Argentina default: Judge Griesa urges new negotiations

A garbage collector in Buenos Aires The bond-holders are known in Argentina as "buitres," Spanish for "vultures"

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Negotiations between Argentina and its creditors should be resumed urgently, US judge Thomas Griesa has said.

Investors holding Argentine bonds and lawyers for the government attended a hearing in New York for the first time since Argentina defied an order to pay.

"Nothing that has happened this week has removed the necessity of working out a settlement," the judge said.

The bond-holders, which Argentina calls "vulture funds," are demanding a full payout of $1.3bn (£766m).

Start Quote

It would have been easier for me to sign it, but I wouldn't be able to sleep ”

End Quote President Cristina Fernandez

The bonds were bought by hedge funds NML and Aurelius Capital Management for a fraction of their face value in the aftermath of Argentina's economic collapse in 2001.

The South American nation defaulted on its debts at the time.

It has since renegotiated its debts with 92% of the creditors who agreed to settle for one-third of they were originally owed.

However, the hedge funds bought up a large chunk of the remaining distressed debt at low prices, and demand to be paid the full face value of their holding.

On Wednesday Argentina refused to pay.

The government had expected their dispute to go all the way to the US Supreme Court, which would have bought the country more time.

In June, the Supreme Court declined to hear Argentina's appeal against the decision of a lower court that made it liable for the money.

'Half-truths'

Mr Griesa ordered Argentina to pay the hedge funds and blocked any payments to other creditors.

"The only sensible way" to solve the crisis, Mr Griesa said, "is to go forward on the path that has been started".

Court-appointed mediator Daniel Pollack Argentine called court-appointed mediator Daniel Pollack "incompetent"
President Cristina Fernandez, 31 July 14, Casa Rosada Ms Fernandez said foreign powers were attempting to undermine Argentina's economy

Argentina has accused Mr Griesa and the court-appointed mediator, Daniel Pollack, of being biased in favour of the funds.

'Let's cool down'

Argentina denies it is in default. It says it has the money to pay the vast majority of its creditors and has not done so only due to the court's ruling.

"To say we are in default is a huge stupidity," said Economy Minister Axel Kicillof on Thursday.

"Judge Griesa took the side of the vulture funds throughout the negotiations. As I mentioned before, the negotiating table was tilted towards them," he told journalists.

President Cristina Fernandez de Kirchner addressed the nation on Thursday night to defend its decision not to sign an agreement that would harm her country's interests.

She later addressed supporters at the presidential palace, the Casa Rosada.

"It would have been easier for me to sign it, but I wouldn't be able to sleep and I wouldn't like to go down in history like that," said Ms Fernandez.

She is in the final year of her second term in office and is constitutionally barred from seeking a third term.

Mr Griesa urged Argentina to focus on a solution for the problem.

"Let's cool down with ideas of mistrust. What can be trusted are facts. What can be trusted are proposals. This is not a personality contest," he said.

Argentina fears that a deal with the investment funds would have an impact on the deals signed between 2005 and 2010.

The bond-holders who agreed to settle for a third of what they were owed might be entitled to be paid in full.

In that case Argentina would not be able to honour its commitments.

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