Argentine leader defends policy after vote defeat

(KIRCHNER, ELECTION, POLITICAL, BUENOS, PRESIDENT, AIRES, FERNANDEZ)

By Helen Popper
BUENOS AIRES (Reuters) - Argentine President Cristina Fernandez faced a new political landscape on Monday after losing control of Congress in a mid-term election as voters rejected her combative style and economic policies.
Former President Nestor Kirchner, who is Fernandez`s powerful husband and predecessor, was defeated by a millionaire businessman from a rival faction within the ruling Peronist party in a high-profile congressional race.
Kirchner resigned as the head of the party on Monday and was replaced by Buenos Aires Governor Daniel Scioli in fallout from the election.
The government`s electoral losses may lead to political gridlock and a power struggle in the Peronist party as rivals jostle for positions ahead of a 2011 presidential election.
Argentine stocks, bonds and the peso currency all rallied on the election result as investors bet the Kirchners would be forced to relax interventionist economic policies that are unpopular with markets. [nN29383705]
"We think that this change in political landscape will translate into a much more pragmatic approach for the conduct of economic policy," Bulltick Capital Markets said in a report on Monday.
A government source, who asked not to be named, said Fernandez could replace several ministers following the humiliating defeat.
The election was widely seen as a referendum on the Kirchners. The former president had hoped to shore up flagging support for his wife, whose popularity rankings have languished at about 30 percent for most of her 18 months in office.
Kirchner had been believed to be planning to run again for president in 2011, but he now cannot use a victory in Buenos Aires province as a springboard.
"The presidential race for 2011 will now dominate the local political scene and there is a risk of seeing earlier presidential elections next year," said Alberto Ramos, senior economist at Goldman Sachs, in a report.
Several political leaders, all of them Fernandez critics, were seen as being strengthened by Sunday`s vote as either they or congressional candidates allied with them fared well.
They include Vice President Julio Cobos, who has broken ranks with the Kirchners, Buenos Aires Mayor Mauricio Macri and Senator Carlos Reutemann, a Peronist.
A SHARP BLOW
In the most closely watched race on Sunday, a slate of candidates headed by businessman Francisco de Narvaez took 2.5 percentage points more votes than the slate headed by Kirchner in Argentina`s most populous province, Buenos Aires.
According to near-complete official results, De Narvaez`s slate won 34.6 percent of the vote compared to Kirchner`s list`s 32.1 percent.  Continued...
Original article

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