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Cristina, in favor of using reserves against Central Bank Autonomy
Clarin
September 03, 2010

By Candelaria De La Sota

With an incendiary defense of the use of reserves to pay debts, strong criticism of those who demand more autonomy for the Central Bank, and her backing of the decision of the monetary authority to emit up to 20 billion more pesos this year, Cristina Kirchner yesterday became the main figure at the Monetary and Banking Days at the Central Bank.

It's the first time a president has participated in these days, which led many to interpret her presence as a strong endorsement of Mercedes Marc del Pont, who on September 23rd will see her term as president of the BCRA expire.

In fact, there was praise and mutual gratitude between the president and the head of the BCRA, who only a few days ago announced the modification of the Monetary Program which will make its targets more flexible, allowing the monetary authority to emit up to 20 billion more pesos than was targeted for the year.

"The change in the Monetary Program responds to what had been a growth forecast of 2.5%, and now we have a growth rate accumulated in the last 12 months that surpasses 9%," the president argued in defense of the changes that the current leadership of the Central Bank introduced. And she took advantage of the occasion to criticize Martin Redrado, previous head of the BCRA. "In reality, if the forecasts are used, the Central Bank has not been terribly right. Without going further, last year the Central Bank authorities said to me that we would not be able to deal with our foreign obligations, because the trade surplus would be only US$6 billion. And finally we have almost US$17 billion from the trade surplus."

After criticizing her ex-official, the President pointed her comments at responding to those that say that this leadership of the Central Bank is not taking care of the value of the currency. "How do you really care for the value of a currency? You don't do it only through monetary policy. You do it by pushing on GDP growth, economic activity, and that creates jobs with a strong production policy," she said.

This way, Cristina Kirchner made if very clear that she rejects the purely monetarist ideas that focus on the excess of pesos as an explanation of inflation, which will top 20% a year. "The currency should be subordinate to what happens in economic activity. It's impossible to think in subordinating economic activity only to the currency," she argued.

But these were not the only criticisms that Cristina Kirchner responded to. Faithful to her confrontational style, the President also criticized those who demand greater autonomy for the Central Bank.

"When I hear talk about autonomy, I think of central banks from a country different from the one they're inserted in," the president admitted. And she proposed "rethinking the role that those banks have to have in the economy of a country, not only in the monetary aspect."

"The 2008 crisis served to put forward a reformulation of the role of central banks that concern themselves only with caring for value of the currency from a monetarist place," the president said. And she asked that a new theory be debated for the new world financial order.

"We can't continue only debating from the theory, we have to discuss what we've been through," Cristina said. And she took advantage of the opportunity to reiterate her rejection of orthodox policies: "We cannot manage them with the same theories that carried us to disaster."

It was understood that she was referring not only to orthodox thinking and its local adherents, but to the demands that the government makes in international forums and before multilateral organizations.

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