Financial markets were gripped by fears of a full-blown emerging country crisis Wednesday night amid mounting expectations that Argentina could be forced to default on its bn debt burden.

　　With the country's stock market plunging and overnight interest rates soaring, Argentina's finance minister, Domingo Cavallo, sought to boost investor confidence by pledging draconian cuts in spending and a crackdown on the black economy to bring the country's budget backsintosbalance.

　　But economists were sceptical about the chances of success. "Argentina has a solvency crisis, not a liquidity crisis," said one analyst.

　　Other leading Latin American countries were infected by the contagion from Buenos Aires, with Brazil''s currency hitting new lows against the US dollar. In Mexico, share prices and the peso were also down on fears that Argentina could trigger another Latin American debt crisis.

　　The Federal Reserve in Washington refused to comment on rumours that it had met secretly to discuss the financial and political woes of Latin America's third largest economy.

　　Mr Cavallo has insisted that the Argentine economy will start to recover at the end of this year, but with unemployment about to hit 16% and with a near-three year recession showing little sign of ending, investors are unconvinced. They believe that a further dose of economic austerity will prove untenable with key elections looming in the autumn.