A US
judge has ruled that the Republic of Argentina is in contempt of court for
refusing to obey an order to repay the debt it owes to two US hedge funds.
Argentina
has been mired in a US court dispute with the funds, which bought the country's
debt at a discount after its default in 2001.
In
July, Judge Thomas Griesa ruled that Argentina must repay the funds before it
can repay other bondholders.
Argentina
refused, sending the country into default.
Earlier
on Monday, Argentina's ambassador to the US warned in a letter to US Secretary
of State John Kerry that if the country was found to be in contempt of court,
it would represent "unlawful interference" in Argentina's domestic
affairs.
And
in a strong statement, the Argentine Foreign Ministry in Buenos Aires said
Judge Griesa's ruling "violates international law" and "has no
practical effect other than to provide new elements helpful to the slanderous
political and media campaign conducted by vulture funds against
Argentina".
It
added: "Griesa holds the sad record of being the first judge to declare a
sovereign state in contempt for paying a debt, after failing in his attempt to
block the restructuring of the foreign debt of Argentina."
Judge
Griesa said he would decide on a penalty at a later date.
'Vulture funds'
After
Argentina defaulted on about $100bn (£61.5bn) of debt in 2001, the country
negotiated a settlement with the majority of its bondholders to repay a certain
portion of the amount owed.
Some
bondholders accepted swaps for lesser-valued bonds but were not paid interest
on those bonds.
However,
two hedge funds - NML Capital and Aurelius Capital Management - have demanded
full repayment of the $1.5bn (£920m) they are owed, and have sued to prevent
the country from paying back only its restructured bonds.
Argentina
has refused, saying that they are "vulture funds", and has attempted
to enact legislation to skirt Judge Griesa's ruling.
This
has left two banks in New York - Bank of New York Mellon and Citigroup -with
millions of dollars on hold that Argentina had planned to pay in interest to
holders of its renegotiated debt.
BBC
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