Argentina's Crisis-hit Banks Open

The frustrated, cashless citizens of Argentina will be able to withdraw money from their accounts for the first time in 10 days when the country's unstable banks open their doors today.

The new economy minister, Roberto Lavagna, intends to test the strength of financial institutions by allowing the peso to trade freely on foreign exchange markets and reopening banks that were shut down on April 19 to avoid a collapse. The government used the shut down time to pass laws intended to stave off a run on the banks.

On Friday banks reopened for a few hours, but only to accept deposits. Today they were scheduled to resume full operations following a dramatic week in which former economy minister Jorge Remes Lenicov resigned.

For four months, Argentinians have lived with sketchy access to their bank accounts, but the last 10 days have seen a total cash drought as banks shut their doors and switched off the ATMs.

Last week the Argentinian congress passed legislation to halt the daily withdrawal of $50m (£34m) from the banks. On Thursday, a bill was approved that prevents savers who have won lawsuits against a four-month-old banking freeze from collecting their deposits until the government can appeal.

Observers say the law will sharply reduce the level of deposits being withdrawn in the coming weeks, preventing any imminent financial collapse.

Mr Lavagna, a foreign-trade specialist who took over the job on Saturday, hopes to unfreeze financial institutions by June. He rejected the idea of breaking off relations with the International Monetary Fund, and agreed to have talks today with the IMF's managing director, Horst Kohler.

Mr Lavagna said an agreement last week between the government and provincial governors set out the deficit-reduction policies and economic reforms demanded by the IMF as a condition for further aid. He said the plan would involve the state and the private banks coming together to guarantee people's savings and gradually return them as the economic climate improves.

Argentina is in a four-year recession that has seen unemployment reach 18.3%. This year, most estimates say the gross domestic product will shrink by 10%-15%.

The current banking freeze was imposed on December 1 by the government of the former president, Fernando de la Rua, amid an economic crisis. At the end of last year Argentina defaulted on its $141bn public debt and its currency dropped steeply in value.

Most Argentinians were expected to be anxiously watching exchange markets today for any further slide in the peso's value. The president, Eduardo Duhalde, allowed the peso to float on the marketplace in January. Its value has dropped from 1:1 to the US dollar to 3.10 to the dollar.

On the black market last week, the peso was trading at 3.50 and above, encouraging some to call for Mr Lavagna, who took over on Saturday, to fix the peso's value. However, in an interview with local daily Clarin published yesterday, he ruled out any such measure for now, arguing that the peso was already overvalued and unlikely to fall further.

"There will not be any type of fixed exchange rate but full freedom of the markets," Mr Lavagna said.

Later yesterday, however, after a meeting with the central bank president, Mario Blejer, he said authorities would act to prop up the peso if necessary.