Argentina calls on US to intervene in default row

Argentina yesterday called on Washington to intervene in a court case over the country’s defaulted debt after a US district judge threatened the South American country with contempt for making what he called false statements.

US Judge Thomas Griesa, overseeing Argentina’s long-running battle with hedge funds over defaulted debt, said on Friday he would issue a contempt of court order unless the government stopped publicly claiming it had met its obligations and was not in default.

Argentina’s cabinet chief Jorge Capitanich countered, yesterday, that a contempt order would violate the country’s sovereign immunity and he called on the Obama administration to rein in Judge Griesa.

“When it comes to a bilateral relationship with a sovereign country and the violation of its immunities, it is necessary for the executive branch to intervene. The executive has a monopoly on relations with other countries.”

“The United States is responsible for the actions of its branches of power, in this case the judicial branch, regardless of the independence of the functioning of those branches.”

In 2002, Argentina defaulted on about $100bn (€74bn) in sovereign bonds. It restructured most of that debt in a deal that gave holders less than 30c on the dollar, while a group of hedge funds went to court for full repayment.

In 2012, Judge Griesa ruled that Argentina could not repay holders of restructured debt without also paying hedge funds their court-award of $1.33bn, plus interest, at the same time.

Argentina says it met its obligation to the holders of restructured bonds when it deposited $539m into the account of intermediary Bank of New York Mellon in June. Judge Griesa called the deposit illegal and ordered the money frozen.

As a result, Argentina effectively missed the coupon payment after a grace period ended on July 30, pushing it into default on its restructured debt. Judge Griesa reiterated on Friday that “there has been no payment.”

Argentina has long accused the judge of overstepping his bounds and being partial toward the funds, which bought Argentine bonds at steep discounts and are characterised by President Cristina Fernandez as “vultures” out to wreck her country’s finances in their pursuit of huge profits.