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Constitutional Showdown in Argentina
President Cristina Kirchner tries to seize control of the central bank.
By MARY ANASTASIA O'GRADY


Argentine President Cristina Kirchner's firing of the country's central bank president last Wednesday has provoked a constitutional crisis, not unlike the one that rocked Honduras last summer. As with then-Honduran President Manuel Zelaya, Mrs. Kirchner has tried to run roughshod over her nation's laws. She blithely ignored legal protections of bank independence.
Not surprisingly, central banker Martín Redrado refused to go and challenged her reason for sacking him: his refusal to hand over to her $6.6 billion in bank reserves.
In response, Mrs. Kirchner issued a decree to amend the bank's charter so that she could push Mr. Redrado out "legally." A federal judge then issued an injunction in favor of Mr. Redrado, and on Friday he returned to his bank post. The same judge froze the bank's reserves so Mrs. Kirchner couldn't take them. The constitutional battle lines were drawn.
Mrs. Kirchner's insistence that the central bank's assets should be at her disposal is noteworthy. It reflects a primitive view, not unknown even in the U.S., that the role of a central bank is to print money for the government's use. Yet it is nonetheless surprising that even after the nation has suffered so much inflationary agony, it is still possible for an Argentine politician to pursue this line of reasoning without risk of being tarred and feathered.
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Another era: Argentina's President Cristina Kirchner and Central Bank President Martin Redrado in 2008.

More interesting is the constitutional crisis that Mrs. Kirchner has provoked. For some time now, Argentine republicans have been battling to preserve the country's institutional checks and balances against a president who seems to believe that no such limits exist for her. Already unpopular for her authoritarian style, Mrs. Kirchner would seem to be skating on precariously thin ice. Why that would be so is worth exploring.
The president might have a case against Mr. Redrado if her complaint were the country's 17% inflation rate last year. But her government has been rapidly increasing expenditures by borrowing from the state-owned banks. It has also been spending the country's $2.7 billion "special drawing rights" windfall from the International Monetary Fund. Both actions are inflationary.
It is true that the central bank could have used monetary policy to contain the inflationary effects of the government's profligacy, but it is also well known that Mrs. Kirchner was demanding that easy money. She would be hard pressed to lay responsibility for debasing the currency solely on Mr. Redrado. Instead she says he has to go because he has refused to fork over bank reserves.
Mr. Redrado is known for his political ambitions, and that reputation is borne out by his track record at the bank. He has too often bent to Mrs. Kirchner's demands. But he is smart enough to know that further financing of the government by the bank will send inflation soaring. It is also clear that if he releases the funds he will be held accountable by Congress.
Mrs. Kirchner has taken her case to the appellate court, which is widely viewed as under her control. But if the issue is later elevated to the Supreme Court, an outcome in her favor is less certain.

Meanwhile, though Congress is in summer recess, opposition members have decided they will convene a special session on Jan. 20. According to the law—prior to Mrs. Kirchner's decreed amendment—a congressional opinion is required before she can fire Mr. Redrado. Separately, one opposition senator has pledged that if Mrs. Kirchner does not back down, he will begin impeachment proceedings.
This call for impeachment may be new, but the political seas were already rough and getting rougher by the day for Mrs. Kirchner. This explains why she is taking such a big risk.
The president says she wants the money to pay back foreign creditors. She could pay them with funds that are already at the treasury, but she has other ideas for that money.
Those ideas are not only about greasing the Peronist machine ahead of the 2011 presidential election. The president is in trouble now. Her bet is that she can force Congress to allow her to replace Mr. Redrado with a compliant central banker. The opposition will be sore about it but with a fatter wallet she will be able to buy the support among Argentine governors that she needs to fend off legal threats to finishing her tenure.
The June removal of Mr. Zelaya by the Honduran Congress for violating the constitution should worry Mrs. Kirchner. Honduras proved that the 2001 Inter-American Democratic Charter of the Organization of American States does not protect a "democratically elected" president from being removed from office for violations of the rule of law. It also showed that the U.S. and the OAS are paper tigers against such a sovereign decision. What may be unfolding on the larger stage that Argentina represents is yet another test of republican values in the region.