Argentina in Limbo with Reviled Court and Frozen Accounts

By Marcela Valente

BUENOS AIRES/IPS - Argentina's Supreme Court ruled Friday that a freeze on bank accounts decreed by the government last Dec 3 is unconstitutional, a verdict that threatens to drive some financial institutions into bankruptcy and which prompted the president to accuse the tribunal of 'blackmail'.

The decree that slapped restrictions on withdrawals of wages and savings 'annihilates the right to private property' guaranteed by the Argentine constitution, ruled the Supreme Court, in a decision that took both the government and society by surprise.

'I know many people must be pleased, thinking that they can go to the banks and they are going to give them their money,' President Eduardo Duhalde told a news conference, Friday. But then: 'I tell you, don't deceive yourselves.'

His announcement that banking curbs were not likely to be lifted even with the court ruling immediately brought thousands of people to the streets for more 'cacerolazos' - the banging of pots and pans that has become the trademark protest of middle-class Argentines.

Duhalde said Saturday during his National Radio show that members of the high court 'began to blackmail us when the Chamber of Deputies created an impeachment commission, they came asking us not to prosecute them.'

The nine-member Supreme Court's ruling is widely seen as a bid to win support and counteract the growing protests regarding its legitimacy and a wave of demands that its members step down, said Elisa Carrió, a leading opposition parliamentary deputy.

Every Thursday in January, thousands of protesters gathered outside the central court building for cacerolazos, to protest against what they saw as the Court's partiality.

The rising pressure to remove the magistrates led legislators to once again take up complaints that had been shelved in parliament, demanding the impeachment of the members of the highest court. Each protest march ended in front of the home of one of the members of the Court.

The credibility of the Supreme Court began to decline when former president Carlos Menem (1989-99) decided, in his first years in office, to increase the number of magistrates

from five to nine, in order to pack the court with loyal judges.

The complaints mushroomed into outrage in the past few weeks, when the Supreme Court ruled against the lawsuits brought by private parties trying to get their money out of the 'corralito', as the banking restrictions have been dubbed.

Saturday, during his 'Conversando con el presidente' programme, President Duhalde said that the Supreme Court ruling 'is very serious.. and is much more than just an error because it is going to bring very serious consequences for the country.'

An emergency meeting with his cabinet chief was called to analyse the implications of the ruling, and the Saturday launch of an economic crisis strategy by Economy Minister Jorge Remes Lenicov was postponed.

The Supreme Court decision could trigger a run on banks by account-holders desperate to withdraw their deposits in pesos or dollars, which have been held out of their reach since early December due to the restrictions, known as the 'corralito.'

The Central Bank declared a bank holidays for Monday and Tuesday, which could be extended for several days.

The Court also ruled that the decree that restricted bank withdrawals - signed by then- president Fernando de la Rúa, who resigned on Dec 20 - amounted to a violation of the constitution, which stipulates the right of people to freely dispose of their assets.

The caretaker authorities who have ruled since then have tightened the restrictions, which were initially to remain in place for three months, thus fanning the widespread discontent among account-holders.

The government and a majority of local economic analysts say many banks would be unable to withstand a mass withdrawal of deposits, until they recover the loans they have granted.

Duhalde recently declared that 'the dollars are not there,' which means the banks cannot return them to account-holders - a statement that triggered an outcry and led to even greater numbers of protesters in the streets banging pots and pans.

Many people demonstrated outside the banks, which are selling dollars at an exchange rate of 1.7 pesos to the dollar - 30 cents of a peso higher than the official exchange rate of 1.4 pesos to the dollar.

Deputy Carrió said that even though she believes that the 'corralito' is unconstitutional, the Supreme Court ruling is dangerous.

A week ago, Carrió's Alliance for a Republic of Equals proposed returning the deposits from a fund to be created with contributions from the banks' large debtors.

Carrió said she fears the collapse of the most vulnerable banks, which means account-holders 'would lose their money forever.' She further warned that it would be the public banks and national private banks, not the transnational institutions, that would most be affected.

She urged the government to design a rational mechanism for the release of deposits, that would protect everyone's savings - including those who had entrusted their money to national private or public financial institutions - and that would prevent public disorder that could pose physical safety risks to clients showing up at the banks.

According to the press release, the Court 'invalidated the successive provisions' that were adopted based on the original decree.

Friday's verdict was made public just when the government was putting the final touches on a plan that contemplated the lifting of restrictions on the withdrawal of salaries, full flotation of the peso, and the conversion to pesos of debts in dollars owed by large companies.

The last measure was expected to spark controversy, due to the huge cost that the conversion to pesos of debts would entail for a bankrupt state.