After a month of wrangling, Argentine President Cristina Kirchner succeeded in sacking central bank President Martin Redrado last week. In his place she named Mercedes Marcó del Pont, a Yale-trained economist who has expressed the view that central bank autonomy ought to be limited.
The opposition howled at the news. Felipe Sola, former governor of Provincia de Buenos Aires, warned that the new bank president “is going to do what the executive decides and they are going to modify the bank charter to justify her doing what the executive tells her.”
Of course that would seem to be the point. Mr. Redrado was fired because he refused to turn over $6.6 billion in bank reserves to Mrs. Kirchner, who wants to pay foreign creditors but doesn’t want to use treasury revenues.Ms. Marcó del Pont, if she wants to keep her job, will follow the orders of the president.
Mrs. Kirchner is not the first politician to covet the wealth available from the monetary authority. Closer to home, there is Barack Obama, who didn’t back Ben Bernanke’s controversial second term as head of the Federal Reserve out of magnanimity. Mr. Bernanke kept his job because he has shown a willingness to finance Mr. Obama’s big-government agenda.
Yet Americans can still hold out hope that competing institutions will check the runaway power of a government that is being underwritten by the central bank. In Argentina, institutions are frail and it is far from certain that they can hold up under Mrs. Kirchner’s iron fist.
There’s a lot at stake. More inflation—beyond the 17% rate in 2009—is one danger. A Hugo Chávez-style power grab is another. Mr. Chávez is Mrs. Kirchner’s closest ally in the region, and she has been open about her desire to copy his model; her husband, former president Nestór Kirchner is widely viewed as the author of her playbook.
The lunge for the bank reserves is all about improving the Kirchners’ odds of staying in power. Until last night when Mr. Kirchner underwent emergency circulatory surgery, analysts expected him, rather than her, to run in the 2011 presidential election. What remains clear is that if the kirchneristas want to retain power they will need to boost government spending.
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And from the English-language Buenos Aires Herald, After gov’t made appointment official
‘Marcó del Pont must stop Moreno, otherwise she has too much to lose’
The Carnival of Latin America will be up this afternoon.