federal Reserve said it would bolster money-market funds, which have faced withdrawals, by lending as much as $540 billion to the industry. France said it would inject $14 billion into six banks on condition they agree to increase their lending. In a sign banks were a little more willing to lend to each other, the London interbank offered rate, a benchmark for many business and consumer loans, again declined.
Argentine President Cristina Kirchner said the move to take over the private pension system was aimed at protecting investors from losses resulting from global market turmoil. Funds in the system, which is parallel to a government pension system, are administered by financial firms. The private system has about $30 billion in assets and generates about $5 billion in new contributions each year.
While no one knows for sure what the government would do with the private system, economists said nationalization would let the government raid new pension contributions to cover short-term debts due in coming years.
Argentina’s financing needs are growing quickly as the global financial squeeze pushes down prices of its commodity exports, such as soybeans. Coupled with unchecked government spending, the commodity downturn has carved a gap of around $10 billion to $11 billion in what Argentina must pay on its debt between now and the end of 2009, according to economists. The payments are from debt restructured after a 2001 default and new debt issued locally.
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