Argentina will default on its debt within hours after talks with holdout creditors broke down on Wednesday, according to The Associated Press.
Economy Minister Axel Kicillof stuck firmly to the government line, repeatedly denigrating the holdouts as "vultures" after two days of intense negotiations, the AP reported.
Argentine banks scrambled to put together a proposal to buy out the non-performing debt held by hedge funds and avert a default. But that deal collapsed, a senior banking executive and a second source from the financial market said, according to the AP.
A default will hurt an economy already in recession, fueling risks to consumer prices in a country with one of the world's highest inflation rates and putting more pressure on a peso that was devalued sharply early in the year, the AP reported.
It also marks a setback to the Buenos Aires government's attempts to return to global credit markets, according to the AP. Argentina has been isolated from international financial markets since its record $100 billion default in 2002.
The default results from Argentina's failure to comply with a court order that holdout bondholders be paid at the same time as a $539 million coupon payment to those who accepted reduced payments in two prior restructurings, the AP reported.
"We're not going to sign an agreement that jeopardizes the future of all Argentines," Kicillof said after he emerged from the meeting with creditors and a mediator in New York City, according to the AP. "Argentines can remain calm because tomorrow will just be another day and the world will keep on spinning."
But court-appointed mediator Daniel Pollack said a default could hurt bondholders who were not part of the dispute as well as the Argentine economy, which is suffering through a recession, a shortage of dollars and one of the world's highest inflation rates, the AP reported.
"The full consequences of default are not predictable, but they are certainly not positive," Pollack said, according to the AP.
