Argentine President Milei unveils 2025 budget, promising savings and preparing for crucial showdown

BUENOS AIRES, Argentina (AP) — Argentine President Javier Milei, of the Libertarian Party, presented his 2025 budget to Congress on Sunday night, outlining policy priorities that reflect his key commitment to eliminating the country’s chronic fiscal deficit and heralding a new phase of confrontation with lawmakers.

In an unprecedented move, Milei personally presented the budget to Congress rather than the economy minister, criticizing Argentina’s record of mismanagement and promising to veto anything that might threaten his stringent fiscal policies.

The president’s budget proposal follows a week of political clashes in the legislature — where Milei controls fewer than 15% of the seats — over spending increases that the administration has warned could undermine an IMF-backed “zero deficit” budget. Opposition parties have sought to raise salaries and pensions along with inflation to help hard-hit Argentines cope with harsh austerity.

“The cornerstone of this budget is the first truth of macroeconomics, a truth that has been neglected for many years in Argentina: zero deficit,” Milei told lawmakers, facing rows of empty seats as most of the Peronist opposition bloc, Unión por la Patria, walked out of his speech. “Governance means cleaning up the balance sheet, deactivating the debt bomb that we inherited.”

Milei’s supporters interrupted his speech — which was filled with his typical libertarian theses — with shouts and cheers.

Final budget approval will fall to the opposition-dominated Congress, which controls government finances. Milea’s political isolation has made matters tense, meaning weeks of negotiations with rivals who are pushing for concessions.

Milei, however, vowed that nothing would stop him from continuing his austerity policies.

“The budget is a statement of principles,” said Argentine economist Agustín Almada. “Even if the opposition does not compromise, Milei will continue this fiscal contraction.”

If stroking the veto pen fails to stop influential lawmakers from spending money, Milei promised to find other ways to curb state spending.

“We will only talk about spending increases once we have an explanation of what we are going to cut to compensate for it,” Milei said.

In Mileia’s final nine months in office, drastic cuts in public spending — which he says are necessary to restore market confidence in a country ravaged by one of the world’s highest annual inflation rates — have produced a fiscal surplus (0.4% of gross domestic product) unseen in almost two decades.

Austerity has also caused deep economic pain in Argentina, where nearly 60% of Argentines now live in poverty, down from 44% in December 2023, according to Catholic University. Milei balanced the budget by cutting financial transfers to provinces, removing energy and transportation subsidies and keeping wages and pensions steady despite inflation.

The pension dispute came to a head last week when Milei and his allies rejected a bill that would have increased spending on social security in Argentina, undermining the administration’s fiscal discipline.

The bill passed both houses of Congress last month, but opposition parties ultimately failed to secure the two-thirds majority needed to override the president’s veto after government lobbying eroded support for the initiative.

When news of the bill’s rejection broke on Wednesday, outraged retirees who had lost about half their purchasing power due to inflation took to the streets of central Buenos Aires, where they were confronted by police who fired tear gas and water cannons.

Milei has warned that his fiscal shock therapy won’t be easy. But his administration is betting the worst is over. Although annual inflation in Argentina hovers around 237%, Milei has retained public support by trying to keep monthly inflation low, which has fallen to 4% from a peak of 26% last December when he took office.

In an upbeat budget statement Sunday, the Finance Ministry said it expected Milea’s proposal would lead to annual inflation of just 18% by the end of 2025 and bring 5% economic growth. Argentina’s economy shrank by more than 3% in the first half of 2024.

But Milea’s future largely depends on Congress. The government’s victory over congressional opponents on the pension bill proved short-lived, as lawmakers in the lower house also passed a bill increasing spending on public universities.

Milei announced she would veto the bill.

Milei suffered another blow when lawmakers rejected his plan to increase spending on intelligence services by more than $100 million. Despite the belt-tightening, Milei pledged to increase defense spending from 0.5% of GDP to 2.1%, irritating some lawmakers amid his cuts to health care and education.

Although Milei has repeatedly compromised to get his legislation through Congress, he took a harsh tone in a speech Sunday, describing lawmakers who disagree with him as “miserable rats who are betting against the country.”

Some analysts warned that Milei’s expression of political views could bring trouble.

“The image of a half-empty chamber during the president’s speech indicates that the government will not easily pass this budget,” said Marcelo J. García, Americas director at New York-based geopolitical risk consultancy Horizon Engage. “Once again, Milei seems to be prioritizing confrontation over compromise.”

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