Argentina's President Cristina Fernandez de KirchnerFRANCISCO LEONG
An Argentine federal judge Friday temporarily blocked the use of foreign currency reserves to make payments on the country's debt.
Judge Maria Jose Sarmiento issued an injunction after opposition leaders filed a legal challenge to President Cristina Fernandez's plan to use the reserves to guarantee debt payments.
On Thursday Ms. Fernandez fired Central Bank chief Martin Redrado who had opposed the plan. He vowed to challenge his removal in the courts and opposition lawmakers say they will contest his removal and the president's plan to use foreign reserves to pay debt.
The conflict over debt payments has highlighted uncertainty in Argentina just as Latin America's No. 3 economy tries to win back investor confidence and issue billions of dollars of global bonds eight years after a massive debt default.
Opposition leaders, emboldened by gains in last year's midterm elections, pledged to try to overturn both presidential decrees: one creating the Bicentennial Fund to use $6.6-billion in foreign reserves to guarantee debt payments and another firing Mr. Redrado.
The opposition says the decrees are unconstitutional.
"This is generating a conflict between the branches of government, in the judicial branch and the legislative branch, that is unprecedented in our democracy," Christian Gribaudo, a member of Congress for the center-right PRO party, said in a statement.
Interim Central Bank President Miguel Pesce, who was named on Thursday to replace Mr. Redrado, said he would implement the fund to pay debt. But the judicial order apparently blocks that plan.
Judge Sarmiento's injunction does not address the issue of constitutionality, it just suspends the creation of the reserves fund until Congress, which is in recess until March, can vote on the issue.
Opposition lawmakers were cancelling summer vacations and planned to seek an emergency session of the lower house for Jan. 20 to debate the presidential decrees.
The opposition said 10 lawmakers had the power to convene an emergency session of Congress, but lawmakers allied with Ms. Fernandez said only the president of the nation has the power to call an emergency session.
Ms. Fernandez forced out Mr. Redrado on Thursday after he balked at handing over reserves to pay debt as the government faces tight financing this year.
Economists estimate that the government needs to raise between $2-billion and $7-billion this year to meet debt obligations that will total $13-billion.
"We must put a limit on the government. They can't throw out Redrado like that," said congressman Felipe Sola, from a dissident faction within the ruling Peronist party. "The government does not want to admit that we are in deficit and go to the markets to seek funds in a normal way."
Bond prices had been expected to rise on Friday if Mr. Pesce implemented the president's so-called Bicentennial Fund, since it diminishes any risk the government would not meet debt obligations.
However, the judicial ruling could motivate selling.
Opposition leaders will call a meeting next Wednesday of the Bicameral Legislative Process Committee, which could approve or reject the two decrees, Sen. Ernesto Sanz of the opposition Radical Civic Union party told La Nacion.
However, the committee may deadlock since eight of its members are Fernandez allies and eight are opposition. In case of an impasse, the decrees would have to be debated in both houses of Congress.