Argentina is once again faced with the prospect of default. A series of quick fixes has only postponed the day of reckoning for Latin America's third-largest economy. Now, domestic political spats between the central government and the provinces look set to torpedo the "zero-deficit plan" that President Fernando de la Rua had hoped would restore international confidence in his country.

Forty-one months of recession have taken a heavy toll on Argentina. By the third quarter of this year, the economy was shrinking at an annual rate of between 6 and 12 percent. Officially, unemployment is 16 percent; an equal number of Argentines are "underemployed." Having a job is some solace, but wages in the manufacturing sector have fallen by an estimated 20 percent over the last three years. Lending and investment have slumped. Business confidence has collapsed. The banking system is under strain as many have voted with their feet: During four weeks in July and early August, some $5 billion in funds was withdrawn from Argentina's banks.

Argentina has been in this spot before. Less than a year ago, the continuing slump forced the government to go to the International Monetary Fund for a $40 billion loan. That shored up international confidence, but it did little for the performance of the economy. President de la Rua then called upon Mr. Domingo Cavallo, a former finance minister who helped put the Argentine economy on the path to stable and continuous growth in the 1990s, to work his magic again. This time, however, Mr. Cavallo could not pull a rabbit out of his hat. He took office in the spring, but only a few months later the government was asking the IMF for $8 billion to help stem the bank run.