In 2011, at the height of the euro crisis, Argentina's president Cristina Kirchner liked to boast that her government's unorthodox economic model was being studied by those looking for a way out from the swamp of debt and economic stagnation in Europe.

Since declaring the world's biggest ever sovereign debt default in 2001, Argentina had shunned international capital markets and instead achieved Chinese rates of growth as it rode a wave of high prices for its commodity exports.

Many observers warned that the boom was brittle, being undermined by high inflation and a lack of investment in infrastructure and productivity.

But as Chinese demand for food showed no signs of easing up, Ms Kirchner’s government grew increasingly confident in its attacks on critics in the economic debate.

However, now the president’s lauded “model” – central to what she has branded as the “victorious decade” of Kirchner rule – has sunk into the much-delayed crisis sceptics have long predicted for it.

Soy prices are falling and the economy is slowing. The lack of investment means infrastructure is struggling to cope with the demands placed on it. Electricity blackouts have struck at the height of a summer heatwave.

The surpluses Ms Kirchner inherited from her husband and predecessor have turned into deficits under her watch as the government has used increased public spending to prop up economic growth.

But with local capital markets too small and foreign ones unavailable because of outstanding disputes from 2001’s debt default, the government has resorted to printing money to cover the gaps.

That has fuelled rampant inflation which is currently running about 30 per cent a year, creating a stampede for dollars as local confidence in the increasingly worthless peso evaporates.

The central bank sought to defend the local currency but was burning through its foreign currency reserves to do so. These have fallen from a record $52.6 billion (€38.6 billion) in 2011 to just $29 billion now, down 29 per cent last year alone.

With about $8 billion of what remains needed for debt repayments this year, such a burn rate raised the prospect of the running out of foreign cash as early as July.

That finally forced the government to throw in the towel and devalue the peso. It lost almost a fifth of its value in January in the largest drop since the fallout from 2001’s debt default.

In public, the government has refused to accept any responsibility for the crisis, instead blaming local businesses and foreign banks.

Jorge Capitanich, the president's powerful new cabinet chief, said the country was "facing a speculative attack in order to grab our oil and water".

Route to orthodoxy
But behind the nationalist rhetoric the government looks to be seeking a route back towards economic orthodoxy. The young economic minister Alex Kicillof rose to power as a leading light of the radical La Camporá grouping within Peronism.

Then he advocated no negotiations with foreign bondholders in dispute with the government since 2001 and also oversaw the expropriation of YPF, the former state oil company, from Spain's Repsol.

However, now he has backtracked and is in talks with Repsol about compensation and is also leading efforts to finally settle with foreign bondholders in an effort to pave the way for a return to international capital markets.

That has become a priority as Argentina's deficit was just €2.07 billion last year. "The fiscal deficit is not large compared to the size of the economy," says Alberto Bernal, a Latin America economist at Bulltick. "It would be pretty easy to raise were the country not shut out from capital markets."

For last month’s devaluation to work, economists say it must be followed by greater monetary and fiscal restraint by the government.

But that will be hard in the face of union demands for pay rises to keep pace with inflation.

Teachers are set for pay talks with governors in the coming weeks with officials signalling they want to cap a rise at 23 per cent, effectively a pay cut when inflation is closer to 30 per cent.

Even pro-Kirchner union leaders are proving restless.

"Workers are being left with their heads under water," warned Hugo Yasky, the head of the pro-government CTA union federation.

The pro-Kirchner governor of Misiones province Maurice Closs has called for talks between government, business leaders and unions so that the situation "does not end like Alfonsín or the crisis in 2001", referring to two previous presidents forced from office in 1989 and 2001 amidst economic crises.

The governor’s comments drew a stern reprimand from Mr Capitanich.

Even Ms Kirchner's critics agree the situation is not so grim. "Argentina is not Venezuela, " says Bulltick's Bernal.

“There are some signs the government is taking corrective measures. Unlike Venezuela, Argentina is not on the verge of Cubanisation.”

But the governor’s comments highlight that among Ms Kirchner’s supporters the confidence of just a few years ago has now been replaced by increasing nervousness.