Argentine Economy Minister, Axel Kicillof, has walked out of talks with U.S hedge fund bondholders seeking to restructure the country’s debt repayments. Minister Kicillof lashed out at the fund managers labelling them ‘vultures’.

The fund managers were seeking the restructure to prevent the Argentinian economy defaulting on its repayments. Earlier in the week these same funds had sought and received a U.S. court injunction preventing Argentina from making $539 million in interest repayments to

Argentinian Finance Minister Axel Kicillof. Photo: m24digital.com

Argentinian Finance Minister Axel Kicillof. Photo: m24digital.com

other creditors. These creditors had agreed to separate debt repayment plans in 2005 and 2010.

The injunction upheld Argentina’s obligation to repay its debt in full, with interest, to the hedge funds. These debts are currently estimated to exceed $1.5 billion.

It now seems certain Argentina will default on its repayments. Credit agency Standard and Poor’s placed the economy on ‘selective default’ the moment talks ended.

The bondholders and Minister Kicillof had until midnight Saturday to come to an agreement. Mr Kicillof refused the offer from the hedge funds saying, “We’re not going to sign an agreement that jeopardises the future of all Argentines.” While the hedge funds refused the offer made by Minister Kicillof; with the hedge funds holding out for more.

Opinion is divided over what will happen next. The Argentinian economy is already suffering from a 20% devaluation of the peso in January; inflation figures estimated to be 30%; and a recession that is crippling the economy.

Argentina has previously defaulted on loan repayments. In 2001 in refused to pay back loans estimated to total $100 billion. Since that time it has been virtually excluded from global capital markets, hampering the rebuilding of its economy. This second default is likely to estrange it even further from the very things it needs.

Not only will the suffering continue and deepen for the Argentinians, but U.S bondholders would take a significant hit. This will be passed on through the markets to policy holders.

Minister Kicillof was not so dour, telling reporters: “Argentinians can remain clam because tomorrow will just be another day and the world will keep on spinning.”

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