FREE now and never miss the top politics stories again. SUBSCRIBE Invalid email Sign up fornow and never miss the top politics stories again. We will use your email address only for sending you newsletters. Please see our Privacy Notice for details of your data protection rights.

A spokeswoman for Germany’s foreign minister said Argentina and the IMF were holding positive discussions about saving the third-biggest economy in the content. She said: “Argentina and the IMF are holding constructive talks. We assume that the IMF and Argentina will find good solutions.” It comes after Argentina's peso lost as much as nearly one-fifth of its value on Thursday despite the central bank's hiking its benchmark interest rate to a dizzying 60 percent as investors panicked over President Mauricio Macri's handling of an economic crisis. Treasury Minister Nicolas Dujovne has pledged to announce a set of new economic measures on Monday, and will target a fiscal deficit for 2019 that is lower than the current target of 1.3 percent of gross domestic product in order to reduce the government's need to go to debt markets.

Onerous borrowing costs combined with government spending cuts and a drought that crippled Argentina's agricultural sector this year have slammed Latin America's third-largest economy. It is expected to enter recession in the third quarter. The political fortunes of Macri, who until recently had been expected to easily win re-election late next year, may also be waning. He is likely to face mounting opposition from emboldened unions after promising further austerity measures following an International Monetary Fund warning on the government's need to cut its fiscal deficit, with voters mindful of the 2002-2003 economic crisis and the burdensome cuts brought by past IMF deals. "Rapid adjustment will be painful, recession could be deep, and political risk will spike amid dwindling confidence at home," Fiona Mackie, regional director for Latin America and the Caribbean at the Economist Intelligence Unit, said on Twitter.

Investors panicked over President Mauricio Macri's handling of an economic crisis

In an effort to stem a slide in the peso, the world's worst-performing currency this year, and to curb inflation running at 31 percent, the central bank's monetary policy committee at an emergency meeting on Thursday voted unanimously to raise its benchmark rate to 60 percent from 45 percent. The surprise move, however, failed to stabilise the peso. It finished down 13.12 percent at a record closing low of 39.25 pesos per U.S. dollar, after touching 42 pesos earlier in the day. The market turmoil erupted early on Wednesday after Macri said he had reached a deal with the International Monetary Fund to accelerate disbursement of a $50 billion loan program agreed in June, in a misguided attempt to calm investor nerves. Instead, Macri's admission that there was a "lack of confidence in the markets" about Argentina's ability to finance its deficit next year sowed panic among investors. The country has $24.9 billion in peso- and foreign currency-denominated debt payments next year.

The IMF said hours later that it was considering speeding up payments because of the financial meltdown, but that Argentina needed to adopt stronger fiscal and monetary policies. Dujovne said he would travel to Washington on Monday evening to discuss the policies with the IMF's technical staff. The central bank auctioned $330 million on Thursday, bringing this week's interventions to more than $1 billion. In efforts to prop up the currency the bank has sold more than $13.5 billion this year, leaving it with $54.3 billion in foreign currency reserves. "We are convinced that these exchange rate levels exaggerate the fundamentals of the Argentine economy," Dujovne said, adding that the country would still be "competitive" with a stronger peso. The MerVal stock market closed up 5.2 percent, led by export-focused companies that benefit from a weaker currency.

Germany has welcomed a financing deal between Argentina and the International Monetary Fund