By Martin Gambarotta     

Politics & Labour

What do bankers most dread? To be in the red. Martín Redrado, the head of the Central Bank, has said that he will not be back at the office on Monday. But Redrado, who has taken to court President Cristina Fernández de Kirchner’s bid to sack him by decree, is still putting up a fight. An appeals court on Friday — in a wordy ruling that had lawyers arguing about what it meant — said that the Fernández de Kirchner administration can’t name a new permanent head of the Central Bank until a special advisory committee in Congress issues its non-binding report on Redrado’s situation. All right, this story was never specifically about Redrado, the Harvard-trained banker dictating monetary policy in the years of an unorthodox administration. But it was Redrado’s decision early this month to defy the President’s decision by decree of earmarking 6.57 billion dollars in Central Banks foreign currency reserves to service debt this year that turned the whole thing into a political and legal scandal in the first place.

The administrative appeals court also ruled on Friday that the CFK administration cannot touch the reserves until Congress reviews the emergency decree issued by Fernández de Kirchner in December to establish the so-called Bicentennial Fund. The emergency decrees are also known by their initials in Spanish DNU, which literally translates as “decrees of urgency and necessity.” The court on Friday said that it saw no clear urgency for the President to issue the decree in the first place. In any case, the ruling said, the decree must first be quashed or approved in Congress. The 16-member bicameral committee that reviews the DNU decrees has already issued (because it is evenly split 8-8 between the ruling party and opposition) two separate resolutions: one approving the decree that established the Bicentennial Fund and the other rejecting it. Congress, currently in summer recess, is scheduled to open on March 1. The President, despite mounting pressure by opposition lawmakers, has refused to call extraordinary sessions. The appeals court upheld the injunctions slapped on the two decrees by Judge María José Sarmiento. Technically the appeals court is still considering the case, meaning that it has not ruled on the use of the reserves but on the right of the President to issue a DNU decree trying to grab the Central Bank funds so zealously guarded by Redrado to start with.

In practical terms the appeals court on Friday said this: this matter must be sorted out politically in Congress. The Supreme Court — and all other courts under it chirping its tune — has generally refrained from issuing drastic final rulings on thorny issues and has behaved more like a political mediator. The DNU decree establishing the Bicentennial Fund was taken to court by the opposition because it was issued when Congress was on holiday. The appeals court said on Friday that the President cannot leapfrog Congress by just issuing vague declaration that there is an emergency. So hear it: the issue of the Central Bank is heading for another showdown in Congress, which is no longer controlled by the ruling party since it lost the midterm elections last year in all the major districts. That’s why Elisa Carrió, the leader of the centrist Civic Coalition, called the ruling “a triumph for the opposition.”

Redrado’s case is also in Congress. “It’s up to Congress,” Redrado told reporters posted outside the Central Bank when he was leaving on Friday night. Yet most legal experts and at least one opposition lawmaker, Deputy Federico Pinedo of the centre-right party PRO, said that Friday’s ruling effectively suspended Redrado while the special advisory board reviews the case in Congress. Pinedo put it mildly. He said that, after studying the ruling, he had come to the conclusion that the CFK administration could not name a new permanent head of the bank, but that Redrado had been suspended. Cabinet Chief Aníbal Fernández, a fast-talking Peronist party chief who harks from the bruising political territory that is Greater Buenos Aires, put it bluntly. Fernández told the state-run news agency that Redrado “will not be allowed back in the Central Bank on Monday.” Redrado issued a statement on Friday saying that he understood the ruling to mean that he is still in charge until the advisory committee issues its non-binding counsel to the President. But on Friday night Miguel Pesce, the Central Bank’s deputy governor loyal to Fernández de Kirchner, was quickly appointed interim head. Reports late on Friday said that Redrado has decided not to show up for work this week to avoid confrontation.

When all was said and done on Friday things were left looking like this: the CFK administration will have to face a showdown in Congress if it wants to push ahead with the fund, but Redrado is very close to leaving the Central Bank building. The very nature of what a DNU decree is actually for could be debated in Congress.

