Argentina's new leader warns of unavoidable economic shock

Argentine libertarian economist Javier Milei took over his country's reins on Dec 10, warning in his maiden speech that he had no alternative to a sharp, painful fiscal shock to fix Argentina's worst economic crisis in decades, with inflation heading towards 200 per cent.

"There is no alternative to a shock adjustment," he said on the steps of Congress after taking the presidential baton and sash, with crowds of supporters cheering despite him saying the economy would worsen in the short term.

"There is no money," he said. Mr Milei, 53, a former TV pundit who shot to fame with expletive-ridden tirades against his rivals, China and the Pope, is taking over from Peronist leader Alberto Fernandez, whose government was dogged by failures to rein in soaring prices.

"The outgoing government has left us on track towards hyperinflation," Mr Milei said. "We are going to do everything we can to avoid such a catastrophe." While the speech was light on details, he said key steps would include a fiscal adjustment equivalent to 5 per cent of the country's gross domestic product through cuts that he said would fall on "the state and not the private sector".

The wild-haired outsider marks a major gamble for Argentina: His shock therapy economic plan of sharp spending cuts has gone down well with investors and could stabilise the embattled economy, but it risks pushing more people into hardship, with over two-fifths already in poverty.

However, voters - who drove Mr Milei to victory in a November runoff against a ruling Peronist coalition candidate have said they were willing to roll the dice on his sometimes-radical ideas that include shutting the central bank and dollarising.