Milei’s veto of pension increase survives congressional vote

President Javier Milei narrowly avoided a major defeat in Congress as lawmakers struggled to obtain enough votes to partly overturn his veto of a pension spending bill.

The lower house of Congress voted 160-83 to reject the veto Wednesday night, just short of the two-thirds threshold needed. An override would also have required a vote in the Senate. The bill Milei vetoed would have boosted pension payments and risked the libertarian government’s budget surplus, highly prized by investors.

Argentina’s sovereign bonds fell earlier Wednesday after lawmakers successfully rejected Milei’s veto of legislation to provide more financial aid to the disabled. The failure to overturn the pension bill is likely to soothe investors for now, though the close vote is a sign of the tense political climate for Milei just weeks ahead of October midterm elections.

“This victory provides the government with some breathing space after recent setbacks and strengthens its position regarding fiscal consolidation commitments,” XP Investimentos analyst Sol Azcune said in a report to investors.

Milei’s government estimated that the expenditures proposed by Congress in recent months represent around 2.5 percent of gross domestic product. Such an outlay would threaten the primary budget surplus achieved after painful spending cuts enacted during the libertarian president’s first year and a half in power.

The congressional vote offered Milei a measure of respite after a rough week. Earlier Wednesday, new figures showed the economy contracted more than expected in June, marking the fourth monthly drop in activity so far this year. The president is also in a stand-off with Argentina’s big banks over tougher regulations his government implemented to contain a peso sell-off in July.

Milei’s party is hoping to secure more than 40 percent of the midterm vote, as he holds less than 15 percent of congressional seats today, to prove to investors his market-friendly reforms are sustainable. Both the President and his opponents are likely to use Wednesday’s closely fought legislative showdown as a key part of their case to voters in the push for more power in the legislature.