The specific DNU decree establishing the fund needs to be rejected by both the Lower and Upper houses to be quashed. A ruling party lawmaker said on Friday that the Executive branch has appealed the court’s ruling. But the Cabinet chief in turn said that the administration no longer plans to use the 6.57 billion to service debt held by private creditors. The Bicentennial Fund, the Cabinet chief said, could be used to pay official lenders.

The CFK administration must meet obligations to the tune of 13 billion dollars and it has said that it needs the Central Bank reserves not to limit public spending this year. Redrado originally objected to the use of the reserves because he feared the legal implications of the move. Some holders of defaulted bonds have sued Argentina in US courts in a bid to be paid. A US judge based in New York, Thomas Griesa, on January 12 froze a Central Bank account holding 1.7 million dollars while he considered the allegation by the group of bondholders that the bank is not independent from the Executive and thus its reserves can be seized. The judge lifted the freeze three days later, but he is still to hand down a final ruling — that would explain why the Cabinet chief on Friday said the reserves will not be used to service debt held by private creditors after all. The Central Bank row has also raised questions about whether Economy Minister Amado Boudou will be able to go ahead with a plan to swap 20 billion dollars held by creditors who did not agree to the restructuring of debt in 2005.

The legal battle — and the doubts about the swap — continues. But the row also shows that Fernández de Kirchner, her popularity no higher than 25 percent according to polls after the massive soybean row with the farmers in 2008, is politically weak and will see her authority tested time and time again this year. The President called a rare press conference on Tuesday to announce that she had cancelled her upcoming visit to China because she could not trust to leave Vice-President Julio Cobos in charge. Cobos is a dissident Radical now in the opposition after he sided with the farmers in their standoff with the CFK administration over soybean export duties. The Vice-President, who is the head of the Senate, cast the decisive tie-breaking over against an export duty hike bill in 2008 and has not been on speaking terms with Fernández de Kirchner since.

Fernández de Kirchner on Tuesday specifically said that she had a problem with Cobos and that she knew of no similar situation anywhere in the world. Fernández de Kirchner had already previously accused Cobos, who has a high popularity rating according to polls, of “wanting to be president before 2011.”
Fernández de Kirchner cancelled her trip when speculation was rife that opposition hawks were trying to pressure Cobos into calling extraordinary sessions while she was away on official business in Asia.
One prominent opposition leader backed the President on this issue: Carrió, of all people. Carrió, who is fiercely critical of the CFK administration but who is also contesting with Cobos the endorsement of the opposition Radical Party for the presidential elections of 2011, said that the President was right in not going to China because, in the eyes of the world, the Vice-President was “a conspirator.” To the critics Cobos wants to have his cake and eat it with the opposition too.

The President also announced that she was seeking the non-binding counsel of the congressional advisory committee on her decision to sack Redrado.

Ruling party officials on Wednesday piled on the pressure for Cobos to resign. But Cobos on Thursday fired back this message: impeach me if you can (and the ruling party can’t: it does not enjoy the kind of majority it needs in Congress to kick the Vice-President out.)

Critics complained loudly that Fernández de Kirchner was inflicting financial damage on this nation by deciding not to travel to China. They have a point. But Fernández de Kirchner is not the first head of state to cancel a visit due to domestic political problems. The cancellation of the trip is just one more sign of just how weak the administration is right now.

The President on Thursday sent Cobos a letter instructing him to call for next Tuesday the meeting of the special advisory committee that will hear the Redrado case in Congress. The five-member advisory body is headed by Cobos and also includes the heads of the Budget and Finance committees of both Houses. Ruling party Deputy Gustavo Marconato was named head of the Lower House’s Budget Committee and Civic Coalition Deputy Alfonso Prat Gay (Redrado’s Central Bank predecessor) head of the Finance Committee on Thursday. The Senate has yet to name its two committee heads. But the advisory body has quorum to gather with three members (Cobos, Marconato and Prat Gay) present. The Vice-President announced on Friday that he had called the meeting for next Tuesday — as requested by Fernández de Kirchner.

Marconato on Thursday said that proceedings, which are expected to take place behind closed doors, could take “up to four months.” But he quickly added that “I hope it won’t take that long.” Cobos is reportedly intent on a swift debate (a similar sacking of Central Bank head Pedro Pou by the Radical-Frepaso administration in 2000 took about two months). Cobos on Tuesday had urged the President to “reconsider” her decision to cancel the China trip. The President’s remarks, he added, were both a personal and institutional attack. Cobos underlined that he had never issued decrees without Fernández de Kirchner’s approval while she was away.

