Stability at a Cost: Milei’s Experiment and Europe’s Silent Dilemma

Ahead of Argentina’s midterm elections, the promise of recovery tests both  the country’s democracy and Europe’s claim to principled partnership.

On Sunday, 26 October 2025, Argentines will return to the polls for pivotal midterm elections, the first since President Javier Milei took office in December 2023. The elections will act as a referendum on Milei’s sweeping reforms, which have sought to liberalise the economy, reduce the role of the state, and restore fiscal order. Lacking a congressional majority, the president has relied on ad hoc deals with conservative and centrist blocs to advance his agenda. The vote will test his ability to sustain this fragile coalition and turn short-term stabilisation into lasting authority.

Since taking office, Milei has pursued what he calls a “chainsaw plan”: drastic cuts to public spending, public layoffs, deregulation, and the dismantling of state institutions. Framed as a remedy to the crisis inherited from previous administrations, this strategy has produced mixed results. Inflation has slowed, the peso stabilised, and Argentina has recorded its  first fiscal surplus in over fifteen years. The International Monetary Fund (IMF) has praised the  government’s discipline, while foreign investors have cautiously re-engaged. In Europe too,  particularly among pro-market and right-wing voices, Milei has attracted attention as a reformer  willing to challenge economic orthodoxy. 

Yet the recovery narrative invites scrutiny. Behind the apparent success story lie deeper questions: how sustainable is this “stabilisation”? What social and democratic trade-offs underpin it? These questions matter as Argentina’s image evolves and Europe observes this transformation with interest and caution. This renewed attention coincides with a broader effort to revitalise EU–Latin America relations  since the 2023 EU–CELAC Summit in Brussels. A follow-up summit is scheduled for 9-10  November 2025 in Santa Marta, Colombia, to deepen cooperation on trade, the green transition,  digital innovation, and democratic governance. In this context, Argentina’s trajectory stands out for its domestic transformation and for the dilemma it poses to Europe: how to reconcile economic recovery with the democratic and social values it claims to uphold. 

The Mirage of Success: Stabilisation and Europe’s Fascination

Inflation remains the most visible indicator of President Milei’s proclaimed success. When he took  office, annual inflation exceeded 210 percent, among the highest worldwide. By May 2025,  headline inflation had dropped to 43.5 percent and core inflation to 44.7 percent, their lowest levels  since 2020. Month-on-month inflation fell to 1.5 percent, and forecasts for year-end inflation were  revised down to around 28 percent, marking a striking reversal from the hyper-inflationary spiral of  2023. 

The decline in prices, however, reflects both policy adjustment and economic contraction. Sharp  reductions in subsidies, wage compression, and tight credit conditions have dampened domestic  demand, producing a disinflationary effect. Consumption has slowed, households have postponed  purchases, and several sectors reduced activity. The fall in inflation thus signals a stabilisation  achieved more through reduced demand than reform. 

Fiscal consolidation forms the second pillar of the government’s narrative. In 2024, Argentina  recorded a primary surplus of 1.8 percent of GDP, its first in 14 years, with cumulative surpluses of  around 1.3 percent by August 2025. These results stem largely from spending restraint: deferred  infrastructure projects, lower transfers to provinces, and compressed social expenditures. Revenues,  meanwhile, have stagnated as consumption weakened. The adjustment has therefore been driven  less by growth than by retrenchment, prioritising fiscal order over productive capacity. 

Monetary and exchange-rate policy follow the same orthodox logic. Upon taking office, Milei  devalued the peso from ARS 366 to roughly ARS 800 per U.S. dollar, then moved to a managed  float between ARS 1,000 and 1,400. Interest rates near 29 percent have stabilised expectations but  restricted credit and investment. This mix of fiscal tightening and monetary discipline restored  short-term confidence and attracted capital inflows, much of it speculative. 

External financing has been decisive. In April 2025, Buenos Aires secured USD 42 billion from the IMF, World Bank, and Inter-American Development Bank. A USD 20 billion currency swap line further boosted liquidity, underscoring how dependent Argentina’s stabilisation remains on external confidence.

Taken together, these developments depict a country that has regained macroeconomic order at high cost. The indicators point to short-term stability, built on compressed demand, fiscal restraint, and foreign support, whose sustainability remains uncertain.

The Politics of Predictability: Why Milei Still Commands Support 

Even as doubts persist about Argentina’s recovery, its political effects have been immediate. Despite austerity, Milei maintains relatively high approval levels. A survey by the University  of San Andrés estimated his support at around 40 percent in October 2025, unusually strong for a  government implementing such far-reaching reforms. This endurance reflects more than satisfaction with economic outcomes; it stems from the appeal of  predictability. After years of hyperinflation, instability, and abrupt policy shifts, the ability to  anticipate the value of money from one week to the next has restored a limited but meaningful sense  of order. Even modest stabilisation allows households and businesses to plan — activities nearly impossible amid chronic uncertainty.

