Argentina took another “creative” step to avoid default this week when it transferred $832 million to Bank of New York Mellon and other institutions to pay bondholders—even though it knew the bank couldn’t deliver the money. A New York judge had blocked the banks from paying any of Argentina’s bondholders until Argentina also pays its “holdout” creditors—in a ruling that both a Second Circuit Court of Appeals, and then the Supreme Court, upheld. This morning, the same judge, Thomas Griesa, refused the country’s request for a stay of the order after learning of the deposit. Argentina now has only a thirty-day grace period before it enters default.Before and even after the Supreme Court finally ruled that Argentina to pay back the creditors from its 2001 default who did not accept the debt restructuring when it pays back those who did, Argentina has been trying to avoid doing so. It claims that if it pays NML Capital, the plaintiff in those cases and the leader of the “holdout” creditors, a surge of other holdout claims will swamp its treasury and force a default. Refusal to pay the “vultures” has also become political, and almost a source of national pride.Now, Argentina must either find a way to negotiate with NML under the gun, or risk defaulting on the whole of its debt. The country is running out of moves.The Argentinian press and political establishment, meanwhile, are arguing that any default will be America’s fault—or the judge’s fault, or the banks’ fault, not their country’s fault. Roberto Feletti, an MP for Argentina’s ruling party, provides a particularly clear example of Orwellian spin:
“With the country showing payment capacity and compliance, if that money does not reach its legitimate owners, (both) the private property and the US agents obligations compliance system would be disrupted,” the head of the Lower House Budget and Revenue Committee pointed out explaining that “tension” has been now “moved” to the United States because Argentina’s dispute with vulture involves “not only an Argentine problem but a problem of the American payment system.”
It looks from here like the American payment system has far less of a problem than Argentina does.