Argentina's newly inaugurated President, libertarian economist Javier Milei, delivered a stark warning in his inaugural speech on Sunday, stating that a sharp and painful fiscal shock is inevitable to address the country's severe economic crisis.

With inflation reaching alarming levels, heading towards 200%, Milei emphasized the necessity of a "shock adjustment" despite acknowledging the short-term challenges it may bring, Reuters reports.

Standing on the steps of Congress, Milei, 53, asserted, "There is no alternative to a shock adjustment. There is no money."

Despite the foreseen economic hardships, crowds of supporters cheered as Milei took over from Peronist leader Alberto Fernandez, whose government faced difficulties in controlling soaring prices.

Milei, known for his fiery TV commentary, labeled the outgoing government's legacy as leading the country toward hyperinflation and vowed to prevent such a catastrophe.

While light on specific details, he outlined a fiscal adjustment equivalent to 5% of the GDP, emphasizing that the cuts would primarily affect the state and not the private sector.

The unconventional leader's economic plan, featuring sharp spending cuts, has garnered support from investors but raises concerns about exacerbating poverty.

Javier Milei's victory in a November run-off reflected voters' willingness to embrace his radical ideas, including proposals to shut down the central bank and dollarize the economy.

Succeeding the unpopular center-left President Fernandez, Milei, now in office, faces the challenge of negotiating with rivals, given his libertarian coalition's limited presence in Congress.

Aligning with the main conservative grouping, he has moderated his tone, appointed mainstream conservatives to his Cabinet, and notably refrained from mentioning dollarization in recent speeches.

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Argentina Economic Crisis

Argentina is grappling with a dire economic situation, with net foreign currency reserves estimated at $10 billion in the red, according to ABC.

Annual inflation stands at 143%, and the country is on the brink of recession, with capital controls affecting the exchange rate.

Decades of boom-bust cycles, money printing, and deficits have fueled inflation, further weakening the peso.

Milei warned of a potential annual inflation rate of 15,000% if not addressed promptly and highlighted a looming $100 billion debt "bomb."

Rebuilding a strained $44 billion loan program with the International Monetary Fund (IMF) and managing relations with key trade partners China and Brazil are critical challenges facing Milei.

President Javier Milei's Move to Fix Argentina Economy

To address the economic crisis, Milei appointed mainstream figure Luis Caputo as the economy minister and Caputo ally Santiago Bausili as the central bank chief, MSN noted.

A more detailed economic plan, focusing on reducing spending and closing the fiscal deficit, is expected next week.

Milei, echoing former U.S. President Donald Trump, pledged to "make Argentina great again" and declared the end of a populist era, envisioning a prosperous and liberal Argentina.

The inauguration ceremony saw notable guests, including Ukrainian President Volodymyr Zelenskiy, Hungarian Prime Minister Viktor Orban, and a US delegation.

Challenges lie ahead, with state energy firm YPF raising petrol prices and market expectations anticipating a sharp devaluation of the peso.

Despite acknowledging short-term difficulties, Milei expressed optimism about the future, stating, "We don't seek or desire the tough decisions that will need to be made in the weeks ahead, but unfortunately, we have no choice."

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This article is owned by Latin Post.

Written by: Bert Hoover

WATCH: Javier Milei Sworn in As Argentina's President, Warns of 'Shock' Austerity - From CNN-News18