Christina Fernandez, the president, had outlined the plan to take over 10 private pension funds on Tuesday arguing that it would secure the assets in the face of the global financial crisis.

Detractors say that it could be a ploy by the government to fortify its own cash reserves, and an attempt to prevent it from defaulting on a debt of $28bn which must be repaid over the next three years.

The announcement led to the Argentinean stock market diving by 20 per cent over two days.

Investors thought that officials would sell equities, buy bonds and restrict access for firms whose shares are traded publicly.

'People's support'

However, Patricia Vaca Narvaja, a member of congress from the Front for Victory party, said: "This isn't a question of partisanship any more, but rather something the Argentine people are demanding'' to protect their savings.

Employees of Retirement and Pension Funds protest in Buenos Aires [EPA]
A significant number of opponents said that they would back the plan if the government guaranteed that the funds were spent only on pensioners.

No ruling party allies addressed that demand, but Amadou Boudou, who as director of the Social Security Administration will manage the funds, said that the scheme was designed to protect retirees.

Analysts say that if the pension funds are not used to pay the country's debts, then the government will default on its borrowing. Argentina's fiscal surplus could potentially wither away as tax revenues from soy and other commodity exports decrease.

Daniel Kerner, an economic analyst with the Eurasia Group in New York, said: "The general consensus is that this is going to pass congress.

"If in the end though, the opposition manages to change the plan in a way that makes it impossible for the government to tap those funds, it's a really bad outcome that will increase market perceptions of possible default."

Almost one in four Argentines has a private pension.

Under the plan the social security administration would take on the funds and individuals would continue to be able to contribute to them.