Argentine finance minister asked to step down as ministry reorganized

By Luc Cohen and Jorge Otaola

BUENOS AIRES (Reuters) - Argentine President Mauricio Macri has asked Finance Minister Alfonso Prat-Gay to step down, cabinet chief Marcos Pena said on Monday, citing disagreements over management style and the structure of the team charged with handling economic policy.

Prat-Gay's departure is part of a reorganization under which the Finance Ministry will be split in two as the economy remains in recession with a wide fiscal deficit a year into Macri's term.

The Finance Ministry will be split into a treasury division led by economist Nicolas Dujovne and a finance division led by current finance secretary Luis Caputo, who has reported to Prat-Gay.

Pena said Macri's decision to ask Prat-Gay to leave was related to management issues rather than disagreements over economic policy. Macri has sought to close Argentina's gaping fiscal deficit, but the government has steered away from a sharp austerity approach to avoid worsening a deep recession.

"Due to the disagreements that there were at times over the design and functioning of the team, we thought it was best for the team at this stage to make a change," Pena said at a news conference.

Dujovne will be in charge of the federal government's budget and leading Argentina on "a path to a fiscal balance," Pena said, while Caputo will oversee government finance and sales of sovereign debt, as well as improving Argentina's domestic financial system.

Rumors about Prat-Gay's future had swirled in recent weeks after an income tax proposal crucial to the government's deficit reduction targets failed in Congress, forcing the government to renegotiate a new deal with the opposition.

The change was announced on a U.S. market holiday, and the reaction in Argentina's currency and stock markets was limited, a trader said.

Latin America's No. 3 economy continues to suffer through inflation seen reaching 40 percent in 2016, while economists see the economy shrinking 2.3 percent. The government has promised a return to growth in 2017, driven largely by public works spending.

The 2017 budget presented by Prat-Gay in September foresees a deficit of 4.2 percent of gross domestic product, higher than the 3.3 percent originally anticipated.

Prat-Gay will remain in place until the end of the week, Pena said, and was flying to the southwestern Argentine city of Villa la Angostura to have lunch with Macri, who is on vacation.

Prat-Gay was instrumental in lifting Argentina's currency controls and negotiating a deal with holdout creditors over debt that Argentina defaulted on in 2002, two of the center-right Macri administration's main achievements after taking office last December, ending more than a decade of populist rule.

Caputo also played a crucial role in the deal with holdouts, which paved the way for Argentina's return to international credit markets for the first time in more than a decade.

(Editing by Bill Trott and Leslie Adler)