CORRECTED - UPDATE 2-Argentina signs new decree to tap reserves

(Corrects paras 1, 2 to show $4 billion to be used to pay private creditors, not multilateral lenders. Removes erroneous references to government bid to revive $6.6 billion fund.)

* Fernandez scraps decree to pay debt with reserves

* Signs new order to use some $4 billion

* Moves to use reserves to pay multilateral bodies

* Central bank starts transfer of funds to Treasury

BUENOS AIRES, March 1 (Reuters) - Argentine President Cristina Fernandez scrapped a decree to tap $6.6 billion in foreign reserves to pay debt on Monday, replacing it with a new order to tap about $4 billion to pay private creditors.

Fernandez said she signed a separate decree allowing central bank reserves to be used to make repayments to multilateral lenders such as the World Bank.

The government was expected to tap the reserves to pay some $2 billion of debt with multilateral institutions coming due this year.

A government source said the monetary authority had started transferring the roughly $4 billion in funds to the Treasury, while opposition parties said they would ask the courts to freeze the new decree. For more see [ID:nN01102374].

Fernandez's initial bid to transfer part of the country's $48 billion in foreign reserves into a fund had been blocked by the country's courts and opposed by the former central bank chief Martin Redrado, who the president then fired.

The bank is now controlled by a close government ally.

Argentine newspaper La Nacion said on Sunday Fernandez's government would try to revive the stymied plan by changing tactics and pushing a law through the opposition-controlled Congress.

Wall Street analysts say Fernandez will likely seek alternative ways to tap Argentina's foreign reserves to boost government spending ahead of next year's presidential elections.

"We suspect this issue is not over yet," RBS Securities analyst Boris Segura said in a research note. "Authorities are still likely to go after the international reserves, as a way to finance their fiscal largesse in the run up to 'the mother of all electoral battles' in 2011."

Fernandez had sought to save the decree by getting the Senate to endorse it, but failed to secure enough support from senators, forcing a change of strategy, La Nacion said.

Congress was in recess in January and February and renewed sessions on Monday.

The political and legal wrangle sparked by Fernandez's reserves plan highlighted persistent uncertainties in Latin America's No. 3 economy just as it seeks to win over investors with a planned swap of $20 billion in defaulted bonds. (Reporting by Kevin Gray, Jorge Otaola and Walter Bianchi; Writing by Helen Popper; Editing by James Dalgleish)