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Opinion
Megan McArdle

Argentina Strikes Out With Supreme Court

In losing its appeal to the Supreme Court, Argentina has only delayed its inevitable default.

You have to appreciate the irony: Argentina's appeal to the U.S. Supreme Court in its debt case was justturned down. So naturally, its bonds ...rallied.

The reason is simple: Most people seem to think that Argentina is ultimately going to lose this case. Argentina took a hard line with its creditors after its 2001 default on a record $95 billion in debt, forcing them to take a deep haircut on its bonds (which were issued under U.S. law). Domestic politics dictates a continued hard line against foreign creditors and any foreign courts that suggest it should pay anything to holdout creditors (those who refused Argentina's stiff terms). And the courts are fed up. They've basically told Argentina that if it wants to pay off the bondholders who took the haircut, it will also have to pay off the holdouts. When Argentina ignored them, a New York judge told the banks that processed these payments that they would not be allowed to remit payments to the exchange bondholders unless the holdouts also got paid -- in full, with back interest.