Milei’s support thus rests less on material improvement than on the perception of restored control. For many voters, austerity itself becomes proof of resolve,  evidence that difficult measures are finally being taken to confront a persistent crisis. This perception of order, however fragile, also resonates abroad. In Europe, Milei’s experiment is  viewed both as a sign of decisive leadership and as a cautionary tale, revealing the tension between  the promise of stability and the risks of democratic contraction. 

Europe’s Fascination

The stabilisation achieved under Milei, though uncertain in substance, has been interpreted by many  European observers as proof that orthodox adjustment and fiscal discipline can restore order even in  a chronically unstable economy. This convergence of narratives, Argentina’s search for  predictability and Europe’s quest for reliable partners, has generated renewed optimism across the  Atlantic. 

From the outset, several European governments, including France and Germany, viewed Milei’s  liberalisation agenda as an opportunity to re-anchor Argentina as a trustworthy and open economy. His pledge to revive the stalled EU–Mercosur trade agreement aligned neatly with Brussels’  priorities and with the interests of export-oriented member states. Within the European  Commission, officials in DG TRADE and the European External Action Service (EEAS) welcomed  what they described as a “constructive reset” in relations. After years of friction with previous  administrations, Buenos Aires once again seemed to speak Europe’s language of discipline,  competitiveness, and fiscal credibility. 

The attraction was not only economic but also political. Across Europe’s right-leaning and  libertarian circles, Milei has been cited as evidence that radical fiscal correction can succeed where  gradual reform has failed. Parties such as VOX in Spain, Lega in Italy, and the FDP in Germany  have portrayed his agenda as an example of political courage against bureaucratic inertia. Milei’s  2024 visit to Europe, including meetings with Czech leaders and an address to the European  Conservatives and Reformists (ECR) group, reinforced his visibility as a leader turning conviction  into policy. 

Yet beneath this enthusiasm, unease persists. Diplomats and analysts question whether Argentina’s  abrupt turn toward market orthodoxy can sustain social and political stability. Others note the  paradox of a president elected in the name of freedom governing through emergency decrees. Such  concerns, however, remain secondary, often overshadowed by relief that Argentina appears once again predictable and disciplined.

For now, Europe’s cautious optimism mirrors Milei’s narrative of recovery. Whether this perception  can withstand growing strains within Argentina’s social and institutional landscape will be the focus  of the following section.

The Hidden Costs: The Social Unraveling and Europe’s Contradiction When Stability Means Decline

Behind the reassuring figures of contained inflation and balanced budgets lies a more precarious  social landscape. According to INDEC, official data show that poverty fell to 31.6 percent in mid-2025, down from over 50 percent in 2024. Yet this decline is less recovery than temporary adjustment.

The government’s emphasis on “fiscal discipline” has delivered short-term balance but limited  developmental impact. The celebrated surplus stems largely from reductions in public works, social  transfers, and provincial funding, cuts that in some ministries exceed 70 percent of planned  expenditures. Even IMF staff have noted that, once interest rollovers are included, Argentina  continues to run a financial deficit. Stability, in this light, appears more statistical than structural: a  balance sheet sustained by deferred maintenance, shrinking services, and compressed safety nets.

In daily life, this arithmetic of adjustment is visible. Hospitals operate with minimal staff and  ageing equipment; schools shorten teaching hours to cut costs. Programmes on gender equality,  reproductive health, youth employment, and housing have been suspended. What remains of the social state survives largely through community kitchens and local solidarity networks.

Employment trends reinforce this pattern. Industrial output has declined as factories close or scale  back under the weight of high interest rates and cheaper imports. The unemployment rate rose to 7.9  percent in the first quarter of 2025, before easing to 7.6 percent in the second. Real wages have  fallen by 18 percent since early 2024, while informal work expands. A dual economy has emerged: a small segment with access to dollars and a majority whose peso incomes erode.

Local economies, deprived of credit and public investment, have stagnated. Domestic demand, long  the engine of Argentina’s market, shrank by 7.3 percent in 2024, a clear sign of austerity’s impact  on consumption. Households postpone medical treatments, delay repairs, and cut spending.  Stabilisation has not brought prosperity but contraction — a stability measured in numbers rather than well-being.

A Shrinking Democracy in the Name of Freedom

The political dimension of Milei’s experiment has evolved alongside its economic transformation. Under the banner of “freedom,” the president has consolidated authority and weakened the  institutional checks that normally constrain executive power. What began as a programme of  deregulation has become a broader reconfiguration of Argentina’s democratic order. 

Since 2024, the administration has relied heavily on emergency decrees to advance reforms, often  bypassing Congress. Although legislators sought to curb this practice later in 2025, its repeated use has already reshaped political norms. Oversight mechanisms have eroded, and the judiciary has faced politicised appointments and public attacks on so-called “activist judges.” The government’s  rhetoric of efficiency blurs the line between reform and concentration of power.

