UPDATE 2-Argentina Senate OKs pension hike, veto expected

* Cabinet chief says president will veto measure

* Bill passed after tie-break by renegade vice president

* Increase unsustainable, would cost $10 bln a year-gov’t
(Adds president’s comments )

BUENOS AIRES, Oct 14 (BestGrowthStock) – Argentina’s Senate on
Thursday narrowly passed a law to boost pension benefits, an
opposition-led measure that President Cristina Fernandez is
expected to veto, arguing it would bankrupt the state.

The bill was passed shortly after midnight when Vice
President Julio Cobos, who presides over the Argentine Senate
and is at odds with the center-left president, cast a
tie-breaking vote in favor of the legislation.

The lower house passed the bill in August, putting
Fernandez in the uncomfortable position of opposing a popular
measure ahead of next year’s presidential race, in which she or
her husband is expected to run again. For details, see
[ID:nN19255736]

“This law … will be vetoed. We will not permit the state
and Argentina to commit suicide,” Cabinet Chief Anibal
Fernandez said via Twitter.

The cabinet chief said the opposition did not genuinely
want to improve benefits for some 5 million retirees, but
simply wanted to see the president “pay the political cost of
having to veto this.”

The measure would raise basic pensions to 82 percent of the
minimum monthly wage — or to 1,427 pesos ($355) from 1,046.50
pesos currently — which officials said would cost the
government roughly $10 billion next year alone.

Funding for the increase would come from tax revenues
exceeding the level set forth in the budget and from the ANSES
state pension agency’s surplus, opposition lawmakers say.

“The 82 percent hike is a law that would bankrupt the
state,” President Fernandez said in a televised speech, vowing
she would not bow to pressure from the opposition.

“If they think they’re going to weaken me, to frighten me
or discourage me, they can forget about it,” she said.

Double-digit inflation in recent years has stoked demands
for wage and pension hikes, which the government has generally
supported. [ID:nN13269275]

But Economy Minister Amado Boudou has warned the pension
reform would set Latin America’s No. 3 economy on a path of
“spiraling debt and a permanent fiscal deficit.”

Cobos, however, said that with economy exhibiting strong
growth, this was an “opportune time” to improve the lot of
pensioners.

Cobos is an opposition leader who Fernandez made her
running mate in 2007 to form a coalition ticket. As head of the
Senate, he blocked her key initiative in 2008 to raise export
taxes on the country’s main crop, soy. They have barely spoken
since.

“With Argentina growing and an extremely favorable
international context, and since the government is also clearly
determined to address social issues … it’s now the
pensioners’ turn” to benefit, Cobos told local television.

But cabinet chief Fernandez called Cobos “a traitor,” and
said he belonged in “the ninth circle of hell,” as described by
Italian poet Dante Alighieri.

The president’s expected veto of the bill is seen as
politically risky since her husband and predecessor, Nestor
Kirchner, could be a candidate in the October 2011 poll.
Another possibility is that Fernandez runs for re-election.
($1=4.015 Argentina pesos)

UPDATE 2-Argentina Senate OKs pension hike, veto expected