And one last thing: Cobos said on Tuesday that he had never publicly sided with Redrado during his row with Fernández de Kirchner.

Cobos is popular, yes. But, just like all mere mortals, he is no saint. The Vice-President has been caught in the crossfire between the Central Bank and Government House. Cobos’ popularity has dropped slightly during the conflict, which is why it’s possible the Vice-President will not go out of his way to protect Redrado when proceedings open on Tuesday. Opposition leaders, like Carrió, who see a potential rival in Cobos for the presidential elections of 2011, are also starting to criticize him. City of Buenos Aires Mayor Mauricio Macri, the leader of the centre-right party PRO, also sees a rival in Cobos and has said that Cobos will eventually have to step down. “What, will she not travel any more?” Macri also asked sarcastically when the President decided not to fly to China. (A member of Cobos’ inner circle on Friday said that he will not step down and will only take a leave of absence to campaign for president in 2011).

Redrado also does not have the backing of the Civic Coalition and the Radical Party. Many opposition lawmakers said that Redrado’s stance effectively stopped the Central Bank reserves from being grabbed (and even seized by the billions to pay the “vulture” funds in the US). But Redrado, with political events moving fast, is no longer the point for Cobos and the opposition.

The opposition’s goal will now be to quash in Congress the DNU decree establishing the fund. The Civic Coalition is also seeking the impeachment of the Cabinet chief, accusing him of contempt of court and of having ties with the suspects in the killing of three businessmen accused of ephedrine trafficking in 2008.
Yet it’s not clear how united the opposition stands. The Civic Coalition, PRO, the Radical Party and the dissident Peronists (they together hold about 117 seats in the 257-seat Lower House) have urged Fernández de Kirchner to call extraordinary sessions and have even considered the possibility of convening Congress of their own accord). But to muster quorum in the Lower House those three parties also need the backing of the centre-left, the Socialist Party and the GEN party headed by Margarita Stolbizer. Stolbizer — until recently a member of Carrió’s Civic Coalition — has said that the opposition cannot call extraordinary sessions of its own accord and without the approval of the Executive.

The centre-left lawmakers, headed by filmmaker Fernando Solanas, have declared that they will only agree to debating the DNU decree if the other opposition parties also agree to a debate on whether the foreign debt is “legitimate” and should be paid at all. Carrió has said that she does not object to such a debate, but that whole issue could turn unpredictable with even the ruling party eventually throwing its weight (87 seats plus 17 allies in the Lower House) behind the idea of declaring the debt “illegitimate” if that’s the way the wind is blowing. The 72-seat Upper House is an unpredictable chamber. Cobos has the key tie-breaking vote in the Senate. But the balance of power there seems to be held by two “independent” Peronist senators from La Pampa province.

The opposition has meanwhile come to the conclusion that it cannot muster quorum in the Senate before March, which is why it is moving in much less of a hurry all of a sudden.

Congratulations! You have reached the end of the Central Bank story (almost, anyway). But what if this row, like so many rows, is part of a much bigger row.

Deputy Néstor Kirchner (the President’s husband and predecessor) has explicitly said that he believes that the powerful media group Clarín has declared war  because the CFK administration had refused to back its bid to purchase Telecom, one of the country’s two major private telephone companies.

Federal Planning Minister Julio De Vido, a member of Kirchner’s inner circle, on Monday said that the President would not hesitate to sponsor in Congress the nationalization of Telecom. De Vido made the comments after a court ruling froze a resolution by a sate regulator ordering Telecom Italia to sell its stake in Telecom Argentina. The state regulator has told Telecom Italia to sell by August because since 2007 it has been partly owned by Spain’s Telefónica (the company that in turn owns Telecom Argentina’s local rival). Maybe all the political suffering has to do with the Clarín-Kirchner war with both sides not caring who gets hurt. So what next? Kirchner is scheduled to make a much-anticipated appearance on state-run Channel 7 at 8pm today. Tune in!