Civil society has also felt this narrowing of democratic space. Trade-union leaders have faced  judicial pressure, NGOs intrusive audits, and journalists hostility from officials. Reporters Without Borders notes a decline in press freedom, with rising pressure on independent media. Public protest,  long a hallmark of Argentine democracy, now carries higher risks, as demonstrations against labour reforms or social cuts often face police intervention and detentions. Beyond these tensions lies a deeper challenge: the erosion of state capacity. Numerous ministries  and agencies have been eliminated or merged, while experienced civil servants and diplomats were replaced by political appointees. This “unmaking of diplomacy” illustrates the weakening of  professional governance in favour of loyalty-based management. The state increasingly acts as an  enforcer of fiscal and monetary discipline, with diminished developmental and redistributive roles. 

This institutional narrowing is reinforced by Argentina’s growing dependence on external financial  support. As creditors, notably IMF, World Bank, and the United States, have become central to  policy, domestic decision-making now aligns with external expectations. Fiscal orthodoxy acquires  both economic and political meaning: a condition for legitimacy in the eyes of international actors  and a constraint on democratic deliberation. 

Europe’s Double Standard: Between Principles and Pragmatism 

As Argentina’s internal tensions became increasingly visible, Europe’s initial optimism gave way to a more cautious stance, yet without a real shift in policy. What began in 2024 as relief at Argentina’s “normalisation” has evolved into measured silence. While officials now acknowledge the concentration of power and strain on social cohesion, these concerns are rarely voiced publicly. The EU continues to prioritise macroeconomic stability, trade dialogue, and  investment protection over a more explicit engagement on democracy, human rights, and social  welfare. 

This restraint reflects not only diplomatic pragmatism but also a deeper tension within EU external  action: the difficulty of aligning normative commitments with strategic and economic interests. The same officials who once praised Milei’s reforms as evidence of “discipline and credibility” now  struggle to reconcile that narrative with the weakening of labour rights, the rollback of social  programmes, and the shrinking space for civil society. Brussels has favoured quiet cooperation over  confrontation, yet this discretion increasingly appears a political choice rather than a tactical necessity. 

By 2025, external assessments had grown sharper. Reports from European research institutes such as SWP (Berlin) or IFRI (Paris) highlighted the broader implications of Argentina’s trajectory: the  erosion of state capacity, deepening inequalities, and the risk of democratic backsliding. Civil society networks, including CAN Europe and Human Rights Watch, have echoed these concerns, arguing that unconditional support for Milei’s liberalisation agenda undermines the EU’s own social and environmental objectives. Within the European Parliament, the Greens/EFA and S&D groups have renewed calls for the Commission to link cooperation with measurable democratic and social  safeguards, warning that a purely transactional approach risks legitimising illiberal governance. 

At a geopolitical level, this selective pragmatism has wider implications. By engaging with Milei’s administration primarily through the lens of economic stabilisation, the EU risks normalising a model that subordinates civic rights and inclusive development to fiscal order.

Europe’s challenge, therefore, is not to choose between engagement and criticism, but to clarify the  meaning of partnership itself. Supporting Argentina’s recovery need not entail silence on rights or  governance. Yet unless the EU articulates this balance more coherently, it will remain caught  between pragmatism and aspiration, applauding macroeconomic progress while overlooking the  fragility beneath it.

Conclusion: Argentina’s Mirror on Europe’s Contradictions 

As Argentina approaches its midterm elections, President Milei’s government stands at a defining  juncture. The first two years of his mandate have brought visible macroeconomic gains, yet rest on a  fragile social and institutional foundation. For Europe, this experience offers a mirror rather than a model. The Argentine case highlights a  deeper policy dilemma within the EU’s external action: how to reconcile economic engagement with commitments to democracy, social development, and human rights. While the Union present  itself as a promoter of values-based partnerships, its muted response to developments in Argentina  exposes the persistent gap between normative ambition and economic pragmatism.

The upcoming EU–CELAC Summit in Santa Marta will test this balance. Beyond trade and  investment, Europe’s legitimacy as a global actor will depend on whether it can align strategic  interests with its declared values. A consistent approach, one that recognises the interdependence of stability, inclusion, and institutional strength, would strengthen both Argentina’s resilience and the EU’s credibility. Europe’s response will reveal the depth of its own convictions. Whether the Union opts for caution or coherence will determine not only the course of its relations with Latin America but also the  legitimacy of its broader role in shaping a values-based international order.

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Thomas Aubineau is a political analyst specialising in EU–Latin America relations, with a focus  on democracy, human rights, and international development cooperation. He has worked with EU  institutions, international organisations, and transnational civil society networks, leading initiatives  on civic space, youth engagement, and responsible business conduct within the EU’s external  action. Thomas holds an Erasmus Mundus Master’s in Latin American and Caribbean Studies from  the Universities of Salamanca, Stockholm, and Sorbonne Nouvelle, and a Bachelor’s in European  Studies from ESPOL – Université Catholique de Lille. His research explores democratic  backsliding, the governance of North–South cooperation, and the role of civil society in shaping  public policy. 

Connect with Thomas on LinkedIn or email aubineauthomas74@gmail.com

The opinions expressed in this blog are solely those of the author and do not reflect the views of the EULAS Network.