MANAGUA, NICARAGUA, JULY 7 -- Out of the rainy season's muck in downtown Managua, a tent city is rising directly across the street from the office of President Violeta Chamorro.

About 60 ragtag squatters, most of them former government workers who lost their jobs to Chamorro's tough program of economic restructuring, maintain a protest vigil there, hoping for employment.

Although the tent city is paid for and organized by the opposition Sandinista Front, not all the occupants are Sandinistas, or even avowed opponents of Chamorro.

"She promised so many things -- economic recovery, better wages, improving conditions," said Julio Cesar Triguero, a 22-year-old engineer who described himself as politically neutral. "But in practice it's all been just the opposite -- more tense, more difficult."

The hope that flickered when Chamorro took office 10 weeks ago is fading into gloom and dejection as Nicaraguans realize that the economic crisis and bitter political divisions of the 1980s will not be tamed quickly.

Chamorro's monumental achievement -- winding up the war between government forces and the rebels, known as contras, as well as demobilizing nearly 20,000 contras in the first 65 days of her term -- has been largely overshadowed by a collapsing currency, staggering inflation and, since Monday, the second round of Sandinista-supported strikes since May.

The strikes -- directed against government offices, public transportation, telephone and mail service, and government-owned agriculture, construction and textile businesses -- appear to fulfill former president Daniel Ortega's promise that the Sandinistas would continue to "govern from below" to "protect the conquests of the revolution." The strikes were called, according to Sandinista organizers, to protest Chamorro's economic policies.

{An 18-year-old youth supporting the strike died today of wounds suffered when he was shot in the head Friday, the Associated Press reported. Marvin Alvarado Ponce was shot by two people on a motorcycle who fired into a street demonstration, family members said.}

Talks to end the walkouts collapsed Friday and the government declared the strikes illegal. Labor Minister Francisco Rosales said state workers who do not go to work Monday could be fired. Union leaders said the walkout would nonetheless spread Monday.

Also Friday night, Finance Minister Emilio Pereira announced a 43 percent salary hike for government workers on lower pay scales. He also promised to give 65,000 of the government's 100,000 employees cost-of-living raises based on price increases.

The protests and economic chaos contrast sharply with Chamorro's inaugural message of national reconciliation and recovery, replayed nightly to the strains of triumphal music on national television.

Sandinista stalwarts build barricades and set tires ablaze in the streets much as they did, some Sandinistas point out, during the 1979 revolt that toppled dictator Anastasio Somoza.

Students march through Managua, chanting slogans against the government's decision to eliminate their subsidized fares for bus travel.

The cordoba, Nicaragua's currency, is losing value so fast that merchants and restaurateurs must change their prices several times a week. Last weekend, the cordoba slipped almost 30 percent, from 350,000 to the U.S. dollar to 450,000. With the largest bill in circulation a 1 million cordoba note, an evening at a restaurant or a show requires a fat pocketful of bills to pay the check. Scrambling packs of men waving fistfuls of nearly worthless bills vie at major intersections to buy dollars from motorists stopped at red lights.

Inflation, according to government figures, was about 185 percent during May and June. Opposition economists put the figure well above 200 percent for the two months.

In the countryside, private and church-run relief organizations report increasing appeals for help from peasants hit hard by the crumbling economy and tighter credit.

"The impact has been tremendous," said Gustavo Parajon, who runs a private development agency organized by a group of Protestant churches. "People are coming to ask for food and clothes -- and not just the poor but also professionals who have lost their jobs. What we can do is just a small drop in the bucket."

The government has said that tough measures were needed to put the economy back on track: an end to many subsidies, including those for public transport, electricity, telephone service and water; the privatization of state-owned enterprises, which are generally inefficient; the return of large parcels of confiscated land to the previous owners, and trims in the government bureaucracy to cut a gaping government deficit.

The economy, battered by years of mismanagement and war, so far does not appear to have responded to the treatment. Government planners, who say they inherited the economic problems from the Sandinistas, describe this as the most difficult point in what they predict will be a slow but steady recovery.

"This is a moment of surgery," Central Bank President Francisco Mayorga, the architect of the government's economic plan, said in an interview. "When you have a patient in the operating room, you don't expect him to dance. We know the operation is painful."

Nevertheless, the Chamorro government and the Sandinistas have traded charges about who is to blame, both for the economic ills and the social unrest.

In a televised speech Tuesday night, Chamorro said the strikes were "strictly political" attempts to sabotage her program. "What every strike {or act of} sabotage or anarchy does is to reduce the good effects of the economic policy of my government," she said. "And the ones who suffer most are the people."

Ortega, in a speech the same day, accused the government of orchestrating a return to the days of Somoza, when a wealthy oligarchy benefited at the expense of the poor majority. "In other countries such as Venezuela, these types of measures have provoked social explosions," he said. "We don't want that in Nicaragua."

Ortega attempted to portray the Sandinista Front as a force of stability, reining in the strikers and seeking a negotiated solution. But most government officials, and many ordinary Nicaraguans, say the Sandinistas are behind the unrest. "They had 10 years and they couldn't do it," said a woman selling shoes in Managua's Eastern Market. "They ought to shut up and let Doåna Violeta have her chance to fix things."

For a leader who received 55 percent of the vote to the Sandinistas' 41 percent, Chamorro has been curiously isolated as the situation has gradually deteriorated.

She is surrounded -- some say smothered -- by her ministers, most of them technocrats with little political experience, and personal advisers such as her son-in-law, Antonio Lacayo, minister of the presidency, and Lacayo's brother-in-law, Alfredo Cesar, a member of the National Assembly.

She has little contact with the 14-party political coalition that triumphed with her in national elections Feb. 25. She rarely appears in public and has never held a press conference at home.

"They're running the government like a laboratory at a university," said Edmundo Jarquin, a top Sandinista legislator. "They've got good intentions, their plan is impeccable, but they're divorced from reality. They haven't got a stable alliance with anyone, so they can't get away with not consulting the different social sectors -- including the Sandinistas."