UPDATE 1-Argentina's pension plan seen clearing lower house

(Adds lower house committees approving bill)

By Kevin Gray

BUENOS AIRES Nov 4 (Reuters) - President Cristina Fernandez is expected to win backing for a bill to nationalize Argentina's private pension funds but the plan may face closer scrutiny in the Senate, lawmakers said on Tuesday.

The lower house is set to vote on Thursday on the proposal, which would allow the government to take over some $25 billion in the funds' assets as it confronts a slowing economy and billions of dollars in debt payments next year.

The plan, announced unexpectedly last month, has shaken Argentine financial markets and raised doubts about the country's ability to weather the global financial crisis.

"It seems they have the necessary votes in the lower house," said Federico Pinedo, head of a bloc of lawmakers from the PRO opposition party. "But it looks tighter in the Senate."

The lower house's finance and social security committees approved the government bill late on Tuesday, clearing the way for Thursday's vote, a source from the ruling Peronist party told Reuters.

Fernandez says the bill will help protect Argentines and future retirees from the global financial crisis. Some 9.5 million Argentines have private pension accounts.

However, foreign investors interpreted the move as a desperate effort to find new sources of money to pay off debt next year. Some analysts have characterized the funds takeover as a bid to stave off the prospect of a default.

Fernandez's coalition holds a majority in the 257-seat lower house, where more than 140 deputies are Peronists or allies of the Argentine leader.

Her party has a slimmer advantage in the Senate, where Fernandez suffered a political blow in July when senators voted against a plan to raise taxes on soy exports that triggered months of farmers' protests.

DEBT PAYMENTS

Argentina's opposition is split over the pensions takeover bill, with some lawmakers supporting nationalization but calling for tight controls on how the funds can be used. Others reject it outright.

The proposed takeover is a "very serious breakdown in a key element of any society, and that is confidence," said Oscar Aguad, head of the opposition Radical party in the lower house. The party is expected to vote against the measure.

Still, Aguad recognized the opposition would have to "make a huge effort" to defeat the bill in the lower house.

After defaulting on some $100 billion in debt in 2002 during a deep economic crisis, Argentina has been largely shut out of international capital markets.

The bill would hand more than $4 billion in annual contributions to the government. Press reports say the government may be willing to agree to some limits on how the money is spent, but details remain unclear.

The government faces more than $20 billion in interest and principal payments on debt next year, of which $8 billion is accounted for in its budget plan.

Some analysts say falling prices for Argentina's key commodity exports combined with a slowing economy mean government revenue is likely to fall.

For some Argentines, the plan has recalled moves by previous governments to raid pension funds at times of economic distress. But they also complain the private funds charge high commissions and yield low returns.

"The pension fund administrators have a bad image," said Pinedo. "And it seems people have confused what should be the defense of workers' savings with what some see as the defense of the pensions funds." (Additional reporting by Lucas Bergman, editing by Anthony Boadle)