Argentina’s President Javier Milei is set to veto a pension reform passed by the Senate in a move that is likely to widen the rift between the libertarian leader and the opposition-controlled Congress.

The Senate defied Milei to push through an increase to pension spending in line with the country’s triple-digit inflation, dealing a blow to his tough austerity programme.

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The bill, which swept through the lower house in June, was passed by a 61-8 vote in the Senate on Thursday. All but one of the lawmakers who voted against the measure were from Milei’s party, a sign that the president’s allies had failed to negotiate with centrist parties.

Lawmakers could override his veto by passing the law with a two-thirds majority again.

“[The bill’s] only objective was to destroy the government’s economic programme,” Milei’s office said in a statement on X, as it would have required spending an extra 1.2 percent of the gross domestic product (GDP).

“The president promised Argentines that he would maintain a fiscal surplus at all costs, and he will,” his office said.

Milei took office in December with strict austerity measures as part of a bid to tackle rampant inflation in the face of rising poverty now hitting half of the population.

He has promised to strike down legislation that undermines his “zero deficit” plan.

“Anything that goes against public accounts will be vetoed,” presidential spokesman Manuel Adorni said on Thursday.

The bruising defeat for the president once again highlighted his weakness in Congress, where leftist and centrist lawmakers hold sway.

Because Milei’s party controls less than 15 percent of Congress – and just seven of the Senate’s 72 seats – he has largely relied on sweeping executive decrees to slash public spending and deregulate the economy.

Last week, Congress struck down a presidential decree that would have multiplied the intelligence budget, arguing those funds could be used for more urgent social needs.

Protests against Milei’s agenda

After six months in office, Milei managed to secure his first legislative victory in June, when his economic reform bill narrowly passed the Senate as thousands of protesters clashed with police.

But the pension law, which sets more than an 8 percent increase in retirement benefits this year, threatened to revive investors’ fears about the ability of the self-described “anarcho-capitalist” to implement his radical agenda.

In the first six months of the year, Milei has managed to achieve an extremely rare fiscal surplus by slashing state spending, halting public works projects and cutting revenue transfers to provinces.

“The pension reform passed today is particularly sensitive because it partially impacts the core of Milei’s fiscal programme,” said Marcelo J Garcia, director for the Americas at Horizon Engage, a New York-based political risk consulting firm.

“What most concerns investors is that this negative streak is the result of the hardline, more confrontational side of Milei’s inner circle taking the lead.”

Executive measures imposed so far have deepened a recession, increased poverty to 55 percent and sent annual inflation surging to 260 percent.