However, Mr Redrado appealed, arguing that under the central bank's charter, only Congress could remove him from his post, and a judge has since reinstated him and blocked the release of the funds until Congress returns from recess.
The timing of this political row is particularly unfortunate as Argentina is trying to restore its reputation by accessing international capital markets for the first time since it was barred in 2001 after defaulting on $100bn. The government is finalising negotiations with multilaterals for a bond swap this month designed to repay bondholders the $29bn owed to them.
Investor confidence has been further hit by a lawsuit by holders of defaulted bonds, which led to the temporary freezing of accounts worth $1.7m held by the Argentine central bank in the US. The account has now been released, but Neil Shearing of Capital Economics said in a research note: "The bottom line is that, in addition to vanquishing any remaining semblance of central bank independence, this episode serves as a reminder of the acute political risks that still face investors in Argentina at a time when the government is planning its return to international debt markets."
