Argentina Bank Runs Feared

The Supreme Court declared a widely hated banking freeze unconstitutional, but the president warned he would keep the clampdown in place as angry depositors kicked off nationwide protests against him.

Thousands of demonstrators massed on the streets of the capital Friday evening, including more than 2,000 people outside the government palace who raucously clanged pots and pans to oppose the continuation of the two-month-old banking freeze.

The noisy but orderly demonstrations began soon after embattled President Eduardo Duhalde went on television and warned Argentines that he regretted to tell them they should not expect to see penned-up savings released anytime soon.

The banking freeze was imposed Dec. 1 after panicky depositors yanked $2 billion from the teetering banking system in one day, and Duhalde suggested late Friday that the restrictions must continue and the "peace" kept.

On the streets, demonstrators lit bonfires of tires and raised huge banners. Similar demonstrations erupted in the central cities of Cordoba and Tucuman, the Atlantic resort of Mar del Plata and in Santa Fe and other heartland provinces.

The banking freeze limits cash withdrawals from most accounts to 1,500 pesos a month (about $800) and leaves many dollar-denominated deposits frozen in banks until 2003. After four years of recession, the banking restrictions remain one of the most highly charged symbols of government mishandling of the devastating crisis.

Duhalde somberly declared he had no choice but to address the surprise court ruling, calling it "the matter that most worries our people today."

Argentina's high court on Friday unanimously ruled that the cash withdrawal restrictions were an "annihilation" of the property rights of Argentines whose hard-earned savings are penned up in the banks.

The court voted 5-0 against the freeze, ruling in favor of plaintiffs who demanded their trapped savings and calling the government clampdown on the banks "irrational."

"I know many people must be pleased today, thinking that they can go to the banks and they are going to give them their money," said Duhalde. But looking straight into the cameras at a hastily improvised news conference Friday night, he added: "I tell you, 'dont deceive yourselves.'"

"This could prompt a disaster," said Ana Gavuzzo, a bank analyst for Fitch ratings agency in Buenos Aires. "People are going to take their money out of the banks. And if everyone wants to take money out at the same time, the money will not be there. There could be massive bank bankruptcies."

Some in government sought to interpret the court ruling as a narrow decision affecting only those plaintiffs who had sued for their deposits, but government opponents took it as a sign they should have access to their money now.

Meanwhile, Duhalde's administration moved immediately to impose a banking holiday on Monday and Tuesday limiting most financial transactions.

The Central Bank announced that, iclosing the nation's banks on both days, that would afford them time to prepare for upcoming economic measures. But some observers suggested a bank holiday early next week would buy the government time to plan new measures to preserve the nation's troubled financial system.

Duhalde declared that the "cursed" banking freeze was imposed by Argentina's last elected president, Fernando de la Rua, but suggested there was no way to make a rapid exit from the banking restrictions.

"As I said on my first day in office, this is a time bomb and one must disarm it. It's a bomb that can explode at any time, and not only will people not withdraw their funds ... but this can impact the entire financial system"

He reiterated warnings that Argentina must remain wary of violence like that which toppled de la Rua last Dec. 20, and which he said had put this country on the brink of anarchy.

Despite Duhalde's efforts as a month-old caretaker president, protests have raged for weeks against the freeze and other austerity measures, occasionally triggering violent attacks on bank branches around the country.

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