Argentina has just defaulted on its international bonds for the third time in three decades. But this time, the default appears to be more technical than the wholesale failures of the previous two times. This default goes back to 2001 when the previous default on government bonds led to a settlement, under which, 93 per cent of the creditors accepted new and less favourable terms, but a holdout group of vulture funds based in the US refused to go along with the plan. They have just won a court case, under which, they sought priority to be paid their original terms.
The US court that came up with this ruling needs to take into account the bigger picture and recognise that the government of Cristina Fernandes de Kirchner may have its faults but in this case it seeks to make the payments but not immediately.
The vulture funds should back off and not imperil Argentina’s fragile chances of getting back to normal. It will be wrong for a court ruling on this narrow technical issue to lead to economic failure.
