Alfie claimed that the government's response to the 2002 crisis was completely orthodox. The government tightened fiscal policy, by raising public sector tariff rates and slashing spending. Alfie claimed that the effect of the devaluation and economic contraction, plus government decisions, meant that the primary fiscal deficit was chopped by a third in two years. It also vaulted its debt problem of 2003 by rescheduling.
The irony of all this is that in the elections this year, the Partido Colorado-Partido Blanco alliance which pushed through these tough-minded policies is almost certain to be kicked out of office. The government lost the referendum on whether the state-owned Administración Nacional de Combustible, Alcohol y Portland (Ancap) should be privatised, on 7 December. The leftwing opposition, led by the Frente Amplio, had campaigned strongly against the privatisation.
Despite this, Alfie argued that the orthodox policies the government had pursued had pulled the economy round much more quickly than the looser policies used to deal with crisis at the beginning of the 1980s. Alfie claimed that then the economy took until the second half of 1985 before growth was restored. He pointed out that in final quarter of 2003, the year-on-year growth rate would be about 12%.
Alfie emphasised that the third quarter of 2003 figures showed that the economy was beginning to fire up. He said that every sector of the economy was growing strongly. This, he argued, was different from previous recoveries where one sector had led the revival. He added that employment was picking up. In the three months to October 2003, some 50,000 more people were in work than in the same period of 2002.
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