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Argentina Vows Not To Default After Court Defeat

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http://www.theguardian.com/business/2014/jun/17/argentina-vow-default-fears-uk-inflation-business-live

Argentinian president Cristina Fernandez took to the airwaves overnight to insist that her country will not default on its payments to bondholders following yesterday's defeat in the US courts.

In a national TV address, President Fernandez declared that Argentina would meet its commitments to investors who hold its new, restructured bonds.

Her government wouldn't simply cave in to 'holdout' bondholders despite their victory on Monday.

Last night's ruling appears to force Argentina to repay its 'holdout' creditors in full before repaying its 'restructured' bonds -- and it has already said it can't afford to do both.

Failure to keep repaying the holders of Argentina's restructured debt would be a technical default -- and Fernandez insisted that won't happen. The next payment is due on June 30th.

She said:

"We want to fulfil and honour our debt and we will do that ... I ordered the economy ministry to set up all the tools needed to make the payment to those who trusted in Argentina."

Argentinian default imminent then?

No wonder the national side had this banner a few days ago.

450237862_3154926.jpg

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http://www.theguardian.com/business/2014/jun/17/argentina-vow-default-fears-uk-inflation-business-live

Argentinian default imminent then?

No wonder the national side had this banner a few days ago.

It does show the problem with having no bankruptcy process for Nation states - something that has fairly brutal political consequences. Ask the Greeks.

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A piece in today's Times says that when their president travels abroad she rents a private jet rather than use the presidential plane, for fear of it being impounded to pay creditors. Grounds for fear include case in 2012 of a frigate being detained for over 2 months in a Ghanaian harbour while a US hedge fund applied to courts.

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It does show the problem with having no bankruptcy process for Nation states - something that has fairly brutal political consequences. Ask the Greeks.

Of course Argentina did walk away from its debt 15 years ago. Aren't these investors the ones that wont except that and want this defaulted debt given equal status to the new debt. Moreover, it has not worked out for Argentina like other defaulters such as Russia and Iceland. Effectively frozen out of the international markets the economy has just imploded, worse than Greece.

I think Argentina has been the one singled out for special punishment and international retribution as an example to any other would be defaulters.

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http://www.reuters.com/article/2014/06/19/us-argentina-debt-idUSKBN0ET1RK20140619?feedType=RSS&feedName=businessNews

'

(Reuters) - Argentina threatened to default on its debt on Wednesday when the government called it "impossible" to pay bond service due on June 30, citing a U.S. court decision earlier in the day that increased pressure on the economically ailing country.

Buenos Aires is locked in a 12-year legal fight with creditors who refused to participate in two restructurings that followed Argentina's 2002 default on $100 billion in bonds.'

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14.JamesStGeorge

"Debts should always be paid in full. No excuses"

==

So you mean all those public sector employees, with contractual final salary pensions, should get exactly what it said on the tin when they signed up for the jobs, then?

Comment from the BBC article cited above.

Here's the thing- if debt were to be always repaid in full then lending would be a risk free game- in which case how can we justify the risk weighted premia charged by the lender?

Capitalism without risk is an oxymoron- so anyone who argues that debt must always be repaid fails to grasp the nature of the system.

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