MercoPress. South Atlantic News Agency

Judge Griesa lifts freeze on Argentine funds to help with planned “debt swap”

New York State Judge Thomas Griesa

A New York State Judge lifted a freeze on Argentine Central Bank accounts held in the US Federal Reserve, Argentina's Finance secretary told reporters on Thursday. The freeze has been imposed on request from investors holding defaulted Argentine sovereign bonds.

Finance Secretary Hernan Lorenzino said Judge Thomas Griesa “lifted the measure so both sides can come to an agreement,” prompting gains in sovereign Argentine bond prices in Buenos Aires.

“On the basis of a presentation by lawyers from the Central Bank and the government, Judge Griesa decided to give both sides time” he said, adding that representatives of investment funds holding defaulted Argentine bonds had also taken part in the meeting.

The decision by Griesa earlier this week to embargo Central Bank funds deepened a dispute over the Argentine government's plan to use foreign reserves to repay debt and sent bond prices tumbling.

Speculation had grown in Argentina that some holders of defaulted government bonds could try to get Central Bank funds embargoed because of a plan to use 6.6 billion USD in foreign currency reserves to service the nation's debt.

Economy Minister Amado Boudou said on Tuesday only 1.7 million USD in Central Bank accounts were frozen adding that the measure would not stop the planned debt swap going ahead.

Boudou again this week accused Central bank governor Martin Redrado of being part of “a plot” to prevent Argentina from reopening the planned debt swap. Redrado has refused to extend the 6.6 billion USD from the central bank’s reserves (48 billion USD) arguing it is Congress that must decide on the operation and his removal.

Cash-strapped Argentina wants to return to global money markets but before must reach an agreement with defaulted bonds hold-outs (estimated in 20 billion USD) and the Paris Club (7 billion USD).

By impeding the creation of the (6.6 billion USD) Bicentennial Fund for Stability and Reduced Indebtedness “they want Argentina to pay exorbitant interest rates of 15% and more”, complained Argentine president Cristina Fernandez de Kirchner.

According to private sector estimates Argentina must pay this year over 13,5 billion USD to service its debt.