Argentina's Milei blocks increases in pension and disability spending
In the heart of Argentina, retirees have been leading weekly protests against President Javier Milei's government, struggling on pensions of just $400 a month. Despite these social challenges, Milei is focusing on boosting his party's representation in the upcoming midterm elections in October.
Milei, who assumed office in late 2023, has implemented a pro-market fiscal policy, characterised by significant reforms. This includes reducing export tariffs on grains such as corn and soybeans, aiming to stimulate agricultural exports and economic growth.
Under Milei's leadership, Argentina recorded its first annual fiscal surplus in 14 years, achieved through painful cuts to social spending and public works. This move helped drive down Argentina's monthly inflation rate to below 2% in June for the first time in five years. However, prices are still up 40% year-on-year under Milei's administration.
Inflation, while remaining high, is showing signs of decline under Milei's fiscal approach. Forecasts indicate improvement to around 25% by the end of 2025 and a continued downward trend over the next two years.
However, criticism of Milei’s fiscal policy centers on concerns about social impacts and potential risks to economic stability due to aggressive austerity and deregulation measures. Although 86% of Argentines supported Milei at the time of his election, reflecting strong approval for change amidst persistent economic challenges, experts and some social groups have warned about the social cost of rapid market reforms in a country with significant poverty and inequality.
President Milei's administration argues that the only way to make Argentina great again is through effort and honesty, not the same old recipes. They have vetoed all efforts to boost public spending since coming to power, including the vetoed spending bills aimed at compensating retirees for inflation and offering financial benefits for people with disabilities.
The government projects that these additional expenditures would undermine Milei's flagship pledge to eliminate the nation's chronic fiscal deficit before October's midterm elections. The bills, passed without determining the source of the funds, contradict Milei's pledge to bring down inflation.
Congress can overturn Milei's vetoes with a two-thirds majority in both chambers. Last year, Milei managed to prevent pension increases with votes from his party's closest ally, the conservative PRO bloc. The midterm elections are seen as a referendum on Milei's two years in office.
Milei prefers to tell an "uncomfortable truth" rather than repeat "comfortable lies," according to his administration. He has been vocal about the need for honesty and effort to overcome Argentina's economic challenges. As the midterm elections approach, the focus remains on whether Milei's fiscal policy can strike a balance between economic stability and social protection.
- Argentina's President Javier Milei, in his pursuit of boosting his party's representation in the October midterm elections, has implemented a pro-market fiscal policy with significant reforms in finance, such as reducing export tariffs on grains, aiming for economic growth.
- Criticism of Milei's fiscal policy centers on concerns about social impacts and potential risks to economic stability, due to aggressive austerity and deregulation measures, especially in relation to social spending on retirees and people with disabilities.
- The government projects that additional expenditures aimed at retirement compensation and financial benefits for people with disabilities would undermine Milei's pledge to eliminate the nation's chronic fiscal deficit before the midterm elections, as they pass bills without determining the source of the funds.
- As the midterm elections approach, the focus remains on whether Milei's fiscal policy can strike a balance between economic stability, represented by the first annual fiscal surplus in 14 years and lowered inflation, and social protection for the economically vulnerable sectors of society.
