Provincial cash crunch triggers strike in Argentina

BUENOS AIRES (Reuters) - Public sector workers in Argentina's largest province went on strike over pay on Wednesday in a challenge to the popular, centrist governor seen as a potential successor to President Cristina Fernandez.

Wednesday's one-day walkout highlights the dire state of provincial finances in Buenos Aires, which is home to more than a third of Argentina's 40 million people and accounts for about 40 percent of gross domestic product (GDP).

Tens of thousands of teachers, doctors and judicial employees downed tools to protest a decision by Governor Daniel Scioli's cash-strapped administration to pay a bonus in four instalments instead of the usual single payment.

Most Argentine workers receive an additional month's salary, half of which is paid on July 1 and the other half on January 1.

"We want them to change their mind, to reverse this decision," Roberto Baradel, head of the province's biggest teaching union, Suteba, told local radio.

Buenos Aires is one of many Argentine provinces facing tight finances as brisk spending - fuelled by double-digit inflation and soaring wage claims - outpaces tax revenue due to a sharp slowdown in Latin America's No. 3 economy.

Scioli, a long-time ally of Fernandez who has been distanced from her government over the last year or so, has high approval ratings and is seen as a possible successor in a 2015 presidential election.

Like Fernandez, he is member of the fragmented Peronist movement that has dominated Argentine politics for 70 years, but he is favoured by Wall Street investors and disliked by her allies for being too right-wing.

Argentina's constitution limits presidents to two consecutive terms, meaning Fernandez could only run again if she sought to revise it and follow in the foot-steps of fellow Latin American leftists such as Ecuador's Rafael Correa and Venezuela's Hugo Chavez.

FINANCING GAP

Scioli, a former speed-boat racer, asked for help from the federal government to plug the financing gap, but the Economy Ministry transferred only about a third of the $620 million he requested.

Fernandez suggested the shortfall was due to Scioli's mismanagement in the province, a Peronist stronghold that includes the densely-populated outskirts of the capital and the sprawling Pampas plains of the country's agricultural heartland.

Buenos Aires province is on track to end the year with a fiscal deficit twice as big as estimated in the budget.

The deficit is set to reach about $2.3 billion and the province must also meet debt repayments of some $950 million, according to the Economia y Regiones consulting firm.

"It's a very, very difficult year," Provincial Economy Minister Silvina Batakis told local radio. "But the forecast we have is that next year's also going to be very complicated. Not until maybe 2014 or 2015 are the good times going to start.

Scioli has been forced to announce cuts in infrastructure spending as he struggles to balance the books without having to resort to more drastic measures that could dent his popularity.

The combative Fernandez's increasingly unorthodox economic policies - such as curbs on foreign currency purchases and imports - are riling investors and middle-class Argentines and her popularity has fallen this year.

A poll last week by the Management & Fit consulting firm showed Scioli had overtaken Fernandez as the country's most popular politician, with a positive image rating of 44.8 percent. That compared with Fernandez's 38.1 percent.

"Scioli's image isn't suffering," said Mariel Fornoni, a director at the polling firm. "The more they beat him, the better he polls. Scioli's image seems to be immune to damage."

(Writing by Helen Popper; Editing by Cynthia Osterman)