Meanwhile, A Standoff In Buenos Aires…

The struggle for control of Argentina’s stockpile of foreign currency appeared headed for a showdown as the country’s dissident central-bank president vowed to come to work Monday even though the government has posted police to bar him at the door.

The government’s latest effort to oust bank president Martín Redrado followed a two-pronged appellate-court decision late Friday that left Mr. Redrado’s status in doubt, while also dealing another blow to the government’s plan to use several billion dollars in central-bank reserves to pay foreign debt. President Cristina Kirchner’s leftist government was scrambling to come up with alternative strategies for laying hold of funds so it can ramp up politically popular spending ahead of 2011 elections.

The Argentine dispute is one of several battles over central-bank independence playing out in various countries in the aftermath of the world financial crisis—though in no other country has the dispute over central-bank autonomy taken such bizarre twists. “It’s a telenovela [soap opera] and [Monday] will be the most interesting chapter yet,” said Aldo Abram, an economist at the Higher School of Economics and Business Administration in Buenos Aires.

In the U.S., Federal Reserve Chairman Ben Bernanke has faced opposition to being confirmed for a second term amid populist anger over the rescue of companies such as American International Group. In South Korea, the government sent a political official to a central-bank policy meeting for the first time in a decade. In Japan, government officials have bluntly targeted the central bank for criticism and policy suggestions. “As part of the general economic and financial meltdown of the last few years, the ‘isolated’ nature of central banks is being questioned,” notes Johns Hopkins political scientist Riordan Roett.

Preparing to go mano a mano with the government, the 48-year-old Mr. Redrado, dubbed the “Golden Boy” by the media when he started his career in government in the 1990s, said he’s confident he’s in the right. In an op-ed column published Sunday in the Buenos Aires daily La Nacion, he said he was acting as “guardian of the reserves” needed to defend Argentina’s economic stability.

The government was equally adamant. Cabinet Chief Anibal Fernandez vowed Friday that Mr. Redrado will “never more” return to the bank. Miguel Angel Pichetto, head of the Kirchner administration’s block in the senate, said on Friday, “Redrado is out of the Central Bank and he should not be there any more. One alternative is removing him with public-security forces.” A police detail was posted this weekend in front of the bank’s broad-columned entrance.

The dispute started in December when Mrs. Kirchner announced the creation of a “Bicentennial Fund” for debt payment, to be funded with $6.57 billion of central-bank reserves. The idea was to free up resources for public-works projects while at the same time reassuring investors of Argentina’s willingness to pay its debts. Argentina is trying to regain access to international capital markets after having been frozen out for eight years since it declared the largest sovereign-debt default in history.

Almost immediately after the plan was announced, Mr. Redrado faced pressure from Congress to refrain from releasing the reserves, which legislators insisted were under their control, not the president’s. As Mr. Redrado delayed, Mrs. Kirchner on Jan. 7 fired him for “bad conduct.” The central banker took his dismissal to court, and was reinstated the next day by a judge, who also blocked the transfer of the reserves.

Late Friday, an appeals court upheld the ban on transferring the reserves. But it created ambiguity over the future of Mr. Redrado by deferring the fate of the bank president to Congress and the executive branch. The Kirchner government interpreted that part of the ruling as a victory in its battle against Mr. Redrado, who it maintains must step aside while Congress deliberates the matter this week. Mrs. Kirchner’s hand-picked replacement, Miguel Angel Pesce, who had been Mr. Redrado’s second in command, signed a document Friday confirming himself as interim president, the government said.

But Mr. Redrado said he is still bank president. “I maintain my decision to continue carrying out my duties as an official until Congress decides the contrary,” he said in the La Nacion article.

It’s anyone’s guess what the denouement will be. Many analysts say he will have a hard time surviving until September when his term is set to end.

Meanwhile, the government was scaling back on its plans to tap the central-bank reserves. Mr. Fernandez said the government intended to use $2.187 billion in bank reserves to pay debts to multilateral creditors, such as the World Bank and Inter-American Development Bank. The government said that paying multilateral creditors, as opposed to bondholders, would be permitted by a law passed in Congress five years ago when the government used reserves to pay its debt to the International Monetary Fund.

The Kirchner government is desperate for resources to bolster its faltering popularity ahead of 2011 presidential elections, analysts say. Mrs. Kirchner’s husband and predecessor, Nestor, has been laying the groundwork for another presidential bid.

The political and judicial setbacks to the Bicentennial Fund are a continuation of the erosion of support for the Kirchners that was evident in midterm elections last June, when Mrs. Kirchner’s coalition lost its majority in Congress, says political scientist Carlos Germano. He is skeptical of the Kirchners’ chances of recovering popularity, no matter how much they spend. “History shows when Argentine leaders begin losing support, it’s very hard for them to reverse the trend,” Mr. Germano says.