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UPDATE 1-Tight budget vote seen in Argentina's lower house

* Lawmakers in lower house begin budget debate

* Opposition against use of foreign reserves to pay debt

* Government has broad powers to spend, even without budget (Updates with start to debate, legislators’ comments)

BUENOS AIRES, Nov 10 (Reuters) - Argentine lawmakers started debating the government’s 2011 budget on Wednesday, with a tight vote expected as opposition legislators dispute official inflation data and the use of foreign reserves to pay debt.

The budget earmarks another $7.5 billion in central bank reserves to pay private creditors, allowing President Cristina Fernandez to maintain brisk public spending ahead of next October’s presidential election.

Fernandez’s government says using the funds to repay debts makes more sense than selling bonds at high rates, but her move to tap $4.4 billion in reserves earlier this year sparked a political crisis. [ID:nN06209372]

The budget bill low-balls inflation, forecasting consumer prices will rise 8.4 percent next year while private economists predict inflation two to three times higher.

The opposition has also slammed the bill’s conservative economic growth and tax revenue projections, which allow the government to spend any “extra” income without congressional oversight. [ID:nN16110959]

“We will not support a bag full of lies,” said congressman Fernando “Pino” Solanas, whose leftist Proyecto Sur movement has submitted its own budget proposal.

Fernandez lost her congressional majority in a June 2009 mid-term election and opposition leaders have tried to seize the initiative since then, with few concrete results.

Agustin Rossi, head of the ruling party bloc in the lower house, said the budget will give Fernandez the tools she needs to govern.

“Never before in Argentina, since Dec. 10, 1983 when we returned to democracy, has any president been deprived of the possibility of having a budget,” Rossi told local television.


Earlier this week, Economy Minister Amado Boudou criticized the Proyecto Sur budget bill along with another opposition-backed proposal, saying they would roll back economic gains made since 2003.

“We ask for rationality and the approval of our budget,” he told a news conference.

If the 2011 budget is not passed, the government will be able to extend the 2010 framework and use its broad powers to continue spending. The government could also issue a decree to authorize the use of central bank reserves.

“There are constitutional and legal mechanisms that will undoubtedly allow the government ... to continue administering the country in a serious way,” Boudou said.

If the bill is approved, it will be sent to the Senate for a vote. Argentina’s government has found it easier to control the upper house since suffering heavy congressional losses in last year’s vote.

The budget bill estimates growth in Latin America’s No. 3 economy at a conservative 4.3 percent, down from forecasts for about 9 percent this year. (Additional reporting by Guido Nejamkis; Editing by Diane Craft)