Argentina's President Cristina Fernandez tried to oust the country's central bank chief on Wednesday over his reluctance to use billions of dollars in foreign currency reserves to make debt payments this year.
Martin Redrado, a Harvard-educated economist and former trade minister, is resisting government calls for him to step down as central bank president.
The standoff has generated uncertainty and raised questions about Argentina's plans to return to global credit markets this year for the first time after a 2001 debt default.
Here are possible scenarios on how the conflict may play out:
• Central bank officials say Redrado has no plans to resign and wants Congress to decide his fate.
The Central Bank charter says the head of the bank can be removed by the executive branch but requires input from a congressional committee. That committee would likely be headed by Vice President Julio Cobos, who has split with President Fernandez but remains in office and has become a key opposition leader.
Throwing the decision to Congress, where opposition leaders have already come out in support of Redrado, would set up a potential political showdown. Fernandez lost her congressional majority in midterm elections last year, but her bloc remains the leading force in both houses of Congress.
Some analysts say the most likely outcome is that prolonged wrangling in Congress could allow Redrado to hang on until September, when his term ends.
• The Central Bank controversy comes as Argentina is working to settle with holders of $20 billion in defaulted bonds and clear the way for a return to international credit markets this year.
The government plans to launch the swap later this month and signs that it is moving to resolve the issue have led to a huge rally in Argentine bond prices in recent months.
The turmoil between the government and the central bank could restrain any boost bonds would be expected to get in the coming weeks as the swap offer is announced. That, in turn, means the government might not get as low an interest rate as it hopes for on a major global bond issue this year.
Economy Minister Amado Boudou said on Wednesday the planned swap is a "successful process" and vowed to move ahead with it.
• On Thursday, the Central Bank's nine-member board of directors, including Redrado, is scheduled to meet. The board is reportedly split between Redrado loyalists and members who are closer to President Fernandez.
If he doesn't get backing from his board, Redrado could decide to step down, clearing the way for Fernandez to name a new central banker.
Officials said on Wednesday the government was looking to designate Mario Blejer, who headed the bank in 2002. He has turned down the offer, according to a newspaper report, but he could reconsider once Redrado's future becomes clear.
A Blejer appointment would likely be welcomed by markets.
• If the turmoil drags on, it would add to already rising tensions between the branches of power. The Supreme Court has asked the government to explain its decision to tap foreign currency reserves to make debt payments as part of a lawsuit filed before the high court.
Opposition leaders in Congress sought a court injunction to block the plan, claiming it threatens the central bank's autonomy.
If Redrado stays on and continues to resist handing over foreign reserves to pay debt, the government could be forced to use its regular balance sheet to meet steeply rising obligations this year.
That could put pressure on the central budget and on social spending, a backbone of the center-left Fernandez administration.
A protracted fight could also complicate the government's ability to find a qualified successor to Redrado.
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