President Javier Milei has vetoed a pension increase approved by Congress in mid-August, his first use of the presidential power since taking office in December. He signed the veto on Friday night and it took effect on Monday after being published in the Official Gazette.

The bill passed by Congress established a hike and guarantees to prevent retirees’ income from falling behind the basket of goods.

In his decree overturning the increase, the president argued the bill was incompatible with the government’s goal of fiscal balance and that it was “irrational.”

The decree says that the bill violates the Bases Law because “it doesn’t address its fiscal impact or the source of funding.” It adds that the pensions system would not be able to comply with the bill with its current budget.

Complying with this law, the decree says, would “seriously compromise the sustainability of Argentina’s public finances,” forcing the government to take on more debt or raise taxes.

It adds that the bill “has serious technical and operative deficiencies that show its irrationality and the serious difficulties that would come from applying it.”

Congress could overturn Milei’s veto, but it would need to be voted through by two thirds of lawmakers in both the Lower and Upper Houses. The majorities that approved the original bill suggest this is a possibility.

Pensions payments have been hovering around the breadline. In August, pensioners who get the minimum payment received AR$295,540 (US$304 at the official rate, US$230 at the MEP rate), including a AR$70,000 monthly sum that has been issued by the government since March. The total basic basket was at AR$291,471 in July, according to the INDEC statistics bureau’s latest data. That month, the minimum pension plus the bonus was at AR$285,581.

Pensions have been indexed to inflation since March, when Milei changed the formula used to calculate them.

The bill modified the formula used to calculate pensions. It was approved by the Senate on August 22. Among other provisions, it stated that the minimum monthly pension should be no less than 9% above the total basic basket of goods. It also established increases to payments, backdated to April, to make up lost ground due to inflation.

On Wednesday, pensioners gathered outside Congress to protest Milei’s decision, which he announced ahead of time. Police responded by using tear gas and hitting them with their truncheons, television footage showed.

Another round in Congress?

This might not be the end of it for Milei. Congress can overturn a veto with the vote of two thirds of lawmakers in both houses. More than two thirds of deputies and senators approved the original bill, suggesting they have the numbers to push the law through.

In the Senate, the bill was approved through an unusual alliance between all the opposition blocs, including PRO, Milei’s principal ally in Congress. The only negative votes came from ruling coalition La Libertad Avanza (LLA) and one PRO senator.

However, PRO’s leader, former President Mauricio Macri, has endorsed Milei’s veto and criticized his party’s senators who backed the bill.

PRO deputies rejected the bill first time round, too. Yet, if the party’s senators decide to change their vote in a prospective second debate, the opposition could struggle to secure two thirds. On Friday, Milei met with LLA, PRO, and former LLA deputies to discuss forming an official alliance. All of the attendees backed the veto.