A day after rating agency Standard & Poor's declared Argentina to be in selective default for failing to make interest payments to holders of restructured debt, the Argentine government dismissed talk of default as "an absurd fable."

Argentina last month deposited $539 million with a New York bank to cover the payments, but the U.S. judge who ruled in favor of holdout creditors demanding 100 cents on the dollar for Argentine bonds has barred the bank from distributing the money, Cabinet chief Jorge Capitanich pointed out at his daily press conference.

The responsibility for the missed payments lies with U.S. District Court Judge Thomas Griesa, Capitanich said.

He lashed out at a U.S. judiciary he said was "co-opted by the vulture funds," Argentina's term for a group of hedge funds - led by Elliott Management Corp.'s NML Capital Ltd unit and Aurelius Capital Management - that sued Buenos Aires for full payment on bonds they bought at large discounts in 2002.

Commenting on the ostensible independence of the U.S. judiciary, the Cabinet chief said: "It's independent of rationality, it's not independent of the vulture funds."

"To say that Argentina is in technical default is an absurd fable that seeks to destroy the debt-restructuring process," Capitanich said.

Argentina defaulted on roughly $100 billion in debt in December 2001 - the largest sovereign default in world history - amid a financial meltdown and economic depression.

More than 92 percent of Argentina's creditors accepted steep haircuts in 2005 and 2010 debt restructurings.

In 2012, Judge Griesa ordered Buenos Aires to repay more than $1.3 billion in defaulted debt to NML, Aurelius Capital and the other litigating hedge funds.

Argentina's appeal of Griesa's decision reached the Supreme Court last month, but the justices declined to hear the challenge.

Wednesday marked the end of the 30 days Argentina had to make good on the $539 million in interest payments, which were due June 30.

S&P's pronouncement of selective default came as an Argentine delegation led by Economy Minister Axel Kicillof was meeting with the court-appointed mediator who has been trying to broker a settlement between Buenos Aires and the hedge funds.

Griesa has ordered the parties to meet again on Friday with mediator Daniel Pollack, an attorney with extensive experience in financial cases.

The judge has prohibited Bank of New York Mellon from disbursing interest payments to holders of restructured Argentine debt until Argentina and the hedge-fund litigants reach an accord.

Full payment to the hedge funds would lead other holdout bondholders to demand the same, Argentine President Cristina Fernandez's administration says.

Buenos Aires says those potential claims represent a liability of some $15 billion, equivalent to half of Argentina's foreign-exchange reserves.

The default declaration will not cause a fall in foreign direct investment in Argentina, Capitanich said Thursday, adding that the Fernandez administration will continue its efforts to "achieve economic growth and expansion in a difficult world."

The origins of the problem go back to Argentina's 1976-1983 military regime, whose policies led to a 465-percent expansion in public debt.

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