Argentina disregards US Supreme Court over $1.5-bn bond default

Taking a hardline stance, Argentinian President Cristina Fernandez de Kirchner has refused to comply with a US Supreme Court ruling ordering her to repay $1.5 billion of defaulted bonds, and vowed on national TV not to submit  to "extortion."

Argentina has been issuing bonds under New York law for decades to obtain the funding from global investors.

Her announcement follows hours after justices in Washington turned down Argentina's appeal.

However, she said her government is ready to negotiate with the "speculators" who scooped up Argentine junk bonds after Argentina defaulted on redeeming the bonds in 2001. Over 92 per cent of the holders of these junk bonds  agreed to accept new bonds worth much less than their original face value.

Analysts say this could be Argentina's last-ditch effort to gain leverage over bond holders ahead of a negotiated settlement that both sides said they wanted, Fox News reported.

However, with only days before a huge debt payment ordered by the court was due, economists, analysts and politicians sy the country's already fragile economy could be severely strained if the dispute is t resolved immediately.

According to Miguel Kiguel, a former deputy finance minister and World Bank economist in the 1990s who runs the Econviews consulting firm in Buenos Aires, refusing to comply with rulings that had been allowed to stand by the US Supreme Court "would be very damaging to the Argentine economy in the near future.''

Argentine markets that appeared nervous over the prospects saw the Merval stock index drop 11 per cent after the court decision, its largest one-day loss in over six months, while the value of Argentina's currency tanked 33 per cent on the black market.

Meanwhile, Kirchner sent top aides to work with lawmakers in a bid to avert a debt crisis a day after she made her stance public, Bloomberg reported.

Hours after the US Supreme Court turned down a hearing on Argentina's appeal of the case, Fernandez described the decision as ''extortion'' even as she vowed to keep paying restructured debt including the next interest payment of $900 million due 30 June.

According to Fernandez, complying with the ruling was impossible and would expose Argentina to as much as $15 billion in claims from creditors who rejected restructuring offers after the country's $95 billion default in 2001.

She said, she instructed Kicillof, who negotiated to resolve debt disputes with the Paris Club and Repsol SA in the past four months, work out a way to keep paying holders of restructured notes.

''Argentina has the willingness to negotiate,'' Fernandez said. ''What it doesn't have -- and I'll spell it out for you -- is the need to be subjected to such extortion. I don't think it's deserved.''