Nov. 7 (Bloomberg) -- Argentina's lower house voted to support President Cristina Fernandez de Kirchner's plan to nationalize about $26 billion in private pensions, a proposal that raised concern of a default.

Legislators voted 162 to 75 to back the plan after a session that began yesterday afternoon and ended after midnight. The proposal will be sent to two senate committees for consideration next week. A full senate vote on the measure may take place Nov. 20, the senate's Work and Social Security Committee said.

``We've achieved a real consensus on this measure, convincing enough people in the opposition that the current pension system failed,'' ruling party lawmaker Jose Maria Diaz Bancalari told reporters. ``The state has an obligation and a responsibility to oversee these funds.''

Concern about Fernandez's plan was reflected in the benchmark Merval stock index, which fell 27 percent in the days after details were first reported on Oct. 20. Lawmakers aligned with Fernandez say the global financial crisis is making private pension plans less attractive, giving momentum to their efforts.

No Stability

``The way these decisions are being made is disastrous for those looking for stability in the Argentine economy,'' said Felipe Sola, a member of the ruling party who opposed the bill, during the debate.

On Nov. 5, supporters and opponents of Fernandez's plan rallied in front of the Congress building waving flags and beating drums. Protests have been sporadic and smaller than the nationwide demonstrations earlier this year against a plan to raise agricultural taxes. That plan was eventually defeated in the senate.

``There may be 9.5 million members in the pension funds, but you can only get 7,000 to protest, so it would seem that this is unstoppable,'' said Federico Thomsen, a political and economic analyst at the E.F. Thomsen research firm in Buenos Aires.

Nationalizing the funds would give the government a surge of continuing revenue at a time of slowing economic growth, offering $4.5 billion in new contributions next year, said Javier Kulesz, an economist at UBS Pactual in Buenos Aires. Argentina's growth rate may slow to 1 percent in 2009 from 6.8 percent this year, JPMorgan forecasts.

Last week, the government's attempt to force pension funds to repatriate cash from investments in the U.S. was temporarily thwarted by holders of outstanding debt tied to the country's 2001 default on $95 billion of bonds.

U.S. District Judge Thomas Griesa granted a request by bondholders including Aurelius Capital Partners LP and Blue Angel Capital, to freeze Argentine pension fund assets in the U.S. A hearing is scheduled in Manhattan federal court Nov. 14 on whether to extend the order.

To contact the reporter on this story: Bill Faries in Buenos Aires at wfaries@bloomberg.net

Last Updated: November 7, 2008 07:35 EST