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Argentina unions protest demanding salary hike

Jessica Weiss, Associated Press

People demonstrate during a protest in Plaza de Mayo main square in Buenos Aires, Argentina, Wednesday, Dec. 19, 2012. Thousands of people crowded the square in front of the presidential palace to demand salary hikes and a solution to spiraling inflation. The sign reads in Spanish "for a Christmas without hungry." (AP Photo/Eduardo Di Baia)

BUENOS AIRES, Argentina (AP) -- Argentine President Cristina Fernandez faced another protest Wednesday led by a union boss who used to be one of her most loyal supporters.

Thousands of people marched from the capital's iconic obelisk to the Plaza de Mayo main square in front of the presidential palace demanding pay raises and a solution to Argentina's spiraling inflation.

The demonstration was called by Hugo Moyano, the head of the powerful General Labor Confederation union. He was once a close ally of Fernandez and her late husband, former President Nestor Kirchner, and his support helped Fernandez win re-election.

"Let the (president) take care of inflation eating up our salaries and the insecurity that is affecting all Argentines," Moyano told a cheering crowd of union members who set off fireworks, banged on drums and waved Argentine flags.

Most union workers won pay hikes of 25 percent or more this year, in line with what private analysts say is Argentina's true annual inflation rate. The government's widely discredited inflation index puts the annual rate at a much lower 10 percent.

The pay increase put most union members over the threshold to begin paying income tax, something many lower-paid workers never had to do before.

For a single worker, income tax begins at an annual salary of about $15,600. The initial rate is 35 percent, and the new income-tax paying workers are seeing about a fourth of their take-home earnings go to the state.

Moyano and some other union leaders broke away from Fernandez this year as she tried to tame the demands of a now-divided labor movement by supporting a rival slate in union elections.