BUENOS AIRES (Reuters) - Argentina’s Peronist leader, Alberto Fernandez, was sworn in as president on Tuesday, marking a shift to the left for Latin America’s No. 3 economy as the country fights rampant inflation, credit default fears and rising poverty.

Argentina's President Alberto Fernandez and Vice President Cristina Fernandez de Kirchner on stage outside the Casa Rosada Presidential Palace after inauguration, in Buenos Aires, Argentina December 10, 2019. REUTERS/Ricardo Moraes

The 60-year-old center-left politician took his presidential oath in front of cheering lawmakers in Congress along with political leaders from the region and representatives from major trade partners, including Brazil and the United States.

In an hour-long speech he criticized rising rates of hunger and poverty and said the country needed to revive growth to escape from “virtual default” after a period of painful austerity under outgoing conservative Mauricio Macri.

“The economy and our social fabric today are in a state of extreme fragility,” he said in the speech in Congress after he had symbolically taken the presidential baton and sash from Macri, whose tenure was hit by recession and debt crisis.

“The government that has just finished its mandate has left the country in a situation of virtual default,” Fernandez said.

He pledged to bridge social divisions and to roll out a “massive” credit system with low rates to bolster domestic demand, something he made a pillar of his campaign, and to boost spending to address hunger and poverty.

The rise of Fernandez marks a return of Argentina’s powerful left-leaning Peronists, including Vice President Cristina Fernandez de Kirchner, a rock-star populist politician who clashed with investors and farmers during her twin terms between 2007-2015.

PARTY ATMOSPHERE

In a move to underscore his man-of-the-people credentials, Fernandez had driven himself in his silver Toyota to Congress, waving to crowds lined along the roadside.

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Supporters gathered in the historic Plaza de Mayo square in the center of Buenos Aires opposite the pink-hued Casa Rosada palace waving banners and beating drums while food vendors grilled “choripan” sausages in the summer heat.

“Today there is going to be a party,” said Rafael Mantero, 45, a food vendor from the city of Rosario, who said he voted for Fernandez because his own sales had fallen by around half in recent years under Macri. “These past four years were terrible for me economically,” he said.

The new administration is expected to usher in growth-focused policies after unpopular fiscal tightening, which critics warn could strain already depleted state coffers and potentially fan tensions with creditors.

Colorful banners hung around the central city square, many from unions and grassroots organizations that helped drive the Peronists back to power. T-shirts with the face of Fernandez de Kirchner were captioned: “We’re back.”

Supporters hope Fernandez can tackle annual inflation running above 50%, poverty approaching 40% amid recession, and tricky restructuring talks on around $100 billion in sovereign debt with lenders that include the International Monetary Fund.

Fernandez said he would seek a “constructive and cooperative” relationship with the IMF, which on Tuesday congratulated him and said it supported his policies to bolster growth.

“There are no debt payments that can be sustained if the country does not grow,” said Fernandez, adding that Argentina currently “had the will to pay, but not the capacity to do so.”

IT’S THE ECONOMY

In a reflection of political challenges ahead, Brazil’s right-wing leader, Jair Bolsonaro, who has clashed publicly with Fernandez, did not attend, the first time since 2002 a Brazilian president has not attended the inauguration in Buenos Aires.

Fernandez also addressed the long-running dispute with Britain over the Falkland Islands, which Buenos Aires calls the Malvinas, saying he would “defend our sovereign rights” over the islands, on which Argentina maintains its claim.

Hard-hit Argentines, investors and markets are most closely watching Fernandez for his plans to right the economy. He picked Martín Guzmán, a young disciple of Nobel Prize winner Joseph Stiglitz, to head the economy ministry.

“Alberto needs to improve the economic and social situation,” said Verónica Quintana, 34, selling flags in the central square. “There are many people who are hungry and it is a critical situation we are in.”

Many investors have been worried about Fernandez ushering in greater state intervention, as happened under Fernandez de Kirchner during her back-to-back administrations.

Fernandez, a political operator who burst into the limelight just this year, will need to balance varied demands of his broad Peronist coalition and pressure from Macri’s party, which has been weakened but is still influential.

With little financial firepower, Fernandez has worker unions demanding wage increases to make up for high inflation and charities calling for an increase in subsidies for the poor.

Political analyst Julio Burdman said this juggling act would be Fernandez’s biggest challenge. “He needs to do a rapid maneuver to get the economy started again, which will all depend on how he is able to handle the debt.”