Many Argentinians have fallen into despair, starting today to realize how much they will be affected by the harsh austerity measures and the devaluation of the peso (the national currency) by more than 50%as part of the program announced by the new government with the aim of stabilizing the economy.

The government of the extreme liberal president Javier Millay presented a program yesterday for public spending cuts and a drastic reduction of the huge fiscal deficit, in a move welcomed by markets. The significant devaluation of the national currency is expected to catapult inflation, which already reaches 150%.

“The measures are good in theory to fix the economy, but many people will suffer because of them,” says 19-year-old Agustina Ferreira, a store clerk in Buenos Aires.

Inflation is expected to rise sharply in the coming months, hitting savings and consumer spending power. Planned subsidy cuts will raise energy bills and public transport ticket prices, while public spending cuts will slow economic growth.

Overnight the Argentine peso lost more than 50% of its value against the US dollar, although in reality strict capital controls forced many to pay high interest rates on parallel markets.

Jose Diaz, an agricultural engineer, says the government’s tough economic measures were “necessary” but the impact on people’s daily lives will be heavy. “Yesterday I was telling my kids at dinner that it’s like being told your salary is being cut in half,” he recounts. His family has already tightened their belts, buying less food. He is more concerned about pensioners. “I don’t know how they’ll manage! When the cost of everything goes up by 30% or 40%, it will be very difficult,” he emphasizes.

“Hard costs in the coming months”

Javier Millay – who rode on public discontent over the worst economic crisis in decades to win Argentina’s presidential election – had warned of the possibility of monthly inflation rising to 20%-40%, but argued that without tough measures the country could find itself in the throes of hyperinflation.

He has repeatedly stated that “there is no money”. However, he pledged to protect some social spending in an attempt to reassure public opinion and avoid a potential wave of protests. At least 4 out of 10 Argentines live in poverty today.

“There will inevitably be hard costs in the coming months” due to stagnant inflation, says economist Gustavo Ber, referring to the explosive mix of inflation and recession.

Analysts stress that Miley’s biggest challenge will be to contain social unrest. Many Argentines, exhausted by years of economic crisis, currently seem willing to give him time to turn things around, but their patience will not last long.

Facundo Marino, a 53-year-old laborer in Buenos Aires, says he supports the government’s program, believing it is necessary to prevent the situation from worsening. However, he admits that “it’s really a big shock for consumers’ pockets”.