Argentina is no stranger to defaulting on its international debt, having defaulted or restructured its loans four times since the 1980s. Today, though, it's at risk of default not because it's unable to pay its creditors but because, as Felix Salmon explains, it's unwilling to pay one in particular:
Argentina has both the willingness and the ability to pay its performing debt. It’s adamant, however, that it’s not going to pay $1.4 billion to Elliott Associates, a hedge fund which has been prosecuting a highly-aggressive litigation strategy against the country, based on the fact that it holds defaulted debt and refused to exchange that debt for performing bonds. Depending on where you sit, Argentina’s refusal to pay off Elliott is either noble or foolish. But after two and a half hours of highly contentious oral testimony in federal appeals court today, it’s pretty clear that the US courts aren’t going to allow Argentina to stay current on its performing debt — not unless the country also writes a ten-figure check to Elliott. Which means that we’re headed straight for default, with almost no realistic chance of avoiding it.
The case is being watched closely as it could have a significant impact on global debt markets.