Argentina's Macri kills layoff bill in 1st legislative challenge

By Hugh Bronstein

BUENOS AIRES, May 23 (Reuters) - Argentine President Mauricio Macri vetoed a bill aimed at preventing layoffs on Monday, in his first legislative clash with Congress since being elected on a pro-business platform.

Macri, who was inaugurated in December, has ordered thousands of jobs cut from state agencies and said the law would have hurt efforts at narrowing the fiscal deficit he inherited from previous leader Cristina Fernandez.

The two champion opposite visions for Latin America's third-largest economy at tumultuous time for the region with Brazil and Venezuela embroiled in crises. Macri, 57, is a proponent of free-markets. Fernandez, 63, favors a heavy state hand in the economy.

The bill would have doubled severance payments to laid off public and private sector workers and prohibited most job cuts for six months. Passage of the measure was a show of force by the opposition ahead of next year's legislative elections.

It also put Macri in the politically awkward position of vetoing a pro-employment bill at a time when Argentines are being hammered by double-digit inflation, exacerbated by his decision to let the currency float in December.

Low-income families are meanwhile getting squeezed by higher utility prices after Macri removed energy subsidies.

In the government's official gazette, the president offered a 30-paragraph explanation of his veto.

"Dialogue among workers, the government, unions and business owners is the way to create jobs," it said.

Macri says fiscal discipline is needed to reduce imbalances in the economy caused by years of heavy trade and currency controls. He says this will ultimately boost investment, productivity and employment.

But with 2017 mid-term elections approaching, the veto showed a president unable to frame the public agenda and block opposition proposals before they reach his desk.

"He needs inflation to fall faster and growth to come back sooner. If not, his governability will be materially affected come 2018, after the mid-term elections," said Alberto Bernal, chief market strategist at U.S.-based XP Securities.

(Reporting by Alexandra Alper and Eliana Raszewski; Editing by Alan Crosby)

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